Tag: Bankruptcy

QuadrigaCX Bankruptcy Trustee Announces Interim Distribution of Funds

by Blockchain News

QuadrigaCX’s bankruptcy trustee, Ernst & Young, has announced an interim distribution of funds to creditors of the now-defunct Canadian cryptocurrency exchange. The announcement was made in consultation with estate inspectors, and a Notice to Affected Users will be posted soon with further details about the distribution process.

QuadrigaCX became insolvent in February 2019, following the death of its co-founder, Gerald Cotten. Cotten had taken the private keys to QuadrigaCX’s offline storage systems to his grave, leaving the exchange unable to access its funds. According to the Ontario Securities Commission (OSC), QuadrigaCX owes its affected clients an estimated $160 million.

Since then, Ernst & Young has been working as the bankruptcy trustee for QuadrigaCX and has been attempting to recover any assets it can for the exchange’s creditors. So far, the trustee has recovered $34.3 million worth of assets.

The interim distribution of funds provides some relief to QuadrigaCX’s creditors, who have been waiting for over two years to receive any compensation for their losses. However, the trustee has also stated that a small number of affected users may receive a Notice of Disallowance of Claim, meaning that their creditor’s claim has been revised or disallowed in the bankruptcy process.

If users receive a Notice of Disallowance, they have the right to appeal the decision. Miller Thomson, the law firm representing QuadrigaCX users, has advised affected users to review the reasons for the revision or disallowance and gather any necessary evidence to support their claim.

The collapse of QuadrigaCX was a major blow to the Canadian cryptocurrency market, raising concerns about investor protection and regulatory oversight. The QuadrigaCX case highlighted the need for proper safeguards and measures to protect investors and prevent similar incidents from happening in the future.

Ernst & Young’s announcement of the interim distribution of funds is a significant step in the bankruptcy proceedings of QuadrigaCX. However, it remains to be seen how much creditors will actually receive and how long the proceedings will continue. The bankruptcy trustee continues to work towards recovering any additional assets for the exchange’s creditors.

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OKX Sends $60M to Alameda Research

by Blockchain News

On May 9, crypto exchange OKX transferred approximately $60 million worth of digital assets to wallets associated with failed hedge fund Alameda Research. According to data from crypto analytics platform Arkham Intelligence, the funds were spread out among 16 separate transactions and included approximately 337.9 million Mask Network (MASK) tokens worth $1.3 million, as well as $57.77 million worth of the Tether (USDT) stablecoin.

Alameda Research currently holds over $284 million worth of assets in its crypto wallets, with its largest holdings being USDT, BitDAO (BIT), Ether (ETH), and Stargate Finance (STG).

It is believed that the funds sent by OKX may have been part of a recovery effort to pay back customers of its sister company FTX. On March 30, OKX announced that it planned to return approximately $157 million it held on behalf of FTX and Alameda, which it had frozen in November to safeguard them. FTX had filed a motion on March 30 to force OKX to release the funds to pay back creditors, which OKX said it “welcomed.”

After filing for bankruptcy and coming under new management, FTX and Alameda Research have been aggressively trying to recover funds from firms they previously sent crypto to. On March 23, FTX reached a settlement with hedge fund Modulo Capital, allowing it to recover $460 million previously invested in the fund. On May 4, FTX filed a motion to claw back $4 billion it allegedly lent to bankrupt crypto lending firm Genesis Global.

FTX Group and roughly 130 companies under its umbrella, including Alameda Research, filed for bankruptcy in November after the crypto exchange suffered a liquidity crisis. Alameda Research’s former CEO, Caroline Ellison, has been charged with fraud for allegedly colluding with former FTX CEO Sam Bankman-Fried to misappropriate FTX customer funds. She pleaded guilty to the charges on Dec. 22. However, Bankman-Fried has pleaded not guilty and has sought to dismiss some of the charges against him.

In summary, OKX sent $60 million worth of digital assets to Alameda Research as part of a recovery effort to pay back customers of FTX. Alameda Research currently holds over $284 million worth of assets, including USDT and ETH. FTX and Alameda Research have been actively recovering funds from firms they previously sent crypto to after filing for bankruptcy in November.

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QuadrigaCX Users to Receive Interim Distribution

by Blockchain News

Users of the now-defunct Canadian cryptocurrency exchange QuadrigaCX are expected to receive interim distribution of funds tied to bankruptcy proceedings in the coming weeks. Law firm Miller Thomson, which represents QuadrigaCX users, announced the news on May 8. Bankruptcy trustee Ernst & Young has consulted with estate inspectors to announce the interim distribution. In the near future, the trustee will post a Notice to Affected Users providing details about the manner and procedure of the distribution.

