The collapse of major digital-asset platforms in recent years has propelled bankruptcy avoidance actions into the spotlight. Among these, claw-back claims under the Bankruptcy Code – especially § 547 (pre-petition preferential transfers) and § 550 (recovery of value from transferees) – present complex, high-stakes terrain for creditors, trustees, and asset-recovery practitioners.
In the world of crypto, where token flows traverse peer-to-peer networks, wallets and exchanges rather than traditional bank ledgers, the enforcement challenge is both technologically and legally novel.
Why Crypto Claw-Backs Are Different
In a typical corporate insolvency, a trustee examines the 90-day look-back period before filing for Chapter 7 or Chapter 11 to identify payments that conferred unfair advantage to a creditor. In the crypto context, however, the complexity is multiplied. Token withdrawals, internal wallet transfers, algorithmic stablecoins, and cross-border custody all complicate the inquiry. Earlier this year, we explored how crypto-industry bankruptcies increasingly involve preference actions, where account-holders or creditors received or moved value shortly before the insolvency event.
Moreover, valuation questions are more acute: which date governs? The petition date? The withdrawal date? And if the transferred value was in a volatile token, how should gains (or losses) be measured for purposes of a claw-back? These issues challenge traditional avoidance frameworks and force adaptation by trustees and creditors alike.
Legislative and Regulatory Shifts Affecting Recovery Strategy
The GENIUS Act, signed into law on July 18, is one of the most significant changes to U.S. bankruptcy law since 2005. The law requires permitted stablecoin issuers to back their coins one-to-one with liquid assets and treat those reserves as property of the customer, not the issuer. In a bankruptcy, if the reserves are insufficient, stablecoin holders receive a superpriority claim – placing them ahead of lawyers, financial advisers, unpaid employees, tax authorities, and even the Justice Department’s bankruptcy monitoring unit. Courts must also approve stablecoin payouts within 14 days of filing. This new priority structure departs sharply from traditional bankruptcy rules and has raised concerns among restructuring professionals.
Because the reserves sit outside the estate and function like a protected trust, they cannot be used to pay legal fees or pledged to secure financing, which may leave many issuers administratively insolvent on day one. Professionals warn that bankruptcy lenders may hesitate to fund cases under this framework, and some companies might issue stablecoins solely to access the bankruptcy system. While the Act aims to ensure stablecoin holders are made whole, it also risks making it harder for issuers to successfully reorganize or exit bankruptcy, fundamentally reshaping creditor repayment hierarchies in the process.
For claw-back strategy, this means several things. First, it may reduce the pool of assets available for general unsecured creditors and trustees conducting avoidance actions. Second, counsel must assess whether any disputed assets involve stable-coins issued by a permitted payment stable-coin issuer, as those reserves receive special treatment. Third, the change introduces a new dynamic: crypto creditors now face a bifurcated landscape in which stable-coins may be treated differently than conventional receivables.
Strategic Considerations for Creditors & Trustees
Creditors or trustees involved in a crypto-entity insolvency must adopt a nuanced view. Timing is critical: withdrawals or transfers made within the look-back window may trigger avoidance, but tracing the assets and proving insolvency or preference in the crypto context may require forensic blockchain expertise and cross-border coordination. Jurisdictional issues quickly arise if tokens were moved to non-U.S. entities. Equally, token value volatility means the estate may face significantly different recoveries if the value drops – or conversely, if value rises, a claw-back may seek greater amounts.
From the debtor side, even creditors must assess whether they may themselves be defendants in avoidance litigation. Whether as transferees or subsequent recipients of value, the exposure is real. As crypto restructurings proliferate, avoidance lawyers must craft strategies that go beyond tracing: they must evaluate custody, solvency indicators, timing, and value in the context of tokens, exchanges, and cross-border flows.
Why THCA Is Well-Positioned
Thomas H. Curran Associates combines longstanding bankruptcy-litigation experience with a deep understanding of digital-asset ecosystems. Our team has worked in avoidance and preference actions across traditional insolvencies, and we have adapted our practice to include the crypto space. We bring together forensic investigation, cross-border enforcement, and asset-recovery acumen that is critical in this arena. Whether you are a creditor seeking to protect value or a trustee navigating multi-jurisdictional crypto flows, we offer a structured, strategic approach tailored to the challenges of digital assets.
Furthermore, crypto insolvencies almost always cross borders; assets move between jurisdictions, exchanges operate globally, and counterparties may be located anywhere. Our ability to collaborate with trusted professionals across multiple international markets strengthens our capacity to handle multi-jurisdictional recovery actions. Through our longstanding relationships across a global advisory network (IR Global), we can coordinate local expertise, gather evidence abroad, and pursue recovery strategies that align with the legal realities of each relevant jurisdiction. This international reach allows us to respond swiftly and effectively to cross-border challenges inherent in modern crypto bankruptcies.
This terrain is continually evolving: regulatory reform, court decisions, token innovation and cross-border flows all ensure that the next chapter is yet to be written. For parties at risk or seeking recovery in the crypto-insolvency environment, early engagement with skilled counsel is more important than ever. THCA stands ready to guide you through these uncharted waters with clarity and strategic purpose.