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A bankruptcy judge declined to place cryptocurrency platform Cred Inc. under the control of an outside trustee but ordered an examination of how and why the company failed, WSJ Pro bankruptcy reported. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., appointed an examiner to look into Cred’s management, including co-founder and former PayPal Holdings Inc. executive Daniel Schatt, who was removed as chief executive earlier this month. Cred filed for bankruptcy protection after a bitcoin heist, a fallout with a former executive and a failed cryptocurrency hedging strategy drained the company’s coffers. In an oral ruling on Friday, Judge Dorsey said investors had raised “serious concerns” about how Cred was run that should be investigated thoroughly. But he wasn’t persuaded to take the more serious step of installing a chapter 11 trustee to wrest control of Cred, saying that independent leadership now in place has a viable path to administer the bankruptcy case and recover as much as possible for creditors.

Town Sports International Holdings, the operator of New York Sports Clubs, had its bankruptcy plan approved after settling objections from two states over its billing of members while its gyms were closed during the COVID-19 pandemic, Bloomberg News reported. Bankruptcy Judge Christopher Sontchi approved the company’s chapter 11 plan on Friday in a court filing. His decision was delayed earlier this week by attorneys general from Massachusetts and the District of Columbia, who objected that club members had been unfairly charged dues when the gyms were shut. Town Sports operated Washington Sports Clubs, Boston Sports Clubs as well as the Lucille Roberts and Total Woman chains. A group of lenders that includes Tacit Capital agreed to exchange about $80 million in Town Sports debt for control of the gym chain. As for the dispute over dues, the order said Town Sports “will reasonably cooperate with the offices of the Massachusetts and Washington D.C. Attorneys General to resolve consumer complaints.” Gym chains have been hit hard by the COVID-19 outbreak amid on-again, off-again shutdowns ordered by governments, and the reluctance of members to come because of fears they’ll be infected. Among those that have filed for bankruptcy are 24 Hour Fitness Worldwide, Gold’s Gym International and, earlier this week, In-Shape Health Clubs. The Washington attorney general’s office claimed NYSC failed to abide by the promises it made to gym members while its facilities were closed and estimated the district is entitled to civil penalties and fees over $5 million. Massachusetts said it received over 2,000 complaints from consumers about billing and cancellation practices. Lawyers for the company and the states said at a hearing Thursday that they were close to settling the matter. The judge’s order establishes a process for gym members to email the company at TSIClaims@hcg.com to resolve billing issues.

Two members of the wealthy Sackler family who own OxyContin-maker Purdue Pharma LP offered apologies yesterday for the role the prescription painkiller has played in the deadly U.S. opioid epidemic, but sought to deflect personal responsibility in response to withering criticism from lawmakers, Reuters reported. Testifying remotely during a hearing before the U.S. House of Representatives Oversight Committee, David and Kathe Sackler, both of whom previously served on Purdue’s board, insisted they were assured by management that the company was meeting regulatory and legal requirements as the opioid crisis unfolded. The two, among several Sackler family members with ownership interests in Purdue, agreed to testify only after the committee’s chairwoman, Democratic Representative Carolyn Maloney, threatened subpoenas. Under a settlement with the Justice Department, Purdue pleaded guilty in November to criminal charges for misconduct with its opioids and agreed to more than $8 billion in penalties that will mostly go unpaid. Sackler family members agreed to pay $225 million to settle civil claims they disputed. Neither they, nor other individuals, were criminally charged.

The former operator of New York Sports Clubs and Lucille Roberts is nearing approval of its chapter 11 plan of liquidation despite complaints from several state attorneys about alleged mistreatment of gym members, WSJ Pro Bankruptcy reported. Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., said during a hearing yesterday that he wanted to confirm the liquidation plan of Town Sports International LLC in a way that preserves due process rights for the various attorneys general to pursue litigation over alleged consumer violations and misconduct. Under the proposed plan, Town Sports won’t be in business after selling nearly all of its assets last month in a deal valued at about $85 million to a group of lenders and an affiliate of investment banking firm Lepercq de Neuflize & Co. “We are a shell entity with limited proceeds to address administrative claims,” Mark McKane, a lawyer representing Town Sports, said during the hearing, held by phone and video. The judge directed Town Sports and representatives of the attorneys general of Washington, D.C., and Massachusetts to work together to agree on language to be included in the proposed confirmation order before he would give his official approval of the liquidation plan. If that cannot be done, the confirmation hearing would continue today. “This will be the last continuance,” Judge Sontchi said about the plan confirmation hearing that began on Monday. The delay arises from customers and multiple attorneys general claiming that Town Sports improperly billed membership fees to customers despite pandemic-related closures and charged dues to customers who submitted cancellation requests when their main gyms remained closed.