However, a small number of affected users are expected to receive a Notice of Disallowance of Claim, which means that the creditor’s claim has been revised or disallowed in the bankruptcy process. If users receive such a notice, they have the right to appeal the decision. Miller Thomson explained that users should review the reasons for the revision or disallowance and gather any necessary evidence to support their claim. The Trustee is likely to have issued a Notice of Disallowance if there was a discrepancy in the user’s proof of claim.

QuadrigaCX was once the largest cryptocurrency exchange in Canada before it became insolvent in February 2019. The exchange’s co-founder, Gerald Cotten, died in India, taking the private keys to QuadrigaCX’s offline storage systems to his grave. According to the Ontario Securities Commission (OSC), QuadrigaCX owes its affected clients an estimated $160 million.

In addition to losing access to cold storage, the OSC alleges that Cotten realized $86 million in crypto trading losses on the QuadrigaCX platform, which was then covered with users’ funds. Since then, bankruptcy trustee Ernst & Young has recovered $34.3 million worth of assets. The OSC stated that they did not identify any other assets beyond those identified by Ernst & Young.

The collapse of QuadrigaCX was a major blow to the Canadian cryptocurrency market, raising concerns about investor protection and regulatory oversight. The QuadrigaCX case highlighted the need for proper safeguards and measures to protect investors and prevent similar incidents from happening in the future.

The interim distribution of funds provides some relief to QuadrigaCX users, who have been waiting for over two years to receive any compensation for their losses. However, it remains to be seen how much users will actually receive and how long the bankruptcy proceedings will continue. The QuadrigaCX case serves as a cautionary tale for investors, highlighting the importance of conducting due diligence and being cautious when investing in cryptocurrencies.

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Celsius Creditors Seek Help from Bankruptcy Judge to Uncover Potential Market Manipulation

by Blockchain News

Creditors of Celsius Network have requested the help of a bankruptcy judge to investigate potential market manipulation of Celsius’ CEL token. The creditors, represented by a committee, are seeking information from cryptocurrency exchange FTX regarding users associated with 10 wallets that were allegedly involved in suspicious trades of the CEL coin between April and August 2022. The creditors suspect that the trades may have artificially inflated the price of the CEL token and want to determine if they were legitimate or constituted market manipulation, such as wash trading.

To identify the suspicious transactions, the committee employed the services of blockchain consultant Elementus. According to Elementus, 947 transactions involving a near one-to-one relationship of CEL token deposits and withdrawals occurred over three-day periods between 10 private wallets and 10 FTX-operated wallets. The committee believes that the information from FTX will be crucial in determining whether the trades were intended to inflate the price of CEL token artificially.

In addition to uncovering potential market manipulation, the committee is also requesting information regarding any short positions taken on CEL. The committee believes that short positions could have had a negative impact on the price of the CEL token, and that this information could also be critical in resolving a dispute related to Celsius’ bankruptcy.

The creditors are seeking permission from the bankruptcy judge to issue subpoenas to FTX to obtain the requested information. The request for subpoenas was made in court papers filed on April 26. The information obtained from FTX could be important in resolving disputes related to Celsius’ bankruptcy.

Meanwhile, FTX is pending approval from the United States Bankruptcy Court for the District of Delaware to sell LedgerX, its futures and options exchange and clearinghouse, to an affiliate of Miami International Holdings for approximately $50 million. The sale is expected to provide FTX with the funds needed to pay back its creditors. A hearing to approve the sale is scheduled for May 4.

In conclusion, the Celsius creditors’ request for subpoenas to FTX reflects their efforts to investigate potential market manipulation of the CEL token. The information obtained from FTX could be crucial in determining whether the trades involving CEL were legitimate or constituted market manipulation, and could be important in resolving disputes related to Celsius’ bankruptcy. Meanwhile, FTX’s pending sale of LedgerX is expected to provide the exchange with the funds needed to pay back its creditors.

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Genesis Capital’s Settlement Disrupted by Creditors

by Blockchain News

Genesis Capital, a troubled digital currency company, has hit another roadblock in its settlement process, just two months after reaching an initial agreement with creditors. The company’s parent firm, Digital Currency Group (DCG), has issued a statement on Twitter announcing that Genesis has filed a motion for mediation due to renewed demands from creditors.

