Shearman And Sterling

Event July 21, 2022

Navigating Valuation Challenges in the Crypto Dispute Landscape

  • Singapore

Counsel Edward Taylor (Hong Kong-International Arbitration) spoke on the topic “Navigating Valuation Challenges in the Crypto Dispute Landscape” at the LegalPlus Conference “Technology: Effects on Arbitration and Corporate Crime in SE Asia – A Game Changer for 2022?” held in Singapore on July 21, 2022.

Edward’s five observations on the current crypto dispute landscape were:

  • The ‘Crypto Winter’ has fundamentally changed the crypto dispute landscape. The number, variety and complexity of crypto disputes is rapidly increasing.
  • With the recent collapse of Three Arrows Capital and other high profile crypto failures, parties are moving quickly to secure assets and evidence through Emergency Arbitration (including via preliminary orders) and ex parte applications for interim measures before national courts. Parties are also seeking to expedite dispute resolution proceedings whenever possible to secure an enforceable award or judgment. Fraud claims, and proceedings targeted at individuals involved in failed crypto businesses, are likely to increase over the coming weeks.
  • Offshore jurisdictions will be a key dispute battleground. While many crypto contracts feature arbitration agreements (with HKIAC being a popular choice), crypto companies are often incorporated offshore. Offshore liquidations and related offshore court proceedings will require arbitration counsel and offshore counsel to work closely together to successfully resolve complex multi-forum disputes.
  • Identifying and accurately valuing potential claims at the outset of crypto disputes is necessary to inform the clients dispute strategy, including with respect to the types of claims pursued (e.g., contract, fraud), the forum in which they are pursued and the manner in which the client funds the dispute (e.g., Third Party Funding, Conditional Fee Agreements and Damages Based Arrangements).
  • Given crypto’s recent volatility, and the limited publicly available information regarding many crypto businesses, accurately valuing potential claims can be difficult. Appointing valuation and other industry experts early is key to overcoming this challenge.