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Former Insys Therapeutics CEO Michael Babich has agreed to pay $30 million to settle claims brought by the Insys Liquidation Trust, which has been seeking to recover tens of millions of dollars from former company executives over their roles in the aggressive marketing of the opioid painkiller Subsys, according to a settlement filed Friday in the Delaware Court of Chancery.

Vice Chancellor J. Travis Laster approved the deal between Babich and Trustee William H. Henrich less than an hour after it appeared on the court’s docket, signaling the potential end of a long-running chapter in the sprawling Insys opioid scandal.

A Landmark Settlement in a Widespread Scandal

The settlement brings closure to a derivative damages lawsuit first filed in 2016 and later amended in 2023, targeting former Insys leaders accused of enabling and profiting from deceptive marketing practices that fueled the U.S. opioid crisis.

Henrich, as trustee for the liquidation trust established after Insys’ bankruptcy, sought to recover financial losses stemming from the company’s illegal sales tactics — a campaign spearheaded by former chairman John Kapoor, who was convicted in 2020 on racketeering and kickback charges and sentenced to more than five years in prison along with nearly $60 million in fines and restitution.

Babich, a key figure in the scheme, was sentenced in early 2020 to two and a half years in prison for his role in bribing medical practitioners to prescribe Subsys, a powerful fentanyl-based spray.

Insys itself agreed in 2019 to a $225 million settlement with the federal government and later reached a $175 million deal in 2023 with four former directors accused of oversight failures.

Terms of the Settlement

Under the agreement, Babich acknowledged that the facts in the amended derivative complaint could support a finding that his settlement debt would be nondischargeable in bankruptcy, meaning it cannot be wiped out in any future insolvency proceedings. This stipulation, however, applies only between Babich and the trustee.

Neither side immediately responded to requests for comment on the deal.

Background of the Case

Babich had opposed Henrich’s move in June 2023 to amend the complaint, arguing that the revisions “revamped” the trustee’s theories of wrongdoing and would drive up litigation costs. He maintained that his actions from 2013 onward were guided by advice from Insys’ in-house and outside counsel.

In January 2020, U.S. Bankruptcy Judge Kevin Gross approved Insys’ Chapter 11 plan, which consolidated the company’s assets into a trust designed to compensate both public and private claimants. The plan included controversial third-party liability releases for certain nondebtor parties, despite objections from former shareholders.

Representation

• Trustee William H. Henrich is represented by Norman M. Monhait, Jessica Zeldin, and Eric D. Madden of Reid Collins & Tsai LLP.

• Michael Babich is represented by Jeffrey S. Cianciulli of Weir Greenblatt Pierce LLP and Russell Piccoli of Russell Piccoli PLC.

The case is William H. Henrich, Trustee of the Insys Liquidation Trust v. John N. Kapoor et al., Case No. 12696, in the Delaware Court of Chancery.