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Genesis Global is facing off against its parent company in bankruptcy court on Monday, aiming to resolve more than a year of disputes over who reaps the benefits of the surging bitcoin price, WSJ Pro Bankruptcy reported. Judge Sean Lane of the U.S. Bankruptcy Court in White Plains, N.Y., is scheduled to hear closing arguments of Genesis’s chapter 11 plan that would offer a path, if approved, for it to wind down the business. After lengthy litigation that played out in court, Genesis’s lenders, customers and regulators support a proposal that would repay as much as 77% of its customers’ holdings in the type of digital assets that they are owed. However, Digital Currency Group, Genesis’s parent company and the biggest borrower, opposes the chapter 11 plan. Much of DCG’s dispute centers around who gets the benefit of bitcoin’s current high price, which has gone up more than 200% since January 2023, when Genesis filed for bankruptcy. DCG has argued that Genesis should repay its lenders and customers at the old rock-bottom price in U.S. dollars, allowing the remaining stakeholders, including DCG, to benefit from the upside of the price increases in digital assets. DCG has cited bankruptcy code stipulating that chapter 11 claims be valued in dollars as of the filing date. New York-based Genesis filed for bankruptcy in the aftermath of the collapses of crypto hedge fund Three Arrows Capital and crypto exchange FTX in 2022. The bankruptcy exposed the interconnected nature of the crypto industry, where companies lend to each other and when one fails it creates a domino effect.

Creditors want to force Rudy Giuliani to sell his $3.5 million Florida condo to help pay his significant debts, according to a court document filed on Friday, CNBC.com reported. The former New York City mayor filed for bankruptcy protection in December, citing myriad unpaid debts including a $148 million payment to two Georgia election poll workers who he falsely claimed had tampered with the 2020 election ballots while he was serving as a lawyer for former President Donald Trump. In response to Friday’s filing, Giuliani’s counsel said the request to sell the Florida condo is “extremely premature.” “The case is still in its infancy,” said Heath Berger, partner at Berger, Fischoff, Shumer, Wexler & Goodman, LLP, who is representing Giuliani in his bankruptcy litigation. Giuliani has argued that he does not have the funds to pay his debts, the Friday court filing said: “According to the Debtor’s counsel, ‘there’s no pot of gold at the end of the rainbow.’” Giuliani’s primary income comes from Social Security payments and money from his Individual Retirement Account, Berger told CNBC. But the court document cited various expenses Giuliani pays now to maintain his lifestyle.

Bankruptcy Judge Jerrold Poslusny yesterday approved the Diocese of Camden's chapter 11 bankruptcy plan, allowing the New Jersey diocese to move ahead with a $87.5 million settlement of sex abuse lawsuits, Reuters reported. The diocese initially had agreed to settle with about 300 sex abuse victims in April 2022, but the deal had been held up in bankruptcy court over objections raised by the diocese's insurers. Judge Poslusny said at hearing yesterday that recent changes to the deal had resolved all of the insurance-related issues. The bankruptcy settlement was supported by more than 97% of the abuse claimants who voted on it. Bishop Dennis Sullivan said yesterday that the approval would allow the diocese to move on from a "painful" three-year bankruptcy restructuring and "provide substantial reparations to survivors harmed by sinful priests dating back more than six decades." Insurers had argued that the bankruptcy plan would create a settlement trust that was "biased" against insurers and could allow for the payment of inflated, invalid or fraudulent claims, in addition to excessive attorneys' fees. Judge Poslusny initially agreed with the insurers and rejected an earlier version of the settlement. But he said that the revised plan gave insurers the ability to defend themselves in court if the settlement trust tried to sue them for coverage without fulfilling its obligations under the diocese's insurance policies. Those obligations may include payment of the initial legal defense costs before insurance coverage kicks in, as well as requirements to cooperate with insurers to defend against claims, Judge Poslusny said.

The Diocese of Buffalo in New York has announced the sale of its headquarters in downtown Buffalo nearly four years after it declared bankruptcy amid hundreds of sexual abuse lawsuits filed against it, CatholicNewsAgency.com reported. The diocese announced in Western New York Catholic this week that “​​the Catholic Center, the diocesan central office building since 1986, has been listed for sale” for $9.8 million. In 2020, the diocese formally filed for chapter 11 protection. At the time the diocese said it was acting to provide the most compensation for victims of clergy sex abuse while continuing the day-to-day work of its Catholic mission. Diocesan officials announced in October of last year that the diocese would be putting forth $100 million to settle the numerous abuse claims lodged against it.

A podcast production company that was accused by comedian Theo Von and others of owing content creators millions of dollars has filed bankruptcy in California, Bloomberg News reported. Kast Media Inc., which historically produced and placed ads in shows, filed a type of chapter 11 for small businesses. It had nearly $700,000 in total assets and more than $6.3 million in total liabilities as of Jan. 31, according to a balance sheet Kast included in the Wednesday filing. Multiple podcasters last year accused Kast and its chief executive officer Colin Thomson of falling behind on payments to shows the company worked with. In a Youtube video with more than 1.7 million views, Von said Kast owes various podcasters more than $4 million in back pay. Kast owes Von’s company $456,398, according to the bankruptcy petition, which is signed by Thomson. The company also listed other debt that it described as being related to podcast content, subscription services and legal services.

