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The Justice Department is objecting to a Texas bankruptcy judge’s recommendation that his court maintain control of a case challenging fees a former fellow judge approved to a law firm while he was involved in an undisclosed romantic relationship with a lawyer there, WSJ Pro Bankruptcy reported. The U.S. Trustee, a division of the DOJ that scrutinizes the nation’s bankruptcies, is instead pushing for a federal district court to take over the legal proceeding. Former bankruptcy judge David R. Jones resigned last year after a circuit court of appeals filed a complaint stating it found probable cause of misconduct. Southern District of Texas chief bankruptcy judge Eduardo Rodriguez in December recommended his court handle the proceeding, in which the trustee is challenging roughly $13 million of fees former bankruptcy judge David R. Jones approved for law firm Jackson Walker across 26 bankruptcy cases. Jones resigned last year after the Fifth Circuit Court of Appeals started an investigation and filed a complaint stating it found probable cause of misconduct surrounding Jones’ relationship with Elizabeth Freeman. She had been a Jackson Walker partner while he approved those fees, and had herself billed hours in 17 of the cases. The trustee argued in an objection filed on Thursday that “alleged years-long, intentional, and repeated ethical failures,” by Jones, Freeman, and Jackson Walker “have raised widespread and legitimate concerns about the fairness and impartiality of proceedings in the Bankruptcy Court for the Southern District of Texas.”

Embattled crypto lending platform Celsius has confirmed it has started recalling and rebalancing its crypto assets, including Ether, as it prepares for “timely distributions to creditors,” CoinTelegraph.com reported. The lending firm, which has been in bankruptcy court since its chapter 11 filing in July 2022, stated on Friday that it has begun shifting assets to “ensure ample liquidity” in preparation for any asset distributions. Celsius added that it will unstake its existing Ether holdings, “which have provided valuable staking rewards income to the estate.” The liberated Ether will be used to “offset certain costs incurred throughout the restructuring process” and “unlock ETH to ensure timely distributions to creditors,” it added.

The $52 million question in Prime Capital Ventures’ bankruptcy case surrounds what happened to the money it invested in a hedge fund, The Real Deal reported. The dilemma is unfolding as Prime deals with an involuntary bankruptcy proceeding. The commercial lender’s bankruptcy was initiated by three companies that allege they were defrauded by Prime, including two real estate developers. They claim Prime accepted $22.7 million in interest-payment deposits without the commercial lender issuing them loans or repaying the deposits when asked. An attorney is serving as an interim trustee to oversee Prime’s assets as a federal judge determines whether to place Prime into chapter 7 bankruptcy or dismiss the company’s case. Tracking down the interest deposits invested into Berone Capital, however, has been no easy task. “I simply can’t find this $52 million,” Christian Dribusch said during a hearing this week. “I can’t get verification that it exists,” Dribusch added, declaring it the “biggest red flag” in front of him. Prime offers lines of credit to clients who provide 20 percent of the value of the loan in advance to cover potential interest payments. Dribusch said Prime would then invest the interest deposits with Berone under a joint venture agreement. The judge in the case is requiring Berone to disclose the value of Prime’s interest in the hedge fund and provide corroboration that the missing funds exist. Berone, which is based in Georgia, did not respond to the publication’s request for comment.

A subsidiary of Chinese developer Xinyuan Real Estate Co Ltd. has filed for chapter 11 protection in the Southern district of New York court, according to a court filing, Bloomberg News reported. Hudson 888 Owner LLC, whose business is “single asset real estate,” filed the petition, according to the court document dated Sunday. Its estimated liabilities and assets are both within the range of $100 million to $500 million, the filing shows. Hudson 888 Owner is a US unit of Xinyuan, according to a document on the SEC website. Like many distressed Chinese developers, Xinyuan fell into distress in 2022 and didn’t make an interest payment in October that year. It did a dollar debt exchange in June 2023 and hired Alvarez and Marsal as its restructuring adviser.

Pharmaceutical developer Humanigen has filed for bankruptcy, attributing its financial problems largely to the U.S. Food and Drug Administration’s rejection of its COVID-19 drug in 2021, WSJ Pro Bankruptcy reported. The Burlingame, Calif.-based company, once controlled by convicted pharma fraudster Martin Shkreli, sought protection from creditors Wednesday with unsecured debts of $44.1 million, while listing assets of $521,000. Humanigen is fending off lawsuits by manufacturers and marketers over its inability to pay for services it procured in anticipation of selling the drug. The company said that its antibody medicine lenzilumab showed promise in treating COVID-19 patients with pneumonia early in the pandemic. Humanigen raised more than $140 million through two stock sales in 2020 even though it had generated little revenue and the drug candidate hadn’t been approved. Humanigen signed agreements with companies that year that would manufacture, package and market lenzilumab. But in September 2021, the FDA declined to give emergency-use authorization to lenzilumab to treat COVID patients because it said it failed to establish the potential benefits outweighed the potential risks, according to a regulatory filing.

