Scheduling Claims Trading with Smart Agreements on Ethereum

4 min readMar 31, 2019

Following ☝️ from 2019 Computational Law & Blockchain Festival | Legal Hackers with https://www.meetup.com/legalhackers/ : ⚔️ /⚖️

One of the biggest headaches I can recall as a junior associate at a corporate law firm was managing records for bankruptcy claims.

Complex cases can drag on for years, leading many creditors to sell off pieces of their rights to a Debtor’s estate for quick satisfaction ✨🥧✨.

For high value claims that influence proceedings, various stakeholders need to securely track and reconcile these claim transfers with little room for human error.

For example, you might see a $9 billion claim held by a major creditor get gradually whittled into many minor claims held by sub-creditors, spread across parties, geographies, and incongruous law firm records.

End result:

Repetitive diligence review whenever these assets change hands in “assignments of claims” to ensure transfers are intact.

Though arduous, this has likely been a necessary friction to make a secondary market in bankruptcy claims work effectively. Among other things: without careful records of the (often rushed) downstream transfers and assignments between an initial creditor and their various subs, a court might not allow full repayment on the claim and/or hear disputes that consume even more resources — hardly ideal when trying to claim large sums against a dwindling estate.

Thankfully, more legaltech tools are coming online to help program the behavior of claim assets and their recordkeeping to save more time and money.

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Tools at hand: 👉 🔧

* PROOF OF CLAIM FORM (TOKEN CLAIM — HOSTED)

* ASSIGNMENT OF CLAIM (TOKEN CLAIM — TRANSFER HOSTED)

Token Factory Smart Contract: 0x6BE2f9087A6d1e7D4C6c1079BbCA5b24719224D2 https://rinkeby.etherscan.io/address/0x6be2f9087a6d1e7d4c6c1079bbca5b24719224d2#code

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As a simple record of transfers, ERC20 token smart contracts seem to add a nifty backend solution here to smooth the trading and reconciliation process between assignments:

Briefly:

(A) proofs that register claims over a debtor’s estate might be tokenized through a platform like OpenLaw.io by calling a Token Factory Smart Contract after a creditor files their “proof of claim” with an Ethereum call embedded into the underlying form itself….

(B) These proof-generated ERC20 “claim tokens” might then be traded very efficiently and transparently using (smart) assignment agreements….

End result: downstream transfers between creditors and their subs are recorded in a more automated fashion by token smart contracts (adding value back to the claims trading market).

OK Then…..that sounds well enough, but let’s see what this actually looks like hashed out: 🏵️

Step #1:

☝️ Generate proof of claim form & ERC20 Token with (Case Number) and (Creditor Name) via: PROOF OF CLAIM FORM (TOKEN CLAIM — HOSTED)

Step #2:

Then, in the event a creditor wants to assign their claim/token to tap into projected value of estate before distributions:

☝️ Take newly-generated token ‘contract’ address….

….schedule desired transfer time (among other transaction details) into smart assignment template via: ASSIGNMENT OF CLAIM (TOKEN CLAIM — TRANSFER HOSTED)