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Bankruptcy Judge David R. Jones resigned from the bench while under a misconduct investigation by a federal appeals court over his failure to disclose his yearslong romantic relationship with a bankruptcy lawyer who had business before his court, WSJ Pro Bankruptcy reported. Judge Jones’s resignation from the U.S. Bankruptcy Court in Houston comes after the appellate court that appointed him found probable cause that he committed misconduct by failing to disclose his romantic relationship with bankruptcy lawyer Elizabeth Freeman. Jones told the Wall Street Journal earlier this month that he and Freeman have been in a relationship for years and live together at a home in the Houston area. Neither Judge Jones nor Freeman had previously disclosed their relationship in court while Freeman worked on major corporate reorganizations that he oversaw. “I have always said that the bankruptcy process should be about the participants and the preservation of jobs,” Jones said on Sunday. “I have become a distraction to the good work that the court does. To end that distraction and hopefully return focus, I have resigned.” The bankruptcies that Freeman worked on and that Judge Jones oversaw included some of the largest chapter 11 cases of recent years, such as retailers JCPenney and Neiman Marcus and oil-and-gas driller Chesapeake Energy. In each of those cases and others, Freeman, then a partner at the Texas law firm Jackson Walker, billed hours along with her colleagues for their work representing the companies in bankruptcy, according to chapter 11 records. Judge Jones approved more than $1 million in legal fees billed by Freeman over 16 corporate bankruptcy cases from 2018 to 2021 when they shared an address. Judge Jones had said in a Friday court hearing that he would step down from overseeing large corporate reorganizations, though didn’t say at the time that he was resigning from the bench. Judge Jones faces an ethics investigation by the U.S. Court of Appeals for the Fifth Circuit, which appointed him to the bench in 2011. On Friday, the chief justice of the Fifth Circuit U.S. Court of Appeals filed a complaint against Jones, finding that there was probable cause he had committed misconduct by failing to disclose his relationship with Freeman.

The U.S. Supreme Court agreed to hear a case in which an insurance company is challenging a bankruptcy reorganization plan that it says doesn’t protect it against fraudulent claims tied to asbestos exposure, WSJ Pro Bankruptcy reported. Truck Insurance Exchange is seeking to overturn a ruling by a U.S. appeals court that rejected the insurer’s challenge and allowed the bankruptcy reorganization plan of defunct cement maker Kaiser Gypsum to go forward. The insurer’s opposition centered on arguments that the Kaiser Gypsum bankruptcy plan would allow asbestos injury plaintiffs to pursue fraudulent claims against its policies. Insurance companies have made similar arguments in bankruptcy cases of the Boy Scouts of America and some Catholic dioceses involving sexual-abuse claims. Insurers have appealed the Boy Scouts of America’s bankruptcy settlement, and are challenging the plan put forward by the Diocese of Camden in New Jersey over similar issues.

Cybersecurity company IronNet, founded by a former director of the U.S. National Security Agency, has filed for bankruptcy protection in Delaware, seeking to sell its assets, Reuters reported. Bankruptcy Judge Brendan Shannon on Friday signed off on some of the company's initial steps in bankruptcy during a court hearing, including approving an agreement that would restore the company's access to customer data and other key information held by Amazon Web Services. The McLean, Va.-based company, which filed for chapter 11 on Thursday, had terminated its 104 employees and shut down operations on Sept. 29 after a series of setbacks including a shareholder lawsuit, delayed payments from foreign government clients, difficulties finalizing new client contracts, and the termination of key cloud computing services provided by Amazon Web Services. "Simply put, the company ran out of money," IronNet president and CFO Cameron Pforr wrote in court documents. IronNet, which owes about $35 million to its creditors, initially believed it would have to pursue a chapter 7 liquidation, according to its court filings. But two bidders stepped forward to fund a chapter 11 restructuring that would allow for a more orderly sale of its assets. IronNet intends to fund its bankruptcy with a $10 million loan provided by IT networking company ITC Global. That loan would be converted into company equity if no buyer steps forward during the bankruptcy, according to court documents. IronNet will use the loan proceeds to conduct an auction of its assets, restore its cloud computing services, re-hire terminated employees, and continue to serve its customers. The company intends to complete a bankruptcy sale within 90 days.

Rite Aid filed for bankruptcy on Sunday in New Jersey, unable to find the money to settle hundreds of federal, state and private lawsuits alleging it oversupplied prescription painkillers, WSJ Pro Bankruptcy reported. The filing puts all those suits on hold. As part of the restructuring, the company will close more of its 2,100 stores and name a new chief executive. Its collapse imperils some of the roughly 47,000 jobs at the company, which just celebrated its 61st anniversary. Lenders will provide the company with about $200 million in new financing as part of a plan to restructure more than $3 billion of existing debt in chapter 11. MedImpact, a pharmacy benefit management firm, has offered to buy Rite Aid’s Elixir segment for $575 million, though an auction will be held to see if Rite Aid can find a higher bid. Jeffrey Stein, head of a financial advisory firm, will take over as Rite Aid’s chief executive. The drugstore chain’s current interim CEO Elizabeth Burr will remain on the board. The company faces a Justice Department complaint that Rite Aid pharmacists filled opioid prescriptions despite clear “red flags.” The DOJ alleged that Rite Aid ignored evidence that its stores were dispensing unlawful prescriptions, deleted internal notes about suspicious prescriptions and directed managers to tell pharmacists “to be mindful of everything that is put in writing.” Rite Aid has denied the allegations.

