The FTX contagion has left many firms uncertain about the future of their businesses, some are seeking answers to questions about when their funds will be returned and if they will be returned. In response to some of these questions, insolvency lawyers have posited that it might take decades to fully recover their assets from the now-bankrupt FTX Derivatives Exchange.
Stephen Earel, who is an insolvency lawyer and partner at Co Cordis in Australia, announced that it will be an “enormous exercise” in the liquidation process to “realize” the crypto assets and then figure out a strategy with which the funds will be distributed, with the process potentially taking years, if not “decades.”
He attributed his prediction to the complexities involved in cross-border insolvency issues and jurisdictions which are in competition.
The news is crucial for those who made crypto-to-crypto trades, Earl believes many of them will not get a distribution of their assets until several years. Unfortunately, many FTX users are still waiting alongside creditors, investors, and venture capital funders.
FTX Creditors to Join Creditors Committee
Since the implosion of the FTX Derivatives Exchange and its Chapter 11 bankruptcy filing in the United States, many industry players have voiced their opinions about the misconduct of the former Chief Executive Officer (CEO) of the exchange Sam Bankman-Fried and the activities of the firm. One such industry heavyweight is Simon Dixon who has been instrumental in the Celsius bankruptcy proceeding.
Founder of global investment firm BnkToTheFuture Dixon resounded that all entities who hold funds in the exchange will be regarded as a creditor and expected to join the creditor’s committee which will be organized to represent the interest of all creditors. At the end of the bankruptcy proceedings, the remaining assets will be left to the creditors, according to Dixon.
The value which will be left is still unknown because according to Binance Australia CEO, Leigh Travers, such legal proceedings incur very high costs.
Eventually, both legal and administrative fees may eat into creditors’ returns before the process is over. Altogether, the number of creditors that were affected by the FTX collapse is suspected to reach 1 million globally. Allegedly, it is said that FTX’s top 50 creditors are owed up to $3.1 billion.