Creditor Claims Trading Case Shows Disclosure Is Paramount

December 2022
Region: Americas

This article originally published on December 6, 2022, by Law360, and is republished here with permission.

Online claims trading platform Xclaim Inc. came under scrutiny this past summer in the Madison Square Boys & Girls Club Inc.[1] bankruptcy case pending in the U.S. Bankruptcy Court for the Southern District of New York

Since at least 2019, Xclaim has executed agreements with at least five notice and claims agent firms to synchronize their proofs of claim registers with Xclaim's website where such claims are posted for sale.[2]

The purpose of the real-time synchronization is to permit third parties to purchase and sell creditor claims on Xclaim's claims trading website using real-time data.

In exchange for the claims agents' cooperation, Xclaim pays the claims agents a small percentage of the commissions that Xclaim obtains for facilitating the trades on its website.

The private business relationships between court-approved claims agents and Xclaim has raised concerns in the Southern District of New York and requires claims agents to be fulsome and transparent in their disclosure to the bankruptcy courts.

All bankruptcy professionals can take away important lessons from the Xclaim matter.