FTX’s Bankruptcy Shines Light on Selling Trade Claims

In the wake of FTX’s downfall and bankruptcy filing, more crypto companies are expected to file for bankruptcy.[1] With a tumultuous year in the crypto world, creditors have been left with billions of dollars worth of claims. Unfortunately, bankruptcy proceedings can take years to resolve, thus leaving a creditor in a state of limbo and waiting to learn what portion of its claim will be paid out. As a result of this uncertainty, creditors may wish to consider selling their claims.[2] By selling a claim, a creditor can receive an upfront payment for the claim instead of monitoring the debtor’s bankruptcy case for years. Reconciling and distributing claims in the bankruptcy process is notoriously slow, particularly for very large debtors such as FTX.

Unlike stocks, bankruptcy claims are not sold or traded on the New York Stock Exchange. Instead, creditors must sell their claims through individually negotiated assignment agreements.[3] While there are no standardized forms for claim assignments, creditors tend to use assignment agreements that contain universally accepted terms in addition to negotiating the details, such as whether the buyer can force the creditor to repurchase the claim. Conveniently, creditors do not need to disclose the purchase price or other details of the assignment in the bankruptcy process.

While the prospect of quickly monetizing a claim may be enticing to a creditor, a creditor should consult an attorney to ensure that risks, such as the purchase price being returned to the buyer if the claim’s validity is questioned, are considered and mitigated. We are confident a market for FTX bankruptcy claims will emerge over the next 60 days.

[1] MacKenzie Sigalos and Rohan Goswami, Crypto firm BlockFi files for bankruptcy as FTX fallout spreads, CNBC (Nov. 28, 2022), https://www.cnbc.com/2022/11/28/blockfi-files-for-bankruptcy-as-ftx-fallout-spreads.html.

[2] Bruce S. Nathan and Scott Cargill, A Primer on Selling Bankruptcy Trade Claims, Business Credit (Feb. 2021), https://www.lowenstein.com/media/6418/nathanpluscargill-a-primer-on-selling-bankruptcy-trade-claims-business-credit-22021.pdf.

[3] Bankruptcy Claims Trading: What is it? How do I maximize my returns?, Nossaman (Mar. 25, 2010), https://www.nossaman.com/newsroom-insights-bankruptcy-claims-trading-what-how-do-i.

Opportunity for U.S. Backed Digital Currency

Cryptocurrency (“Crypto”) is an easily accessible digital asset used for financial transactions.[1] Crypto has become a source of payment on virtual platforms and utilizes blockchain technology.[2] While digital transactions eliminate the need for intermediaries such as banks, credit card companies, or third-party payment processors, it is an unregulated and volatile field.[3] The recent events with FTX highlight this issue.

The use of Crypto rose globally at an unprecedented rate during the COVID-19 pandemic.[4] Developing countries in particular accounted for 15 of the top 20 economies in 2021 using Crypto.[5] One of the most notable countries attempting to adopt Crypto is El Salvador. In 2021, El Salvador became the first country in the world to recognize Bitcoin as legal tender.[6] As such, El Salvador attempted to turn an impoverished area around the Conchagua volcano into a Bitcoin City.[7] The President of El Salvador, Nayib Bukele, hoped to create a futuristic metropolis from Crypto using the Conchagua volcano as a geothermal plant.[8] Unfortunately, President Bukele invested $100 million of government funds into Bitcoin when prices peaked, which led to a further debt crisis in El Salvador. One of the issues El Salvador and other developing countries have run into with the use of Crypto as legal tender is the volatility of the market. Since 2021, Bitcoin has dropped 61%, and El Salvador is likely to default on its debts in the next few years due to the dramatic drop in value.[9] The price of Crypto is open to fluctuation, fraud, and tax evasion due to the lack of regulation and backing by a central bank or government.[10]

One solution that has been proposed to bring stability to the Crypto market is a Central Bank Digital Currency (“CBDC”), which is a digital token, similar to Crypto, issued by a central bank. In the United States, the digital form of the token would be the equivalent of the U.S. dollar.[11] President Biden and the Federal Reserve are evaluating the creation of a U.S. CBDC and how it would work alongside the existing form of physical currency.[12]

The benefits of a U.S.-issued CBDC include privacy-protected digital currency, improvements to cross-border payments, and support to the U.S. dollar’s international role.[13] A U.S. CBDC would offer access to digital money that is free from credit and liquidity risks, unlike money held in a traditional bank.[14] Currently, Federal Reserve notes are the only central bank money available to the public. The use of a CBDC would provide a cheaper, faster form of transferring money and bring people who do not have bank accounts into the financial market.[15]

