SEPTEMBER 2022 Turnarounds & Workouts 4
Crypto Winter , from page 3
individual currencies is an important topic in crypto bankruptcies . They note , “ Will account holders / crypto creditors be treated as if they are holders of specific crypto currencies or coins , or will they receive a general unsecured claim based the on the dollar value of their various crypto holdings computed at the time of the bankruptcy filing ?” For Gold and Kleiner , the question is whether holders of a particular currency would try to have their claims and distributions tied to the particular currency or , alternatively , would all claims and assets be aggregated across coins and currencies ( the norm in a bankruptcy ).
Gold explains platforms like Celsius and Voyager , dealt in many different crypto assets for their customers but the losses were not evenly distributed among currencies . “ So , for example , Voyager ’ s losses from its loans to Three Arrows Capital were primarily in Bitcoin and USD Coin , leaving other currency balances unaffected , in which case Ether depositors would likely push to have their claims paid out of available Ether , while Bitcoin depositors would want all assets aggregated before prorata distribution . Similarly , crypto currencies other than stablecoins , while generally correlated with one another , do not move in lock-step , so fixing claim amounts at the time of the petition will be adverse to depositors of crypto assets that performed better since the petition date relative to other currencies .”
Kleiner notes Section 502 of the Bankruptcy Code says — “ Except as provided in subsections ( e )( 2 ), ( f ), ( g ), ( h ) and ( i ) of this section , if such objection to a claim is made , the court , after notice and a hearing , shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition .” “ This would argue for having all claims aggregated and
“ It may be hard for platforms to continue as viable enterprises if deposits are treated as a single , commingled pool of currencies , and separate asset classification may be necessary for a successful reorganization .”
fixed at their dollar value at the time of the bankruptcy and sharing prorata in the value of the debtor . But note also that in connection with a plan of reorganization , the debtor has significant leeway in how it classifies claims ,” according to Kleiner .
Meanwhile , Section 1122 ( a ) provides : “( a ) Except as provided in subsection ( b ) of this section , a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class .” “ A debtor may choose , therefore , to create separate classes of claims based on the crypto currency deposited . So , for example , there could be individual classes for Bitcoin deposits , for Ether deposits , for USDC deposits , etc . Then , assuming the other requirements of the bankruptcy code were met , assets could be distributed by class , so that Bitcoin class holders receive their pro-rata share of Bitcoin assets , Ether class holders receive their pro-rata share of Ether assets , USDC class holders receive their pro-rata share of USDC assets , and so on ,” Kleiner continues .
At the Voyager first day hearing , the court questioned whether digital assets on the Voyager platform should be considered property of the estate , and thus subject to distribution to unsecured creditors , or property of Voyager customers themselves . An adversary proceeding was filed in Celsius addressing this same issue . According to Dendinger , Termine and Burns , the answer will impact how these companies can reorganize or sell their assets in the bankruptcy proceeding . They note that Voyager ’ s bankruptcy is “ not a www . TurnaroundsWorkouts . com