Comparing the catastrophic failure of cryptocurrency exchange FTX to the failure of Lehman Brothers, Enron, and the Bernie Madoff scam is not an exaggeration.
And just like previous cases, individuals who practice law with a deep understanding of crypto know “there’s going to be a lot of work.”
Professor of Law at the University of Chicago and former bankruptcy lawyer Anthony Casey put it this way. For Fortune, he predicted a crypto bankruptcy that would last for years.
Bankman-Fried was accused of mishandling customer funds on the exchange and using them to pay the operations of trading business Alameda Research, another company he created; this led to FTX filing for Chapter 11 bankruptcy on November 11 and Bankman-Fried resigning as CEO.
If found guilty of fraud, Bankman-Fried faces jail time and is apparently being held “under surveillance” by local authorities in the Bahamas, where FTX is headquartered. The repercussions from FTX, however, is expected to affect more people than just the company’s ex-leader. This week, FTX revised its bankruptcy filing to reflect the fact that its insolvency could affect between one and two billion customers who are owed money by the exchange, which is currently missing between one and two billion dollars in client monies.
Those figures, say legal experts quoted by Fortune, suggest the FTX bankruptcy might stretch on for years and cause a widespread collapse in the industry. Legal professionals, on the other hand, are set to have a field day as a result of this unfortunate development for many individuals and corporations who have put money into cryptocurrencies.
According to Casey, “everyone is learning crypto bankruptcy right now,” and he anticipates “a lot of business” related to dealing with cryptocurrency failures.
This is a “unprecedented” disaster.
Casey speculates that the sheer scale of FTX’s demise could result in a number of lawsuits on par with those filed in the wake of the world’s largest bankruptcies.
“A lot of law firms are going to be on this case,” he predicted. If it’s worse than Enron’s bankruptcy and has as many unanswered questions, it will be one of the most convoluted fraud bankruptcies ever.