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Cryptocurrency exchange FTX's former top lawyer testified yesterday that its founder Sam Bankman-Fried asked him to come up with "legal justifications" for why it was missing $7 billion in customer funds four days before the company declared bankruptcy, Reuters reported. Can Sun, FTX's former general counsel, testified at Bankman-Fried's fraud trial that the company on Nov. 7, 2022, asked investment fund Apollo for emergency capital to cover a wave of customer withdrawals. After Apollo requested FTX's financial statements, Sun testified, either Bankman-Fried or another executive sent him a spreadsheet indicating the cryptocurrency exchange was billions of dollars short of being able to satisfy customer withdrawals and that it also was owed billions of dollars by Bankman-Fried's crypto-focused hedge fund Alameda Research. "I was shocked," said Sun, who testified under a non-prosecution agreement in the third week of the trial in Manhattan federal court. Sun told jurors that after FTX shared the spreadsheet with Apollo, Bankman-Fried pulled him aside at the Bahamas luxury apartment complex where the 31-year-old former billionaire lived and told him Apollo had asked for a legal justification for the missing funds.

Rite Aid plans to plans to close about 7% of its stores initially, as the drugstore chain makes its way through its chapter 11 bankruptcy process, the Associated Press reported. The company submitted a list of 154 stores in a court filing. Most of the chain’s stores are on the East and West Coasts, and the list reflects that. Several locations in New York, New Jersey, Pennsylvania, California and Washington made the list. The company also plans to close some stores in Michigan and Ohio as well. Rite Aid said in a recent Securities and Exchange Commission filing that it has more than 2,200 locations in 17 states. That filing also noted that the company lost about $1.3 billion in the first half of its fiscal year. That’s more than double the $441 million it lost in the same period during the previous fiscal year.

Waits RV Center in West Palm Beach filed for chapter 11 protection with 41 new and used recreational vehicles listed in its inventory, the South Florida Business Journal reported. The company submitted its chapter 11 petition on Oct. 15 in U.S. Bankruptcy Court in West Palm Beach. William Waits signed the petition as president of the company. According to the company’s website, Waits opened the dealership in West Palm Beach in 2010 after previously owning RV dealerships in Vero Beach and Savannah, Georgia, both of which he sold. Waits RV Center listed $1.85 million in assets, mostly its inventory of vehicles, and $2.38 million in debts. Its largest creditors were Wells Fargo with a $600,000 loan, Alpharetta, Georgia-based Northpoint Commercial Finance with $500,000 owed, Fort Lauderdale-based AFC Funding with $400,000 owed, and Tampa-based BayFirst National Bank with a $350,000 SBA loan.

A federal court in southern Texas quickly moved to reassign about 3,500 bankruptcy cases after the sudden resignation of U.S. Bankruptcy Judge David Jones in Houston, transferring his large-company chapter 11 cases to two judges who are already among the busiest in the U.S., Reuters reported. Judge Jones resigned Sunday, days after a federal appeals court opened an ethics probe into his failure to disclose a long-term romantic relationship with an attorney whose firm had many cases before his court. Replacing Jones, the busiest bankruptcy judge in the U.S., is an enormous lift for a Houston bankruptcy court that is one of the top three destinations for big corporate debtors' chapter 11 filings in the U.S., along with Wilmington, Delaware and Manhattan. In recent years, Judge Jones has managed the bankruptcies of high-profile retailers like JC Penney and Nieman Marcus and complex debt disputes in mattress maker Serta Simmons' and aircraft part supplier Incora's chapter 11s. "Judge Jones was highly regarded and highly respected by the bar and by his colleagues," Chief U.S. Judge Randy Crane in the Southern District of Texas told Reuters. "Everybody's still in shock, so to speak." Judge Jones has handled more corporate bankruptcies in recent years than any other U.S. bankruptcy judge. He has overseen 17% of cases with more than $1 billion in liabilities since 2020, according to data from Debtwire, which provides research and intelligence on credit markets.

