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Providers of the legal services that underpin the nation’s largest corporate bankruptcies are facing pushback in a major chapter 11 hub involving their side deals with a claims-trading startup, the Wall Street Journal reported. Judges in the busy U.S. Bankruptcy Court in New York are scrutinizing those deals with the legal servicers, hired as claims agents in chapter 11 cases to carry out the vast amount of administrative work spawned by large corporate restructurings. Four of the top six firms in the field had deals to provide claims data from their bankruptcy cases to Xclaim Inc., a claims-trading platform, according to the startup. The service providers agreed to supply publicly-available chapter 11 claim information to Xclaim in a digital format that can be used by the platform to facilitate trade between bankruptcy creditors and debt buyers. In return for the information, Xclaim paid the claim agents 10% of the commission it received when its users completed a trade on its platform, court papers show. Bankruptcy specialists who have reviewed the agreements say the deals are problematic because when private companies do claims-agent work, they are stepping into the shoes of courtroom clerks who perform the same tasks in smaller chapter 11 cases but are barred from making money off them. New York judges and the U.S. Trustee Program, are scrutinizing the Xclaim agreements. Read more.
https://www.wsj.com/articles/bankruptcy-services-providers-are-question…

Be sure to read in-depth analysis "Claims Agents Are Barred from Making Money on the Side from the Claims Docket" from ABI Editor-at-Large Bill Rochelle's August 23 column. https://www.abi.org/newsroom/daily-wire/claims-agents-are-barred-from-m…

Voyager Digital Ltd. won a bankruptcy judge’s permission to pay $1.6 million in bonuses to employees deemed critical to the insolvent crypto lender’s future, Bloomberg News reported. The payouts will go to 34 Voyager employees — none of whom are top executives — who work in areas like accounting and IT infrastructure, according to court papers. The bonuses are equal to 22.5% of each employee’s annual salary. Voyager’s official creditor committee had earlier attacked the bonus plan as unnecessary, but dropped its objection after the crypto lender agreed to take steps including slashing the size of the bonus pool and to quickly cut $4.6 million of annual costs elsewhere. Bankruptcy Judge Michael Wiles in a hearing yesterday said that he would approve the bonuses. Preventing key employees from quitting will help Voyager maximize the value of its business and, in turn, maximize creditor recoveries, he said. Voyager customers with crypto stuck on the platform still haven’t recovered any of their holdings. Those who stored cash with the company have so far fared better: about $219 million, or 80%, of customer cash trapped in the platform since the start of the bankruptcy has since been returned, a lawyer for Voyager said in the hearing.

The U.S. Trustee handling the bankruptcy case for crypto lender Celsius Network is seeking the appointment of an examiner to help get additional information and clear up “confusion and anxiety,” Bloomberg News reported. A representative for U.S. Trustee William Harrington said in a hearing on Tuesday that they’re considering appointing an examiner to look into a slew of issues surrounding the bankrupt company. The representative, Shara Cornell, said in a filing dated Thursday that she hasn’t been able to get some additional financial information that would shed light on the crypto lender’s operations. “There is no real understanding among customers, parties in interest, and the public as to the type or actual value of crypto held by the Debtors or where it is held,” the filing said. An independent examiner would analyze Celsius’s business model, operations, investments and lending transactions, among other things. An examiner would also look at Celsius management’s “role in creating the Debtors’ current illiquidity,” the filing said, as well as any “irregularities.” Celsius filed for bankruptcy on July 13. Since then, more than 300 customers sent in letters, some of them claiming they were deceived and asking for the return of their money. A lawyer for Celsius on Tuesday said that it’s received multiple offers of fresh cash to help fund its restructuring process. The firm said it will meet with an unsecured creditors’ committee next week and is working “expeditiously” on the path forward.