A corporate restructuring and bankruptcy BLOG

    Not So Silver Lining, Weird Science, F is for Fraud, and Alex Jones Under the Microscope

    What's News
    March 3, 2023

    Below is our initial take on recent bankruptcy-related developments:

    Silvergate sinks after delaying annual report, warning about viability | Yahoo News

    Silvergate reported a $1 billion loss for the fourth quarter and said it is unable to meet an extended March 16 deadline for submitting its annual report. Shares dropped by 29% in premarket trading on Thursday.

    S&K Take: Very interesting news came out yesterday regarding Silvergate, which appears to be the latest domino poised to fall in the crypto space. Hard to imagine that the FDIC isn’t already involved here, and the FDIC generally shuts down failing institutions on Friday after the close of business to minimize market disruptions. Bank insolvencies are governed by the Federal Deposit Insurance Act (rather than general bankruptcy law).

    Core Scientific Bankruptcy Approves $70M Financing Deal From B. Riley | CoinDesk

    The federal judge overseeing bitcoin miner Core Scientific's Chapter 11 bankruptcy process approved a $70 million loan from B. Riley Commercial Capital that will help the company recuperate after it filed for bankruptcy in December.

    S&K Take: The Core Scientific saga has been an interesting one. The debtors entered bankruptcy with a different DIP facility, but the uptick in value of crypto during the pendency of the case has allowed them to pivot to the alternative B. Riley financing. It has also sparked the interest of equity holders, who now see a recovery as possible, and have moved for the appointment of an official equity committee. Lots of interesting levers at play here. One is that while crypto prices have increased (crypto being Core Scientific’s end “product” and thus a higher price has a direct positive impact on the company) the cost of mining also increases. This is because more miners participate in the marketplace, creating more competition to actually “mint” any cryptocurrency. The other interesting item is that the senior debt here is apparently alleging an obligation akin to a make whole exists under the debt instrument, meaning that equity is out of the money no matter what the value of BTC might be. Sure looks like a fight looms on the horizon.

    FTX ex-director Nishad Singh pleads guilty to fraud charges | Cointelegraph

    Nishad Singh, the former director of engineering at FTX, pleaded guilty to multiple counts of fraud and conspiracy to commit fraud, related to the misappropriation of FTX funds.

    S&K Take: More crypto related news, as Nishad Singh, a former engineer at FTX, has pleaded guilty to a slew of criminal charges. Those include copping to tweaking a program intended to limit the amount that Alameda could borrow from FTX, thus allowing Alameda unlimited access to FTX customer funds, as well as admitting to charges related to campaign contributions.

    Sandy Hook families get approval to dig into Alex Jones's finances | Reuters

    This week, a U.S. bankruptcy judge ruled that victims of the 2012 Sandy Hook massacre are allowed to secure forensic investigators to look into Alex Jones’ finances. Jones and his company have been found liable in two defamation trials over misinformation and lies he spread about the deadly shooting.

    S&K Take: Alex Jones is on the hook for $1.5 billion in litigation judgments based on his conduct in connection with the Sandy Hook massacre. He has cried poor to date, while concurrently starting businesses outside of the bankruptcy process. Victims, which are the claims holders in the bankruptcy case, have hired a forensic accountant to unravel the mess and hopefully source and recover assets. Nardello & Co. is acting on a pro bono basis for the claimants.

    The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

    November 18, 2022

    This Week In Crypto Contagion



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