Mallinckrodt PLC shareholders are pressing for a seat at the bankruptcy bargaining table, where the future of the drugmaker will be determined, WSJ Pro Bankruptcy reported. Targeted in most of the opioid litigation that has driven other drugmakers to bankruptcy and hit with damages over pricing of a non-opioid product, Mallinckrodt filed for chapter 11 protection in October with a partial deal on a way out. In broad strokes, the drugmaker wants to swap out debt for equity, and settle with the states, local governments, Native American tribes and others claiming damages for Mallinckrodt’s alleged wrongful marketing of painkillers. Company shareholders, left behind under Mallinckrodt’s proposed bankruptcy scenario, are asking the court to appoint an official committee to speak for them in the chapter 11 negotiations. Most companies that file for chapter 11 bankruptcy protection sacrifice shareholders to pay creditors. Mallinckrodt, still profitable, could be an exception, shareholders said in court papers. Stephen Welch, chief transformation officer for Mallinckrodt, said that the debt-for-equity swap proposal was the best the company could do as it is confronted with billions of dollars in potential damages.

Children’s arcade and pizza chain Chuck E. Cheese failed to persuade a bankruptcy judge to delay or cut rent obligations due to COVID-19-related restrictions on the business, WSJ Pro Bankruptcy reported. The ruling yesterday from Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston sounds a warning note for retailers and restaurants trying to survive a pandemic-driven drop in revenue, while comforting commercial landlords trying to do the same. The question of rent cuts and delays for businesses hurt by COVID-19 has come up in other bankruptcy cases, including that of Ruby Tuesday Inc. which like Chuck E. Cheese resorted to chapter 11 protection as fear of infection and government regulations kept customers away. Judge Isgur said that U.S. bankruptcy laws limit how much help he can extend to Chuck E. Cheese when it comes to the rent obligations owed on six restaurants in North Carolina, Washington and California. According to the ruling, varying degrees of health restrictions constricted the business, which is built around giving children a place to play as part of family dining. However, the Bankruptcy Code only allows the company to delay rent payments for 60 days, and nothing in state law or the terms of the leases changes that, according to the ruling. Leases are governed by their own provisions and by the laws of the states where the restaurant is located.

Two Sackler family members who previously served on OxyContin maker Purdue Pharma LP’s board have agreed under pressure to testify this week before a U.S. House of Representatives panel examining the nationwide opioid epidemic, avoiding subpoenas threatened by the committee’s chairwoman, Reuters reported. David and Kathe Sackler reached an agreement in recent days with the House Oversight Committee to appear at a hearing set for Thursday, according to a memo yesterday from Democratic Chairwoman Carolyn Maloney to members of the panel. The two are among the Sackler family members who own Purdue. Purdue Chief Executive Craig Landau is also slated to testify at the hearing, the memo said. Landau was not at any point threatened with a subpoena. The opioid epidemic has claimed the lives of roughly 450,000 people in the United States since 1999 due to overdoses from prescription painkillers and illegal substances such as heroin and fentanyl, constituting an enduring public health crisis. Purdue reaped more than $30 billion from opioid sales over the years that enriched Sackler family members, and it funneled illegal kickbacks to doctors and pharmacies, investigations have found. Purdue in November pleaded guilty to criminal charges over its handling of OxyContin, which included defrauding the U.S. Drug Enforcement Administration and paying illegal kickbacks to doctors and a healthcare records vendor, all to help keep opioid prescriptions flowing. The plea deal was part of a broader settlement allowing the company to effectively sidestep paying billions of dollars in penalties. Sackler family members agreed to pay $225 million to resolve Justice Department civil claims that they disputed. They were not criminally charged. The Justice Department contends that the settlement, which foregoes most of a $2 billion forfeiture on the condition Purdue receives court approval for its bankruptcy plan, allows more money to flow to U.S. communities suffering from the opioid epidemic.

Purdue Pharma LP creditors pressing for confidential documents have provided “no evidence” that members of the billionaire Sackler family committed crimes or fraud while managing the opioid maker, lawyers for the family argue in court papers, Bloomberg News reported. States suing Purdue say that the privileged documents could help show that billions of dollars transferred out of the firm in recent years should belong to creditors. The family has denied allegations of wrongdoing and is fighting to keep the documents confidential. The ongoing battle took a turn in October when Purdue agreed to plead guilty to three felonies related to its handling of OxyContin. Members of the Sackler family that own and previously helped manage the company agreed to a separate $225 million civil settlement, without admitting wrongdoing. In papers filed alongside the civil settlement, the U.S. Department of Justice alleges that despite knowing in 2012 that the legitimate market for opioids had contracted, members of the Sackler family “requested that Purdue executives recapture lost sales and increase Purdue’s share of the opioid market,” resulting in the approval of an “aggressive marketing program” that led to the over-prescribing of the drugs. Creditors cited that deal and Purdue’s plea agreement as evidence of wrongdoing by the Sacklers, but lawyers for the family members point to their continued denial of any misconduct — neither deal included an admission of wrongdoing from the family members. The settlements will provide “substantial funding to communities in need, rather than to years of legal proceedings,” members of the family said in an October statement.