The recent implosion of crypto firm FTX and its affiliates provides a case study for potential crypto exposure under traditional insurance policies. The FTX debacle is described herein is an introduction to a series of four articles on the potential liability exposure and coverage: Silent Crypto for D&O and Corporate Liability Insurance (Part I), Silent Crypto Exposure for Accountants (Part II), Silent Crypto Exposure for Lawyers (Part III), and Crime and Custody Coverage for Crypto Assets (Part IV).
On December 27, 2022, the IRS issued two notices providing key initial guidance for the new excise tax on corporate stock buybacks and the new corporate alternative minimum tax (CAMT). Both the excise tax and the CAMT were enacted as part of the Inflation Reduction Act that Congress passed in August 2022.1
Over the past year, the ebb and flow of bankruptcy filings has been an interesting one. Through 11 months, the number of bankruptcy filings has decreased from 2021, which was already at its lowest level since the 1980s.
The total number of bankruptcy filings through November stands at 346,760. Based on a recent monthly uptick in both consumer and commercial filings, we should expect the year to end with approximately 385,000, a 4% decrease from the 401,291 filings in 2021.
“The [Subchapter V] Trustee shall— . . . facilitate the development of a consensual plan of reorganization.” 11 U.S.C. § 1183(b)(7).
That’s what we Subchapter V trustees are supposed to do.
Ok, fine. But how are we supposed to do that?
A facilitation tool that many Subchapter V trustees are using is this: Zoom facilitation meetings.
What follows is an explanation of how such meetings can work.
Initial Meeting
On December 20, 2022, the Office of Science and Technology Policy (OSTP) issued a notice of request for information (RFI) on the regulation of biotechnology on behalf of the U.S. Food and Drug Administration (FDA), the U.S. Environmental Protection Agency (EPA), and the U.S. Department of Agriculture (USDA).
A crash in the cryptocurrency industry started this past spring, causing a significant number of cryptocurrency exchanges and related entities to seek bankruptcy protection, including the recent filing of one of the largest cryptocurrency exchanges, FTX. The volatility in the industry continues, with the subsequent filing of the cryptocurrency firm BlockFi and the crypto-mining company Core Scientific.
Crypto Basics
The U.S. Court of Appeals for the Ninth Circuit recently affirmed a bankruptcy court’s judgment in favor of a debtor who sought to avoid a judgment lien under California’s homestead exemption law.
In so ruling, the Ninth Circuit held that, when a judgment lien impairs a debtor’s state-law homestead exemption, the Bankruptcy Code requires courts to determine the exemption to which the debtor would have been entitled in the absence of the lien.
A bankruptcy discharge “does not discharge an individual debtor from any debt– . . . for fraud or defalcation while acting in a fiduciary capacity.” 11 U.S.C. § 523(a)(4).
The effect of this “fiduciary capacity” statute is newly before the U.S. Supreme Court on a petition for certiorari in Spring Valley Produce, Inc. v. Forrest, Case No. 22-502.
The question presented in Spring Valley is this:
It’s often hard to persuade a bankruptcy court to grant a motion for substantial contribution. Any attorney thinking about making a motion should first ask herself two questions. First, has my work benefitted both my client and other creditors? Second, did my work result in more than an incidental benefit to the bankruptcy estate? If the answer to either question is no, then the attorney should forget about making the motion. The time spent on it will be wasted, and the motion will be denied.
- Companies Seek More Liquidity – As access to capital may decrease in the coming year, companies on the periphery of needing more operations income are reaching out to lenders to capture the full amount of capital they can borrow currently.
- Correction in Valuations of Companies Without Apparent Underlying Assets – Investors are scrutinizing the valuations of companies more closely, particularly those whose probability of success is tied to nascent products or services.
- Operations Right-Sizing is Underway – Companies are