The dollar is the world’s most widely used currency for payments and investment.[16] A CBDC would expand the U.S. economy by creating a financial market with the global use of a CBDC.[17] Recently, China introduced its own CBDC, which may decrease the demand for the U.S. dollar abroad. The creation of a U.S. CBDC would allow competition on a global scale with China and other countries that have developed a digital currency backed by their central bank.[18]

Despite the benefits to the U.S. consumer and the global financial system, a U.S. CBDC has several issues. Many Americans actively use and prefer cash.[19] Additionally, there are privacy issues with digital currency. A Federal Reserve-backed CBDC system would allow the central bank to see every user transaction.[20] Additionally, banks have questioned the legal authority of the Federal Reserve to issue a digital currency without authorization from Congress.[21]

The White House, the Office of Science and Technology Policy, and the National Science Foundation continue to work on the National Digital Assets Research and Development Agenda.[22] The Executive Branch has placed a high priority on advancing research concerning Crypto and how it could provide financial inclusion and equity to Americans.[23]  While the benefits of a U.S. CBDC are plentiful, there are many moving parts to the initiation of a central bank backed digital currency in the United States. However, even with the lack of regulation and its volatile nature, Crypto is not going away. Crypto provides businesses and consumers with easily transferable, convenient, less expensive means of transferring money.[24] A U.S. backed stable coin may provide such stability. Clearly, the U.S. would not want the European Union or another Western power to issue such a coin and undermine the U.S. leadership in global currencies.

 

[1] Molly Mastantuono, Cryptocurrency 101: A Guide to Digital Dollars (Dec. 17, 2021), https://www.bentley.edu/news/cryptocurrency-101-guide-digital-dollars.

[2] Id.

[3] Id.

[4] UN trade body calls for halting cryptocurrency rise in developing countries, United Nations (Aug. 10, 2022), https://news.un.org/en/story/2022/08/1124362.

[5] Id.

[6] Joe Hernandez, El Salvador Just Became The First Country To Accept Bitcoin As Legal Tender, NPR (Sept. 7, 2021), https://www.npr.org/2021/09/07/1034838909/bitcoin-el-salvador-legal-tender-official-currency-cryptocurrency.

[7] Zeke Faux, El Salvador’s $300 Million Bitcoin ‘Revolution’ Is Failing Miserably (Nov. 4, 2022), https://www.bloomberg.com/news/features/2022-11-04/el-salvador-s-bitcoin-revolution-is-failing-badly.

[8] Id.

[9] Id.

[10] UN trade body calls for halting cryptocurrency rise in developing countries, supra note 4.

[11] Dr. Alondra Nelson, Alexander Macgillivray, Nik Marda, Technical Possibilities for a U.S. Central Bank Digital Currency (Sept. 16, 2022), https://www.whitehouse.gov/ostp/news-updates/2022/09/16/technical-possibilities-for-a-u-s-central-bank-digital-currency/.

[12] Money and Payments: The U.S. Dollar in the Age of Digital Transformation, Board of Governors of the Federal Reserve System (Jan. 2022), https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf.

[13] Money and Payments: The U.S. Dollar in the Age of Digital Transformation, supra note 12.

[14] Id.

[15] Andrew Ackerman, What is a Central Bank Digital Currency and Should the U.S. Issue it? (May 26, 2022), https://www.wsj.com/articles/should-the-u-s-issue-a-digital-dollar-which-could-compete-with-crypto-assets-11646921329.

[16] Money and Payments: The U.S. Dollar in the Age of Digital Transformation, supra note 12.

[17] Id.

[18] Boucher, supra note 16.

[19] Andrew Ackerman, Fed Launches Review of Possible Central Bank Digital Currency (Jan. 20, 2022), https://www.wsj.com/articles/fed-launches-review-of-possible-central-bank-digital-currency-11642706158

[20] Id.

[21] Id.

[22] Money and Payments: The U.S. Dollar in the Age of Digital Transformation, supra note 12.

[23] Id.

[24] Shobhit Seth, What is a Central Bank Digital Currency (CBDC)?, Mar. 9, 2022, https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp.

Pastore partner recieves recognition by the American Lawyer and Martindale-Hubbell

Joseph Pastore, the chairman of Pastore LLC, has been named a 2023 Top Rate litigator nationally by the American Lawyer and has received recognition as 2023 AV Preeminent from Martindale- Hubbell. Both publications evaluate attorneys from around the country using independent criteria.

