The largest creditor in the long-running bankruptcy process of the Mt Gox crypto exchange has opted for an early payout in Bitcoin rather than fiat currency, easing some concerns about the token’s price outlook, Bloomberg News reported. Mt Gox Investment Fund has picked an early payout in September this year. The fund decided against waiting for all the litigation around the failed exchange to be resolved, which could take as many as nine years. The fund will get 90% of what’s collectible. The bankruptcy trustee won’t have to sell tokens in the open market since the creditor chose to receive Bitcoin. Such sales could have sapped Bitcoin’s price. Mt Gox creditors have until March 10 to decide whether to chose the September payout or to wait longer to recover a higher percentage of their claims. Tokyo-based Mt Gox was at one time the world’s biggest Bitcoin exchange. It lost some customer assets and went bankrupt in 2014.
A Delaware bankruptcy judge on Wednesday denied a request by the U.S. Justice Department for an additional independent investigation into FTX’s collapse, saying it would needlessly suck up funds that could go to customers, WSJ Pro Bankruptcy reported. Bankruptcy Judge John Dorsey said existing probes by the cryptocurrency exchange’s new management and government authorities were sufficient. The judge praised the qualifications of FTX’s new chief executive, John J. Ray III, who was brought on to succeed FTX founder Sam Bankman-Fried as CEO just before the company filed for chapter 11 in November. “There is no question that Mr. Ray is completely independent of prior management,” Judge Dorsey said. Ray and his team are investigating FTX’s collapse, while federal and state agencies are doing their own probes, making additional review unnecessary, the judge said. Judge Dorsey said that a new investigation by an outside examiner would need to bring in a team of experts, a move that could lead to more than $100 million in extra costs—counter to the bankruptcy’s purpose to recover as much money as possible for FTX customers and creditors.
Debtors of bankrupt crypto lender Celsius Network have presented a sale plan to the U.S. Bankruptcy Court of the Southern District of New York, Coindesk.com reported. The plan is as part of the overall reorganization plan for Celsius' retail platform and mining business and has the support of the official committee of unsecured creditors. At the center of the plan is an in-principle agreement with NovaWulf Digital Management, a digital asset investment firm, making it the plan sponsor. The debtors chose NovaWulf as it "provides the best method to distribute the debtors’ liquid crypto assets and maximize the value of the Debtors’ illiquid assets through a new company run by experienced asset managers," the filing said. The plan is the product of the debtors’ court-approved sales process which Celsius Network lawyers had outlined in January 2023. They had said that the bankrupt crypto lender is planning to reinvent itself as a new, publicly traded “recovery corporation” in order to exit the bankruptcy process. The "comprehensive" sale process involved debtors’ advisors contacting over 130 parties and executing non-disclosure agreements with 40 potential bidders. This was whittled down to six bids for the retail platform, and three bids for the mining operation. The next step will be to finalize a binding agreement to designate NovaWulf as the successful bidder. According to the plan, NovaWulf will make a direct cash contribution of $45 million to $55 million to NewCo, a term used a describe a corporate spin-off before it is assigned a final name. Read more.
Revlon Inc. scored a legal victory against a lenders group when a bankruptcy judge dismissed a lawsuit against the company over a 2020 debt deal that stripped their collateral and sent it to a different creditor group, WSJ Pro Bankruptcy reported. Judge David Jones of the U.S. Bankruptcy Court in New York dismissed the lenders’ lawsuit against Revlon, though not against the rival creditor group that benefited from the transfer of collateral in return for providing the cosmetics company a lifeline. The judge has yet to issue a decision concerning the rival creditor consortium being sued along with Revlon, including Ares Management LLC, Angelo Gordon & Co. and Deutsche Bank AG. But he said that claims brought by HPS Investment Partners, Symphony Asset Management and others had wrongly attempted to sidestep the automatic stay that bars legal actions against Revlon in bankruptcy. Judge Jones said it was “difficult to conceive of a viable way to unwind” years-old deals that have been relied on by market participants in subsequent transactions and financial calculations. He also said that lenders targeted in the lawsuit have provided bankruptcy financing to Revlon expecting that deals made before the chapter 11 case would hold up.
An act of Congress that waived sovereign immunity for Marines at Camp Lejeune meant that personal injury tort claims did not arise when the injury was sustained.
The bankruptcy case filed by Johnson & Johnson's subsidiary shouldering talc-related lawsuits will soon be dismissed unless a U.S appeals court agrees to reconsider its decision to nix the company's attempt to offload the litigation into chapter 11 proceedings, a federal judge said yesterday, Reuters reported. Bankruptcy Judge Michael Kaplan said during a hearing in Trenton, New Jersey that he intends to toss the chapter 11 case once the Philadelphia-based 3rd U.S. Circuit Court of Appeals issues a formal mandate to carry out a Jan. 30 ruling by a three-judge panel to dismiss the matter. The 3rd Circuit panel ruled that the J&J subsidiary, called LTL Management, had no legitimate claim to chapter 11 protection because it did not face financial distress. The dismissal is on hold since LTL asked the full 3rd Circuit late on Monday to reconsider the panel's decision. Should the 3rd Circuit deny that request, Kaplan could dismiss the case within days. "It is my intent, when the mandate is issued, to issue an order dismissing the case," Judge Kaplan said during yesterday's hearing. Read more.
