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Senate Judiciary Committee Chair Dick Durbin (D-Ill.) and fellow Senate Judiciary Committee colleagues Sens. Sheldon Whitehouse (D-R.I.) and Josh Hawley (R-Mo.) submitted an amicus brief to the Supreme Court in Bestwall LLC v. Official Committee of Asbestos Claimants, supporting hundreds of thousands of victims of the company’s asbestos-linked products, according to a Senate Judiciary Committee press release. To avoid facing the legal claims of victims in court, Georgia-Pacific “moved” to Texas for less than five hours, offloaded its asbestos-related liabilities onto a shell company called Bestwall, put Bestwall into bankruptcy, and then claimed that Bestwall’s bankruptcy protected the entire Georgia-Pacific enterprise from accountability, according to the press release. The bipartisan trio of Senators urge the Court to overturn the Fourth Circuit’s decision to approve the stay of asbestos litigation against Georgia-Pacific, writing, “The bankruptcy system was not designed to provide solvent non-debtors with the option to simply decline to be held liable for alleged wrongdoing, but that is precisely what the Fourth Circuit’s decision countenances. That was not what Congress intended, and it is not a result that this Court should permit.” Read the press release.

Click here to read the full amicus brief.

Johnson & Johnson is seeking to move a unit to Texas as it prepares for a potential third bankruptcy court filing to resolve more than 50,000 lawsuits alleging tainted talc in its baby powder caused cancer, Bloomberg News reported. The company filed a request last month with the Texas secretary of state’s office to relocate its LTL Management unit to Austin and rename it ahead of a chapter 11 filing in the state, according to the Dec. 19 filing and people familiar with the plan. J&J has put the LTL subsidiary into chapter 11 twice before in hopes of imposing a $9 billion settlement on former users of the product. Both cases, filed in J&J’s home state of New Jersey, were thrown out. The decade-long litigation, plus the prospect of potential future cancer suits, is limiting its stock price, analysts have said. J&J, based in New Brunswick, wouldn’t say where the bankruptcy case would be filed or comment on the timing, but has said it is working hard toward a resolution of its current and future talc cases. “Consistent with the plan we outlined last year following the New Jersey bankruptcy court’s dismissal of the case,” the company “continues to pursue several paths to achieve a comprehensive resolution of the talc litigation,” Erik Haas, its in-house lawyer overseeing the cases, said in a statement. He said that includes a new bankruptcy filing, as “strongly recommended” by the court.

Bankrupt cryptocurrency exchange FTX's affiliate Alameda Research has dropped a lawsuit against Grayscale Investments that had accused the digital asset manager of "enriching itself at shareholders' expense," a court filing showed on Monday, Reuters reported. Alameda, which filed the lawsuit in a Delaware court in March last year, had also accused Grayscale of charging high fees and refusing to allow investors to redeem their shares from its two crypto-focused trusts, the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust. Grayscale CEO Michael Sonnenshein was named in the lawsuit along with parent company Digital Currency Group (DCG) and its CEO, Barry Silbert. "Alameda's voluntary dismissal underscores Grayscale's position that this legal action was entirely without merit," a Grayscale spokesperson said. GBTC began trading as an exchange-traded fund earlier in the month on NYSE Arca after the U.S. Securities and Exchange Commission approved to convert its existing Grayscale Bitcoin Trust into an ETF. Since it went bankrupt in Nov. 2022, FTX has been trying to recover assets to repay its creditors.

Terraform Labs, the company behind the stablecoin TerraUSD, which collapsed and roiled cryptocurrency markets in 2022, filed for chapter 11 protection, according to court papers filed on Sunday, Reuters reported. Singapore-based Terraform Labs, in a filing with the bankruptcy court in Delaware, listed assets and liabilities in the range of $100-$500 million. Terraform Labs said it would meet all financial obligations to employees and vendors during the chapter 11 case without requiring additional financing. It also plans to continue Web3 offerings expansion. "The filing will allow TFL to execute on its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and U.S. litigation involving the Securities and Exchange Commission (SEC)," Terraform Labs said in a statement. The SEC's civil case against Terraform and Kwon is linked to the collapse of TerraUSD, a "stablecoin" designed to maintain a constant $1 price, and the more traditional token Luna, which is closely associated with TerraUSD.

A federal appeals court on Friday ruled that an independent examiner must be appointed to oversee FTX’s ongoing bankruptcy to sort out what went wrong at the cryptocurrency exchange before it collapsed, WSJ Pro Bankruptcy reported. Judges for the U.S. Court of Appeals for the Third Circuit said that the Bankruptcy Code clearly states that a bankruptcy court is required to appoint an independent examiner in cases with over $5 million in debt if one has been requested and no outside trustee has been brought in to manage the chapter 11 cases. The judges also said that it is a matter of public interest to have a report on what went wrong at FTX before it filed for bankruptcy in November 2022. “The collapse of FTX caused catastrophic losses for its worldwide investors but also raised implications for the evolving and volatile cryptocurrency industry,” the judges wrote in their opinion. “In addition to providing much-needed elucidation, the investigation and examiner’s report ensure that the Bankruptcy Court will have the opportunity to consider the greater public interest when approving the FTX Group’s reorganization plan.”

