Shoba Pillay, the Examiner appointed in Celsius’ bankruptcy cases, filed her interim report on November 19, 2022.  The Celsius Examiner’s report provides some important insight into a crypto-exchange’s operational and risk management failures which may provide investors and creditors some insight into what to expect in FTX.

The initial report provides important insight on the financial management at Celsius and treatment of various types of customer accounts. Given Celsius’ management of the different accounts, and the commingling of assets between and among them, “customers now face uncertainty regarding which assets, if any, belonged to them as of the bankruptcy filing” as explained by the Examiner. Her report is extremely thorough and can be accessed here. We highlight a few high-level observations from the report below.

  • Earn Program. Pursuant to its “Earn” program, customers purported to lend cryptocurrency to Celsius in exchange for certain “rewards” plus the return of their principal. The terms of use, while changing over time, were largely consistent with respect to Celsius’ ownership of all cryptocurrency deposited. While each customer’s account reflected the amount of each digital asset deposited (plus rewards), Celsius did not have individual wallets holding those assets. Instead, when amounts were deposited by a customer they would be swept into one or more “Main” wallets that pooled many customers’ assets. Celsius accessed those accounts at its discretion for purposes of funding its many investments — needed to generate its customers’ expected returns. When needed, Celsius effectuated withdrawals related to the Earn program by transferring assets from any one or more of its many commingled Main wallets to its customers’ external wallets.
  • Custody Program.  This program was launched in April 2022 in response to investigations then underway by various state regulatory authorities. The program was designed to allow the company a mechanism to maintain relationships with unaccredited customers in the US, purportedly holding their assets in “custody” without the benefit of rewards. Generally, all deposits of US customers following April 15 would go to Custody accounts (and accredited customers could then move them to an Earn account). The terms of use with respect to Custody accounts were clear — title remained with the customer (although they also identified bankruptcy risks). Hastily developed however, the Custody program did not provide customers with individual wallets that segregated assets.  Instead, the company sought to maintain an aggregate level of deposits in commingled wallets (as expressly permitted by the terms of use) that roughly matched the assets held in such program. When first deposited by a customer, assets would be directed to the company’s Main wallets at which time it lost any ability to trace an assets to a customer. From Main wallets, assets were periodically, and manually, transferred to Custody wallets. The aggregate amount contained in these commingled Custody wallets did not necessarily correspond to the aggregate customer balances allocated to them. Reconciliations occurred from time to time. When a shortfall existed, Celsius would transfers coins from a number of sources into Custody wallets to regain balance. In the days leading up to the filing, the swings in liabilities to customers with Custody accounts and the amounts maintained in the Custody wallet swung by millions of dollars in value. The Examiner reports that the deficit reach $45 million by June 28th. When it came to withdrawals to Custody customers, Celsius effected transfers, not from Custody wallets, but instead from wallets located in a different workspace.
  • Withhold Accounts. Celsius was unable to offer Custody accounts to users in nine states due to regulatory issues. For customers in those states, the company purported to maintain Withhold accounts as a temporary substitute. These funds were unavailable for either Custody accounts or the Earn program, and customers were advised to withdraw them. Unfortunately, customers could not withdraw funds through the Celsius app but rather need to contact customer care. In the interim, rather than be treated similarly to Custodial accounts, assets supposedly held in Withhold accounts were held in the Main wallets and available for use by Celsius as those in the Earn program.

Based on the Examiner’s initial report, it appears that Celsius’ ability to match the cryptocurrency deposited by a customer, whether in an Earn account, Custody account or Withdrawal account, was non-existent shortly following deposit and that assets were commingled with other Debtor assets for a short period of time.  While certain customer accounts were being tracked by accounting ledgers, the facts revealed by the Examiner’s report will provide the Bankruptcy Court with additional factual guidance in determining whether account holders can claim that their assets were being held in trust or “constructive trust.”    In other non-crypto bankruptcy cases,  whether or not trust funds can be identified or traced after such funds have been commingled (sometimes using a technique called the “intermediate balance rule”) helps to determine how much a beneficiary can actually recover.   Under this standard, if the amount of the commingled deposit equals or exceeds the amount claim to be in trust, then a constructive trust may be imposed. The Examiner’s report provides important factual backdrop for that rapidly approaching litigation, the outcome of which will certainly have dramatic consequences of customers’ ultimate recoveries.

