Lost your crypto amid Chapter 11 bankruptcy filings? You probably won’t get it back TechCrunch

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

As Chapter 11 bankruptcy proceedings progress for several major crypto companies, those who have lost funds are surely hoping to recover all or at least some of their money. Lawyers and experts shared their thoughts with TechCrunch on what these cases could mean for creditors and what could happen to those who saw their money disappear 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. 11 alongside FTX, BlockFi, Three Arrows Capital, Celsius Network and Voyager, all of which filed in mid to late 2022.

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

One of FTX’s largest unsecured creditors owes more than $226 million, and the company may have more than a million creditors, according to previous bankruptcy filings.

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

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

What happens to creditors really depends on the mix of assets and liabilities of the company as well as the bankruptcy prospects of the same company, Jason Allegrante, chief legal officer and chief compliance officer at Fireblocks, told TechCrunch. If the company is otherwise healthy but has suffered a liquidity shock, for example, there is still a chance that the company can recover and generate income, which means that creditors can be reunited with part of their funds.

Secured creditors will have priority if and when the assets are distributed, Joel Telpner, general counsel at Input Output Global and special counsel at Sullivan & Worcester, told TechCrunch. All other creditors line up after the first payment from secured creditors. If it’s a company with shareholders, then if there’s anything left over, it’s going to the shareholders.

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