%1

Celsius Network LLC has agreed to let Core Scientific Inc. shut off more than 37,000 crypto mining rigs that the bankrupt digital-asset lender hasn’t been fully paying for, resolving a months-long conflict, Bloomberg News reported. Core, a Bitcoin miner that hosts rigs for third parties, itself filed for bankruptcy last month and partially blamed non-payment by Celsius for its downfall. Their hosting deal allows Core to pass on some power costs to Celsius, but the company hasn’t been paying those bills since it filed for chapter 11 protection in July, according to lawyers for Core Scientific. The case could serve as legal precedent for other Core Scientific customers disputing the terms of hosting agreements with the company. Over the last year, soaring energy prices due to extreme weather conditions and Russia’s invasion of Ukraine have sharply driven up operating costs for electricity-intensive mining operations. About 41% of Core’s total fleet — or 100,000 servers — were dedicated to hosting its customers as of the company’s Nov. 7 operational update.

Nearly two weeks after he was released by a Manhattan judge on a $250 million bond and ordered to stay with his parents in Palo Alto, Calif., Sam Bankman-Fried, the disgraced cryptocurrency executive, returned to New York and pleaded not guilty yesterday to charges that he engaged in widespread fraud, paving the way for a possible trial, the New York Times reported. Bankman-Fried appeared in Federal District Court in Manhattan, where he faces charges stemming from the implosion of FTX, the cryptocurrency exchange he founded and led. Its collapse resulted in billions of dollars in customer losses. Bankman-Fried could ultimately change his mind and plead guilty to at least some of the charges. But his initial response tees up a potentially titanic court fight. The judge, Lewis A. Kaplan, set a tentative trial date of Oct. 2.

The Securities Commission of the Bahamas (SCB) yesterday rebuffed FTX's claims about the digital assets of its Bahamas unit held by the regulator, saying the debtors of the bankrupt cryptocurrency exchange had "incomplete information," Reuters reported. Last month, the SCB said it had seized more than $3.5 billion in cryptocurrency from the unit, FTX Digital Markets, which it was holding for future repayment to customers and other creditors. FTX disputed SCB's calculations, saying its digital assets seized in November were worth just $296 million and not $3.5 billion. "Such public assertions by the chapter 11 debtors were based on incomplete information," the regulator said in a statement yesterday. There was no immediate response from FTX, which has been at odds with Bahamian officials since filing for bankruptcy protection on Nov. 11. Bahamas officials have sought access to FTX's records to help liquidate FTX Digital Markets, but the company's U.S. bankruptcy team said it did not trust them with the information. FTX's founder and former chief executive, Sam Bankman-Fried, was arrested on fraud charges and is expected to be arraigned today before U.S. District Judge Lewis Kaplan in Manhattan federal court. Read more.

In related news, the committee of FTX customers chosen to represent the interests of all exchange users in its chapter 11 case hired Jefferies and FTI Consulting Inc. as financial advisers, WSJ Pro Bankruptcy reported. Last week, the official committee brought on the law firm Paul Hastings LLP. Made up of nine members, the official committee is the sole customer group that can currently bill its legal and advisory fees to FTX. Representatives from cryptocurrency-sector companies Pulsar Global Ltd., Coincident Capital International Ltd. and Wintermute Asia PTE are among the committee members, according to court documents. A separate group of 15 international customers with $1.9 billion in claims recently hired their own lawyers at Eversheds Sutherland LLP and on Wednesday filed a lawsuit seeking a ruling from the bankruptcy court that their crypto deposits on FTX.com belong to them and that they didn’t sign over rights to their property to the exchange. The question of ownership of customers’ crypto assets has been in dispute in other crypto bankruptcy cases, with some companies in chapter 11, such as Celsius Network LLC, asserting the right to sell or otherwise use their users’ coins in chapter 11.
Read more.

A group of FTX’s international customers asked for a court order shielding their names from the public, spotlighting a privacy issue that has divided bankruptcy courts in other crypto-related cases, WSJ Pro Bankruptcy reported. Unnamed customers of FTX.com, the failed company’s largest exchange platform outside the U.S., said in court papers Wednesday their interest in keeping their identities and contact information secret trumps the public’s interest in an open and transparent bankruptcy process. Public disclosure of customer identities puts them at risk of identity theft and cyber scams, and could diminish whatever value remains in FTX, according to the customer group. “It is difficult to imagine a more compelling case that would warrant withholding and redacting the information of the thousands of FTX.com customers who had their funds stolen and never anticipated that their use of cryptocurrency and FTX.com would become publicly known,” the customers’ filing said. Justice Department lawyers and media organizations including The Wall Street Journal have asked in bankruptcy court for FTX customers’ names to be disclosed in its public filings. The judge overseeing FTX’s chapter 11 case is scheduled to consider next month if the identifying information should be redacted. Bankruptcy courts normally require transparency into the affairs of troubled businesses, including their creditors, in return for the protections of chapter 11. FTX, Celsius Network LLC and other crypto platforms moving through bankruptcy have said their customers should nonetheless stay anonymous.

