Crypto Bankruptcy: Recovering Assets from Failed Exchanges (FTX Lessons)

If you had funds on FTX when it collapsed in November 2022, you're likely familiar with the sickening feeling of watching your assets disappear overnight. Perhaps you've received automated emails about "bar dates" and "proof of claim forms," unsure whether to hire an attorney, sell your claim, or wait it out.

I've been on the other side of these cases. As a bankruptcy attorney at Dechert LLP and White & Case LLP, I represented creditors in the FTX, Genesis, and Celsius bankruptcies—three of the largest crypto insolvencies in history, involving billions in customer assets. I've seen firsthand what works, what doesn't, and what creditors wish they had known from day one.

This article shares practical lessons from those cases: how crypto bankruptcy actually works, what recovery rates to realistically expect, and how to make strategic decisions about your claim.

How Crypto Bankruptcy Differs from Traditional Bankruptcy

When a crypto exchange fails, it typically files for Chapter 11 bankruptcy—a reorganization process designed to preserve value and maximize creditor recoveries. This differs fundamentally from Chapter 7 liquidation, where a trustee simply sells everything and distributes the proceeds.

Chapter 11 Characteristics:

• The debtor (usually) remains in control of operations during bankruptcy
• A court-appointed creditor committee represents unsecured creditors
• The case can take 18-36 months or longer to reach distributions
• The debtor proposes a reorganization plan that must be approved by creditors and the court

Chapter 7 Characteristics:

• A trustee takes immediate control and liquidates all assets
• The business ceases operations entirely
• Typically faster but often yields lower recoveries for unsecured creditors
• No reorganization—just asset liquidation and distribution

FTX, Genesis, and Celsius all filed Chapter 11 cases, preserving the option to recover assets, pursue litigation against insiders, and negotiate better outcomes for creditors.

The Critical Question: Do You Own Your Crypto?

The single most important issue in crypto exchange bankruptcies is whether customer assets are customer property (returned to you) or property of the bankruptcy estate (shared among all creditors).

This determination depends on the exchange's Terms of Use and the type of account you held.

Customer Property (Best Case): If the court determines that cryptocurrency belongs to customers, you're entitled to return of those specific assets. This typically applies when:

• The exchange held assets in custody for you
• Terms of Use clearly stated you retained ownership
• Assets were segregated from the exchange's operational funds
• You held assets in a custody or wallet account (not lending/staking)

General Unsecured Claim (Worst Case): If assets are deemed property of the bankruptcy estate, you become a general unsecured creditor competing with all other creditors for a share of available assets. This often applies when:

• You deposited assets in an "Earn" or yield-generating account
• Terms of Use granted the exchange ownership or rights to use your assets
• The exchange commingled customer funds with operational assets
• You permitted the exchange to lend or stake your assets

Real Example: In the Celsius bankruptcy, the court ruled that assets in "Earn" accounts became property of the bankruptcy estate because Celsius's Terms of Use transferred ownership to the company. Earn account holders became unsecured creditors, while Custody account holders retained ownership of their specific crypto assets.

This distinction has profound implications for recovery rates and timelines.

Lessons from Three Major Cases: FTX, Genesis, and Celsius

Having worked directly on these bankruptcies representing creditor interests, I can share specific outcomes and strategic lessons from each case.

FTX: The Unexpected Recovery Success Story

Background: FTX filed for Chapter 11 bankruptcy on November 11, 2022, following the revelation of massive fraud by founder Sam Bankman-Fried. Initial estimates suggested customer losses could exceed $8 billion, with many expecting pennies-on-the-dollar recoveries.

Timeline:

• November 11, 2022: Bankruptcy filing
• September 29, 2023: Proof of claim bar date (10 months after filing)
• May 7, 2024: Amended reorganization plan filed (17 months)
• October 7, 2024: Court confirms reorganization plan (23 months)
• May 30, 2025: First major distributions begin (30 months)

Recovery Outcomes: 98% of FTX creditors will receive 119% of their allowed claim valued as of November 2022. The estate recovered between $14.7-$16.5 billion in assets through:

• Clawback litigation against insiders
• Asset sales (Solana tokens, venture investments, real estate)
• Recovery of funds from related entities
• Criminal forfeiture proceedings

The Catch: While creditors receive 119% of their November 2022 claim value, they don't benefit from subsequent cryptocurrency price appreciation. A customer with 1 Bitcoin (worth ~$20,000 in November 2022) receives $23,800 in cash—not 1 Bitcoin (worth ~$60,000+ in 2025).

This valuation methodology became controversial but was approved by the court.

Strategic Lesson: FTX creditors who sold their claims in early 2023 at 20-30 cents on the dollar missed substantial recoveries. By September 2023, claims traded at 50+ cents. Those who waited for distributions received over 100% of petition-date value.

Claims Trading Activity:

• February 2023: Claims traded at 20 cents on the dollar
• September 2023: Claims reached 50-53 cents
• Late 2024: Claims approached 60+ cents as confirmation neared

Genesis: In-Kind Recovery Pioneer

Background: Genesis Global Capital, a major crypto lender, filed for Chapter 11 on January 19, 2023, after halting withdrawals following the FTX collapse. The case involved approximately $4.9 billion in customer claims.

Timeline:

• January 19, 2023: Bankruptcy filing
• May 22, 2023: General claims bar date (4 months)
• May 17, 2024: Court approves reorganization plan (16 months)
• August 2024: Plan effective date and distributions begin (19 months)

Recovery Outcomes: Genesis pioneered in-kind distributions, returning cryptocurrency on a coin-for-coin basis rather than capping claims at petition-date dollar values:

• Bitcoin creditors: 51% coin-for-coin recovery (166% of petition-date dollar value)
• Ethereum creditors: 66% coin-for-coin recovery (153% of petition-date value)
• US dollar creditors: 100% recovery

Total distributions: approximately $4 billion in crypto assets and cash, plus an additional $2.2 billion to Gemini Earn users.

Strategic Innovation: Unlike FTX, Genesis did not cap creditor recoveries at petition-date values. This approach recognized that cryptocurrency appreciation benefits should flow to creditors who owned the underlying assets.

Strategic Lesson: Genesis creditors who advocated for in-kind distributions (rather than accepting dollar-denominated claims) achieved superior outcomes. The creditor committee's negotiation of this structure added billions in value.

New York Attorney General Settlement: The NYAG secured a $2 billion victims' fund, agreeing to subordinate enforcement claims and direct all recoveries to creditors—a significant advocacy win that increased available distributions.

Celsius: Tiered Recovery Based on Account Type

Background: Celsius Network filed for Chapter 11 on July 13, 2022, after freezing customer withdrawals. The case involved multiple account types with different legal treatment.

Timeline:

• July 13, 2022: Bankruptcy filing
• January 3, 2023: Proof of claim bar date (6 months)
• January 31, 2024: Emergence from bankruptcy (18 months)
• February 1, 2024: Initial distributions of $2 billion
• November 2024: Second distribution of $127 million
• August 2025: Third distribution of $220.6 million

Recovery Outcomes: As of August 2025, creditors have received distributions totaling approximately $2.35 billion:

• Overall recovery rate: 60.4% of eligible claims (as of second distribution)
• Custody account holders received better treatment (closer to 100% recovery)
• Earn account holders received lower recoveries as general unsecured creditors
• Some creditors receive equity in Ionic Digital LLC (reorganized mining business)

Account Type Matters: The court ruled that Celsius Custody account holders retained ownership of their crypto, while Earn account assets became property of the estate. This created a two-tier recovery system based purely on account type selection.

Strategic Lesson: The critical importance of reading Terms of Use before depositing assets on an exchange. Custody account holders at Celsius fared dramatically better than Earn account holders—solely due to contractual language.

Ongoing Distributions: Unlike FTX's single large distribution, Celsius has made multiple distributions as the estate recovers assets through litigation against executives and third parties (including ongoing Tether litigation).

Understanding Proof of Claim Filing

A proof of claim is your formal statement to the bankruptcy court documenting what the debtor owes you. Missing the filing deadline (bar date) can forfeit your right to recovery entirely.

Filing Requirements

What You Must Include:

1. Account information: Exchange account username, email, customer ID
2. Asset details: For crypto claims, specify the type and quantity of each cryptocurrency
3. Dollar amount: State the USD value as of the petition date
4. Supporting documentation: Account statements, transaction history, screenshots
5. Contact information: Current mailing address and email for court notices

Common Filing Methods:

• Online claims portal: Most crypto bankruptcies establish dedicated websites (e.g., FTX used Kroll's restructuring platform)
• Mail submission: Official Bankruptcy Form 410 sent to claims agent
• Attorney filing: Legal counsel can file on your behalf through court electronic filing system

Critical Deadlines

FTX: September 29, 2023 (4:00 PM ET) — 10 months after petition date

Genesis: May 22, 2023 (4:00 PM ET) — 4 months after petition date

Celsius: January 3, 2023 (5:00 PM ET) — 6 months after petition date

Late Filing Consequences:

• Claims filed after the bar date are subject to objection and disallowance
• You may be bound by the debtor's scheduled claim amount (which may be incorrect)
• You lose the right to dispute or amend your claim
• In most cases, late claims receive no distribution

Pro Tip: Even if the debtor schedules your claim correctly, filing a proof of claim gives you standing to participate in the case, receive notices, vote on the reorganization plan, and object to unfavorable provisions. Always file.

Do You Need an Attorney to File?

Simple Claims (Usually Don't Need Attorney):

• Standard customer account with clear balance
• Debtor's scheduled amount matches your records
• No disputes about account ownership or transfers
• Total claim under $50,000

Complex Claims (Strongly Consider Attorney):

• Claim amount disputed by debtor
• Multiple accounts or entities involved
• Claims involving margin trading, derivatives, or complex products
• Preference actions or clawback exposure
• Claims exceeding $100,000
• Classification disputes (secured vs. unsecured, priority treatment)

Filing a basic proof of claim is straightforward and designed for self-representation. However, maximizing recovery often requires legal expertise.

Creditor Representation: Individual vs. Committee

One of the most strategic decisions creditors face is whether to retain individual counsel or rely on the court-appointed creditor committee.

Official Creditor Committee Representation

How It Works: In Chapter 11 cases, the U.S. Trustee appoints an Official Committee of Unsecured Creditors (typically 7-9 members representing the largest or most diverse creditor groups). The committee hires legal counsel and financial advisors to represent all unsecured creditors' interests.

Committee Counsel's Role:

• Investigate debtor's prepetition conduct and asset transfers
• Review and negotiate the reorganization plan
• Advocate for maximum distributions to unsecured creditors
• Litigate on behalf of all unsecured creditors
• Monitor estate administration and fee applications

Cost: Committee professionals' fees are paid by the bankruptcy estate—not individual creditors. This means you receive expert representation at no direct cost to you.

Examples from Major Cases:

• FTX: Official Committee incurred $81 million in professional fees (paid by estate)
• Genesis: Committee represented thousands of creditors in negotiating in-kind distributions
• Celsius: Committee advocated for customer property treatment and plan terms
• Voyager: Committee incurred $16.5 million in fees over 11 months

Advantages:

• No cost to individual creditors
• Sophisticated Big Law representation (firms like White & Case, Paul Weiss, McDermott Will)
• Access to confidential estate information
• Ability to influence plan terms affecting all creditors
• Standing to object to improper estate expenditures

Limitations:

• Committee represents collective interests, not individual circumstances
• Cannot assist with claim-specific disputes or issues
• Limited communication with individual creditors (typically through periodic updates)
• Cannot provide individual legal advice

Individual Creditor Representation

When to Consider Individual Counsel:

1. Disputed claims: Debtor objects to your claim amount or validity
2. Large claims: Claims exceeding $500,000 where individual attention matters
3. Preference exposure: You received transfers within 90 days before bankruptcy that may be subject to clawback
4. Classification disputes: Fighting for priority or secured status
5. Complex situations: Multiple accounts, entity ownership issues, derivative claims
6. Strategic transactions: Buying or selling claims on secondary market

Cost Structure:

Based on my experience representing creditors in crypto bankruptcies and consistent with legal market rates:

Hourly Rates:

• Partners: $900-$1,500/hour
• Associates: $400-$800/hour
• Paralegals: $200-$400/hour

Estimated Total Costs by Claim Complexity:

Simple Claim Review and Monitoring ($3,000-$8,000):

• Review scheduled claim and debtor's treatment
• File proof of claim if needed
• Monitor case developments
• Review and analyze reorganization plan
• No litigation or extensive negotiation

Moderate Complexity ($17,000-$50,000):

