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After the cryptocurrency exchange FTX collapsed last year, bankruptcy lawyers, federal prosecutors and forensic investigators embarked on a global hunt to recover billions of dollars in lost deposits and repay the firm’s customers. One large chunk of money has been sitting for months in an interest-bearing account at JPMorgan Chase, the world’s largest bank. JPMorgan holds $400 million that FTX’s founder, Sam Bankman-Fried, invested in an obscure hedge fund, Modulo Capital, the New York Times reported. The founders of Modulo, which has drawn scrutiny from prosecutors investigating FTX’s implosion, are now negotiating the return of the funds with bankruptcy lawyers representing the exchange, said two of the people, who were not authorized to speak publicly. There is no indication that the Modulo founders did anything wrong, and they are looking for FTX to release them from certain legal liabilities in exchange for returning the money. Recovering $400 million from Modulo would be a major coup for FTX. Last month, FTX’s lawyers said they had located $5.5 billion in cash, securities and digital assets held in customer accounts or stored in other parts of the company. But that total includes a large stash of cryptocurrencies whose actual value is hard to determine, and the company’s lawyers say that FTX still has a significant shortfall in assets. Read more.

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A former FTX executive’s foundation made millions of dollars off the company’s digital tokens while he was its chief of staff and is now trying to eke out a bit more from a frozen account on the exchange, WSJ Pro Bankruptcy reported. While working at FTX and its closely tied trading firm Alameda Research, Ruairi Donnelly helped run a charitable foundation that promoted research in effective altruism and artificial intelligence, topics of shared interest to him and FTX founder Sam Bankman-Fried. One of the first employees at Alameda, Mr. Donnelly became the chief of staff of FTX as the exchange launched in 2019 and introduced its own currency called FTT, a digital coin for use on the new platform. At the time, FTX offered early employees like Mr. Donnelly a deal to buy its FTT tokens for 5 cents each, weeks before trading opened to the public at an initial price of $1. Donnelly took advantage of the company’s offer and requested that $562,000 of his salary be exchanged into FTT, worth the equivalent of 11.2 million tokens, according to his lawyer. FTX then sent the tokens at his request as grant to a Switzerland-based charity he co-founded, known today as Polaris Ventures, according to the foundation’s financial statements. The foundation made millions of dollars selling the tokens after they began trading publicly at $1 in 2019 and 2020, while Mr. Donnelly was still working at FTX, according to people familiar with the matter and the foundation’s financial statements.

A new judge has been assigned to oversee tens of thousands of lawsuits in New Jersey federal court against Johnson & Johnson over its talc products, two weeks after an appeals court rejected the company's plan to offload the claims into bankruptcy, Reuters reported. U.S. District Judge Michael Shipp, based in Trenton, will take over the long-running litigation from former Chief District Judge Freda Wolfson, who retired from the bench on Feb. 1, according to an order filed on Monday. The cases, numbering more than 38,000, had been on hold since October 2021, when a J&J subsidiary newly created to hold the talc liabilities filed for bankruptcy. Plaintiffs have said that J&J's Baby Powder and other talc products contain asbestos and caused cancer. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free. The company has said it will challenge the ruling by the Philadelphia-based 3rd U.S. Circuit Court of Appeals dismissing the bankruptcy, which it said was intended in good faith to resolve talc claims efficiently and equitably.

Biopharmaceutical company Sorrento Therapeutics Inc. has filed for bankruptcy weeks after being hit with judgments totaling more than $173 million in a licensing dispute with affiliates of billionaire health entrepreneur Patrick Soon-Shiong’s NantWorks LLC, WSJ Pro Bankruptcy reported. Sorrento filed for chapter 11 on Monday in the U.S. Bankruptcy Court in Houston, an action that immediately pauses NantWorks affiliates’ attempt to collect the judgments awarded over alleged breaches by Sorrento of an exclusive licensing agreement between the companies related to the development of anticancer immunotherapies. An arbitrator awarded NantCell Inc. and Immunotherapy NANTibody LLC the judgments in December, a decision confirmed last week by a Los Angeles Superior Court judge. NantCell was awarded more than $156.8 million and NANTIbody was awarded more than $16.6 million, according to U.S. Securities and Exchange Commission and bankruptcy filings. The judgments are part of a broader legal dispute between Sorrento, NantWorks affiliates and Dr. Soon-Shiong. In December, Sorrento was awarded $125 million in a separate arbitration with NantPharma LLC related to the development of the cancer drug Cynviloq. Sorrento said that before filing for bankruptcy that it faced significant disruption to its business because the NantWorks affiliates planned to immediately take steps to levy the company’s assets to satisfy the judgments it was awarded in the licensing dispute. Sorrento said in December that it believed the arbitration was wrongly decided and would explore its options for vacating the judgments.

