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SVB Financial Group said it agreed with the Justice Department to tweak the financial terms and benchmarks of a plan to pay millions of dollars in bonuses to executives at a subsidiary, Bloomberg News reported. Bonus benchmarks for nine leaders of SVB Capital — the capital and investment arm of the bankrupt company — are now more “substantive and focused,” James Bromley of Sullivan & Cromwell said at a Tuesday hearing. The total payout for executives at lower performance benchmarks was reduced by $500,000, Bromley said, while the top level of payouts was increased by the same amount. The changes come after the Justice Department’s bankruptcy watchdog said the plan’s performance benchmarks were vague and not rigorous. The “true purpose” of the initial $12.5 million in bonuses was to maximize SVB Capital’s sale value by keeping the executives in place, the department said. SVB Financial Group, the former parent of Silicon Valley Bank, filed chaper 11 in March. It’s exploring a sale of SVB Capital, its primary remaining asset. The US Trustee, part of the DOJ, oversees bankruptcies on behalf of all creditors, and can object to a companies’ restructuring plans.

Bankrupt crypto lender BlockFi Inc. wants to block attempts by FTX and Three Arrows Capital to get back billions of dollars exchanged between the firms before all three companies unraveled last year, Bloomberg News reported. BlockFi said in a Monday court filing that it was victimized by Sam Bankman-Fried’s platform and, as a result, failed crypto exchange FTX isn’t entitled to more than $5 billion being sought. Similarly, BlockFi accused the collapsed crypto hedge fund Three Arrows of using fraud to borrow money from the lender and isn’t entitled to potential repayment. Monday’s filings advance an ongoing court fight that could impact how much creditors of BlockFi, FTX and Three Arrows are repaid in the companies’ separate bankruptcy proceedings. BlockFi, which is liquidating, has said litigation with FTX, Three Arrows and a few other crypto firms could affect the amount its customers are repaid by $1 billion. FTX said in July that it’s primarily seeking to recover loan repayments and collateral pledged to BlockFi before Bankman-Fried’s platform crumbled into bankruptcy in November. Bankman-Fried has pleaded not guilty to fraud charges and is scheduled to go to trial in October.

JPMorgan Chase & Co. was accused of helping Sinclair Broadcast Group raid its own local sports television unit for $929 million when that affiliate, Diamond Sports Group, was likely insolvent, according to a lawsuit made public on Monday, Bloomberg News reported. Diamond accused JPMorgan of working with Sinclair — Diamond’s parent company — to extract the cash from the sports broadcasting business as it was headed toward chapter 11 with billions of dollars in debt, according to the complaint in Texas bankruptcy court. Diamond has separately accused Sinclair of wrongly draining $1.5 billion from the business, an allegation the parent company denies. Specifically, Diamond alleges JPMorgan advised Sinclair to funnel roughly $929 million out of the sports broadcaster in order to repay preferred equity held by a JPMorgan affiliate. That was despite JPMorgan being “well aware” of significant challenges facing the company’s network of regional sports channels at the time Sinclair acquired the business from The Walt Disney Company in August 2019 in a deal valued at $10.6 billion, according to the lawsuit.

FTX cryptocurrency exchange founder Sam Bankman-Fried is "subsisting on bread and water" because the federal jail where he is being held ahead of his fraud trial has not provided him with a vegan diet as he requested, his lawyer said on Tuesday, Reuters reported. Bankman-Fried pleaded not guilty in Manhattan federal court to seven criminal charges contained in a new indictment during a hearing before U.S. Magistrate Judge Sarah Netburn. His lawyer, Mark Cohen, told Netburn during the hearing that a lack of adequate food and medication provided at Brooklyn's Metropolitan Detention Center was hampering Bankman-Fried's ability to prepare for his scheduled October trial. The former billionaire was led into court wearing leg restraints and a beige-colored uniform for his first appearance since his bail was revoked on Aug. 11 by U.S. District Judge Lewis Kaplan, who found that Bankman-Fried had tampered with witnesses at least twice.

