Leading the Past Week

Voyager Digital Assets Inc., along with two of its affiliates, filed bankruptcy petitions in the Southern District of New York on July 5, 2022. The filing is significant—it followed months of an extreme downturn in the cryptocurrency sector which led to the collapse of Three Arrows Capital, a Singaporean cryptocurrency hedge fund (that borrowed $350 million and 15,250 Bitcoins from Voyager).

Tolstoy warned that “if you look for perfection, you’ll never be content”; but Tolstoy wasn’t a bankruptcy lawyer. In the world of secured lending, perfection is paramount. A secured lender that has not properly perfected its lien can lose its collateral and end up with unsecured status if its borrower files bankruptcy.

Finds Bankruptcy Court to be Proper Forum for Claim Objection Despite Forum Selection Clauses in Investor Agreements

The Southern District of New York recently reiterated the critical difference between creditor claims and equity interests in the bankruptcy context.  In a recent opinion arising out of the Arcapita Bank bankruptcy case, the Court was faced with an objection to a proof of claim filed by an investor, Captain Hani Alsohaibi, who characterized his right to recovery against the debtors as being based on a “corporate investment.”

The United States District Court for the Eastern District of California, applying California law, has concluded that it should exercise jurisdiction under the federal Declaratory Judgment Act to determine the availability of coverage for a written demand and has held that the related coverage action should not be stayed in favor of potential future underlying litigation between the Federal Deposition Insurance Corporation (FDIC) and the insureds because the outcome of the coverage litigation would not be dependent on resolution of disputed facts in such a future action.  Progressiv

A Georgia bankruptcy court has held that notwithstanding the discharge of an individual in his individual bankruptcy proceeding, the Federal Deposit Insurance Corporation (FDIC) may file suit against the individual as a former officer of a failed bank so long as the applicable D&O policy covers defense costs and the FDIC’s recovery is limited to insurance proceeds.  In re Hayden, 2012 WL 3597422 (Bankr. N.D. Ga. July 6, 2012).

Wiley Rein LLP partner H. Jason Gold, the chapter 11 bankruptcy trustee in the mortgage fraud and Ponzi scheme case of Vijay Taneja, announced today that he has reached settlements with 11 defendants in the 60 lawsuits he filed last year seeking to recover tens of millions of dollars for the benefit of Mr. Taneja's creditors.

The United States District Court for the District of Connecticut, applying Connecticut law, has held that coverage under a bankers professional liability policy was precluded by the policy's insolvency exclusion where the underlying claims "arose out of" the bankruptcy of a third-party securities broker or dealer. Associated Community Bancorp, Inc. v. The Travelers Cos., 2010 WL 1416842 (D. Conn. Apr. 8, 2010). The court also held that coverage was barred by the professional services exclusion of the management liability coverage part of the policy.

The United States District Court for the District of Kansas, applying Kansas law, has held that a D&O policy issued to a bank was not automatically canceled or terminated when the FDIC was appointed as the bank’s receiver but that coverage under the policy ceased. Columbian Fin. Corp. v. BancInsure, Inc., 2009 WL 4508576 (D. Kan. Nov. 30, 2009). The court concluded that although coverage ceased upon the appointment of the FDIC as receiver, the insureds could report claims at any time prior to the expiration of the policy.

The COVID-19 (Temporary Measures) Act (the Act) will have a considerable impact on the enforcement of certain contracts and commercial disputes in Singapore for the next 6 to 12 months. The Act was passed by the Singapore Parliament, and commenced on the same day, 7 April 2020.

The key measures of the Act are: