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A bankruptcy judge largely rejected a “double-dip” bid by a former Lehman Brothers bond trader for an $83 million bonus he claimed he was owed following the investment bank’s 2008 collapse, with the judge calling his request “pure nonsense,” the Wall Street Journal reported on Saturday. Bankruptcy Judge Shelley Chapman said that former top trader Jonathan Hoffman is entitled to only about $7.7 million stemming from an unpaid portion of the bonus he was awarded in 2007. Furthermore, Hoffman will receive only 35 cents on the dollar for the bonus. “Mr. Hoffman was a gifted trader who generated billions of dollars in profits for Lehman over the course of his employment,” Judge Chapman said in an 87-page decision Thursday. But she characterized as “pure nonsense” the Wall Street veteran’s argument that Lehman owed him more than $83 million, even though he had received a similar amount from Barclays PLC.

The Supreme Court yesterday rejected an appeal by longtime investors with Bernard Madoff who argued the formula used to return money to clients should have treated them more favorably, Dow Jones Daily Bankruptcy Review reported today. By declining to hear the appeal, the high court's move clears the way for court-appointed trustee Irving Picard to distribute more than $900 million to customers defrauded by Madoff's Ponzi scheme. Those funds had been held in reserve while the investors' appeal worked its way through the courts. The investors, some of whom had invested money with Mr. Madoff for several decades, argued that the amount of their recoveries should be adjusted upward for interest or inflation to reflect the time value of money. Lower courts disagreed, ruling the Securities Investor Protection Act didn't permit such adjustments. Read more. (Subscription required.) 

Take a closer look into unwinding financial fraud with ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

Caesars Entertainment Operating Co. opened a multi-day trial to determine the exact date it went bankrupt, a question that could threaten a $468 million claim senior lenders have made on the casino company’s cash and affect talks with lower-ranking creditors, Bloomberg News reported yesterday. The dispute might not be as important to the judge overseeing the $20 billion bankruptcy in Chicago as it is to the company. Bankruptcy Judge A. Benjamin Goldgar said yesterday that he’s in no hurry to rule on whether the chapter 11 case officially began on Jan. 12, when creditors filed to force Caesars into bankruptcy, or Jan. 15, when the company filed a voluntary petition. A fight over the cancellation of an employee pension is more of a priority to him, Judge Goldgar said. The dispute over the start of the bankruptcy involves a technical point of law. Bondholders filed a petition on Jan. 12 in Wilmington, Delaware, seeking to force the company into bankruptcy. The company filed its own bankruptcy case three days later in Chicago. The earlier date would fall within a legal time-period for the lower-ranking creditors to challenge a cash claim by senior lenders, who are allied with Caesars and support its reorganization plan. The later date would protect the lender claim to the $468 million.

Hit with a big fine for violating a judge’s order, Michigan lawyer David W. Charron filed for bankruptcy protection to avoid paying it, the Wall Street Journal Bankruptcy Beat Blog reported on Friday. But a bankruptcy judge derailed that plan on Wednesday, ruling that Charron’s civil contempt fine of $363,506.77 — a penalty for orchestrating the sale of an insurance firm despite a court order not to do so — isn’t the type of debt that a person can get rid of using bankruptcy. In his 26-page ruling, Judge James Boyd said that Charron can’t cancel his debt to Glenn Morris, the former co-owner of insurance agency Morris, Schnoor & Gremel Inc.

Creditors of Caesars Entertainment Corp.’s casino business are heading to court on Monday to argue that the company has been bankrupt for three days longer than it acknowledges, and $468 million hangs on the outcome, Reuters reported yesterday. The battle stems from how the casino operator wound up in bankruptcy in the first place. Creditors hope to convince U.S. Bankruptcy Judge Benjamin Goldgar in Chicago that the process began on Jan. 12 in Delaware. That was the day that Appaloosa and two other hedge funds filed an involuntary bankruptcy petition against the company. Three days later, the operating unit of Caesars, which was formed by the 2008 buyout of Harrah's Entertainment, filed its own Chapter 11 in Chicago, and the Delaware judge transferred his case to Goldgar. The law allows creditors to attack certain transactions dated within 90 days before a bankruptcy filing so they can claw back cash. If the judge considers the Jan. 12 bankruptcy date valid, unsecured creditors could challenge an October deal granting Caesars' senior creditors a lien on $468 million in cash.

