%1

A Texas bankruptcy judge declined to bring monetary sanctions against lawyers for Sorrento Therapeutics, ruling that a bank account and mailbox established to justify the company’s chapter 11 filing in Houston didn’t rise to the level of bankruptcy fraud, WSJ Pro Bankruptcy reported. Timothy Culberson, a Sorrento shareholder, earlier revealed that Sorrento’s lawyers at the firms Latham & Watkins and Jackson Walker had prepared a bankruptcy petition for the company’s subsidiary Scintilla Pharmaceuticals that relied on a bank account Sorrento wired $60,000 to three days before the filing and a mailbox established at a UPS store in a Houston suburb the day before the filing. Sorrento had used Scintilla’s Feb. 13, 2023, petition as a basis to make its own chapter 11 filing in Houston immediately after. The U.S. trustee for the Southern District of Texas, which serves as a bankruptcy watchdog on behalf of the U.S. Justice Department, presented evidence earlier this month showing that Scintilla had made representations to the California Secretary of State both before and after its bankruptcy filing that its principal address was in San Diego. Both the trustee and Culberson filed court papers this month demanding that the Sorrento and Scintilla cases be either dismissed or transferred out of state, alleging that the Scintilla petition falsely stated the company’s principal assets and place of business were in Texas. Culberson had separately alleged that the actions Latham and Jackson Walker had taken in preparing the filing amounted to bankruptcy fraud, seeking both firms to pay monetary damages.

Sam Bankman-Fried’s lawyer said Tuesday that a suggested 100-year prison sentence for the FTX founder by an arm of the court is “grotesque” and “barbaric” and at most a term of a few years behind bars is appropriate for cryptocurrency crimes that the California man still disputes, the Associated Press reported. In presentence arguments filed just minutes before a late Tuesday deadline in Manhattan federal court, attorney Marc Mukasey said a report by Probation officers improperly calculated federal sentencing guidelines to recommend a sentence just 10 years short of the maximum potential 110-year sentence. A spokesperson for prosecutors, who will respond in court papers in mid-March, declined comment. Mukasey noted, however, that prosecutors have agreed with the 100-year recommendation and say it was supported by trial evidence. On March 28, Judge Lewis A. Kaplan will sentence the man prosecutors say cheated investors and customers of at least $10 billion in businesses he controlled from 2017 through 2022.

Macy’s said yesterday that it would vastly reshape its strategy and retail footprint, closing about 150 Macy’s stores over the next three years while expanding its upscale Bloomingdale’s and Bluemercury chains, the New York Times reported. The moves put the stamp of the company’s new chief executive, Tony Spring, on an effort to improve the profitability of the largest department store operator in the United States and stave off a potential takeover bid. It is the second major downsizing of the Macy’s chain since 2020 and will leave the company with 350 stores, slightly more than half the number it had before the pandemic. Macy’s called the stores it planned to close “underproductive locations” that accounted for 25 percent of the company’s overall square footage but just 10 percent of sales. The company said it expected to take in $600 million to $750 million by selling these stores and streamlining some of its warehouses. The company said that it would start notifying workers later that day at stores it planned to close. It plans to shutter roughly 50 stores this fiscal year and the rest by the end of 2026.

The former chief executive of Firestar Diamond, a jewelry wholesaler accused of taking part in bank fraud allegedly orchestrated by Nirav Modi, transferred his interest in a multimillion-dollar New York residence to his wife days after his company filed for bankruptcy in 2018, the trustee responsible for liquidating Firestar said in a lawsuit seeking to undo the transfer, WSJ Pro Bankruptcy reported. Mihir Bhansali made the transfer to place his interest in the residence, which had been purchased for $7.1 million, “outside the reach of his present and future creditors,” Richard Levin, the trustee working to distribute Firestar’s remaining assets, said in a lawsuit filed Monday in the U.S. Bankruptcy Court in the Southern District of New York. It is the third lawsuit lodged by the Firestar trustee against Bhansali, whom Levin said participated in the Indian bank fraud allegedly orchestrated by jewelry magnate Modi. Levin said in his new lawsuit that the residence in New York was bought partly with cash from the alleged Modi scheme. Levin said that Modi was found living in London in 2019 and arrested. In 2021, after a trial, the U.K. granted India’s request to extradite him, but Modi appealed the extradition ruling, and he remains in prison in London, Levin said.

