BlocksInform
Steven Church
As the cryptocurrency mania raged, Congress took a hands-off approach, keeping the fast-growing industry in legal limbo as it spawned startups and drew billions of dollars from investors.
We'll leave the debris to the courts.
The bankruptcies of FTX Group, Celsius Network and Genesis Global are promising to turn judges into after-the-fact rulemakers for an anarchic industry whose pioneers saw it as a way to keep money beyond government reach.
With few tips for moving forward, Judges will have to decide basic issues with high stakes for creditors who have financed businesses and clients who have trusted them with their funds. Not much advice, Judges will have to decide basic issues with high stakes for creditors who have financed businesses and clients who have trusted them with their funds. is a token more like money or a value like a share or an obligation? What is due to those who have deposited cryptocurrencies on platforms which are now ruined? Who is eligible for reimbursement first? And how does the court correctly assess debt denominated in tokens—just bits of numerical code concocted by individuals—rather than the U.S. dollar? Nothing is clear about this.
"Bankruptcy tribunals do things that the normal regulatory system can't do, as a leader," said yesha yadav, a law professor at vanderbilt's Faculty of Law and a former World Bank lawyer specializing in financial regulation and insolvency. "Bankruptcy tribunals do things that the normal regulatory system cannot offer, as a leader," said Yesha Yadav, a law professor at the Vanderbilt Faculty of Law and a former World Bank lawyer with expertise in financial regulation and insolvency.
"He basically becomes a regulator by proxy."
Without specific legislation, the securities and exchange commission and the commodity futures trading commission have been left to decide for themselves how to use their current powers over the securities and derivative industries to crack down on alleged wrongdoing in cryptocurrencies. But bankruptcy decisions can have a faster impact on the company because regulators usually have to go to a tribunal to apply their decisions.
| Read More |
|---|
FTX advisors found five billion dollars in cash or marketable cryptocurrency. Celsius, a cryptocurrency lender who offered high interest rates to depositors, for failure in July. Ftx, the stock market established by sam bankman-fried, in November. Genesis, once a major crypto lender, just last month.
Genesis, once a major crypto lender, just last month.
However, there are already potential precedents in some of the discussions.
In the absence of regulatory guidance, Glenn relied rather on the disclosure of the terms and conditions in small print. The bottom line is that some 600,000 users of degrees Celsius no longer had the property rights to the digital assets they put in their accounts, no matter what they thought. In other words, they are like other creditors, and there is little doubt that they will suffer a significant loss.
Under a floating potential in degrees centigrade, the company would emerge from bankruptcy as a new listed entity and would use a newly invented token to help repay creditors. Below Celsius buoyant potential, the company would emerge from bankruptcy as a new listed entity and would use a newly invented token to help repay creditors.
The question of ownership arises still more in the bankruptcy ftx being supervised by a judge in the delaware. In this case, there are millions of clients that will be impacted, making any fight over clients' deposits even more contentious. It may also cause confusion if the judge's decision is contrary to the manner in which the accounts will be dealt with in the Celsius case.
A group of clients has already filed a precautionary lawsuit asking us to bankruptcy judge John Dorsey to decide that all the assets on the FTX books belong to them, not the company. The clients were informed in the FTX service contract that they would keep ownership of the assets, the group stated in a court filing.
Yet ftx can always argue that because all the assets have been mixed together like a bank, the business is the owner of the property and is required to use it to repay all creditors. And there just isn't enough money left in ftx to give back to each client what they put on the platform, ftx said.
Federal judges are also overseeing lawsuits outside of bankruptcy that could set legal precedents for how crypto assets are treated, but most of those decisions are at least several months away. Most of them are months away.
Bankruptcy cases are usually dealt with more quickly than other federal court cases because of pressure to have creditors receive the money as quickly as possible.
Unless Congress makes a change in the law, Court decisions will clarify the nature of cryptocurrency and how investors should expect to be treated should another mortgage brokerage or lender go bankrupt.
