Judge Robert Drain, who retired from the U.S. Bankruptcy Court for the Southern District of New York last year, is joining Skadden, Arps, Slate, Meagher & Flom as of counsel, the law firm said Thursday, Reuters reported. Drain, who oversaw the bankruptcy of OxyContin maker Purdue Pharma LP and approved controversial legal protections for the Sackler family members that owned the company, will be part of the firm's corporate restructuring group in New York. In his 20 years on the bench in White Plains, New York, Drain oversaw chapter 11 bankruptcies of Sears Holdings Corp., Hostess Brands Inc., Windstream Holdings Inc., Frontier Airlines, the Minneapolis Star Tribune and Reader's Digest. Judge Drain was a partner at Paul, Weiss, Rifkind, Wharton & Garrison before joining the bench in 2002.
A terse Second Circuit order seems to mean that a stay of a confirmation order pending appeal granted in district court can’t be appealed to the circuit, at least when the appeal is being expedited.
Chicago’s Judge Cleary didn’t compel arbitration of an affirmative counterclaim by the debtor against the creditor that would be determined in the course of passing on the allowance of the creditor’s proof of claim.
Bankruptcy Judge Christopher Klein provides authority for student loan debtors who win in bankruptcy court but face an appeal aimed at the trial court’s fact-findings.
Consulting firm McKinsey & Co. is winding down its bankruptcy practice after numerous lawsuits and government investigations concerning the division’s work advising troubled borrowers, The Wall Street Journal reported. Some McKinsey partners who had previously focused on bankruptcy advisory work in the firm’s recovery and transformation services, or RTS, division have either been leaving the firm or pivoting to other kinds of work. A McKinsey spokesman said that RTS isn’t being shut down, and that while layoffs have been occurring among non-client-facing staff, it isn’t laying off consultants. “McKinsey RTS is a part of our broader transformation practice which continues to grow and serve clients around the globe,” said the spokesman, who confirmed that the company isn’t currently doing any chapter 11 engagements. McKinsey has faced years of private lawsuits and government probes into the firm’s work in the bankruptcy space, including whether it failed to disclose potential conflicts of interest and guard against insider trading involving companies the firm was advising. (Subscription required to view article.)
Sixth Circuit judges wrote 17 pages of dicta to muse on whether the ‘person aggrieved’ test for appellate standing died with the adoption of the Bankruptcy Code but remains good law under the ‘zone-of-interests’ test.
Hundreds of thousands of people around the world have been unable to access their funds after turmoil in the crypto industry took down some of its leading players. Along with FTX, crypto lenders Celsius, Voyager Digital, BlockFi, and Genesis Global Capital, as well as hedge fund Three Arrows Capital (3AC), all collapsed, leaving investors — from small traders to financial institutions — at the mercy of bankruptcy proceedings, Wired reported. These collapses, and the difficult situations that investors have found themselves in, have helped drive the growth of digital marketplaces for trading bankruptcy claims, which give speculators willing to wait out the legal cases a chance at large returns and cut-price exposure to crypto. Some, like Open Exchange, which is headed by the former founders of bankrupt hedge fund 3AC, are even trying to tokenize these claims, turning crypto failures into new tokens that holders can either sell off or post as collateral. Some claim holders accuse the marketplaces and buyers of taking advantage of distressed sellers. But with their money locked away, potentially for years, others are having to take the hard decision to sell their claims now for a fraction of their paper value. Buying claims in crypto bankruptcies is seen as a way to invest in crypto at a discount. Although each creditor’s claim is valued in dollars on the date of the bankruptcy filing, not denominated in crypto, the balance sheets of these firms are made up largely of crypto assets. Therefore, if crypto were to appreciate in price, claim holders would receive a greater return. In the case of Mt. Gox, the judge even decided that claim holders should share fully in the rise in crypto prices, meaning they are set to make a return of over 100 percent on their claims when redistribution begins on October 31. However, purchasing claims is not for the faint of heart, says Thomas Braziel, founder of 507 Capital, an investment company that specializes in distressed debt, which holds a large position in the Mt. Gox bankruptcy and others. Not only do creditors sometimes misrepresent the value of their claims, intentionally or otherwise — some people “fib around the edges,” says Braziel — but some claims turn out to be entirely fraudulent. Read more.
Don't miss the "Issues Impacting Unsecured Creditors in Crypto Bankruptcies" session at the Annual Spring Meeting in April. Are you registered?
