Cryptocurrency – The part it plays in Bankruptcy and Corporate Insolvency and Recent News
What is Cryptocurrency?
Cryptocurrency (Crypto) is a virtual currency or a “digital asset” that was originally designed to work as a medium of exchange, much like the Australian dollar.
Do I need to declare Crypto to my Bankruptcy Trustee?
Yes. Like any other asset, a Bankrupt must disclose ownership or interest in Crypto to the Trustee of their Bankruptcy. Failure to disclose may constitute an offence under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).
How does a Bankruptcy Trustee identify Crypto assets?
Ownership or interests in Crypto is more difficult to identify than traditional cash assets, however there are companies that specialise in tracing Crypto assets. Because crypto is recorded on a publicly available blockchain, it can be traced to a user’s digital or hard wallet address.
In cases where a Bankrupt is not forthcoming with this information, Trustees typically find evidence of Crypto purchases in bank statements, emails, apps or browser history.
Crypto in Corporate Insolvency
Through the initial thorough investigation of a company and its affairs, the administrators will identify and secure any assets. As above, it is expected that the company would disclose any interest or ownership of Crypto from the outset, however, if the administrators suspect the company is not forthcoming with the information, engagement with a broader group of stakeholders may be required.
Insolvency practitioners are able to use their powers under the Corporations Act 2001 (Cth) (Corporations Act) to acquire access to Crypto held by the company and secure it in a wallet controlled by the practitioner.
In cases of personal and/or corporate insolvency, the Crypto will be realised for the benefits of the creditors.
Chamberlains Insolvency Team
Our insolvency team is able to assist both Bankrupts and Trustees, by providing advice and assistance in dealing with Crypto as it evolves throughout Bankruptcy and Corporate Insolvency matters.
Recent Crypto News
FTX Trading Ltd (FTX), once the third-largest Crypto exchange company, has filed for Bankruptcy with an alleged $8-10 billion USD worth of assets owed to creditors.
The former CEO and Founder of FTX, Sam Bankman-Fried (SBF), has been arrested and faces 12 charges from multiple United States agencies including security fraud, wire fraud, defrauding customers and lenders, and violating United States campaign finance laws. These charges were laid by the Security and Exchange Commission (SEC), the Commodity Futures Trading Commission, and the United States Justice Department.
SBF was allegedly diverting customers’ funds to sister company Alameda Research, a Crypto hedge fund and market maker, of which SBF was the founder, major shareholder and former CEO. It is alleged that funds were also being used as a ‘personal piggy-bank’ by SBF and his inner circle, to purchase luxury accommodation, support political campaigns, and make private investments.
Chamberlains Crypto Team
At Chamberlains, we have a dedicated Crypto team who specialise in providing advice and assisting clients with use, exchange and tax related issues stemming from the ownership of Crypto.
Contact our team on the number below to discuss.