American court hearing recordings and interviews - 10/5/23 hearing in the Prime Core/Prime Trust #bankruptcy, Delaware case no 23-11161, #crypto

Episode Date: October 6, 2023

publicly available hearing audio

Good afternoon, everyone. Please be seated. Judge Stickles were on the record in Prime Core Technologies, case number 23-11161. Good afternoon. Thank you. Mr. President. Aaron Edmond and my colleague Michael Longbacher and Dante Belmont. Good afternoon. Also, in the courtroom today is Bill Murphy, who is an M3 partner, our financial advisor.

Your Honor, we recently filed... I just handed a copy. Great. This is the agenda. I'd like to thank your honor for entering orders prior to today on items 3-135, which brings us to item 6, which is our request for an interim cash management order with respect to the 345 of three waivers. We spoke to the trustee about this and gave them to a further extension through October

18th, our next hearing. Okay. Yes, please. And we'll see that it's basically just changing the date and accounting for the second hand questions we have said here. Mr. Cudia, do you want to be heard? Good afternoon, Your Honor, Justice Qudy of the United States Trustee. Ms. Candleston is correct.

We do consent to the further interim order, 345 release. Okay, thank you. We will get that in, our two. Item seven on the agenda is our request for conditional approval of a disclosure statement, as well as approval of proposed solicitation, voting, and noticing procedures, our proposed confirmation timeline and the forms of solicitation. They filed their initial plan to disclosure statement

on September 8th, adopt members 92 and 93. And since that time, we've been working with a number of parties to make adjustments, changes, and negotiate some resolutions to concern. So within informal objections for comments and formal objections by report.

In particular, you work very, very closely with the U.S. He's office and the committee. We got to really down to the wire with the committee on this one. So I want to thank USJC. Delta's initial for working to cooperate with us. We have incorporated some new changes to enough versions of the plan of disclosure student that we filed on the second of October,

which is Monday, those were at document numbers 235 and 236. And yesterday, very late, we filed new versions, which incorporated even more. You mean this morning. Yeah, but yes. But my days and nights are blending together. But yes, today you filed amended. Yes. Yes.

Thank you for that. To be here today. At docket number, you can see if you on. And we also filed a revised proposed a conditional approval order this morning at socket number 22. And if you're listening to the court, I'd like to provide an overview of the plan of disclosure statement before I turn to objection. Yes, that would be great. So, Your Honor, voting parties, submit an important decision to vote. to reject or accept the plan.

Among other things, the disclosure statement provides information conserving the debtors' business organizational structure, capital structure, the key events that led to these cases, as well as the major events that have happened on sparring cases. It provides an overview of the plan, including the classification and treatment.

It outlines the potential risk factors associated with the plan, and also includes the liquidation analysis, demonstrating the difference between recoveries under this plan versus is bucket of the federal chapter 7. That we filed our litigation analysis today at document number 23. Does your honor want to copy?

I do. It also includes an explanation of the plan structure, including what I'll call the one and a half, or two and a half toggles rather. So specifically there are a number of restructuring events that are possible under the plan. And the first of the sale transaction, which would be consummated outside of the plan, percent to 363. And then the plan administrator would then wind out in residual estate.

There's also a possibility of a reorganization transaction where a third party hits the capital contribution in exchange for 100% of the equity interest with your reorganized debtors. And if those two fail or are not complicated, the plan would then toggle through a straight liquidation. The disclosure statement also includes a description of the revisions under the plan,

and just to sort of put on the record former directors and offices are not released for any company for plans. And with certain exceptions, current directors and officers are also not released for them. And those are current directors and officers are not released with respect to the 90F wallet causes of action or avoidance actions other than those related to ordinary course benefit and wages. But current directors and officers are explicated. The disclosure statement also includes a description of who qualified in a rule of

the voting as well as the opt-out procedures. And under those, all parties can opt-out of the releases, the voting parties can check the opt-out box on the ballot. And the non-voting creditor of this include the box as well. So those parties can either file a formal objection to the releases with the court,

or they can just check that box and return it to the clinic data. And of course, you know, voting parties can also file formal objections. Right. Turning to the objection. and informal comments. They fell into two buckets in my mind, disclosure objections and confirmation objections.

