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FTX founder Sam Bankman-Fried previewed a potential defense Thursday when he told a federal judge that he relied on the blessing of lawyers to make business decisions such as deleting communications and making loans to himself, actions that prosecutors said allowed him to commit the crimes that led to the implosion of his crypto exchange, the Wall Street Journal reported. Bankman-Fried, on trial for fraud, money laundering and other offenses, had been expected to testify in front of a Manhattan federal jury on Thursday afternoon. Instead, in what amounted to an unusual practice session after the jury was dismissed for the day, U.S. District Judge Lewis Kaplan required the FTX founder to walk through several subjects that were in dispute so the judge could rule on what Bankman-Fried could say to jurors. Wearing an oversize gray suit and purple tie, Bankman-Fried began steadily and confidently, walking through business decisions that he said were guided by legal advice. But the rehearsal quickly turned when the prosecution came out swinging. Under cross examination, Bankman-Fried testified that he couldn’t recall specific conversations with the lawyers who he earlier said had overseen bank accounts, loans and communication policies. He at times was evasive and stumbled while saying he didn’t remember key details of the alleged conduct in question. Assistant U.S. Attorney Danielle Sassoon pressed Bankman-Fried on whether he had proof of the involvement of certain lawyers. “Do you have any paper records of these consultations?” she asked. Bankman-Fried said he had requested such records but didn’t have them. Under other questioning, he said he had little knowledge of some inner workings of the company he created.

FTX founder Sam Bankman-Fried has decided to testify in his own defense, a legal gamble that sets up a dramatic conclusion to his criminal trial in New York City, YahooFinance.com reported. The 31-year-old, who pleaded not guilty to seven counts of fraud and money laundering, has sat silently at his Manhattan trial for the last three weeks while prosecutors outlined their version of what happened to $8 billion in missing FTX customer deposits. He could take the stand as early as today, when the trial is scheduled to resume. His attorneys reportedly told U.S. District Judge Lewis Kaplan on Wednesday that Bankman-Fried would testify. Once Bankman-Fried takes the witness stand he opens himself up to significant risk because he can be cross-examined "extensively," said Northwestern University criminal law professor Juliet Sorensen. The government, which is expected to rest its case as soon as Thursday, alleges that FTX customers couldn't withdraw their money during the exchange's final days in November 2022 because Bankman-Fried had allowed his crypto trading fund, Alameda Research, to spend it. That claim was backed up by testimony from friends and former classmates Bankman-Fried hired for top jobs at FTX and Alameda. Some of those executives pleaded guilty to multiple felonies and agreed to testify against him.
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In related news, Prices for FTX Group claims shot higher after an adviser to the failed crypto conglomerate said it is considering proposals from three bidders for its currently shuttered exchange, Bloomberg News reported. Cherokee Acquisition, which brokers bankruptcy claims, is now quoting larger FTX claims between 50 and 53 cents on the dollar, according to founder Vladimir Jelisavcic. Prices were in the low-to-mid 40 cents range last week. FTX claim prices have been rising relatively steadily in the year since the crypto empire collapsed into bankruptcy and advisers began recovering billions of dollars in assets. Major hedge funds have also been buying and selling the claims, which range from the rights to FTX accounts to the damages owed as a result of an abandoned contract. On Tuesday, FTX investment banker Kevin M. Cofsky said in court that the company is engaging with “multiple parties every day.” Options under consideration include selling the entire exchange, bringing in a partner to help restart the exchange or rebooting it by itself.
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Shareholders of Western Global Airlines (WGA) have requested the U.S. Bankruptcy Court in Delaware to dismiss or reduce to zero, claims arising from a class action suit claiming prohibited financial transactions relating to the company's employee stock ownership plan (ESOP), CH-Aviation.com reported. The U.S. Department of Labor (DOL) is also investigating the circumstances of the ESOP transactions. The Neff family shareholders are seeking a court order subordinating the ESOP claims to those of general unsecured creditors to be reduced to zero or disallowed entirely. On October 17, WGA and its debtor subsidiaries in chapter 11 protection filed their objection to the class action, arguing the ESOP claims be disallowed for purposes of voting on the airline's restructuring plan. A court hearing has been scheduled for November 13 before Judge Karen B. Owens, but the court may grant the order without further notice or hearing if no responses to the shareholders' objection are filed.

Mutual funds that purchased $280 million of municipal debt to finance a 320-acre youth-sports complex near Phoenix would be virtually wiped out under a preliminary deal struck in the bankruptcy case, Bloomberg News reported. Miami-based Burke Operating Partners agreed in principal to purchase Legacy Park for $25.5 million, with most of the proceeds going to building contractors for unpaid work. Bondholders would receive $2.2 million in cash and 11% of preferred equity in a new company that would own the facility according to an agreement outlined in a bankruptcy court hearing late Tuesday. It would need to be approved in the bankruptcy process to take effect. Legacy Park has enough cash to remain open while the parties work to close the deal by the end of the November, said Keith Bierman, the complex’s chief restructuring officer. Legacy Cares filed for bankruptcy in May, saying construction setbacks, labor shortages and supply-chain delays amid the pandemic led to the park’s delayed opening and resulted in lost revenue. Mutual funds including the Vanguard Group and AllianceBernstein Holdings LP hold the $280 million of Legacy Cares bonds issued by an Arizona agency. The bonds last traded on Aug. 23 for 10 cents on the dollar. In addition to labor shortages, Legacy Park was also plagued by poor execution of restaurant and concession operations. In all, Legacy Park brought in just $27.7 million in 2022, far short of its nearly $100 million projection. It was losing more than $1 million a month on operations alone.

