New technologies have the potential to create new industries and reshape existing ones. This month’s issue of the Journal of Corporate Renewal looks at the challenges new technologies bring and how they can shape the restructuring industry, and vice versa. As one example, from the popularization of blockchain technology sprung the cryptocurrency industry. But as we saw this year, with the breakneck pace cryptocurrency was adopted comes much uncertainty with respect to government regulation and when entities in this industry enter bankruptcy. To tackle these challenges requires inventiveness and ingenuity that make the restructuring practice vibrant and rewarding.
In this issue, we have five excellent articles, beginning with a piece by Steve Weise, Wai Choy, and Vincent Indelicato of Proskauer Rose LLP, who discuss the treatment of crypto assets held custodially for customers by an exchange or similar platform. This novel issue was brought to the forefront by Voyager Digital’s and Celsius Network’s Chapter 11 filings—putting into question customers’ ownership interest in crypto held on the platforms. They cover the common law treatment of custodially held assets and revisions to the Uniform Commercial Code that address the treatment of digital assets to provide a framework for how a Bankruptcy Court could address the issue.
Brian Lohan and Maja Zerjal Fink of Arnold & Porter Kaye Scholer LLP walk through the considerations for buyers of intellectual property in bankruptcy 363 sales, including the importance of proper diligence and specific nuances under the Bankruptcy Code for the treatment of intellectual property rights that may affect the value of such property.
Justin Eisenband and John DeFriest of FTI Consulting explore the potential disruption to the digital advertising economy due to new government privacy regulations and similar policy changes by major digital advertising platforms. They cover the specific drivers of revenue disruption, potential solutions to minimize such disruption while ensuring compliance with higher standards of user privacy, and the effects of the digital economy disruption on various players in the space.
Craig Johnson and Tiffany Archbell of Kroll Restructuring Administration LLC cover the challenges securities held electronically at a clearinghouse present to debtors soliciting votes on a Chapter 11 plan. While electronically held securities promote efficiency, anonymous trading, and liquidity, such anonymity means an effective solicitation of a Chapter 11 plan requires considerably more foresight and effort. They discuss the various steps that can be taken to address these challenges for a successful solicitation.
Finally, Darren Azman and Gregg Steinman of McDermott Will & Emery LLP look at issues of first impression when decentralized autonomous organizations (DAOs), entities that are collectively owned and managed by their members on the blockchain, fail and consider wind-down or restructuring. They explore issues such as whether a DAO can be a debtor under the Bankruptcy Code, challenges for a DAO to authorize a bankruptcy filing, the status of DAO members and equity holders or creditors, who the fiduciaries of a DAO are, and challenges to confirming a Chapter 11 plan.