Two Sides of the Same Coin? Cryptoassets and Estate Property in Bankruptcy
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In an article for the American Bankruptcy Institute Journal, White & Case partner Samuel Hershey and associate Kathryn Sutherland-Smith examine how recent volatility in the cryptocurrency market has led to speculation regarding how this asset class will be handled in future bankruptcy and chapter 11 filings. This includes an analysis of whether cryptoassets can be considered “estate property” under section 541(a)(1) of the Bankruptcy Code and how cryptocurrency rulings in foreign courts might reveal what we can expect from courts in the US.
The article notes: "In considering these questions, US courts may look to the recent experiences of courts in various foreign jurisdictions that have grappled with analogous issues. While certain US law considerations will no doubt influence how a US court would rule, these foreign case studies illustrate the issues that cryptoexchange bankruptcy would likely pose and how US courts may respond."1
1 Since this article was written, cryptocurrency finance platform Celsius and cryptocurrency brokerage Voyager have filed for chapter 11. According to Celsius, it is a crypto platform that allows users to transfer their crypto assets, earn rewards on those assets and take loans using those transferred crypto assets. In re Celsius Network LLC, et al., No. 22-10964 (MG) (Bankr. S.D.N.Y 2022) [ECF No. 23]. Voyager describes itself as a cryptocurrency brokerage that allows customers to buy, sell, trade and store cryptocurrency on an accessible platform. In re Voyager Digital Holdings, Inc. et al., (Bankr. S.D.N.Y 2022) [ECF No. 15].
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