The Federal Reserve Board, on August 15, 2022, issued final guidelines for regional Reserve Banks to use when considering applications for Federal Reserve “master accounts”—deposit accounts that enable direct access to the Federal Reserve’s payment systems and provide critical infrastructure to financial institutions operating in the United States. The final guidelines comprise a set of principles and three-tiered review framework that, according to the Board, should bring greater transparency and consistency to the application process. 

Although the final guidelines will help to move forward the discussion around account access, the Board left key issues open. The fintech community must continue to wait for resolution as Reserve Banks and federal courts grapple with the ultimate question: What types of nontraditional financial services providers are eligible for master accounts, and on what terms?

The Crypto-Related Bankruptcies Timeline serves as an interactive compilation of select dates relating to bankruptcies of companies involved in cryptocurrency, including hedge funds, lending companies, and exchanges.  Beginning with Mt. Gox filing for Chapter 15 bankruptcy protecting in February 2014, the Timeline includes relevant information regarding crypto-related companies that filed for bankruptcy protection, as well as, where applicable, their suspension of deposits and withdrawals in advance of filing for bankruptcy.  

This Timeline is meant to be a resource for those following bankruptcies in the crypto market.  The Timeline is for informational purposes only and does not constitute legal advice.  If you are planning to file for bankruptcy, you may want to contact experienced bankruptcy and restructuring counsel.

Information in the Timeline is provided “as-is,” and may not reflect the latest information regarding crypto-related bankruptcies. The Timeline contains links to third-party websites.  Such links are only for the convenience of the reader or user.  Use of and access to the Timeline, including the links contained within the Timeline, do not create an attorney-client relationship with Perkins Coie LLP.

Voyager Holdings filed a Notice of Auction with the bankruptcy court announcing an Auction* of its assets (or the assets Voyager believes it is entitled to sell). The Auction will start on September 13 in New York and promises to be anything but simple or dull. Whatever occurs and whichever bidder(s) emerge(s) successful, expect a hotly contested Sale Hearing.

An interesting aspect of bankruptcy auctions is their flexibility compared to a regular auction. Voyager has been soliciting bids on anything and everything—up to and perhaps including a bid for the whole kit and kaboodle. Qualified bidders were invited to submit offers for 100% of Voyager’s equity, all of Voyager’s assets, or some unspecified subset of the assets.

Continue Reading Voyager—The Auction to Come
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Continue Reading Blockchain Week in Review: Week of September 9, 2022

The Celsius Network bankruptcy cases provide another opportunity for parties to acquire their assets and/or operations. As predicted in an earlier post, the bankruptcy court issued an order in the Celsius cases, approving bidding procedures that outline the entire process and steps to be followed by anyone interested in submitting a bid.

Anyone interested in buying assets or operations from Celsius will need to follow the process outlined in the order to connect with the advisors to Celsius, sign a nondisclosure agreement (NDA), and structure a bid with the bid requirements to become a Qualified Bid* as defined in the order.  

Continue Reading Celsius Bidding Procedures Create Possible Bidding Opportunities

A host of reasons can cause bankruptcy timelines to slide—ongoing negotiations, buyers dealing with their lenders, holidays, court scheduling issues, perhaps a dearth of interested buyers, and more. These types of changes are usually more of a stew of events than they are attributable to any single ingredient.

An earlier post included a timetable for the Voyager sale process that contemplated a September 8 hearing to approve one or more sale of assets to an as-of-yet-undetermined bidder or bidders. Voyager also initially planned for a Chapter 11 plan confirmation process that would have a disclosure statement hearing on September 29.

