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Johnson & Johnson faces an uphill battle to salvage its strategy for settling roughly 40,000 cancer lawsuits concerning its talc-based products through a subsidiary’s bankruptcy after a court rejected the company’s tactic, WSJ Pro Bankruptcy reported. The ruling by the U.S. Court of Appeals for the Third Circuit dismissed the chapter 11 case of J&J’s talc subsidiary, LTL Management LLC, and could force the consumer health giant to resume defending the mass personal injury lawsuits against it on a case-by-case basis, rather than through a single bankruptcy proceeding. J&J has long maintained its talc products are safe and won a majority of trials over the talc allegations. J&J has said that it would challenge the appeal’s court’s ruling. J&J has some avenues to challenge the decision dismissing LTL’s case, authored unanimously by a three-judge panel on the Third Circuit. The company has the right to ask all of the judges sitting on the appeals court to weigh in, a request that litigants often make in high-stakes cases. More than 20 appellate judges sit on the Third Circuit, according to the court’s website. It’s up to the Third Circuit to decide whether all of the judges on the appeals court will reconsider LTL’s case. The company can also request a stay of Monday’s ruling while appealing further.

A U.S. judge on Wednesday temporarily barred FTX founder Sam Bankman-Fried from contacting current or former employees of the cryptocurrency exchange or his Alameda Research hedge fund, and from using encrypted messaging tools including Signal, Reuters reported. The ruling by U.S. District Judge Lewis Kaplan came after federal prosecutors in Manhattan said Bankman-Fried might tamper with witnesses or destroy evidence in his criminal fraud case. He was arrested in December on charges of looting billions of FTX customer funds, and lying to investors and lenders. Prosecutors last week cited a Signal message Bankman-Fried sent on Jan. 15 to the general counsel of the FTX U.S. affiliate, referred to in court papers as "Witness-1." Bankman-Fried proposed the two speak on the phone to try to "have a constructive relationship" or "vet things with each other." Bankman-Fried, 30, has been under house arrest at his parents' California home after pleading not guilty. His lawyers said last week that his efforts to contact the general counsel the company's current chief executive, John Ray, were attempts to offer "assistance" and not to interfere.

Johnson & Johnson‘s loss in a federal appeals court over baby-powder litigation could force the health-products company to defend thousands of lawsuits case by case, just as it navigates the biggest restructuring in its 137-year history, the Wall Street Journal reported. The decision by the U.S. Court of Appeals for the Third Circuit rejecting J&J’s efforts to use bankruptcy proceedings to handle talc-related lawsuits means the company won’t be able to resolve the allegations as soon as it could have and in a single court, according to legal experts and analysts. It could also deter other companies from trying the same legal tactic, the legal experts said. For J&J, the ruling could mean it will have to contest the lawsuits in state and federal courts, and the litigation will probably take years longer as cases would revert to standard civil proceedings in each of the courts, the legal experts and analysts said. It could also raise J&J’s talc-settlement costs to as much as $10 billion, according to Wells Fargo analyst Larry Biegelsen. Neal Katyal, outside counsel for the J&J subsidiary, LTL, said the appellate ruling turned on the view that LTL didn’t meet a technical requirement of facing sufficient financial distress. “But the current situation, with a significant volume of current and future claims, and a plaintiff bar business model primed to generate more, is exactly the sort of ongoing and future financial distress that courts have recognized as serving a valid bankruptcy purpose,” he said. “The same conclusion should have been reached here.”

