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Rite Aid yesterday sued the U.S. Department of Justice, seeking to block a lawsuit alleging that the bankrupt pharmacy chain ignored red flags and illegally filled hundreds of thousands of prescriptions for addictive opioid medication, Reuters reported. The DOJ, which sued Rite Aid in March, agreed only to a "brief pause" of its lawsuit after Rite Aid went bankrupt last month, a position that threatens to undermine the company's restructuring efforts, Rite Aid said in a complaint filed yesterday in New Jersey bankruptcy court. Rite Aid asked U.S. Bankruptcy Judge Michael Kaplan to rule that the DOJ lawsuit cannot proceed while Rite Aid is bankrupt, which would put the government on equal footing with other opioid plaintiffs whose lawsuits were automatically stopped by the company's bankruptcy filing. The DOJ has argued that U.S. bankruptcy law does not stop it from exercising its "police powers" through its lawsuit. Rite Aid would not concede that point, and said Kaplan, who is overseeing the company's chapter 11 proceedings, should rule on that dispute rather than the judge overseeing the DOJ's lawsuit in Cleveland federal court.

A federal judge on Tuesday tentatively approved a portion of the newest plan to restructure $10 billion of debt owed by Puerto Rico’s power company amid heated negotiations between creditors and the U.S. territory’s government, the Associated Press reported. The overall debt restructuring plan has been amended four times this year by a federal control board that oversees Puerto Rico’s finances. A confirmation hearing is set for March 2024 as various bondholders continue to oppose the plan. The board did not have immediate comment on the judge’s decision regarding the plan’s disclosure statement, which requires modifications before bondholders vote on it. The decision was issued after an hours-long hearing that drew protesters to the courthouse who are opposed to electric bill increases outlined in the plan. The bankruptcy of Puerto Rico’s Electric Power Authority has dragged on for years amid intense debate on how to restructure its debt — the largest of any government agency in the U.S. territory. Numerous restructuring attempts have failed, with several creditors seeking to recuperate more money than what the plan currently offers. The plan was amended for a third time in August and a fourth time over the weekend. The newest proposal seeks to cut the power company’s debt by nearly 80%, to some $2.5 billion. If approved, it is expected to lead to increases in residential and commercial power bills that already are among the highest of any U.S. jurisdiction.

Right-wing conspiracy theorist Alex Jones has asked a court for permission to sell a cache of firearms, jewelry, cars, boats, and a cryogenic chamber to help pay for costs of his personal bankruptcy, Bloomberg Law reported. Jones is also looking to conduct part of the sales on his Infowars radio and video talk shows to increase the value of the items, according to a filing Tuesday in the U.S. Bankruptcy Court for the Southern District of Texas. The talk show host filed for bankruptcy protection last year after he was ordered to pay more than $1 billion in judgments related to his lies that the 2012 Sandy Hook Elementary School shooting was a hoax. Promoting the sales on his shows could increase the items’ value “because supporters’ demand for items attributable to Debtor will increase value — much like memorabilia sales,” Jones said. Jones has previously disclosed that he has almost 50 firearms that include shotguns, rifles, pistols, and revolvers. He also previously said he’s holding a stash of guns for people who participated in the Jan. 6 attack at the U.S. Capitol. Other items Jones aims to sell include household goods, including furnishings, golf carts, and gym equipment, according to court papers. Jones has previously estimated his firearms are worth at least $72,000. Whatever money is left over at the end of his bankruptcy would be used for payments as part of a chapter 11 plan, Jones said. The request to sell some personal items comes amid criticisms by Sandy Hook victim families of Jones’ “opulent” spending habits during his bankruptcy. The sale request comes after Jones lost a key bankruptcy court ruling last month. Judge Christopher M. Lopez found that despite Jones’ bankruptcy, about $1.1 billion of the $1.4 billion in debt he owes from Connecticut and Texas defamation judgments can’t be discharged under the bankruptcy code. Judge Lopez said the debt can’t be tossed because the Texas and Connecticut state courts made findings that Jones’ conduct was intentional and malicious. Jones said that he intends to appeal.