Continue Reading Voyager—Bankruptcy Timelines Begin to Slide

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), on August 8, 2022, sanctioned virtual currency mixer Tornado Cash. OFAC alleged that it had been “used to launder more than $7 billion worth of virtual currency since its creation in 2019 [, including] over $455 million stolen by the Lazarus Group[,]” a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that OFAC identified for sanctions in 2019, in what the agency characterized as the largest known virtual currency heist to date.[1]

Continue Reading OFAC Takes Action Against Virtual Currency Tornado Cash in Novel Application of Sanctions Authorities

Something big happened the Celsius bankruptcy case last week. The filed by the Office of The United States Trustee (“UST”), a part of the US Department of Justice, has filed a motion asking the Court to appoint an examiner in the Celsius chapter 11 case. According to the UST, an examiner is needed because of: (1) the dozens of customer letters to the Court, (2) multiple pre-bankruptcy lawsuits and regulatory actions, (3) questions about decisions made and actions taken, (4) the state of cryptocurrency markets, (5) a lack of visibility into Celsius, (6) Celsius’ illiquidity, and (7) the divergent interests of stakeholders.

If the UST’s motion is granted, the examiner may look into, some or all of the following:

  • Cryptocurrency – how much does Celsius hold? Where is it? Who owns what?
  • Commingling – what customer assets were commingled and what is the consequence of that?
  • Intercompany loans – why were large intercompany loans made?
  • Underwriting – what underwriting of third-party loans occurred?
  • GK8 – why was GK8 acquired?
  • Tether loan – why was the Tether loan liquidated when it was?
  • Taxes – have all taxes due been paid?
  • Mining operations – what mining and other equipment does Celsius owned or otherwise hold?  Is it cost-effective to continue?
  • Management – did the Celsius management and board of directors satisfy their duties?
  • On the eve of bankruptcy – who got crypto from or paid by Celsius close to bankruptcy, who did not and why?
  • Securities laws and regulations – were unregistered securities sold in violation of securities laws?
  • Hedging – what was hedged and what should have been hedged?
  • Pledging – whose digital assets did Celsius pledge? To what end?
  • Stories – what were customers and potential customers told? What should they have been told?
  • Market upheaval – how did changes in crypto markets impact Celsius? Should those changes have been expected?
  • Licensing – did Celsius obtain necessary licenses and other governmental approvals?
  • Other – any other issues raised by the judge or another party.

The UST believes a publicly filed examiner’s report will give visibility that is both lacking and needed. The motion says, “Given the unique nature of these cases, a public report which provides transparency as to the debtors’ business model and operations, their investments, their lending transactions, and the nature of customer accounts is essential….”

The UST hopes an examiner would also consider what causes of action the creditors committee might be authorized to pursue on behalf of the bankruptcy estate and thereby customers, creditors and potentially equity holders.

Keep reading and watching. The examiner motion is scheduled to be heard on September 14, 2022 and objections are due on September 7, though those dates may change.

Voyager filed its Disclosure Statement and First Amended Plan (Plan) on Friday, August 12. A primary purpose of a Chapter 11 plan is to define how creditors’ and customers’ claims are proposed to be treated. For a business such as Voyager’s, the plan would be expected to include how customers’ claims will be treated. A disclosure statement typically describes the plan, the debtors’ history, events leading to bankruptcy, and for debtors that intend to operate after bankruptcy, includes projections of its future under the plan (along with a liquidation analysis to compare the plan with a liquidation of the debtors).

Calling Voyager’s Plan a shell is an overstatement to anyone who has ever searched for crustaceans by the seashore. It does not indicate what customers or creditors will receive. It does not indicate what Voyager’s future will or may hold, since the bidding process is still underway and there is no way to know whether there will be one or more “white knights” or if Voyager will seek to keep existing management in charge.

Continue Reading Voyager Holdings—Disclosure Statement and Plan Leave Customers and Creditors Asking “Who’s on First?”

As we’ve previously noted, customers and other creditors of Voyager Digital Holdings face a deadline to file official “proofs of claim” setting forth the amounts they assert that Voyager owes them. The deadline is 5:00 p.m. ET on October 3, 2022. Information regarding the deadline, filing requirements, and procedures is available in the bankruptcy court’s order that established the deadline.

            The court-approved proof of claim form for customers can be found here.

            Proofs of claim can be filed electronically here.

Continue Reading Voyager Bankruptcy Shows a Smorgasbord of Digital Assets