Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, January 13. Sam Bankman-Fried launched  “SBF’s Substack” to offer new defense on the events leading to the crypto exchange’s collapse. The SEC sued Genesis Global Capital LLC and Gemini Trust Company LLC over a $900 million crypto-lending program that allegedly violated investor-protection laws. And Bed Bath & Beyond Inc. faces interest payments in February and may find it hard to justify making them as the threat of bankruptcy looms.

This newsletter won't publish Monday in observance of Martin Luther King Jr. Day. We will see you back here on Tuesday, January 17. 

SBF is back with new defense of FTX collapse. Sam Bankman-Fried launched “SBF’s Substack” on Thursday, giving his take on the events leading to the crypto exchange’s collapse. Mr. Bankman-Fried is under house arrest at his parents’ California home as he faces federal fraud charges. He has pleaded not guilty.

His arguments, which appear to be an outline of his coming legal defense, mirror those Mr. Bankman-Fried posted on Twitter in the weeks before his arrest.

Mr. Bankman-Fried wrote on his Substack:

• The collapse of Mr. Bankman-Fried’s hedge fund, Alameda Research, stemmed from a broad crypto market meltdown.
• He didn't run Alameda for the last few years.
• FTX could have raised fresh investor cash and made customers whole if it wasn’t forced into bankruptcy.
• Alameda’s insolvency stemmed from failure to hedge its positions and actions by rival exchange Binance.
• Alameda’s contagion spread to FTX.
• Also, Sam Bankman-Fried said cryptocurrency exchange FTX had a closer relationship than previously disclosed with its bankruptcy law firm Sullivan & Cromwell LLP, adding to questions about the law firm’s work for past FTX management.

SEC sues Genesis, Gemini. The Securities and Exchange Commission on Thursday sued Genesis Global Capital LLC and Gemini Trust Company LLC over a $900 million crypto-lending program that allegedly violated investor-protection laws.

The SEC filed its civil lawsuit in Manhattan federal court alleging that Genesis should have registered the product, which would have required providing clients with detailed financial disclosures. The companies began marketing the program to individual investors in February 2021 and raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors, the SEC said.

Crypto.com cuts 20% of its staff, citing economic downturn and FTX collapse. Crypto.com is cutting a fifth of its global workforce, in a second round of layoffs in six months, after a plunge in the value of many cryptocurrencies and the collapse of rival FTX.

The cryptocurrency exchange’s co-founder and chief executive officer, Kris Marszalek, blamed “a confluence of negative economic developments” for the reductions, which followed staff cuts that took place last July. The additional reductions were necessary to position Crypto.com for long-term success, he said in a blog post on Friday.

Bed Bath & Beyond faces debt interest payment. Bed Bath & Beyond Inc. may find it hard to justify making coming interest payments of roughly $28 million as its cash dwindles.

The coming payments, due Feb. 1, are the next big hurdle the beleaguered housewares retailer faces as it looks for ways to keep its business going. Bed Bath & Beyond has coupons due on all of its $1.2 billion in bonds outstanding as of August, and while it has more than enough cash on hand to make the payments, it will face a difficult choice between staying current on its debts and conserving its cash as it charts its future course.

Morphe owner Forma Brands files for bankruptcy. Forma Brands LLC, owner of the Morphe and Jaclyn beauty lines, filed for chapter 11 bankruptcy protection Thursday, facing a debt maturity and souring partnerships with influencers like pop star Ariana Grande.

The Pacoima, Calif., company, backed by investment firm General Atlantic, owes $868 million to lenders and bondholders including Cerberus Capital Management LP. It listed $500 million to $1 billion in assets in its bankruptcy filing. On Jan. 12, the day Forma filed for bankruptcy, $26.5 million in bridge loans came due.

Forma’s financial problems arose from a combination of the Covid-19 pandemic, changing consumer beauty tastes and fallouts with certain influencers, Chief Restructuring Officer Stephen Marotta said in a filing in the U.S. Bankruptcy Court in Wilmington, Del.

Infowars wants to hold-off on a decision about Alex Jones’s employment contract. The bankrupt parent company of conspiracy site Infowars is turning away a request by Mr. Jones, its founder, to set a deadline for deciding whether to keep his employment agreement in place.

