Below is our initial take on recent bankruptcy-related developments:
FTX creditors will make money on bankruptcy: $1.19 for every dollar | CNBC
Delaware bankruptcy Judge John Dorsey approved failed cryptocurrency exchange FTX’s reorganization plan which involves paying over $14 billion to customers of FTX.
S&K Take: Judge Dorsey confirmed the FTX plan on Monday, Oct. 10 in a one-day hearing. As previously noted in these pages, the plan is set to provide up to a 143% recovery to customers. That being said, the title of the article is misleading. The percentage distribution is based on the value of the customer’s account as of the petition date. As the article notes, the price of BTC is up 260% since the PD, which means that not every customer is in the same boat. If you held USDC (or fiat) in your account, you are probably pretty happy with this result. You may get 150% of the value held as of the PD, which is a solid return. If you held BTC, ETH or SOL, not so much. The appreciation of those crypto assets will be spread to all customers, so you are only getting approx.. 40% of today’s value of those assets. One thing is certain, which is that claims purchasers that have amassed billion-dollar positions in FTX claims will be happy. There is also speculation in the Twitter/X-sphere that there is further upside to the recovery number, mainly based on some undervalued investments, adding to the glee. Timing of distributions is still TBD, but I would imagine we hear more about that in the near future. Also notable in the confirmation decision is Judge Dorsey’s ruling on opt-out releases. Apparently, not all opt-outs are created equal. Judge Dorsey considered Judge Goldblatt’s recent ruling (that consent needed to be affirmative to be consent) but felt that FTX was distinguishable given the amount of notice provided to creditors. The consent issues continues to evolve in Delaware (and across the nation) and bears continued vigilance.
J&J talc bankruptcy stays in Texas despite 'forum-shopping' opposition | Reuters
On Thursday, U.S. Bankruptcy Judge Christopher Lopez ruled that a Johnson & Johnson subsidiary can pursue its third endeavor to settle tens of thousands of lawsuits claiming its talc products were the origin of cancer in a federal bankruptcy court in Houston, Texas.
S&K Take: The other big story came down yesterday in the Red River bankruptcy, which will stay in the Fifth Circuit. Judge Lopez denied a motion to transfer venue to NJ, which is where the two LTL cases were located. This admittedly comes as a bit of a surprise to this author—I had it 60/40 the other way. The history and gravity of the prior LTL decisions seemed like it would carry a lot of weight, and optically this filing seems designed to avoid the Third Circuit’s “financial distress” requirement for debtors. There are some other optics at play in the SD Tex as well (which we seem to discuss weekly) which may have pushed the Court to a more conservative decision that kicked the case back to NJ. At the end of the day, that was all wrong. Judge Lopez was instead swayed by the support of creditors for a filing in Texas (according to the debtors, 83% of creditors support the plan), and thought his Court could certainly adjudicate the issues in an efficient fashion. Fair enough. Next stop, motion to dismiss. That will be an incredibly interesting ruling, which will be inevitably appealed to the Fifth Circuit. We could even make the Supreme Court on this one to test the “financial distress” requirement if things shake out right. Giddy up.
