> But wait, you bluster, the custodial agreement clearly says that I am the owner, that it’s my property, that I retain title to it. Yup, but that’s not how the law actually works. Just because they wrote that doesn’t mean it’s true.
> In fact, the exchanges are lulling the consumers with language claiming that the consumer "owns" the coins, when in fact the legal treatment is quite likely to be different in bankruptcy. In bankruptcy, it is likely to be treated as a debtor-creditor relationship, not a custodial (bailment) relationship.
> Not only are the customers likely mere creditors, but they are also likely general unsecured creditors, which means they will have to wait at the back of the line for repayment with everyone else. They will share on a pro rata basis whatever assets are leftover (if any) after the secured creditors and the priority creditors (including the expenses of running the bankruptcy) get paid, and any payment might not be for quite a while. That’s not a happy to place to be. Recoveries could be pennies on the dollar.
Your citation refers to the status of customers with respect to other creditors.
It says diddly squat about shareholders, who are below creditors in the event of a bankruptcy. Because, in a corporate bankruptcy, shareholders generally lose their investment.
Absent bankruptcy, fiduciary duty to shareholders is prioritized over creditor's interests. In bankruptcy, customers will be screwed over to benefit the other creditors, not to benefit the shareholders as I mistakenly said.
Absent bankruptcy, fiduciary duty to shareholders is prioritized over creditor's interests.
No, this is still wrong. Shareholders are not prioritized over creditors, at any time. Shareholders are the least important stakeholders in a corporation, because by virtue of their limited investment, they have the least at risk.