Wireless spectrum venture Ligado Networks is preparing to file for bankruptcy within weeks after negotiations with the U.S. over a multibillion-dollar claim asserted by the company fell apart, WSJ Pro Bankruptcy reported. Ligado is expected to file for chapter 11 because it can’t pay off or refinance some $4 billion in debt that comes due in November, these people said. Ligado had hoped for a last-minute infusion of capital from the government, which the company has long accused of improperly blocking it from commercializing a valuable block of wireless spectrum. But the company instead sued the government for $39 billion on Thursday after the negotiations failed to produce a settlement. Ligado is now preparing a restructuring that would wipe out much or all of the company’s debt and replace it with tranches of preferred and common equity, people familiar with the company’s plans said. The company set the restructuring in motion earlier this year, aiming to allow for commercial deals involving its satellite service with a leaner balance sheet free of imminent debt obligations.

RVL Pharmaceuticals said several of its operating subsidiaries are filing for bankruptcy in a prepackaged deal with lender Athyrium Capital and other key stakeholders, WSJ Pro Bankruptcy reported. The reorganization will give the RVL subsidiaries a pathway to reduce their debt, streamline operations and position themselves under new ownership. RVL will wind down all operations aside from the three subsidiaries that are reorganizing. Shares of RVL will be canceled once the wind-down is finished, expected next year. The company said there will likely be no recovery for public shareholders. Through the reorganization, Athyrium will exchange its outstanding debt into equity in the newly formed entity. The operating subsidiaries that will reorganize are: RevitaLid Pharmaceutical, RVL Pharmaceuticals and RVL Pharmacy.

Envision Healthcare, which is backed by private equity firm KKR & Co and provides outsourced emergency department services to hospitals, on Wednesday received U.S. bankruptcy court approval to split into two companies and cut over $7 billion in debt, Reuters reported. Bankruptcy Judge Christopher Lopez approved Envision's restructuring at a court hearing in Houston. Lopez commended Envision's bankruptcy lawyers for putting together an "incredibly complex" financial transaction while minimizing disruption to patients needing emergency care and the more than 20,000 doctors employed by Envision. "At the end of the day, this is going to remain a viable business, and those people have not been forgotten," Judge Lopez said. The bankruptcy restructuring will split Envision Healthcare into two separate companies, Envision Physician Services (EVPS) and AMSURG. EVPS will focus on providing doctors to hospital emergency rooms, intensive care units and birthing suites, while AMSURG will operate outpatient surgery centers specializing in gastroenterology, ophthalmology and orthopedic care.

Party City Holdco completed its restructuring and exited from chapter 11 bankruptcy, WSJ Pro Bankruptcy reported. The celebrations and party goods retailer said it eliminated nearly $1 billion in debt, enhanced its liquidity and optimized its store portfolio after negotiations resulted in improved lease terms. The company also exited from less productive stores. It plans to move forward with about 800 locations nationwide. Party City’s restructuring, approved by the U.S. Bankruptcy Court for the Southern District of Texas in September, resulted in a new exit ABL facility of $562 million and a $75 million new money investment to fund go-forward operations and distributions. In connection with the completed restructuring, Chief Executive Brad Weston intends to step down on Nov. 3. Sean Thompson, currently president and chief commercial officer, will transition to interim CEO.

The co-founder and former chief executive officer of Voyager Digital Ltd. broke derivatives rules while at the helm of the crypto lender, leading to its bankruptcy and $1.7 billion in customer losses, U.S. regulators alleged yesterday, Bloomberg News reported. The Commodity Futures Trading Commission filed a lawsuit against Stephen Ehrlich in US federal court in New York, claiming he and Voyager “fraudulently solicited participation in and operated a digital asset trading and custody platform.” The agency accused the firm of luring customers with promises of returns as high as 12% on certain crypto holdings and making misleading statements about the platform’s safety. Through those enticements, Voyager facilitated billions of dollars worth of transactions involving digital assets that were commodities, including Bitcoin and Circle’s USD Coin, according to the CFTC. Voyager was one of the dominoes to fall in 2022’s crypto chaos. The industry is still reeling from the tumult, which culminated in the collapse of crypto trading giant FTX. The criminal trial of FTX’s co-founder, Sam Bankman-Fried, began last week in New York.