What A Crypto Exchange Bankruptcy Filing Could Look Like

By Darren Azman and Gregg Steinman (May 27, 2022, 3:40 PM EDT) — To date, no cryptocurrency exchange in the U.S. has sought bankruptcy relief.[1]

As cryptocurrency prices fall to some of the lowest levels since 2020, however, there is growing concern regarding how customers of cryptocurrency exchanges will be treated if an exchange commences bankruptcy proceedings. Namely, whether customers’ crypto-assets constitute property of the bankruptcy estate.

If the answer is yes, then customers will not be entitled to the return of their crypto-assets. Instead, all customers — and other unsecured creditors — will share pro rata in whatever assets remain at the exchange.

This article addresses these issues and provides a general discussion regarding…

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