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The 4,553 total commercial chapter 11 bankruptcies filed during the first nine months of 2023 represented a 61 percent increase over the 2,837 filed during the same period in 2022, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Small business filings, captured as subchapter V elections within chapter 11, totaled 1,419 in the first nine months of 2023, a 41 percent increase from the 1,009 elections during the same period in 2022. Overall commercial filings registered 18,680 for the first nine months of 2023, representing a 17 percent increase from the commercial filing total of 15,955 during the same period in 2022. Total bankruptcy filings were 332,138 during the first nine months of 2023, also a 17 percent increase from the 284,839 total filings during the same period a year ago. Total individual filings registered a 17 percent increase year-to-date to 313,458 filings up from the 268,884 filings during the first nine months of 2022. The 131,236 individual chapter 13 filings represented a 19 percent increase over the 110,186 filings during the same period in 2022. Individual chapter 7 filings increased 15 percent to 181,719 from the 158,178 filed in the first nine months of 2022.

A federal judge rejected pleas by opponents of the Boy Scouts of America’s bankruptcy reorganization to block distributions from the $2.4 billion settlement fund for sex-abuse victims created in the youth group’s chapter 11 case, WSJ Pro Bankruptcy reported. Insurance companies and a small group of sex-abuse plaintiffs who had opposed the Boy Scouts’ reorganization plan recently renewed their efforts to block it, seizing on the Supreme Court’s decision to examine a similar plan drawn up by closely held drugmaker Purdue Pharma. U.S. District Judge Richard Andrews in Wilmington, Del., said on Tuesday that, unlike Purdue’s bankruptcy plan, which hasn’t been put into motion, the youth group’s reorganization went into effect five months ago and many of the transactions it contemplates have already happened. Judge Andrews said the Boy Scouts and tens of thousands of sex-abuse victims have relied on the court-approved chapter 11 plan. A pause on the reorganization plan would throw into limbo the overwhelming majority of abuse claimants who support it, he said. The Supreme Court is set to examine on an expedited basis a central feature of both the Purdue and Boy Scouts reorganization plans: whether bankruptcy courts can extinguish legal claims against third parties that aren’t in chapter 11 without the consent of all claimants. Purdue’s plan would release its Sackler family owners from opioid-related liabilities in return for up to $6 billion in settlement payments over time from the family members, who have denied wrongdoing. Similarly, the Boys Scouts’ affiliated councils and partner organizations are being shielded from sex-abuse lawsuits under its chapter 11 plan. The youth group’s plan took effect in April after winning approval from a bankruptcy court last year and surviving an appeal before Judge Andrews in March. The plan is now being appealed to the Court of Appeals for the Third Circuit in Philadelphia.

Prison healthcare provider YesCare and its backers reached a $37 million settlement of legal and financial liability it moved into bankruptcy court through an emerging corporate restructuring tactic, WSJ Pro Bankruptcy reported. YesCare, among the nation’s largest providers of healthcare in prisons and jails, agreed to the proposed deal with a committee of creditors whose claims it shifted to chapter 11 through a legal tactic known as the Texas Two-Step. The settlement payment from YesCare and its investors would cover only a fraction of the claims asserted by inmates who filed malpractice lawsuits against the business or vendors it failed to pay. If approved in bankruptcy court, the proposed deal would also resolve the bankruptcy case filed earlier this year by Tehum Care Services, the shell entity used to ferry the company’s debts and liabilities to chapter 11. YesCare put a new spin on the Texas Two-Step by using it earlier this year to address not just tort lawsuits, but ordinary commercial debts to hospitals, physicians and other vendors. YesCare began the chapter 11 process by separating assets from liabilities last year through a corporate reorganization in Texas. The Tehum affiliate was made responsible for the company’s liabilities before it filed for protection in February in the U.S. Bankruptcy Court in Houston.

A New Jersey appeals court on Tuesday threw out a $223.8 million verdict against Johnson & Johnson that a jury had awarded to four plaintiffs who claimed they developed cancer from being exposed to asbestos in the company's talc powder products, Reuters reported. The Superior Court of New Jersey, Appellate Division found that a lower court judge should not have allowed some of the scientific expert testimony the plaintiffs presented to jurors at trial. J&J Worldwide Vice President of Litigation Erik Haas said in a statement that the decision "resoundingly rejects ... the 'junk science' advanced by purported 'experts' paid by the mass tort asbestos bar." The company again said that its talc products are safe and do not contain asbestos. The jury in the case had ordered the company to pay $37.2 million in compensatory damages and $750 million in punitive damages, though that amount was automatically reduced to $186.5 million under state law. In reversing the verdict and ordering a new trial, a three-judge panel of the appeals court found that the trial court failed to fulfill its "gatekeeping role" of assessing whether the plaintiffs' experts based their testimony on sound science. In their opinion, the judges found that three experts had not explained the facts or methods they used to support their opinions that the plaintiffs got cancer from being exposed to asbestos in talc products.