As Celsius Network LLC nears the end of its bankruptcy, it may find the US Securities and Exchange Commission eyeing a key business element of its restructuring plan similar to those the regulator has targeted at other companies, Bloomberg Law reported. Celsius recently secured court approval to emerge from Chapter 11 as Fahrenheit LLC, a public crypto mining company that would include a crypto “staking” division. But before it can implement the plan, it needs a green light from the SEC as well. Without the regulator’s blessing, Celsius says it may be forced to liquidate, which would hurt creditors’ recoveries. In crypto staking, holders of cryptocurrency give their assets to a company to hold, which in turn pays them some reward on the holding. The SEC has previously raised issues with staking-as-a-service businesses at Coinbase and Kraken. Celsius says the Fahrenheit entity intends to operate a self-staking business. Though the staking issue could prove problematic for the SEC down the road, multiple lawyers said they expected the agency to allow Celsius to emerge from bankruptcy. The full nature of Fahrenheit’s staking operation may emerge over time, Yuliya Guseva, a professor at Rutgers Law School, said. Celsius’ successful restructuring would be a major development in the crypto landscape, which cascaded into chaos late last year with a series of bankruptcies and criminal proceedings. BlockFi Inc. and Voyager Digital Holdings both liquidated, while FTX remains in Chapter 11 as its co-founder Sam Bankman-Fried faces life in prison for fraud. The SEC’s pending decision on Celsius comes as it seeks to get a hold on a young and complicated industry. The agency has said some staking operations function as unregistered securities exchanges. It also has a contentious past with Celsius itself, having accused its founder of fraud and settling related allegations against the company.

Drugmaker Mallinckrodt said yesterday that it has emerged from bankruptcy and reduced its total funded debt by about $1.9 billion, Reuters reported. Mallinckrodt, which won court approval for its bankruptcy plan last month, said it is moving ahead with ample liquidity to execute its strategic priorities. Pursuant to the bankruptcy plan, ownership of the company will now be handed over to its lenders and all its equity shares would cease to exist. Mallinckrodt, which makes branded and generic drugs, first filed for bankruptcy in 2020 to address its high debt load, litigation over its allegedly deceptive marketing of highly addictive generic opioids and drug pricing disputes. Despite the previous bankruptcy settlement that resolved those litigation threats and cut $1.5 billion in debt, the company quickly found itself in financial trouble again due to declining sales for its key branded drugs, including Acthar Gel. Mallinckrodt said on Tuesday it will continue operating its Specialty Generics under the oversight of an independent monitor and operate in compliance with other existing Acthar-related settlement conditions.

A Texas bankruptcy judge on Tuesday appointed a new mediator for Tehum Care Services, a bankrupt affiliate of prison health provider YesCare, to revisit its $37 million settlement facilitated in August by former judge David R. Jones, who resigned from the bench last month following an ethics controversy, WSJ Pro Bankruptcy reported. Judge Jones’s resignation followed an official complaint filed by the chief judge of the Fifth Circuit Court of Appeals, stating probable cause existed to believe that Jones had committed misconduct surrounding his undisclosed romantic relationship with bankruptcy lawyer Elizabeth Freeman, whose then-employer Jackson Walker frequently appeared before Judge Jones. Freeman participated in the negotiation representing YesCare when Judge Jones — who served as a court-appointed mediator for the case — mediated the settlement, according to court papers. The Justice Department’s bankruptcy watchdog in its court filings earlier this month expressed concerns over the “propriety of the mediation that serves as the basis for the global settlement.” A few days after Jones’s resignation, Judge Christopher Lopez with the U.S. Bankruptcy Court in Houston, who has been overseeing the YesCare affiliate bankruptcy proceeding, declined to approve the framework of the company’s bankruptcy exit plan on an expedited basis and instructed the parties to “rethink” the proposal, which was built upon the global settlement. Judge Lopez at that time said he wasn’t questioning the integrity of the mediation, but the proposal didn’t provide enough information for him to approve it. Lawyers of the YesCare affiliate and other stakeholders recently petitioned Judge Lopez to appoint Christopher Sontchi, a retired Delaware bankruptcy judge, as a new mediator to look at the case “clean and fresh.”