Pastore’s Managing Partner Leads Discussion with Congressman Jim Himes

On September 23, the Connecticut Crypto Forum (the “Forum”) held an event at the University of Connecticut at Stamford. The Forum connects large and sophisticated capital pools with leading players and thinkers across the crypto, defi and Web 3.0 markets to strengthen investor knowledge, understanding and skill. Pastore LLC is proudly a Founder and Sponsor of the Connecticut Crypto Forum. The Forum’s September 23 event was an invite-only session.

In the first half of the event, a panel of speakers discussed the current maturity of the crypto and blockchain markets.  The panel addressed the current challenges facing the evolving asset class and concluded that crypto/blockchain assets are still “metaphorically” in their teenage years. The asset class still is characterized by volatility. Moreover, the panelists noted the time of hyper valuation of projects in the industry is over. What follows now is a time of acquisitions. Many companies and projects will likely fail, but the ones with worthwhile technology that lack sufficient cashflows to continue operation will likely be consolidated within larger players and ultimately be poised to make the industry more efficient. However, the panelists agreed that the industry’s best days are ahead of it.

During the second half of the event, Pastore LLC’s Managing Partner, Christopher Kelly, led a discussion with Congressman Jim Himes, an emerging leader in the crypto/blockchain industry on Capitol Hill. Congressman Himes noted the significant attention that crypto and blockchain assets have received in Congress. He noted that he is working with other members of Congress on legislation concerning the industry.

When a member of the crowd asked what should businesses do considering the lack of legal and regulatory clarity surrounding crypto assets, Mr. Kelly gave a poignant response: Don’t be afraid, be transparent and work with counsel to navigate the murky regulatory waters. Pastore, as a thought leader in the field, is positioned to help businesses and individuals plan a path forward despite the uncertainty.

 

SEC Proposes Change to Cybersecurity Reporting Requirements for Public Companies

With the threat of irrevocable reputational harm and damage to consumer trust brought on by data breaches to public companies, the United States Security and Exchange Commission (“SEC”) recently proposed new cybersecurity reporting requirements. In March, SEC Chair Gary Gensler noted these new amendments will, “strengthen investors’ ability to evaluate public companies’ cybersecurity practices and incident reporting.”[1] If the proposed amendments pass, it would impose new requirements on board of directors, including management reporting, organization, and board composition.[2]

The proposals aim to promote incident disclosure and increase risk management, strategy, and governance disclosure of data breaches.[3] One amendment would require a company to notify shareholders and the SEC within four business days when a material cybersecurity incident occurs.[4] The SEC would also require standardized disclosure of a company’s cybersecurity risk management and strategy, management’s role in implementing cybersecurity policies, and the board of directors’ cybersecurity expertise.[5]

As the SEC signals the necessity of new disclosure policies, companies should assess their current cyber reporting practices and procedures. The proposals aim to bridge the gap between business executives and security executives to ensure cybersecurity is included in their everyday business conversations and reporting practices.[6] In preparation of these proposals, companies can educate their board on their policies and procedures regarding cyber security risks. It is no longer the sole job of the chief information security officer to translate technology risk to business risk.[7]

[1] SEC Proposes Rules on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure by Public Companies, SEC (Mar. 9, 2022), https://www.sec.gov/news/press-release/2022-39

[2] Id.

[3]  Public Company Cybersecurity, Proposed Rules, https://www.sec.gov/files/33-11038-fact-sheet.pdf (last visited Sep. 22, 2022).

[4] Id.

[5] Id.

[6] Insight Report, World Economic Forum Global Cybersecurity Outlook (January 2022), https://www3.weforum.org/docs/WEF_Global_Cybersecurity_Outlook_2022.pdf.

[7] Bob Ackerman, New SEC Cybersecurity Reporting Requirements: Three Things Companies Need To Do Now, Forbes (May 25, 2022) https://www.forbes.com/sites/forbesfinancecouncil/2022/05/25/new-sec-cybersecurity-reporting-requirements-three-things-companies-need-to-do-now/?sh=2d78e01e6f05.

