Data Scandal Hits Obscure Corner of Bankruptcy Trading Market

The first tip arrived last December. In an email to a Justice Department official, an anonymous author called for a probe into the handful of private companies that courts enlist to process paperwork in big bankruptcy cases.

The concern: some of these companies, known as claims agents, were selling data to a new market maker, Xclaim Inc., which facilitates the buying and selling of the debts of bankrupt companies. The deals allowed claims agents to profit from the trades.

“Is this legal?” the tipster asked the head of the US Trustee Program, a Justice Department unit that polices bankruptcy ...