FTX cryptocurrency exchange founder Sam Bankman-Fried is "subsisting on bread and water" because the federal jail where he is being held ahead of his fraud trial has not provided him with a vegan diet as he requested, his lawyer said on Tuesday, Reuters reported. Bankman-Fried pleaded not guilty in Manhattan federal court to seven criminal charges contained in a new indictment during a hearing before U.S. Magistrate Judge Sarah Netburn. His lawyer, Mark Cohen, told Netburn during the hearing that a lack of adequate food and medication provided at Brooklyn's Metropolitan Detention Center was hampering Bankman-Fried's ability to prepare for his scheduled October trial. The former billionaire was led into court wearing leg restraints and a beige-colored uniform for his first appearance since his bail was revoked on Aug. 11 by U.S. District Judge Lewis Kaplan, who found that Bankman-Fried had tampered with witnesses at least twice.
McKinsey and several of its executives must face a critic’s lawsuit alleging the consulting firm concealed conflicts of interest from bankruptcy courts to win business advising on major corporate restructurings, WSJ Pro Bankruptcy reported. Judge Jesse Furman of the U.S. District Court in New York declined on Monday to dismiss the bulk of claims filed against McKinsey by the founder of a competing firm accusing it of submitting false disclosures to bankruptcy courts that omitted potentially disqualifying financial conflicts. The judge’s ruling allows Jay Alix, the retired founder of turnaround consulting firm AlixPartners, to advance his claims that McKinsey’s disclosures were part of a racketeering conspiracy to boost its restructuring advisory practice at the expense of competing firms. Judge Furman granted McKinsey’s motion to dismiss one of the four racketeering counts Alix alleged, while finding the other three were plausible enough to proceed against the firm. It has denied the allegations and said Alix wants to use the lawsuit to drive McKinsey out of the lucrative marketplace for restructuring advice.
The Roman Catholic Archdiocese of San Francisco filed for bankruptcy on Monday, saying a chapter 11 filing will facilitate a settlement of about 500 lawsuits accusing the church of enabling childhood sexual abuse by priests, Reuters reported. The filing in U.S. bankruptcy court in San Francisco will put the lawsuits on hold and buy time for settlement talks, Archbishop Salvatore Cordileone said in a statement. "We believe the bankruptcy process is the best way to provide a compassionate and equitable solution for survivors of abuse while ensuring that we continue the vital ministries to the faithful and to the communities that rely on our services and charity," Cordileone said. The "overwhelming majority" of the alleged abuse occurred in the 1960s and 1970s, involving priests who are deceased or no longer in ministry, Cordileone said. The current wave of lawsuits was filed after California passed a 2019 law allowing people to bring claims for childhood sexual abuse that otherwise would have been barred due to the expiration of the statute of limitations. The dioceses of Oakland and Santa Barbara this year also filed for bankruptcy, each citing the impact of hundreds of sex abuse lawsuits.
The Supreme Court recently announced that it will review Purdue Pharma’s bankruptcy settlement, which would release the company’s owners, the Sackler family, from future civil liability for the harms they imposed on millions of opioid victims. Some see this as an opportunity to vindicate victims and prevent abusive bankruptcy settlements. That is wrong. The reality is that the Supreme Court’s review comes at a major cost to opioid victims, potentially delaying compensation they would receive by months or even years, according to a commentary today in the Washington Post by Profs. Anthony Casey of the University of Chicago Law School and Edward Morrison of the Columbia Law School (New York). It might also cost the entire legal system. If the court rejects the settlement in this case, it would cripple our bankruptcy courts, which play a key role in remedying mistreatment of mass tort victims by our legal system. The Sacklers played a key role in these misdeeds, yet they never filed for bankruptcy, and victims never had an opportunity to pursue lawsuits against them in civil courts. Instead, Purdue commenced a bankruptcy case, which brought all victims, governments and other injured parties into a single court. The Sacklers agreed to offer settlement money in exchange for a release from liability. After injured parties pushed back, and after months of mediation, the Sacklers increased their offer from more than $4 billion to nearly $6 billion for a release. The company has twice pleaded guilty to criminal charges — first in 2007, for misleading the public about the safety of its products, and again in 2020, for defrauding the United States and violating the federal anti-kickback statute. Today, more than 95 percent of victims who voted did so in favor of this settlement; so have nearly 80 percent of the states and territories and more than 96 percent of tribes and other non-state governments with claims against Purdue and the Sacklers. Read more.
*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.
Sinclair Broadcast Group Inc. told a court it wants a faster breakup from its bankrupt sports broadcasting unit after the company was accused of draining more than $1.5 billion from the subsidiary, Bloomberg News reported. Sinclair on Monday provided a defense against allegations it wrongly extracted substantial sums from its Diamond Sports Group subsidiary before the unit filed bankruptcy earlier this year. Sinclair said it agreed to waive millions of dollars in management fees and provided other financial assistance in hopes restructuring Diamond’s balance sheet. But instead of continuing to work with its parent company on a plan to get the business out of bankruptcy, Sinclair told a Texas bankruptcy judge that Diamond and some of its creditors “pivoted to an all-out ‘shoot-first’ litigation war on Sinclair.” Diamond accused Sinclair of charging excessive fees under a management services agreement that costs more than $100 million a year. In response, Sinclair said Diamond should terminate the deal if it believes it’s too expensive, but claimed the subsidiary is dragging its feet because it wants benefits it gets under the deal while paying its parent company a significantly lower rate in bankruptcy. On Monday, Sinclair demanded Diamond make a choice: either accept the management agreement and drop some of the allegations in its complaint or end the deal with its parent company. Scuttling the agreement would mean Sinclair would no longer be forced to subsidize Diamond’s business or litigation against the parent company, Sinclair said.