In February, Genesis Capital submitted a comprehensive settlement proposal to the bankruptcy court after reaching an “agreement in principle” with DCG and its creditors. Under the proposed restructuring plan, Genesis creditors were expected to recover 80% of funds lost due to the company’s collapsed operations.

However, DCG has now reported that Genesis creditors have raised their demands, significantly disrupting the ongoing court process. “While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement,” DCG wrote.

The disruption has raised concerns about the timing of the settlement process, with some experts questioning whether the prolonged proceedings could harm the company’s chances of recovery. However, others have suggested that the additional mediation may ultimately help resolve outstanding issues and pave the way for a successful restructuring.

Genesis Capital’s struggles come amid broader uncertainty in the digital currency market, with many investors and companies grappling with regulatory challenges and price volatility. The company’s difficulties are particularly notable given its high profile in the industry; Genesis has been a leading provider of digital asset lending and borrowing services, with a portfolio of more than $15 billion in assets.

Despite these challenges, DCG expressed confidence in Genesis’ ability to weather the storm. “We believe that Genesis is well-positioned to continue to provide best-in-class digital asset services,” the company wrote. “We remain committed to working through these challenges in partnership with our creditors and the broader digital asset community.”

The case underscores the challenges facing digital currency companies as they navigate a rapidly evolving regulatory landscape and seek to establish themselves as viable players in the broader financial ecosystem. With Genesis’ future hanging in the balance, the industry will be closely watching to see how the settlement process unfolds in the coming months.

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OPNX Reveals Venture Capital Backers

by Blockchain News

OPNX, a new exchange founded jointly by members of the Three Arrows Capital (3AC) and Coinflex teams, has revealed the venture capital firms that are backing the project. The announcement came in the form of a video posted by the company on April 21, in which CEO Leslie Lamb thanked some of the major backers of the project, including AppWorks, Susquehanna (SIG), DRW, MIAX Group, China Merchant Bank International, and Token Bay Capital.

Despite the announcement, OPNX has faced criticism in the crypto community due to its association with the bankrupt 3AC hedge fund. Some firms have claimed they may refuse to associate with anyone who helps fund the new exchange. However, the company behind the project has defended itself, arguing that it will help make customers of failed crypto ventures whole again.

According to early fundraising documents, OPNX will allow traders to buy and sell claims against bankrupt firms such as 3AC and FTX. The exchange aims to create a secondary market for these claims, allowing investors to potentially profit from them.

The backers of OPNX have previously funded various tech and financial projects. For example, SIG was one of the early backers of TikTok, and MIAX Group owns a U.S.-regulated equities and options exchange. AppWorks is also listed on Crunchbase as a partial owner of Uber.

However, at least one of the firms mentioned in the video has denied funding the project. DeFi trading firm Nascent stated that it bought Coinflex tokens issued by the company’s previous incarnation but did not participate in a funding round for OPNX.

Three Arrows Capital was a crypto hedge fund founded in 2012. In June, it was issued a notice of default by Voyager Digital after allegedly failing to pay 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) that had been loaned to it. The hedge fund filed for bankruptcy on July 1, and some creditors have accused the founders of being “on the run” or hiding from the bankruptcy court.

Despite these controversies, OPNX seems determined to move forward with its plans. By creating a secondary market for claims against bankrupt firms, the exchange aims to provide a new avenue for investors to potentially profit from these types of investments. However, it remains to be seen how successful the venture will be, especially given the backlash it has received from some corners of the crypto community.

Overall, the emergence of OPNX highlights the growing interest in crypto-related investment opportunities, as well as the potential risks and rewards of these types of investments. As the crypto market continues to evolve, it is likely that we will see more projects like OPNX emerge, each with their own unique opportunities and challenges.

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BlockFi Granted Extension to Submit Bankruptcy Exit Plan

by Blockchain News

BlockFi, a leading lender of digital assets, filed for bankruptcy in November 2022, and has been granted an extension until May 15 to submit an exit plan, according to a New Jersey bankruptcy judge. The crypto firm is exploring a potential sale of company assets or the possibility of getting an outside backer to support a restructuring deal, as per the company’s lawyer Joshua Sussberg.

The bankruptcy code requires debtors to propose a Chapter 11 plan within the first 120 days of filing, which meant that BlockFi was required to present a plan by March 27. However, on March 21, the company filed a request to prolong the deadline for its Chapter 11 plan by 90 days to June 26. The company’s lawyers argued that “much work remains” due to the scale and complexity of the Chapter 11 cases. Judge Michael Kaplan, the bankruptcy judge handling the case, deemed it worthwhile to extend the deadline to ensure the smooth continuation of the case, albeit a shorter extension than the one requested by BlockFi.

