Crypto platform Gemini Trust Co. is suing bankrupt crypto lender Genesis Global Holdco LLC in an attempt to determine who rightfully owns a slug of shares in the Grayscale Bitcoin Trust now worth nearly $1.6 billion, Bloomberg News reported. In a bankruptcy-court lawsuit filed Friday, Gemini asked a federal judge to find that Genesis has no right to more than 60 million GBTC shares promised as collateral to users of Gemini’s Earn product. The shares at issue — most of which are still held by Genesis or its affiliates — should not be used to repay other Genesis creditors, the company argues. The lawsuit comes just days after Genesis said it was dropping a proposed settlement with its parent company, Digital Currency Group, in favor of suing the firm. The settlement was a cornerstone of a debt-repayment plan that could have allowed Genesis creditors to recover between 70 and 90 cents on the dollar, according to Genesis. Gemini disputed those estimates. Through its new lawsuit, Gemini says it intends to clarify the value of its claims against Genesis and eventually tap the GBTC shares to repay its users.
Scilex Holding, a subsidiary of bankrupt drugmaker Sorrento Therapeutics, said it filed an emergency motion in bankruptcy court related to its allegations that possible naked short selling of Scilex has taken place, MarketWatch.com reported. The company is seeking "production of books and records from certain brokers, dealers, banks and other nominees." Scilex, which focuses on non-opioid pain management drugs, said earlier this month that it retained Warshaw Burstein and Christian Attar Law to investigate potential naked short selling and market manipulation.
The National Hockey League’s Arizona Coyotes said that bankrupt sports broadcaster Diamond Sports Group owes the team nearly $18 million following the termination of its telecast deal, Bloomberg News reported. Diamond has said that it needed to end the deal because its regional sports channel, Bally Sports Arizona, was losing money and telecast agreements with the state’s major professional teams were only getting more expensive. The team said in a bankruptcy court filing on Thursday that it was owed money. Terminating the Coyotes deal effectively ended Diamond’s broadcasting of Arizona’s major professional sports teams. Diamond ended its broadcast deal with Major League Baseball’s Arizona Diamondbacks earlier this year and stopped broadcasting the National Basketball Association’s Phoenix Suns after declining to match a competing offer. Earlier this month, the Coyotes announced a multi year agreement with Scripps Sports to broadcast its games locally on free TV channels. Diamond has said that rights fees it owed to the Coyotes “total tens of millions of dollars annually and increase yearly.” The hockey team’s claim for repayment is an unsecured debt which, in general, is repaid in chapter 11 for pennies on the dollar. Diamond filed chapter 11 in March and has been attempting to formulate a plan to get out of bankruptcy as the NBA and NHL regular seasons get underway.
The Miami-based parent company of charter airline iAero Airways and aviation maintenance firm iAeroTech, which combined employ 860 workers, is slated for bankruptcy auction, the South Florida Business Journal reported. iAeroAirways lists its headquarters as being located in Miami with its operational headquarters at Piedmond Triad International Airport in Greensboro, where it is believed to employ fewer than 100. The company was founded in 1997 as Swift Air, which iAero Group acquired and rebranded as iAero Airways in 2019. It operates a fleet of 42 aircraft. U.S. Bankruptcy Judge Robert A. Mark approved the auction and bidding procedures for AeroTech Miami on Oct. 17. The bid deadline is Dec. 1, the auction takes place Dec. 6 and a court hearing to confirm the auction result is scheduled for Dec. 13 in Miami. The minimum purchase price is $216.3 million, which represents the value of AeroTech’s secured loans with Synovus and BXC Bridge, an affiliate of Blackstone. Under the judge’s order, BXC Bridge is allowed to submit a credit bid, but it must include enough cash to repay the Synovus loans.
