Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, January 20. Crypto lender Genesis filed for bankruptcy protection in New York, another indication that the era of high-yielding crypto lending has fizzled out. FTX CEO John J. Ray III said he is looking into the possibility of reviving the bankrupt crypto exchange in his first interview since taking over the company in November. And FTX’s former compliance chief said that law firm Sullivan & Cromwell should be removed from the case because of its past representation of co-founder Sam Bankman-Fried and crypto lender BlockFi Inc.

Genesis files for bankruptcy. Cryptocurrency lender Genesis Global Holdco LLC and two of its lending subsidiaries filed for bankruptcy protection late Thursday night in New York, the latest domino to fall after the failure of crypto exchange FTX.

The bankruptcy marks the end of an era in which the lending of crypto assets fueled trades by both individual and institutional investors chasing high yields. A big drop in crypto prices that began in late 2021 led to the collapse of many companies that depended on that business model. Genesis held on longer than others. Crypto lenders Celsius Network LLC and Voyager Digital Ltd. filed for bankruptcy in July.

The firm filed for bankruptcy protection alongside Genesis Global Capital LLC and Genesis Asia Pacific Pte. Ltd., two subsidiaries. Genesis’s derivatives and spot trading subsidiary, custody business and its brokerage arm Genesis Global Trading aren’t included in the filing and continue client trading operations, it said.

New FTX chief says crypto exchange could restart. FTX’s new chief executive, John J. Ray III, said he is looking into the possibility of reviving the bankrupt crypto exchange as he works to return money to the failed company’s customers and creditors.  

In his first interview since taking over FTX in November, Mr. Ray said that he has set up a task force to explore restarting FTX.com, the company’s main international exchange. Although top FTX executives have been accused of criminal misconduct, some customers have praised its technology and suggested that there would be value in rebooting the platform, he said.

Mr. Ray said he would look into whether reviving FTX’s international exchange would recover more value for the company’s customers than his team could get from simply liquidating assets or selling the platform.

• Outsider likely responsible for FTX hack. An outside player, rather than an FTX employee, was likely involved in the roughly $400 million stolen in a hack during the crypto exchage's collapse, according to digital-assets data analytics firm Chainalysis. "It's not easy to launder $400 million in crypto," said Chainalysis co-founder Michael Gronager on the sidelines of the World Economic Forum in Davos, Switzerland. Chainalysis, which maintains a data trove of crypto transactions, was hired by FTX's new management to track down existing assets.
• The meeting that kicked off the lending relationship between Alameda and Genesis. Alameda Research was working out of a Berkeley, Calif., office building in late 2018 when executives from crypto lender Genesis Global Capital arrived for a visit, according to people familiar with the matter. They found Sam Bankman-Fried, the now-defunct crypto trading firm's founder, asleep in a beanbag chair. The meeting kicked off a relationship that would see both the trading firm and the lender grow. In the years that followed, Genesis made hundreds of millions of dollars of unsecured loans to Alameda, people familiar with the matter said. Alameda unraveled as its parent company, FTX, fell apart last year. 

Former FTX compliance chief accuses law firm of conflicts. FTX’s former compliance chief said Thursday that the law firm representing the failed cryptocurrency exchange in bankruptcy should be removed from the case because of its past representation of co-founder Sam Bankman-Fried and crypto lender BlockFi Inc.

Daniel Friedberg, who served as chief compliance officer for FTX’s U.S. business and regulatory officer for its international exchange, said in a sworn statement that Sullivan & Cromwell LLP is disqualified from representing the company in chapter 11 due to conflicts of interest. Mr. Friedberg resigned from FTX days before the company filed for bankruptcy in November and Mr. Bankman-Fried was arrested.

Mr. Friedberg questioned Sullivan’s qualifications because it simultaneously represented FTX’s U.S. and international business as well as its affiliated trading firm, Alameda Research. He said each FTX business unit needs separate legal representation and has distinct creditor groups. He said FTX should be represented by a law firm that hasn’t done past work for FTX or former executives like Mr. Bankman-Fried or former engineering director Nishad Singh.

• Crypto lender Nexo settles with the SEC. Crypto lender Nexo Capital Inc. agreed to pay $45 million to settle claims that its product violated investor-protection laws, becoming the second digital-asset lender in a week to face a major enforcement action.
  
  The Securities and Exchange Commission said Nexo’s Earn Interest Product was the type of investment that should have been registered with regulators before being sold to the public. Crypto middlemen such as Nexo recruited huge numbers of customers over the past several years by offering interest rates in excess of 10% to people who would loan out their crypto.
  
