Fraudulent transfer scrutiny often intensifies when a distressed company finally files for bankruptcy protection. That dynamic is now unfolding in the cryptocurrency sector.
In February 2026, San Francisco-based crypto firm Archblock filed for Chapter 11 protection after facing fraud allegations from the SEC and litigation from another crypto company. The filing revealed striking discrepancies across affiliated entities, with reported liabilities in the hundreds of millions of dollars and subsidiary balance sheets that appear materially different from the parent company’s financial position. Prior SEC allegations claimed that customer funds backing the TrueUSD stablecoin were invested in speculative offshore vehicles, raising concerns about how assets were managed prior to bankruptcy.
For creditors, these circumstances raise an important question: were assets transferred or repositioned before the bankruptcy filing in ways that may reduce recoveries?
The Bankruptcy Code provides mechanisms to address precisely that risk. Under 11 U.S.C. § 548, a trustee may pursue avoidance actions to recover transfers made before the filing if those transfers were intended to hinder, delay, or defraud creditors, or if they were made while the debtor was insolvent and for less than reasonably equivalent value. This provision allows the estate to claw back improperly transferred assets so that they can be redistributed to creditors.
Courts have repeatedly emphasized that transactions between affiliated entities or related parties are particularly vulnerable to scrutiny. In In re TOUSA, Inc., the Eleventh Circuit allowed creditors to recover hundreds of millions of dollars transferred in connection with loans that primarily benefitted a parent company but imposed obligations on its subsidiaries. The case illustrates how courts examine whether the debtor actually received “reasonably equivalent value” for the transaction.
Asset movements across multiple entities can also complicate recovery efforts. Large-scale fraudulent transfer litigation frequently involves tracing funds through layered corporate structures and financial intermediaries. In In re Tribune Co. Fraudulent Conveyance Litigation, courts addressed claims involving billions of dollars in allegedly avoidable transfers, demonstrating the scale and complexity such disputes can reach.
Once a bankruptcy petition is filed, the automatic stay under 11 U.S.C. 362 immediately halts most litigation and collection actions against the debtor. Courts strictly enforce the stay, and actions taken in violation of it are generally void. While the stay provides the debtor with breathing room, it also shifts creditor efforts toward the bankruptcy forum, where avoidance actions and asset-recovery strategies are often pursued.
As crypto restructuring continues in 2026, creditors should expect increased scrutiny of pre-petition asset movement, affiliate transfers, and offshore investment structures. Early analysis of these transactions can be critical to identifying potential recovery claims and protection creditor rights in the Chapter 11 process.
THCA represents creditors in fraudulent transfer litigation, asset tracing, and cross-border insolvency disputes, helping clients protect and maximize recoveries.
For more information, please contact us at +1 (617) 207-8670 or visit https://thcalaw.com/contact/