Lost your cryptocurrency in the midst of Chapter 11 bankruptcy filings? You probably won’t get it back • TechCrunch

If you lost access to your money when the crypto company holding your assets files for bankruptcy, then you’re probably out of luck.

As Chapter 11 bankruptcy proceedings progress for several well-known crypto companies, those who lost funds are surely hoping to get all — or at least some — of their money back. Lawyers and experts shared their thoughts with TechCrunch about what these cases could mean for creditors and what could happen to those whose money disappeared overnight.

Earlier this month, Genesis Global Trading, a subsidiary of crypto conglomerate Digital Currency Group (DCG), filed for Chapter 11 bankruptcy. Genesis is the latest crypto-focused entity to join the Chapter 11 bankruptcy club, along with FTX, BlockFi, Three Arrows Capital, Celsius Network and Voyager — all of which filed in mid-to-late 2022.

For the most recent Chapter 11 filings, Genesis owes more than $3.6 billion to its top 50 unsecured creditors, while FTX owes its top 50 unsecured creditors over $3 billion. The bankruptcy filings redacted most — if not all — of the identifying information of the parties involved.

One of FTX’s largest unsecured creditors is owed more than $226 million, and the company could have more than a million creditors, according to earlier bankruptcy filings.

“If I were a creditor of FTX, I would hope for the best, but I expect to face reality. If you get more than 2 cents on the dollar, I’d consider myself lucky.” Terrence Yang, Director of Swan Bitcoin

Therefore, it is safe to say that many people are heavily invested in the outcome of these bankruptcy proceedings, as their funds are involved, ranging from small amounts to millions of dollars. But it is not certain whether they will ever see the deposited funds again.

What happens to creditors “really depends on the combination of the company’s assets and liabilities, as well as the prospect of that same company emerging from bankruptcy,” Jason Allegrante, chief legal and compliance officer at Fireblocks, told TechCrunch. “If the business is otherwise healthy but has suffered a liquidity shock, for example, there is still a chance the business can recover and generate income,” meaning creditors could be reunited with some of their funds.

Secured creditors will have priority “if and when assets are distributed,” Joel Telpner, chief legal officer at Input Output Global and special counsel at Sullivan & Worcester, told TechCrunch. “All other creditors stand in line after the first payment of different creditors. If it is a company with shareholders, then if there is anything left, it will go to the shareholders.”

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