Issue link: https://digital.shearman.com/i/1479657
Funding Considerations for IPs Cryptoassets & Insolvency 24 Where cryptoassets are held on trust, an IP may be able to rely on a Berkley Applegate trust order, which can provide that an officeholder's fees and expenses are paid from the sale proceeds of the trust assets. When assessing potential actions against third parties, an IP may consider litigation funding options. Although it can be costly, litigation funding could be used to hedge the IP's (and estate's) risk in pursuing actions to, e.g., collect / preserve assets or investigate prior transactions. However, a key factor will be time, since assessing the merits of potential actions and engaging and reaching agreement with liquidation funders can be a protracted process. This may reduce the attractiveness of the option when dealing with assets which allow for low levels of control and are at risk of dissipation and/or price volatility. The expenses of an insolvency rank above unsecured claims, but as in all insolvencies, an IP considering a cryptoasset appointment will need comfort that there are sufficient assets in the estate to cover likely expenses. When deciding the best approach, IPs may need to engage with creditors and/or claimants and seek their approval where necessary. They may also need to provide such parties with reports or other documentation to evidence / rationalize any allocation or steps taken. The challenges involved in locating and realizing cryptoassets assets may be significant. IPs will need to weigh these challenges (including the time, cost and risk implications) against potential realization value and the likelihood of being able to deliver that value to creditors. We set out below some factors that may be relevant to this assessment.