Relatedly, while an examiner has yet to be appointed in the FTX case, it will be important to monitor and understand the severity of record keeping and segregation failures by FTX and the impact it will have on their account holders and creditors.

FTX has warned its investors, customers and the crypto-world that they may have to file for bankruptcy protection without rescue financing to address its immediate liquidity crisis. Unlike the bankruptcy cases of Celsius and Voyager, FTX’s case, should it file, will likely involve many institutional investors with secured and unsecured claims. These institutional investors are now having to take steps to limit their exposure in the face of such uncertainty while considering the consequences of an FTX filing. While history rarely repeats itself, it does rhyme quite often, and lessons learned from Lehman’s epic bankruptcy in dealing with securities trades, loans, swaps, repos, customer property and dozens of other structured transactions may be useful guidance.  Of course, adding the novelty and complexity of digital assets and absence of regulatory clarity, an FTX case could be a tangle of confusion.

The legal questions that investors will face include:

  1. How will my digital assets or investments be classified in an insolvency proceeding?
  2. In a US Bankruptcy proceeding, do any traditional safe harbors apply which would allow termination, liquidation and set-off of claims?
  3. How will my claims or assets be valued?
  4. What should a counterparty do with any collateral they hold?
  5. What are the risks of withdrawing my digital assets today (assuming I still have access)?
  6. Do I have any legal recourse against management in connection with my potential losses?

This is a gut check moment for institutional investors in the cryptocurrency space and may be the first real test of how market, counterparty and legal risk management should respond to these types of events in digital asset investing and trading.

FTX’s insolvency will have repercussions on Voyager as well. As has been widely reported, Voyager’s exit from Chapter 11 is premised on the consummation of a sale of substantially all of its assets to FTX US (or West Realm Shires, Inc.).  Very generally, under the transaction FTX US would acquire the cryptocurrency on the Voyager’s platform and pay additional consideration which the company estimated to provide at least approximately $111 million of incremental value.  In its disclosure statement, the company reported that “the FTX US bid can be effectuated quickly, provides a meaningful recovery to creditors, and allows the Debtors to facilitate an efficient resolution of these chapter 11 cases, after which FTX US’s market-leading, secured trading platform will enable customers to trade and store cryptocurrency.” After this week’s news of FTX’s severe liquidity constraints and its own bankruptcy risk, Voyager’s prospects for a quick wind-down, and the associated recovery for customers and other creditors, have dimmed considerably.

It has been reported that Binance was a leading competitor of FTX US for Voyager’s assets. Binance has now backed out of any purported agreement to provide rescue financing to FTX, leaving FTX US’s ability to close on its acquisition in grave doubt. If unable to close, Voyager will surely look to Binance to revisit their interest in the  platform. While this will certainly cause a delay, the framework of Voyager’s plan to exit bankruptcy may hold.

The excitement in the distressed digital assets markets may only be in the early innings.

Over a decade after Lehman’s insolvency, the English High Court handed down a key judgement in Grant v FR Acquisitions Corporation (Europe) Ltd [1] on 11 October 2022. The judgement provides commentary on when certain Events of Default have occurred and are “continuing”.

Although the court addressed these issues in the context of interest rate swaps entered into pursuant to an ISDA Master Agreement (the “Transactions”) and the impact of Lehman’s UK entity, LBIE, coming out of administration, the judgement may have implications beyond the derivatives market, for example in the context of financing agreements, corporate documentation, and distressed debt trading, as well as cross-border restructuring or insolvency situations.

Continue Reading When Is an Event of Default “Continuing”?

In an earlier post we discussed the bankruptcy filing of Compute North Holdings, Inc., a bitcoin miner felled by high electricity costs and falling cryptocurrency prices (see here). It may be followed shortly by another miner, Core Scientific, Inc., which announced on October 26, 2022 that it has similarly been severely impacted by rising electricity costs and the price of bitcoin. It also noted increases in the “global bitcoin network hash rate” as well as ongoing litigation with Celsius Networks and its affiliates. The company, whose stock is listed on NASDAQ under the symbol CORZ, is engaged in a battle with Celsius regarding the latter’s failure to pay certain “utility tariffs” purportedly owing in relation to the hosting of Celsius’ mining equipment at Core Scientific’s data centers, among other things. In a filing earlier this month in Celsius’ bankruptcy case, Core Scientific asserted that it was “losing approximately $1.65 million per month subsidizing Celsius’s business.” A hearing on Core Scientific’s demand that Celsius pay these administrative expenses, among other things, has been scheduled for November 9, 2022 in Celsius’ case.  Core Scientific may have commenced its own case by that time. 

