Eugen Zhdanok, lawyer of the ASTL investment project from Astol Advanced Limited, told what is the probability of returning assets to users of bankrupt crypto companies, what victims can count on and what they need to do to try to get their money back.
Recall that on November 11, FTX, Alameda and about 130 other affiliated firms filed for bankruptcy. The liquidity crisis at the exchange manifested itself after the announcement on November 6 by Binance CEO Changpeng Zhao that the company was liquidating its position in the FTX token (FTT). Presumably, the decision was made following an investigation by CoinDesk that revealed a high proportion of the digital asset in Alameda’s balance sheet. Various experts suggest that a possible cause of the collapse of the exchange could be the “large financial assistance” Alameda Research, which she provided to her own trading company in the second quarter of 2022.
The new CEO of FTX, John Ray, accused the former management of the exchange of hiding the illegal use of customer funds, “a complete failure of corporate control” and providing Alameda with “secret” preferences. According to “former executive” Bankman-Fried, FTX and Alameda’s assets are valued at $1 billion and liabilities are $8 billion. In principle, this is probably more or less the correct estimate, although John J. Ray, the new CEO of FTX, said that The asset review has been ongoing since last week and “we are pleased to learn that many of FTX’s regulated or licensed subsidiaries in the United States and beyond have solvent balance sheets, responsible management and valuable franchises,” Ray said.
Previously, Bloomberg experts called it “unlikely” the possibility of returning funds to customers and investors. The collapse of the FTX crypto exchange led to losses for more than a million investors. FTX customers around the world are hoping for a refund. But the almost complete lack of examples of such proceedings in the cryptocurrency industry and the unclear situation with the remaining assets of the exchange do not give the victims an idea of whether there is a real chance for a refund.
The legislation of any state has provisions on the bankruptcy of a legal entity and on the order of creditors in this procedure, Eugen Zhdanok, lawyer of the ASTL investment project, recalls. By submitting a claim against the debtor within the prescribed period, the creditor gets some chances to return his funds, the lawyer explains. He notes that the sooner the claim is filed, the higher those chances will be.
In practice, the probability of a return of funds will depend on the number of creditors, the volume of their claims and the amount of assets remaining with the cryptocurrency exchange. According to the expert, the larger the “hole” in the capital of the exchange, the lower the chances of returning the money. The procedure itself depends on the bankruptcy law in the jurisdiction in which the case is pending. For example, the FTX group has more than 100 subsidiaries registered in different countries, but the application was filed in the United States (and already in Brazil), where the laws of some states may differ significantly from the laws of other states.
FTX managers have already begun to form lists of creditors. The usual practice is then to set up a bankruptcy committee, appoint a bankruptcy trustee, and develop a reorganization plan. But the exchange’s new team is still working to understand the accounting records of the FTX group of companies and is bringing in third-party lawyers and experts to do this, for example, in the case of FTX, this is the New York-based financial services company Perella Weinberg Partners LP (PWP).
For creditors, the procedure consists of submitting claims to all necessary recipients for the return of funds and participating in a meeting of creditors. Eugen Zhdanok clarified that the debtor, the interim manager and the court could be the addressees of the claims. The terms of refunds also differ depending on the jurisdiction, the lawyer explained. According to him, in the US, creditors usually receive their funds within 6-8 weeks from the date when the manager sends the notification of the Final report and accounting.
Most likely, creditors will not be able to fully return their funds. The fact is, the ASTL lawyer explained, that FTX not only acted as an intermediary between buyers and sellers of assets and took a commission for its services, it also actively used clients’ funds for other purposes. For example, she issued a loan to Sam Bankman-Fried’s company Alameda secured by her own FTT tokens. However, creditors will most likely be able to return part of their funds, says Eugen Zhdanok. He pointed out that the company’s new CEO, John Ray III, a lawyer previously hired by the oil company Enron during its scandalous bankruptcy, claims FTX has “valuable assets.” In addition, FTX has filed for Chapter 11 bankruptcy, the lawyer added. He explained that the application of this chapter would involve reorganizing the company in order to keep the business going. However, the lawyer noted that it is still difficult to say exactly what part of the lost funds of clients will be able to cover the assets of FTX after the restructuring.
Due to the specifics of the cryptocurrency industry, the procedure for returning funds to FTX customers has not yet been determined, the expert says. But in his opinion, there is a significant likelihood that it will be similar to the procedure for returning funds to clients of the large Mt.Gox exchange, which went bankrupt in 2014. Clients had to apply online with a choice of how to receive the payout. However, by the way, the same Mt.Gox only this summer, eight years after bankruptcy, began preparations for payments to creditors.
What should an FTX client do to get their funds back? To return their assets to an FTX client, it makes sense to track the filing of class-action lawsuits against the exchange, our lawyer believes. According to him, if there is such a claim from the clients of the exchange, you can join it and try to return at least part of your funds. In the event of a lawsuit, it may be necessary to prove ownership of assets on the FTX exchange, suggest lawyers working with crypto investors from Taiwan. To do this, they recommend not relying only on screenshots of their accounts: the court may not accept them because of the high probability of forgery. Instead, advocates advise you to submit a regular withdrawal request from the FTX platform and then keep a letter of cancellation of this request, which should come to your email, since the withdrawal of funds is terminated. In addition, it is recommended to save emails about previous deposits and withdrawals of assets.
According to the CEO of the ASTL project Andjei Korotkewič, the collapse of the FTX crypto exchange and its affiliated structures, as well as the collapse of the BlockFi crypto lending platform, thank God, did not affect either the positions of the capitalization of the ASTL investment project, or the activities of the project as a whole, since no financial assets both the project itself and investors have never been involved in the scams of FTX and investment funds and projects affiliated with it, and, accordingly, have not suffered. The project also did not conduct any financial dealings with the Oxygen, AAX and Bitvo crypto platforms.
Moreover, against the backdrop of all this “disgrace”, according to the CFO of the project Konstantinas Sizovas, the project even managed to slightly increase the total capitalization of the cryptocurrency basket. “The ASTL investment project demonstrates great prospects. Already, the creators have managed to attract more than $5 million into it, and the investment rate continues to grow rapidly, especially since the new, second stage of pre-sales with an increase in value started on time. If we analyze other similar projects on the cryptocurrency market, we can conclude that the price of ASTL tokens may increase several times when listings on exchanges start,” he added.
Investors need to be able to directly and prospectively invest fiat and cryptocurrency assets in projects that provide a stable income that obviously exceeds inflationary expectations and is not subject to any sanctions, blocking and confiscation. And, at the same time, they have high liquidity. The ASTL project is a simple and elegant solution for potential investors – an investment in the development of the real sector of a diversified portfolio of cryptocurrencies, with a fairly high ROI (up to 18% annually) with payments in stablecoin (USDT).