Jul 9, 2021

Opinion: Is cryptocurrency fools’ gold?

Rob Armstrong, MD Restructurin...
5 min
Opinion: Is cryptocurrency fools’ gold?
Rob Armstrong, Managing Director Restructuring Advisory, Kroll, takes a look at the potential pitfalls of cryptocurrency investment

The word cryptocurrency elicits ideas of deceitful characters stealing real-life money and turning it into monopoly money somewhere deep in the dark web. But what is it actually? And how should it be dealt with in an insolvent estate?

Over time, and certainly in the past year, with the drastic increase in value, cryptocurrency has changed in many people’s minds from a salacious method of money laundering to becoming a serious contender for investment. More and more novice investors are dipping their toes in the metaphoric water and even large brands (Starbucks, Amazon, Paypal, to name a few) are starting to accept cryptocurrency as a form of payment.

Cryptocurrency goes mainstream

As more money is being converted into cryptocurrency, these types of assets are becoming more prevalent in insolvent estates. So, what does that mean for creditors of companies or bankrupts who have invested in cryptocurrency?

Because cryptocurrency is decentralised i.e., it’s not tied to a country’s currency, nor is it regulated. It is viewed as an easy method of defrauding people. However, that is not necessarily the case.

All transactions are public knowledge, meaning ownership can be verified and traced. Because there isn’t one controlling body, everyone is accountable to everyone. This transparency is a security feature in itself as it is difficult to hide in plain sight, as it were.

There is, however, a hurdle of learning new terminologies and understanding a new process. As a result, many people shy away from dealing with it. This can seem daunting and is certainly a barrier to entry for some. However, it isn’t a reason to ignore what could potentially be an immensely fruitful asset pot.

Professionals must now start to change their perspective on cryptocurrency, particularly in relation to company investments in insolvency estates, and adapt processes to enable us to deal with cryptocurrency more effectively. Gone are the days of solely dealing with traditional assets.

So, how should a cryptocurrency be dealt with in an insolvent estate?

First, how can we identify that the company has cryptocurrency? There are various indicators to look out for to help identify whether the estate may have a cryptocurrency, such as: 

  • Transfers to exchanges as indicated in the company bank statements
  • Finding a USB key within the books and records of the company
  • Running everyday keyword searches such as “crypto” or “bitcoin” against the electronic records
  • Identifying seed phrases written down within the company records 
  • Asking the directors

Once it becomes apparent that the company holds cryptocurrency as an investment, the insolvency practitioner (IP) will need to take steps to secure and preserve their investment. Just like any other asset, the IP will need to act quickly to ensure the cryptocurrency is secured correctly. Identifying and locating the key is a critical step, but the IP shouldn’t assume that someone else doesn’t have a copy of the key.

A prudent IP should transfer the cryptocurrency into a secure wallet of their own (on behalf of the estate) or to an agent. Under the new FCA legislation, cryptocurrency held on someone else’s behalf must be held by an approved agent, who could secure the assets properly, holding the assets offline, and obtaining appropriate insurance.

However, what if it's discovered that the company entered into a cryptocurrency transaction, but the asset isn't held within its wallet? Just with the dissipation of physical assets or cash, the transfer of cryptocurrency away from the estate could be considered an antecedent transaction. Further investigation would be required, as with any other claim, to review whether the IP can substantiate a claim to an evidential standard to be successful in clawing back the assets for the benefit of the estate. 

How can cryptocurrency be realised once it has been successfully recovered?

It is important to note that much like fiat currency, all exchanges have their own conversion rate.  Because there is no interbank offer rate, there is no standard for what that conversion rate is.

As we have seen in the last year, the rate has fluctuated drastically, much to the investors’ delight. In order to mitigate any criticisms and ensure the best price is being achieved for the asset, it would be prudent to compare exchanges and conversion rates. Alternatively, another option would be to place the cryptocurrency into an auction, which has an element of protection for the IP from any potential criticism as the value is simply the highest bid, rather than an exchange.

Cryptocurrency legitimacy

Given the increase in use and popularity of cryptocurrency, it is likely we will continue to see a huge investment shift towards it, particularly now with the backing of so many blue-chip companies. It is not the fraudsters’ friend, as it can sometimes be thought, and is traceable if you have the skills and know-how in dealing with it.

IPs need to embrace the move toward cryptocurrency as a more prevalent asset class and look to expand their training and understanding of the toolkits available to them, whether that is through normal recovery action of an asset or the tracing of assets leading to a claim for the benefit of the estate.

Main image credit: Fools' gold, Getty

About the author: Rob Armstrong is Managing Director Restructuring Advisory practice for Kroll. He has more than 15 years of industry experience, assisting clients with allegations of fraud, misfeasance, other financial misconduct, or improper behaviour.

Rob Armstrong, Kroll

Image credit: Rob Armstrong, MD Restructuring Advisory, Kroll


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Jul 28, 2021

Nymbus enters strategic partnership with Plaid

2 min
Nymbus has partnered with Plaid to help meet customer demand for connecting to digital finance apps

Nymbus, a leading provider of banking technology solutions, has partnered with Plaid, a data network powering the digital financial ecosystem, to more instantly authenticate and fund customer bank accounts for financial institutions. 

This new integration will allow Nymbus bank and credit union clients to securely onboard new users in a matter of seconds, which in turn translates to more active and engaged banking experiences. Plaid’s data network enables consumers to connect their financial accounts at over 11,000 institutions globally to more than 5,000 digital finance apps, including leading payments, investing, and budgeting tools.


What are the benefits of the integration?


Benefits of the Nymbus and Plaid integration for financial institution customers include:

  • Improve user identity verification and reduce fraud.
  • Instantly authenticate and link members’ bank accounts.
  • Streamline ACH transfers between any bank or credit union in the US.
  • Access and analyse comprehensive transaction data.
  • Validate real-time account balances to protect against overdraft and enable account pre-funding.

“As more consumers than ever before rely on digital finances for their everyday lives, financial institutions need to meet their customers where they are while supporting safe and reliable money management experiences,” said Sarah Howell, Chief Alliance Officer at Nymbus. “Our expanding network of partners are important contributors to Nymbus’ combined portfolio of the technology, people and process available to quickly innovate with new routes to market and revenue streams.”


Continuous growth and expanding partnerships


Founded in 2015, Nymbus has continued to grow. Most recently the company has closed a new round of financing led by the Curql Fund. The US$5 million investment will be used towards Nymbus CUSO and accelerate a shared commitment to breakthrough technology for ensuring continued growth and stability for the credit union community.

Nymbus CUSO was founded in March 2021 to help break through barriers to growth, and its mission is to connect credit unions with trusted fintech offerings that both simplify technology delivery and enable new digital revenue opportunities.

Last year Plaid set a goal to move 75% of its traffic to APIs by the close of 2021, calling it “one of our top priorities as the industry moves full-steam ahead toward a fully digital financial system.”

Recently it has announced an open finance partnership with Capital One, a digital finance innovator, and the successful completion of its migration to the Capital One API. They have also completed or have in-motion data access agreements with major US financial institutions, including U.S. Bank, JPMorgan Chase, Wells Fargo, and others.

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