Electric vehicle company Lordstown Motors received U.S. bankruptcy court approval Wednesday to sell its manufacturing assets to a new company affiliated with its founder and former CEO Stephen Burns for $10.2 million, Reuters reported. LAS Capital, majority-owned by Burns, will acquire Lordstown's intellectual property, business records, and machinery including assembly lines for electric vehicle motors and batteries. Bankruptcy Judge Mary Walrath approved the sale at a court hearing in Wilmington, Del., saying that it was the best available offer. The sale does not include any rights to pursue legal claims against Lordstown's directors, officers or equity owners, which will remain with the bankrupt company, Lordstown Motors' attorney David Turetsky said at the court hearing. Several investor groups have already brought claims against Lordstown and its directors, alleging that the electric truck startup misled consumers and investors about its ability to ramp up electric vehicle production. Lordstown Motors filed for bankruptcy in Delaware in June, seeking to wind down its business after failing to resolve a dispute over a promised investment from Taiwan's Foxconn, which had agreed to collaborate on the development of Lordstown's electric pickup truck after its purchase of Lordstown's manufacturing center.

The Boy Scouts of America has received a U.S. bankruptcy judge's approval to pay about $245 million in fees to lawyers and financial advisers who crafted the youth organization's $2.46 billion settlement of sex abuse claims, Reuters reported. U.S. Bankruptcy Judge Laurie Selber Silverstein in Wilmington, Del., late on Tuesday mostly approved final fee applications from more than two dozen law firms and advisers who worked on the bankruptcy case. The overall bankruptcy fees could end up closer to $275 million, based on outstanding requests for payment from other groups that participated in the bankruptcy. Judge Silverstein had decried the "staggering" legal fees racked up in the case in 2021, when the number crossed the $100 million threshold. White & Case, which served as lead counsel during the Boy Scouts' bankruptcy, received the highest fee award, at $71 million. Pachulski Stang Ziehl & Jones, which represented the official committee of abuse claimants, received $37.8 million, and Alvarez & Marsal, the Boy Scouts' financial adviser, received $19 million.

Home-decor retailer Z Gallerie is searching for a buyer after it filed bankruptcy for the third time on Monday, Bloomberg News reported. The California-based firm, which sells upscale furniture pieces, said in a Delaware court filing that high mortgage rates and a resulting pullback in home sales crimped demand for its products. It also cited higher import costs, negative cash flow in many of its stores and industry headwinds as factors that led to its filing. It listed assets and liabilities of as much as $100 million each in its bankruptcy petition. The company has secured a $1.1 million debtor-in-possession financial facility from ZG Lending SPV, its existing secured lender, according to court papers. It plans to retain Stump & Company, an M&A advisory firm, to help market its assets. If Z Gallerie can’t find a buyer willing to invest in brick and mortar stores, the company will shut down all of its 21 locations along with its warehouse by the end of the year, Robert Fetterman, the company’s chief financial officer and interim chief executive officer said in a court filing. He also said the firm was prepared to trim its 250-person workforce as a means to save cash.

Ultimate Jet, the charter airline based at Ohio’s Akron-Canton Airport, is expected to continue operating as usual while its management financially restructures the company under chapter 11 bankruptcy protection, the Cleveland Business Journal reported. Ultimate Jetcharters LLC, which does business as Ultimate Jet, filed for bankruptcy protection last week “to address challenges from the previous management group,” said Stephen West, president and CEO, in an emailed response to questions. Those challenges included at least $10 million in debt for which Ultimate Jetcharters became responsible after the airline’s founder sold a controlling interest in the company in early 2020, according to a bankruptcy court filing by CEO West.

Rite Aid Corp. resolved a fight with its largest supplier of prescription drugs, McKesson Corp., that the retailer said threatened its ability to continue providing customers with life saving medicines and imperiled its ability to survive bankruptcy, Bloomberg News reported. Lawyers for the two companies said during a court hearing Tuesday in New Jersey that they’ve agreed in principal to a settlement that will end a lawsuit Rite Aid filed against McKesson over their supply agreement. The settlement ensures that Rite Aid’s stock of prescription drugs won’t be impacted during its chapter 11 case, the lawyers said. The deal avoids a potentially costly fight that could have hindered Rite Aid’s restructuring efforts. Rite Aid claimed McKesson was threatening to walk away from the supply agreement unless it paid for new goods when delivered, describing the effort as “a cynical ploy for negotiating leverage” over the retailer. McKesson argued the long-term supply deal ended prior to the bankruptcy. Rite Aid lawyer Josh Sussberg said the retailer has now agreed to pay McKesson within seven days of receiving new products, versus 19 days previously. Terms of the proposed settlement must be documented and the agreement might be challenged by other Rite Aid creditors, he added. Any settlement must be approved by Judge Michael Kaplan, who is overseeing Rite Aid’s chapter 11 case.