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Securities regulators in Texas and Alabama are expanding their investigations into Voyager Digital Ltd. and Celsius Network Ltd. to account for new information arising from the implosions of the two crypto-lending firms, Bloomberg News reported. The two states are examining if Voyager properly disclosed material information on its loans and the creditworthiness of the borrowers. Texas and Alabama are among a coalition of U.S. states investigating Voyager and Celsius, including a recent freeze on customer withdrawals at both firms, according to Joe Rotunda, director of enforcement at the Texas State Securities Board, and Amanda Senn, chief deputy director at the Alabama Securities Commission. “What we’re seeing now is that a lot of these crypto-lending firms may not have fully disclosed what they were doing on the backside with investors’ money, the risks associated with those types of lending practices or even the other types of transactions they are engaging in,” Rotunda said in an interview. Voyager filed for chapter 11 bankruptcy protection on Tuesday, just weeks after getting a lifeline from billionaire Sam Bankman-Fried’s Alameda Research, citing market volatility and the collapse of a Three Arrows Capital, the crypto hedge fund it had lent money to. Celsius, which halted user withdrawals in June amid liquidity issues, said last week it’s exploring options such as “strategic transactions as well as a restructuring of our liabilities.” Regulators have been investigating yield-product offerings at Voyager and Celsius, including whether they are unregistered securities. Voyager lends deposits to third parties and passes on some interest to customers, a dynamic that users agree to when they sign up for the platform. In its bankruptcy filing, Voyager disclosed for the first time a lot of names of its biggest borrowers, including Three Arrows Capital and Alameda Research.

A father-son team behind a hops wholesale company has faced tough years recently: first falling prey to a foreign scam, then grappling with legal action against two corporate giants. Now, Randall and Tase Flores, the pair behind US Hop Source in Englewood, Colo., fear bankruptcy is their only way forward, the Denver Post reported. The trouble started in the fall of 2020 when US Hop Source received a request for a price quote on 1,100 pounds of hops from a so-called Marcos Estrada of Estrada and Sons for a new brewery being built in Panama City, Panama. The Floreses’ company buys and sells hops around the world. “It wasn’t out of the ordinary,” said father Randall Flores pointing to deals they’ve done with a Swedish merchant and a craft brewery in Palau. First, it was business as usual: providing prices, chatting over the phone, starting the invoice process and taking a credit card payment for about $19,000, which initially posted, he said. A follow-up email from Estrada prompted US Hop Source to hold those hops, as he placed an additional order valued at $31,000. Another credit card payment was issued, but this time, online payments company Paysafe flagged it for further investigation. Later, it was determined that both major payments were fraudulent. “We fell prey to a very sophisticated, international business scam,” the elder Flores said. However, for the Floreses, the financial situation is worse. After receiving the first payment of around $19,000, the team at US Hop Source had already begun buying related supplies and shipping, not realizing “the card number that was used was a JPMorgan Chase bank card number that does not nor has never existed,” Randall Flores said. Tase Flores said, after it dawned on them, they tried to contact Estrada and Sons to no avail. They filed police reports and met with the Department of Homeland Security. Paysafe soon came calling for its money back, although “it was more than two weeks before they realized that they had paid out $19,000 on a credit card number that never existed,” Randall Flores said. The Floreses allege that Paysafe terminated US Hop Source’s account in December 2020, and tried to withdraw money from the company’s bank account several times.

Sequencing technology firm Genapsys is considering bankruptcy amid an escalating power struggle between the firm's former CEO and cofounder and his successor, GenomeWeb.com reported. According to court documents obtained by GenomeWeb, Genapsys in May sought and received permission from the Delaware Court of Chancery to hire New York-based financial services firm Lazard "to explore both financing transactions and bankruptcy." This activity appears to be related to a "special finance and risk committee" created by the Genapsys board in March. This revelation comes from proceedings related to one of two lawsuits filed earlier this year by Genapsys Cofounder and former CEO Hesaam Esfandyarpour against the firm and current CEO Jason Myers, among others. Esfandyarpour, still on the Genapsys board, opposed the formation of the committee, just one in a series of actions that have pitted him against the company. In his second suit, filed in April, he demanded more visibility on the special committee's activities. As first reported by Law360, Esfandyarpour alleged that the committee is "acting in secret" and denying him access to information. The defendants, including Myers and other board members, have disputed the allegations that Esfandyarpour has not received information about the company's finances, Court Vice Chancellor Morgan Zurn said during a June 10 hearing, and they have claimed the ex-CEO is "adverse to the company's financing efforts and therefore can be excluded from the committee's work."

Voyager Digital Ltd. marketed its deposit accounts for cryptocurrency purchases as safe, protected by the nation’s banking insurance system in the event of a failure, the Wall Street Journal reported. This week, when the company tumbled into bankruptcy, customers learned they didn’t exactly have the protection they expected and a banking regulator began an inquiry. Voyager, a brokerage and lender, was caught in a spiral of plunging crypto prices that is collapsing hedge funds and companies and which blew a hole in its assets. Bitcoin, for example, has lost more than half of its value so far this year. Voyager froze all activity, including withdrawals on $350 million in customer deposits that are stored at Metropolitan Commercial Bank, a small New York bank. Voyager said customers would be able to access those dollars after “a reconciliation and fraud prevention process is completed.” It wasn’t clear how long that would take. The funds are expected to be paid in full to the customers. That may not be the case for crypto assets held at Voyager. Still, some customers online said they were only just learning their deposits weren’t insured by the Federal Deposit Insurance Corp. in the way they thought. Voyager had marketed the accounts as protected by that national safety net, an attractive pitch in the volatile world of cryptocurrency. Read more. (Subscription required.) 

In related news, crypto trading firm Alameda Research provided emergency credit lines to the now-bankrupt crypto lender Voyager Digital Ltd., in which it owned a minority stake. Bankruptcy filings show Alameda was also a customer, the Wall Street Journal reported. Alameda, founded by the crypto billionaire Sam Bankman-Fried, borrowed $376.8 million worth of cryptocurrencies from Voyager, the filings in the New York bankruptcy court show, paying rates between 1% and 11.5%. Alameda “seems to be wearing every possible hat in Voyager’s bankruptcy,” as a creditor, shareholder and borrower, said Georgetown Law professor Adam Levitin. “There is a general phenomenon of a lot of recycled capital within crypto, and this is an example of that.” In an interview, Mr. Bankman-Fried said that Voyager had lent money to Alameda as part of its normal course of business, and that it was unrelated to the $75 million that Alameda recently lent to Voyager to ease the lender’s short-term liquidity crunch. “The money that was lent to Alameda is money that will ultimately be returned, and presumably used to pay back customers,” he said. The tight links between crypto firms are reverberating across the industry. Voyager’s bankruptcy was precipitated by the insolvency of the crypto hedge fund Three Arrows Capital — Voyager’s largest borrower, owing more than $650 million to the lender. Three Arrows defaulted on the uncollateralized loan on June 27. The Singapore-based hedge fund has been ordered to liquidate in the British Virgin Islands and sought protection from creditors in the U.S. on Friday. Read more. (Subscription required.) 

Scandinavian airline SAS canceled almost 70% of its flights on Friday as a pilots strike stranded thousands of tourists overseas, Reuters reported. Some 181 flights, or 69% of those scheduled, were canceled on Friday, data from flight tracker FlightAware showed. SAS has been forced to cancel hundreds of flights since Monday when talks between the airline and pilots over a new collective bargaining agreement collapsed. The carrier, whose biggest owners are the Swedish and the Danish states, filed for chapter 11 protection in the United States this week. It held a first court hearing on Thursday in a process SAS expects will take up to a year. Since the talks broke down the only movement has been work toward an agreement between SAS and unions allowing the carrier to bring home stranded charter passengers booked on flights operated by SAS. A SAS spokeswoman said about 18 planes were set to repatriate such travellers on Friday while a negotiator for Dansk Metal, representing Danish pilots, said unions were still seeking assurances the planes would be used for no other purpose.

A bankruptcy judge said he would consider appointing an independent expert to assist in evaluating the mass claims linking Johnson & Johnson’s talc-based baby powder to cancer, WSJ Pro Bankruptcy reported. Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey on Wednesday floated the idea of appointing an outside expert to help him wade through legal, financial and scientific questions around allegations that J&J’s talc products contained asbestos and caused ovarian cancer. Personal-injury lawyers and the healthcare company disagree about how much those tort claims are worth. J&J has denied that its baby powder was unsafe but moved its talc-related liabilities into chapter 11 in October to drive a settlement of roughly 40,000 pending talc cases as well as future injury claims. J&J created subsidiary LTL Management LLC to carry those or the company’s talc liabilities into chapter 11, keep its consumer-health business out of bankruptcy and freeze lawsuits in place. Plaintiffs’ lawyers have decried the bankruptcy filing, saying it will deny injury claimants their constitutional right to a jury trial. J&J has said that victims can be compensated more quickly and efficiently in a chapter 11 plan than through costly litigation in the tort system. Judge Kaplan agreed with J&J in February that the chapter 11 was filed in good faith and for a valid reorganizational purpose. A federal appeals court is now reviewing those findings. Meanwhile, mediated talks are continuing, though both sides appear to be at an impasse regarding a settlement proposal mediators have put forth, according to Judge Kaplan, who said he was considering how to move the process forward and encourage a resolution.

Account holders at now-bankrupt Voyager Digital Ltd. shouldn’t expect to get all their crypto back as the company reorganizes, Bloomberg News reported. The crypto brokerage and lender filed for chapter 11 bankruptcy late Tuesday, renewing unresolved legal questions about how digital assets will interact with U.S. insolvency law. One thing is certain: Voyager doesn’t intend to simply give users back their Bitcoin, Ether and other assets stored on the platform. The company’s plan to exit bankruptcy plainly says it expects account holders to be “impaired” by the chapter 11 process, meaning they won’t be getting back exactly what they’re owed. Voyager intends to repay users with a mix of the crypto they deposited, stock in the restructured company, Voyager tokens and money recovered from bankrupt hedge fund Three Arrows Capital, court papers show. Three Arrows owes Voyager more than $650 million. Customers with U.S. dollar deposits in their accounts will be able to reclaim that money “after a reconciliation and fraud prevention process” is completed with Metropolitan Commercial Bank, according to a statement from Voyager. Voyager doesn’t keep user assets in designated wallets for each customer. It instead mixes deposited crypto into asset-specific pots, like ones for Bitcoin and Ether, according to court papers. The company has about $1.3 billion of crypto assets on its platform, it said in the statement.

Hundreds of SAS flights were canceled on Thursday as the airline wrestled with a strike by pilots at its main SAS Scandinavia arm, overshadowing a traffic surge during June, Reuters reported. Talks between the airline and pilots over a new collective bargaining agreement collapsed on Monday, prompting a strike which adds to travel chaos in Europe and deepens the financial crisis at SAS, which estimated it would ground half its flights. The troubled airline, whose biggest owners are the Swedish and the Danish states, filed for chapter 11 bankruptcy protection in the United States on Tuesday. The first hearing was due to begin at 1400 GMT in New York with SAS expecting the process to take between nine and 12 months. Tuesday's traffic figures highlighted what SAS was now missing in the peak summer period, with the airline flying 1.9 passengers in June, a 220% increase on the year. Data from flight tracker FlightAware showed 202 flights, 66% of the airline's daily total, were cancelled on Thursday. The Swedish pilots union said that the pilot associations had proposed making an exception for several weeks to SAS in order to repatriate stranded charter passengers. Charter companies have warned thousands of people could be stranded unless a solution for their return flights, which were due to be operated by SAS, could be reached.

Two creditors of TPC Group Inc. lost a bankruptcy court ruling on Wednesday, with a judge saying that the chemical business didn’t act improperly when loan documents were amended to change the pecking order of creditors, WSJ Pro Bankruptcy reported. Judge Craig Goldblatt of the U.S. Bankruptcy Court in Wilmington, Del., said TPC didn’t violate the rights of Cerberus Capital Management LP and Bayside Capital Inc., who combined own about 10% of TPC’s $930 million senior secured notes issued in 2019. TPC in 2021 and 2022 issued roughly $200 million in 10.875% notes senior to its 2019 notes and the transactions were backed by creditors holding most of the existing debt. The Houston-based company filed for bankruptcy protection in June with a restructuring agreement with most creditors. Cerberus and Bayside, who didn’t consent to the agreement, sued TPC shortly after its bankruptcy filing, arguing the company breached its credit agreements by layering new debt on top of the notes Cerberus and Bayside hold without their consent. The court concluded on Wednesday that the loan documents permitted the majority holders to amend the agreement to allow for the subordination of the old debt to the new notes, Judge Goldblatt wrote. “As a result, the debt now held by the majority holders is senior to that of the minority lenders,” he wrote.

Voyager Digital said that it had filed for bankruptcy, a week after the crypto lender suspended withdrawals, trading and deposits to its platform as it sought additional time to explore strategic alternatives, Reuters reported. In its chapter 11 bankruptcy filing yesterday, New Jersey-based Voyager estimated that it had more than 100,000 creditors and somewhere between $1 billion and $10 billion in assets, and liabilities worth the same value. "The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now," Voyager Chief Executive Officer Stephen Ehrlich said in a statement. In a separate message to customers on the company Twitter handle, Ehrlich said the process would protect assets and "maximise value for all stakeholders, especially customers". A filing with the U.S. Bankruptcy Court Southern District of New York showed that Alameda Research was Voyager's largest single creditor, with unsecured loans of $75 million. Voyager announced Alameda's investment in October, describing the deal as "a strategic alliance" with "a clear pioneer" in the crypto industry. At the same time, Alameda Co-CEO Caroline Ellison said the partnership offered "endless mutually beneficial opportunities to grow both our businesses." Last week, Voyager said that it had issued a notice of default to Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make required payments on a loan of 15,250 bitcoin (approximately $324 million) and $350 million worth of USDC, a stablecoin. Later that week, 3AC filed for chapter 15 bankruptcy, which allows foreign debtors to shield U.S. assets.