A bankruptcy judge on Friday granted Rudy Giuliani, the former New York City mayor and ex-lawyer for Donald Trump, permission to challenge a $148 million defamation verdict, WSJ Pro Bankruptcy reported. Giuliani filed for chapter 11 protection last month in the U.S. Bankruptcy Court for the Southern District of New York, after a federal district court ordered him to pay the damages to Georgia election workers Ruby Freeman and her daughter Shaye Moss. They had sued Giuliani for defamation after he accused them of meddling with President Trump’s 2020 election results in the state. Earlier this month, Giuliani asked the bankruptcy court for permission to allow him to take steps to fight or reduce the $148 million judgment, to potentially seek a new trial in district court, and, if need be, to file an appeal. Bankruptcy Judge Sean Lane on Friday agreed to Giuliani’s request to seek a new trial or to ask that the damages be reduced. Lane, however, stopped short of granting Giuliani permission to seek a full appeal. Lane stressed that the district court should have much discretion in deciding how to handle or whether to grant the request.

Lawyers for prisoners suing Corizon Health over allegedly substandard medical care in U.S. prisons have asked a bankruptcy judge to toss the chapter 11 case of a Corizon subsidiary, saying the prison healthcare provider's bankruptcy was a fraud from the start, Reuters reported. The Corizon subsidiary, Tehum Care, was created solely to get rid of medical malpractice and wrongful death lawsuits for "pennies on the dollar" through the chapter 11 process, while allowing Corizon to rebrand itself as YesCare, according to a Tuesday filing in Houston bankruptcy court by the official tort committee that represents about 200 prisoners, former prisoners, and family members suing Corizon. Tehum does not intend to reorganize its business, and is instead using its bankruptcy to stop lawsuits against Corizon, its owners and key employees, according to the committee. "There is no possible rehabilitation here," the committee said in the filing. "This case was a fraud from its inception." Tehum Care, which filed for bankruptcy in February, has been pursuing a mediated bankruptcy settlement which would allocate roughly $8.5 million to settle prisoners' and former prisoners' claims.

The world’s largest sovereign-wealth fund is going after the now-defunct Silicon Valley Bank, its management and the Wall Street advisers that aided its rise, the Wall Street Journal reported. Norges Bank Investment Management, which manages Norway’s $1.5 trillion wealth fund, and other former SVB shareholders attacked the failed bank in a legal filing late Tuesday. The filing accused SVB and its executives of concealing the lender’s ailing health from public view, while also ignoring warnings about risks from rising interest rates. The suit said the bank’s board, its auditor KPMG, and four investment banks that helped it raise money — Goldman Sachs, Bank of America BAC, Keefe, Bruyette & Woods and Morgan Stanley — all “ utterly failed in their role as gatekeepers” and “must be held to account for the harm they caused to investors.” The suit said investors lost more than $24 billion in market value. The filing is the main complaint in a large class-action lawsuit from SVB shareholders, who were wiped out in March 2023, when a rapid bank run led to one of the biggest bank failures in U.S. history. In December Norges was made lead plaintiff in the class action, along with a Swedish pension fund. The suit names three executives, including former SVB Chief Executive Greg Becker, and 12 former board members as individual defendants.
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In related news, New York City is trying to collect more than $2.1 million it says Silicon Valley Bank owes in back taxes from before the California-based regional lender collapsed last year, Bloomberg News reported. In a complaint filed yesterday against the Federal Deposit Insurance Corporation, the receiver for the failed bank, the city cites corporation business tax “deficiencies” for 2017 through 2021 and is also seeking interest and penalties. The city said the FDIC in November denied its request to be paid out of remaining bank assets. “The city has a legitimate tax claim against the SVB and is entitled to collect taxes due,” New York’s lawyers said in the complaint, filed in federal court in Washington. “The FDIC, in its capacity as receiver for SVB, is liable for the claim amount.” The March collapse of Silicon Valley Bank, following a wave of withdrawals by the tech startups and venture capital firms that formed its client base, was the biggest U.S. bank failure in more than a decade and presaged a banking crisis that engulfed several other financial institutions. This month, the parent company of Silicon Valley Bank announced it had struck a deal with key creditors in a step toward resolving its bankruptcy case. The arrangement, which requires court approval, involves forming a new company that would hold valuable assets like the firm’s venture capital arm — SVB Capital — and tax attributes potentially worth billions of dollars, according to court papers.
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Former New York mayor Rudolph Giuliani may soon find out how far chapter 11 bankruptcy can go in sheltering him from overwhelming legal bills, Bloomberg News reported. Giuliani is scheduled to make his first appearance Friday in New York bankruptcy court, where he has asked a judge’s permission to challenge the $148 million judgment that drove him to seek protection from creditors. The hearing is slated for 11 a.m. The onetime prosecutor went bankrupt last month after losing a defamation lawsuit to two 2020 Georgia election workers he falsely accused of trying to rig the election for Joe Biden. Giuliani must ask Judge Sean Lane permission to appeal their $148 million award because filing bankruptcy pauses all litigation against him and prevents the election workers from immediately collecting the judgment. The election workers and others who have sued Giuliani, including Dominion Voting Systems, are challenging his request.