Thread by @nicholashall

Should #FTX creditors file a proof of claim ("POC"), even if their bankruptcy claim is scheduled (and they received the Kroll unique ID email)?

Simple answer: Yes, file a POC.

Let's discuss why filing a POC is crucial, particularly for FTX international customers.

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2/◉ First, what is a POC? It's a document evidencing your claim against debtor's estate.

It ensures the bankruptcy court and debtor acknowledge your claim, giving you a voice in the process.

But what if your claim is already scheduled (and you got the Kroll email)?

3/◉ It can be dangerous to blindly rely on the debtor's representations.

Even if your claim is properly scheduled, debtor may later modify your claim amount, categorization, and even remove it entirely.

Filing a POC can resolve these discrepancies.

4/◉ Now let's touch on preference exposure.

In bankruptcy law, a preference refers to #FTX withdrawals between 8/12/22 and 11/11/22 (dates under Bankruptcy Rule 9006).

These payments may be recaptured or subject to clawback for equitable distribution among all creditors.

5/◉ By filing a proof of claim, you may help protect yourself against preference risk by establishing your position as an international customer entitled to full recovery of your property.

But how?

6/◉ For international accounts, the trust argument may prevail, or not, but failing to file a proof of claim might limit your ability to argue for unique treatment of your assets, if your account is misclassified.

Filing a POC allows you to protect your position.

7/◉ But there are jurisdictional risks for filing a proof of claim.

By filing a POC you are consenting to the jurisdiction of the bankruptcy court to adjudicate not only claim matters but claims the debtor may have against you.

8/◉ A foreign #FTX customer generally is not subject to action by a US court.

"Can't touch me. F**k the bankruptcy court!"

Hold up, bruh.

What about a creditor who obtained a Bahamian KYC withdrawing massive amounts of funds after the bankruptcy petition date?

9/◉ If that creditor files a POC for that claim (where money left in exchange exceeds any preference amount) and/or files a POC for a legit account in their name, they are consenting to US jurisdiction to hear any action against them for violating the automatic stay, and more.

10/◉ It gets better. If they lie or misrepresent on the POC, they are consenting to US jurisdiction for penalty of perjury (fined up to $500,000, imprisoned up to 5 years, or both).

This creditor may want to think twice about filing a POC. Everyone else, you're probably OK.

11/◉ Also keep in mind that filing a POC waives your right to a jury trial.

This really is important if you have massive preference exposure. Otherwise, probably not a big deal.

12/◉ Ultimately, while there are considerations about consenting to US jurisdiction, the benefits of filing a proof of claim typically outweighs the risks.

Plus your personal information is still kept private on the court docket. Your POC remains anon, for now.

13/◉ Bankruptcy law is intricate, and the landscape is even more complex with it intersects with the crypto world.

Always consult with a legal advisor to understand your specific situation and risks.

14/◉ To wrap up, filing a #FTX proof of claim can help you protect your rights and ensure your place in the proceedings.

Remember: do not lie on the POC; it is filed under penalty of perjury!

I'll thread soon about how to file a POC.

Hope this helps.