The Roman Catholic Diocese of San Diego is warning it may have to file bankruptcy in the future because of the potential fallout from hundreds of pending lawsuits alleging sexual abuse by clergy over the last 75 years, the Los Angeles Times reported. The warning comes nearly 15 years to the day since the diocese last sought the sanctuary of the bankruptcy code, filing for chapter 11 reorganization in the face of 144 claims of sexual abuse by clergy. The bankruptcy was dismissed eight months later, after the diocese reached a settlement with the victims for $198 million. Now the diocese might have to go down the same path, said Keven Eckery, the communications director for the sprawling diocese of 1.3 million Roman Catholics in San Diego and Imperial counties. On Thursday night at a 90-minute meeting with priests from the 96 diocesan parishes, Cardinal Robert McElroy informed them of the possibility the diocese could again file for reorganization under chapter 11 of the Bankruptcy Code. Lawyers representing accusers criticized the move and said the diocese was trying to avoid or lessen its liability for clergy misconduct, as well as pressure plaintiffs into seeking a settlement. Irwin Zalkin, who represents about 120 of the 400 plaintiffs who have filed suits in San Diego Superior Court, said the diocese has enough assets to pay settlements. Zalkin represented hundreds of claimants in the 2007 cases and was instrumental in negotiating the final settlement.

The founders of failed hedge fund Three Arrows Capital Ltd. have resurfaced with a $25 million crypto-exchange venture that will let users trade bankruptcy claims from insolvent platforms and funds, including their own, the Wall Street Journal reported. Open Exchange, or OPNX, was created by Su Zhu and Kyle Davies — who set up Three Arrows together — and the two founders of crypto exchange CoinFLEX. The new platform is expected to launch by the end of this month, Mr. Su said. It has begun accepting applications from individuals who want to be among the first to trade their crypto claims; Mr. Su tweeted on Sunday that there were more than 3,600 sign-ups so far. U.S. residents are among those that aren’t eligible for the wait list, the company said. The company’s website said there is a $20 billion market of crypto claimants, and the exchange will allow creditors to convert their claims into cryptocurrencies to use them as margin collateral for crypto futures trading. Claims against Three Arrows Capital are among those that can be traded on the new exchange, in addition to claims against FTX, Genesis Global Capital, Celsius Network LLC and others, OPNX said. Further down the road, OPNX wants to introduce decentralized custody and clearing services and also stocks and foreign-exchange products, Mr. Zhu said in a tweet.

A U.S. judge on Thursday extended a ban on FTX cryptocurrency exchange founder Sam Bankman-Fried's ability to contact employees of companies he once controlled and use encrypted messaging technology while out on bail awaiting trial on fraud charges, Reuters reported. U.S. District Judge Lewis Kaplan on Feb. 1 had temporarily barred Bankman-Fried from contacting any current or former employees of FTX or Alameda Research, his hedge fund, after prosecutors raised concerns that the 30-year-old former billionaire may be trying to tamper with witnesses. As a condition of his release on $250 million bond, the judge also prevented Bankman-Fried from using messaging apps such as Signal that let users auto-delete messages. After rejecting an agreement between defense lawyers and prosecutors to loosen those conditions on Tuesday, Kaplan on Thursday said the restrictions would remain in place until Feb. 21 and instructed both sides to explain by Feb. 13 how they could be sure Bankman-Fried would not delete electronic messages.

FTX’s bankruptcy lawyers, legal and financial advisors have billed the company more than $19.6 million in fees for their work done in 2022, according to court documents unveiled on Tuesday, the Wall Street Journal reported. The law firms that billed FTX are Sullivan & Cromwell, Landis Rath & Cobb, and Quinn Emanuel Urquhart & Sullivan. Advisory firms Alvarez & Marsal and AlixPartners also billed the company, according to their applications for compensation.

A group of insurers fighting the Boy Scouts of America’s bankruptcy reorganization plan wants to capitalize on a recent court ruling rejecting Johnson & Johnson’s use of chapter 11 to freeze 40,000 lawsuits linking its talc products to cancer, WSJ Pro Bankruptcy reported. Allianz Global Risks US Insurance Co. and Liberty Mutual Insurance Co. are among the carriers scheduled to appear Thursday in the U.S. District Court in Wilmington, Del., to argue against a bankruptcy court’s 2022 approval of the Boy Scouts chapter 11 plan, which would settle tens of thousands of sexual abuse claims. Last week, they argued in written papers that the now-dismissed bankruptcy of J&J subsidiary LTL Management LLC could apply to the youth group as well. The appeals-court ruling against LTL said that debtors seeking protection in chapter 11 must demonstrate good faith by acting in conformity with the underlying principles of the bankruptcy code, according to the insurers’ recent letter. They have previously said the Boy Scouts plan seeks to inflate financial distress to provide a windfall for sex-abuse attorneys. “Good intentions — such as to protect the J&J brand or comprehensively resolve litigation — do not suffice alone,” the insurers’ letter said, quoting the LTL decision. Some insurers settled with the Boy Scouts, but those that are appealing the chapter 11 plan argue their contractual rights under the policies they issued the Boy Scouts or its affiliates were unfairly disregarded.

Bankrupt cryptocurrency lender Celsius Network’s request to extend the deadline to present its chapter 11 plan has run into opposition because of cash burn and the length of time already taken, Bloomberg News reported. The debtors are seeking to extend the period during which they can exclusively file a plan to the end of March from Feb. 15. They also want to be the only ones who can solicit a plan until the end of June. But the U.S. Trustee, the official committee of unsecured creditors and an ad hoc group of borrowers filed objections on Wednesday, expressing little confidence in the debtors’ ability to come up with a restructuring proposal. Celsius filed for bankruptcy in July after a sharp decline in crypto prices caused risky bets to backfire. The firm is one of a number of digital-asset lenders that hit the buffers in last year’s market rout. A court-appointed examiner late last month blasted Celsius and its former Chief Executive Officer Alex Mashinsky for lacking adequate risk management and misleading customers about its business practices and financial health.