Lawyers say it might take years or decades to get money from FTX
According to insolvency lawyer Stephen Earel, partner at Co Cordis in Australia, it will be an “enormous exercise” in the liquidation process to realize the crypto assets and then figure out how to distribute the funds, with the process potentially taking years, if not decades. According to him, cross-border bankruptcy concerns are complicated, and several competing jurisdictions exist.
FUD on the rise amid the market crisis
According to the lawyer, years might be added to the timescale due to the difficulties associated with digital assets, cross-border bankruptcy, and competing authorities. Investors are curious about when they can get their money from the now-defunct cryptocurrency exchange FTX, but bankruptcy attorneys caution that it might take decades.
On November 11, the cryptocurrency exchange and 130 affiliates applied for Chapter 11 bankruptcy protection in the US. Earel said people who have made crypto-to-crypto trades may not see the distribution for years and lamented that FTX customers are in line with everyone else, including other creditors, investors, and venture capital backers.
Anyone with assets on FTX will become a creditor, with a creditors committee being constituted to protect their rights, according to Simon Dixon, founder of the international investing platform BnkToTheFuture. He has been a vocal participant in the Celsius bankruptcy processes.
According to what is left after bankruptcy fees, the creditors will eventually have access to the residual assets. According to the CEO of Binance Australia, these expenses might be considerable considering the time needed to recover the cash. He also pointed out that this would result in increased legal and administrative costs that would reduce clients’ returns.
Heaver also speaks out on the FTX contagion.
Irina Heaver, a partner at Keystone Law in the United Arab Emirates and a digital assets lawyer, told the press that users in the Middle East, which had the third-largest FTX user base, are also suffering because of the exchange’s demise.
Heaver said that because FTX has already been granted a license and regulatory oversight by the newly established Dubai Virtual Assets Authority regulator (VARA), it poses significant challenges for the regulators because they are already dealing with a “massive regulatory failure.”
He further stated that the legal system, including courts and bankruptcy administrators, will supervise creditors’ rights only “when and if” FTX enters Chapter 11 bankruptcy processes.
Investors all around the world have seen significant effects as a result of the recent cryptocurrency exchange FTX crash. The defunct bitcoin exchange may have more than 1 million creditors, according to a new report. The insolvent cryptocurrency exchange owes its top 50 debtors “almost $3.1 billion,” according to a Nov. 20 Reuters story.
