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WeWork is planning to file for bankruptcy as early as next week in what would mark a stunning reversal for the flexible-office-space venture that was once valued at $47 billion, WSJ Pro Bankruptcy reported. New York-based WeWork is considering filing a chapter 11 petition in New Jersey. WeWork missed interest payments owed to its bondholders on Oct. 2, kicking off a 30-day grace period in which it needs to make the payments. Failing to do so would be considered an event of default. On Tuesday, the company said it has struck an agreement with the bondholders to allow it another seven days to negotiate with the stakeholders before a default is triggered. A spokesperson for WeWork pointed to a securities filing early Tuesday that “the forbearance agreement provides time to continue in the positive conversations with our key financial stakeholders and engage with them to implement our ongoing strategic efforts to enhance our capital structure." In August, the company shook up its board after three directors resigned due to a material disagreement regarding board governance and the company’s strategic direction, according to a securities filing. WeWork appointed four new directors with expertise in large, complex financial restructurings. Those directors have been negotiating with WeWork’s creditors over the past several months about a restructuring plan as they prepare for the bankruptcy.

Crypto exchange Bittrex received bankruptcy court approval on Monday to shut down its U.S. operations after a months-long effort to return crypto deposits to customers, Reuters reported. U.S. Bankruptcy Judge Brendan Shannon approved Bittrex's bankruptcy plan at a court hearing in Wilmington, Del., clearing the company to emerge from bankruptcy with a wind-down plan that would pay remaining creditors in full. Bittrex filed for bankruptcy protection in May, shortly after the U.S. Securities and Exchange Commission charged it with operating an unregistered securities exchange. Bittrex chose to shut down its U.S. operations and return assets to customers in the wake of the SEC complaint. It reached a $24 million settlement with the SEC in August. Seattle-based Bittrex said the bankruptcy filing would not impact Bittrex Global, which serves customers outside the United States. The company's non-U.S. operations are based in Liechtenstein.

Over and over on Tuesday, Sam Bankman-Fried, the founder of the failed FTX cryptocurrency exchange, denied knowing that billions of dollars in customer money had been misappropriated until shortly before his company collapsed last year, as a federal prosecutor grilled him for a second day in his criminal fraud trial, the New York Times reported. The 31-year-old onetime crypto mogul fumbled for an answer when the prosecutor, Danielle Sassoon, repeatedly asked whether he had told his employees not to spend FTX customer money on investments, pricey real estate and other expenditures. Mr. Bankman-Fried also couldn’t name any employees who might have authorized the use of FTX customer money for that spending. “I don’t recall giving any direction,” Mr. Bankman-Fried said three times about the spending of FTX customer money before he concluded his testimony. Both sides rested their case before lunchtime on Tuesday, with closing statements set to unfold on Wednesday. Mr. Bankman-Fried was on the stand for a third day testifying before a jury in his own defense for a trial that has come to symbolize the highs and lows of the volatile crypto industry. The entrepreneur has been accused of masterminding a yearslong fraud to steal as much as $10 billion from FTX’s customers and then funneling the money to extravagant real estate purchases and other spending, as well as using the funds to prop up a crypto trading firm he also founded, Alameda Research. FTX, which was valued at $32 billion at its peak, imploded spectacularly last year, leaving many customers unable to recover their deposits. Mr. Bankman-Fried has pleaded not guilty to seven counts of fraud, conspiracy and money laundering. If convicted, he could face what amounts to a life sentence.

In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales, CNBC.com reported. “The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.“ Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Banks lend to these weak firms in hopes that they can turn their trend of sinking sales around. “A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University. Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the COVID-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit. The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.

Small businesses account for close to half of U.S. private sector employment, so there’s always considerable focus on their prospects, especially during periods of rising interest rates and contracting credit. Smaller firms have fewer financing options than larger peers, and they’re much more exposed to variable-rate loans, making them something of a canary in the coal mine. No doubt, the recent run-up in interest rates makes 2024 a year to watch, but America’s smallest employers mostly seem to be tolerating the headwinds and can continue to tread water for awhile longer — just not indefinitely, according to a Bloomberg News commentary. Consider what’s happened so far this year. Small business bankruptcies within chapter 11 (specifically, Subchapter V elections) rose consistently in the first nine months of the year, giving the appearance of a deterioration in firm finances. But business failures were uniquely low during the COVID-19 pandemic thanks to extraordinary federal support. Some businesses survived that would otherwise have gone under even in the absence of the COVID disruptions. So it’s conceivable that part of the increase in bankruptcy activity is simply a reversion to “normal” levels from artificially compressed levels in 2021-2022. That doesn’t mean that small businesses are bulletproof, of course, especially after the recent run-up in borrowing costs. 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.

