The rising tide of liability surrounding bankrupt cryptocurrency firms raises some intriguing questions when it comes to directors and officers insurance, and it could also leave a lasting impact on the market as carriers look to shield themselves from an increasingly unpalatable risk, attorneys say.
"Insurance companies may argue that cryptocurrencies and ICOs are not securities and therefore are not covered under public D&O policies," said Raymond Mascia Jr., a shareholder in Anderson Kill's insurance recovery practice.
Mascia believes policyholders should push back on those arguments, based on recent statements from the SEC as well as the nature of some of the claims against crypto companies.
"In the case of FTX, Sam Bankman-Fried was sued in a class action lawsuit in which the plaintiff alleged that he purchased unregistered securities from FTX in the form of yield-bearing accounts that were funded with crypto assets," he noted." Those types of allegations are sufficient to trigger coverage as a securities claim for public company coverage."
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