A coal company owned by West Virginia Gov. Jim Justice has been found in contempt by a federal judge for not following an order to pay an insurance company to maintain collateral for financial obligations, the Associated Press reported. U.S. District Judge Elizabeth Dillon found Southern Coal Corp. in civil contempt Monday and granted the insurance company's request to fine it $2,500 per day until it complies with the order, the Charleston Gazette-Mail reported. The ruling dismissed Southern Coal’s argument that it was unable to comply with the order for payment, issued five months ago, because it isn't actively mining coal and has no income. That September order said Southern Coal failed to satisfy contractual obligations and must pay Charleston-based BrickStreet Mutual Insurance Co. $503,985 to maintain collateral for financial obligations, along with attorney fees. BrickStreet provides workers' compensation and employers' liability insurance. Southern Coal argued that other Justice-controlled companies could no longer pay the company's debts because of recent judgments against them, but the judge said in the contempt order that no evidence had been presented to support that assertion. Southern Coal has seven days to comply before the daily fine begins, according to the order.

Crypto lender Genesis Global on Monday kicked off a multi-day court hearing on its proposal to repay customers in bankruptcy, asking a U.S. bankruptcy judge to overrule its parent company Digital Currency Group's objections to its chapter 11 plan, Reuters reported. Equity owners are last in line to be repaid in bankruptcy, and DCG is trying to cut in line ahead of customers who loaned their cryptocurrency to Genesis, Genesis attorney Sean O'Neal said at a court hearing in White Plains, N.Y. "Our clients lent us these assets, and we're trying to give them back," O'Neal told U.S. Bankruptcy Judge Sean Lane. "DCG should not be able to come in and take a cut." DCG is trying to stop Genesis' bankruptcy plan from being confirmed, arguing that it cuts off any chance of recovery to equity holders. The heart of their dispute centers on a fundamental question: When is a bankruptcy creditor paid "in full?" Genesis is seeking approval of a bankruptcy plan that would repay customers in bitcoin, Ether, or U.S. dollars, depending on the type of assets they had on deposit with Genesis when it filed for chapter 11 in January 2023. Genesis has estimated that its customers will receive up to 77% of the value of their deposits under its plan. Genesis said that its customers are not being fully repaid because the prices of bitcoin and other cryptocurrencies have risen since it filed for bankruptcy, and it cannot repay the full current value of customers' crypto deposits.

Trucking, logistics and factoring companies are collectively owed millions of dollars after a California-based freight forwarder filed for bankruptcy liquidation, FreightWaves reported. Boateng Logistics, headquartered in Carlsbad, Calif., filed its petition Friday in the U.S. Bankruptcy Court for the Southern District of California. In its filing, Boateng Logistics listed its assets as up to $50,000 and its liabilities as between $1 million and $10 million. The company stated that it has up to 99 creditors and maintains that no funds will be available for unsecured creditors once it pays administrative fees. The largest unsecured creditor is the U.S. Small Business Administration, which is owed $750,000 for a loan the company received through the COVID-19 Economic Injury Disaster Loan (EIDL) program in 2020. While funds received through the Paycheck Protection Program are forgivable, the disaster relief funds loans must be repaid.

The Trump International Hotel in Washington, D.C., was a favorite Republican meeting spot during the Trump presidency, attracting lobbyists, lawmakers and others with business before the administration. After the Trumps faced criticism that they were skirting government-ethics laws by profiting from the property, they put up for sale the long-term lease rights for the hotel in the former Old Post Office, the Wall Street Journal reported. In 2022, the Trumps sold those rights to Miami-based investor CGI Merchant Group for $375 million — a price that was tens of millions of dollars more than the other offers. CGI rebranded the hotel as a Waldorf Astoria. This month, the new owner defaulted on a $285 million loan related to the property, according to people familiar with the matter. The missed payments on that loan reflect higher interest rates and the above-market price the firm paid the Trumps, industry executives say. In an interview, CGI Chief Executive Raoul Thomas said he is lining up $100 million of new financing for the property. Mavik Capital Management, a real-estate debt and investment fund, is in talks to provide $75 million to cure the default and restructure the troubled balance sheet, while also providing money for a private club and another restaurant at the hotel. But reaching a final deal might not be easy. Hilton, which manages the Washington, D.C., property, has been talking to other firms about new capital and would have to approve any new partner.

As the North Carolina Theatre in Raleigh works to emerge from bankruptcy reorganization, it’s pushing to terminate key contracts, from leases to employment, the Triangle Business Journal reported. The action includes an employment agreement with Eric Woodall, who was named executive artistic director of the theater last September. In a court motion to terminate Woodall’s contract, NCT says that doing so is “a proper use of its business judgment.” The theater is asking a judge to rule that any claims arising from the contract termination be filed in the next 30 days. Last year, Woodall had actively pushed for additional funding for the theater, which is housed downtown at the Martin Marietta Center for the Performing Arts. “We are determined to stay afloat and thriving," he told WRAL in November. But a post-pandemic comeback proved to be a difficult task. Last month, Woodall posted on LinkedIn that he was looking for a new role. The theater's board voted to pursue bankruptcy on Feb. 12. The bankruptcy filing shows just under $205,000 worth of assets and more than $2.1 million in debts.