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Alex Mashinsky, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, must face a lawsuit by New York Attorney General Letitia James accusing him of civil fraud, a Manhattan state court judge ruled on Friday, Reuters reported. Justice Margaret Chan said the attorney general sufficiently alleged that Mashinsky defrauded investors by touting Celsius as a safe alternative to banks and concealing its risks, including hundreds of millions of dollars of investment losses. Judge Chan also said James could pursue some claims under the Martin Act, a powerful state securities law, and that the "earned interest accounts" that Celsius offered customers qualified as securities under state law. The attorney general's lawsuit "supports a reasonable inference that the harm suffered by investors flowed, at least in part, from Mashinsky's alleged misrepresentations made in New York concerning Celsius' overall financial health and investment safety," Chan wrote in a 25-page decision.

FTX Dubai, which was created just months before the global crypto exchange collapsed last November, is asking to be exempt from U.S. bankruptcy proceedings, TheStreet.com reported. “FTX Dubai is balance-sheet solvent. Therefore, the debtors believe that a solvent voluntary liquidation procedure in accordance with the laws of the United Arab Emirates would allow a timely distribution of the positive cash balance after payment of all outstanding liabilities and liquidation of all assets," court documents said. Although the parent company went into bankruptcy proceedings in November, its decision to wrap up 102 affiliated entities scattered across the world in its proceedings has caused problems. FTX Dubai, for example, was owned by FTX's Europe arm. Now, FTX Dubai is claiming it was not engaged in business before the FTX collapse and has "no reasonable likelihood of rehabilitating its operations." It only wanted the ability to pay employee wages and benefits. The issue is pending a hearing at the end of the month.

Johnson & Johnson and a committee of cancer victims have agreed to speed up a court appeal of their fight regarding whether the health-care giant can use bankruptcy to end as many as 100,000 talc-related claims, Bloomberg News reported. The move could cut months off the appeals process. The first time the two sides fought about the issue, it took about a year and resulted in the bankruptcy case being dismissed. Now, J&J intends to appeal a decision by US Bankruptcy Judge Michael Kaplan to throw out the insolvency case of LTL Management, the unit the company created in order to try to resolve tens of thousands of cancer lawsuits. With Judge Kaplan gearing up to likely sign a final order dismissing the bankruptcy case next week — for the second time — both J&J and the committee of cancer victims want the federal appeals court to take up the matter. The cancer lawsuits have been on hold since J&J put LTL into bankruptcy for the first time in 2021. After that case was dismissed, J&J struck a deal with tens of thousands of claimants and put LTL back into bankruptcy, only to have that case struck down as well.

A bankrupt Holiday Inn in downtown Manhattan can’t use chapter 11 to maintain its low-rate mortgage without paying penalty interest linked to its default, a judge ruled in a setback for borrowers seeking to hold on to more affordable loans as interest rates rise, WSJ Pro Bankruptcy reported. Judge Philip Bentley of the U.S. Bankruptcy Court in Manhattan said in this week’s ruling that Golden Seahorse, owner of the 50-story hotel, should pay the default interest and fees charged by its lenders, totaling about $20 million, if it wants to keep its cheaper mortgage as it leaves chapter 11. The judge, however, said that Golden Seahorse can return to his court to argue that its defaults should be excused because under New York state law, the COVID-19 pandemic made it impossible to keep up with its payments. A lawyer for Golden Seahorse, Scott Markowitz, said the company would do so. Golden Seahorse arranged a 10-year, $137 million loan in 2018 and had been current until May 2020, when it failed to make a payment after the hotel closed because of the pandemic. Its lenders began charging default interest and Golden Seahorse filed for bankruptcy in November to avoid a seizure.

Bankrupt crypto lender Genesis Global Holdco LLC has extended its mediation with creditors for the last time, a company lawyer said during a hearing yesterday, Bloomberg News reported. “If we do not make substantial progress with respect to a deal in principle in the next two weeks, we do not believe that we will be seeking to extend the mediation further,” company lawyer Sean O’Neal told US Bankruptcy Judge Sean Lane. As a result, the talks will have to wrap up by Aug. 16. Genesis has been in mediation with key stakeholders — including parent company Digital Currency Group and Gemini Trust Co. — since May. They’re trying to save a proposed bankruptcy exit plan backed by DCG that was rejected by its official committee of unsecured creditors. If the parties don’t come to a deal by Aug. 16, the crypto lender will move forward with its existing bankruptcy plan, subject to certain amendments, the lawyer said. The mediation is one of the final hurdles preventing Genesis from wrapping up its time in bankruptcy.

