Bankrupt Crypto Companies Are Fighting Over a Dwindling Pot of Money

Legal experts, though, say they’re skeptical of FTX’s chances. Marc Powers, adjunct professor of law at Florida International University, who acted as counsel in the liquidation of Bernie Madoff’s, says that the exchange is attempting to “jump ahead of the other creditors” in the GGC bankruptcy. “Why should the FTX bankruptcy, or FTX as a potential creditor of Genesis, be more important than any other?” he asks.

“I don’t think the Genesis bankruptcy court will grant the motion of FTX,” Powers says. “Given the size of the claim, I think it would be extremely disruptive.” If the case proceeds, GGC will likely argue that the $1.8 billion in loan repayments were made in the ordinary course of business, which would exempt them from being recalled. There are also questions, Powers and others point out, posed by FTX’s failure to specify the dates of the withdrawals in its filing.

The only mercy for creditors, says Rosenberg, is that both FTX and GGC—as bankrupt entities—have a fiduciary duty to reach an agreement as quickly as possible. “Everybody’s goal is to make a distribution to creditors. The more you fight, the more it will deplete the estate,” he says. “Both parties have an interest in reaching a resolution swiftly.”

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