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The lead negotiators for Johnson & Johnson's proposed $8.9 billion settlement of thousands of talc lawsuits faced intense questioning in U.S. bankruptcy court on Wednesday about how much support the company has for the deal, Reuters reported. During a multi-day court hearing in Trenton, New Jersey, attorneys for plaintiffs alleging that J&J's baby powder and other talc products sometimes contained asbestos and caused ovarian cancer and mesothelioma drilled down on J&J's public statements that it has "secured commitments from over 60,000 current claimants" for the settlement, and that the "majority" of talc claimants support it. The deal has divided lawyers representing cancer victims, many of whom claim that J&J has created the illusion of widespread support for a settlement that would deny plaintiffs just compensation. Johnson & Johnson is attempting to use the second bankruptcy of its subsidiary LTL Management to resolve all current and future claims stemming from its talc products. LTL's first attempt to do that was dismissed in April after a U.S. appeals court ruled that it was not in sufficient financial distress to be eligible for bankruptcy protection. LTL quickly filed for bankruptcy again, arguing that its second effort has won more support from plaintiffs.

FTX is moving ahead with efforts to revive its flagship international cryptocurrency exchange, even while its reputation continues to take a hit as new managers shed light on how they say nearly $9 billion in customer funds were stolen before the company’s collapse last year, WSJ Pro Bankruptcy reported. The company “has begun the process of soliciting interested parties to the reboot of the FTX.com exchange,” said Chief Executive John J. Ray III, who took over in November when it filed for bankruptcy. The failed crypto company has been holding early talks with investors about backing a potential restart of the FTX.com exchange through structures including a joint venture, people familiar with the discussions said. FTX would likely rebrand as part of any restart, these people said. The talks include possible compensation for certain existing customers, possibly by offering them stakes in any reorganized entity, the people said. Blockchain technology company Figure has indicated its interest in helping back a restart of FTX, people familiar with the matter said. Figure was part of an investment group that bid for the rights to restart Celsius Network, another bankrupt crypto business, but lost out to a consortium backed by Fortress Investment Group.
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In related news, bankrupt cryptocurrency exchange FTX sued one of its former top lawyers, accusing him of aiding fraud by company founder Sam Bankman-Fried and silencing whistleblowers who reported wrongdoing at the company, Reuters reported. The complaint, filed on Tuesday in U.S. Bankruptcy Court in Delaware, describes Daniel Friedberg, a former chief compliance officer at FTX and general counsel of its related crypto hedge fund Alameda Research, as a "fixer" for Bankman-Fried and other FTX executives who enabled the "wholesale raiding" of customer funds. Friedberg “whitewashed” complaints from employees raising concerns about the activities of FTX and Alameda by settling claims for “inflated” amounts and in some cases hiring law firms that represented whistleblowers to perform legal work for FTX, the company said. The settlement amounts are redacted in the complaint.
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A beleaguered trucking business that received a $700 million pandemic-era loan from the federal government may be forced to file for bankruptcy protection this summer amid a dispute with its union, a development that could leave American taxpayers stuck with a failed company, the New York Times reported. The financial woes at the business, Yellow, which previously went by the name YRC Worldwide, have been building for years. The company lost more than $100 million in 2019 and has more than $1.5 billion in outstanding debt, including the government loan. In 2022, YRC, which ships meal kits, protective equipment and other supplies to military bases, agreed to pay $6.85 million to settle a federal lawsuit that accused it of defrauding the Defense Department. In 2020, the Trump administration, which had ties to the company and its executives, agreed to give the firm a pandemic relief loan in exchange for the federal government assuming a 30 percent equity stake in the company. Three years later, Yellow is on the verge of going bankrupt. Since receiving the loan, the company has changed its name, restructured its business and seen its stock price plummet. As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million that is owed to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year. On Tuesday, Yellow sued the International Brotherhood of Teamsters for blocking the company’s restructuring plan and accused the union of causing more than $137 million in damages. The company said that it was taking “immediate steps to try to save itself” and that the union was trying to “cause Yellow’s economic ruin.”

A federal judge on Tuesday rejected Sam Bankman-Fried's bid to throw out most of the U.S. government's criminal case accusing the FTX cryptocurrency exchange founder of orchestrating a multibillion-dollar fraud, Reuters reported. The decision by U.S. District Judge Lewis Kaplan in Manhattan paves the way for an Oct. 2 trial of Bankman-Fried, a 31-year-old former billionaire. Prosecutors accused Bankman-Fried of stealing billions of dollars in FTX customer funds to plug losses at his Alameda Research hedge fund. They also accused Bankman-Fried of misleading investors and lenders, and contributing illegally to U.S. political campaigns in the names of colleagues. Bankman-Fried has pleaded not guilty and denied stealing funds, while acknowledging that FTX had inadequate risk management.

