Three InfoWars entities file voluntary bankruptcy on April 17, 2022, under Subchapter V of Chapter 11.[Fn.1] And a storm of controversy immediately erupts on whether the three entities actually qualify for Subchapter V relief.

On June 10, 2022, the Bankruptcy Court enters an “Agreed Order Dismissing Debtors’ Chapter 11 Cases” (Doc. 114), based on this stipulation of the three InfoWars debtors: “Debtors and the UST wish to stipulate to the disposition of the Chapter 11 Cases.”

Now that their bankruptcy filing is a few weeks behind us, we provide below an update on certain matters of interest in the case of Celsius Networks and its affiliates. Of course, it’s still very early in the bankruptcy case — and in cryptocurrency cases in general — but we have already heard from many distressed opportunity investors that are interested in identifying investment opportunities. Given the novel legal and difficult valuation issues involved, it will be important to keep a close eye on the developments in these proceedings.

State laws on assignments for benefit of creditors (“ABC”) have been around for a long time. But times have changed over the last half-century. Specifically, the bankruptcy alternative has changed dramatically:

When an enforcement authority issues guidelines to its personnel for making enforcement decisions and makes those guidelines public, all who are subject to that authority should sit-up and take notice.

On June 10, 2022, the U.S. Trustee’s Office, Department of Justice, issues “Guidelines” to its personnel for enforcing rules on “Bifurcated Chapter 7 Fee Agreements.”[Fn. 1]

Here is an internal description on the nature of the guidelines (at 6):

“the specter of sanctions and contempt spawns ancillary litigation that often eclipses the issues at the heart of the underlying dispute.”

—From In re A.T. Reynolds & Sons, Inc., 452 B.R. 374, 376 (S.D.N.Y. 2011), reversing a Bankruptcy Court order of contempt and sanctions for lack of “good faith” in a mandated mediation.

The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:

In a matter of first impression relating to an important bankruptcy claims administration issue, Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York, recently denied the ability of a court appointed claims agent to sell and profit from providing direct access to publicly available claims register information. The unsuccessful purchaser of such information was XClaim Inc. (“Xclaim”), a relatively new venture that is seeking to develop a web-based claims trading platform.

The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:

Mediation-in-bankruptcy has been an effective tool for resolving mass tort cases.

That effectiveness has been for the benefit of all parties involved, such as:

“2 There is one inconsequential difference — § 1228(a) refers to debt ‘of a kind specified,’ while § 1192(2) refers to debt ‘of the kind specified.’” [Fn. 1]

This “inconsequential difference” quotation, from footnote 2 in the Fourth Circuit’s Cantwell v. Clearyopinion, is on the application of § 523 discharge exceptions to corporations and LLCs. The “inconsequential difference” quote, is both: