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Federal prosecutors are scrutinizing a growing array of people tied to Sam Bankman-Fried’s collapsed cryptocurrency empire, including his father, his brother and former colleagues, as part of a rapidly expanding investigation into one of the biggest American financial crime cases in more than a decade, the New York Times reported. The U.S. attorney’s office in Manhattan has created a special task force to pursue its investigation into the collapse of FTX, the crypto exchange founded by Mr. Bankman-Fried. More than half a dozen prosecutors, led by Damian Williams, the U.S. attorney for the Southern District of New York, are building the criminal case and tracking down the billions of dollars in customer money that Mr. Bankman-Fried has been charged with misappropriating. In recent weeks, prosecutors have had talks with lawyers representing a dozen former executives and employees at FTX and Alameda Research, the hedge fund Mr. Bankman-Fried also founded. Prosecutors have also examined the role of Mr. Bankman-Fried’s family members in his business empire. The collapse of FTX has forced virtually everyone in Mr. Bankman-Fried’s immediate orbit to seek legal counsel as the investigation intensifies and prosecutors weigh bringing more charges. Defense lawyers at the law firms Mayer Brown, Steptoe & Johnson, and Covington & Burling each represent multiple former FTX executives who may have information to contribute. The FTX investigation could also ensnare companies that either received money from the exchange or lent it funds. The collapse of FTX last year set off a crisis at the crypto lending firm Genesis, which was recently charged with securities law violations by the S.E.C. And in late January, a bipartisan group of senators sent a letter to Silvergate, a bank that did business with FTX, asking company officials whether they were aware of the exchange’s misuse of customer money.

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.

Former plaintiffs’ personal injury lawyer Thomas Vincent Girardi has been indicted by a federal grand jury for allegedly embezzling more than $15 million from several of his legal clients, the Justice Department announced yesterday in a press release. Girardi, who owned the downtown Los Angeles-based Girardi Keese law firm, is charged with five counts of wire fraud, a crime that carries a statutory maximum sentence of 20 years in federal prison. Girardi, a once-powerful figure in California’s legal community until creditors forced his law firm into bankruptcy in December 2020, is expected to appear on Monday, February 6 at the United States District Court for arraignment. The State Bar of California disbarred Girardi in July 2022. Also charged in the indictment unsealed today is Christopher Kazuo Kamon, who was residing in The Bahamas at the time of his November 2022 arrest on a federal criminal complaint. He remains in federal custody. Kamon was the controller and chief financial officer of Girardi Keese from 2004 until December 2020. In this role, Kamon oversaw the law firm’s financial affairs, supervised its accounting department, and oversaw paying the firm’s expenses.

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.

The chapter 11 trustee for a collapsed United Furniture Industries Inc. was approved on Wednesday by a bankruptcy judge, the Winston-Salem (N.C.) Journal reported. Derek Henderson was selected as the trustee by a federal bankruptcy trustee after being signed off on by United and its creditors, led by Wells Fargo & Co. The chapter 11 motion approved on Jan. 18 for United gives the manufacturer the opportunity to direct the sale of its assets with the oversight of a trustee. United unexpectedly shut down Nov. 22, immediately ending employment and health insurance benefits for 530 Triad employees and about 2,700 companywide. Among its assets is the 850,000-square-foot production facility at 401 W. Hanes Mill Road in Winston-Salem. Wells Fargo filed a motion for chapter 7 liquidation of the manufacturer’s assets and the appointment of a bankruptcy trustee. The bank said in a Dec. 30 court filing requesting the chapter 7 liquidation of United that it is owed $99.21 million in secured debt. However, the bank acknowledged it “estimates that any recoveries from liquidation of (United’s) collateral will result in a recovery equal to a fraction of this amount.”