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Eight months after a pair of brothers in rural North Carolina pleaded guilty to charges tied to a multi-million dollar Ponzi scheme, they’ve both been sentenced by a federal judge, the Triangle Business Journal reported. Joseph Floyd IV last week was handed a three-and-a-half-year sentence in federal prison for conspiracy to sell and deliver unregistered securities. Floyd’s brother and co-conspirator, William Floyd, was previously sentenced to just over a year in prison for his role in the scheme. Both Floyds were ordered to pay more than $10.6 million in restitution. They could have faced up to five years in prison for orchestrating a situation described as a “mess” by one of their victims. The Floyds owned and operated Floyd’s Insurance Agency in Whiteville, North Carolina, offering what they described as a “loan program.” More than 150 people and businesses invested funds in exchange for interest-bearing promissory notes, thinking they were conservative investments with high interest rates – to the tune of 6 to 10 percent. When profit checks came, they considered it proof that the business was legitimate. But in actuality, by 2012, the company had borrowed more than $20 million from investors and did not have the means to service the debt through legitimate means. And the notes were never registered with the U.S. Securities Exchange Commission, a regulatory requirement meant to prevent misrepresentations and forms of fraud. To forestall bankruptcy, the Floyds ran the loan program as a Ponzi scheme, where principal and profits were paid to existing investors with funds raised from more recent investors — all without disclosing the situation to their investors. They also controlled a Chapel Hill company called Monthly Payment Plan Inc., that would provide loans to enable consumers to finance a portion of their annual insurance premiums. The promissory notes were entered into by the insurance company and individual investors, but Floyd’s Insurance Agency did not use the borrowed funds to finance insurance premiums. Instead, it loaned the funds to Monthly Payment Plan on an “as-needed” basis for this purpose. Monthly Payment Plan was to repay the principal balance with interest.

Texas law firm Jackson Walker said in court filings that it was an unbiased advocate for the businesses it was guiding through bankruptcy in recent years. It never mentioned that one of its bankruptcy lawyers at the time was in a romantic relationship with the judge overseeing at least two dozen of those chapter 11 cases, WSJ Pro Bankruptcy reported. Jackson Walker didn’t disclose that one of its law partners, Elizabeth Freeman, was living with bankruptcy judge David R. Jones, and didn’t correct its paperwork in the bankruptcy cases after learning of the couple’s relationship. The possible conflict of interest could have kept Jackson Walker off chapter 11 cases it filed in Houston’s bankruptcy court — and that earned the firm nearly $10 million in fees, The Wall Street Journal found through a review of court records. Judge Jones resigned from the bench earlier this month amid an official misconduct probe by the federal appeals court that appointed him after he confirmed his romantic relationship with Freeman to the Journal. Earlier this week, the Justice Department’s Office of the U.S. Trustee, which oversees the nation’s bankruptcy courts, said it has started to review Jackson Walker’s fee requests in light of Jones’s resignation. Jackson Walker told the Journal earlier this month that the firm in March 2021 first learned of an allegation that Freeman was in a relationship with Jones. Jackson Walker declined to comment on when it verified that the relationship was real and on the fee requests. It said in a court filing Thursday regarding a pending fee request that it “is working to evaluate and address the issues that have come to light over the past three weeks.”

Small business bankruptcies are on the rise. Subchapter V filings — which most small businesses these days are using to reorganize a floundering business — have outpaced filings from 2022, CNBC.com reported. There were 1,659 subchapter V filings through October, compared with 1,553 for the full year earlier, according to the American Bankruptcy Institute. Businesses may have several options when it comes to filing for bankruptcy, and the right course to charter will depend on the business, the scope of its troubles, the owner’s intentions for continuing on in business and other factors. Subchapter V tends to work best for businesses with debts that are mostly straightforward. Using this option, eligible businesses can spread debt repayment over three to five years, a relatively lenient timeline. But there are restrictions. For instance, businesses can’t exceed certain aggregate debt levels, currently $7.5 million. Subchapter V is quicker and less expensive than a traditional chapter 11, but there are still costs involved, said Megan Murray, a founding shareholder of Underwood Murray, a law firm that focuses on commercial bankruptcy. It’s not like you throw your business into bankruptcy and avoid legal and administrative fees. “You can’t just walk away,” she said. Donald Swanson, a shareholder with the law firm Koley Jessen, said he’s helped hundreds of businesses work through financial challenges, but only put dozens in bankruptcy because there can be better ways to help owners recover. “Once you file for bankruptcy, you are kind of playing your last card,” Swanson said.