  Nexo settled the SEC’s investigation without admitting or denying wrongdoing, and agreed to pay half of the $45 million fine to the federal agency and half to a group of states that had already sued it. The SEC last week sued crypto lender Genesis Global Capital LLC, alleging its crypto-lending program is a security that should have followed federal rules.
  
  Nexo agreed with the SEC to stop offering the program to American investors, and had already decided in December to start phasing it out in the U.S., the SEC said. A group of states including California and New York sued Nexo in September over the same claims the SEC alleged on Thursday.

Wayfair to cut more than 1,000 jobs. Wayfair is preparing to lay off more than 1,000 workers, according to people familiar with the matter, as the online furniture seller confronts shrinking sales after a pandemic-driven boom.

Wayfair’s restructuring, the second round of layoffs in six months, is expected to affect more than 5% of the workforce at the Boston-based company. Wayfair said in August it was cutting about 870 jobs, or about 5% of its global workforce.

Wayfair, like many of these firms, aggressively added staff during the pandemic to expand its warehouse operations and customer-service teams. It had 16,681 full-time equivalent employees as of the end of 2021, up from 12,100 at the end of 2018. Its customer-service staff roughly doubled over that period to about 4,900 people, according to company filings.

Sexual-abuse plaintiffs propose $280 million settlement in Rockville Diocese chapter 11. A plaintiff group representing victims of childhood sexual abuse filed a new unilateral proposal to settle its claims against the largest Catholic diocese in bankruptcy after a year-long mediation failed.

Under the new plan filed with the bankruptcy court on Thursday, the plaintiffs are seeking contributions of $280 million in cash from the Diocese of Rockville Centre’s parishes and cemeteries. Mediation talks that started in 2021 recently fell apart, lawyers for the two sides said at a court hearing.

The group filed the plan without the support of the Rockville Diocese, the seat of the Roman Catholic Church in suburban Long Island in New York. Restructuring proposals are usually filed by organizations in bankruptcy, rather than by creditors.

Retired bankruptcy judge Chapman picked to mediate Endo International dispute. U.S. Bankruptcy Judge Shelley Chapman has been selected to mediate a dispute over attempts to move Endo International PLC.

Judge James Garrity Jr. of the U.S. Bankruptcy Court in Manhattan said during a hearing Thursday that Ms. Chapman will be tasked with mediating disputes over requests by Endo to maintain until June 12 the exclusive authority to file a chapter 11 plan and a separate request to market its assets. Both Endo requests have been challenged by either different creditor groups or lenders.

Mediation is scheduled to last the next three to four weeks, Judge Garrity said, adding that he hoped Endo and its stakeholders can come to an agreement that moves the cases forward “effectively, economically and successfully.” Judge Garrity said he will hold a status conference on the mediation in February. – Jonathan Randles

Major creditors in Tricida to recover 8c on the dollar. Publicly-traded drug developer Tricida Inc., which filed for bankruptcy earlier this month, said unsecured bondholders and trade creditors with claims totaling more than $360 million are expected to recover 8 cents on the dollar. The estimate was provided Wednesday in a filing in the U.S. Bankruptcy Court in Wilmington, Del. The South San Francisco, Calif.-based company has no secured debt.

Founded in 2013, Tricida sought protection from creditors after commercialization efforts for its Veverimer product, aimed at treating chronic kidney disease, experienced a “significant setback.” It plans to sell its assets in a chapter 11 liquidation plan. – Becky Yerak

Jobless claims fell. Jobless claims declined last week to the lowest level since September, suggesting the labor market remained tight at the start of the year.

Initial jobless claims, a proxy for layoffs, fell by 15,000 to a seasonally adjusted 190,000 last week, the Labor Department said Thursday. Claims are up from lows reached early in 2022, but continue to hover near prepandemic levels when the job market was also tight.

The four-week moving average of weekly claims, which smooths out volatility, decreased to 206,000 from 212,500 the prior week. In 2019, the year before the pandemic began, claims averaged about 220,000 a week.

Fed Vice Chair Lael Brainard (pictured above) indicated in remarks Thursday she was supportive of slowing the pace of rate rises to a more traditional quarter percentage point at the central bank’s next policy meeting, which is Jan. 31 to Feb. 1, joining a number of colleagues.

New York Fed President John Williams said at a separate event Thursday evening he was encouraged by signs interest-rate increases were having their desired effect in slowing growth and keeping consumers’ and businesses’ expectations of future inflation in check.

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