Issue link: https://digital.shearman.com/i/1479657
International Case Studies Cryptoassets & Insolvency 42 Cryptopia (2019) Cryptopia was put into liquidation when it lost a substantial amount of its cryptocurrency following a hack. The liquidators sought directions from the New Zealand Court regarding the categorization and distribution of the assets in the liquidation—specifically how to deal with the $170 million of cryptocurrency held in accounts for particular account holders. The Court determined the cryptocurrency was property and that a trust had been created with an associated proprietary interest in the assets held by Cryptopia for its clients i.e., the cryptocurrency was not the property of Cryptopia itself. This meant that the liquidators were not able to distribute the cryptocurrencies held on trust to the general unsecured creditors of Cryptopia. 02 Bitgrail (2019) The Italian cryptocurrency exchange filed for bankruptcy following a theft of more than 11m Nano XRB coins. The Italian Courts determined that cryptocurrency is both "property…over which rights can be claimed" and a "means of payment." While the cryptoassets were determined to be proprietary, they were treated as commingled by the custodian with other assets, resulting in only a contractual claim being available to clients of the custodian. 03 Mt. Gox (2015) 01 Mt. Gox was the largest cryptocurrency exchange (it was responsible for more than 70% of Bitcoin transactions at its peak) until 2014 when it was targeted by hackers who purportedly misappropriated 744,800 Bitcoins. Restructuring proceedings started as an insolvency filing but shifted to a civil rehabilitation proceeding in 2017 when the Tokyo District Court determined that creditors seeking to regain their lost funds in Bitcoin may receive larger amounts of cash than those who sought to be repaid in the fiat currency, thereby allowing the trustee to distribute tranches of Bitcoin to the creditors in its proprietary form.