Alameda Research Ltd., Sam Bankman-Fried’s defunct crypto trading house, is seeking to claw back about $446 million from bankrupt digital asset lender Voyager Digital Ltd, Bloomberg News reported. The funds are related to cryptocurrency loans Voyager provided to Alameda before Voyager filed for bankruptcy in July. Alameda repaid the loans shortly before its own bankruptcy filing, so it’s trying to get the funds back using bankruptcy rules designed to ensure some creditors aren’t favored over others, court papers show. Alameda may uncover additional payments it wants to recover while the lawsuit unfolds, its lawyers said in court papers. Voyager and Alameda are deeply intertwined. When Voyager filed for bankruptcy, court papers showed Alameda lent to Voyager, borrowed from it and was one of its largest shareholders. FTX, the crypto exchange portion of Bankman-Fried’s empire, was slated to buy Voyager out of bankruptcy prior to the exchange’s November implosion. “Largely lost in the (justified) attention paid to the alleged misconduct of Alameda and its now-indicted former leadership has been the role played by Voyager and other cryptocurrency ‘lenders’ who funded Alameda and fueled that alleged misconduct, either knowingly or recklessly,” lawyers for Alameda wrote in its complaint, filed Monday in bankruptcy court.

When Jean Chalopin applied to buy a tiny bank in Washington state nearly three years ago, he made modest promises to bring not-so-new innovations such as ATM cards to a place with few local banking options. Farmington State Bank’s business plan wouldn’t change, Chalopin, a onetime TV and film producer who co-created the “Inspector Gadget” cartoon, assured federal regulators in documents viewed by the Wall Street Journal. But it wasn’t long before the bank got a new name, Moonstone, and new target customers in the high-risk cryptocurrency and cannabis industries. It also got a new shareholder: Sam Bankman-Fried’s crypto-trading firm, Alameda Research LLC. Alameda paid $11.5 million for a stake in Moonstone at a roughly $115 million valuation, which was 37 times the $3.1 million Mr. Chalopin paid for the bank 18 months earlier. Executives from Mr. Bankman-Fried’s crypto exchange, FTX, discussed using the bank to offer interest-bearing crypto accounts and lend out depositors’ digital assets. Bankman-Fried’s crypto empire collapsed in November, thrusting the little-known bank into the spotlight. Lawmakers are pressing for information about whether Alameda used FTX customer funds to pay for its stake in the bank. Mr. Chalopin, a pair of Democratic senators noted in a letter to banking regulators in December, chairs Deltec International Group, the crypto-friendly Bahamian bank with close ties to FTX. Last week, the new management team steering FTX through bankruptcy asked a judge to approve a subpoena for records related to Moonstone from Mr. Bankman-Fried and other FTX insiders. The Justice Department in early January seized about $50 million that an FTX entity held at Moonstone — about 77% of the total deposits the bank reported holding at the end of 2022. Moonstone said it is getting out of crypto and cannabis and returning to its community-banking roots.

Madonna sang the praises of nonfungible tokens, or NFTs, depicting cartoon portraits of bored apes. Tampa Bay Buccaneers quarterback Tom Brady appeared in commercials endorsing crypto exchange FTX, which collapsed suddenly in November. And Kim Kardashian gushed about EMAX tokens on Instagram. Now they and other celebrities are facing civil lawsuits from investors who suffered losses on virtual assets, as well as scrutiny by regulators for allegedly duping the investing public, the Wall Street Journal reported. The legal actions, which have prompted some agents to caution their clients against financial endorsements, could clarify the ground rules for crypto promotions, as well as the hurdles investors must clear to hold promoters liable when investments go south. “Promoting a company and promoting a security issued by a company are not necessarily the same thing,” said Tibor Nagy Jr., an attorney who represents both plaintiffs and defendants in the cryptocurrency space. “We should expect judicial guidance and clarity on the rules of the road for celebrities in the next few months.” The use of celebrity promoters heated up in 2021 during the massive bull run in crypto. Last year, celebrity crypto ads filled prominent slots in the Super Bowl, the largest marketing event of the year. Lawyer Sean Masson, of law firm Scott + Scott, who has filed several proposed class-action suits, said celebrities found they could be compensated simply for touting a token, without realizing their legal obligations under federal and state rules governing endorsements and compensation.

