Is your crypto on Celsius or Voyager? Factors that determine whether you can get your money back

In recent weeks, it seemed that several crypto companies were in need. Lender Celsius stopped withdrawals since June 12, while Babel Finance and CoinFlex followed suit. Digital real estate agent Voyager said Wednesday that it filed for Chapter 11 bankruptcy in New York.

What do these mean for your customers? Can they still get their money back? I contacted Daniel Saval, partner in the law firm Kobre & Kim, to break down the situations.

Crypto in no time

Bitcoin BTCUSD,
+5.76%
increased 5.3% over the past seven days, trading at around $ 21,395 on Thursday, according to CoinDesk data. Ether ETHUSD,
+6.49%
rose around 11.7% over the seven-day stretch to around $ 1240. Meme token Dogecoin DOGEUSD,
+3.41%
went up 2.5% while another dog-themed token, Shiba Inu SHIBUSD,
4.40,
traded 3.4% higher from seven days ago.

Cryptometry

Recovery of cryptocurrencies?

If a cryptocurrency exchange or lender has stopped withdrawing, “it can be a long stretch for users and customers before they can get anything back,” according to Kobre & Kims Saval.

First, a customer must look more closely at the terms of the user agreements to see if they give the company rights and discretion to pause withdrawals. “Customers can be unlucky,” Saval said.

“If there is room for maneuver,” consumers can take legal action against the company, Saval said. However, such proceedings usually take a long time, while if the companies file for bankruptcy, an automatic stay will be imposed which prevents creditors and others from initiating or continuing such actions.

For crypto companies that have already gone bankrupt, the key question will be whether the customers will be treated as unsecured creditors.

The question is important because on many crypto exchanges, customer funds are collected and not segregated, Saval noted.

If a customer “is unable to demonstrate that they have control over their accounts, they can actually identify or track their specific cryptocurrencies. “Then these assets will most likely be considered the property of the bankruptcy estate,” according to Saval. This means that customers will share with all other creditors the amount of assets, instead of claiming what was in their accounts, according to Saval.

“For brokerages, exchanges or platforms, where the client can put crypto in it and control when it comes out, and is the only person who has access to that wallet, you will probably have a good argument that the assets are kept in trust by the platform to benefit the customer, “said Saval. “It would make it easier for them to point to the specific assets in the segregated account that they control, and therefore they should get it back.”

Saval’s comments were repeated with the popular expression in the crypto industry – “not your key, not your wallet”, which highlighted the risks of centralized entities and pointed to the potential benefits of decentralized finance, or DeFi. Although, to be sure, the DeFi area remains largely unregulated and premature, vulnerable to some risks such as those associated with smart contracts.

Miners struggling

Many bitcoin miners, who expanded their business in 2021 to make more profit, are now struggling as the cryptocurrency price crashes.

The Bitcoin mining industry’s daily revenue fell to $ 18 million from a peak of $ 62 million in November, when the largest crypto reached a record high, according to a Tuesday note from analysts at Arcane Research.

Due to such pressure, several miners have sold their bitcoin holdings. In June, Core Scientific sold 7,202 bitcoins at an average price of around $ 23,000 per coin for a total of $ 167 million.

What they say

• Crypto-billionaire Sam Bankman-Fried, CEO of FTX, said he and his company still have “a few” billion to stop pressured digital asset companies, as cryptocurrencies crash and the fairly nascent industry struggles with ripple effects from the failure of several major players. Bankman-Fried told Reuters that the firm still had enough money on hand to make a $ 2 billion deal if necessary, even though “each of these is getting more expensive.”

• Michael Novogratz, founder of Galaxy Digital, said regarding several failed crypto companies, “there will be accusations and prosecutions for fraud.” “There will be gross dishonesty in some of these companies where you just look at the amount of influence and interlending that was going on,” Novogratz told CNBC. MarketWatch’s Joseph Adinolfi wrote more about it here.

Crypto companies, funds

Shares of Coinbase Global Inc. COIN,
+11.12%
increased 11% to $ 57.47 on Thursday, and they were up 22% over the last five trading sessions. Michael Saylors Microstrategy Inc.
MSTR,
+16.57%
jumped 15.5% on Thursday to $ 217.50, up 32.38% in the last five days.

Mining company Riot Blockchain Inc. RIOT,
+16.56%
Shares rose 14.8% to $ 5.20 on Thursday, rising 24.22% over the past five days. Shares of Marathon Digital Holdings Inc.
MARA,
+24.07%
increased 20.4% to $ 6.79, up 27.2% over the last five days. Another miner, Ebang International Holdings Inc. EBON,
+24.69%,
was up 35.7% to $ 0.61 on Thursday, contributing to a 52% gain over the last five days.

Overstock.com Inc.
OSTK,
+7.82%‘s
the stock went up 9.1% to $ 28.87. Shares rose 15.1% during the five-year period.

Shares of Block Inc.
SQ,
+5.63%,
Formerly known as Square, was up 5.9% to $ 68.78, contributing to a 12% increase for the week. Tesla Inc. TSLA,
+5.53%
the stock went up 5.2% to $ 733.78, while it was up 9% over the last five sessions.

PayPal Holdings Inc.
PYPL,
+2.46%
rose 2.2% to $ 74.81, up 7.1% in five sessions. Nvidia Corp.
NVDA,
+4.81%
the stock rose 4.9% to $ 158.74, seen a rise of 4.8% over the last five trading days.

Advanced Micro Devices Inc.
AMD,
+5.24%
Shares rose 5.6% to $ 79.56 on Thursday, up 4.1% from five trading days ago.

Among cryptocurrencies, ProShares Bitcoin Strategy ETF
BITI,
-7.79%
was up 5.3% to $ 13.22 on Thursday, while its Short Bitcoin Strategy ETF
BITI,
-7.79%
lost 5.5% to $ 38.22. Valkyrie Bitcoin Strategy ETF
BTF,
+7.81%
increased 5.2% to $ 8.20, while VanEck Bitcoin Strategy ETF
XBTF,
+7.89%
increased 5.4% to $ 20.77.

Grayscale Bitcoin Trust
GBTC,
+ 9.30%
rose 7% to $ 13.47.

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