Free Speech Systems LLC said in a Wednesday court filing that it would be premature to set a deadline on whether to assume or reject the employment contract. The company said the business is still working to improve its operations with the assistance of the chief restructuring officer and anticipates future mediation with families of Sandy Hook victims who have been awarded $1.5 billion in damages against the company and Mr. Jones, who also filed personal bankruptcy.

“Decisions with regards to Mr. Jones’ employment agreement will certainly be informed by the developing business operations,” FSS said. “Given the evolving landscape of the business and the case as well as the anticipated mediation, it is premature at this time to establish a date by which Mr. Jones’ employment agreement must be assumed or rejected.”

In April, FSS agreed to pay Mr. Jones $1.3 million in 24 biweekly payments of $54,166, court papers say. Mr. Jones agreed to reduce his salary to biweekly payments of $10,000 when FSS first filed chapter 11 over the summer and subsequently increased his pay to biweekly payments of $20,000.

Mr. Jones’s lawyer said in December that the radio host could get another job if his full salary isn’t restored. – Jonathan Randles

Drugmaker Tricida files for bankruptcy with plans to sell assets. Tricida Inc., a publicly traded developer of a drug aimed at treating chronic kidney disease, has filed for bankruptcy protection, saying commercialization efforts for its Veverimer product experienced a “significant setback.”

In a filing Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., the South San Francisco, Calif.-based company lists $93.9 million in assets and $230 million in debts as of Sept. 30. It plans to sell its assets in chapter 11.

Tricida, founded in 2013, said clinical-trial results that fell short of goals last year have hurt its ability to obtain additional funding. Its stock closed Thursday at 17 cents a share. In October, after trial results were released, its share price fell from roughly $11 to less than $1. – Becky Yerak

China inflation picks up. Inflation in China picked up in December and is expected to accelerate further in the months ahead as the economy revs up following Beijing’s abrupt dismantling of its zero-tolerance measures to contain Covid-19.

Consumer prices rose 1.8% in December compared with a year earlier, faster than the 1.6% annual rate recorded in November, China’s national statistics bureau said Thursday.

Economists expect the end of China’s draconian Covid restrictions will push up inflation in the country as consumers bid up the price of travel, medicine and other in-demand goods and services, and as companies have struggled with production disruptions caused by waves of sickness.

China’s junk-bond market creaks open. A Chinese commercial property company sold U.S. dollar bonds on Thursday with yields topping 12%, reopening the market for junk debt from the country after a wave of defaults last year.

Dalian Wanda Commercial Management Group Co., which operates shopping malls across China and is controlled by Chinese billionaire Wang Jianlin, tested investors’ appetite for risk this week with a two-year bond offering by one of its units.

The unit sold bonds with a $400 million face value and an 11% coupon. The securities were sold at 97.6 cents on the dollar, which enabled the deal to be priced to yield 12.375%. The new debt was rated BB by Fitch Ratings and Ba3 by Moody’s Investors Service, levels that sit in the highest category of speculative-grade ratings.

Inflation slowed. U.S. inflation eased in December for the sixth straight month following a mid-2022 peak as the Federal Reserve aggressively raised interest rates and the economy showed signs of cooling.

The consumer-price index, a measurement of what consumers pay for goods and services, rose 6.5% last month from a year earlier, down from 7.1% in November and well below a 9.1% peak in June.

• Inflation is turning the corner. December’s consumer price data add to a picture of inflation, across a broad range of definitions, coming down. In fact, just as the U.S. got used to thinking high inflation could be here to stay, signs are emerging that most of the surge through 2021 and the first half of 2022 was actually transitory—as Federal Reserve officials first thought.
• Fed likely to raise rate by quarter-point in Feb. Fresh data showing inflation eased in December are likely to keep the Fed on track to reduce the size of interest-rate increases to a quarter-percentage-point at its meeting that concludes on Feb. 1.
• Jobless claims edge down. Applications for unemployment insurance fell slightly in the first week of 2023, reflecting a still-tight labor market. Initial jobless claims, a proxy for layoffs, fell by 1,000 to a seasonally adjusted 205,000 last week, the Labor Department said Thursday. Claims had trended higher since touching near record lows early in 2022, but continue to hover near prepandemic levels.

Crypto lender Nexo targeted in Bulgaria probe into alleged money laundering, tax violations. (CoinDesk)

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Soma Biswas; Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Jonathan Randles; Alexander Saeedy; Andrew Scurria; Becky Yerak. 

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