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Cryptocurrency prices have been on a wild tear this year. But thousands of FTX customers, whose tokens have been trapped on the exchange for more than a year, are missing out on the action, WSJ Pro Bankruptcy reported. That is because the new managers running FTX plan to sell all of their bitcoin and other cryptocurrency and return a sum of cash to customers, according to a draft plan FTX is expected to propose to a bankruptcy judge later this month. While the run-up in crypto prices means FTX could have more money to distribute, some FTX customers are realizing they may never recover any of their increasingly valuable tokens. The exchange says it is easier to repay customers in cash because of the difficulty in untangling the company’s poor record-keeping and figuring out who has title to the exchange’s tens of millions of leftover tokens. U.S. bankruptcy law also says unpaid creditors can only demand to be repaid in dollars, no matter if they are owed euros, yen, or bitcoin. The expected proposal is a shock, many FTX customers say, as many of them believed they would eventually recover some of their frozen savings. Read more.

Be sure to listen to the latest ABI TechBytes podcast examining fiduciary duties in cryptocurrency cases!

In a move that could further complicate the already contentious final chapter in the Roman Catholic Diocese of Rochester’s bankruptcy, the U.S. Trustee is urging the court to reject competing plans of reorganization filed by the diocese and the Continental Insurance Co., the Rochester Beacon reported. The Trustee’s Dec. 5 filing comes on the eve of hearings scheduled for the court to consider the dueling plans filed by the diocese and Continental. Also known as CNA, Continental is a lone holdout among several insurers refusing to go along with a plan agreed to by the diocese, other insurance companies and survivors with claims in the bankruptcy. Projecting that the bankruptcy would end with a more than $100 million payout to abuse survivors, diocese officials stated early on that they expected the church’s liability carriers to shoulder the bulk of the financial burden. The diocese and Continental filed competing reorganization plans earlier this year after ongoing tortuous, court-ordered negotiations failed to yield an agreement acceptable to the official creditors' committee. Such plans are the final step in resolving chapter 11s. Made up of abuse survivors, the creditors committee is a body appointed by the U.S. Trustee to look out for the interests of the more than 400 sexual abuse survivors who have now waited more than four years for the chapter 11 to wrap up. Both the insurer’s and the diocese’s plans contain provisions that render them unconfirmable and should be scrapped, attorneys in the Trustee’s New York City office maintain in the Dec. 5 filling.

More than $1 billion doled out to shareholders in Sycamore Partners’ 2014 buyout of retailer Nine West and other apparel brands owned by Jones Group is legitimate and can’t be unwound, according to an appeals court ruling that gave priority to market stability over creditors seeking to recoup funds in bankruptcy, according to a WSJ Pro Bankruptcy analysis. In a long-awaited 56-page ruling, the U.S. Court of Appeals for the Second Circuit last week affirmed the Southern District of New York’s 2020 decision that extended safe harbor protections to payments distributed to shareholders in the deal. Nine West’s bankruptcy trustee has argued that directors, officers and shareholders of the retailer’s former parent company unlawfully profited from the buyout. Junior debtholders said the LBO saddled the company with debt, stripped it of its best assets and led it to bankruptcy. These creditors, who suffered big investment losses after the retailer filed for chapter 11 in 2018, asked the court to deem more than $1.18 billion of payments made to both the shareholders and to former directors and officers in the buyout illegal and that they should be paid back. The court of appeals held that in Nine West’s LBO most of the distributions in question — $1.105 billion paid to shareholders — are protected by the safe harbor and that Nine West was considered a financial institution because it hired a bank agent, Wells Fargo, as the conduit of the transactions. The court said in this case a customer to a financial institution is a financial institution itself. The Nine West trustee hasn’t said whether this ruling will be appealed.

Johnson & Johnson's worldwide vice president for litigation said yesterday that the company has recently reached settlements with several law firms over their clients' claims that J&J talc products caused cancer, Reuters reported. The settlements were reached "with a goal to facilitate our pursuit of a consensual prepackaged bankruptcy resolution," Erik Haas said on an investor call. It was not clear whether the deals have been finalized. J&J said in October that it was considering a new bankruptcy filing to resolve talc claims. Courts have rejected its two previous attempts to resolve talc litigation through bankruptcy, most recently a proposed $8.9 billion deal. Haas said that the recent settlements covered cases involving plaintiffs with mesothelioma, a type of cancer linked to asbestos, but did not provide any details about the dollar amounts involved or say how many people they covered. He said the company had resolved all but one of the cases scheduled for trial in 2023, "significantly curtailed" trials in 2024 and did not require the company to record any new charges against earnings. Bloomberg reported earlier yesterday that J&J had reached settlements covering about 100 people.

Enforcement action against crypto firms may have peaked after last month's $4.3 billion settlement with Binance, as such cases provide companies with a "template" for how they should be governed, a senior U.S. regulator said on Tuesday, Reuters reported. Binance's settlement with the Commodity Futures Trading Commission (CFTC) and Treasury Department, negotiated by the Justice Department, was for breaking U.S. anti-money laundering and sanctions laws. U.S. regulators have brought several cases against crypto firms such as Binance, helping to establish "guardrails" to bring "order and structure" to the market, CFTC Commissioner Kristin Johnson told an FT crypto and digital assets summit. "My hope would be that we have seen a spike, and what we will see going forward is that these early cases will really be a bit of cautionary tale for those firms that really do want to successfully operate in this ecosystem," Johnson said. She urged crypto firms to study the Binance settlement to see what sort of governance regulators look for at crypto firms.

