FTX withdrawals could take years or even decades



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FTX withdrawals could take years or even decades

Over the next few years, we may see more complications arising from digital assets, cross-border insolvency, and competing jurisdictions. In anticipation of the day when investors can regain control of their funds from the now-bankrupt crypto exchange FTX, bankruptcy attorneys warn it may take decades.

A bankruptcy filing was filed by cryptocurrency exchange FTX on November 11 along with 130 affiliates. The liquidation process, according to bankruptcy lawyer Stephen Earel, a partner at Co Cordis in Australia, will be an “enormous exercise” since the process of realizing the crypto assets and then determining how to distribute the funds will take years, if not decades.

Insolvency cases involving cross-border jurisdictions and competing jurisdictions are more complex, according to attorney Earel.

The catastrophic consequences of FTX's bankruptcy

As with other lenders, investors, and venture capital financiers, FTX's customers are in line with everyone else.

A distribution may not be paid out to those who traded "crypto to crypto trades" for a "long time." BnkToTheFuture founder Simon Dixon, who was involved in Celsius' bankruptcy proceedings, noted that everyone with funds on FTX will become a creditor.

Depending on what remains after bankruptcy costs, creditors will eventually have access to the remaining assets. This could result in high costs, Binance Australia's CEO said, noting that more legal and administrative fees affect refunds due to the time it takes to recover funds.

According to Irina Heaver, a partner at Keystone Law in the UAE, the Middle East is home to FTX's third largest user base, which is also feeling the effects of the collapse. The newly established Dubai Virtual Assets Agency (VARA) has already granted FTX a license and regulatory oversight, which presents major complications to regulators due to the fact that they already have a "major regulatory oversight"

As Heaver noted, the legal system will only be overseen by creditors' rights, including courts and receivers, if FTX enters Chapter 11 bankruptcy. Global investors have been adversely affected by the recent collapse of the FTX.

Reuters reported on Nov. 20 that the bankrupt cryptocurrency exchange may have "more than 1 million creditors." According to Reuters, the bankrupt cryptocurrency exchange owes its biggest 50 creditors "nearly $3.1 billion."