Old Dominion Freight Line stepped up competition for bankrupt trucker Yellow’s sprawling North American real-estate holdings, outbidding a rival operator with a $1.5 billion offer for the properties, WSJ Pro Bankruptcy reported. The bid surpasses a $1.3 billion proposal by Estes Express Lines and signals a potentially spirited bankruptcy court-supervised auction for the network of 169 truck terminals that would provide Yellow with more than enough money to roughly cover the loans the company accumulated before its chapter 11 filing this month. Yellow was in business for 99 years before the company collapsed this summer. Its terminals include sought-after sites close to major metropolitan areas that are ideal for trucking and logistics companies looking to store and deliver goods quickly to homes. A lawyer for Yellow said earlier this month in bankruptcy court that the company had received formal expressions of interest in Yellow’s assets from almost 100 parties. Executives at several rival trucking companies have said they would be interested in buying some of Yellow’s locations. ODFL’s bid was disclosed in a court filing, setting up the Thomasville, N.C.-based operator as the stalking horse bidder, meaning its offer is subject to higher or better proposals at a court-supervised auction, for Yellow’s properties.
Survivors who say they endured sexual abuse during their involvement with the Boy Scouts of America are one step closer to receiving compensation, CBSNews.com reported. According to a statement from the trustee of the Scouting Settlement Trust, Hon. Barbara J. Houser (ret.), the processing portal for all general claimants opened on Aug. 17 which is estimated to include 75,000 people or their legal counsel. The trust first opened the portal on Aug. 4 only to those survivors who elected to have expedited claims. The trust's team says 7,000 people are included in that group. Last fall, the U.S. District Court of Delaware approved a $2.46 billion bankruptcy reorganization plan for the BSA approximately two years after it filed for bankruptcy protection. The protection allows the organization to continue to operate while compensating thousands of people who submit claims against the trust.
A senior-living company filed for bankruptcy this week after it exhausted an emergency loan, the latest to falter because of COVID-19, Bloomberg News reported. Nashville Senior Care LLC’s plight illustrates the pressures bearing down on the senior-living sector. Higher staff and supply costs on top of tepid demand for such facilities have caused defaults to outpace the rest of the municipal bond market this year. About 8% of the $43 billion in outstanding senior-living bonds is in default, compared with less than 1% of the total municipal bond market, according to data compiled by Bloomberg. At Nashville Senior Care, the pandemic shutdown lowered the number of residents “precipitously,” while expenses rose “dramatically,” leaving the facilities without the means to make needed investments, executive director Thomas Johnson said in a court filing. Read more.
The financially troubled healthcare sector, including a spotlight on struggling senior care centers, will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.
London-based digital-first healthcare platform Babylon Health has filed for chapter 7 bankruptcy for two subsidiaries — Babylon Healthcare and Babylon Inc. — as it shuts down core U.S. operations, according to documents filed on Aug. 9 in a Delaware bankruptcy court, Becker's Hospital Review reported. The filing comes shortly after a planned combination Babylon's core operating subsidiaries with MindMaze, digital neurotherapy company, collapsed. Both Babylon subsidiaries list hundreds of creditors with liabilities between $100 million and $500 million, according to the filing signed by COO Paul-Henri Ferrand. After administrative expenses are paid, only secured creditors — where the debt is backed by collateral — will be able to get paid. Earlier this month, Babylon closed its Austin, Texas, headquarters, laid off 94 employees and abruptly canceled patient appointments.
China Evergrande, which is the world's most heavily indebted property developer and became the poster child for China's property crisis, yesterday filed for chapter 15 protection from creditors in a U.S. bankruptcy court, Reuters reported. An affiliate, Tianji Holdings, also sought chapter 15 protection yesterday in Manhattan bankruptcy court. Evergrande's filing comes amid growing fears that problems in China's property sector could spread to other parts of the country's economy as growth slows. Since the sector's debt crisis unfolded in mid-2021, companies accounting for 40% of Chinese home sales have defaulted. The health of Country Garden (2007.HK), China's largest privately run developer, is also worrying investors after the company missed some interest payments this month. Evergrande recently had $330 billion of liabilities. A late 2021 default triggered a string of defaults at other builders, resulting in thousands of unfinished homes across China. In a filing in the Manhattan bankruptcy court, Evergrande said it was seeking recognition of restructuring talks under way in Hong Kong, the Cayman Islands and the British Virgin Islands. Evergrande has said creditors may be able to vote this month on a restructuring, with possible approval by Hong Kong and British Virgin Islands courts in the first week of September. The company proposed scheduling a chapter 15 recognition hearing for Sept. 20.
