Legal-service firms that administer major corporate bankruptcies are apologizing for undisclosed data-sharing deals, asking the bankruptcy court in New York to spare them from punishment for collecting unauthorized fees in large chapter 11 cases, WSJ Pro reported. Bankruptcy service providers Stretto Inc., Donlin, Recano & Co. Inc., Epiq Corporate Restructuring LLC and Omni Agent Solutions Inc. apologized in court papers Friday for agreeing to feed information they gathered from administering chapter 11 cases to a claims-trading startup. The apologies followed a monthslong investigation by bankruptcy judges in New York into side deals between the firms and Xclaim Inc., which used claims data to facilitate trades between bankruptcy creditors and debt-buyers on its platform. The firms face possible sanctions after a bankruptcy judge ruled in July they couldn’t serve as chapter 11 claims agents while generating revenue by furnishing data to Xclaim. Epiq, Stretto, Donlin and Omni said Friday they shouldn’t be sanctioned and that they believed their deals with Xclaim in 2019 were permissible because they were providing the startup with publicly available claims data in a format it could use. In exchange for supplying the information in a digital format, Xclaim paid the claim agents 10% of the commission it received when its users completed a trade on its platform, according to court papers. The firms said they either didn’t collect or returned fees generated under the agreements, which amounted to just hundreds or thousands of dollars per company, according to court documents. The investigation, led by Judge Martin Glenn of the U.S. Bankruptcy Court in New York, is exploring the firms’ dealings with Xclaim during past cases in which they served as court-approved claims agents. Fees generated under the Xclaim deals were substantially less than what bankruptcy service providers earn for claims agent work, which can cost bankrupt companies millions or tens of millions of dollars depending on the size of a chapter 11 case.