McKinsey and several of its executives must face a critic’s lawsuit alleging the consulting firm concealed conflicts of interest from bankruptcy courts to win business advising on major corporate restructurings, WSJ Pro Bankruptcy reported. Judge Jesse Furman of the U.S. District Court in New York declined on Monday to dismiss the bulk of claims filed against McKinsey by the founder of a competing firm accusing it of submitting false disclosures to bankruptcy courts that omitted potentially disqualifying financial conflicts. The judge’s ruling allows Jay Alix, the retired founder of turnaround consulting firm AlixPartners, to advance his claims that McKinsey’s disclosures were part of a racketeering conspiracy to boost its restructuring advisory practice at the expense of competing firms. Judge Furman granted McKinsey’s motion to dismiss one of the four racketeering counts Alix alleged, while finding the other three were plausible enough to proceed against the firm. It has denied the allegations and said Alix wants to use the lawsuit to drive McKinsey out of the lucrative marketplace for restructuring advice.

The Roman Catholic Archdiocese of San Francisco filed for bankruptcy on Monday, saying a chapter 11 filing will facilitate a settlement of about 500 lawsuits accusing the church of enabling childhood sexual abuse by priests, Reuters reported. The filing in U.S. bankruptcy court in San Francisco will put the lawsuits on hold and buy time for settlement talks, Archbishop Salvatore Cordileone said in a statement. "We believe the bankruptcy process is the best way to provide a compassionate and equitable solution for survivors of abuse while ensuring that we continue the vital ministries to the faithful and to the communities that rely on our services and charity," Cordileone said. The "overwhelming majority" of the alleged abuse occurred in the 1960s and 1970s, involving priests who are deceased or no longer in ministry, Cordileone said. The current wave of lawsuits was filed after California passed a 2019 law allowing people to bring claims for childhood sexual abuse that otherwise would have been barred due to the expiration of the statute of limitations. The dioceses of Oakland and Santa Barbara this year also filed for bankruptcy, each citing the impact of hundreds of sex abuse lawsuits.

The Supreme Court recently announced that it will review Purdue Pharma’s bankruptcy settlement, which would release the company’s owners, the Sackler family, from future civil liability for the harms they imposed on millions of opioid victims. Some see this as an opportunity to vindicate victims and prevent abusive bankruptcy settlements. That is wrong. The reality is that the Supreme Court’s review comes at a major cost to opioid victims, potentially delaying compensation they would receive by months or even years, according to a commentary today in the Washington Post by Profs. Anthony Casey of the University of Chicago Law School and Edward Morrison of the Columbia Law School (New York). It might also cost the entire legal system. If the court rejects the settlement in this case, it would cripple our bankruptcy courts, which play a key role in remedying mistreatment of mass tort victims by our legal system. The Sacklers played a key role in these misdeeds, yet they never filed for bankruptcy, and victims never had an opportunity to pursue lawsuits against them in civil courts. Instead, Purdue commenced a bankruptcy case, which brought all victims, governments and other injured parties into a single court. The Sacklers agreed to offer settlement money in exchange for a release from liability. After injured parties pushed back, and after months of mediation, the Sacklers increased their offer from more than $4 billion to nearly $6 billion for a release. The company has twice pleaded guilty to criminal charges — first in 2007, for misleading the public about the safety of its products, and again in 2020, for defrauding the United States and violating the federal anti-kickback statute. Today, more than 95 percent of victims who voted did so in favor of this settlement; so have nearly 80 percent of the states and territories and more than 96 percent of tribes and other non-state governments with claims against Purdue and the Sacklers. Read more.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Sinclair Broadcast Group Inc. told a court it wants a faster breakup from its bankrupt sports broadcasting unit after the company was accused of draining more than $1.5 billion from the subsidiary, Bloomberg News reported. Sinclair on Monday provided a defense against allegations it wrongly extracted substantial sums from its Diamond Sports Group subsidiary before the unit filed bankruptcy earlier this year. Sinclair said it agreed to waive millions of dollars in management fees and provided other financial assistance in hopes restructuring Diamond’s balance sheet. But instead of continuing to work with its parent company on a plan to get the business out of bankruptcy, Sinclair told a Texas bankruptcy judge that Diamond and some of its creditors “pivoted to an all-out ‘shoot-first’ litigation war on Sinclair.” Diamond accused Sinclair of charging excessive fees under a management services agreement that costs more than $100 million a year. In response, Sinclair said Diamond should terminate the deal if it believes it’s too expensive, but claimed the subsidiary is dragging its feet because it wants benefits it gets under the deal while paying its parent company a significantly lower rate in bankruptcy. On Monday, Sinclair demanded Diamond make a choice: either accept the management agreement and drop some of the allegations in its complaint or end the deal with its parent company. Scuttling the agreement would mean Sinclair would no longer be forced to subsidize Diamond’s business or litigation against the parent company, Sinclair said.