Mass tort exposure has created a proliferation of bankruptcies, affecting organizations from Johnson & Johnson (talcum powder) to the Boy Scouts (sexual abuse), according to a Wall Street Journal commentary. Congress could come up with systemic solutions to the claims-proliferation problem, but that seems unlikely given political gridlock and trial lawyers’ clout, according to the commentary. The Judicial Conference of the U.S., which prescribes the official rules and forms governing bankruptcy practice and procedure, is a more viable avenue for reform. The Judicial Conference could quickly change the claim forms to require greater upfront disclosures—including requiring submission of a specific diagnosis linking the claim to the alleged tort, as well as disclosure of any relationship between the doctor giving the diagnosis and the lawyers—and heightened certification requirements for lawyers and others who help file claims on behalf of tort claimants. Bankruptcy judges could also appoint claims examiners in cases where large numbers of claims are brought into the proceedings to review how claims were generated and to advise judges on their findings, prior to those claims being allowed.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Tessemae’s, a Baltimore-based maker of organic salad dressing and condiments sold at dozens of national and regional retailers, plans to sell to a New Jersey owner of specialty food brands for $4.5 million through a bankruptcy procedure, the Baltimore Sun reported. The U.S. Bankruptcy Court in Baltimore must approve the sales agreement between the company, founded 15 years ago by three Annapolis brothers, and Panos Brands. Tessemae’s filed for chapter 11 reorganization Feb. 1 to restructure debts and stop what it called costly and distracting litigation by a former lender. The filing at the time listed liabilities in a range of $10 million to $50 million. After working to stabilize the business and boost orders, the company determined it could best preserve the brand by selling its assets, according to a Dec. 21 court filing. Panos, based in Rochelle Park, New Jersey, manages a portfolio of brands such as Andrew & Everett cheese, KA-ME Asian food products, Walden Farms calorie-free foods and Amore Italian cooking pastes. Panos, which offered $4.5 million, was selected Dec. 18 as the highest or best bidder of two competitors at a bankruptcy auction. The Panos bid excluded Tessemae’s $800,000 in accounts receivable. If the sale to Panos falls through, the company would be sold to McDermott Group, made up of principals of Tesse DIP Fund I LLC. McDermott was chosen as backup bidder with a $4.75 million offer, including accounts receivable.

The U.S. Supreme Court review of Purdue Pharma’s $6 billion opioid settlement could open the door for Canada’s municipalities and indigenous First Nations — the only two groups not made up of individual claimants that have opposed the deal — to seek compensation they say has been denied them, WSJ Pro Bankruptcy reported. Purdue’s bankruptcy plan would compensate thousands of individuals, healthcare providers, and U.S. state and local governments accusing the maker of the OxyContin painkiller of helping to fuel the opioid epidemic. But Canadian cities and First Nations don’t have access to the settlement money promised by the Sackler family owners. The bankruptcy plan is being challenged by the U.S. Justice Department, which contests the lifetime immunity the settlement would grant Purdue’s Sackler family owners from opioid-related lawsuits. The Supreme Court heard arguments on the challenge last month. If the Supreme Court rejects the plan, lawsuits that Canadian municipalities and First Nations have filed against Purdue and the Sacklers in Canada and New York could move forward, giving them a new opportunity to litigate their cases for compensation.

A solar company under investigation in Connecticut and around the country filed for bankruptcy, NBCConnecticut.com reported. Vision Solar filed for chapter 7 bankruptcy on December 28. After a joint investigation by the state’s Department of Consumer Protection and Attorney General’s office, the AG’s office sued Vision Solar in March 2023 alleging the company used high-pressure sales tactics, like pressuring consumers into loans for solar panels which they could not afford and in some cases were never activated. In addition, the suit claimed the company did unpermitted work, leaving customers struggling to get connected to the grid as it originally promised, among other allegations.

The slot machine operator formerly known as Lucky Bucks is suing members of its former management and their affiliates, seeking the return of approximately $200 million and accusing them of defrauding the company, WSJ Pro Bankruptcy reported. Now known as Arc Gaming and Technologies, Georgia-based Lucky Bucks emerged from bankruptcy in October. The company’s new management filed a lawsuit in state court on Tuesday under Georgia’s Racketeer Influenced and Corrupt Organizations Act that named nine former high-ranking employees and one contractor as well as a dozen associated entities. The lawsuit alleged Lucky Bucks founder and former owner Anil Damani led a scheme to loot the company. Damani was barred from the company’s operations by a state regulator in June 2020, the lawsuit said. Damani and his lieutenants had Lucky Bucks and its affiliated entities borrow hundreds of millions of dollars from lenders and distributed the proceeds among themselves, the lawsuit said. The mounting debt ultimately pushed the company to file for chapter 11 bankruptcy protection last June, the lawsuit said. Lucky Bucks covered about 345 locations throughout Georgia with about 2,300 slot machines when it filed for bankruptcy. It blamed a sharp decline in revenue in 2022 caused by challenges such as increased local competition and regulatory enforcement. Lucky Bucks handed itself to its lenders in exchange for reducing its debt by more than $500 million under the company’s chapter 11 plan, which was approved in July.