Johnson & Johnson faces at least 18 jury trials over the next year tied to claims of tainted talc in its iconic baby powder, prompting the company to consider a third bankruptcy filing in hopes of fostering a global settlement, Bloomberg News reported. J&J has talc cases set for trial everywhere from Pennsylvania to California between November and December 2024, some of which involve consolidated claims by more than a half-dozen plaintiffs, according to their lawyers. Those trials were scheduled after a judge in July threw out a J&J unit’s latest chapter 11 case aimed at resolving all current and future talc claims. Since 2016, J&J has been hit with at least $570 million in damage awards over talc-related cancer claims and paid out at least $2.5 billion in settlements, according to data compiled by Bloomberg.
A collection of bondholders and insurers of Puerto Rico Electric Power Authority (Prepa) debt are banding together in their opposition to the bankrupt utility’s proposal to slash its debt by 75%, Bloomberg News reported. GoldenTree Asset Management, Syncora Guarantee, Assured Guaranty and certain members of an ad hoc group of the power utility’s bondholders — which includes Invesco Advisers — entered a cooperation agreement where they pledge to work together against the agency’s potential debt-cutting plan, according to a court document. The amount of creditor opposition to Prepa’s restructuring plan is greater than those supporting it. GoldenTree and the other parties in the new agreement hold or insure more than 49%, or about $4 billion, of the utility’s roughly $8.3 billion of outstanding debt. That’s more than the $2.4 billion held by a investor group led by BlackRock Financial Management that has signed on to the debt-cutting proposal. The agreement between GoldenTree and others directs the firms to “cooperate and coordinate activities in good faith (to the extent practicable and subject to the terms hereof) with the other parties to support the parties’ efforts in connection with any potential transaction and opposition to the plan,” according to the court document filed Tuesday. The Prepa ad hoc group holds a combined $2.3 billion of Prepa debt, as of Oct. 1, and along with Invesco includes MacKay Shields, Goldman Sachs Asset Management and Alliance Bernstein, among other firms, according to a court document. The pact aims to prevent bondholders or insurers from striking their own deals with Prepa and Puerto Rico’s financial oversight board, which is managing the island’s bankruptcy cases. GoldenTree and others claim that the BlackRock group forged their own debt-cutting plan with the oversight board and excluded other creditors.
FTX founder Sam Bankman-Fried previewed a potential defense Thursday when he told a federal judge that he relied on the blessing of lawyers to make business decisions such as deleting communications and making loans to himself, actions that prosecutors said allowed him to commit the crimes that led to the implosion of his crypto exchange, the Wall Street Journal reported. Bankman-Fried, on trial for fraud, money laundering and other offenses, had been expected to testify in front of a Manhattan federal jury on Thursday afternoon. Instead, in what amounted to an unusual practice session after the jury was dismissed for the day, U.S. District Judge Lewis Kaplan required the FTX founder to walk through several subjects that were in dispute so the judge could rule on what Bankman-Fried could say to jurors. Wearing an oversize gray suit and purple tie, Bankman-Fried began steadily and confidently, walking through business decisions that he said were guided by legal advice. But the rehearsal quickly turned when the prosecution came out swinging. Under cross examination, Bankman-Fried testified that he couldn’t recall specific conversations with the lawyers who he earlier said had overseen bank accounts, loans and communication policies. He at times was evasive and stumbled while saying he didn’t remember key details of the alleged conduct in question. Assistant U.S. Attorney Danielle Sassoon pressed Bankman-Fried on whether he had proof of the involvement of certain lawyers. “Do you have any paper records of these consultations?” she asked. Bankman-Fried said he had requested such records but didn’t have them. Under other questioning, he said he had little knowledge of some inner workings of the company he created.
