The first tip arrived last December. In an email to a Justice Department official, an anonymous author called for a probe into the handful of private companies that courts enlist to process paperwork in big bankruptcy cases, Bloomberg News reported. The concern: some of these companies, known as claims agents, were selling data to a new market maker, Xclaim Inc., which facilitates the buying and selling of the debts of bankrupt companies. The deals allowed claims agents to profit from the trades. What followed is a courtroom reckoning that threatens to disrupt the quietly lucrative world of bankruptcy administrators and a niche, multibillion-dollar financial market that depends on them. Several claims agents face judicial sanctions in New York City, one of the nation’s busiest bankruptcy districts. A worst-case scenario could see the companies barred from doing business with those courts entirely, putting millions of fees at risk. Bankruptcy Judge Martin Glenn has ordered each claims agent in his district to explain whether they cut deals with Xclaim and disclose a detailed accounting of the arrangements. He’s also weighing sanctions against Xclaim’s founder and another employee for publicly disclosing the contact information of federal employees during the proceedings.
