So today, Sister Sa’s team will update the latest progress of FTX bankruptcy case with you, and give some suggestions for you on how to deal with your own bankruptcy claims.
I. Latest progress of FTX case
According to the documents made public by the bankruptcy court in Delaware, the first creditors’ meeting ("section 341 meeting") was held by telephone at 10: 00 am (EST) on December 20, 2022, and the court will hold an important hearing on the bankruptcy procedure on January 13, 2023, local time, and the creditor list is being registered continuously.
On January 13th, the comprehensive hearing was mainly to decide two urgent motions put forward by FTX joint provisional liquidators: (1) Relief from automatic stay; (2) The compulsory conversion of electronic records according to Articles 542, 1519(A)(3), 1521(A)(7) and 1522 of the Bankruptcy Law. Among them, we should pay attention to the motion on Automatic Stay, which is a technical term in American bankruptcy law. It refers to a legal consequence that will appear immediately when a bankrupt debtor applies for bankruptcy according to Chapter 7 or Chapter 13 of American bankruptcy law. Automatic Stay will prohibit most creditors from collecting creditor’s rights, and restrict creditors from exercising their rights such as creditor’s rights, mortgages, liens, etc. through litigation. This is mainly to give debtors as much breathing time as possible and provide them with opportunities for restructuring during bankruptcy. Of course, there are some exceptions to the automatic stop, such as criminal proceedings, alimony or child support lawsuits filed in family courts, loans secured by retirement accounts or pensions, and debts incurred after filing a case.
The second news worthy of attention is that the debtor’s lawyer in charge of FTX bankruptcy case clearly stated at the hearing held on January 11, 2023 that FTX has now recovered more than $5 billion in liquid assets (of course, there is no further specific information disclosure). This figure is similar to the analysis data given by an investment bank analyst on Wall Street at the end of 2022, who estimated that FTX still had $2 billion to $4 billion in remaining assets. According to the previous media estimate of FTX’s debt of about 10 billion dollars, it seems that the recovered funds are enough for FTX creditors (even a large number of unsecured creditors) to get back about 40%-50% of their assets.
At the same time, good news continues to be heard on the issue of recovering the remaining assets in the Bahamas. According to the debtor’s lawyer, a liquidation agreement has been reached with the Bahamas (FTX is headquartered in the Bahamas, and SFB himself was arrested in the Bahamas). The Bahamas will help the company’s property (mainly some real estate) located in the Bahamas on the basis of sharing the bankruptcy information of FTX with the head of liquidation in the United States, and protect the interests of creditors through cooperation. This also means that about $425 million of FTX’s assets frozen by the Bahamas are expected to be used to realize the bankruptcy of creditors. At the same time, the liquidator also said that he has mastered dozens of kinds of sub-liquidity tokens, but it is difficult to realize these tokens without affecting the market because the overall market of virtual assets is cold at present.
Generally speaking, there are many exciting good news in the FTX bankruptcy case, and it seems that the reorganization is expected to be successful. To say the least, even if it enters the liquidation situation, according to the current asset scale, the creditors’ bankruptcy claims are expected to be paid off in a higher proportion.
Second, on the handling of bankruptcy claims: sale or registration?
Due to the turnaround of FTX bankruptcy case, it seems that a large part of assets have been recovered, which has caused many bankrupt creditors to have doubts about how to dispose of their creditor’s rights. From the recent consultation summary received by Sister Sa’s team, a large number of people who hold FTX bankruptcy creditor’s rights (especially creditors with assets of about 100,000 US dollars) are considering whether to sell their creditor’s rights. In fact, this test is the creditors’ confidence in FTX restructuring, their confidence in the virtual asset market and their own investment vision. Undoubtedly, for those who have no hope for FTX, now is the best time to get out: take advantage of a wave of good news to raise the price of bankruptcy claims and sell them in time to get out.
However, the transfer of bankruptcy creditor’s rights is not simple, and there are many big pits hidden in it, so both buyers and sellers must be cautious, cautious and cautious again. Legally speaking, selling one’s own bankruptcy creditor’s rights is essentially a legal relationship of creditor’s rights transfer, which means that the creditor transfers all or part of the creditor’s rights to a third party without changing the content of the debt. With the continuous advancement of supply-side structural reform and the increase of judicial practice of centralized and fair settlement of debts in bankruptcy procedures in recent years, the transfer of bankruptcy claims has become an increasingly common and effective way to help bankrupt creditors realize their claims as soon as possible.