In its 8-K, Core Scientific announced that it will be unable to make certain upcoming payments under financing arrangements. Such failure may lead to defaults under its other indebtedness, including two series of convertible notes. They have hired restructuring advisors and announced that alternatives include the filing for bankruptcy. As of the date of the 8-K, the company was holding 24 bitcoins and approximately $26.6 million in cash. 

Meanwhile, Compute North Holdings’ case has progressed rapidly.  The company is engaged in a sale process and has scheduled an auction to begin on November 1, 2022.

We will provide further updates as on these matters as circumstances warrant. 

Secured lenders who include personal property assets as collateral in lending transaction structures have long relied upon the regularity and clarity of the Uniform Commercial Code (“UCC”) provisions which provide a roadmap for creation, perfection and enforcement of security interests in personal property. Revisions made to the UCC since 2000 have recognized and incorporated concepts to address changes in marketplace reality driven by technological advances.  The creation of cryptocurrencies, however, has posed challenges to entrepreneurial lenders and their counsel who desire to reach a level of comfort that a perfected security interest in a cryptocurrency can be achieved within the existing UCC framework.  The mere fact that a new Article 12 of the UCC, tentatively entitled “Controllable Electronic Records”, is in the early stages of adoption in state legislatures is proof enough that current law is at best inadequate to address issues peculiar to digital asset classes, including cryptocurrencies. The Wyoming legislature amended its version of UCC Article 9 effective as of July 1, 2019 with the intent of permitting perfection by control for cryptocurrencies (by controlling the applicable private key, including through a multi-signature arrangements) without addressing significant legal, practical and policy issues addressed in the proposed new Article 12 and its conforming amendments to other UCC articles.  It is presently unclear if Wyoming will follow other jurisdictions in adopting the Article 12 regime.

Secured lending against cryptocurrencies as collateral is but one of the topics addressed by the proposed UCC revisions.   Lenders who are currently taking  cryptocurrencies as collateral and their counsel have followed two basic approaches to achieve security interest perfection to the extent possible under current law:

Approach 1: The cryptocurrency is transferred to a securities intermediary, the securities intermediary agrees to treat the cryptocurrency as a “financial asset” which is then credited to the borrower’s “securities account” held at the “securities intermediary,” and the securities intermediary, the borrower and the lender enter into a control agreement as to the “securities account” and the “securities entitlement”; or

Approach 2: The lender files a UCC financing statement indicating the cryptocurrency/general intangible as collateral, the borrower provides the lender with the private key, and the lender transfers the cryptocurrency into its own public address or “wallet”. Note that absent the filing of the financing statement, the lender will be unperfected; having the cryptocurrency in the lender’s “wallet” alone does not perfect the security interest. Often, lenders may have no option under current law other than to perfect via Approach 1 as borrowers may be apprehensive about transferring the cryptocurrency to the lender and having a public record by filing of a financing statement tying the borrower to ownership of cryptocurrency, especially if the public address or amount of cryptocurrency is disclosed in the financing statement.  

Neither of these approaches, however, provides the securities intermediary or the secured party with any legal or practical assurance that the borrower owns the cryptocurrency free of other claims, nor that the securities intermediary will acquire the cryptocurrency free of other claims. Under the current version of Article 9 of the UCC there is also no way to ensure priority of the security interest without obtaining a release or subordination from all other secured parties, even if they are disclosed.  While the Wyoming non-uniform UCC amendments offer some additional protections, these uncertainties cannot be fully resolved under the current state of the law.

Therefore, lenders may need to simply rely on representations and warranties from the borrower as to its ownership of the cryptocurrency being free and clear of liens and other adverse claims encumbrances. In addition, in order to provide some comfort to the lender until the law catches up with the marketplace, the lender may need to engage in a factual diligence process to protect itself from other claimants to the cryptocurrency that may exist at the time of the transfer to the securities intermediary or the filing of the financing statement, such as examining the on-chain transactions and inquiring about the prior owners and prior public addresses of the cryptocurrency being used as collateral. In practice, while not fully resolving these concerns, some lenders have required borrowers to incorporate a borrowing entity in Wyoming to utilize Wyoming’s amendments to Article 9 to make use of the perfection by control rules available in that jurisdiction.