The Buffalo (N.Y.) Diocese is offering up to $100 million to settle child sex abuse claims in its federal bankruptcy case, the Buffalo News reported. As much as half of that would come from parishes, schools and other Catholic entities, while the diocese would also need to sell its Catholic Center on Main Street, the former Christ the King Seminary campus in the Town of Aurora and other properties. Those details were revealed in court papers filed late Monday in which diocese lawyers sought a preliminary injunction to keep all sex abuse lawsuits against parishes and schools grounded while mediated negotiations in the diocese bankruptcy case continue. Court papers said that the $100 million does not include insurance funds, while suggesting that insurance companies additionally could contribute “perhaps even hundreds of millions of dollars” to a settlement. Ilan D. Scharf, lead attorney for the unsecured creditors' committee that represents about 850 abuse claimants in the Buffalo Diocese bankruptcy case, declined to comment Tuesday on the numbers unveiled by the diocese lawyers. But some plaintiffs' lawyers on Tuesday accused the diocese of trying to "silence survivors" in its motion to halt the lawsuits. The Buffalo Diocese settlement offer appears to be very similar to the pending chapter 11 reorganization plan the Syracuse Diocese announced in July. Syracuse Bishop Douglas J. Lucia at the time said that the diocese had reached a deal with its creditors committee in which it would pay $50 million to a settlement trust, while its parishes would contribute $45 million, and $5 million would come from other Catholic entities. The full plan could be filed in court as early as next month.

BlockFi emerged from bankruptcy on Tuesday, nearly 11 months after it was swept away by the turbulence in the cryptocurrency industry following the collapse of FTX, Reuters reported. In its bankruptcy filing in November last year, BlockFi had cited its loans to FTX's sister firm Alameda as one of the reasons for the crisis it was facing. On Tuesday, the company said that it would officially begin enacting the actions detailed in its bankruptcy plan, like recovering assets it believes are owed to it by FTX, Three Arrows Capital and others. Any attempts to recover assets from those companies, however, will likely be contentious as both are themselves waddling through their respective bankruptcy processes. Separately, FTX co-founder Sam Bankman-Fried is undergoing a trial for fraud. BlockFi said that withdrawals are currently available to nearly all of its Wallet customers. Those with BlockFi Interest Accounts and Retail Loans will be repaid over the coming months, but the amounts they receive could vary based on the outcome of the FTX bankruptcy, BlockFi said.

Crypto lender Genesis Global said yesterday that a New York civil fraud lawsuit could lead to a bankruptcy liquidation that does not resolve its claims against parent company Digital Currency Group (DCG), Reuters reported. New York Attorney General Letitia James sued cryptocurrency firms Genesis Global, its parent company DCG, and former partner Gemini Trust Co on Oct. 19, alleging that they defrauded investors of more than $1 billion through a jointly run investment program called Gemini Earn. The lawsuit seeks to ban all three cryptocurrency firms from the financial investment industry in New York, which would imperil their efforts to reach a longer-term settlement. Rather than await the outcome of the lawsuit, Genesis intends to propose a "no deal" bankruptcy plan to distribute available crypto assets to customers and set up a process to preserve litigation claims against DCG and others, Genesis attorney Sean O'Neal said at a court hearing in New York. "It's not an easy decision, but it is an obvious decision," he told U.S. Bankruptcy Judge Sean Lane. "That was forced upon us by the New York Attorney General's complaint." Genesis believes creditors would be better off under a bankruptcy plan that includes a DCG settlement, but the company is running out of time to finalize a plan and send it to creditors for a vote, O'Neal said. DCG will continue to engage in settlement talks in hopes of reaching a better outcome for Genesis creditors, but it is "fully prepared to defend and win" if forced to litigate Genesis's claims, a DCG spokesperson said by email.

FTX Trading Ltd. is considering proposals from three bidders to restart trading on what had been one of the world’s biggest crypto exchanges before the company sank into bankruptcy amid fraud allegations, Bloomberg News reported. The company will make a decision about how to proceed by mid-December, the company’s investment banker, Kevin M. Cofsky of Perella Weinberg Partners, said Tuesday during a court hearing in Wilmington, Delaware. FTX is negotiating details of potentially binding offers with investors, Cofsky said. Options include selling the entire exchange, including a valuable list of more than 9 million customers, or bringing in a partner to help restart the exchange, Cofsky told US Bankruptcy Judge John Dorsey. FTX is also mulling a reboot of the trading platform on its own, he said. “We are engaging with multiple parties every day,” Cofsky said, without disclosing the names of the bidders. Since filing for bankruptcy last year, FTX has been trying to raise money to repay creditors. FTX’s administrators have so far recovered about $7 billion in assets, including $3.4 billion of crypto, according to court documents.

Federal judges in the Southern District of Texas have agreed to let a different court hear any lawsuits against U.S. Bankruptcy Judge David Jones — including the case that revealed his previously undisclosed relationship with a bankruptcy lawyer and prompted his resignation, Reuters reported. Chief U.S. District Judge Randy Crane in an order on Friday said that his counterpart in the Western District of Texas, Chief U.S. District Judge Alia Moses, had consented to the referral of all cases against Judge Jones to her. Moses, in turn, may either hear those cases herself or assign them to another judge on her court. While Crane did not give an explanation for his order, courts often transfer cases to other jurisdictions when there is a potential conflict. Just two lawsuits are pending against Judge Jones, both by self-represented litigants. One of them, by a former shareholder of energy company McDermott International, helped prompt Judge Jones' announced resignation on Oct. 15. McDermott had gone through a chapter 11 restructuring approved by the Houston-based bankruptcy judge in 2020. The Oct. 4 lawsuit, by former shareholder Michael Van Deelen, accused Jones of failing to disclose his relationship with a partner at Jackson Walker, a local law firm that handled many bankruptcy cases in Jones' courthouse, including that of McDermott.