American Apparel Inc. filed for bankruptcy protection after posting years of losses as the clothing retailer, which fired controversial founder Dov Charney last year, seeks to reorganize debts that have ballooned to levels exceeding its assets, Bloomberg News reported today. As part of a pre-packaged chapter 11 restructuring, more than $200 million of bonds will be exchanged for stock in the reorganized company and the clothing retailer will have access to financing after its restructuring, American Apparel said in a statement. Business will continue throughout the reorganization, which was supported by 95 percent of secured lenders and may last about six months, it said. Though American Apparel has been in disarray since Charney was suspended and then fired as chief executive officer last December for alleged misconduct — claims he says are baseless — American Apparel’s financial woes stretch back longer. The chain has posted losses every year since since 2010.

A federal bankruptcy judge on Friday said that he was leaning toward approving the bankruptcy plan for Freedom Industries Inc., the company behind last year’s chemical spill in West Virginia, the Wall Street Journal reported on Saturday. The move would pave the way for thousands of people harmed by the spill to begin receiving payments. At a hearing Friday afternoon in U.S. Bankruptcy Court in Charleston, W.Va., Judge Ronald Pearson said that the various settlement and compromises in the plan, which divvies up $6.1 million between Freedom’s creditors and West Virginia residents, merited approval. But he took Freedom’s liquidation plan under advisement in order to review the final language on some minor modifications to the proposal. He said he would rule this week.

U.S. Democratic presidential candidate Hillary Clinton said Friday that a bankruptcy plan proposed by Patriot Coal Corp. is "outrageous and must be stopped" because it diverts money intended for coal miners' retirement benefits, Reuters reported on Friday. "Patriot Coal is trying to take $18 million of the $22 million put aside for retired coal miners, wives and widows and use it to pay its lawyers instead," Clinton said. "Ensuring healthcare and retirement security should be the first priority in a bankruptcy proceeding, not the last." Clinton, who is running for the Democratic Party nomination for the November 2016 presidential race, was referring to workers at an Indiana mine that operated under an agreement between a Patriot subsidiary and the Aluminum Company of America. According to court filings, the Patriot subsidiary operated the mine and in return Alcoa Inc. reimbursed some mine worker benefits. The two companies are now terminating that agreement, with Alcoa paying Patriot $22 million.

JPMorgan Chase & Co. prevailed in an $8.6 billion lawsuit brought on behalf of Lehman Brothers Holdings Inc. creditors who said that the bank abused its power by draining Lehman of critical liquidity in its final days, precipitating the global financial crisis, Reuters reported yesterday. U.S. District Judge Richard Sullivan rejected claims that JPMorgan exploited its "life or death" leverage as Lehman's main "clearing" bank to extract billions of dollars of collateral just before Lehman went bankrupt on Sept. 15, 2008. Creditors said that JPMorgan had no need for this despite volatile markets and extracted a windfall at their expense. But the judge said JPMorgan was entitled to demand collateral to secure Lehman's obligations and did not defraud Lehman into providing it. He also said that JPMorgan had no contractual obligation to extend credit to keep Lehman alive.

Lawyers for the bankrupt 50 Cent, whose real name is Curtis James Jackson III, are asking for special permission to keep the full financial details of his briefs deal under wraps, the Wall Street Journal Bankruptcy Beat blog reported yesterday. The Frigo RevolutionWear brand underwear deal keeps Jackson associated “with the luxury end of the consumer market and provides [him] with a potential upside that will help pay back his creditors,” said his lawyers, who pointed out that the brand is also affiliated with celebs like ex-Yankees great Derek Jeter, Knicks star Carmelo Anthony and rapper Timbaland. At the risk of undersharing, Mr. Jackson’s lawyers gave Judge Ann Nevins full details on the product in their court-filed motion.