The revisions to the UCC, once enacted, will as a legal matter, create uniform rules for perfection of “controllable electronic records” (a new asset class that includes digital assets broadly defined and most, but not all, cryptocurrencies) via a “control” regime aligned to the peculiarities of this new asset class and rules that will either cut off prior claims or that will give the secured lender with control a priority over other claims.  These revisions are more clear and robust than the non-uniform Wyoming amendments. Wyoming, for example, provides for a cut off of prior claims only after two years following perfection by filing provided the secured party does not have actual, as opposed to constructive, notice of an adverse claim during  two-year window. Unlike the very familiar account control agreements for deposit accounts and securities accounts currently in use where parties can look for the magic language that imparts “control” to the secured party, the new Article 12 paradigm will  require careful analysis to determine if in fact the asset in question is a “controllable electronic record” and whether it is meets the newly developed tests for “control” of a “controllable electronic record” set out in the new Article 12. It is unlikely that a “form” document like an account control agreement will be the one size fits all mechanic to gain perfection by “control” for this asset class.

The purchase and sale of assets by a debtor is governed by Section 363 of the Bankruptcy Code. So-called “363 sales” are typically attractive from a buyer’s perspective (and may be a primary reason for a bankruptcy filing). Perhaps the most important benefit afforded to buyers in 363 sales is the ability to acquire assets “free and clear” of claims and interests of third parties. Section 363(f)(5) of the Bankruptcy Code provides that a debtor can sell property free and clear of any interest in such property when a third party “could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.” But what constitutes an “interest” remains the subject of some debate, particularly as it relates to successor liability claims. One category of successor liability claims that may arise in traditionally unionized industries are the claims of pension funds that are triggered by a participant’s withdrawal. “Withdrawal liability” arises under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”) and may, at times, be asserted against a purchaser of the participant’s assets, typically where it had notice of the claim at the time of the acquisition and where there exists a “substantial continuity” in the business operations following the purchase. 

Continue Reading Successor Liability and Section 363: A Broad Interpretation of an “Interest in Property”

On September 22, 2022, Compute North Holdings, Inc. and certain affiliates filed bankruptcy in the Southern District of Texas in Houston.  The company describes itself as “a leader in data centers, focused on delivering sustainable, cost-effective infrastructure for customers in the blockchain, cryptocurrency mining and distributed computing space.”  See Declaration of Harold Coulby, Chief Financial Officer and Treasurer of the Debtors (Doc. 22). It owns and operates three operating facilities that provide remote computing capacity and has rights to two others that remain in development. Its main business lines include (i) hosted cryptocurrency mining services, (b) bitcoin mining, and (c) cryptocurrency equipment sales. See Id.

The company attributes its predicament to a severe liquidity crisis that constrained its ability to complete development of two facilities that had begun prior to the distress that has marked the digital assets markets in 2022. In particular, it points to the drop in bitcoin prices to levels almost 75% below its peak in late 2021 and the doubling of costs for electricity required for bitcoin mining. See Id. The company also encountered extreme difficulties with one of its lenders, Generate Lending, LLC (“Generate”), the lender on a $300 million credit facility. Following a number of alleged defaults under the facility, among other things, Generate effectively ceased control of a non-debtor subsidiary that indirectly owns two critical facilities, including the so-called “crown jewel.” The company says that it had disputed the existence of the alleged defaults and remains in discussions with Generate regarding financing. See Id.    

With regard to its mining operation, the company says that it maintains cryptocurrency wallets which contain customer “subaccounts or subwallets” — the mining gear that is awarded bitcoin “could belong to a customer.” The wallets are maintained on the Genesis and Bitstamp exchanges. See Id. Given the opacity in this largely unregulated environment, it is unclear whether there will be any dispute regarding the ownership of bitcoin maintained in those wallets.

Like Voyager and Celsius before them, the company filed bankruptcy without arranged financing. The case will be funded at the outset with the company’s limited unrestricted cash (approximately $8.7 million).Also similar to those cases, the company plans to pursue a dual path process, either a sale of the business as a going concern or a stand-alone plan.  See Id.  

We will continue to provide updates as circumstances warrant.

On September 14, Crowell partners Rick Hyman and Gregory G. Plotko, together with Dawn Haghighi, General Counsel of PVC Murcor, published an article on the Association of Corporate Counsel’s ACC Docket, “Your Counterparty Filed Chapter 11 – Make Sure to Check These 10 Boxes.” The article provides valuable insight for in-house counsel who find themselves dealing with a bankrupt counterparty, and are unsure of their next steps. For the full article, view it here on the web, and remember to subscribe and check back soon for more posts on Restructuring Matters.

