%1

FTX Group will recover about $404 million that its disgraced founder Sam Bankman-Fried allegedly transferred to the investment fund Modulo Capital, according to a proposed bankruptcy settlement made public yesterday, Bloomberg reported. The agreement adds to the slowly growing pot of money FTX has been trying to collect since the crypto firm filed bankruptcy last year. Modulo Capital, managed by Xiaoyun “Lily” Zhang and Duncan Rheingans-Yoo, got $475 million last year before FTX collapsed into bankruptcy amid fraud allegations, according to the settlement, filed Wednesday afternoon in federal court in Wilmington, Delaware. Modulo has no other money it could use to repay the funds, FTX said. The proposed settlement avoids an expensive lawsuit in which Modulo would fight FTX for the cash, according to court records. FTX said the deal is worth $460 million because it would bring in $404 million in cash and require Zhang and Rheingans-Yoo to drop claims they have against the company for $56 million. The agreement must be approved by Bankruptcy Judge John Dorsey.

Based on the “natural breadth of the passive voice” used in Section 523(a)(2)(A), the Supreme Court held yesterday in a unanimous opinion by Justice Amy Coney Barrett that a partner who herself was innocent of fraud is nonetheless saddled with a nondischargeable debt resulting from the fraud of her partner. The opinion is a reaffirmation of the Court’s holding in Strang v. Bradner, 114 U.S. 555 (1885). In a concurring opinion, Justices Sonia Sotomayor and Ketanji Brown Jackson endeavored to limit the scope of the holding by saying that they understood the outcome to be based on the existence of a partnership under state law. Read the full column.