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FTX is unloading cryptoassets and hoarding cash as bankruptcy advisers look for a way to repay customers whose accounts have been frozen since the platform collapsed in 2022, Bloomberg News reported. The fraud-tainted crypto firm’s four largest affiliates — including FTX Trading Ltd. and Alameda Research LLC — together nearly doubled the group’s cash pile to $4.4 billion at the end of 2023 from about $2.3 billion in late October, according to chapter 11 monthly operating reports. The company’s total cash is likely higher including the rest of its affiliates. The company said in a court filing last month that FTX raised $1.8 billion through Dec. 8 by selling off some of the firm’s digital assets. FTX also said that it’s conducting Bitcoin derivative trades to hedge exposure to the coin and generate additional yield on its digital holdings — and is exploring options to potentially restart the exchange. An uptick in FTX’s cash stockpile has coincided with the rising value of customer accounts. Since FTX unraveled in November 2022, bankruptcy advisers have been tracking down assets and struck deals intended to benefit customers who had smaller accounts on the platform. The company has also brought major lawsuits against former associates of Sam Bankman-Fried and crypto firms like Bybit Fintech Ltd. that withdrew funds from FTX before it filed chapter 11. Customer claims worth more than $1 million traded at around 73 cents on the dollar as of Friday, up from around 38 cents on the dollar in October, according to investment firm and bankruptcy claims broker Cherokee Acquisition. Actual trading prices depend on the value of a specific claim and other factors, Cherokee Acquisition said. Read more.

In related news, Rashit Makhat was paid close to $500 million months before FTX collapsed when he sold most of his stake in a bitcoin-mining enterprise, Genesis Digital Assets, to Bankman-Fried’s hedge fund, the Wall Street Journal reported. Makhat’s lawyers in London say he remains in possession of the proceeds. The peak-of-market deal made Makhat one of the biggest individual beneficiaries of what U.S. prosecutors in Bankman-Fried’s recent trial called a “spending spree” of money Bankman-Fried stole from FTX customers. In pressing their case, prosecutors used details such as bank-account data and testimony from insiders to show how much of the $8 billion of customer money went into startups and other investments. Bankman-Fried was convicted and is in custody awaiting sentencing. The early 2022 Genesis Digital deal was among the largest highlighted by prosecutors, who displayed to jurors a diagram showing how more than $1 billion of funds went from customers to an account owned by Bankman-Fried’s hedge fund and then into Genesis Digital shares. Prosecutors didn’t mention Makhat, who hasn’t been accused of wrongdoing. Prosecutors also singled out Bankman-Fried-led deals including Bahamas property purchases and $1.2 billion that went toward buying out the rival crypto exchange Binance, which had been an FTX shareholder. Read more. (Subscription required.)

3M said that participation in its $6 billion settlement of allegations that its earplugs caused hearing loss among veterans is on pace to exceed the 98% threshold required by the agreement, the Wall Street Journal reported. Last year, 3M agreed to pay $6 billion, including an option to pay up to $1 billion in stock or cash, to settle the litigation. The manufacturer said Monday it had elected to pay the $1 billion in cash. The company said that its settlement has garnered support from more than 250,000 eligible claimants, who have agreed to release their claims as part of their participation in the settlement.

A Texas-based trucking company has filed for bankruptcy liquidation four days before a wrongful death civil trial filed by the family of one of its former drivers who drowned in 2016 was slated to start in El Paso County, Texas, Freight Waves reported. J.J. & Sons Logistics, doing business as JJ Transport, of Clint, Texas, filed its petition Monday in the U.S. Bankruptcy Court for the Western District of Texas. In its Chapter 7 petition, JJ Transport listed its assets as up to $500,000 and liabilities as between $100 million and $500 million. The shuttered company states that it has up to 49 creditors and maintains that funds will be available for unsecured creditors once it pays administrative fees. JJ Transport once had 19 drivers and 18 power units prior to filing for bankruptcy. In its bare-bones petition, the company listed Fleetone Factoring LLC of Antioch, Tennessee; Auxillior Capital Partners of Plymouth Meeting, Pennsylvania; and Wells Fargo Bank of Des Moines, Iowa, as creditors, although no amounts were given. Its trucks had been inspected 27 times and two had been placed out of service in a 24-month period, resulting in a 7.4% out-of-service rate. This is lower than the industry’s national average of around 22.3%, according to the Federal Motor Carrier Safety Administration’s SAFER website. JJ Transport’s drivers had been inspected 53 times over the same 24-month period and one driver was placed out of service, resulting in a 1.9% out-of-service rate. This is lower than the national average of around 6.7%, according to FMCSA data. In the past two years, the company’s trucks had been involved in five crashes, including two injuries and three towaways.