At age 88, World War II veteran Robert Kroll moved to Friendship Village of Schaumburg, a retirement community where he would be taken care of until death, and so his children would get their inheritance after he died. He paid an entrance fee of $124,000, plus about $2,400 a month, to guarantee that he would always get housing and medical care even if he ran out of money, with the understanding that his family would get 90% of his remaining entrance fee after expenses upon his passing. Kroll died in 2019, but his family still hasn’t gotten their money back. In June, Friendship Village, citing problems caused by the COVID pandemic, filed for chapter 11 bankruptcy, in which officials say operations will continue as usual, but with some debts unpaid, the Chicago Tribune reported. A company has bid $115 million to buy the facility, but the bankruptcy proposal includes only $2 million to pay back families of former residents — about 10% of what is owed. The Kroll's dispute is over Friendship Village’s policy of only paying back entry fees upon the resale of a resident’s unit. The facility — the largest not-for-profit retirement community in Illinois, with 815 units — didn’t resell Kroll’s one-bedroom unit, so hadn’t paid his family back. Now that Friendship Village has entered bankruptcy, families of former residents are unlikely to ever receive full repayment, which Barnes and other families see as a betrayal of what they were promised. Friendship Village officials say that the contracts were clear about the arrangement, which had worked well for decades since the retirement community opened in 1977. “We never expected this to happen,” CEO Mike Flynn said.

Collapsed cryptocurrency exchange FTX, the biggest casualty of the “crypto winter” last year, just hit the first anniversary of its bankruptcy filing. Crypto lender Celsius Network, which collapsed in the summer of 2022, was cleared to exit bankruptcy last week. Their failures, along with those of crypto industry players like Voyager Digital and BlockFi, have tested a bankruptcy system with little experience with a decentralized and volatile sector with difficult to trace and value assets, WSJ Pro Bankruptcy reported. Many factors have led crypto bankruptcies like FTX’s to drag on as so-called free fall cases, or when companies file for bankruptcy protection without restructuring agreements with creditors in place. “The sheer fact that we are talking about this case a year later is different from what we’ve been seeing in the bankruptcy landscape,” said Timothy Graulich, head of international restructuring at Davis Polk & Wardwell. The law firm represents several large customers in FTX’s bankruptcy. Businesses often seek chapter 11 protection with prepackaged restructuring agreements and hope to reorganize quickly, so “It is really only free fall cases that last this long,” said Graulich.

A real estate investor facing scrutiny from lenders and investors is now the subject of a government inquiry into an offer to buy shares in WeWork Inc., Bloomberg News reported. The U.S. Securities and Exchange Commission has sent inquiries to Jonathan Larmore, the founder of Arciterra Cos., about a Nov. 3 press release in which an entity called Cole Capital Funds said it was seeking to buy shares in the coworking company at a significant premium, according to a person familiar with the matter who asked not to be named citing private information. The inquiry includes Larmore’s trading history in WeWork stock and options, the person said. A company filing links Larmore to Cole Capital Funds, which was registered in October with the Arizona Corporation Commission. The real estate investor was already facing an SEC inquiry about Arciterra, which had owned as many as 80 properties including strip malls. In an interview, Larmore said that he planned to make all of the required filings related to his purchase of WeWork shares and that he couldn’t comment further on the matter until he had done so. He declined to comment on the SEC inquiry, and said that he was working through lawsuits filed by private parties and was confident in their outcome. “Many of the lawsuits have been resolved and we will continue to resolve the rest,” he said.