• Disputed claim requiring response to objection
• Negotiation with debtor over claim amount
• Preference defense (fighting clawback demand)
• Claims trading advice and documentation
• Plan negotiation and voting strategy

High Complexity ($75,000-$225,000+):

• Significant claim litigation (adversary proceeding)
• Multi-party disputes over asset ownership
• Complex preference litigation
• Standing to bring derivative claims on behalf of estate
• Participation in plan negotiation as major creditor

Fee Arrangements:

• Hourly billing: Most common for bankruptcy work
• Flat fee: Possible for discrete tasks (proof of claim filing, claim sale transaction)
• Contingency: Rare in bankruptcy but possible for preference defense (e.g., 30% of amount saved)
• Hybrid: Reduced hourly rate plus success fee

Reality Check: For most individual creditors with claims under $100,000, individual representation costs exceed the value added. The creditor committee provides excellent representation at no cost. Individual counsel makes sense primarily for disputed claims, preference exposure, or claims exceeding $250,000.

Strategic Decision Framework

Rely on Committee Counsel If:

• Your claim is scheduled correctly or filing proof of claim is straightforward
• No individual disputes with debtor
• Claim amount under $250,000
• Standard unsecured customer claim
• No preference or clawback exposure

Retain Individual Counsel If:

• Debtor objects to your claim
• Claim exceeds $500,000
• Preference demand or clawback exposure
• Classification disputes
• Complex account structures or ownership issues
• Considering significant claims trading transactions

Questions to Ask Potential Counsel:

1. What's your experience with crypto bankruptcies specifically?
2. Have you represented creditors in FTX, Genesis, Celsius, or similar cases?
3. What's your fee structure and estimated total cost for my situation?
4. What value can you add beyond committee representation?
5. What's the expected timeline and recovery improvement?

Claims Trading: Strategic Considerations

The secondary market for bankruptcy claims allows creditors to sell their claims for immediate liquidity rather than waiting years for distributions. This market has become particularly active in crypto bankruptcies.

How Claims Trading Works

Mechanics:

1. Claims marketplace: Platforms like Xclaim, Cherokee, and Claims Market connect sellers with institutional buyers
2. Pricing discovery: Claims trade at a percentage of face value (e.g., "53 cents on the dollar")
3. Due diligence: Buyers review claim documentation, estate assets, and recovery projections
4. Transfer agreement: Formal claim assignment transfers your rights to the buyer
5. Court approval: Bankruptcy court must approve claim transfers (usually ministerial)
6. Payment: Seller receives immediate cash; buyer receives future distributions

Typical Timeline: 2-8 weeks from initial contact to closing and payment.

Recent Crypto Bankruptcy Claims Pricing

FTX Claims:

• February 2023: 20 cents on the dollar
• September 2023: 50-53 cents
• Late 2024: 57 cents
• Current: Limited trading as distributions have begun

Genesis Claims:

• Traded at approximately 50 cents during case
• In-kind distribution structure increased value

Celsius Claims:

• Traded at 35-40 cents
• Actual recovery: 60.4% (and ongoing)

Other Crypto Bankruptcies:

• Alameda Research: 10-15 cents
• Three Arrows Capital: 7-9 cents
• Voyager: Varied based on acquisition terms

Factors Affecting Claim Prices

Higher Prices Indicate:

• Strong estate assets relative to claims
• Successful asset recovery efforts
• Shorter expected timeline to distribution
• Favorable legal rulings on key issues
• Competent estate management
• Claims approaching plan confirmation

Lower Prices Suggest:

• Uncertain recovery prospects
• Complex litigation or regulatory issues
• Long timeline to distribution
• Management or governance problems
• Limited estate liquidity
• Early-stage bankruptcy (high uncertainty)

Strategic Decision: Sell or Hold?

