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FTX founder Sam Bankman-Fried allegedly used $100 million in funds he stole from his customers to make political campaign contributions ahead of the 2022 midterm elections, federal prosecutors wrote in a superseding indictment on Monday, The Hill reported. The prosecutors allege that Bankman-Fried embezzled customer deposits to, among other accusations, “help fund over a hundred million dollars in campaign contributions to Democrats and Republicans to seek to influence cryptocurrency regulation.” This comes just days after Judge Lewis A. Kaplan revoked Bankman-Fried’s bail and sent him to jail, saying that there was probable cause to suggest he had attempted to “tamper with witnesses at least twice” since his December arrest. He had previously been under house arrest as he awaits trial over allegations that he defrauded his investors and unlawfully diverted millions of dollars’ worth of cryptocurrency from FTX customers. The new charges in the superseding indictment allege that Bankman-Fried also directed two FTX executives to avoid political contribution limits and conceal where the money was coming from.

Crypto lender Celsius Network on Monday received a U.S. bankruptcy judge's permission to seek creditor approval for its bankruptcy plan, advancing a proposal to exit chapter 11 as a new entity owned by its creditors, Reuters reported. Judge Martin Glenn signed off on Celsius's disclosure statement and solicitation materials at a U.S. Bankruptcy Court hearing in Manhattan, saying Celsius had given creditors sufficient information to vote on the proposed restructuring. Some creditors oppose the plan, but the official committee appointed to represent junior creditors supports it and will recommend that Celsius customers vote in favor. New Jersey-based Celsius filed for chapter 11 protection in July 2022, one of several crypto lenders to go bankrupt following the rapid growth of the industry during the COVID-19 pandemic. Celsius had 600,000 customers who held about $4.4 billion in interest-bearing Celsius accounts when it filed for bankruptcy, according to court documents.

Prime Trust, a firm that bridged the crypto industry’s banking access and stored its assets, filed for bankruptcy protection late Monday, after facing a shortfall in customer funds, the Wall Street Journal reported. The company estimates that it has between 25,000 and 50,000 creditors. It listed assets of between $50 million and $100 million, and liabilities of between $100 million and $500 million, according to a court filing. The bankruptcy filing comes after a Nevada regulator filed a petition to place the company into receivership in June, pointing to a shortfall of roughly $83 million. Part of the shortfall stemmed from Prime Trust losing access to some crypto wallets that held customers’ digital assets in December 2021, Nevada regulators have said. The Las Vegas-based company said it intends to explore a number of options, including a potential sale of its assets and operations. It expects to continue paying wages and providing benefits to remaining employees. Prime Trust started catering to the nascent and volatile crypto industry in 2018. The company started catering to crypto clients in 2018, acting as a bridge with the banking system, which had largely shunned the nascent and volatile digital-asset industry. In addition to holding firms’ crypto assets, Prime Trust also helped clients stash dollars with its network of banking partners. When crypto exchange Binance.US struggled to find a bank for customer funds, Prime Trust acted as a stopgap.

Prosecutors in the criminal case against Sam Bankman-Fried, the founder of the collapsed cryptocurrency exchange FTX, on Monday provided the most detailed account to date of the evidence they plan to use to convict him at trial in October, the New York Times reported. In a 70-page court filing, the prosecutors said they would draw on testimony from some of Bankman-Fried’s closest advisers, as well as an expert witness and other employees of FTX and Alameda Research, a crypto hedge fund he also founded. The prosecutors also said that they planned to use notes that Caroline Ellison, one of Bankman-Fried’s top lieutenants, took after conversations with him, including a memo titled “Things Sam Is Freaking Out About.” And they said that they would introduce a recording of a meeting in which Ms. Ellison told Alameda employees that she had worked with Mr. Bankman-Fried to siphon funds from FTX customers’ accounts. Bankman-Fried, a onetime crypto mogul who built FTX into one of the world’s largest virtual currency exchanges, was arrested in December and charged with orchestrating a sweeping scheme to use customer deposits to finance real estate purchases, charitable giving and donations to politicians. Ellison and two other top FTX executives, Gary Wang and Nishad Singh, have pleaded guilty to participating in the effort and agreed to cooperate with prosecutors. Bankman-Fried faces seven charges of wire fraud, securities fraud, commodities fraud and money laundering. He has pleaded not guilty and is scheduled to go on trial on Oct. 2. Last week, he was sent to jail after the judge overseeing the case revoked his bail over allegations that he was trying to intimidate witnesses.