New York State Department of Financial Services Issues Consent Order Against Robinhood Crypto, LLC

As interest in cryptocurrencies (“crypto”) continues to rise, businesses and investors are left wondering what regulations they must follow. While a broad regulatory framework is still nonexistent for the crypto industry, the New York State Department of Financial Services (“DFS”) recently imposed a $30 million fine on Robinhood Crypto, LLC (“Robinhood”), a wholly-owned crypto trading unit of Robinhood Markets Incorporated, for failing to comply with New York anti-money laundering (“AML”) and cybersecurity regulations.[1] This is the first time DFS has taken enforcement action against a crypto company. In making the announcement, the Superintendent of DFS, Adrienne Harris, stated, “[a]ll virtual currency companies licensed in New York State are subject to the same anti-money laundering, consumer protection, and cybersecurity regulations as traditional financial services companies.”[2] Superintendent Harris made it clear that while this may be the first such action against a crypto company, it will not be the last.[3] DFS expects crypto companies to invest in compliance programs like traditional financial institutions.

In the DFS Consent Order, DFS took issue with several aspects of Robinhood’s compliance program[4] Specifically, Robinhood failed to devote sufficient funds and resources to its compliance program,[5] its Chief Compliance Officer lacked “commensurate experience to oversee a compliance program such as [Robinhood’s]” and did not participate adequately in the implementation of Robinhood’s automate software compliance program, [6] and Robinhood overly relied on the compliance program of its parent and affiliate despite those compliance programs were not compliant with New York State’s regulations.[7] Moreover, Robinhood failed to adequately evaluate “potentially suspicious transactions in order to determine whether a [Suspicious Activity Report] should be filed.”[8] DFS noted that as of October 26, 2020, Robinhood had a backlog of 4,378 potentially suspicious transaction alerts.[9]

While Robinhood may have had a compliance program on paper, DFS made it clear that it is focused on the execution of such programs. One thing is clear: the DFS Consent Order indicates that regulatory and enforcement agencies are starting to take action against the crypto industry. Common sense, sound legal advice, and diligence will help any business or investor navigate this market as state and federal agencies begin to enforce traditional financial services regulations on the industry.

[1] In the Matter of Robinhood Crypto, LLC, Dep’t of Fin. Servs. (Aug. 1, 2022), https://www.dfs.ny.gov/system/files/documents/2022/08/ea20220801_robinhood.pdf.

[2] DFS Superintendent Harris Announces $30 Million Penalty on Robinhood Crypto for Significant Anti-Money Laundering, Cybersecurity & Consumer Protection Violations, Dep’t of Fin. Servs., https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202208021 (last visited Sept. 19, 2022).

[3] Id.

[4] Id.

[5] Id. at ¶¶ 36-41.

[6] Id. at ¶ 36.

[7] Id. at ¶ 6.

[8] Id. at ¶ 37.

[9] Id.

Pastore Advises Private Equity Fund in Connection with Continuing Proceedings as a Result of $1 Billion Portfolio Sale

Pastore LLC continues to advise a large private equity general partner in connection with the sale by one of its sub funds of a substantial portion of its automotive dealership portfolio. Pastore LLC has advised the client on multiple issues with the sale, and most recently, on escrow issues arising from state regulatory matters as a result of the sale of a certain asset within the portfolio. The sale was subject to review by the state automotive regulator overseeing the transaction after one party to the transaction objected to the sale. After review, the state regulator has sided with the client and ordered the sale, but the challenging party has sought to appeal the order, placing barriers to the closing of the transaction.

https://www.autonews.com/dealers/subaru-dealership-gets-support-new-hampshire-board

Pastore LLC Represents Investment Bank Before Third Circuit

Pastore LLC represented one of the Nation’s largest investment banks before the Third Circuit on a case involving the scope of a bankruptcy court’s subject matter jurisdiction. White & Case represented an issuer of private debt, arguing that bankruptcy court subject matter jurisdiction extends to disputes involving a reorganized debtor. Law 360 has issued several articles regarding  this matter. In addition to handling this appeal, Pastore LLC has won Appeals at the Eighth Circuit (Rights holders in a merger) and Second Circuit (Hedge Fund investments) over the last year.

The Modernized Marketing Rule for Financial Advisers

On November 4, 2022, compliance with the amendments to the advertising and cash solicitation rules in Rule 206(4)‑1 under the Investment Advisers Act of 1940 (Marketing Rule), which the Commission issued on December 22, 2020 will become mandatory.

Since the advertising and cash solicitation rules were adopted (Rule 206(4)-1 in 1961 and Rule 206(4)-3 in 1979, respectively) the advent of the internet and social media, among other things, has dramatically changed the landscape of marketing professional services. The Marketing Rule is designed to modernize rules that govern investment adviser advertisements and payments to solicitors, replacing the broadly drawn limitations and prescriptive or duplicative elements in the previous rules with more principles-based provisions, as described below.

