Rudolph Giuliani must pay the $148 million debt he owes two Georgia election workers — despite his bankruptcy, the pair said in a new complaint, Bloomberg Law reported. The judge overseeing the former New York City mayor’s chapter 11 case shouldn’t allow Giuliani to use bankruptcy to avoid the debt because bankruptcy law blocks the discharge of debt incurred through “willful and malicious injury,” the election workers, Ruby Freeman and Shaye Moss, said in a filing Friday. Freeman and Moss were awarded $148 million in December after a court found Giuliani liable for defaming the pair by accusing them of rigging 2020 election results for Joe Biden. He filed for bankruptcy shortly after. A ruling in favor of Freeman and Moss in the bankruptcy case would prevent Giuliani from clearing what is by far his biggest debt. Giuliani has reported having $10.6 million in assets against almost $153 million in liabilities.
Bankrupt cryptocurrency exchange FTX received court approval to sell its stake in Anthropic, an artificial-intelligence startup in which Amazon.com and Google late last year agreed to invest billions of dollars, WSJ Pro Bankruptcy reported. Judge John Dorsey in the U.S. Bankruptcy Court of Wilmington, Del. approved the sale on Thursday after FTX reached a compromise with a group of customers who had objected to the sale. FTX invested $500 million in Anthropic in 2021 and holds a stake of about 7.8% in the company. In a court filing earlier this month, FTX said that “given the increased interest in AI and large language models, there has been significant appreciation in the value of the Anthropic shares.” In September, Amazon said it would be investing up to $4 billion in Anthropic. And in October, Google agreed to invest up to $2 billion in Anthropic, building on its earlier investment in the AI company. By getting approval for the sale procedures, FTX said it can unload the shares at “the most optimal and appropriate time.” Read more. (Subscription required.)
In related news, the FTX estate has agreed to drop a lawsuit that sought to claw back at least $323.5 million from the original owners of the bankrupt cryptocurrency exchange’s European unit, WSJ Pro Bankruptcy reported. Under a proposed settlement, the two main targets of the lawsuit—FTX Europe co-founders Patrick Gruhn and Robin Matzke—agreed to buy back the unit’s assets for $32.7 million. Details of the proposed settlement emerged in a Thursday court filing from the FTX estate. The deal still needs to be approved by a judge. The proposed settlement marks a retreat by the FTX bankruptcy estate, led by Chief Executive John J. Ray III. The suit against the former owners of the European unit was one of around a dozen lawsuits filed by FTX seeking to claw back billions of dollars from former FTX insiders and companies that did business with FTX under the leadership of its former CEO and founder, Sam Bankman-Fried. In recent months, the rising value of cryptocurrencies and FTX’s stake in artificial-intelligence startup Anthropic have made it less imperative for the estate to claw back funds. A lawyer for FTX said in court in January that the estate expected to repay customers in full. Filed in July, FTX’s lawsuit alleged that Bankman-Fried massively overpaid for Digital Assets DA AG, the Swiss firm that became FTX Europe, when FTX bought it for more than $376 million in a series of transactions in 2020 and 2021. At the time, Bankman-Fried was eager for his crypto exchange to become licensed in the European Union. Read more. (Subscription required.)
Baudax Bio, a Malvern, Pa.-based biopharmaceutical company spun out of Recro Pharma more than four years ago, has filed for U.S. Bankruptcy Court protection, the Philadelphia Business Journal reported. In Thursday's chapter 11 filing at U.S. Bankruptcy Court in Philadelphia, Baudax listed assets of just under $20.6 million and debts of nearly $21.8 million. The company's two largest unsecured creditors, according to the filing, are law firms. Goodwin Procter of Boston is owed $1.8 million, and Troutman Pepper Hamilton Sanders in Philadelphia is owed $1.3 million. The next largest unsecured creditor among the 20 listed in the filing is ERG Holding Co., a clinical services provider based in St. Louis, which is owed $917,000. Baudax was established in 2019 after Recro Pharma decided to split its two businesses. Recro continues to serve as a contract development and manufacturing organization with its headquarters in Malvern and a manufacturing plant in Gainesville, Georgia. Baudax was established as a drug development company. It received Food and Drug Administration approval for a non-opioid paid medicine called Anjeso, which Recro had been developing. Early last year, Baudax shelved Anjeso, which was approved for the management of moderate to severe pain for patients in medical centers or other acute-care settings. When announcing the decision in February 2023, Baudax Bio CEO Geri Henwood said the company was halting sales and marketing efforts for the drug due to "persistent economic challenges facing hospitals."
