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Some hotel owners that rode out the coronavirus pandemic are finding the recent travel rebound might not be enough to persuade lenders to extend new credit when their debts mature in the coming months or years, WSJ Pro Bankruptcy reported. Leisure travel has rebounded since the second half of last year, but the recovery has been much weaker for facilities with large meeting rooms that rely on business trips and conferences, partly because many meetings are now held remotely. Even as business-focused hotels can attract some vacationers, the numbers aren’t high enough to make up for the slow recovery in business travelers. Persistently low occupancy rates for business-focused hotels have driven down their property values. As a result, lenders are asking hotel owners to put up more capital before agreeing to refinance their loans — but cash-strapped borrowers saddled with lots of debt might not be able to meet the requirements. As many as 10 hotel owners in the U.S. filed for bankruptcy this January, compared with just two in January 2022, according to New Generation Research Inc., a data provider on corporate bankruptcies. Recent bankruptcies included two large hotels in Manhattan, a Holiday Inn in the Financial District and a Crowne Plaza in Times Square. Still, a bigger surge in hotel bankruptcy filings is unlikely because of factors including high costs associated with the process, said David Neff, a lawyer specializing in hotel bankruptcy at Perkins Coie LLP. “If things go south, many of them will just hand the keys back [to the lenders],” Mr. Neff said.

U.S. regulators won’t be allowed to punish executives or advisers involved in the bankruptcy of Voyager Digital Ltd. for creating a new cryptocurrency that would help repay customers of the failed digital asset lender, a judge said yesterday, Bloomberg News reported. The comments by Bankruptcy Judge Michael Wiles reflect a growing conflict between efforts to rehabilitate troubled crypto companies and an increased regulatory push by the Securities and Exchange Commission. SEC lawyers have opposed a legal protection typically given to executives and restructuring advisers of a bankrupt company. The protection blocks lawsuits against those professionals for implementing a court-approved bankruptcy plan. The SEC’s position would “leave a sword hanging over the heads of anybody who’s going to do this transaction,” Judge Wiles said. “How can a bankruptcy case or any court proceeding function with that kind of suggestion?” Judge Wiles’s remarks came during the third day of debate over a plan by Voyager to issue a new cryptocoin and sell itself to Binance.US, the US arm of the world’s biggest crypto exchange. SEC lawyers argue that the proposals likely will violate federal law because, in their view, the new coin is an unregistered security and Binance.US is operating an unregulated securities exchange. SEC lawyer Therese A. Scheuer argued that the legal protections are so broad that Voyager employees and lawyers would have permission to violate securities laws. After several minutes of debate, Voyager lawyers agreed to change the plan to narrow the legal releases.

Alameda Research, the trading arm of the bankrupt digital-asset exchange FTX, has filed a lawsuit against Grayscale Investments alleging “exorbitant management fees” and accusing Grayscale of “improperly preventing redemptions” from the Bitcoin and Ether trusts it manages, Bloomberg News reported. “We will continue to use every tool we can to maximize recoveries for FTX customers and creditors,” John J. Ray III, chief executive officer and chief restructuring officer of the FTX Debtors, said in the statement. “Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban.” A spokesperson for Grayscale said the lawsuit was “misguided”: “Grayscale has been transparent in our efforts to obtain regulatory approval to convert GBTC into an ETF — an outcome that is undoubtedly the best long-term product structure for Grayscale’s investors. We remain confident in the common sense, compelling legal arguments that will be argued tomorrow before the D.C. Court of Appeals.” For two years, the $14.8 billion Grayscale Bitcoin Trust (ticker GBTC) has been trading at a steep discount to the cryptocurrency it holds. The group of FTX debtors said they are seeking injunctive relief to unlock $9 billion or more in value for shareholders of the two Grayscale trusts.

A top executive at Babel Finance is betting a new stablecoin can resolve the troubled crypto lender’s financial crisis, which came to a head last year when it froze withdrawals, Bloomberg News reported. Co-founder Yang Zhou, now sole director of Babel, has filed a moratorium of protection to the high court of Singapore on Monday, asking creditors not to take further action against the company for up to six months as it seeks their approval on a restructuring plan. The plan proposes repaying debts owed to creditors with revenue generated by a new decentralized finance project minting so-called “Babel Recovery Coins,” according to a document viewed by Bloomberg News ahead of the filing. Babel hit trouble last year during the crypto market’s meltdown after the company’s proprietary trading desk ran up an order-book deficit of $766 million using customer funds. The filing alleges co-founder Wang Li — who was removed from the company’s leadership in December — was responsible for the losses, contending that “the risky trading activities appear to have been instructed solely by Wang.”