Liquidators at bankrupt cryptocurrency hedge fund Three Arrows Capital are seeking to recover $1.3 billion from the co-founders, a person familiar with the matter told Reuters on Tuesday, an amount that reflects losses they allegedly racked up before the firm collapsed last year, Reuters reported. The liquidators discussed the allegations against Three Arrows co-founders Su Zhu and Kyle Davies at a Tuesday meeting with the hedge fund's creditors, the person said. Zhu and Davies are accused of causing Three Arrows to take on significant leverage between May and June 2022 after the hedge fund suffered big losses on Luna tokens and other investments, the person said. The firm was already insolvent, liquidators contend, and they are now taking action against Zhu and Davies in a British Virgin Islands court to recover those losses for the creditors, the person added.

Johnson & Johnson is facing a key test of its plan to use the U.S. bankruptcy system to end more than 60,000 claims that a talc-based baby powder it sold for years causes cancer, Bloomberg News reported. A group of cancer victims is asking a federal judge in New Jersey to throw out, for the second time in less than two years, the insolvency case of LTL Management, a unit that J&J created to settle lawsuits over talc-based baby powder for $8.9 billion. Tuesday marks the start of a trial in which Bankruptcy Judge Michael Kaplan will again decide whether J&J is wrongly using bankruptcy laws to force a settlement. The bankruptcy court strategy has split lawyers suing J&J into two camps: those who back the settlement and are ready to drop their lawsuits, and holdouts who want to take their claims to juries around the country instead. Last year Kaplan sided with J&J against a unified band of the top plaintiff’s law firms in the U.S., but was overruled by a federal appeals court in Philadelphia, which ordered the judge to dismiss LTL Management’s first chapter 11 bankruptcy petition. J&J responded by tweaking its legal strategy and raising its settlement offer to $8.9 billion in order to attract support from cancer victims. LTL returned to bankruptcy in April and Kaplan agreed to hold a hearing to decide if the new case fixed the legal flaws that doomed the first effort.

U.S. electric truck manufacturer Lordstown Motors filed for bankruptcy protection on Tuesday and put itself up for sale after failing to resolve a dispute over a promised investment from Taiwan's Foxconn, Reuters reported. Shares of Lordstown tumbled 35.6% in pre-market trading. The automaker, named after the Ohio town where it is based, filed for chapter 11 protection in Delaware and simultaneously took legal action against Foxconn. In a complaint filed in bankruptcy court, Lordstown accused the electronics company of fraudulent conduct and a series of broken promises in failing to abide by an agreement to invest up to $170 million in the electric-vehicle manufacturer. Foxconn previously invested about $52.7 million in Lordstown as part of the agreement, and currently holds an almost 8.4% stake in the EV maker. Lordstown contends Foxconn is balking at purchasing additional shares of its stock as promised and misled the EV maker about collaborating on vehicle development plans.

Sam Bankman-Fried’s crypto conglomerate made “false statements” to banks about accounts commingling customer funds and fired an employee who raised concerns about the practice, the new management of bankrupt FTX alleged in a report Monday, Bloomberg News reported. FTX Group employees lied to banks about using trading firm Alameda Research’s accounts for FTX.com customer transactions after some banks questioned Alameda’s wire activity in 2020 and began rejecting transfers, according to the report. In one instance, a bank representative — noticing references to FTX — asked whether an Alameda account that received customer deposits would be used to settle trades for FTX. An Alameda employee was then directed by a senior FTX executive to lie and say customers “occasionally confuse FTX and Alameda,” but all incoming and outgoing wires are used to settle Alameda trades, the report said. The tangled relationship between FTX and Alameda was at the heart of the empire’s unraveling. Caroline Ellison, the former CEO of Alameda Research, estimated in March 2022 in private notes that FTX.com had a cash deficit alone of over $10 billion, the report said.
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In related news, one creditor of bankrupted cryptocurrency exchange FTX decided not to sit and wait to get their money back. Instead, the unidentified creditor of a FTX bankruptcy claim worth $31,307 converted the claim to a token on the Ethereum blockchain and sold it to a buyer who on June 23 used the token to borrow $7,500 worth of stablecoin USD, according to nonfungible token lending platform Arcade, Bloomberg News reported. A number of high-profile bankruptcies in the digital-asset space, not just the FTX insolvency, has left millions of investors frustrated over how much money they’ll be able to recover. Solutions to temporarily reduce the pressures have been popular in the crypto industry. By putting the claim on the blockchain, the ownership of the claim is represented by an NFT. Activity history on NFT marketplace OpenSea shows that the NFT was originally sold at a value worth about $12,163.33 in a version of Ether token, at the time. The “tokenization” process was facilitated by Found, a platform that allows users to trade tokenized bankruptcy claims. The lender of the loan ultimately decides the value of the NFT as a collateral, Gabe Frank, founder of Arcade told Bloomberg News. The loan is now set to be repaid in five days, according to Arcade, and in the event of a payment default, the lender can take the NFT, therefore, the ownership of the bankruptcy claim.
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