Gimme Back My Crypto: Clawbacks are Imminent in Crypto Bankruptcies

July 5, 2024 and July 13, 2024 will mark the two-year anniversary of Voyager’s and Celsius’s bankruptcy filings, respectively. Under the Bankruptcy Code, actions to clawback pre-bankruptcy transfers, such as 90-day preferential transfers, must be commenced within two years after bankruptcy is filed.  Given the impending deadline in both cases, we can expect a wave of clawback actions to be filed against account holders in the coming days and weeks.  Voyager has specifically said as much in a May filing, warning all account holders that received transfers of more than $350,000 within the 90-day preference period that litigation will be commenced against them no later than July 5th.  As for Celsius, a similar notice was filed in January, warning certain account holders that received more than $100,000 within the 90-day preference period that they will not receive a distribution until their alleged preference liability is resolved.

As we discussed in our article, Clawback to the Future: Avoidance Actions in Crypto Bankruptcies, various defenses may be available to account holders, but there is much uncertainty around how traditional defenses, such as ordinary course and bankruptcy safe harbors, will apply in these unique circumstances. Debtors and account holders will of course stake out their positions, and it is expected that the vast majority of these clawback actions will be settled without court intervention. However, given the sheer number of actions expected to be filed and the significant amounts at stake, it is likely that some of these issues will be presented to the courts to decide. No matter how these rulings shake out, they will bring much needed guidance to the crypto community.

We are currently advising and defending several investors in crypto and other asset clawbacks in various stages of demands. Please reach out if you would like to learn more. 

Timing matters, stay ahead with Credit Chronometer. 


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