Reasons to Sell Your Claim:

1. Immediate liquidity needs: You need cash now and can't wait 18-36 months
2. Certainty over upside: Guaranteed payment vs. uncertain future recovery
3. Risk reduction: Eliminate exposure to adverse rulings, estate mismanagement, or prolonged delays
4. Opportunity cost: Can invest proceeds in other opportunities with better risk-adjusted returns
5. Small claim size: Administrative burden of monitoring case exceeds value of potential additional recovery
6. Low market confidence: If current pricing is 10-20 cents, buyers expect minimal ultimate recovery

Reasons to Hold Your Claim:

1. High market pricing: If claims trade above 50 cents, market expects substantial recovery
2. Strong estate performance: Asset recovery efforts are succeeding (like FTX's $14.7B recovery)
3. Favorable legal rulings: Key issues resolved in creditors' favor
4. In-kind distribution potential: You prefer cryptocurrency over cash (important if you believe in long-term crypto appreciation)
5. Short timeline to distribution: If distributions expected within 6-12 months, waiting may yield better returns
6. Large claim: Transaction costs and discounts matter less on multi-million dollar claims

Real Example: FTX creditors who sold at 20 cents in early 2023 received $20,000 on a $100,000 claim. Those who waited received $119,000+ by mid-2025. However, sellers received immediate liquidity 24 months earlier—and avoided uncertainty about whether recovery would succeed.

Claims Trading Risks

Seller Risks:

1. Claim objections: If buyer's due diligence reveals claim defects, purchase agreement may allow rescission or price adjustment
2. Setoff rights: You lose ability to offset debtor's claims against you
3. Tax implications: Claim sale may trigger capital loss recognition
4. Recourse provisions: Many agreements allow buyer to demand refund if claim is reduced or disallowed

Buyer Risks:

1. Claim disallowance: Court may reduce or eliminate claim
2. Plan rejection: Bankruptcy plan may not be confirmed
3. Lower recovery: Actual distributions may be less than projected
4. Timeline delays: Case may take longer than expected

Due Diligence for Sellers:

• Verify buyer is reputable institutional investor (not individual speculator)
• Understand recourse provisions in purchase agreement
• Confirm pricing reflects recent market transactions
• Consider tax consequences with accountant
• Review claims portal to ensure claim is properly filed and not subject to objection

Recovery Timeline: What to Expect

Based on the major crypto bankruptcy cases, here's a realistic timeline framework:

Typical Chapter 11 Crypto Bankruptcy Timeline

Months 0-3: Initial Chaos and Stabilization

• Bankruptcy filing and first day motions
• Asset freeze and customer withdrawal halt
• Appointment of creditor committee
• Initial asset inventory and investigation
• Early media coverage and creditor panic

Months 3-6: Information Gathering

• Debtor files schedules of assets and liabilities
• Proof of claim bar date set and noticed
• Committee retains professionals and begins investigation
• Estate identifies recoverable assets
• Initial clawback and litigation strategies developed

Months 6-12: Claims Process and Investigation

• Creditors file proofs of claim
• Estate reviews and potentially objects to claims
• Committee investigates prepetition conduct
• Asset recovery litigation initiated
• Fee applications and administrative expenses mount

Months 12-18: Plan Development

• Debtor proposes initial reorganization plan
• Negotiations with creditor committee
• Disputes over plan classification and treatment
• Disclosure statement filed and potentially amended
• Mediation of contentious issues

Months 18-24: Plan Confirmation

• Disclosure statement approval
• Plan voting and solicitation
• Confirmation hearing
• Court approves plan (or requires modifications)
• Effective date and initial distributions

Months 24-36+: Distributions

• Initial distribution to creditors
• Ongoing asset recovery and subsequent distributions
• Wind-down of estate operations
• Final distributions and case closure

Actual Case Timelines

FTX:

• Filing to bar date: 10 months
• Filing to plan confirmation: 23 months
• Filing to first distribution: 30 months
• Total estimated duration: 36+ months

Genesis:

• Filing to bar date: 4 months
• Filing to plan confirmation: 16 months
• Filing to distributions: 19 months
• Total duration: ~20 months (relatively fast)

Celsius:

• Filing to bar date: 6 months
• Filing to emergence: 18 months
• Ongoing distributions continuing 36+ months
• Total duration: 36+ months with ongoing recoveries

What Causes Delays?