Crowell’s Crypto Digest Blog sat down with MakersPlace’s Head of Legal and Trust and Safety, Kayvan Ghaffari, to learn about the NFT marketplace and the current legal landscape regarding NFTs.

What does it mean to be the Head of “Trust and Safety”?

Trust and safety revolve around ensuring the platform is secure and safe, and ensuring that whoever interacts with the website has a trusting relationship with the platform.

To me, it involves four buckets.

One, is content moderation. Essentially, how are we thinking about the content that is being provided on our platform? We are thinking through these murky issues to make sure people are safe and that there is nothing inherently wrong, illegal, or harmful on our platform.

Second, is fraud. How do we prevent fraud and scams from occurring on our platform? This is a big issue in the art world and also the digital assets space. We want to make sure we have a reputable platform that people engage in.

Third, is cybersecurity. How do we maintain our infrastructure and secure it?

Finally, intellectual property. How do we approach potential IP theft? All of these encapsulate trust and safety at a high level.

How did you come into your role at MakersPlace?

MakersPlace was a client of mine when I was at Crowell. What I did for them for the most part was IP due diligence. They would send artistic works from creators before they were launched and I would look at them and see if there were any IP issues. I was really fascinated by this work. There’s a lot of IP issues around art, including licensing, copyright, and trademark issues.

I never anticipated being an art lawyer. Working with any startup is a fascinating opportunity. They don’t take no for an answer and you are required to think creatively about a solution. Regardless of where they are located in the world, they have this ethos of “break it and then fix it.” As a lawyer, you’re saying “alright, here’s a set of items you want to achieve, I can’t tell you, ‘you can’t do this.’” That doesn’t work, because the startup will go to another law firm. Instead, I find ways to mitigate that risk and look at the startup’s risk tolerance. You don’t get that same issue with large institutional clients. With startups, you’re forced to reckon with that. From that perspective, it always fascinated me and interested me – it’s something I always enjoyed in my career. When they asked me to take this role, it was a hard decision, but it was an opportunity to flex my creativity and I couldn’t say no to it. I have a chance to operate at the cutting edge of IP issues. 

What’s the mission of MakersPlace?

Our company is called MakersPlace, a place of makers. Our goal is to empower creators and to give them a platform to speak. We want to connect these creators with collectors who value and appreciate that art and expression. We haven’t wavered from this mission. This is evident by the fact that we have not deviated from being a curated marketplace. It’s also why in our smart contracts there’s a built-in royalty flow where an artist will gain royalties for any secondary sale of that particular art in perpetuity. This is a revolutionary system for creators. This has never happened before in the “traditional” art world.

What’s exciting you right now at MakersPlace?

The first thing that comes to mind is O(V.)Erturned.This month-long exhibition featured women creators. The idea behind this came after the Supreme Court overturned Roe v. Wade. We as a company took issue with that decision and we issued a public statement condemning the decision. So, we wanted to empower women voices and amplify them. We had a curated exhibition, just of women creators, where we donated all of our commissions to Planned Parenthood, the ACLU Reproductive Freedom Project, and the Brigid Alliance. Each week we had a Twitter Spaces with some of our women creators. It was such a remarkable, moving, powerful experience to hear these women and hear about their inspiration and their thoughts on the Supreme Court’s decision. Hearing the raw vulnerability of these creators was so moving.

What are the goals of MakersPlace moving forward?

We want to really lean in and maintain our message of being a curated digital marketplace for leading artists.  In many ways, we want to be premier destination of digital art. We want people to think about and be proud of owning a beautiful piece of digital art. It is art. It’s just using another medium – a new technology – to communicate that art. We want to become the go-to for art. And we want to be able to cultivate that community of collectors who value and appreciate it in a material way.

And, as a I mentioned earlier, trust and safety is a big deal, MakersPlace is taking and making strides to lean in on trust and safety. We want to be totally transparent about issues that are happening on the platform, and being transparent on what our views are on content and moderation. I want to ensure that anyone that spends any money at MakersPlace can trust that they are receiving the value for what they spent money on.

On the flip side, what are some challenges that are on the horizon?

