Below is our initial take on recent bankruptcy-related developments:
The Celsius administrator and liquidators of Three Arrows Capital objected to FTX's Chapter 11 plan, arguing it aims to compensate people who had accounts with both FTX and Celsius, however the funds FTX would use include over $440 million that belongs to Celsius. It argued the plan should include Celsius' recovery claims in the same class as other FTX customer claims and set aside funds to cover claims that haven't yet been adjudicated.
The plan aims to repay in full the bankruptcy claims of non-governmental creditors (plus interest) and resolve disputes with governmental and private counterparts to avoid protracted legal battles. FTX received support from 95% of voting creditors, representing 99% of the claims by value.
S&K Take: FTX is pushing forward towards an October confirmation hearing and looks to have the votes to get its plan approved, which could see customer claims receive up to 143% of their petition date value. It isn’t all smooth sailing though. The Celsius plan admin is arguing that the plan frustrates his own preference claims against Celsius customers that funded their FTX accounts with withdrawals from Celsius. Those customer funds, he contends, should be routed to Celsius instead of the customer. There is also a preferred equity group that appears to be coalescing and filed a reservation of rights which states that they are in talks with the Debtors, so we may be in for some kind of fight on October 7. We will be watching.
A lawsuit against former U.S. Bankruptcy Judge David Jones and two law firms was dismissed due to the judge's undisclosed relationship with former Jackson Walker partner Elizabeth Freeman. While the judge's conduct raised concerns of impropriety, the court ultimately found that the lawsuit lacked sufficient evidence to proceed.
S&K Take: The saga continues. Judge Moses dismissed the Van Deelen’s RICO actions, but still had some choice words for the defendants, calling their actions a “sprawling tapestry of ethical lapses”. At the end of the day, however, there were no viable causes of action arising out of those lapses. In other news, Judge Jones was sanctioned by Judge Rodriguez for his bad faith in participating in an “off-the-record” interview with Jackson Walker and its counsel in an attempt to avoid sitting for a deposition. Former Judge Jones will have to complete 7.5 hours of ethics CLEs. This blog will not opine on the brutality of such a sanction.