Israel-based fintech Vesttoo is seeking chapter 11 protection in a U.S. court which will enable it to pursue legal action against those responsible for a fake collateral scandal, it said in a statement yesterday, Reuters reported. Vesttoo — partly backed by Banco Santander's fintech venture capital arm Mouro Capital — has laid off staff, closed offices and appointed an interim chief executive following the discovery of fraudulent letters of credit used on its platform. Vesttoo provides insurers with access to so-called insurance-linked securities — an alternative form of reinsurance. These securities may be backed by collateral in the form of letters of credit. The company has conducted internal and external analysis of events leading up to the first report of a fraudulent letter of credit that was used in many transactions. Led by Mouro, Vesttoo last raised $80 million at a $1 billion valuation last October. In its bankruptcy filing, Vesttoo said that it had appointed law firm DLA Piper and financial adviser Kroll to represent the firm.

Hawaiian Electric Industries Co., which supplies roughly 95% of the state’s residents with power, traces its roots back to 1891, just a decade after King Kalakaua met Thomas Edison to see the incandescent light bulb. Now, the utility is facing what’s shaping up to be the biggest-ever test over its future, Bloomberg News reported. In just one day, relentless selling wiped more than a $1 billion from the company’s value as the stock plunged by a third in its biggest loss on record. Investors are dumping shares amid increasing scrutiny over power equipment as the possible source of the deadly Maui wildfire. Analysts are starting to raise questions over whether Hawaiian Electric, one of the smallest publicly traded U.S. utilities, will be able to withstand the pressure if it does end up being at fault. To be clear: no official cause of the fire, which has become the deadliest in the U.S. in more than a century, has been identified. And it could be weeks — even months — before any investigation is finalized. Still, lawsuits have already been filed against Hawaiian Electric amid reports of downed power lines that were knocked over by strong winds in the lead up to the blazes. Damages from the tragedy have so far reached more than $5.5 billion, according to federal estimates, an amount that dwarfs Hawaiian Electric’s market capitalization of about $2.4 billion as of Monday’s close.

The landlord of Chicago’s historic Clark Adams Building has filed for chapter 11 protection over a $29 million mortgage on the property, with the team that plans to redevelop it working to take ownership, The Real Deal reported. A venture led by local investor Musa Tadros submitted a bankruptcy petition in the federal Northern District of Illinois court on July 31, claiming that the entity that owns 105 West Adams Street has assets of less than $50,000, records show. The $178 million proposal from Chicago-based developers Celadon Partners and Blackwood Group would convert the Clark Adams Building’s upper floors, which are vacant office space, into 247 apartments, 185 of them affordable housing. Tadros has owned the building’s upper floors since at least 2006; the third through 10th floors are occupied by a Blackstone-owned Club Quarters business hotel, which is a distressed property itself and could be set up for a change in ownership after a recent transaction of mezzanine debt tied to the lodging portion of the tower. In 2020, lender First Midwest Bank filed a $23 million foreclosure suit against the Tadros-led venture that owns the office portion of the property, according to previously published reports. The property’s receiver put the more than 30 floors of the building Tadros owns up for sale in May 2022, but it hasn’t traded. A judgment of foreclosure was entered in the foreclosure case with First Midwest in December, online court docket records show, but it’s unclear when a lender-controlled sale may take place.

