Below is our initial take on recent bankruptcy-related developments:
The SEC has confirmed that they are objecting Binance.US’ move to acquire over $1B in assets belonging to the now defunct cryptocurrency lending firm, Voyager Digital. According to the SEC’s filing submitted this week, it believes that some aspects of Binance.US’ restructuring plan could breach securities law.
S&K Take: The Voyager sale saga has proven to be an uphill battle, with initial winner FTX disqualified because it appears to have been one the biggest frauds in US history, and now Binance coming under SEC scrutiny. It looks like this may be curable with diligence, although that is a bit of a haphazard guess on my part. One takeaway is that regulators have more than woken up to issues in the industry, with the SEC focused on what crypto-related financial instruments constitute securities and the ability of unregistered brokers to trade in those.
Manhattan prosecutors have charged former FTX CEO Sam Bankman-Fried with four additional counts of conspiracy, which brings the total up to twelve counts, including charges of conspiracy to commit bank fraud as well as conspiracy to make unlawful political contributions.
S&K Take: Some new charges were filed against SBF earlier this week, as federal prosecutors filed a superseding indictment. This doesn’t have a significant impact on the bankruptcy or creditors’ recoveries, but it is interesting nonetheless. Prosecutors seem convinced that SBF very deliberately and intently perpetrated one of the biggest frauds in American history. The new facts are likely coming from his co-conspirators, who turned on SBF months ago. The other interesting aspect of this is that SBF’s public statements, via social media or otherwise, in some cases corroborate certain allegations. There was an interesting piece from criminal defense lawyers in the WSJ this week (link here) which also discussed the unconventional approach he is taking to his defense (i.e. putting his foot in his mouth).
California based test manufacturer Lucira Health Inc. filed for Chapter 11 bankruptcy this week, citing low sales and demand for tests, due in part to declining Covid-19 restrictions as well as slower-than-expected approval for their flu testing kit.
S&K Take: Bankruptcy filings have been coming fast and furious of late, with Lucira and Starry (detailed below) some of the latest and greatest. Lucira looks to be a pretty straightforward sale case which will be followed by a liquidating plan in all likelihood. If any interesting aspects pop up, we will report on them.
Starry, a Boston-based wireless internet service, has filed for bankruptcy this week, noting its aim to reduce its debt while continuing to operate in a limited number of locations. The news comes after a massive layoff of half its workforce last October and an additional round of layoffs last month. The company has said it will continue offering service in Boston, New York City, Los Angeles, Denver, and Washington, D.C.
S&K Take: Starry is the latest in a series of de-SPACs that hit the skids. Starry is running a dual-track process, where the company will either be sold for a number that exceeds the baseline bid or existing lenders will equitize their debt. 100% of the lenders are party to an RSA, so it appears that there is peace in the valley for the time being.