A federal judge moved to limit the cost and length of a new outside investigation of FTX Trading, the fraud-tainted crypto firm, saying its insolvency case should not be disrupted by another multimillion-dollar probe, Bloomberg News reported. Bankruptcy Judge John Dorsey sided with lawyers for FTX and its creditors, who argued that the new investigation ordered by an appellate court should be short and limited in scope. Earlier this month, a federal appeals court in Philadelphia ordered the appointment of an examiner for the chapter 11 case, but left the details of any investigation up to Judge Dorsey. The Office of the U.S. Trustee, the federal watchdog that monitors corporate bankruptcies, had argued that the cost, length and scope of the new investigation should be left open until after the appointment of an examiner. Judge Dorsey said that was a recipe for runaway costs that won’t turn up anything new. “Left to an open process, that could involve tens of millions of dollars,” Judge Dorsey said during a court hearing in Wilmington, Delaware. In the coming weeks, attorneys for the company, its creditors and the U.S. Trustee should work together on a formal proposal to appoint an examiner, Judge Dorsey said.

WeWork hasn’t paid certain landlords January rent as part of its negotiation strategy, lawyers representing the creditor committee in bankruptcy said in a court filing on Tuesday, WSJ Pro Bankruptcy reported. The co-working company is withholding January rent payments of about $33 million “in an effort to strong-arm negotiations with certain landlords,” while receiving fees from its members that occupy the space, according to the bankruptcy court filing. The lawyers said in the filing that while they understand WeWork’s need to rationalize its lease portfolio as part of financial restructuring, the bankruptcy code clearly states that while in bankruptcy, rent payments for unrejected leases must be paid. In fact, WeWork’s budget recently approved by the court “expressly provided for the payment of January rent,” the lawyers said. The company in November filed for chapter 11 protection with the U.S. Bankruptcy Court in New Jersey. A WeWork spokesman said that the company’s temporary actions of nonpayment “are intended to expedite conversations to reach resolutions that are in the best interests of our entire ecosystem.” “We remain committed to finding mutually beneficial solutions that are better aligned with today’s market conditions, and that will enable us to successfully move forward in our restructuring process,” the spokesman said. Landlords that weren’t paid January rent include City Office REIT, which owns and operates office properties mostly in Sunbelt cities such as Dallas, Phoenix and Tampa, according to the court filings and the company’s website.

Sandy Hook conspiracy theorist Alex Jones could exit chapter 11 bankruptcy by late March or early April, his lawyer said on Wednesday after a judge decided families whom he owes $1.5 billion for lying about the 2012 school shooting can vote on competing plans to resolve their claims, Reuters reported. Bankruptcy Judge Christopher Lopez in Houston allowed Jones to solicit votes on a proposal that would pay at least $55 million to the relatives of 20 students and six staff members killed in the 2012 mass shooting at Sandy Hook Elementary School in Newtown, Conn. Jones, who hosts a radio show, claimed for years that the massacre was a hoax, staged with actors as part of a government plot to seize Americans’ guns. He has since acknowledged the shooting occurred, but the families, who said Jones cashed in for years off his lies, sued him for defamation. Courts in Connecticut and Texas have ruled that Jones intentionally defamed them and have ordered Jones to pay $1.5 billion in damages. Judge Lopez on Wednesday also allowed the family members, whose defamation judgments make them the main creditors in Jones' bankruptcy, to solicit votes on their own plan, which would liquidate Jones' assets and pursue litigation against his associates. The families previously estimated that they would receive at least $85 million from Jones under their plan. Judge Lopez said at a court hearing that both proposals contained enough information for creditors to make an informed vote. Lopez set a Feb. 12 deadline for votes.

Johnson & Johnson’s agreement to settle litigation with multiple states over its talcum-based baby powder is putting the company on a new path to addressing mounting lawsuits against its former flagship product, according to a WSJ Pro Bankruptcy commentary. After two failed attempts to address them in bankruptcy through its subsidiary, the healthcare-products company has pivoted toward a new strategy to tackle mass lawsuits against its talc-based baby powder, focusing on aligning various litigating groups for settlements. With Tuesday’s proposal to pay roughly $700 million to more than 40 states over alleged false marketing of the talc powder, J&J has potentially snatched victory with one group of claimants. Now, it can focus on settling with its most significant group of claimants — ovarian and mesothelioma cancer patients that have filed more than 50,000 cases alleging harm from the asbestos content in the baby powder. J&J’s ability to settle these cases would be crucial for successfully addressing all talc-related liabilities either in or out of court. Settling with each group would allow injury claimants to receive distribution more quickly than trying each case in federal courts. Reaching settlements with various groups would also be helpful in securing bankruptcy court approval for its restructuring plan, if J&J decides to pursue another chapter 11 filing.

Senate Judiciary Committee Chair Dick Durbin (D-Ill.) and fellow Senate Judiciary Committee colleagues Sens. Sheldon Whitehouse (D-R.I.) and Josh Hawley (R-Mo.) submitted an amicus brief to the Supreme Court in Bestwall LLC v. Official Committee of Asbestos Claimants, supporting hundreds of thousands of victims of the company’s asbestos-linked products, according to a Senate Judiciary Committee press release. To avoid facing the legal claims of victims in court, Georgia-Pacific “moved” to Texas for less than five hours, offloaded its asbestos-related liabilities onto a shell company called Bestwall, put Bestwall into bankruptcy, and then claimed that Bestwall’s bankruptcy protected the entire Georgia-Pacific enterprise from accountability, according to the press release. The bipartisan trio of Senators urge the Court to overturn the Fourth Circuit’s decision to approve the stay of asbestos litigation against Georgia-Pacific, writing, “The bankruptcy system was not designed to provide solvent non-debtors with the option to simply decline to be held liable for alleged wrongdoing, but that is precisely what the Fourth Circuit’s decision countenances. That was not what Congress intended, and it is not a result that this Court should permit.” Read the press release.

Click here to read the full amicus brief.

Johnson & Johnson has tentatively agreed to pay about $700 million to settle an investigation brought by more than 40 states into the marketing of its talcum-based baby powder, a J&J executive said, the Wall Street Journal reported. The agreement in principle with attorney general offices in most U.S. states is an “important step” for the company, based in New Brunswick, N.J., as it tries to “reasonably put the matter behind us,” J&J Chief Financial Officer Joseph Wolk said yesterday. Johnson & Johnson has said in securities filings 42 states and Washington, D.C., had launched an investigation into its marketing of talc-based products. New Mexico and Mississippi have filed lawsuits against the company alleging violations of consumer-protection laws. The proposed settlement with states would only address a small portion of the litigation over the safety and marketing of J&J’s talcum powders. It doesn’t resolve the personal-injury lawsuits filed by more than 52,000 plaintiffs in various U.S. courts against J&J, alleging that use of the powders, primarily Johnson’s Baby Powder, caused cancer. J&J likely will have to spend billions more dollars to resolve the broader litigation. The company last year proposed paying at least $8.9 billion to resolve the personal-injury lawsuits in a bankruptcy plan filed by a subsidiary, but a bankruptcy judge rejected the plan. J&J is pursuing the consensual resolution of the personal-injury claims through another bankruptcy plan, and analysts have estimated the ultimate settlement cost could range from $10 billion to $15 billion.