FTX bankruptcy could go on for years, legal expert says
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## The flurry of lawsuits
FTX has already settled mutual adversary complaints with Genesis, a crypto firm that has yet to emerge from its own bankruptcy, and which had been a major creditor of FTX-affiliated trading firm Alameda Research, Similar complaints by FTX and Alameda have also not been resolved yet, including, among others, a lawsuit against crypto exchange ByBit for $1 billion. FTX is also trying to recover $71 million from its own philanthropic arm, as well as payments to multiple celebrities for promotion, too. There are also lawsuits involving what the bankruptcy estate believes were fraudulent transactions, and FTX is currently suing ex-CEO Sam Bankman-Fried and other former executives, as well as Bankman-Fried's parents. There could be more such complaints to come up in the future, Rosenberg said, adding some may concern FTX investments and its political donations. “Some folks may not want to fight about it, but other people probably will and some people might not have the money anymore. And my understanding is that FTX was throwing money all over the place, so there's a lot of targets,” Rosenberg said.
## What it’s worth
One of the key questions in such litigation is how to calculate the value of crypto over time, Rosenberg said. "There hasn't been any definitive case law that I'm aware of on how cryptocurrency gets valued in avoidance action litigation." One precedent that can potentially be used is the 2014 bankruptcy of a crypto firm HashFast, Rosenberg added. "It was a classic cryptocurrency avoidance issue, which is prior to the petition date, somebody was given a certain amount of crypto. And then by the time they got sued, that same amount of crypto was worth significantly more,” he continued. Another painful question in crypto bankruptcies is how creditors should be paid, in crypto or in fiat money, and there are no official rules on that. However, given the amount and scope of bankruptcies in crypto recently, and the adoption of crypto by mainstream finance, Rosenberg hopes that new rules are soon to come. "I'm hoping that these enormous crypto insolvency cases and the aftermath inspire legislators to come to some kind of a consent at least come up with a mechanism that will allow people to determine what kinds of crypto's could be distributed," the lawyer said. Source : The Block by Anna Baydakova / Jan 2, 2024