{"id":139046,"date":"2023-09-02T02:32:45","date_gmt":"2023-09-01T21:02:45","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=139046"},"modified":"2023-09-02T02:32:45","modified_gmt":"2023-09-01T21:02:45","slug":"what-is-chapter-11-bankruptcy-understand-the-basics-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/what-is-chapter-11-bankruptcy-understand-the-basics-crypto-news\/","title":{"rendered":"What is Chapter 11 bankruptcy? Understand the basics &#8211; Crypto News"},"content":{"rendered":"<div data-v-2649fa34=\"\">\n<p>In the complex world of finance and business, bankruptcy serves as a crucial mechanism that allows struggling companies to reorganize and regain financial stability.\u00a0<\/p>\n<p>One of the most well-known forms of bankruptcy is Chapter 11, a legal process in the United States that grants businesses the opportunity to restructure their operations while protecting them from creditors\u2019 immediate demands. This article delves into the intricacies of Chapter 11 bankruptcy, its objectives, procedures and notable examples within the realm of the cryptocurrency industry.<\/p>\n<h2>Chapter 11 bankruptcy, explained<\/h2>\n<p>Chapter 11 bankruptcy, often referred to as \u201creorganization bankruptcy,\u201d provides companies, both large and small, with the chance to rehabilitate their financial health while keeping their operations intact. <\/p>\n<p>This chapter allows a debtor (the company) to propose a plan that outlines how it will address its financial obligations, including repaying creditors over an extended period, reducing debts and restructuring operations for improved efficiency and profitability.<\/p>\n<p><strong><em>Related:\u00a0<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/prime-trust-bankruptcy-spotted-by-crypto-community-months-ahead\">Prime Trust bankruptcy spotted by crypto community months ahead<\/a><\/em><\/strong><\/p>\n<h3>The objectives of Chapter 11<\/h3>\n<p>The primary goals of Chapter 11 bankruptcy are twofold: to provide the debtor with an opportunity to reorganize its financial affairs and to maximize the return for creditors.<\/p>\n<p> By granting the debtor a chance to revamp its operations and financial structure, Chapter 11 aims to facilitate the company\u2019s return to profitability, safeguarding jobs and business continuity.<\/p>\n<h2>The Chapter 11 bankruptcy process<\/h2>\n<ul>\n<li>Filing for bankruptcy: The process starts when the struggling company files a Chapter 11 bankruptcy petition with the appropriate federal bankruptcy court.<\/li>\n<li>Automatic stay: Upon filing, an \u201cautomatic stay\u201d is imposed, halting most creditor actions against the company. This provides the debtor with temporary relief from creditor pressure, allowing for the formulation of a reorganization plan.<\/li>\n<li>Creating a plan: The debtor is typically granted a limited period to exclusively propose a reorganization plan. This plan details how the company will address its debts, reduce costs, and streamline operations. The plan must be approved by creditors and the court.<\/li>\n<li>Creditor voting: Creditors vote on whether to accept or reject the reorganization plan. If a majority of creditors in each class vote in favor, the plan moves forward.<\/li>\n<li>Confirmation: The court then evaluates the plan, ensuring it meets legal requirements and is fair to all parties involved. If approved, the plan is confirmed, and the debtor begins executing it.<\/li>\n<li>Implementation: The company now operates under the confirmed plan, making necessary changes to fulfill its commitments and restore financial viability.<\/li>\n<\/ul>\n<h2>Chapter 11 bankruptcies in the cryptocurrency industry<\/h2>\n<p>The cryptocurrency industry, despite its rapid growth and potential, has witnessed its share of financial struggles and legal complexities. Several companies within this sector have turned to Chapter 11 bankruptcy to navigate financial difficulties:<\/p>\n<h3>Prime Trust\u00a0<\/h3>\n<p>After encountering a deficiency in customer funds, crypto custodian Prime Trust has sought refuge under <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/prime-trust-files-for-bankruptcy-delaware\">Chapter 11 bankruptcy protection in Delaware<\/a> on Aug. 15, 2023. The entities pursuing Chapter 11 relief encompass Prime Core Technologies Inc., Prime Trust LLC, Prime IRA LLC and Prime Digital LLC.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Prime Trust Chapter 11 bankruptcy filing: <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/esfnhDmGjK\">https:\/\/t.co\/esfnhDmGjK<\/a><\/p>\n<p>25,000 to 50,000 creditors<br \/>largest unsecured claims are customers<br \/>estimated liabilities between $100 million to $500 million<br \/>estimated assets between $50 million to $100 million <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/DkFOwvn9Xz\">pic.twitter.com\/DkFOwvn9Xz<\/a><\/p>\n<p>\u2014 Pledditor (@Pledditor) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/Pledditor\/status\/1691278340013830144?ref_src=twsrc%5Etfw\">August 15, 2023<\/a><\/p><\/blockquote>\n<h3>Bittrex<\/h3>\n<p>Cryptocurrency trading platform also <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/crypto-platform-bittrex-files-for-chapter-11-bankruptcy-following-sec-charges\">filed for Chapter 11 bankruptcy protection in May 2023<\/a>. The bankruptcy application pertains to multiple entities, including Bittrex Inc. based in Seattle, two Bittrex entities located in Malta and an associated entity named Desolation Holdings LLC.