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Bankrupt cryptocurrency exchange FTX is suing former chief executive Sam Bankman-Fried and others over the acquisition of stock trading platform Embed, looking to claw back hundreds of millions in funds to repay creditors and customers, WSJ Pro Bankruptcy reported. The lawsuit alleges former FTX executives did little due diligence before an “astronomical” $240 million was paid for a business now valued at no more than $1 million, the highest bid received in bankruptcy for the asset, according to the lawsuit filed Wednesday in the U.S. Bankruptcy Court in Wilmington, Del. “The result of the bidding process leaves no doubt” that the more than $240 million paid to acquire Embed “was wildly inflated,” the new FTX management team said in the lawsuit. The bidders in bankruptcy “figured out what FTX insiders didn’t bother to assess before the Embed acquisition, namely, that Embed’s vaunted software platform was essentially worthless.” In pursuing the Embed acquisition, “the FTX insiders prioritized speed above all else,” the suit said. At the time of the acquisition, Embed had a “minuscule” customer base and “serious bugs plaguing its software platform,” according to the lawsuit. The new FTX management also filed lawsuits against former Embed employees and shareholders.

When asked in a Senate hearing this week who was to blame for the demise of Silicon Valley Bank, the lender’s former chief executive, Greg Becker, had plenty of ideas, blaming regulators, the bank’s board and its own customers for bringing it down. Yesterday, senior officials from two of the bank’s main regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, told members of the same Senate panel that some of the impressions Becker had left lawmakers with were false, the New York Times reported. The contradictory congressional testimony threatened to pose yet another problem for Becker, who is facing an investigation by federal criminal prosecutors into his handling of the failed California lender as well as a shareholder lawsuit accusing him and another senior leader of misleading investors about the bank’s health in the lead-up to its failure. James N. Kramer, a lawyer for Mr. Becker, said Mr. Becker stood by the statements he had made. The regulators’ statements were part of a hearing held by the Senate Banking Committee on how bank oversight should look in the future in light of the failures of three regional banks this spring. It came two days after Mr. Becker appeared alongside former senior leaders of Signature Bank, a New York lender that collapsed just after Silicon Valley Bank did and prompted the federal government to take drastic steps to prevent widespread panic in the banking system.

Failed cryptocurrency brokerage Voyager Digital Holdings Inc. won court approval to begin winding down its operations and start repaying customers a portion of their crypto that’s been held on its platform since last year, Bloomberg News reported. Judge Michael Wiles approved Voyager’s liquidation procedures Wednesday, about a month after Binance.US terminated an agreement to purchase the crypto platform and after a deal to sell itself to FTX last year fell apart. Voyager customers will get about 36% of what they’re owed but their recovery could increase if the firm succeeds in a pending dispute with FTX, according to court documents. Nobody is happy with the liquidation, Judge Wiles said, addressing Voyager customers who complained about his oversight of the case, the cost of the bankruptcy, the amount lawyers are being paid and the fact that users are getting only a percentage of their crypto back. But the wind-down is the path Voyager is taking because the firm doesn’t have enough to fully repay customers, Judge Wiles said. Options that could have resulted in a better recovery, namely selling the company to FTX or Binance, didn’t work out, he said. Voyager didn’t realize when it tried to sell itself to FTX that Sam Bankman-Fried’s firm would turn out “to be a gigantic fraud,” the judge said.

A lawyer for Celsius Network on Wednesday said the crypto lender hopes to conclude an auction for its assets within days and the current lead bidder is Fahrenheit LLC, a consortium that includes blockchain-based venture capital firm Arrington Capital, at a U.S. bankruptcy court hearing in Manhattan, Reuters reported. Celsius attorney Ross Kwasteniet told U.S. Bankruptcy Judge Martin Glenn the auction has taken longer than expected, but has been highly competitive. The current bids are "hundreds of millions of dollars" higher than the initial bid by NovaWulf LLC, a digital asset investment firm, he said. New Jersey-based Celsius filed for chapter 11 protection in July, one of several crypto lenders to go bankrupt following the rapid growth of the industry during the COVID pandemic. Celsius said at the time it had more than 1.7 million registered users and approximately 300,000 active users with account balances greater than $100.

Lenders to Mallinckrodt Plc are mobilizing with legal counsel ahead of a $200 million settlement payment for the drugmaker’s role in the opioid epidemic, Bloomberg News reported. The payment — due June 16 and earmarked for an opioid trust — is supposed to be Mallinckrodt’s first since exiting bankruptcy a year ago and some lenders want the company to skip the payment in order to safeguard its liquidity, said the people, who asked not to be identified because the matter is private. Law firm Gibson Dunn & Crutcher held a call earlier this week with a group of first-lien lenders, while Paul Weiss Rifkind Wharton & Garrison hosted a call Wednesday for creditors with holdings in both the company’s first- and second-lien loans, they added. Both firms represented creditor groups during the company’s chapter 11 process back in 2020. Meanwhile, the drugmaker is consulting with its long-standing adviser Guggenheim Partners. An initial $450 million payment was made upon Mallinckrodt’s emergence last year. The pharmaceutical company in February 2022 won court approval of its bankruptcy exit plan, clearing the path for a settlement of thousands of lawsuits related to its opioid drugs. The plan handed control of the company to creditors and placed opioid litigation claims in a trust set aside for their settlement and payment.

