Max Solomons and Alec Hoy have written an article titled “Trusts in a Trustless System: An Analysis of Entitlement to Digital Assets Held by Bankrupt Third Parties,” published by Business Law Today. They write:
In the week of November 7, 2022, the digital asset ecosystem experienced an unprecedented level of market instability, as billions of dollars of value seemingly disappeared from FTX.com (FTX), an industry goliath, overnight. By the end of the week, a series of shocking revelations culminated in FTX itself and approximately 130 affiliated entities filing for bankruptcy. Earlier that year, FTX had been valued at $40 billion and was endorsed by celebrities and institutional investors alike, and its founder was coined “the next Warren Buffett” by Time magazine. The sudden collapse and disappearance of billions of dollars of value left many wondering whether users who had assets stored on FTX would be entitled to recovery of any of those assets, and more generally, how other users can protect themselves in the future when choosing to store their digital assets on these platforms.