Getting money out of FTX could take years, if not decades

While investors are eager to learn when they will be able to recover their funds from the now-defunct crypto exchange FTX, insolvency lawyers warn that it could take “decades.”

On November 11, the crypto exchange and 130 affiliates filed for Chapter 11 bankruptcy protection in the United States.

Insolvency lawyer Stephen Earel, partner at Co Cordis in Australia, stated that “realizing” the crypto assets and determining how to distribute the funds will be a “enormous exercise” in the liquidation process, which could take years, if not “decades.”

He attributes this to the complexities associated with cross-border insolvency issues and competing jurisdictions.

Earel stated that FTX users are in the same line as everyone else, including creditors, investors, and venture capital funders, and that those who have made “crypto to crypto trades” may not receive a distribution “for years.”

Simon Dixon, founder of global investment platform BnkToTheFuture and an active participant in the Celsius bankruptcy proceedings, stated that anyone who holds funds on FTX will become creditors, and a creditors committee will be formed to represent their interests.

He stated that creditors will eventually be able to access the remaining assets, depending on what remains after bankruptcy costs.

According to Binance Australia CEO, these costs could be high due to the time required to recover funds, which means more legal and administrative fees that eat into customers’ returns.

Meanwhile, Irina Heaver, Partner at Keystone Law in the UAE, said that users in the Middle East are also feeling the effects of the FTX collapse, as the region was the third largest FTX user base. Heaver explained that because FTX already has a license and regulatory supervision from Dubai’s newly formed Virtual Assets Authority regulator (VARA), the regulators face major complications because they already have a “huge regulatory failure” on their hands.

Joining forces with other creditors

Heaver stated that creditors’ rights will be overseen by the legal system, with courts and bankruptcy administrators involved “when and if” FTX enters Chapter 11 bankruptcy procedures.

Heaver’s advises people who have suffered significant losses as a result of the FTX collapse to seek legal counsel and join forces with “other injured parties.”

The recent FTX collapse has had far-reaching consequences for investors worldwide. According to recent reports, the bankrupt cryptocurrency exchange may have “more than 1 million creditors.” According to a Reuters article published on November 20, the bankrupt cryptocurrency exchange owes “nearly $3.1 billion” to its top 50 creditors.

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