A long road lies ahead to repair confidence in crypto after unprecedented bankruptcies and hacks, including the major challenge of giving investors a way of insuring against such events, Bloomberg News reported. Stock brokerage accounts often come with some cover against outcomes like bankruptcy but digital-asset platforms provide few if any shields, a reality underlined by the November collapse of Sam Bankman-Fried’s FTX exchange. Investors seeking such policies face a tough task. Traditional insurers are wary and crypto-native solutions in decentralized finance — or DeFi — account for a fraction of the $1.1 trillion digital-asset sector. For instance, funds locked in DeFi insurance protocols amount to about $300 million, compared with more than $80 billion in DeFi services overall, according to data from DeFiLlama. “Last year highlighted the importance of insurance but it seems a very difficult problem for DeFi to solve,” said Riyad Carey, a research analyst at crypto data provider Kaiko. “To properly protect a protocol or position is challenging.” The largest DeFi insurance provider is Nexus Mutual, a member-based service accounting for about 70% of funds locked in crypto-native insurance protocols. Nexus Mutual has paid out roughly $5 million in claims from the bankruptcies of FTX and crypto lender BlockFi. It expects to pay another $2 million but those figures are dwarfed by the billions of dollars eviscerated by FTX alone.

New cryptocoins that Voyager Digital Ltd. plans to issue to pay creditors in bankruptcy are actually securities that should be regulated, a lawyer with the U.S. Securities and Exchange Commission said in court on Friday, Bloomberg News reported. The comments by William Uptegrove, reflecting the views of the SEC staff, may complicate the bankrupt crypto firm’s proposal to repay creditors by issuing the digital tokens, part of a plan that also includes selling itself Binance.US, the U.S. arm of the world’s biggest crypto exchange. Uptegrove was arguing against the proposal and responding to skeptical questions about the SEC staff’s views from the judge overseeing Voyager’s bankruptcy case. The commission itself has not taken a position, the lawyer said. Uptegrove also said SEC staff have concluded that Binance.US is operating an unregulated securities exchange. Earlier Friday, a Voyager restructuring adviser testified that Binance.US is facing an investigation by the SEC. The SEC lawyer’s comments were met with a call for clarity from Binance.US. “It is regrettable that an SEC staff member would make allegations, that Binance.US and platforms like ours are operating an unregistered exchange, without specifying the assets listed on our exchange that the SEC considers to be securities,” a spokesperson for the trading services provider said. Bankruptcy Judge Michael Wiles has held two days of hearings about the Binance.US sale and the related payout plan.

Binance exploded onto the crypto scene in 2017 and grew into the world’s biggest digital-currency exchange. It quickly ran into a problem. It largely operated from hubs in China and then Japan, yet a fifth of its customers were in the U.S., where authorities signaled a coming crackdown on unregulated offshore crypto players. Any lawsuit from U.S. regulators would be like “nuclear fall out” for Binance’s business and its officers, a Binance executive warned colleagues in a 2019 private chat, the Wall Street Journal reported. Worried about the threat of prosecution, Binance set out on a plan to neutralize U.S. authorities, according to messages and documents from 2018 to 2020 reviewed by the Wall Street Journal as well as interviews with former employees. The strategy centered on building a bare-bones American platform, Binance.US, that would license Binance’s technology and brand but otherwise appear to be wholly independent of Binance.com. It would shield from U.S. regulators’ scrutiny the larger Binance.com exchange, which would exclude U.S. users. But Binance and Binance.US have been much more intertwined than the companies have disclosed, mixing staff and finances and sharing an affiliated entity that bought and sold cryptocurrencies, according to the interviews and the messages and documents reviewed by the Journal. Binance developers in China maintained the software code supporting Binance.US users’ digital wallets, potentially giving Binance access to U.S. customer data.