Is there even an obligation to investigate crypto assets?
Yes. Under insolvency law, cryptoassets are not to be treated differently from other realizable assets. In principle, the insolvency estate includes all of the debtor's assets.
Three provisions of the Insolvency Code form the legal framework for this:
- § 81a Para. 2 IO: The insolvency administrator must immediately determine the status of the bankruptcy estate and ensure the collection and securing of the assets.
- § 96 IO: An inventory of the estate must be prepared.
- § 114 IO: The estate is to be administered and liquidated.
Therefore, if there are concrete indications of Bitcoin, Ether, stablecoins, exchange accounts, wallets, or other tokens, the insolvency administrator must not ignore these indications.
Scope of the duty to investigate
The scope of the required investigations depends on several factors:
- the specific grounds for suspicion,
- the potential value of the crypto assets,
- the probability of a successful seizure,
- the available documents and information,
- the expected costs of the follow-up,
- the ratio of effort to potential mass increase.
The standard is the duty of care pursuant to Section 1299 of the ABGB: The insolvency administrator must undertake those investigations that can be expected of a careful and expert administration of proceedings under the specific circumstances. A breach of duty by omission may trigger liability pursuant to Section 81, paragraph 3 of the IO.
When in-depth crypto tracing is warranted
A closer examination becomes necessary in particular if there are indications of:
- Transfers to crypto exchanges,
- Accounts at Binance, Bitpanda, Kraken, Coinbase or other providers,
- Wallet addresses in emails, accounting documents, or messenger messages,
- seed phrases, private keys, or hardware wallets,
- Crypto tax reports or documents from crypto tax software,
- Withdrawals from crypto exchanges to bank accounts,
- Information provided by the debtor regarding crypto investments,
- conspicuous asset outflows prior to the opening of insolvency proceedings,
- business activities in the blockchain or crypto sector,
- Information from creditors regarding specific wallets or transactions.
In such cases, a structured review is regularly indicated – through the inspection of accounting records, bank accounts, email communications, devices, tax documents, and available wallet information, as well as through inquiries to identified crypto service providers and the analysis/tracking of transactions.
What does blockchain analysis actually achieve?
If wallet addresses or transaction hashes are known, blockchain analysis can clarify:
- which assets and amounts were moved,
- when the transfers took place,
- whether the assets are still on controllable addresses,
- whether they were transferred to a centralized crypto exchange,
- whether claims for avoidance, restitution, or damages come into consideration,
- whether transfers have been made to related parties or connected wallets.
A distinction must be made here between two levels: the purely technical tracking of a transaction and the legal proof that a specific wallet can be attributed to the debtor or a specific third party. Initially, the blockchain only shows transactions between addresses. Personal attribution must regularly be established through additional information—such as exchange data, device information, bank payments, or communication.
Appointment of an expert pursuant to Section 81 Paragraph 4 of the Insolvency Act
The insolvency administrator does not have to carry out the technical analysis themselves. Pursuant to Section 81 paragraph 4 of the Insolvency Act (IO), they may engage suitable third parties for individual activities with the approval of the insolvency court. Such approval requires:
- The activity in question exhibits special difficulties on.
- The commissioned person or law firm is suitable and reliable.
- It is no significant reduction of the estate To be expected.
In practice, a two-stage approach is recommended: for time-critical security measures, a rapid initial technical assessment is initially advisable. In contrast, a full analysis typically requires a cost-benefit analysis and court approval.
Duty to cooperate of the debtor
The debtor must provide the insolvency administrator with all information necessary for the administration of the business (§ 99 IO). This also includes details regarding:
- Cryptocurrency exchange accounts,
- Wallets and wallet addresses,
- Hardware wallets,
- Seed phrases and private keys,
- Staking and DeFi positions,
- Tokens, NFTs, and stablecoins,
- crypto assets held by third parties,
- Transactions prior to the opening of insolvency proceedings.
Special care must be taken when transferring private keys and seed phrases: they should not be transmitted unencrypted via email or in a publicly accessible file. After securing the assets, a transfer must be made to a wallet controlled exclusively by the insolvency administration.
Realization of secured crypto assets
If crypto assets are identified and secured, the insolvency administrator must decide on their realization (§ 114 IO). In this context, the following questions arise in particular:
- immediate sale or temporary holding,
- Price and volatility risk,
- secure storage,
- Selection of a suitable regulated service provider,
- Documentation of the recycling rate,
- Transaction costs,
- tax treatment,
- Origin and compliance checks,
- potential third-party rights to the assets.
Speculative holding in anticipation of rising prices is regularly harder to justify than prompt, verifiably documented realization. However, the specific decision depends on market liquidity, asset type, procedural status, and realization costs.
ATB.LAW: Legal and forensic expertise including security and asset recovery options from a single source
ATB.LAW combines legal expertise with forensic know-how and blockchain analysis experience. With ATB.LAW, insolvency administrators have access to specialized technical knowledge that meets the requirements of Section 81, Paragraph 4 of the Austrian Insolvency Act (IO) regarding suitability and reliability. Attorney-at-law Roman Taudes has crypto escrow accounts and the ability to liquidate crypto assets in a documented and secure manner.
Insolvency administrators who discover indications of crypto assets during proceedings can commission ATB.LAW – Mag. Roman Taudes, LL.M. – with court-approved tracing pursuant to Section 81 Paragraph 4 of the Insolvency Act (IO).
Conclusion
The insolvency administrator has the duty to,
- to ask for cryptoassets,
- to check for identifiable clues,
- to appropriately follow up on concrete leads,
- securing existing crypto assets,
- taking economically sensible investigative measures,
- to involve specialized third parties if necessary,
- to subsequently realize the assets properly.
The more specific the clues and the higher the potential value, the more intensive the duty to investigate. If, for example, the insolvency administrator becomes aware of specific wallet addresses, exchange transfers, or transaction hashes, complete inaction is hardly compatible with Sections 81 and 81a of the Insolvency Act (IO).
Contact us. Roman Taudes and his team is available at all times under office@atb.law or by phone at 01 39 12345 available.
FAQ:
Yes, the insolvency administrator must investigate existing leads regarding crypto assets. The scope of the duty to investigate depends on the circumstances of the individual case.
Can insolvency administrators engage external service providers for crypto investigations?
YES. § 81 para 4 IO permits the involvement of qualified third parties (e.g., ATB.LAW or TRCN GmbH) for individual, particularly demanding activities, such as the tracking, securing, and realization of crypto assets.
Must the debtor provide information about their crypto assets?
Yes, pursuant to Section 99 of the Insolvency Act (IO). This duty to cooperate includes, among other things, providing information on wallets, access data, trading venues, and transactions prior to the opening of insolvency proceedings.
How quickly should cryptoasset tracing be initiated in insolvency proceedings?
As early as possible. Crypto assets are subject to value fluctuations, and tracking and securing them can be quite complex, making prompt action necessary.
What happens if crypto assets have already been transferred abroad?
Cross-border tracing is possible, but may require additional legal steps and is time-critical.
