Issue link: https://digital.shearman.com/i/1479657
Cryptoassets & Insolvency 31 Other issues that bankruptcy courts will have to grapple with include the value of the cryptoassets, whether customer claims should be paid according to that value as of the petition date or a later date, and whether customer recoveries should be in kind or based on the value of the cryptoassets as of that date. For instance, should a bankrupt exchange be required to convert cryptoassets into U.S. dollars or make customer distributions in kind? The answers to these issues can significantly impact creditor recoveries in a crypto exchange bankruptcy because the value of the cryptocurrency is volatile and can change significantly in a short period of time. Voyager, for example, has indicated that it will not convert cryptoasset holdings as part of its plan of reorganization, but instead will (pursuant to its chapter 11 plan of reorganization) seek to make customer distributions in kind. A significant portion of Voyager's cryptoassets ($307mm of its $4.3bn) are Voyager Tokens or VGX. VGX has fallen in price to $0.48 as of July 19 from $1.81 as of March 31. A further decline could significantly reduce customer claimant recoveries. The value of the cryptoasset could be vastly different at the start of a crypto bankruptcy as compared to the end. If, by the end of a case the value of certain crypto currencies increases significantly, many creditors would want their claims paid in kind to reap the benefit of such increased value. Valuation, Realization and Distribution