The company is estimated to owe up to $10 billion to over 100,000 creditors. A committee of BlockFi customers argued they should be allowed to take control of the bankruptcy case so that cryptocurrency held on the platform can be returned to creditors immediately. Committee lawyer Robert Stark told Kaplan that BlockFi creditors aren’t sophisticated lenders, but individual mom-and-pop retail customers, “many of whom have lost their life savings.” The committee cited the lack of a workable business for reorganization and the potential sale of the platform, which Stark referred to as a “bundle of sticks.”

Although Kaplan rejected the committee’s appeal, he granted an extension that was “modest” according to Sussberg, who stated that the company would have a plan ready for unsecured creditors to evaluate within two weeks. The crypto firm’s lawyers have indicated that they are exploring all possible avenues, including a sale of assets, to emerge from bankruptcy as a more robust entity.

BlockFi’s financial woes stem from the company’s controversial decision to offer high-yield accounts backed by cryptocurrencies like Bitcoin and Ethereum. However, the firm’s aggressive growth strategy was met with regulatory scrutiny, with several states such as New Jersey, Alabama, and Texas ordering the company to cease operations in their jurisdictions.

In January 2022, the US Securities and Exchange Commission (SEC) issued a cease-and-desist order against BlockFi, alleging that the firm’s interest accounts were unregistered securities. The SEC’s lawsuit is ongoing, with BlockFi seeking to have the case dismissed.

In conclusion, the extension granted to BlockFi provides the company with additional time to devise a plan to emerge from bankruptcy as a viable entity. However, the company faces several challenges, including regulatory scrutiny, legal battles, and the loss of customer confidence. Only time will tell whether BlockFi can overcome these hurdles and regain its position as a leading player in the cryptocurrency lending space.

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Tribe Capital explores injecting capital into bankrupt FTX exchange

by Blockchain News

Tribe Capital, a San Francisco-based venture capital firm, is reportedly exploring the possibility of injecting new capital to revive the bankrupt cryptocurrency exchange, FTX. Bloomberg reported on April 18 that Tribe Capital is considering leading a $250 million fundraising campaign, with $100 million from itself and its limited partners. According to sources familiar with the matter, Tribe co-founder, Arjun Sethi, met with FTX’s Committee of Unsecured Creditors in January to discuss the informal proposal.

The venture capital firm’s proposal in January included an estimated 9 million customer accounts, FTX US, FTX Australia, FTX Japan, FTX EU, FTX International, and LedgerX. However, the proposal excluded a venture capital portfolio and crypto assets, among others. If the reboot plan is successful, the revived exchange would retain the name FTX.

On April 18, the Official Committee of Unsecured Creditors of FTX confirmed via Twitter that it was “working with the Debtors to evaluate all options to reboot or sell the FTX exchanges and create value for creditors.” However, the committee added that “there is no definitive timetable for a reboot or sale of the exchanges at this time.”

In January, the judge overseeing the FTX bankruptcy proceedings gave the troubled crypto exchange approval to sell some of its assets to help repay its creditors. According to a filing in Delaware Bankruptcy Court, Judge John Dorsey approved the sale of four key units of FTX – the derivatives platform LedgerX, stock-trading platform Embed, and the exchange’s regional arms, FTX Japan and FTX Europe.

Attorneys from Sullivan & Cromwell, representing FTX at a hearing in the United States Bankruptcy Court for the District of Delaware on April 12, stated that the exchange had recovered approximately $7.3 billion in liquid assets. This development offers hope for the future of the exchange, and it is possible that Tribe Capital’s proposed capital injection could be a critical step in FTX’s revival.

FTX was one of the fastest-growing cryptocurrency exchanges in the world, with a valuation of $18 billion in December 2021. The exchange was founded in 2019 by Sam Bankman-Fried, a former Wall Street quant trader, and Gary Wang, a software developer. The exchange’s meteoric rise was driven by its advanced trading infrastructure and innovative products, such as leveraged tokens and prediction markets.

However, in December 2021, the exchange suffered a massive blow when it was hit by a wave of liquidations caused by the collapse of its risk-management system. The incident resulted in the loss of over $4 billion in customer funds, triggering a chain of events that led to the exchange’s bankruptcy.

