The largest crypto bankruptcy case, in which FTX creditors are attempting to recoup nearly $8 billion, may drag on for years due to the sheer volume of parties vying for what’s left. 2023 may be recognized for the sheer volume of these lawsuits.
The case was filed in November of last year, and according to Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog, it will take longer to resolve than some previous cryptocurrency bankruptcies like Celsius and BlockFi. This is due to the fact that FTX is pursuing several clawback claims, also known as avoidance proceedings, in an effort to recoup funds it disbursed in the final weeks and months prior to going bankrupt.
“Given that some of these transfers are probably very significant and some of them were made to large organizations, which I’m sure are very capable of defending themselves, it’s very possible that some of these things could last for a long time,” Rosenberg told The Block during a recent interview.
According to Rosenberg, these types of cases are typically settled out of court since it is typically less expensive to do so than to go to trial. Negotiating the settlement, though, can also take some time.
FTX is battling the Internal Revenue Service’s massive $24 billion charge that it did not pay all of its taxes, in addition to its attempts to recoup the money its previous leadership lavishly spent.
The barrage of legal action
Mutual adversary complaints between FTX and Genesis, a cryptocurrency company that is still in bankruptcy and was a significant creditor of FTX-affiliated trading firm Alameda Research, have already been resolved.
Similar grievances from FTX and Alameda remain unresolved as well. Among these is a $1 billion lawsuit filed against the cryptocurrency exchange ByBit. FTX is also attempting to recoup payments to several celebrities for promotional purposes, in addition to $71 million from its own charitable division.
In addition, there are legal cases about alleged fraudulent transactions by the bankruptcy estate; FTX is presently pursuing claims against former CEO Sam Bankman-Fried, several other former executives, and Bankman-Fried’s parents.
Rosenberg predicted that additional complaints of this kind would surface in the future, saying that some would have to do with FTX’s political donations and investments. While some people might not want to argue over it, others most likely will, and some might run out of money. There are many targets because, from what I gather, FTX was throwing money around,” Rosenberg added.