The New York judge overseeing Celsius Network LLC’s bankruptcy urged the U.S. Securities and Exchange Commission to move quickly in deciding if it will authorize the failed crypto lender’s plan to transform itself through chapter 11 into a publicly-traded Bitcoin mining firm, Bloomberg News reported. Judge Martin Glenn told an SEC lawyer during a Monday court hearing he hopes the regulator will go through its own decision-making process expeditiously because Celsius and its creditors have moved through chapter 11 relatively quickly. “The SEC will make whatever decision it believes is the correct one,” Judge Glenn said. “I just hope the process will move forward, so if there are any bumps in the road we can try and work those out along the way.” Judge Glenn is considering whether to approve Celsius’s plan to partially repay customers whose accounts have been frozen since June 2022, weeks before the company filed bankruptcy. Celsius’s bankruptcy plan proposes repaying customers through a combination of crypto currency and stock in a new publicly traded Bitcoin mining company guided by a new management team led by Arrington Capital. Celsius and creditors would still need clearance from the SEC if its proposal to transform the company into a new business is approved by Judge Glenn, according to court documents. The crypto firm could liquidate if its plan to exit chapter 11 as a crypto miner fails. Celsius’s repayment proposal, though widely supported by creditors, is being challenged by some of its customers. Customers who spoke Monday against the restructuring plan said they’d prefer liquidation because they’d receive more Bitcoin and Ethereum as opposed to stock in a new, unproven venture.

FTX founder Sam Bankman-Fried testified on Monday that the collapse of the cryptocurrency exchange was precipitated by the head of his Alameda Research trading firm failing to adequately hedge against a downturn in the market, Reuters reported. Testifying in his defense for a second day, the 31-year-old former billionaire said that he asked Caroline Ellison — chief executive of Alameda Research and his former romantic partner — to make trades that would offset the risk of falling cryptocurrency prices starting in mid-2022. Answering questions from his defense lawyer, Mark Cohen, Bankman-Fried said Ellison became emotional when he discussed the risk of Alameda — which had lent funds to FTX executives and invested in startup companies — going bankrupt. "She started crying," he said. "She agreed that Alameda should have hedged, she also said that maybe it shouldn't have made some of the venture investments." Ellison is one of three of Bankman-Fried's former close confidantes who pleaded guilty and testified for the prosecution. Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy. Prosecutors have said he looted billions of dollars in FTX customer funds to prop up Alameda, make speculative venture investments, and contribute to U.S. political campaigns. If convicted, he could face decades in prison.

Sunlight Financial Holdings Inc. filed for chapter 11 bankruptcy in the U.S. after arranging a deal to be bought by a solar energy industry investor group that includes a lender, Bloomberg News reported. The buyers include an affiliate of Greenbacker Capital Management, Sunstone Credit, IGS Ventures and secured lender Cross River Bank, according to a Monday statement from the company, which provides homeowner loans for rooftop solar panels. As part of their restructuring plan to reduce debt, the consortium would invest “significant” new capital, according to the statement. Sunlight also said it would seek an expedited in-court process, with suppliers and employees paid. In its Delaware bankruptcy court filing dated Oct. 30, Sunlight listed liabilities between $500 million to $1 billion, while assets were in the range of $100 million to $500 million. A bank loan for just over $1 million from Georgia’s Own Credit Union featured atop the list of unsecured claims. Sunlight went public through a merger in 2021 with a special purpose acquisition company backed by Apollo Global Management Inc. Its shares slumped this year after it flagged “substantial doubt” about its ability to continue operations. Investors sued Apollo and other architects of the blank-check merger earlier this year, claiming shareholders were duped into participating in a deal that made millions for insiders.

Texas law firm Jackson Walker said in court filings that it was an unbiased advocate for the businesses it was guiding through bankruptcy in recent years. It never mentioned that one of its bankruptcy lawyers at the time was in a romantic relationship with the judge overseeing at least two dozen of those chapter 11 cases, WSJ Pro Bankruptcy reported. Jackson Walker didn’t disclose that one of its law partners, Elizabeth Freeman, was living with bankruptcy judge David R. Jones, and didn’t correct its paperwork in the bankruptcy cases after learning of the couple’s relationship. The possible conflict of interest could have kept Jackson Walker off chapter 11 cases it filed in Houston’s bankruptcy court — and that earned the firm nearly $10 million in fees, The Wall Street Journal found through a review of court records. Judge Jones resigned from the bench earlier this month amid an official misconduct probe by the federal appeals court that appointed him after he confirmed his romantic relationship with Freeman to the Journal. Earlier this week, the Justice Department’s Office of the U.S. Trustee, which oversees the nation’s bankruptcy courts, said it has started to review Jackson Walker’s fee requests in light of Jones’s resignation. Jackson Walker told the Journal earlier this month that the firm in March 2021 first learned of an allegation that Freeman was in a relationship with Jones. Jackson Walker declined to comment on when it verified that the relationship was real and on the fee requests. It said in a court filing Thursday regarding a pending fee request that it “is working to evaluate and address the issues that have come to light over the past three weeks.”

FTX founder Sam Bankman-Fried told a jury Friday that he didn’t commit fraud and didn’t take customer funds, beginning his defense against criminal charges that he stole billions from his cryptocurrency exchange and spent the money on investments, political donations, and real estate, YahooFinance.com reported. He did, however, say that he "made a number of small mistakes and a number of big mistakes." His biggest mistake, he said, was not having a chief risk officer. "A lot of people got hurt," he said. His highly anticipated testimony began Friday morning with questions from his attorney Mark Cohen that attempted to address the heart of the government’s case against his client. Prosecutors have alleged that Bankman-Fried deliberately stole funds that belonged to FTX customers and secretly lent the assets to his crypto trading firm Alameda Research. They produced several key witnesses over the last month who corroborated those claims.