The Supreme Court justices seemed divided yesterday over a fiercely contested bankruptcy settlement for Purdue Pharma that would funnel billions of dollars into addressing the opioid epidemic in exchange for shielding members of the wealthy Sackler family from related civil lawsuits, the New York Times reported. The U.S. Trustee Program, an office in the Justice Department, had challenged the deal, saying that it violated federal law by guaranteeing such wide-ranging legal immunity for the Sacklers even as they themselves had not declared bankruptcy. Questions from the justices reflected why the agreement, which pits money against principle, has drawn intense scrutiny to start. Under debate was the practical effect of unraveling the settlement, painstakingly negotiated for years, and broader concerns over whether releasing the Sacklers from liability should be allowed. “The opioid victims and their families overwhelmingly approve this plan because they think it will ensure prompt payment,” Justice Brett M. Kavanaugh said. He asked why the government was pushing to end a tactic, known as third-party nonconsensual releases, that has figured in settlements approved over “30 years of bankruptcy court practice.” The lawyer for the government, Curtis E. Gannon, acknowledged the tension, but he argued that the U.S. trustee “has been given this watchdog role” and that a ruling for the government would not foreclose an opioid deal with the Sacklers. Although the question before the court was a narrow one — whether the Bankruptcy Code allowed such nonconsensual third-party waivers — the deal’s effect on a public health crisis that has left tens of thousands of people dead was on full display. While Justice Kavanaugh and others repeatedly questioned what any ruling would mean for victims of the opioid crisis and their families, others asked what consequences there would be for other settlements, including sexual abuse lawsuits against the Boy Scouts of America and the Catholic Church, that have included this release of liability.

The Supreme Court today will delve into the intricacies of bankruptcy law when it hears oral arguments about the controversial deal regarding Purdue Pharma, the former manufacturer of prescription painkiller OxyContin, The Hill reported. The company filed for bankruptcy in 2019 as it faced thousands of lawsuits in connection with the opioid crisis, as it was accused of downplaying the risks of Oxycontin and illegally marketing the drug. Under the bankruptcy reorganization plan, members of the wealthy Sackler family, who controlled Purdue Pharma, would contribute up to $6 billion to the settlement in exchange for being released from civil liability. But the Sacklers involved in the company did not personally file for bankruptcy themselves. They divested themselves of ownership of the company, and Purdue reorganized into a public-benefit company, with profits going to fighting the opioid crisis. The $6 billion would be contributed over the course of a decade, and the family admitted no wrongdoing. Under the so-called “third party release,” neither the Sacklers nor their associates could ever be sued in relation to Purdue and Oxycontin. The liability release has been a major sticking point, though about 95 percent of creditors — which include personal injury victims, states and various governmental entities, among others — voted to approve the plan, court filings show. The settlement was approved by a bankruptcy judge, but the U.S. Trustee Program, a component of the Justice Department that serves as a watchdog in bankruptcy cases, objected. The possibility that none of the Sackler family members involved in the company could face any liability for the opioid crisis has generated public outrage. The Justice Department argued that the bankruptcy court did not have the authority to release the Sackler family members from the claim. In August, the Supreme Court paused the bankruptcy settlement on an emergency basis as the justices agreed to take up the case in full. Read more.

To listen to the live oral argument today starting at 10 a.m. ET, please click here.

Norway's $1.5 trillion sovereign wealth fund, the world's largest, said on Friday it has been appointed by a U.S. court to co-lead an ongoing U.S. securities class action relating to the now-bankrupt Silicon Valley Bank (SVB), Reuters reported. SVB's collapse in March was the trigger for the worst banking shock since the 2008 global financial crisis, sending bank stocks globally on a wild ride. The Norwegian fund said the SVB case raised significant concerns regarding the integrity of the public markets, the governance of large financial institutions and the interests of the investor community more broadly. "We manage money on behalf of all Norwegians. I see it as our duty to take legal action to both maximise our recoveries after the SVB collapse and to signal that this is not acceptable market behaviour," the fund's Chief Executive Nicolai Tangen said in a statement. The fund, which invests Norway's surplus oil and gas revenue abroad, is the world's biggest single stock market investor, owning some 1.5% of all globally listed shares with stakes in more than 9,200 companies. It held a 1% stake in SVB at the end of 2022, valued at $137.9 million, according to data on the fund's website. The other co-lead plaintiff in the class action is Swedish pension fund Sjunde AP-fonden (AP7), the Norwegian fund said.

Chinese property giant Evergrande and its biggest foreign creditors are negotiating an 11th-hour deal to prevent a liquidation of the company’s offshore businesses on Monday, WSJ Pro Bankruptcy reported. Evergrande and a group of its bondholders have been negotiating to restructure the financially troubled company after Chinese regulators vetoed a previous version of their plan. In a recent proposal, Evergrande has offered to give control of around 20% of its Guangdong-based parent company, China Evergrande Group, to its creditors. To comply with Chinese regulators’ demands, Evergrande wouldn’t issue new debt as part of the restructuring. Additionally, Evergrande is in discussions with NWTN, a Dubai-based electric-vehicle company, to invest new money in Evergrande’s EV unit, the people said. NWTN had agreed to invest $500 million for a 28% stake in Evergrande Auto, which would have helped Evergrande Auto’s expansion, but NWTN temporarily suspended its commitment to invest the funds when Evergrande’s earlier restructuring plan fell apart, according to securities filings.