Indian tech firm Think & Learn Pvt must freeze $533 million in order to protect the money for disgruntled lenders who claim the cash should only be used to pay them, a U.S. judge said yesterday, Bloomberg News reported. The decision by U.S. Bankruptcy Judge John Dorsey was a mixed victory for lenders. They earlier demanded the money be placed under the control of the federal court to prevent the cash from being spent by the Indian education-tech firm, which operates under the name Byju’s. Dorsey’s order was aimed at Riju Ravindran, one of the company’s directors and the brother of founder Byju Raveendran. Ravindran was also ordered to help solve one of the central mysteries of the court dispute: where the money is located. “I do not believe him when he says he cannot” learn the location from Think & Learn, Judge Dorsey said. Lenders had previously seized control of a holding company set up by Think & Learn to issue $1.2 billion in debt. That unit, Byju’s Alpha, is now in bankruptcy under Judge Dorsey’s oversight.

The Justice Department’s U.S. Trustee Program (USTP) recently prevented the payment of bonuses to an executive of three small businesses that had stopped operating and already had sold their assets in bankruptcy, according to a DOJ press release. Aviation Safety Resources and its two debtor affiliates, which filed for bankruptcy under subchapter V of chapter 11, argued that $30,000 in bonuses were designed to incentivize the companies’ president to avoid leaving for other employment and to facilitate a sale of the debtors’ assets. The U.S. Trustee’s Orlando office objected to the bonuses as a “key employee retention plan,” commonly known as a KERP, which is impermissible under the Bankruptcy Code for insiders unless the proponent can satisfy stringent standards. Among other things, the USTP argued that the bonuses were not incentivizing because they were not tied to any performance-based metrics and that the debtors had already closed on the sale of nearly all their assets three days before filing a motion to approve the bonuses. On February 2, after a half-day trial, the Bankruptcy Court for the Middle District of Florida sustained the U.S. Trustee’s objection and denied the debtors’ KERP motion.

The Securities and Exchange Commission can proceed with its suit accusing Gemini Trust Co. and bankrupt cryptocurrency lender Genesis Global Capital of illegally offering unregistered securities through their interest-paying Gemini Earn product, Bloomberg News reported. U.S. District Judge Edgardo Ramos in New York yesterday denied a request to throw out civil claims the SEC filed in January 2023. The agency is seeking an order barring Gemini and Genesis from selling unregistered securities, requiring them to give up money they illegally earned from the program plus civil penalties. Earn allowed customers to lend their cryptocurrency to collect interest. The defendants argue that the transactions are loan agreements that don’t constitute securities under U.S. law. Ramos said that according to the SEC’s complaint, Earn met the U.S. Supreme Court’s test for a security because customers were investing in a common enterprise and had a reasonable expectation of profit. Therefore, the SEC “plausibly alleges that defendants offered and sold unregistered securities through the Gemini Earn program,” the judge said. That same test has been used by other judges to determine whether digital assets themselves are securities, though courts have reached different conclusions. Genesis filed for bankruptcy soon after the SEC filed suit. Gemini Trust Co., the crypto exchange founded by twins Cameron and Tyler Winklevoss, last month agreed to return at least $1.1 billion to customers through the Genesis bankruptcy as part of a settlement with the state of New York. Wednesday’s ruling allows both sides to go forward with pretrial evidence-gathering. The companies may try again to have the case thrown out once they have exchanged records and taken pretrial deposition testimony from witnesses.

A hedge fund founder at the center of a $1.2 billion legal battle between Indian education-technology company Byju’s and its lenders is staying outside the U.S. despite a court order to return, saying he fears for his safety, WSJ Pro Bankruptcy reported. William Cameron Morton said in an interview that he left the U.S. rather than comply with a court order to divulge the whereabouts of nearly $540 million that Byju’s invested in his Florida-based hedge fund firm, Camshaft Capital. Morton faces the threat of jail time because he hasn’t turned over that information to investors that lent $1.2 billion to Byju’s, once India’s most valuable startup before its financial problems clouded the country’s venture-capital scene. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., recently threatened Morton with “all possible sanctions,” including confinement, if he continued ignoring orders. Credit funds including Ares Management and Redwood Capital allege that Morton helped Byju’s move more than a half-billion dollars out of their reach through his hedge fund, which they have called a sham operation. Last month, an agent acting on the lenders’ behalf filed a chapter 11 petition for Byju’s Alpha, a shell entity named as the loan borrower, as part of their efforts to track down the money it invested in Camshaft. Byju’s has said it wasn’t required under its loan agreement to keep its assets in cash and did nothing wrong by investing $540 million with Camshaft.

U.S. banking regulators confronted an unusually large penalty when they seized Silicon Valley Bank last year: $285 million in fees to prematurely wind down emergency financing from the Federal Home Loan Bank system, Bloomberg News reported. That was the price tag to retire billions in financing that the firm obtained in a last-ditch attempt to survive a run on deposits, according to an internal Federal Deposit Insurance Corp. document obtained by Bloomberg. The fee, which hasn’t been previously reported, was the largest of its kind for any bank failure since before the 2008 financial crisis, the document shows. The ability of FHLBs to generate fees on emergency lending, even when borrowers fail, is sure to stoke the debate in Washington over how to reform the Depression-era system designed to help finance mortgage lending. In November, the Federal Housing Finance Agency, which oversees home-loan banks, said it planned to study prepayment fees and potentially change rules. The regulator aims to ensure such institutions have an incentive “to improve their due diligence” before ramping up financing — known as advances — to struggling members. To be sure, FHLBs incur costs when retiring the debt, and the fees they’re allowed to charge are approved by their regulator. The idea is to let the institutions recoup those expenses so that they remain financially indifferent to prepayments. Such fees “are disclosed to all interested parties, are generally equal to the cost of unwinding the hedged transaction, and are in keeping with safe and sound banking practices,” said Ryan Donovan, chief executive officer of the Council of Federal Home Loan Banks, a trade group. As SVB teetered on the edge of collapse last year, the FHLB of San Francisco quickly ramped up its lending to the struggling bank, eventually providing it with $30 billion. When it collapsed, that money was repaid early, along with fees.