RESOLVING CRYPTO DISPUTES
Despite the misfortunes that have beset the crypto space in recent months, cryptocurrencies, non-fungible tokens (NFTs) and other cryptoassets remain popular. The market, including all its associated technologies such as smart contracts, blockchains, distributed ledgers, cryptoassets and cryptocurrencies, as well as public and private keys, is here to stay.
But rising popularity also heightens the risk of crypto-related disputes. 2022 saw the financial outlook for many crypto companies rapidly deteriorate, with cryptoassets losing approximately $2 trillion in value from their 2021 peak. Following the onset of this so-called ‘crypto winter’, cryptocurrency litigation has increased significantly.
According to Morrison Cohen, in the first five months of 2022 there were more than 200 class action lawsuits and other private litigation suits launched in the crypto space – up more than 50 percent since the start of 2020. Half of all crypto litigation are class actions or private suits, according to the firm’s data.
Crypto bankruptcies
The crypto market has seen its share of high-profile failures. The crypto winter persisted through the second half of 2022, with a number of cryptocurrency exchanges and brokers filing for Chapter 11 bankruptcy protection in the US.
The most notable was FTX, one of the world’s largest cryptocurrency exchanges, which caused aftershocks across the crypto space and precipitated the filing of a number of class action lawsuits, notably against some of the exchange’s celebrity promoters. In terms of the scale of the losses, some estimates suggest that as much as $32bn of wealth was wiped out as a resulted of the exchange’s demise.
In November 2022, crypto lending platform BlockFi filed for bankruptcy. The company is believed to have owed $275m to FTX US and lent over $1bn of clients’ funds to FTX and Alameda Research, FTX’s sister company. BlockFi declared that it owed $1.3bn to its 50 largest creditors and had $257m in cash on hand.
Apr-Jun 2023 issue
Richard Summerfield