Generally speaking, according to the provisions of China’s Civil Code, an effective transfer of creditor’s rights needs to meet the following conditions:
1. The transferred creditor’s rights are valid creditor’s rights;
2. The assigned creditor’s rights must be assignable;
3. The transferor and the transferee shall reach an effective agreement on the transfer of creditor’s rights, and shall not violate the mandatory provisions of the law;
4. The debtor receives the notice of assignment of creditor’s rights.
However, due to its own particularity, the transfer of bankruptcy creditor’s rights may have a certain impact on the fairness of creditor’s rights realization and the procedure of bankruptcy cases, so there is a difference between it and ordinary creditor’s rights transfer, and we need to interpret it in stages.
First of all, if it is the transfer of creditor’s rights before entering bankruptcy proceedings. At this time, because the debtor has not entered the bankruptcy procedure, as long as it meets the requirements of general creditor’s rights transfer, the transfer of creditor’s rights will not affect the bankruptcy procedure. After accepting the bankruptcy application, the assignee can only declare the creditor’s rights as a bankrupt creditor.
Secondly, if it has entered bankruptcy proceedings, the transfer of bankruptcy claims will have an impact on bankruptcy cases. This is because after the debtor enters the bankruptcy procedure, the creditor has the right to become a member of the creditors’ meeting and enjoy the right to vote in bankruptcy affairs. At this time, the transfer of creditor’s rights will mainly affect the bankruptcy procedure in two aspects:
one
It may lead to the imbalance of rights between creditors.
According to Article 64 of China’s Bankruptcy Law: "The resolution of the creditors’ meeting is passed by more than half of the creditors with voting rights present at the meeting, and the amount of creditor’s rights represented by it accounts for more than half of the total unsecured creditor’s rights. However, unless otherwise provided for in this Law. " Then the problem comes at this time. If a creditor divides his creditor’s rights into hundreds of creditor’s rights and transfers them, the number of creditors will increase sharply, which will undoubtedly increase the voting weight of the same creditor’s rights in the creditors’ meeting, thus affecting the resolution of the creditors’ meeting and directly hindering the rights of other creditors to obtain fair repayment.
Two
It may lead to improper settlement of bankruptcy claims.
In the judicial practice of bankruptcy reorganization/liquidation, the common creditor’s rights are generally paid off by stages, and the creditor’s rights with small amount are paid off in a higher proportion or even in full, and the payment time is generally short. If the creditor divides its creditor’s rights into several small creditor’s rights and then transfers them, it will lead to the actual payment of its creditor’s rights being improperly higher than the amount it should have received before the transfer.
In addition, the transfer of bankruptcy creditor’s rights may also lead to certain identity changes, such as the change of the legal identity of the chairman of the creditors’ meeting and the chairman of the creditors’ committee. Refer to [(2013) Yubei Famenpo ZiNo. 00001-2] and [(2017) E 0191 Po No.1] rulings, after the chairman of the creditors’ meeting transferred his creditor’s rights, the court re-appointed the chairman of the creditors’ meeting.
Of course, because Sister Sa’s team is a practicing lawyer in China, the above analysis is only based on the analysis of China’s Bankruptcy Law and other relevant laws, administrative regulations and judicial precedents, from which it can be seen that the transfer of bankruptcy creditor’s rights is different from ordinary creditor’s rights transfer. The FTX case is applicable to the United States bankruptcy law and related laws. If you want to get out as soon as possible through the transfer of bankruptcy claims, you must consult a professional lawyer who is familiar with American law and even needs to be familiar with the relevant bankruptcy laws in Delaware, so as to avoid accidents in the process of bankruptcy claims transfer, which is not worth the loss.
Write it at the end
It is worth mentioning that SBF attended the trial on January 3, 2023 after his parents signed a bail agreement of up to $250 million (not actually delivered), and refused to plead guilty to the eight charges raised by the US prosecutor. The federal prosecutor said in court that he had obtained a lot of evidence against SBF and would inform the defense in the next few years.
Sister Sa’s team will continue to pay attention to the latest development of FTX bankruptcy case and SFB’s own criminal case, and synchronize the latest information of the case with everyone. In addition, if you need to consult readers about the transfer of bankruptcy claims in the United States, you can contact us directly through the WeChat of Xiao Sa’s legal team at the end of the article, and we can provide you with professional consulting services for American bankruptcy lawyers without language barriers.
That’s all for today’s sharing, thank you readers!