Common Timeline Extenders:

1. Complex asset recovery litigation: Pursuing fraudulent transfers, preference actions, officer/director claims
2. Regulatory investigations: SEC, CFTC, DOJ investigations and enforcement actions
3. Valuation disputes: Disagreements over crypto asset valuation methodology
4. Multi-jurisdictional issues: International assets and claims requiring coordination
5. Plan disputes: Contentious negotiations over distribution priorities
6. Claims objections: Significant disputed claims requiring resolution
7. Insider litigation: Cases against founders, executives, and insiders

Faster Timeline Indicators:

• Clear asset base with limited recovery litigation
• Cooperative management and governance
• Single jurisdiction with minimal international complexity
• Creditor consensus on plan terms
• Prepackaged or pre-negotiated bankruptcy

Practical Guidance: What to Do Now

Whether you're a current creditor in a pending crypto bankruptcy or preparing for potential future exchange failures, here's actionable guidance:

If You're Currently a Creditor

Immediate Actions:

1. Verify your claim filing: Log into the claims portal and confirm your proof of claim was properly filed and reflects accurate amounts
2. Monitor case developments: Sign up for court notice service or check the restructuring website weekly
3. Preserve documentation: Maintain account statements, transaction records, and all correspondence
4. Understand your classification: Determine whether you're likely customer property or general unsecured creditor
5. Evaluate representation needs: Assess whether your situation requires individual counsel beyond committee representation

Strategic Decisions:

1. Claims trading assessment: Research current pricing on secondary markets; calculate whether immediate liquidity or waiting serves your financial needs better
2. Tax planning: Consult with a tax advisor about loss recognition timing and strategies
3. Risk monitoring: Track estate asset recovery efforts and adjust expectations accordingly
4. Plan voting: When disclosure statements are distributed, carefully review treatment and vote your informed preference

Red Flags Requiring Immediate Attention:

• Objection to your claim filed by debtor
• Preference or clawback demand letter
• Notice of classification different from expected
• Plan provisions that negatively impact your recovery

For Future Protection

Due Diligence Before Using Exchanges:

1. Read the Terms of Use: Understand whether you retain ownership of deposited assets
2. Account type matters: Custody accounts generally provide better bankruptcy protection than Earn/yield accounts
3. Segregation practices: Prefer exchanges that segregate customer assets from operational funds
4. Proof of reserves: Use exchanges that provide cryptographic proof of reserves
5. Regulatory compliance: Choose exchanges registered with FinCEN and compliant with state money transmitter laws

Risk Management:

1. Diversification: Don't keep all assets on a single exchange
2. Self-custody: For long-term holdings, use hardware wallets or self-custody solutions
3. Insurance: Some exchanges offer limited insurance; understand coverage limits
4. Monitoring: Watch for warning signs (withdrawal delays, executive departures, regulatory actions)

Warning Signs of Exchange Distress:

• Delayed or halted withdrawals
• Lack of proof of reserves or audit resistance
• Significant customer service degradation
• Executive turnover or departures
• Regulatory enforcement actions
• Unusual terms of use changes
• Commingling of customer and corporate funds

Key Takeaways from Three Years of Crypto Bankruptcies

Having represented creditors through these cases from initial filing through distributions, here are the most important lessons:

1. Recovery rates vary dramatically—from 60% to 119%+

The FTX outcome (119% recovery) is exceptional, not typical. Celsius creditors are receiving approximately 60% of claims, while some crypto bankruptcies (like Three Arrows Capital) yield under 10%. Don't assume full recovery.

2. Timeline is always longer than expected

Plan for 24-36 months minimum from filing to substantial distributions. Even "fast" cases like Genesis took 19 months. Budget accordingly and don't depend on bankruptcy recoveries for near-term liquidity needs.

3. Account type and Terms of Use determine everything

The difference between Celsius Custody accounts (near-100% recovery) and Earn accounts (60% recovery as unsecured claims) came down entirely to contractual language. Read terms before depositing assets.

4. Creditor committee representation is highly valuable—and free

The FTX committee's $81 million in legal fees bought sophisticated advocacy that benefited all creditors at no individual cost. Trust the process and leverage committee representation.

5. Claims trading provides real optionality

The secondary market offers genuine liquidity for those who need it. FTX claims that sold for 20 cents in early 2023 ultimately yielded 119%+ to holders, but sellers received immediate certainty. Both strategies can be rational depending on your circumstances.

6. Individual attorney representation is expensive and rarely justified

Unless your claim is disputed, exceeds $500,000, or involves preference exposure, individual counsel costs likely exceed value added. Most creditors are better served by committee representation.