The biggest challenge is the unknown. The regulatory uncertainty is challenging. We don’t know who is going to regulate us. What they are going to regulate us with. We don’t know how everything is going interplay with laws in other countries. We’re starting to see hints of it, but it will be interesting to see how it all plays out. In many ways, it’s helpful to be regulated because it creates some certainty.

Of note, the SEC recently announced that they are doubling the size of their digital assets division and for the first time the SEC has identified NFTs as an area of focus.

In general, how would you use outside counsel and how can outside legal counsel be helpful to MakersPlace?

There are a few things that outside counsel can do to help MakersPlace and any NFT company.

First, monitoring what laws are happening. What’s the noise on the ground? What is the SEC saying? What is the CFTC saying? What is Congress saying on NFTs? This all goes to what regulations will be applicable. I think law firms need to keep their ears to the ground and immediately notify companies like MakersPlace about any developments and, critically, to provide insight on how it may affect us.

Outside counsel would also be helpful in IP litigation. Or any litigations. The non-digital art world is full of litigations both in terms of IP litigation but also a “who owns it?” litigation, what is the commission split, breach of contract stuff. I suspect we’ll start to see additional activity in that domain in the next few years. Scam and fraud are happening a lot in this ecosystem as well. It’s not just isolated to NFTs and crypto. It happens all the time outside of this space.

Most importantly, and lastly, when I’m asking outside counsel for advice, I’m asking, “what should I do?” I’m not asking for a recitation of the law. Take the law and tell me what to do with it. First and foremost, I’m paying you to tell me what to do first. I don’t necessarily need or want a memo or full-blown analysis of the law. I need lawyers to give me solution and provide a pathway of how we’re going to mitigate those risks.

What predictions do you have for the NFT ecosystem in the next few years?

I think we are starting to see a lot of consolidation of marketplaces. I think people are being smarter about NFTs, and digital assets in general because there have been a lot of rug pulls recently. We’ve launched an education hub on our platform which is designed to actually educate people on NFTs, including on what it takes to become a creator and collector on our platform.

I also think we’re going to see a bifurcation and trifurcation of the industry. We’re going to see companies like OpenSea that are open marketplaces. And we’re going to see curated marketplaces. And we’re also going to see studios that are facilitating creators that will feed into these marketplaces.

Anything else that you want to communicate about MakersPlace and the NFT space?

It’s a young space. If we think about the internet and where it is and how many issues there are, it’s like what my mentors Gabe Ramsey and Warrington Parker would always tell me, “it’s kind of like an adolescent riding a bus.” We kind of know what it is. We kind of have an understanding of its full potential, but we don’t really know, and don’t really have the capacity and the maturity to really understand it. With NFTs, we’re like children driving a bus. It’s an exciting industry that needs to be taken seriously. The industry needs to do a better job of educating people about its capacity and about instilling trust and safety within the industry, and we’re trying to do that through our MakersPlace Education Hub. From an intellectual perspective, there are a lot of opportunities to pave the way and be leaders from a business and artistic perspective. It’s scary, but also really fun. There are so many ways this industry can mature and adapt. I found it both exciting and impactful.

The UK has seen the launch of a competition-law based collective action – the equivalent of a class action in other countries – on behalf of an estimated 240,000 investors in the digital assets space.  The claim is brought against four cryptocurrency exchanges: Binance, Bittylicious, Kraken and ShapeShift.  It alleges that those exchanges colluded in delisting the Bitcoin Satoshi Vision (BSV) currency; and converting BSV to other cryptocurrencies without investor consent.  The claim is being brought by BSV Claims Limited, a special purpose company set up to bring the action.

This is interesting for a number of reasons.  First, it is the first time that a competition law claim has been brought in the digital asset space in the UK.  Second, the level of the claim – at just under £10 billion – would, if successful, be the second largest UK collective action to date and would have serious consequences for the four exchanges.  Third, the class representative and founder of BSV Claims Limited is Lord David Currie, a previous Chairman of the Competition and Markets Authority, the UK competition regulator.

The claim is being brought in front of the UK Competition Appeal Tribunal (“CAT”), which has powers to hear collective actions on breaches of competition law.  The first step is for the CAT to decide whether the claim is a suitable one for collective proceedings.  Class actions are still a relatively novel way of bringing a claim in the UK; although the number of cases being brought and approved by the CAT is growing rapidly since a recent landmark ruling by the UK Supreme Court effectively lowered the bar for successful certification of a claim.  If this claim is approved, it will be the tenth collective claim successfully certified.