Blockchain Is Coming: Blockchain & Basics and How It Might Arrive at a Bankruptcy Near You

In the past several months, we have seen an uptick in crypto-related insolvencies.  In May 2019, the hacked cryptocurrency exchange, Cryptopia, filed for bankrutpcy relief in the United States Bankruptcy Court for the Southern District of New York.  In April 2019, QuadrigaCX, a Canadian crypto exchange, filed for filed for bankruptcy in Halifax.  In November 2018, Giga Watt, a bitcoin mining firm, filed for chapter 11 relief in the Eastern District of Washington.  Mt Gox, a Japan based crypto exchange that filed for bankruptcy in 2014, continues to dominate headlines, with a potential class action lawsuit looming for its beleaguered CEO, and a big-money investor offering to buy back bitcoin claims.  Despite the number of crypto related companies filing papers with insolvency courts around the world, a recent report by INSOL International indicates that only 5% of insolvency practitioners have a “comprehensive or practical/working knowledge or understanding” of cryptocurrency.

Often times, the questions arising out of a crypto-related bankruptcy revolve around the value of bitcoin or other cryptocurrency, how to sleuth out those assets, and what recourse is available if those assets have been irretrievably lost—usually the precursor to many of these insolvency proceedings. However, while cryptocurrency is certainly how blockchain technology was first deployed, it is, by no means, its only utility. For example, in the organics food industry, retail giants like Walmart have employed blockchain technology to shore up their supply chains. If there is a need to identify precisely from where a SKU of organic lettuce was sourced, blockchain technology now affords Walmart the ability to do so in a matter of seconds instead of days.  Thus, while often discussed in connection with a cryptocurrency like bitcoin, blockchain technology in the bankruptcy context is not exclusively a conversation about a crytpo’s worth.

This year at the 2019 NCBJ Conference in Washington, D.C., the NCBJ and Next Generation 2019 is presenting an educational panel on all things blockchain. This CLE is designed to provide the basics of cryptocurrency and the technology underlying cryptocurrency.  Attendees will be equipped with the foundation for a “practical/working knowledge” of cryptocurrency, in order to understand the issues that typically arise in a bankruptcy or insolvency proceeding that involves cryptocurrencies. These include property of the estate issues, crypto as collateral, valuation, fraudulent transfers, and privacy concerns.  The CLE will also address the civil, criminal, and regulatory issues that attend both cryptocurrencies and blockchain. Finally, the CLE will also discuss how courts can and have utilized blockchain technology and what the future holds as courts and legislatures across the world grow more knowledgeable on a topic that still confounds many legal practitioners.

(Please note that this panel is on October 31st at 2:00 p.m., and is for the following invitees:  Next Generation Class of 2019, Next Gen Alumni, lawyers with 7 or less years of practice experience, and judges.)

Submitted by:
David W. Gaffey, Esq.
Whiteford, Taylor, Preston LLP
Falls Church, Virginia

Editor’s Note:

Mr. Gaffey is a partner at Whiteford, Taylor, Preston LLP in its Reorganizations & Bankruptcy Practice.