7. Filing your proof of claim is critical—and easy

Missing the bar date can forfeit your entire recovery. Filing is straightforward through online portals. Don't skip this step, even if the debtor scheduled your claim.

8. In-kind distributions matter for long-term holders

Genesis's in-kind recovery approach preserved cryptocurrency upside for creditors. If you're a long-term crypto believer, advocate for coin-for-coin distributions rather than petition-date dollar valuations.

Conclusion: Hope and Realism

Three years after the 2022 crypto bankruptcy wave, we now have data: creditors can achieve meaningful recoveries, but the process is long, complex, and uncertain.

FTX creditors are receiving 119% of petition-date values. Genesis returned billions in-kind, allowing creditors to benefit from cryptocurrency appreciation. Celsius has distributed over $2.3 billion with more to come. These outcomes far exceeded initial expectations when exchanges first collapsed.

But recovery is not guaranteed, not quick, and not without strategic decisions. The difference between receiving 20 cents on the dollar (by selling your claim early) and 119% (by waiting for FTX distributions) came down to tolerance for uncertainty, liquidity needs, and market timing.

If you're navigating a crypto bankruptcy as a creditor:

• File your proof of claim before the bar date
• Preserve all documentation
• Leverage creditor committee representation
• Make informed decisions about claims trading based on your specific circumstances
• Consult specialized counsel if your claim is disputed or exceptionally large
• Prepare for a multi-year process

Having worked these cases from the inside, I can tell you: competent legal representation (whether through the committee or individual counsel), strategic decision-making, and patience are your greatest assets in crypto bankruptcy proceedings.

The crypto bankruptcy landscape is still evolving. Each case provides new precedents about asset classification, recovery mechanisms, and creditor treatment. As the industry matures, we'll likely see more sophisticated resolution frameworks and potentially better customer protections.

Until then, understanding how the current system works—and how to navigate it effectively—can mean the difference between losing everything and achieving meaningful recovery.

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Chanté Eliaszadeh represented creditors in the FTX, Genesis, and Celsius bankruptcies at Dechert LLP and White & Case LLP. She now advises crypto companies and creditors on insolvency, restructuring, and asset recovery matters at Astraea Counsel APC.

Need Crypto Bankruptcy Guidance?

Astraea Counsel represented creditors in the FTX, Genesis, and Celsius bankruptcies, recovering assets for tens of thousands of account holders. We provide strategic counsel on asset recovery, proof of claim filing, and creditor representation. Explore our Dispute Resolution services.

Related Resources

• Treasury Management for Crypto Companies - Custody practices that protect assets from bankruptcy risk
• DAO Liability After Lido: Why You Need a Legal Wrapper - Entity structures that limit bankruptcy exposure
• Corporate & Transactions Practice - Strategic legal counsel for crypto companies
• Contact Us - Discuss your asset recovery needs

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Disclaimer: This article provides general information about crypto bankruptcy proceedings and does not constitute legal advice. Bankruptcy law is complex and fact-specific. Consult qualified legal counsel for advice regarding your specific situation.

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Sources and Further Reading

1. FTX Trading Ltd. Bankruptcy Case, Case No. 22-11068 (Bankr. D. Del.), available at https://restructuring.ra.kroll.com/ftx/
2. Genesis Global Holdco, LLC Bankruptcy Case, Case No. 23-10063 (Bankr. S.D.N.Y.), available at https://restructuring.ra.kroll.com/genesis/
3. Celsius Network LLC Bankruptcy Case, Case No. 22-10964 (Bankr. S.D.N.Y.), available at https://cases.stretto.com/celsius/
4. SEC v. Bankman-Fried, Case No. 22-cv-10501 (S.D.N.Y. 2022)
5. In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023) (ruling on customer property vs. estate property)
6. Federal Rules of Bankruptcy Procedure, Rule 3003 (Proof of Claim Filing Requirements)
7. 11 U.S.C. § 541 (Property of the Estate)
8. Sullivan & Cromwell LLP, "FTX's $14+ Billion Bankruptcy Plan Approved in 'Model Case'" (October 2024)
9. Cleary Gottlieb Steen & Hamilton LLP, "Genesis Completes Debt Restructuring" (2024)
10. CoinDesk, "FTX Creditors Will Make Money on Bankruptcy: $1.19 for Every Dollar" (October 7, 2024)