And I really have resolved if not solved in the same rejection through language of the plan, disclosure statements. The disclosure objections were focusing primarily on maintaining the status quo established under the final cash management order

and including information regarding the debtor's investigation and when it will be completed and also available insurance. We've made changes to the extent we could to the plan disclosure statement. I'll just put into the record where they are. And the disclosure statement is section 6B4 and 7H6A and sorry, there's 6H6A and 7A2 and as well as in Article 2.4 of the plan.

And I also believe there's something in 6.9. You think there's something what? I'm sorry, I didn't hear that. In Article 6.9. as well. I think that just got in breaking the court court. So your respect to the detail that we provided about the investigation, I expect folks are going to be unhappy. They would like more. But what I'll say is that we're investigating the 98 F-wallet issues as well as the property-based state issues as quickly as we can. Because you're very complicated issues. We are being as thoughtful as we can. And like I said, we're working as fast as we can. But either at this time,

have nothing more to report than what's in the disclosure statement, or we cannot report more because we can be jeopardized the investigation. So what we've tried to do is balance the disclosures against where we are in the investigation. And in terms of when we'll be completed, we are taking a very thoughtful and careful approach. So at this time, I don't have an update as to when those plans will be completed, either one of them.

But we're working as quickly as we can. We're serving 2004 notices. I believe we're going to file a 2004 version today. perhaps probably in short a time so we can have it for around the 18th but we're in our next here

and so you know we're doing what we can but we don't have a dependent outside date and then let me ask you if you

discovered information that you could share would you file like a supplement if you had it prior to the plan supplement

Yes, yes. I believe what I usually do in the pieces is I file a sort of a supplement to the disclosure statement at the time of the plan supplement that explains the changes from the oldest, like, from the disclosure statement that was solicited in. Of course, we only anticipate recovery getting better, not worse, than the fed on file, or if that was sent me on to my earlier today. So, yes, we would definitely do that. Confirmation objections were really related to the scope.

really related to the scope of the releases, which we've been negotiating with the committee very closely. And the treatment of claims specifically cryptocurrency and client currency and customer accounts, which is touching on the property to the state issue, which we haven't found along yet. With respect to confirmation objection, it's our position that we know,

which we know is preserved. With that, I just walk, Your Honor, through changes being aid since we file. Okay. Okay. earlier, well not early this morning, but I don't believe you have them. Okay, so perhaps... Well, maybe I should hear from objectors.

I don't even know who's a live objection right now. I'm sorry, what? I don't even know who are live objections right now. What I believe has happened. I believe that we have resolved allegation of Lepalty objection by including the other secure claims, which was inadvertently left out. With respect to TG labs, I believe we have resolved their disclosure objection by including language in 2.4 of the plan. But that they might want to just put something on the record with respect to their reservation of rights to confirmation.

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Find an agent at CINFIN.com. Parties could just let me know where we stand. I just start with the objection. And then I'm assuming that you're in line with that are in the response. Okay. So why don't we hear from objectors so committee can respond together with the debtors? And let's take an issue, you know, an objector at a time. Good afternoon. The objection was that the initial disclosure statement did you mention any of the resolutions reached in the final cash management order? There is language that has been added and 2.4 of the plan to address that the customer account funds will be transferred.