A durable medical equipment and supply company with a long history in the Tri-Cities has filed for chapter 11 protection, the Tri-City Business Journal reported. But Washington Medical Supplies Inc., known as Densow’s Medical Supplies, remains open for business and in fact has tripled its revenue in recent years, its co-owner said. “I’m hopeful for the future. I have an amazing team and we work as hard as we can every single day to ensure the success of the business,” co-owner Lisa Lewis said. “I’m looking forward to, in the next year, this being in the rear view. It will be a little blip as we move forward.” Lewis said that she and her business partner filed for bankruptcy as costs piled up dealing with billing errors made by the business’ former owners as well as ongoing litigation with those former owners. The COVID-19 pandemic also played a role, she said. Lewis and Paul Protzman bought Densow’s Medical Supplies at 1019 Wright Ave. in Richland in 2018. In making the purchase, “we brought some money to the table for the initial closing,” she said. In a move typical with those types of deals, “we did a holdback because we knew there were going to be some invoices that should have been paid by them that we’d have to pay on their behalf, and things like that. So then, at the one-year mark, we would work out what the difference is,” she said. But then they discovered billing errors, including patients without prescriptions on file, Lewis said. They hired auditors and had to pay back “tens of thousands” of dollars to Medicare, she said. In 2019, former owners Jonathan and Joelle Reynolds sued Lewis and Protzman in Benton County Superior Court, saying they still were owed $90,160 for the business, plus a 5% late fee and interest. They eventually were awarded more than $488,000 including those costs and attorney fees. Lewis and Protzman filed their own suit in 2022, alleging breach of contract, negligent misrepresentation and fraud. That case was dismissed; Lewis said it was because of legal errors, and they plan to re-file. In that case, the Reynoldses were awarded about $39,000 in attorney fees and interest.

Puerto Rico’s bankrupt power utility reached a tentative agreement with a “substantial number” of its bondholders, according to a federal oversight board, and received another week to finalize a potential deal to reduce nearly $9 billion of debt, Bloomberg News reported. U.S. District Court Judge Laura Taylor Swain on Thursday granted a request by the federally appointed board to postpone to Aug. 18 a deadline to file an amended debt-cutting plan. The board, which manages the bankruptcy, and some bondholders are working on the specific terms of a restructuring support agreement, according to the board’s motion seeking an extension. A potential debt deal between Puerto Rico’s Electric Power Authority, called Prepa, and its creditors would be a long-awaited and positive development in the utility’s six-year bankruptcy, which has been prolonged by hurricanes, the commonwealth’s own debt restructuring and the pandemic. “The oversight board is pleased to report it has reached an agreement in principle with a substantial number of holders of Prepa bonds to settle their respective claims against Prepa,” lawyers for the board wrote in Thursday’s court filing.

Yellow, a trucking company that filed for bankruptcy protection last Sunday, told a judge this week that it would fully repay the $729 million it owed the federal government by selling warehouses, trucks and other assets. But with its industry in a downturn, Yellow could struggle to get top dollar for its assets, the New York Times reported. Failure to pay back taxpayers in full would be an ugly conclusion to a three-year financial saga that began during the pandemic. The Trump administration handed a financial lifeline to Yellow, then called YRC Worldwide, in 2020, when the economy was in free fall and the company, which had been struggling before the coronavirus, was in danger of collapsing. Yellow’s most recent financial statements showed that its liabilities exceeded its assets by nearly $450 million at the end of June. But the company said this week that it expected to repay its debt to the government in full. The loan comes due in September 2024. The uncertainty about whether Yellow’s assets will be worth enough to pay the Treasury Department and private creditors does not surprise lawmakers and legal experts who have long raised questions about the company’s business and the federal loan granted to it.
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In related news, Yellow Corp. will extend negotiations on a bankruptcy loan until next week, seeking to explore at least two alternative loan proposals that would provide $142.5 million in new cash, the company's attorney said in court on Friday, Reuters reported. Yellow filed for bankruptcy on Sunday with a loan offer for that amount from private equity firm Apollo, a senior lender to the company before its bankruptcy. The trucking company said earlier this week it was seeking alternative financing from MFN Partners, an investment firm that owns 41% of Yellow's stock, and Estes Express Lines, a rival in freight trucking. Yellow is continuing to negotiate those offers, and it has received additional loan offers in the past few days, Yellow's attorney Pat Nash told U.S. Bankruptcy Judge Craig Goldblatt at a Friday court hearing in Wilmington, Delaware. Yellow will likely choose one of the loans, which are "much more favorable" than Apollo's initial proposal, by early next week, Nash said.
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