FTX founder Sam Bankman-Fried told a jury Friday that he didn’t commit fraud and didn’t take customer funds, beginning his defense against criminal charges that he stole billions from his cryptocurrency exchange and spent the money on investments, political donations, and real estate, YahooFinance.com reported. He did, however, say that he "made a number of small mistakes and a number of big mistakes." His biggest mistake, he said, was not having a chief risk officer. "A lot of people got hurt," he said. His highly anticipated testimony began Friday morning with questions from his attorney Mark Cohen that attempted to address the heart of the government’s case against his client. Prosecutors have alleged that Bankman-Fried deliberately stole funds that belonged to FTX customers and secretly lent the assets to his crypto trading firm Alameda Research. They produced several key witnesses over the last month who corroborated those claims.

Crypto platform Gemini Trust Co. is suing bankrupt crypto lender Genesis Global Holdco LLC in an attempt to determine who rightfully owns a slug of shares in the Grayscale Bitcoin Trust now worth nearly $1.6 billion, Bloomberg News reported. In a bankruptcy-court lawsuit filed Friday, Gemini asked a federal judge to find that Genesis has no right to more than 60 million GBTC shares promised as collateral to users of Gemini’s Earn product. The shares at issue — most of which are still held by Genesis or its affiliates — should not be used to repay other Genesis creditors, the company argues. The lawsuit comes just days after Genesis said it was dropping a proposed settlement with its parent company, Digital Currency Group, in favor of suing the firm. The settlement was a cornerstone of a debt-repayment plan that could have allowed Genesis creditors to recover between 70 and 90 cents on the dollar, according to Genesis. Gemini disputed those estimates. Through its new lawsuit, Gemini says it intends to clarify the value of its claims against Genesis and eventually tap the GBTC shares to repay its users.

Scilex Holding, a subsidiary of bankrupt drugmaker Sorrento Therapeutics, said it filed an emergency motion in bankruptcy court related to its allegations that possible naked short selling of Scilex has taken place, MarketWatch.com reported. The company is seeking "production of books and records from certain brokers, dealers, banks and other nominees." Scilex, which focuses on non-opioid pain management drugs, said earlier this month that it retained Warshaw Burstein and Christian Attar Law to investigate potential naked short selling and market manipulation.

The National Hockey League’s Arizona Coyotes said that bankrupt sports broadcaster Diamond Sports Group owes the team nearly $18 million following the termination of its telecast deal, Bloomberg News reported. Diamond has said that it needed to end the deal because its regional sports channel, Bally Sports Arizona, was losing money and telecast agreements with the state’s major professional teams were only getting more expensive. The team said in a bankruptcy court filing on Thursday that it was owed money. Terminating the Coyotes deal effectively ended Diamond’s broadcasting of Arizona’s major professional sports teams. Diamond ended its broadcast deal with Major League Baseball’s Arizona Diamondbacks earlier this year and stopped broadcasting the National Basketball Association’s Phoenix Suns after declining to match a competing offer. Earlier this month, the Coyotes announced a multi year agreement with Scripps Sports to broadcast its games locally on free TV channels. Diamond has said that rights fees it owed to the Coyotes “total tens of millions of dollars annually and increase yearly.” The hockey team’s claim for repayment is an unsecured debt which, in general, is repaid in chapter 11 for pennies on the dollar. Diamond filed chapter 11 in March and has been attempting to formulate a plan to get out of bankruptcy as the NBA and NHL regular seasons get underway.

The Miami-based parent company of charter airline iAero Airways and aviation maintenance firm iAeroTech, which combined employ 860 workers, is slated for bankruptcy auction, the South Florida Business Journal reported. iAeroAirways lists its headquarters as being located in Miami with its operational headquarters at Piedmond Triad International Airport in Greensboro, where it is believed to employ fewer than 100. The company was founded in 1997 as Swift Air, which iAero Group acquired and rebranded as iAero Airways in 2019. It operates a fleet of 42 aircraft. U.S. Bankruptcy Judge Robert A. Mark approved the auction and bidding procedures for AeroTech Miami on Oct. 17. The bid deadline is Dec. 1, the auction takes place Dec. 6 and a court hearing to confirm the auction result is scheduled for Dec. 13 in Miami. The minimum purchase price is $216.3 million, which represents the value of AeroTech’s secured loans with Synovus and BXC Bridge, an affiliate of Blackstone. Under the judge’s order, BXC Bridge is allowed to submit a credit bid, but it must include enough cash to repay the Synovus loans.