Tribe Capital’s potential involvement in FTX’s revival is significant given its previous investment in the exchange. The venture capital firm was part of a group of investors that participated in FTX’s $900 million funding round in July 2021. However, Tribe Capital was also an investor in Archegos Capital Management, the family office that triggered a $20 billion margin call in March 2021, resulting in significant losses for several banks. The firm’s involvement with Archegos led some to question its due diligence processes and risk management practices.

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Celsius Network Considers Legal Action Against Crypto Blogger

by Blockchain News

Celsius Network, a crypto lending platform, has been considering legal action against Tiffany Fong, a crypto blogger and Celsius creditor, for sharing leaked internal information regarding the company’s bankruptcy case. Fong, who has roughly $119,000 worth of crypto assets locked on Celsius, has been reporting on the bankruptcy case via YouTube and other social media platforms since the firm paused withdrawals in mid-June 2022 and filed for Chapter 11 bankruptcy the following month.

According to a recent court filing, Celsius’ legal counsel, Kirkland & Ellis International, has been working on the case for Fong since January 26, 2023. The filing shows that the law firm had worked 77 billable hours worth roughly $72,000 on an invoice titled “Tiffany Fong litigation” as of April 14, 2023. While no concrete legal action has been formulated yet, the filing suggests that Celsius’ legal counsel has been looking into the leaked information Fong reported on via her social media accounts.

Fong claims that she received the leaked information privately from disgruntled former Celsius employees, and has reported on various internal details, such as company bids on Celsius assets, alleged audio of private company discussions, and alleged transaction activity of executives such as former CEO and founder Alex Mashinsky.

In the filing, Celsius’ law firm also outlined that it was drafting cease and desist letters for Fong and a motion to compel, which generally asks courts to enforce a request for information relevant to a case. While Fong maintains that she has not done anything illegal, Celsius Network is seeking to prevent further dissemination of internal information related to its bankruptcy proceedings.

Fong’s attendance at the 2023 NYC NFT event has added fuel to the fire. In a Twitter post on April 15, she revealed that she had found Alex Mashinsky and his wife, Krissy Mashinsky, in public and approached them. A video posted to Twitter also shows the Mashinsky couple hurriedly walking away as other crypto content creators, such as BitBoy Crypto, approach alongside Fong in an attempt to engage them in conversation.

Celsius Network’s bankruptcy case is ongoing, with the company’s legal counsel actively pursuing action against Fong for leaking internal information. The case highlights the potential legal consequences of sharing confidential information regarding a company’s bankruptcy proceedings, even if the information is provided by former employees.

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Media Outlets Object to Withholding Identities in FTX Bankruptcy Proceedings

by Blockchain News

Several major media outlets, including Bloomberg, the Financial Times, The New York Times, and The Wall Street Journal’s parent company, Dow Jones & Company, have jointly objected to attempts to withhold the identities of non-US customers of cryptocurrency exchange FTX during its bankruptcy proceedings.

In a filing to a Delaware Bankruptcy Court on April 4, the media outlets argued that the press and the public have “a presumptive right of access to bankruptcy filings,” and that FTX and its customers have failed to justify the need for secrecy.

While FTX’s debtors are able to argue for the names of creditors to be redacted in bankruptcy filings, the media outlets believe that the names of FTX’s customers should not be sealed permanently.

The Ad Hoc Committee of Non-US Customers of FTX.com, which represents the interests of FTX’s non-US customers, had claimed in a filing on December 28 that publicly revealing the names and private information of non-US customers would leave them vulnerable to identity theft, targeted attacks, and “other injury.”

In response, the media outlets argued that if the permanent sealing of customer identities were permissible on the grounds claimed by FTX and the ad hoc committee, then such sealing would become routine in virtually every bankruptcy proceeding.

FTX, which is one of the largest cryptocurrency exchanges in the world, filed for bankruptcy in December 2021, citing a liquidity crisis. The exchange had been struggling to meet customer demands for withdrawals in the wake of a crackdown on cryptocurrency trading in China, where it is based.

Since then, FTX has been engaged in a legal battle with its customers over the release of their identities. The exchange has argued that the identities should be kept secret to protect its customers’ privacy, while its customers have argued that the identities should be made public to ensure transparency in the bankruptcy proceedings.

The media outlets’ objection to the withholding of customer identities is likely to increase pressure on FTX and its debtors to release the names. However, it remains to be seen how the bankruptcy court will rule on the matter.

Cryptocurrency exchanges have come under increasing regulatory scrutiny in recent months, as governments around the world seek to crack down on money laundering and other illegal activities. The case of FTX is likely to be closely watched by regulators, as it could set a precedent for how cryptocurrency exchanges are regulated in the future.

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