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Crypto-Asset Disputes

Chambers FinTech look into the last 12 months of crypto asset disputes.

Published on 24 October 2022
Written by Simon Christian
Simon Christian

A rough year for digital assets

Many speculative assets have suffered over the last 12 months, but crypto has also had to contend with hack after hack after hack, particularly of Decentralised Finance (DeFi)applications and bridges, as well as the complete implosion of the third-largest stable coin, TerraUSD. 

This cryptocurrency was intended to stay algorithmically pegged to the value of one US dollar, but in May 2022 it suffered a so-called “death spiral”, falling by over 90% to a few cents and its linked crypto, LUNA, fell from $86 to $0.000017 (just under two thousandths of a cent) in just a few days.

Some argued that the institutions which had invested heavily in the project, including its founder Do Kwon, ought to have seen the potential for a run on TerraUSD/LUNA before it happened.

The fall of TerraUSD/LUNA has also, directly or indirectly, led to a number of bankruptcies of several cryptocurrency institutions, the most prominent among them being crypto fund Three Arrows Capital (3AC) and crypto savings and lending platforms Celsius and Voyager Digital.

Crypto disputes to the fore

As struggling projects go bankrupt, suffer hacks or attract regulatory scrutiny, we expect to see a significant increase in cryptocurrency-related litigation, insolvency, regulatory enforcement and white-collar criminal defence work. 

In response, we are launching a new practice area, Crypto-Asset Disputes, in the US and UK chapters of this year’s Chambers FinTech guide. These new categories will cover commercial litigation, bankruptcy, regulatory enforcement, and white-collar crime work concerning cryptocurrency and digital assets.

We expect to receive significant interest in crypto commercial litigation and bankruptcy work as the Celsius, 3AC, Voyager and other crypto bankruptcies start working their way through the courts. The high-profile commercial case of Tulip Trading Ltd v. Bitcoin Association for BSV is on its way to the England & Wales Court of Appeal, and luxury goods brand Hermès’ trademark infringement case against the creator of the “MetaBirkins” NFT collection is proceeding to trial in the US District Court for the Southern District of New York, having survived a motion for summary judgment.

We are also starting to see more and more putative class action lawsuits being brought by crypto investors who have lost money in DeFi hacks or the collapse of TerraUSD/LUNA, as well as increasing regulatory enforcement, including the recently announced action against a former Coinbase executive accused of insider trading and the long-running SEC v. Ripple Labs case.

The likelihood is that this work will become increasingly important in the crypto world in the next 12 months, and the Crypto-Asset Disputes rankings are a unique opportunity for law firms to showcase their expertise in this area.

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