<\/p>\n<h3>SVB\u00a0Financial Group <\/h3>\n<p>In a bid to preserve value, SVB Financial Group in distress has submitted a self-initiated request for court-monitored <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/svb-financial-group-files-for-chapter-11-bankruptcy\">restructuring via Chapter 11<\/a>. This move occurred in March 2023 and was directed toward the United States Bankruptcy Court.<\/p>\n<h3>Genesis Global Capital<\/h3>\n<p>Genesis Global Capital, a cryptocurrency lending entity, had <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/crypto-lender-genesis-files-for-bankruptcy\">filed for Chapter 11 bankruptcy proceedings<\/a> in the Southern District of New York in January 2023. As per the filing on Jan. 19, the company has approximated liabilities and assets within the bracket of $1 billion\u2013$10 billion. This action extends to its parent company, Genesis Global Holdco, and an affiliated lending division named Genesis Asia Pacific, both of which sought the shelter of bankruptcy protection.<\/p>\n<h3>Core Scientific Inc<\/h3>\n<p>In December 2022, Core Scientific Inc, a major publicly traded cryptocurrency mining firm in the United States, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/core-scientific-plans-september-bankruptcy-exit\">attributed its Chapter 11 bankruptcy filing<\/a> to a combination of factors. These included declining Bitcoin (<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/bitcoin-price\">BTC<\/a>) prices, escalating energy expenditures and a significant unpaid debt of $7 million owed by the insolvent crypto lender Celsius Network.<\/p>\n<h2>FTX<\/h2>\n<p>In November 2022, the Bahamas exchange\u2019s abrupt bankruptcy followed $6 billion in withdrawals in 72 hours, with Binance not aiding. Alameda Research, FTX\u2019s linked hedge fund, also <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/ftx-ftx-us-and-alameda-file-for-chapter-11-bankruptcy-in-us-sbf-resigns\">filed bankruptcy<\/a>. The high-profile failure involved founder Sam Bankman-Fried.<\/p>\n<p><strong><em>Related:\u00a0<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/learn\/who-is-sam-bankman-fried-ftx\">Who is Sam Bankman-Fried: Profile, biography, FTX, arrest and more<\/a><\/em><\/strong><\/p>\n<h3>BlockFi<\/h3>\n<p>In late November 2022, BlockFi, a crypto lender, filed for Chapter 11, following FTX\u2019s collapse just two weeks prior. BlockFi cited a liquidity crisis due to its <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/blockfi-files-for-bankruptcy-as-many-expected-cites-ftx-collapse-for-its-troubles\">significant exposure to FTX<\/a>. The New Jersey-based company had depended on a $400million FTX credit line for survival, especially after fellow crypto lenders Voyager Digital Ltd and Celsius Network went bankrupt earlier in 2022.<\/p>\n<h3>Celsius Network<\/h3>\n<p>In July 2022, Celsius, a crypto lending platform, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/breaking-celsius-is-reportedly-filing-for-bankruptcy-imminently\">declared Chapter 11 bankruptcy <\/a>due to the downfall of TerraUSD and Luna, which led to the crypto lender\u2019s demise.<\/p>\n<h3>Three Arrows Capital (3AC)<\/h3>\n<p>On July 1, 2022, the crypto hedge fund Three Arrows Capital <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/three-arrows-liquidators-recoup-losses-from-founders\">filed for bankruptcy<\/a>, citing the May crash of stablecoin TerraUSD and Luna as the cause.<\/p>\n<h3>Voyager Digital<\/h3>\n<p>On July 6, 2022, Voyager Digital, a crypto lender headquartered in New Jersey, filed for U.S. bankruptcy. The reason was a default on a crypto loan exceeding $650 million by Three Arrows Capital.<\/p>\n<p>Chapter 11 bankruptcy serves as a crucial tool for businesses, including those in the cryptocurrency industry, to restructure their operations and overcome financial difficulties.\u00a0By providing a framework for rehabilitation, it balances the interests of debtors and creditors while allowing companies to maintain operations, protect jobs and contribute to the economy.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In the complex world of finance and business, bankruptcy serves as a crucial mechanism that allows struggling companies to reorganize and regain financial stability.\u00a0 One of the most well-known forms of bankruptcy is Chapter 11, a legal process in the United States that grants businesses the opportunity to restructure their operations while protecting them from [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":139047,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[235,203,210,234,231,232,237,238,236,233],"class_list":["post-139046","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain","tag-bitcoin","tag-crypto-currency","tag-elon-musk","tag-ethereum","tag-hyperledger","tag-ibm","tag-mining","tag-nodes","tag-spacex","tag-tesla"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/139046","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=139046"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/139046\/revisions"}],"predecessor-version":[{"id":147873,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/139046\/revisions\/147873"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/139047"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=139046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=139046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=139046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}