Crypto companies are emerging from bankruptcy: What it means for customers, markets and the industry

CNBC Crypto World explores what it means for the industry, markets and customers with tied up funds now that several crypto companies are emerging from bankruptcy.

Between 35 and $45 billion of funds are still tied up in crypto bankruptcies that’s according to a February 15th estimate from xclaim now some of the companies that went under in the industry’s 2022 meltdown are emerging from bankruptcy all these different companies tied back to 3ac and so when

3ac went bust it really set a clock for the rest of them there were two tough years we had teruna collapse we had FTX we had celius so far this year Celsius exited bankruptcy and began repaying customers core scientific real ested shares on the NASDAQ and lawyers representing FTX said they expect the

Exchange to repay creditors in full bankruptcy courts are challenged with untangling debt and Assets in a relatively new industry then they face the difficult decision of whether to prioritize getting money back to creditors or rebuilding the existing business not many of them are really being successful in relaunching

Operations FTX there was a lot of discussions around whether the exchange component which during its Heyday was really regarded as a very good trading platform whether that technology was valuable and worth restarting because if it was then you could give creditors another Pathway to their money back your

Bank priorities to maximize the recovery and to uh keep the business intact maybe in Conflict to one another it may be better to liquidate the company and get people their deposits back than it is to try to use those deposits to rebuild the company that nobody wants to do business

With anymore so if you’re a customer who has money tied up in these companies exiting bankruptcy what should you expect in the US the assets of the company are valued at the time of the bankruptcy if you had one Bitcoin at FTX you’re going to think well I had one

Bitcoin I should be getting $50,000 really what you’ll get is $18,000 but because the prices of the assets have rallied so much there’s a better opportunity to cover cover all the customers for which there aren’t the crypto deposits there first it’s important to remember that not all creditors are treated equally in

Bankruptcy courts and that’s exacerbated by the unregulated nature of crypto the difference really comes down to secured versus unsecured creditors secured creditors get priority when it comes to repayment because their funds are backed by collateral you always have to make sure that the secur Creditor gets its value back because the bankruptcy laws

Are not allowing are not allowed uh to hurt that collateral interest through the mag process itself unsecured creditors not so much they’re stuck at the back of the line when it comes to repayment and many customers like the ones at Celsius and blockfi are classified as unsecured they were told

In some of the marketing promises especially in Celsius is case that it’s almost the same thing as if you deposited your crypto in your savings and loan and in local bank well the bankruptcy cor ruled in fact you made a loan and now you’re left as a general

Unsecured creditor that is very very tough news to hundreds of thousands of customers who thought very differently and it wasn’t just Celsius so blocki for example followed the Celsius rules add them two together well north of a million customers found themselves not thinking that they were going to be

Unsecured creditors in a bankruptcy case losing their savings losing their deposits and being stuck at the bottom of a priority lad are fighting for scraps at the bottom of a case but that’s in fact how it ended up so when it’s all said and done how long should customers expect to wait before

Receiving their funds this is really a process that’s dependent on how fast the courts move and how fast the regulatory agencies that are also involved move so in the case of Celsius there was an earlier plan to restart not only a mining operation but also an operation

That would uh run validators that could earn staking yield on tokens the SEC got in the way and said no we don’t want that and because of that it took a little bit longer crypto companies are also looking to unique ways to make customers whole Celsius has restructured

Into a mining business as a way to repay debt FTX has looked to sell major crypto Holdings to reach 100% repayment those asset sales have had an effect on the crypto Market prolonged pressure on the grayscale Bitcoin trust as FTX sold its Holdings weit on bitcoin’s price for

Several days in January Genesis has also been given the Greenlight to offload over $1.3 billion of the product FTS which held massive amounts of grayscale Bitcoin trust product now selling that product because they have much more liquidity to do so via the new Bitcoin ETF and no matter what the crypto

Industry still has to deal with the issue of public trust which has been damaged by the slew of failed businesses the crypto industry has gone through fouryear cycles of what we call crypto Winters and crypto Summers and as a company you need to be able to weather

That out it’s kind of hard when you’ve lost TR and you’ve lost so much money into a system for anybody wanting to provide capital or otherwise provide trust I root that all into the lack of Regulation because people’s expectations were dashed so significantly that it makes it very very

Hard to feel like why you know once bit and twice shy why would I support it again