A number of prescription opioid manufacturers, including OxyContin developer Purdue Pharma and generics maker Mallinckrodt, have agreed to pay billions to settle lawsuits accusing the companies of fueling a drug abuse crisis in the U.S. The money they agreed to pay was meant to help communities fight opioid addiction and cover rehabilitation costs for individuals, WSJ Pro Bankruptcy reported. Three of those settlements are at risk of falling apart or being substantially reworked, putting more than $8 billion of settlement money intended for addiction victims and governments in jeopardy. The drug manufacturers in particular faced charges of deceptive marketing practices, as companies like Purdue told the public that less than 1% of patients became addicted to their opioid pills, although internal company correspondence revealed that they knew that the risk of addiction was in fact much higher. Purdue Pharma’s settlement is also at risk. The drugmaker and tens of thousands of addiction victims, state governments and municipalities last year reached a global settlement that includes a $6 billion contribution that Purdue’s owners, the Sackler family, agreed to pay. In July, however, the federal government filed an appeal to the Supreme Court to review the settlement, suggesting that the inclusion of legal waivers for the family members may not conform with U.S. law. If the justices agree to hear the case, it could take until the end of next year for a decision to be made on whether the releases are legally permissible, and even longer for funds to be distributed. If the Supreme Court decides that the Sacklers can’t get releases under their plan, it is possible the whole settlement will have to be reworked and renegotiated.

The Second Circuit on July 25 denied the request of the government to stay issuance of the mandate pending the U.S. Solicitor General’s petition for certiorari asking the Supreme Court to review the Purdue decision allowing the bankruptcy court to issue nonconsensual releases of creditors’ direct claims against nondebtors. The mandate from the Second Circuit is scheduled to issue today, allowing the Purdue debtor to consummate the chapter 11 plan originally confirmed by the bankruptcy court in New York in September 2021, according to a special analysis from Rochelle's Daily Wire. The government isn’t giving up. The Solicitor General filed an application in the Supreme Court on July 28, asking the high court to stay issuance of the mandate pending disposition of the government’s forthcoming certiorari petition. The Supreme Court immediately directed that responses be filed by noon on Friday, August 4. The response deadline suggests that a grant or denial of a stay could come as early as Friday afternoon.

The Buffalo (N.Y.) Diocese faces more pressure to make a deal with child sex abuse survivors after Catholic dioceses in Rochester and Syracuse recently took major steps toward exiting their chapter 11 bankruptcy proceedings, according to legal experts, the Buffalo News reported. The Syracuse Diocese announced on Thursday that it will pay abuse victims at least $100 million, and possibly more, through insurance funds, while Rochester last week negotiated a new deal with victims that now includes some insurance money, and would pay at least $126 million toward a settlement. The proposed deals in Rochester and Syracuse still must be approved by a vote of victim creditors and confirmed by a federal bankruptcy judge, but they provide the Buffalo Diocese with a potential path forward in resolving what has been a lengthy and arduous reorganization effort now in its 40th month. Mediated talks between the Buffalo Diocese and abuse survivors are ongoing, although the status of the negotiations is unclear because the parties are bound by a gag order.

FTX Group unveiled a draft creditor-repayment plan as part of its bankruptcy that calls for settling customer claims in cash and wiping out its digital token FTT, Bloomberg News reported. The plan — which FTX expects to amend based on feedback from stakeholders — proposes valuing customer claims in U.S. dollars as of the date it went bankrupt and repaying them by selling assets tied to various silos of the business, court papers show. FTX also still hasn’t ruled out rebooting an offshore exchange, according to the filings. Three so-called recovery pools will guide creditor repayments. They include assets linked to FTX.com customers, assets linked to FTX US customers and assets not clearly tied to the exchanges, court papers show. Almost every proposed creditor class is deemed impaired, meaning the company expects they will not be made whole. The plan calls for giving no recovery on account of FTT tokens due to their “equity-like characteristics,” advisers for FTX wrote in the filings. Equity is almost always wiped out in US bankruptcy reorganizations.