Below is our initial take on recent bankruptcy-related developments:
The Sandy Hook families, who have been dragged into the Chapter 11 bankruptcy of InfoWars, will be dismissed from the bankruptcy case, allowing them to continue with their defamation case against Alex Jones.
S&K Take: In an interesting turn of events, the InfoWars debtors are permitting families impacted by the Sandy Hook shooting to withdraw their claims against the debtor entities and to continue their defamation claims against non-debtors (Alex Jones included) outside of bankruptcy. The deal is not finalized but was described to the court. The debtors still face a motion to dismiss filed by the US Trustee.
Armstrong Flooring paid four top executives $4.8 million in bonuses just before filing bankruptcy, a practice that is considered an evasion of bonus restrictions that judges can impose once a company enters bankruptcy.
S&K Take: Another example of a soon-to-be debtor paying bonuses to executives on the eve of filing. We will see if there is any effort by the unsecured creditors’ committee or other case constituency to claw back those payments.
Stemming from Coinbase’s recent disclosure that customers’ money would be at risk in the event of the crypto exchange’s bankruptcy, the Biden administration is pushing Congress to create a legal framework to require crypto firms to mirror traditional financial firms and separate corporate funds from customer assets.
S&K Take: The government continues to play catch up on cryptoasset regulation, this time with a bankruptcy twist. Last week’s Coinbase disclosure has the feds taking a closer look at asset segregation. As we said, the issue is nuanced and fact intensive. We will see if the government has any bright ideas here.
The Archdiocese of Santa Fe, New Mexico has reached a tentative agreement to resolve sex abuse claims, surpassing the Diocese of Camden, New Jersey’s 87.5 million settlement agreed to in April.
S&K Take: The Roman Catholic Church of New Mexico has agreed to a deal to resolved sex abuse claims impacting approximately 300 victims. The settlement amount is one of the largest that the Church has agreed to. The settlement is yet to be approved by the bankruptcy court but seems like the first step for some kind of resolution for victims whose claims may stretch back decades.