In related news, Johnson & Johnson is preparing to again defend thousands of lawsuits linking its talc-based products to cancer as the company attempts to revive a bankruptcy strategy that has kept the mass injury litigation on hold for more than 16 months, WSJ Pro Bankruptcy reported. Greg Gordon, a lawyer representing J&J’s bankrupt talc unit, LTL Management LLC, said yesterday the company is requesting that a federal appellate court revisit and reverse its recent ruling dismissing the chapter 11 case. LTL may pursue its appeal with the U.S. Supreme Court, if necessary, he said. In the interim, Mr. Gordon said the company is contingency planning and preparing to resume defending the talc litigation outside bankruptcy court. “It is a herculean effort to get the defense team back in place to manage cases around the country,” Mr. Gordon said during a hearing in the U.S. Bankruptcy Court in Trenton, N.J. Yesterday's hearing comes weeks after a three-judge panel of the U.S. Court of Appeals for the Third Circuit dismissed LTL’s chapter 11 case, which has kept the talc litigation on pause since October 2021. The appellate ruling found that LTL wasn’t eligible for bankruptcy because its parent, J&J, had agreed to fund its chapter 11 expenses and any potential settlement of claims that Johnson’s Baby Powder and Shower to Shower caused ovarian cancer and contained asbestos. Read more.
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After the cryptocurrency exchange FTX collapsed last year, bankruptcy lawyers, federal prosecutors and forensic investigators embarked on a global hunt to recover billions of dollars in lost deposits and repay the firm’s customers. One large chunk of money has been sitting for months in an interest-bearing account at JPMorgan Chase, the world’s largest bank. JPMorgan holds $400 million that FTX’s founder, Sam Bankman-Fried, invested in an obscure hedge fund, Modulo Capital, the New York Times reported. The founders of Modulo, which has drawn scrutiny from prosecutors investigating FTX’s implosion, are now negotiating the return of the funds with bankruptcy lawyers representing the exchange, said two of the people, who were not authorized to speak publicly. There is no indication that the Modulo founders did anything wrong, and they are looking for FTX to release them from certain legal liabilities in exchange for returning the money. Recovering $400 million from Modulo would be a major coup for FTX. Last month, FTX’s lawyers said they had located $5.5 billion in cash, securities and digital assets held in customer accounts or stored in other parts of the company. But that total includes a large stash of cryptocurrencies whose actual value is hard to determine, and the company’s lawyers say that FTX still has a significant shortfall in assets. Read more.
The intersection of cryptocurrency and bankruptcy is one of the key issues to be discussed by expert panels at next week’s Alexander L. Paskay Memorial Bankruptcy Seminar in Tampa. Are you registered?
A former FTX executive’s foundation made millions of dollars off the company’s digital tokens while he was its chief of staff and is now trying to eke out a bit more from a frozen account on the exchange, WSJ Pro Bankruptcy reported. While working at FTX and its closely tied trading firm Alameda Research, Ruairi Donnelly helped run a charitable foundation that promoted research in effective altruism and artificial intelligence, topics of shared interest to him and FTX founder Sam Bankman-Fried. One of the first employees at Alameda, Mr. Donnelly became the chief of staff of FTX as the exchange launched in 2019 and introduced its own currency called FTT, a digital coin for use on the new platform. At the time, FTX offered early employees like Mr. Donnelly a deal to buy its FTT tokens for 5 cents each, weeks before trading opened to the public at an initial price of $1. Donnelly took advantage of the company’s offer and requested that $562,000 of his salary be exchanged into FTT, worth the equivalent of 11.2 million tokens, according to his lawyer. FTX then sent the tokens at his request as grant to a Switzerland-based charity he co-founded, known today as Polaris Ventures, according to the foundation’s financial statements. The foundation made millions of dollars selling the tokens after they began trading publicly at $1 in 2019 and 2020, while Mr. Donnelly was still working at FTX, according to people familiar with the matter and the foundation’s financial statements.
The soup recipes of Hale & Hearty, the New York chain forced into bankruptcy last year, are up for grabs after its lawyers settled a fight with a wholesale food manufacturer that claimed to own the brand, Bloomberg News reported. The deal, announced in bankruptcy court yesterday, clears the way for the beleaguered chain to sell its soup recipes and other intellectual property — including its website and branding — to the highest bidder. The process had been stymied by a dispute with Mauzone Food Services, a kosher food maker that has been selling soups under the Hale & Hearty name in recent months. Mauzone said it bought the rights to Hale & Hearty’s brand when it took over the soup chain’s Brooklyn factory last year, but the trustee overseeing Hale & Hearty’s liquidation disagreed. “We are trying to sell the intangible assets as quickly as possible,” Lauren Kiss, an attorney representing the trustee who’s overseeing the business’s liquidation, said in a bankruptcy hearing Tuesday. “The longer the brand is out of the market the less valuable it is.” The brand — once a lunchtime favorite for Midtown office workers — is likely one of the most valuable assets left for the company. The parties came to a tentative settlement yesterday before a hearing with US Bankruptcy Judge James Garrity. Under the deal, Hale & Hearty is allowed to sell all of its intellectual property, while Mauzone will hand over branding it has been using and pay $50,000 for furniture, fixtures and equipment at the Brooklyn facility. Mauzone will also have to prove it is no longer making Hale & Hearty soups.
