Voyager Bankruptcy Ruling Deals Blow to Crypto Liquidation Protections

A US District Chief Judge has ruled that bankruptcy courts lack jurisdiction to grant prospective exculpation in crypto liquidations. The decision affects Voyager Digital's bankruptcy case, which was filed on July 5, 2022, and has been ongoing for over three years.

The exculpation clause in question had provided protections for debtors, committee members, plan administrators, distribution agents, released professionals, and employees from lawsuits related to rebalancing transactions and distributing digital assets. However, US District Chief Judge Laura Taylor Swain vacated the provisions, ruling that they went too far.

The decision was made after the US Department of Justice and the US Trustee appealed the protections, which had been designed to insulate parties from future civil or criminal liability for actions taken during plan implementation. The core issue at hand is whether a bankruptcy court can grant a prospective liability shield for future conduct.