January, 2023: Recent Legal and Statutory Developments in Bankruptcy and Restructuring

In an effort to keep you apprised of what’s happening in the realm of bankruptcy and restructuring, here are four significant legal and statutory developments from the month of January, 2023.

1. Chapter 11 business bankruptcy filings continue to tick up (albeit slightly). Filing increased 3 percent to 326 in December 2022 from the 315 filings recorded in December 2021, according to data from Epiq's Bankruptcy Analytics platform.

2. On January 4, 2023, the United States Bankruptcy Court for the Southern District of New York issued a decision in the Celsius Network LLC chapter 11 cases regarding the ownership of cryptocurrency assets deposited by customers in the Celsius “Earn” rewards program accounts. The Court ruled that under the Celsius terms of use, customers transferred ownership of the deposits to Celsius and therefore such assets are presumed to be property of the bankruptcy estate. The Court did leave the door open for individual customers to rebut the presumption based on defenses or other circumstances.

3. In the past few weeks, it has been reported that retailers Party City and Bed Bath & Beyond are struggling and may need to seek bankruptcy protection. Since 2020, the retail sector has been one of the hardest hit, leading to a number of bankruptcy filings, including Neiman Marcus, J.C. Penney, Ascena Retail Group and Tailored Brands. One of the benefits of bankruptcy for a retailer with a large footprint of retail locations is that it gives retailers the ability to reject undesirable lease agreements.

4. One of the challenges of administering complex cryptocurrency company bankruptcy proceedings is the fact that many key parties to these proceedings seem to go “AWOL.” That’s requiring lawyers to think in novel ways about how to serve notices and subpoena people who go off the grid. For example, the Bankruptcy Court overseeing Three Arrows Capital Ltd.'s Chapter 15 Case pending in the Southern District of New York, recently authorized service via Twitter of a subpoena on one of the debtor's founders.

To learn more about these issues, or if you have additional questions regarding bankruptcy and restructuring legal issues, please contact David Dragich.