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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.

A Minnesota man pleaded guilty yesterday for attempting to evade his federal income taxes by submitting an incomplete bankruptcy filing, according to a DOJ press release. According to court documents and statements made in court, from 2000 until 2023, Robert Schlosser, of Prior Lake, owned and operated a business that installs Christmas lighting, special event lighting and decoration displays for its customers. In 2018, Schlosser filed for bankruptcy and listed the IRS as a creditor for his unpaid federal income taxes. As part of the bankruptcy, Schlosser was required to sign and file, under penalty of perjury, a bankruptcy petition and schedules providing information regarding his assets, income and other financial affairs. Schlosser attempted to evade the payment of his delinquent taxes by filing false bankruptcy schedules that concealed assets to hinder IRS collection efforts. In total, Schlosser admitted that his conduct resulted in a tax loss to the IRS of $429,848.

An Agoura Hills real estate developer was sentenced today to 41 months in federal prison for failing to disclose on a bankruptcy petition that he had earned nearly $2.3 million in income and for failing to report almost $6.9 million in income on his tax returns, according to a DOJ press release. Mark Handel was sentenced by U.S. District Judge Otis D. Wright II, who also fined Handel $20,000 and ordered him to forfeit approximately $3,545,712, which represents the proceeds of the sale of real estate in Alameda County. Judge Wright also ordered Handel to pay the IRS approximately $1,618,836 in outstanding tax liabilities, including penalties and interest. Handel pleaded guilty on February 23 to one count of making a false statement in bankruptcy and one count of subscribing to a false tax return. Prior to today’s hearing and pursuant to his plea agreement, Handel paid the IRS approximately $1,618,836 in outstanding tax liabilities, including penalties and interest.

Texas law firm Jackson Walker said in court documents yesterday that its former partner Elizabeth Freeman lied about her romantic relationship with David R. Jones, a bankruptcy judge who was presiding over cases in which Freeman was billing hours, WSJ Pro Bankruptcy reported. Jackson Walker began to investigate the matter after a shareholder involved in one of the bankruptcy cases alleged in March 2021 that Freeman and Jones were in a romantic relationship, the law firm said. At the time, it also immediately notified the Southern District of Texas Bankruptcy Court, the firm said. The filings were in response to a recent request made by the U.S. Trustee Program, urging the court to reverse prior orders awarding about $13 million in legal fees to Jackson Walker for its work in more than two dozen chapter 11 cases before Jones, including about $1 million in fees billed by Freeman. In a court filing Monday, Jackson Walker provided an email exchange from August 2021, in which Freeman said that she agreed with a draft letter prepared by the law firm that stated she and Jones were “close personal friends” stemming from when they worked together at another law firm, and “there has been no romantic relationship since prior to the time in March 2020 when COVID caused so many of us to shift to remote work and virtual-only meetings.” Freeman “confirmed that there is no current romantic relationship between herself and Judge Jones and that none is expected going forward,” the letter that she agreed to said. “They’re throwing her under the bus,” said Nancy Rapoport, a law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, who specializes in bankruptcy ethics, adding she thinks Jackson Walker still has more questions to answer. “Didn’t they know from any independent means that she might be lying?”

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.

FTX’s bankruptcy advisers sued crypto exchange Bybit Fintech Ltd and two corporate affiliates to recover cash and digital assets valued at roughly $953 million that was withdrawn from Sam Bankman-Fried’s crypto exchange before it filed chapter 11 a year ago, Bloomberg News reported. The lawsuit filed Friday in Delaware court alleges Bybit’s investment arm, Mirana Corp., had special “VIP” benefits, which most FTX customers didn’t have, and used those special privileges to get most of its assets off Bankman-Fried’s platform before it collapsed in November 2022. Mirana pressured FTX employees to fulfill its withdraw requests as regular customers of FTX.com waited hours trying to get money off the exchange as it collapsed, according to the complaint. The lawsuit seeks to recover assets worth roughly $953 million, a figure that includes more than $327 million Mirana allegedly withdrew from FTX between the early morning of Nov. 7 and Nov. 8 2022, when Bankman-Fried’s exchange paused withdraws. The bankruptcy lawsuit names Bybit Fintech Ltd., Mirana and an affiliated crypto trading firm named Time Research Ltd. The lawsuit also lists as defendants a senior Mirana executive at the time and Singaporean residents whom the complaint alleges either benefited or had a role in the FTX withdraws, which are subject to the bankruptcy suit.

A year after the bankruptcy of FTX, the cryptocurrency industry is irrevocably altered — while at the same time in many ways remarkably familiar, Bloomberg News reported. Mostly gone are the day traders and the abundant leverage that drove Bitcoin to its November 2021 high at close to $69,000. Same for celebrities and social-media influencers peddling nonfungible tokens and memecoins. Regulators determined not to get caught off guard again are tightening their grip. And large financial firms like BlackRock Inc. are moving in, drawn by the prospect of the U.S. Securities and Exchange Commission giving its first blessing for an ETF investing directly in Bitcoin. Perhaps the most tangible indicator that crypto has moved on: Bitcoin has recovered all its losses since the May 2022 implosion of stablecoin TerraUSD, which set in motion the wave of failures that ultimately helped bring down FTX. Some observers see an industry still afflicted by rampant speculation and insufficient safeguards. The Tether stablecoin, a pillar of the sector long dodged by speculation about the quality of assets backing it and allegations that it’s being used by criminals, has become more dominant in recent months. Binance, the biggest exchange, still operates without a formal headquarters.

A year after it shuttered operations at its 60,000-square-foot farming facility in Braddock, Pa., the vertical farming startup Fifth Season has filed for bankruptcy, the Pittsburgh Post-Gazette reported. Michael Von Lehman, president of Meridian Management Partners, had been trying to find a new buyer for the plant after he was brought on as chief restructuring officer in December. But the vertical farming industry is too fragile for any company to take on such a significant acquisition right now, he said. RDC, the owner and developer that poured $30 million into the autonomous farming facility, had planned to convert the space to food manufacturing in early July if a new operator wasn't found. The building was listed for sale for $12 million in June by the commercial real estate firm CBRE Inc. Fifth Season did not own most of the assets it operated, Mr. Von Lehman said. It leased the Braddock building and most of its equipment. According to a filing with the United States Bankruptcy Court for the Western District of Pennsylvania, the company estimated its asset value ranges between $50,001 and $100,000. Its liabilities are estimated to be between $10,000,001 and $50 million. 1