As investors fret over when they can get their money back from now-bankrupt crypto exchange FTX, bankruptcy attorneys warn it could take “decades.”
The crypto exchange, along with 130 affiliates, filed for Chapter 11 bankruptcy protection in the United States on Nov. 11.
Bankruptcy attorney Stephen Earel, a partner at Co Cordis in Australia, said it will be a “tremendous exercise” in the liquidation process to “realize” the crypto assets and then work out how the funds will be distributed, with the process potentially taking years. if not “decades.”
This is because of the complexities that come with cross-border insolvency issues and competing jurisdictions, he said.
Earel said FTX users are unfortunately queuing with everyone else, including other creditors, investors and venture capitalists, and warned those who have made “crypto-to-crypto trades” may not see distribution “for years.” .
Simon Dixon, founder of global investment platform BnkToTheFuture, who was an active voice in Celsius’ bankruptcy proceedings, noted that anyone holding funds in FTX becomes creditors, with a creditors’ committee set to be established to represent their interests.
He explained that the remaining assets will ultimately be available to creditors, depending on what’s left after the bankruptcy costs.
Those costs could be high given the time it takes to recover funds, according to Binance Australia’s CEO, who notes that it means more legal and administrative fees that impact customer returns.
Meanwhile, Irina Heaver, a digital assets attorney and partner at Keystone Law in the United Arab Emirates, told Cointelegraph that there are users in the Middle East who are also feeling the pain of FTX’s collapse, as the region has the third largest user base of FTX was.
Heaver explained that since FTX has already received a license and regulatory oversight from the newly established Dubai Virtual Assets Regulator (VARA), this poses major complications for regulators as they already have a “major regulatory failure” on their hands .
Heaver said it’s only “when and if” FTX initiates Chapter 11 bankruptcy proceedings that creditors’ rights are overseen by the legal system, with courts and trustees involved.
Related: Bankrupt crypto exchange FTX begins strategic review of global assets
Heaver’s is advising those suffering significant losses from the FTX collapse to seek legal advice and join forces with “other victims”.
The recent FTX collapse had significant consequences for investors around the world. It was recently revealed that the bankrupt cryptocurrency exchange could have “more than 1 million creditors.” According to a Reuters article published Nov. 20, the bankrupt cryptocurrency exchange owes its top 50 creditors “nearly $3.1 billion.”