Definition of Advertisement. The amended definition of “advertisement” contains two prongs:

  • The first prong captures communications traditionally covered by the advertising and includes any direct or indirect communication an investment adviser makes that: (i) offers the investment adviser’s investment advisory services with regard to securities to prospective clients or private fund investors, or (ii) offers new investment advisory services with regard to securities to current clients or private fund investors. The first prong of the definition excludes most one-on-one communications.
  • The second governs solicitation activities previously covered by the cash solicitation rule and includes any endorsement or testimonial for which an adviser provides cash and non-cash compensation directly or indirectly (e.g., directed brokerage, awards or other prizes, and reduced advisory fees).

General Prohibitions. Under the Marketing Rule, the following advertising practices are prohibited:

  • making an untrue statement of a material fact, or omitting a material fact necessary to prevent making the statement misleading;
  • making a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate;
  • including information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the adviser;
  • discussing potential benefits without providing fair and balanced treatment of any associated material risks or limitations;
  • referencing specific investment advice provided by the adviser that is not presented in a fair and balanced manner;
  • including or excluding performance results, or presenting performance time periods, in a manner that is not fair and balanced; and
  • including information that is otherwise materially misleading.

Testimonials and Endorsements. The Marketing Rule prohibits the use of testimonials and endorsements in an advertisement, unless the adviser satisfies certain disclosure, oversight, and disqualification provisions:

  • Disclosure. Advertisements must CLEARLY and PROMINENTLY disclose whether the person giving the testimonial or endorsement (the “promoter”) is a client and whether the promoter is compensated. Additional disclosures are required regarding compensation and conflicts of interest. There are exceptions from the disclosure requirements for SEC-registered broker-dealers under certain circumstances. Advisers will no longer need to obtain from each investor acknowledgements of receipt of the disclosures.
  • Oversight and Written Agreement.An adviser that uses testimonials or endorsements in an advertisement must oversee compliance with the marketing rule. An adviser also must enter into a written agreement with promoters, except where the promoter is an affiliate of the adviser or the promoter receives de minimis compensation (i.e., $1,000 or less, or the equivalent value in non-cash compensation, during the preceding twelve months).
  • Disqualification. Subject to certain exceptions, “bad actors” may not serve as promoters.

Third-Party Ratings. The rule prohibits the use of third-party ratings in an advertisement, unless the adviser provides disclosures and satisfies certain criteria pertaining to how the rating was prepared.

Performance Information Generally.  In order to deter the provision of misleading information, the rule prohibits including in any advertisement:

  • gross performance, unless the advertisement also presents net performance;
  • performance results, unless they are provided for specific time periods in most circumstances;
  • any statement that the Commission has approved or reviewed any calculation or presentation of performance results;
  • performance results from fewer than all portfolios with substantially similar investment policies, objectives, and strategies as those being offered in the advertisement, with limited exceptions;
  • performance results of a subset of investments extracted from a portfolio, unless the advertisement provides, or offers to provide promptly, the performance results of the total portfolio;
  • hypothetical performance (which does not include performance generated by interactive analysis tools), unless the adviser adopts and implements policies and procedures reasonably designed to ensure that the performance is relevant to the likely financial situation and investment objectives of the intended audience and the adviser provides certain information underlying the hypothetical performance; and
  • predecessor performance, unless there is appropriate similarity with regard to the personnel and accounts at the predecessor adviser and the personnel and accounts at the advertising adviser. In addition, the advertising adviser must include all relevant disclosures clearly and prominently in the advertisement.

If you are an investment adviser, now is the time to ensure your marketing materials comply with the modernized Marketing Rule.

Will Delaware Order Elon Musk to Perform?

