On january 5th Sam Bankman-Fried turned up at the funeral of his own crypto empire. He lodged a complaint against ftx’s bankruptcy proceedings, demanding $500m in frozen assets earmarked for creditors. Mr Bankman-Fried wants the money in order to pay legal fees for his criminal trial, in which he is accused of sucking billions of dollars of customer deposits from the crypto exchange for his own use (he has pleaded not guilty).
The demand is an opening salvo in what will be a long, chaotic battle. America’s bankruptcy laws have evolved over centuries to pick apart regular businesses. Now, on the fly, lawyers must work out how to apply them to crypto companies. In November ftx filed for bankruptcy under Chapter 11, which allows a bankrupt firm to reorganise rather than liquidate. The process usually plays out as a legally refereed tussle between a company and its creditors. The firm, told by a court what it owes, tries to convince lenders to accept stakes in the business rather than cash. If successful, it emerges with less borrowing and a shiny new growth plan. If unsuccessful, it shuts up shop. A big restructuring might have 100 creditors. A long one lasts a year. A complex one takes at least a couple.