Fintech & Crypto Bankruptcy Litigation
Dynamis has wide-ranging experience navigating complex litigation in connection with large-scale Fintech/Crypto bankruptcies.
When these businesses become insolvent—because of fraud, economic forces, regulatory issues, or otherwise—Dynamis LLP represents executives, creditors, clawback defendants, or even debtors in addressing the legion of novel legal issues. We understand the nuances of a trustee’s duties to recover and distribute funds to creditors and to commence adversary proceedings against recipients of preferential or fraudulent transfers.
We also have expertise with bankruptcy-adjacent white collar defense, regulatory proceedings, and consumer/investor class actions. Drawing on that expertise, we have represented or are currently representing stakeholders in the Mt. Gox, Celsius, Voyager, and Rhodium matters.
If you are in a high-value dispute in connection with such bankruptcy proceedings, Dynamis LLP is here to provide you with the highest level of legal representation.
Trends in Crypto/Fintech Bankruptcy Litigation
Crypto companies keep falling into bankruptcy. When they do, courts are finally starting to lay down rules for a market that, until now, looked lawless.
Who Actually Owns the Crypto?
Courts have started treating crypto assets like other property. If the exchange held customer coins “in trust,” those coins might stay with the customer. If not, they go into the bankruptcy pot with everything else.
In the Celsius and Voyager cases, judges looked at the fine print. If your agreement said the platform “owned” the coins once deposited, you’re probably an unsecured creditor. That means you stand in line and hope there’s something left after the lawyers and big banks eat.
Fraud Gets Special Treatment
If there’s fraud—think FTX—courts freeze the assets of the exchange. They appoint examiners or trustees to take over. Funds tied to fraud or mismanagement can get clawed back from whoever got paid out before the collapse, even innocent folks. Bottom line: Just because you cashed out early doesn’t mean you’re safe. In fact, Dynamis attorneys have represented multiple creditors who have had funds clawed back.
Valuation Is a Mess
Crypto prices swing. Courts hate guessing the “real” value at any moment. Some judges peg value to the day bankruptcy is filed. Others use the date assets are actually distributed. That difference can mean millions.
No Special Breaks for Decentralization
Courts don’t care if your company is “decentralized” or just has a lot of token holders. If there’s a real business behind the scenes, bankruptcy rules apply. In Celsius and BlockFi, judges treated crypto tokens like assets, not something magical that avoids the law.
Third-Party Liability Is Expanding
We’re seeing more lawsuits against lenders, marketing firms, and even lawyers who “enabled” alleged scams. Bankruptcy courts now routinely greenlight claims against anyone who “substantially assisted” a fraud or misleading statement.
Speed Matters
Some crypto bankruptcies are dragging out for years. But judges are showing less patience, pushing for faster asset sales and creditor resolutions. The Celsius judge, for example, cut off endless delays and forced claimants to put up or shut up.
Selected Experience and Results
Currently representing the former Chief Financial Officer of Celsius in the Celsius bankruptcy proceedings in the Southern District of New York.
Representing multiple individuals in the Voyager and Celsius bankruptcy proceedings who are potentially subject to clawbacks.
Represented businesses in bankruptcy adversary proceeding in the federal courts of Colorado.
Currently representing note holders in planned asset sale concerning the FTX bankruptcy proceeding.