Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Thursday, Aug. 4. Dozens of Catholic dioceses have moved through bankruptcy over the past two decades to weather sex-abuse litigation, but a recent crop of cases in New York and New Jersey are proving especially difficult to resolve. Pro Bankruptcy's Soma Biswas looks at the rising settlement demands that are prompting pushback from insurers and snarling the chapter 11 process.

Elsewhere, Microstrategy's business plan to buy-and-hold bitcoin is reaching its limits. And Alex Jones testified that an ongoing defamation trial in Texas could kill Infowars, his conspiracist broadcasting business.

Catholic diocese bankruptcies drag on as insurers resist abuse costs. Insurers are fighting against sex-abuse victims’ demands for more compensation in the bankruptcies of several large Catholic dioceses, as both the number of claimants and the proposed payouts have grown. The standoff is slowing the dioceses’ efforts to emerge from chapter 11.

More victims are now coming forward when dioceses file for bankruptcy after New York, New Jersey and other states relaxed their statutes of limitations on sex-abuse claims, opening temporary look-back windows during which abuse victims could sue even if the alleged trauma happened decades ago.

In addition, victims are seeking bigger settlements than in earlier diocese bankruptcies, prompting insurers to fight harder against covering abuse liabilities at these higher levels, lawyers involved in diocese cases said.

New York and New Jersey both opened two-year look-back windows for sex-abuse victims in 2019, unleashing waves of abuse litigation in those states. Since then, four dioceses in New York have filed for bankruptcy—Buffalo, Rochester, Syracuse and Rockville Centre on Long Island—as has the diocese in Camden, N.J. Tensions between insurers and victims’ representatives have dominated those chapter 11 cases, driving up legal fees and prolonging the dioceses’ stints in bankruptcy.

MicroStrategy bet big on bitcoin and lost. MicroStrategy CEO Michael Saylor's dalliance with bitcoin began in 2020 when the tech company announced a plan to take $250 million—half of its corporate reserve—and convert it into bitcoin.

It has since doubled down, and doubled down again. In total, MicroStrategy raised $2.4 billion in debt and loans. It issued $1 billion in equity. The company used it all to buy bitcoin. The company is now sitting on nearly 130,000 bitcoins valued at roughly $3 billion at current market prices. Its market capitalization is about $3.1 billion, meaning MicroStrategy has essentially become a bitcoin-holding vehicle with a cash-generating software business attached to it.

Under accounting rules, the company must assess the value of its bitcoin holdings each quarter and take an impairment charge if the price has declined. MicroStrategy has taken a string of such charges totaling about $2 billion. But the ultimate judgment on MicroStrategy’s bitcoin bet won’t come until some of that debt it borrowed to buy bitcoin starts to mature.

It marks the latest salvo in an intensifying battle among federal agencies and congressional committees that oversee them over who will regulate crypto. Thirteen years after bitcoin was created, cryptocurrencies remain largely unregulated by the federal government, leaving investors without key protections from fraud and market manipulation.

Alex Jones said the Sandy Hook trial could doom Infowars. The conspiracist broadcaster told a Texas jury that a significant defamation judgment could foretell the end of his Infowars media empire.

It isn’t known how much the talk-show host would be able to pay in damages to the families of Sandy Hook shooting victims for his false statements that the 2012 massacre was a hoax. Infowars parent company Free Speech Systems LLC filed for bankruptcy protection last week, the second attempt by the business in recent months to use chapter 11 to drive a settlement of the defamation claims.

New drama was injected into the proceedings Wednesday when plaintiffs’ counsel said that Mr. Jones’s lawyers had inadvertently shared Mr. Jones’s cellphone records with them, including text messages that Mr. Jones earlier claimed didn’t exist.

Separately, an accountant retained by Infowars testified in bankruptcy court that the conspiracy site filed for chapter 11 because it can’t afford a second upcoming defamation trial.

Jury selection for the second defamation trial, this one in Connecticut, was scheduled to begin this week. W. Marc Schwartz, an accountant as the chief restructuring officer for Free Speech Systems, said the company can’t afford the cost of a second trial and turned to bankruptcy to pause the litigation.

“Quite frankly, we can’t go to trial in Connecticut,” Mr. Schwartz testified in a Texas bankruptcy court. “We don’t have the money to pay for that at this point-in-time. That’s a huge problem right there.” The bankruptcy hearing was held simultaneously as the defamation trial in Texas. — Jonathan Randles

Muni market transaction costs stay high despite customer protections. Municipal bond dealers set prices well above what they pay for the securities, reaping windfalls at the expense of individual investors despite recent regulation aimed at curbing so-called markups, according to an academic study of trading data expected to be released Thursday.

Unlike in the stock market, there is no publicly searchable daily price information for municipal bonds. Muni borrowers and investors typically rely on the dealers in the middle of each trade—buying bonds from a government or an investor and selling them to another investor—to propose prices for the securities.

The CEO of bankrupt cryptocurrency exchange Voyager Digital made millions of dollars selling Voyager shares in February and March 2021 when shares were near their peak, nineteen months before the crypto lending firm declared bankruptcy in July 2022, financial records show. (CNBC)

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