Verde Building Solutions Inc. filed for chapter 11 protection on Oct. 11, according to records from the U.S. Bankruptcy Court for the Western District of North Carolina, the Charlotte Business Journal. In the filing, the company's assets were estimated to be between $500,001 and $1 million. Its liabilities, or potential financial obligation or debt owed in the future, were listed between $1 million and $10 million. The company's secured and unsecured debt is less than $7.5 million, not including debts owed to insiders or affiliates, the filing shows. That allowed Verde to file for bankruptcy under subchapter five, which doesn't require it to receive creditors' approval for its repayment plan. The company was founded in 2013, according to state business corporation records. Verde president Ron Staley is also behind Verde Homes. That company, founded in 2014, builds semi-custom, economically friendly homes and also does residential construction complex remodels and additions. Its portfolio includes six townhome/residential communities in Charlotte and one in Raleigh. In May 2019, Verde Homes received pushback from residents on a plan to develop a dozen age-restricted homes on Sardis Road, between Oak Creek and Creek Valley drives. Staley said at the time that the project would allow older residents to age in place. But community members argued it didn't align with approved plans and policies for that area or the city. The petition was eventually withdrawn. Verde Building Solutions will remain in possession of its properties and the management of its business during the bankruptcy proceedings, according to the filing.
FTX founder Sam Bankman-Fried has decided to testify in his own defense, a legal gamble that sets up a dramatic conclusion to his criminal trial in New York City, YahooFinance.com reported. The 31-year-old, who pleaded not guilty to seven counts of fraud and money laundering, has sat silently at his Manhattan trial for the last three weeks while prosecutors outlined their version of what happened to $8 billion in missing FTX customer deposits. He could take the stand as early as today, when the trial is scheduled to resume. His attorneys reportedly told U.S. District Judge Lewis Kaplan on Wednesday that Bankman-Fried would testify. Once Bankman-Fried takes the witness stand he opens himself up to significant risk because he can be cross-examined "extensively," said Northwestern University criminal law professor Juliet Sorensen. The government, which is expected to rest its case as soon as Thursday, alleges that FTX customers couldn't withdraw their money during the exchange's final days in November 2022 because Bankman-Fried had allowed his crypto trading fund, Alameda Research, to spend it. That claim was backed up by testimony from friends and former classmates Bankman-Fried hired for top jobs at FTX and Alameda. Some of those executives pleaded guilty to multiple felonies and agreed to testify against him. Read more.
In related news, Prices for FTX Group claims shot higher after an adviser to the failed crypto conglomerate said it is considering proposals from three bidders for its currently shuttered exchange, Bloomberg News reported. Cherokee Acquisition, which brokers bankruptcy claims, is now quoting larger FTX claims between 50 and 53 cents on the dollar, according to founder Vladimir Jelisavcic. Prices were in the low-to-mid 40 cents range last week. FTX claim prices have been rising relatively steadily in the year since the crypto empire collapsed into bankruptcy and advisers began recovering billions of dollars in assets. Major hedge funds have also been buying and selling the claims, which range from the rights to FTX accounts to the damages owed as a result of an abandoned contract. On Tuesday, FTX investment banker Kevin M. Cofsky said in court that the company is engaging with “multiple parties every day.” Options under consideration include selling the entire exchange, bringing in a partner to help restart the exchange or rebooting it by itself. Read more.
Crypto lender Genesis Global is pursuing a chapter 11 liquidation plan that abandons a previous settlement proposal to restructure the $1.7 billion in loans it extended to its parent company Digital Currency Group, WSJ Pro Bankruptcy reported. Genesis filed court papers Wednesday for a plan to exit from chapter 11 without a resolution of its claims against DCG, the crypto conglomerate founded by finance veteran Barry Silbert. Genesis is now preparing to liquidate its assets without the settlement proposal reached in August that intended to deliver estimated recoveries of between 70% to 90% for Genesis customers, including users of crypto exchange Gemini Trust’s Earn program. The settlement proposal didn’t get the support of key stakeholders, notably Gemini and its founders, the Winklevoss brothers, and the parties had been in continuing negotiations. Ultimately, Genesis was unable to reach an agreement with DCG on final debt terms, Genesis said in filings with the U.S. Bankruptcy Court in New York. And last week, New York Attorney General Letitia James filed a lawsuit against Gemini Trust, Genesis and DCG for allegedly defrauding more than 230,000 investors of more than $1 billion. In light of the lawsuit, Genesis and the official committee representing its customers determined that a settlement with DCG isn’t a viable route, Genesis said in the filings.
