Below is our initial take on recent bankruptcy-related developments:
FTX and CFTC agree to $12.7 billion settlement following months of negotiations | The Block
FTX and the CFTC struck a deal granting the CFTC $4 billion disgorgement claim and an $8.7 billion restitution claim. Payments to the CFTC will contribute to the Supplemental Remission Fund, which benefits affected holders after creditors are paid.
S&K Take: Another piece to the FTX puzzle falls into place, with the CFTC falling in line with the IRS and agreeing to subordinate massive claims to those of customers. The CFTC originally claimed $52.2 billion, agreeing to $12.7 billion at the end of the day. That will sit behind customers, who will be paid in full and then some (currently an estimated 129-143%) before the CFTC recovers. Any recovery on the CFTC claims will be routed to the Supplemental Remission Fund, which is also for the benefit of customers. Governmental entities seem to be in lockstep behind this concept, so while there are others out there, it seems to pave the way to getting the FTX plan done. The secondary market recognizes this, with claims recently selling in the 125% range.
Prison health company YesCare strikes deal in 'Texas two-step' bankruptcy | Reuters
Prison health contractor YesCare has agreed to pay $75 million to settle hundreds of personal-injury lawsuits related to its prison healthcare services. Creditors and victims of the company's alleged negligence have expressed support for the agreement, which still requires court approval.
S&K Take: Tehum Care Services reached a settlement of outstanding issues in its bankruptcy case with YesCare, the goodco to Tehum’s badco (both spun out of Corizon Health), as well as the official tort claimants’ committee and the official committee of unsecured creditors. This could mark the end of a long and winding road. Going way back, you might recall that former Judge Jones served as a mediator in these cases, and the parties had agreed to a $37 million settlement. Scandal broke out, Judge Sontchi was appointed as mediator, and the parties reconsidered the settlement. The TCC was appointed and moved to dismiss the case while also considering an improved $54 million settlement. That motion was denied, the TCC sought interlocutory appeal, and here we are. Based on the article the plaintiffs’ bar seems happy with what amounts to double the original settlement, and creditors that don’t like it can opt out and keep their claims. Wow. This is being reported as the first two-step to cross the finish line, although we aren’t quite there yet.
Exiled Chinese businessman Guo convicted at US fraud trial | Reuters
On Tuesday, exiled Chinese businessman and outspoken opponent of Beijing’s communist government Guo Wengui was convicted in his U.S. trial on charges of stealing hundreds of millions of dollars from his online followers. He was convicted on nine of the twelve criminal counts he faced.
S&K Take: We have covered bits and pieces of this story over the course of the case, but this seemed worth a note. Guo Wengui filed bankruptcy in Connecticut in early 2022 with hundreds of millions in debt and purportedly $0 in assets. Seemed a far-fetched story at the time—all of the “billionaire’s” money was with his children or elsewhere, and he lived a life of luxury solely based on their goodwill. The case unraveled relatively quickly, with a trustee being appointed. A massive bankruptcy asset-tracing investigation ensued, with the trustee recovering millions, while concurrently being threatened by Wengui’s followers. The criminal trial ran on a parallel track and has now culminated in a conviction on 9 of 12 counts.
Giuliani spent on Florida condo, RNC trip instead of bankruptcy fees | Reuters
On Wednesday, after U.S. Bankruptcy Judge Sean Lane ruled last week that Rudy Giuliani should be kicked out of bankruptcy over his failure to make required financial disclosures, he criticized Giuliani for spending money on his Florida condo and traveling to the Republican National Convention as he avoids paying bankruptcy fees.
S&K Take: In other significant individual bankruptcy news, Rudy got kicked out of his. Judge Lane ruled last week to dismiss Giuliani’s bankruptcy case based on Giuliani’s failure to provide financial reporting and other transparency required of a debtor. This week it has come out that Giuliani was depleting his bank accounts without authority to do so, spending to pay amounts owed with respect to a Florida home and a trip to Milwaukee. Giuliani will now have to deal with a $148 million judgment, although indications are that he plans to appeal.
