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Potential Preference Exposure for Withdrawing Crypto

Crypto customers who withdraw their crypto assets from an exchange or custodian within 90 days of the exchange or custodian’s bankruptcy filing may be sued to return those crypto assets as preferential transfers under section 547 of the Bankruptcy Code. There are a number of considerations relevant to whether those claims will succeed. 
In this Reuters article authored by Loeb & Loeb Restructuring & Bankruptcy partners Schuyler Carroll and Daniel Besikof and associate Noah Weingarten, the writers examine how preference law may be applicable to the withdrawal or transfer of assets in cryptocurrency bankruptcies. More specifically, the article focuses on three key issues pertaining to preference law in cryptocurrency bankruptcies: (i) whether the transfer was of property of the debtor; (ii) whether the debtor was insolvent at the time of the transfer; and (iii) whether any defenses apply.