A New Jersey-based police training firm singled out in a government watchdog report for its “vulgar” and “unconstitutional” lessons has since relocated to Florida and declared chapter 11 bankruptcy as officials in at least nine states move to ban Street Cop Training from instructing officers, NJ.com reported. New Jersey Attorney General Matthew Platkin this week directed any Garden State police officers who attended Street Cop’s 2021 conference in Atlantic City to undergo mandatory re-training in Trenton in March and steer clear of the company going forward. That order followed a scathing New Jersey State Comptroller report, released in December, that found conference speakers “promoted likely illegal tactics, glorified violence and demeaned women and minorities.” The report drew national attention as videos spread of invited speakers remarking on the size of their penises, mocking suspects and motorists with lewd images and memes and complaining about police oversight. Now, several states have prohibited officers from attending Street Cop trainings, including Minnesota, Missouri, Maryland, Illinois, California, Oregon, Nevada, Michigan and New Jersey, according to court filings. Facing a shrunken customer base and more investigations, Street Cop founder Dennis Benigno, a former Woodbridge police officer, filed for chapter 11 bankruptcy for the firm in a Florida federal court earlier this month, citing continued “harassment from the State of New Jersey” among the sources of the firm’s financial woes.
The North Carolina Theatre, Raleigh’s largest professional theatre company producing live musical theatre for the past 40 years, announced on Friday they are filing for chapter 11 protection, WRAL.com reported. They are also suspending the remainder of their 2024 season. This comes after financial challenges the production company faced during and following the pandemic. "With profound sadness, the NCT Board of Directors announces that it must implement a financial restructuring by seeking protection under Chapter 11," said. "The financial restructuring is a necessary step toward rebuilding and revitalizing The North Carolina Theatre for the future." NCT will join multiple prominent live theatres across the country that have either closed or sought bankruptcy protection resulting from external forces during and after the pandemic, including significant increases in production costs, loss of corporate and personal sponsorships, decline in subscription sales and a slow return of audiences to live venues.
Texas-based factoring company Genesis Network Telecom filed for bankruptcy liquidation on Wednesday, FreightWaves.com reported. Genesis Networks Telecom Services LLC, also known as Genesis ATS (GNET), headquartered in San Antonio, filed its petition in the U.S. Bankruptcy Court for the Western District of Texas. Founded in 2005, the company offered financing solutions for small and midsize companies. It lists its assets as up to $50,000 and its liabilities as between $100 million and $500 million, according to the petition filed Wednesday. Genesis Funding, which states on its website that it’s a “one-stop shop for fast financing,” has up to 49 creditors and maintains that no funds will be available for unsecured creditors once it pays administrative fees. FedEx Supply Chain Logistics of Carrollton, Texas, and Arris Solutions Inc. of Austin, Texas, are listed as creditors, although no amounts are listed in the bare-bones petition. According to court documents, GNET, which was founded by James Goodman, has been involved in a number of lawsuits over the past three years, including a chapter 7 filing involving one of its affiliates, Arris Solutions Inc. The suit, filed by FedEx against GNET in October 2023, alleges the company engaged in a “protracted and multifaceted scheme to defraud the company of more than $67 million dollars.” Tina Younts is listed as the executive assistant on the bankruptcy petition. A creditors meeting has been set for March 19.
The U.S. Justice Department’s bankruptcy watchdog accused Sorrento Therapeutics lawyers of submitting false paperwork to justify the company’s chapter 11 filing in Houston, saying the mailbox location it cited as a principal place of business was created only hours ahead of its bankruptcy, WSJ Pro Bankruptcy reported. Kevin Epstein, the U.S. trustee for the Southern District of Texas, said that on Feb. 12, 2023, a lawyer for Sorrento rented a mailbox at a UPS in the Woodlands, a Houston suburb, on behalf of Scintilla Pharmaceuticals, a Sorrento subsidiary. Both Sorrento and Scintilla are based in San Diego. Scintilla wasn’t registered or licensed to do business in Texas, Epstein said. It had been dormant since about 2019, with no employees or business operations, and its only asset was a $60,000 bank balance that Sorrento had wired to it days before the bankruptcy filing, he said. Ten hours after establishing the mailbox, Scintilla filed its chapter 11 petition in the U.S. Bankruptcy Court in Houston stating that the mailbox was its principal place of business, while still listing its San Diego office as its mailing address, court records show. Sorrento, Scintilla’s parent company, then filed its own chapter 11 petition in Houston.