Lawmakers around the U.S. have tried to grant justice to victims of decades-old incidents of child sexual abuse by giving them extra time to file lawsuits. Now some of the defendants in these cases, including church and youth organizations, are finding a safe haven: America’s bankruptcy courts, Reuters reported. In New York, nearly 11,000 cases flooded state courts, many seeking to hold Catholic dioceses responsible for sexual abuse by clergy, after a 2019 law suspended statutes of limitations that would have otherwise barred many of the lawsuits. In response, four New York dioceses that collectively faced more than 500 sexual-abuse claims filed for bankruptcy. That halted the cases — and blocked those from anyone who might sue later — and forced the plaintiffs to negotiate a one-time settlement for all abuse claims in bankruptcy court. The pattern has taken hold across the United States, a Reuters review of bankruptcies precipitated by mass child sexual-abuse litigation found. Many of the defendants turning to bankruptcy court are nonprofit organizations. In court filings dating back to 2009, the Boy Scouts of America, a New York boys & girls club and 13 separate Catholic institutions each have cited state laws extending abuse victims’ right to sue as factors in their decisions to seek bankruptcy protection.

Cineworld, the British cinema operator in bankruptcy proceedings, said today that it would not sell any of its assets individually, and that it had not held discussions with AMC Entertainment about the sale of any of its theaters, Reuters reported. The British company said it would focus on selling the group as a whole rather than disposing of individual assets, along with its restructuring efforts, and was expecting to start reaching out to potential parties for a sale later this month. Cineworld said today that it had not held discussions with AMC about the sale of any of its cinema assets, in response to media reports, and that talks about a reorganisation of its U.S. operations were ongoing. In October, Cineworld, the world's second-largest cinema chain operator, announced a bankruptcy settlement with its landlords and lenders, clearing the way for the company to borrow funds and make a $1 billion debt repayment.

The owners of the recently reopened Crowne Plaza Hotel in Times Square filed for capter 11 bankruptcy protection Wednesday in an effort to resuscitate the ailing and lawsuit-plagued business, The Real Deal reported. Andrew Penson’s Argent Ventures wants to reorganize the finances of the hotel’s home, 1601 Broadway, having gained control of the 46-story tower in the heart of Times Square by vanquishing office giant SL Green in court and replacing Vornado Realty Trust. Penson had elbowed his way into the marquee property by buying — at a steep discount — the mezzanine debt on which Vornado had defaulted. The debt is $526 million on the 795-room hotel, 196,300 square feet of office space and 17,800 square feet of retail, according to bankruptcy filings. Almost all of that — $519 million — is owed to senior and mezzanine lenders. Some $418 million in senior debt has been delinquent since April 2020, according to bankruptcy filings. The hotel, which occupies floors 15 through 46, closed the previous month when COVID arrived. It reopened last month. While tourism to New York City has rebounded substantially, the pandemic’s effects linger in the hospitality industry, which still employs fewer people than it did in 2019.

Almost five years after filing for chapter 11 bankruptcy, former NASCAR Cup Series car owner Ron Devine has been ordered to pay $31 million after proceedings, Fox News reported. Associated companies and trusts will also have to pay the bank that issued loans, the IRS, employees and others still owed money through approved claims of the bankruptcy, according to FOX Sports. Devine owned BK Racing from 2012 to 2018, which paid Devine-affiliated trusts and companies $6 million and another $11 million in debt that a trustee claims requires reimbursement. A judge ruled that Devine did not comply with discovery procedures of financial disclosures, so he owes the full $31 million. Devine testified that the payments in question often covered short-term loans and that he had done all he could to comply with requests of financial disclosures. "I'm trying as hard as I can ... to keep up with this thing," he said. Devine, also a Burger King franchise owner, filed for chapter 11 bankruptcy just three days before the 2018 Daytona 500. He was stripped of team ownership in favor of a trustee.