As Sam Bankman-Fried goes on trial for the crypto world’s biggest alleged fraud, liquidity in the digital asset market is still only half of what it was before his FTX trading platform collapsed almost a year ago, Bloomberg News reported. The sudden drop in liquidity was dubbed the “Alameda Gap” in November by blockchain-data firm Kaiko. Alameda Research was the trading arm of Bankman-Fried’s failed digital empire. The lingering effect is largely a result of the huge losses that market makers incurred after the meltdown, researchers at Kaiko wrote in a report yesterday. Many traders and market makers either kept significant funds on the exchange, had devastated crypto projects in their portfolio, or accepted FTT, the exchange’s cryptocurrency, as collateral. The FTT token acted as a trigger for FTX’s collapse, unraveling the multibillion dollar hole in the company’s balance sheet, according to the report. Market makers fulfill an especially valuable role in the liquidity-sensitive crypto space by buying and selling coins. But as they turn more conservative in times of crisis, that results in thinner liquidity where users have greater difficulty buying or selling an asset, which in turn makes the market more volatile.

Celsius Network LLC customers whose assets have been trapped on the failed crypto lender’s platform questioned the firm’s acting chief executive officer about fluctuations in the company’s native token and its plans to partially repay creditors with stock in a new Bitcoin mining business, Bloomberg News reported. Nearly a dozen customers cross-examined Celsius Interim CEO Chris Ferraro, who testified Tuesday in New York bankruptcy court in support of the company’s plan to partially repay creditors and resolve its chapter 11 case. The hearing gave customers a chance to probe Ferraro, who has guided Celsius through bankruptcy, while their assets remain in limbo. Ferraro, who took over as Celsius’ acting CEO following the resignation of Alex Mashinsky, said his primary goal is to distribute roughly $2 billion in Bitcoin and Ethereum to creditors and transfer the reformulated business to a new management team led by Arrington Capital. Customers on Tuesday also questioned Steven Kokinos, who is expected to become the new company’s CEO. The new creditor-owned firm slated to emerge from Celsius’ bankruptcy has a strong chance at succeeding because it will be staked with $450 million in crypto, carry no debt and run a robust Bitcoin mining operation, Ferraro said.

IronNet, a once-promising cybersecurity startup founded by a former NSA director and funded by cyber and defense investors, has shuttered and laid off its remaining staff following its collapse, TechCrunch.com reported. In a regulatory filing published Friday, IronNet’s president and chief financial officer Cameron Pforr said the company had ceased all business activities as it prepares for chapter 7 bankruptcy, effectively liquidating the company’s remaining assets to pay its remaining debts. The Virginia-based IronNet was founded in 2014 by retired four-star general Keith Alexander, soon after he departed as the former director of the National Security Agency during the biggest leak (at the time) of government secrets by former contractor Edward Snowden. IronNet provided corporations and government agencies with technologies aimed at helping to defend against cyber threats, and using large datasets and analytics to automate threat intelligence. Its other products were designed to protect critical infrastructure.

Bridal dressmaker JLM Couture Inc. has filed for bankruptcy in Delaware — hit hard by the disputes with a landlord and a former designer as well as by the pandemic, WWD reported. Already the company — which makes bridal-related dresses under the Allison Webb, Lazaro, and Hayley Paige brands, among others — had cut back its operations significantly, shifting down from a workforce of 70 in 2020 to 21 employees today. Leading the company was Joseph L. Murphy, who founded JLM in 1988 and became chief executive officer and controlling shareholder in the mid-’90s, according to a declaration that was part of the chapter 11 filings. Murphy said that the company was on the “verge of insolvency” when he took the reins, but that he was able to raise new equity and set up new lines of credit and expand the business. In 2012, JLM expanded the luxury portion of the business, adding the Hayley Paige line as well as a West Hollywood flagship. But the pandemic weighed heavily on the bridal business generally as well as on JLM and by 2021 the relationship with the brand’s designer — Hayley Paige Gutman — had broken down into a nasty legal dispute over Gutman’s use of the Hayley Paige name professionally and access to an Instagram account. While a court largely sided with JLM and Gutman ultimately changed her name to Cheval, the battle weighed on the company. “The debtor’s operations were primarily affected by the active and contentious litigation with one of its former designers,” Murphy said. “The breach of contract by this designer has substantially hurt the company’s sales, and the legacy costs associated with the designer’s operation could not be reduced quickly enough to offset this damage."

Failed crypto lender Celsius Network kicked-off a bankruptcy trial over its plan to restart as a user-owned Bitcoin miner, telling a judge it wants to repay customers whose funds have been frozen on the platform since June 2022 a portion of what they’re owed by year’s end, Bloomberg News reported. Celsius lawyer Christopher S. Koenig said yesterday during a New York bankruptcy hearing that the new company slated to emerge from chapter 11 will be seeded with $450 million in capital and financial backing from a group of companies picked to manage the mining business, a consortium named Fahrenheit LLC that’s led by investment firm Arrington Capital. “Fahrenheit believes in the business,” Koenig said. “They are putting their money where their mouth is.” Judge Martin Glenn is considering whether to approve Celsius’s plan, which is being challenged by some customers whose funds have been locked on the platform. An affiliate of Lantern Ventures that says its owed about $82 million also opposes the plan, arguing Celsius’s advisers have overvalued the new business. The new venture must also be cleared by securities regulators. But if Celsius’s plan is approved, it would mark the first time a failed crypto platform would be reborn in chapter 11 after a string of insolvencies rocked the industry last year. The business could liquidate if the new company fails, an outcome that likely would result in Celsius customers getting repaid less, according to court documents.