Disgraced cryptocurrency entrepreneur Do Kwon should be extradited to the U.S. to face trial on fraud charges, rather than to his native South Korea, a court in the tiny Balkan country of Montenegro has ruled, the Wall Street Journal reported. Kwon’s lawyers have three days to appeal the ruling by the High Court in the Montenegrin capital of Podgorica, a spokeswoman for the court said Wednesday. The appeals court will have the final word in the case, she added. A local lawyer for Kwon, Goran Rodić, called the ruling illegal and pledged to appeal. Kwon, the creator of the failed TerraUSD and Luna cryptocurrencies, has previously denied committing fraud. Kwon has been at the center of a tug of war between the U.S. and South Korea ever since he was arrested in March 2023 at the Podgorica airport while attempting to board a private jet to Dubai with a fake Costa Rican passport. Both the U.S. and South Korea have sought to prosecute him on charges stemming from the May 2022 collapse of TerraUSD and Luna. The crash erased some $40 billion in value from the crypto markets, hurt thousands of investors worldwide and triggered a chain reaction that caused other digital-currency firms to topple into bankruptcy. Last year, federal prosecutors in New York charged Kwon with eight criminal counts of fraud. The Justice Department alleged that Kwon misled investors about the stability of TerraUSD, an algorithmic stablecoin that used financial engineering to maintain a value of $1 a coin. A Stanford University-educated entrepreneur, Kwon had hyped TerraUSD as the future of money and derided critics who called it potentially unstable. The Securities and Exchange Commission has also sued Kwon and his company, Terraform Labs, over securities fraud in a civil case stemming from the TerraUSD and Luna collapse. Lawyers for Terraform Labs have denied the SEC’s allegations. Read more. (Subscription required.)
The nation’s highest court has put to rest a legal challenge that could have threatened a massive debt market that private-equity managers and other corporate dealmakers rely on, WSJ Pro Bankruptcy reported. The Supreme Court on Tuesday declined to hear a case brought by bankruptcy trustee Marc Kirschner against a group of banks including JPMorgan Chase and Citigroup that organized a loan to drug-testing business Millennium Health. The banks issued a $1.8 billion syndicated loan in 2014, then chopped the obligation up and sold it to some 400 investors. The bankruptcy trustee argued that the banks withheld from those investors information about a government investigation into Millennium’s billing practices. The company settled the probe for $256 million, precipitating its 2015 bankruptcy. A district court in 2020 rejected the trustee’s case on the grounds that loans aren’t covered by U.S. securities laws. An appeals court last year again upheld this view, saying there was “no compelling reason” to rewrite the loans’ legal status to treat such debt as securities. The Supreme Court didn’t provide any reason for declining to take the case. Wall Street firms and lobbyists have been watching the Kirschner case with apprehension for seven years, because of its potential impact on the multitrillion-dollar syndicated-loan market. Syndicated loans are loans that banks issue and then resell, and are typically used to finance leveraged buyouts. The market recently sputtered after the Federal Reserve raised interest rates and banks reduced lending, but it remains a financial cornerstone for private-equity dealmakers.
FTX founder Sam Bankman-Fried is expected to return to a New York courtroom Wednesday for a rare appearance since his November conviction over a multibillion-dollar fraud on cryptocurrency customers, Bloomberg News reported. Bankman-Fried is slated to answer questions from a federal judge as to whether he is aware of potential conflicts of interest for the lawyers he hired last month to represent him at sentencing on March 28. His new attorneys also represent another crypto mogul, former Celsius Network Ltd. Chief Executive Officer Alex Mashinsky. Earlier this month, prosecutors asked U.S. District Judge Lewis Kaplan to question Bankman-Fried about possible conflicts for attorneys Marc Mukasey and Torrey Young. The government wants to determine if Bankman-Fried is willing to waive his Sixth Amendment right to effective assistance of counsel, given the lawyers represent Mashinsky in a separate criminal case related to the collapse of Celsius. Bankman-Fried faces as long as 20 years in prison for the most serious charges for which he was convicted. Prosecutors noted Mashinsky has partially blamed Celsius’s bankruptcy on actions taken by Alameda Research, a hedge fund linked to Bankman-Fried’s FTX crypto exchange, and that the lawyers’ use of some records could be limited. When Celsius filed for bankruptcy in 2022, Alameda was among its top creditors, court filings show.
