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Investors who backed a biotechnology company led by executive Martin Shkreli are suing to get back the $5.4 million they had invested just hours before his arrest, Reuters reported yesterday. Shkreli took control of KaloBios Pharmaceuticals Inc in November, saving the company from closing down. He became its chief executive on Nov. 20. As part of Shkreli's rescue, the company reached a deal with three individuals and two funds to invest $5.4 million in it under an agreement that KaloBios said was completed on Dec. 16. On Dec. 17, Shkreli was arrested for allegedly engaging in a Ponzi-like scheme at his former hedge fund and Retrophin Inc, a pharmaceutical company he previously headed. KaloBios' outside counsel, Evan Greebel, was also arrested, and on Dec. 29 KaloBios filed for bankruptcy.

Arch Coal Inc., the second-largest U.S. coal producer, asked a bankruptcy judge to put aside $75 million to backstop future cleanup costs — far less than the roughly $450 million that regulators foresee needing, Reuters reported yesterday. Arch made the proposal to a Missouri court after filing for bankruptcy protection yesterday, seeking to shed $4.5 billion in debt in the face of weak demand for coal and increasing pressure from creditors. Arch has used cash, bonds and other financing to assure mine cleanup. But Arch's use of a federal program called self-bonding to cover a large share of cleanup costs raises the possibility that taxpayers be saddled with much of the bill. Securities filings show that Arch Coal has not qualified for self-bonding since 2012. In those years Arch Coal accessed self-bonding through a subsidiary, Arch Western Resources, according to regulatory paperwork.

The former chairman of Dewey & LeBoeuf has reached an agreement with New York prosecutors to avert a retrial on fraud charges stemming from the law firm's collapse, Reuters reported on Friday. The agreement with Steven Davis was discussed at a hearing on Friday in Manhattan Supreme Court. Two former Dewey colleagues, executive director Stephen DiCarmine and chief financial officer Joel Sanders, failed to reach similar agreements and face a possible second trial, their respective lawyers said at the hearing. Dewey, which once counted over 1,400 lawyers and ranked as one of the largest U.S. law firms, filed for bankruptcy in 2012.

General Motors Co. heads to trial today over a defective ignition switch linked to 124 deaths, continuing a legal battle over a safety lapse still dogging the automaker despite a raft of previous settlements, the Wall Street Journal reported today. The ignition-switch case, part of consolidated litigation in a New York federal court, will dredge up for a jury past safety lapses the auto maker has worked to put behind it for the better part of two years. The trial is a reminder that GM still faces potential financial penalties over the faulty switch even after reaching settlements with the U.S. Justice Department, shareholders and thousands of consumers totaling more than $2 billion. Remaining lawsuits and additional government probes loom.

A federal appeals court on Friday set back Bank of New York Mellon Corp's effort to recoup $312 million it lent to Sentinel Management Group Inc, a money manager that collapsed in 2007 and whose former chief is now in prison for fraud, Reuters reported. The U.S. Court of Appeals for the Seventh Circuit said that a lower court judge reviewing bankruptcy trustee Frederick Grede's lawsuit erred in clearing the bank of wrongdoing in its dealings with Sentinel and its chief executive officer, Eric Bloom. Writing for the appeals court, Circuit Judge Richard Posner said the bank should be treated as an unsecured Sentinel creditor, not a secured creditor, because it was aware of suspicious facts that should have led it to investigate whether Northbrook, Ill.-based Sentinel was up to no good. Judge Posner also rejected Grede's argument that the bank's claim should be pushed further behind other claims, saying the trustee did not show that the bank acted deliberately to avoid confirming its belief there was a high probability of fraud.