Celsius Network LLC used customer funds to cover shortfalls in its obligations to pay lofty yields and to prop up the value of its CEL token while some company insiders were cashing out, according to an examiner’s probe into the crypto lender’s practices before its collapse last year, WSJ Pro Bankruptcy reported. Celsius sold customers’ Ethereum and bitcoin to fund purchases of the firm’s proprietary CEL token since it wasn’t earning enough yield through its various investment activities to cover obligations under its flagship customer offering, according to the report by Shoba Pillay, the examiner appointed to probe the firm’s business practices. The increasing price of the CEL token made it possible for Celsius insiders to make millions of dollars selling it before Celsius went bankrupt, the examiner’s report found. Celsius founders Alex Mashinsky and Daniel Leon sold a substantial portion of their holdings of the native digital coins, realizing at least $68.7 million and at least $9.7 million respectively, between 2018 and when Celsius filed for bankruptcy in July, according to Tuesday’s report.

H2 Brands Group, a wholesaler of home and hardware products including fans, humidifiers and paint supplies, said it has filed for bankruptcy due to supply-chain problems, vendor lawsuits and potential liabilities from a deadly 2022 fire in New York City, WSJ Pro Bankruptcy reported. The Cranbury, N.J.-based company, which counts Target Corp., Dollar General Corp. and Family Dollar Stores Inc. among its customers, has total debt of roughly $100 million and plans to sell its assets in chapter 11. Its revenue fell to $256 million last year from $325 million in 2021, according to a document filed Monday in the U.S. Bankruptcy Court in Wilmington, Del. Supply-chain problems have played a role in the company’s financial problems, Chief Executive Mark Rostagno said in a sworn declaration. The amount of time needed to receive products from China has increased more than fourfold to 150 days during the pandemic, H2 Brands said. In response, the company said it placed bigger orders so it wouldn’t be caught short of inventory, increasing its financial obligations. H2 Brands said the cost of ocean containers has risen to an average of $8,800, up from roughly $2,500 before the supply-chain disruptions. The company said it also faces claims related to a fire in a Bronx apartment building that killed 17 people last year, one of the deadliest blazes in New York City in decades. Fire investigators said a space heater distributed by the company was a factor in the fire. H2 Brands has disputed the claims.

On direct appeal, the Third Circuit reversed the bankruptcy court and directed dismissal of the petition filed by LTL Management LLC, the subsidiary of Johnson & Johnson created to file in chapter 11 to deal with talc and asbestos claims arising from the sale of Johnson’s Baby Powder, according to today's edition of Rochelle's Daily Wire. In his 40-page opinion yesterday, Circuit Judge Thomas L. Ambro held that “resort to Chapter 11 is appropriate only for entities facing financial distress.” LTL did not qualify because it has a $61.5 billion backstop from another J&J subsidiary and from the ultimate J&J parent. Judge Ambro said that the parent has $400 billion in equity value, a AAA credit rating, plus $31 billion in cash and marketable securities. He also noted that the parent had distributed $13 billion to shareholders in 2020 and 2021. Judge Ambro pointedly declined to rule on whether LTL improperly used chapter 11 as a “litigation tactic.” Unless the debtor is in “financial distress,” this writer reads the opinion to mean that debtors may not justify the use of chapter 11 by contending that it’s superior to the tort system or multidistrict litigation in federal courts.

Bankrupt crypto lender Celsius Network used investor money and customer deposits to prop up its own token, inflating its balance sheet while two of its founders cashed out millions, a U.S. court-ordered examiner report released today showed, Reuters reported. Crypto lenders such as Celsius boomed during the COVID-19 pandemic, drawing depositors with high interest rates and easy access to loans. New Jersey-based Celsius filed for U.S. bankruptcy in July last year, after freezing customer withdrawals from its platform. Bankruptcy Judge Martin Glenn, who is overseeing the chapter 11 case, appointed former prosecutor Shoba Pillay as an independent examiner in September. She was tasked with investigating accusations by Celsius customers that the company operated as a Ponzi scheme and also with reporting on its handling of cryptocurrency deposits.