Federal bank regulators must turn over any tax refund checks made out to SVB Financial Group, a judge said Wednesday, handing the bankrupt holding company a victory in its strategy to pay bondholders, Bloomberg News reported. Over the next two years, SVB Financial is expecting about $300 million in tax refunds, company attorney James Bromley said during a court hearing in Manhattan. A few checks have already been mailed out, but wound up in the hands of the federal receiver or with First Citizens Bank & Trust Company, which took over Silicon Valley Bank’s deposits. Bankruptcy Judge Martin Glenn denied a request by the Federal Deposit Insurance Corp. to hold the checks in an escrow account while SVB Financial and bank regulators decide how to split up the tax refunds. Under a tax-sharing agreement, the money will eventually be divided between the holding company and an FDIC receiver, who is overseeing the remnants of Silicon Valley Bank. “There is a process,” Glenn told FDIC lawyer Derek Baker. “You want to bypass all that and keep the money for yourself.” When SVB Financial filed for bankruptcy in March, it had huge net operating losses and was owed substantial tax refunds. The refund checks and the right to use the losses to reduce future income taxes are among the most valuable assets available to pay creditors, Bromley said.

Johnson & Johnson has set aside $400 million to resolve U.S. state consumer protection actions as part of its broader $8.9 billion effort to settle claims that its Baby Powder and other talc products cause cancer, Reuters reported. J&J subsidiary LTL Management filed a bankruptcy plan in New Jersey late on Monday that details how the company intends to pay different types of cancer victims in a bankruptcy settlement. J&J has said that its talc products are safe and do not cause cancer. It is attempting for a second time to resolve more than 38,000 lawsuits in bankruptcy and prevent new cases from coming forward in the future. LTL's bankruptcy plan would pay $400 million into a separate trust for claims filed by state attorneys general alleging that J&J violated state unfair business practices and consumer protection laws by misleading consumers about the safety of its talc products. Several states had begun consumer protection actions against J&J before LTL's first bankruptcy filing stopped those investigations from moving forward in 2021. New Mexico and Mississippi had already filed lawsuits against Johnson & Johnson before then, and the states of Arizona, Maryland, North Carolina, Texas and Washington had issued civil investigative demands or subpoenas, according to LTL's court documents.

Kidde-Fenwal, the fire-protection business bankrupted by possible liability for “forever chemicals,” said it believes it has potentially hundreds of millions of dollars in insurance coverage to help pay claims, WS Pro Bankruptcy reported. However, the Carrier Global subsidiary might have trouble tapping that coverage as its insurers are disputing their obligations and aren’t helping to defend the business, a Kidde-Fenwal lawyer said Tuesday during the company’s debut in bankruptcy court. “None of the insurers are currently paying claims,” Kidde-Fenwal lawyer Andrew Dietderich said in the U.S. Bankruptcy Court in Wilmington, Del. “One of the big tasks we have in front of us is to get to the bottom of that and figure out what insurance coverage may be available." Kidde-Fenwal’s options in bankruptcy include seeking settlements with, or suing, insurers or the chemical suppliers that made the allegedly harmful substances used in the company’s products, he said.

Kidde-Fenwal Inc., an industrial fire-detection and -suppression business owned by Carrier Global Corp., has filed for bankruptcy to deal with more than 4,000 lawsuits, becoming the first major reorganization to try to contain liability over health and property damage caused by “forever chemicals,” WSJ Pro Bankruptcy reported. Kidde-Fenwal filed chapter 11 on Sunday after being embroiled in mass litigation stemming from the past sale and distribution of firefighting foam that allegedly contained man-made substances commonly known as PFOA and PFOS, or forever chemicals because they take a long time to break down. Bankruptcy offers a path for corporate defendants to resolve mass lawsuits in a single forum and has been used to address tort claims stemming from opioid misuse, asbestos poisoning and other allegedly dangerous or defective products. In recent decades, research has linked exposure to these long-lasting chemicals with health problems including kidney and testicular cancers, thyroid disease and high cholesterol, according to the U.S. Environmental Protection Agency. The chemical industry has disputed some of the EPA’s findings, but a wave of liability lawsuits has targeted manufacturers that once used those substances, alleging water contamination, property damage and personal injury.