Tech giant Elon Musk (“Musk”) has been making headlines recently for announcing the termination of his agreement to purchase the popular social media platform, Twitter, Inc. (“Twitter”). In a court filing on July 12, 2022, Twitter accused Musk of breaching an agreement to buy Twitter for $44 billion.[1] Musk and his lawyers have asserted that he is not in violation of the agreement, which requires Musk to use “reasonable best efforts” to complete the purchase.[2] In support of this position, Musk claims that Twitter has not provided the necessary disclosures regarding the number of spam accounts on the platform and halted ordinary operation of the company while the acquisition was closing. Further, Musk alleges that Twitter’s public disclosures that five percent of its users are bots are materially misleading, which equates to a “material adverse effect” under the terms of the deal.[3]

Twitter was quick to file a lawsuit against Musk following his vocalized desire to back out of the agreement. Twitter stated that it was Musk who was violating the agreement, calling his quick escape from the merger a measure of “bad faith” and a “model of hypocrisy”.[4]

Twitter, which is headquartered in San Francisco, California, is suing Musk in Delaware, where its business is incorporated.[5] Delaware’s Court of Chancery is Twitter’s choice of venue for this litigation predominately for its excellent reputation in dealing with corporate law and for its specialization in being a “Court of Equity”[6]. Twitter has asked newly appointed Chancellor Kathaleen McCormick, to force Musk to abide by his offer to purchase the company at the $44 billion price the two sides agreed upon in just a five-day trial.[7]

Chancellor McCormick did just that, granting Twitter a five-day trial in October, the first win for either side – stating that “the reality is that delay threatens irreparable harm to the seller, Twitter, for the reasons I described earlier: The longer the delay, the greater the risk.”[8]

With Chancellor McCormick’s initial ruling, as well as the difficulty it takes to get out of a legally binding agreement, it appears that Musk has an up-hill battle to face against Twitter.

This is largely a result of the fact that the merger agreement includes a “specific performance clause”. This purpose of this type of provision is to prevent a party from backing out of a deal without good reason. The clause gives Twitter the right to sue Musk to force him to go through with the deal, as long as he still has the debt financing in place. [9]

Courts have enforced specific performance clauses in the past, notably in IBP v. Tyson Foods. This 2001 case saw Tyson agreeing to acquire IBP, a meat distributor for just over $3 billion. However, when the agreement went sour over poor business, Tyson tried to get out of the merger arguing over financial issues at IBP. The court ruled that Tyson had to buy IBP given the contract’s specific performance clause, “as it is the only method by which to adequately redress the harm threatened to IBP and its stockholders”.[10]

In addition to Tyson, a case from 2007 titled Genesco v. Finish Line saw the Delaware Court of Chancery rule in favor of Genesco after Finish Line attempted to terminate the deal. However, rather than going through with the deal, the sides agreed to terminate the transaction, with Finish Line paying Genesco damages.

The Musk litigation team has accused Twitter of a “material breach” of the deal agreement.  Musk’s lawyers argue that Twitter fraudulently reported the numbers of spam accounts, to which the company has estimated about 5% of users. In this case, Musk would have to prove that the number of bots is much higher and to show a material adverse effect on Twitter’s business for grounds to end the deal. A material adverse change is a change in circumstances that significantly reduces the value of a company. Twitter has responded, saying that the issue with bots did not have material adverse effect because its regulatory filings had warned that those figures were estimates. Equally, some commentators have noted that the term “bots” is not found anywhere in the deal documents, thus making it less likely to form a basis for termination.

As stated in the original agreement, a breakup fee of $1 billion is in effect if either side wants out. However, with Twitter’s stock price crashing as a result of Musk’s termination attempt. It seems as if settlement may not be on the table, which means that unless Musk is able to prove that there are many more than admitted bots on Twitter, he may be in for a difficult trial. The expectation is that the lack of substantial legal footing that Musk is leaning on will end in him becoming the new face of Twitter or having to pay the company financial damages (Tenesco v. Finish Line). The strategy to stall these eventualities out seems to be failing at least initially as the Delaware Court of Chancery has set a trial date for mid-October.

 

[1] Why Elon Musk Can’t Back Out of Buying Twitter, According to Twitter (July 2022) https://www.nytimes.com/2022/07/12/technology/twitter-musk-lawsuit-reasons.html

[2] Id.

[3] Id.

[4] https://www.documentcloud.org/documents/22084456-final-verified-complaint

[5] https://www.npr.org/2022/07/13/1111239959/twitter-elon-musk-delaware-court-of-chancery

[6]  https://www.npr.org/2022/07/13/1111239959/twitter-elon-musk-delaware-court-of-chancery

[7] https://www.reuters.com/technology/groundbreaking-judge-will-oversee-twitters-lawsuit-against-musk-2022-07-13/

[8] https://finance.yahoo.com/news/twitter-elon-musk-hearing-152545679.html?guccounter=1

[9] https://www.cnbc.com/2022/07/08/elon-musk-faces-long-legal-war-with-twitter-as-he-abandons-deal.html

[10] https://courts.delaware.gov/OPINIONS/download.ASPx?ID=2530