And so we might have a tweak or two here. there and the plan, but we're still in active discussion. And we're comfortable at this point in proceeding and just reserve on that. Our second objection is that there was an adequate information with respect to claims that were being released for available insurance. The debtors did address the V&O insurance

and added additional disclosures there. But with respect to the state claims that are being released, that's still an issue from our perspective, which tied directly into our third objection, which is that the debtor's current directors and officers should not be released from many states with third party claims in positive action. And it's our understanding from debtors' counsel, as is preview,

that the debtors are proposing to release current directors and officers with respect to claims except for the defined non-released DNO claims. But the plan of disclosure to find are very confusing on this point. So nowhere in the definition of released parties are the current directors listed. But then the end of the definition says,

quote, notwithstanding, the foregoing, the directors and officers against whom the debtors hold non-release DNO claims, as of the petition date, shall not be released parties under the plan. But as noted, that definition of released parties only includes eight separate parties, and none of them are the current DNOs. So it's our position of the plan and disclosure statement needs to be amended to make clear exactly what releases the debtors are proposing to grant to current directors and officers, if that's a perspective of non-released D&O claims.

And then, coupling on for the end of this, the disclosure statement, our position, lacks adequate information as to what claims are being released for current DNOs, what the value of those claims are, as well as what the contribution is that the DNOs are making in exchange for those releases. We understand that there are ongoing investigations,

but there's no other discussion of what these claims they be, what their value are, and it's really not adequate information to provide voting creditors with a reasonable understanding what the plan is doing to make an informed judgment as to how to vote on the plan. Therefore, we would respectfully request that the court require an amendment to the disclosure statement to add sufficient information regarding what plans are being released, and estimated value, and what contribution is being made in exchange.

And then just with respect to confirmation, do you reserve the right to bring any confirmation objections related to the third party and plan debt releases? No, but I'd like to hear from the debt. or the committee of their position. And I know you were just getting documents, so I don't know if you heard the end of that. Your Honor, so a couple of things, Mr. Bennett's hope that, Mr. Silliver's told me that, I mean,

admitted the governor releases for the correct directors and officers. They are not released parties with the time to 90s while it positive action and wanted to make that clear. So I have the red lines now. Certainly. Is this just a black line of edits since this morning? Yes. Okay.

The officers and directors and officers, subject to applicable limitations and the debtor if you not proposed to release former directors and officers on the plan. I went through what, and I think that the plan is viewed in terms of what the releases are created. The red line of the plan. The red line you just gave me. The black line of the plan. Okay. Right. Okay.

the non-polar lens. We added language at the end of section 6.9 that also describes, you know, the scope of the use and it covers that they're not being released except for avoidance actions, except for ordinary course wages, and it's not, articles that is not intended to release or otherwise limit or modify things of action

against one of the officers. So I, maybe I'm just doing the leaves, but I don't know that it's not here. And we tried to work with Ingerpoints to make it clear, and maybe made a dozen changes on behalf, and I just, I'm not sure if I'm clear. And the scope of, in terms of who is released, I think that's a confirmation issue.

And that might change between now and then, So their rights that reflected are preserving my mind. And when we get to the plan government stage, perhaps the solution is we quite a bit of released officers as part of the plan supplement. Robert Stark from down by the proposed counsel of the creditors committee. I'm going to do something a little bit at risk

here my partner's been doing the language. So I may get this wrong. I'm able to come up and tell me I have it long. But I think these folks have not been sleeping for days. I think it's really important understanding. And unlike so many other cases that we do here, where the releases are everyone and affiliated people and their affiliates and their affiliates

and so on and so on, the releases that have been negotiated here are very, very, very, very now. And so what we're talking about in terms of, what's easy in lots of other cases, everyone's released. Here, it's like almost no one's released. And whatever investigation is yielding, will whatever value is accretive as a result of that.

And as Ms. Convinsky said, that he, I'm sorry, said, if between now when we get to the plan supplement time, there's more information that's yielded, that will be made available to everyone. So it's the subversion, I think, of the fact that it's a little more complicated because it's very few people that are being released.

You have to trail the definition around and figure that out. But it's really the people who are working on this bankruptcy case. It's really the people who are on the special committee that much more. So private people who are at the company are no longer there? No releases. Anybody related to the 98 F issue?

No releases. Any individual claims that creditors have? We can't really delineate all of those people because it's sort of everybody. It's almost so I don't know if that's really where the confusion lies as to why somebody may say there's not enough disclosure. There is enough disclosure.

It's that there's not a lot of disclosure. there's not a lot of leases going on. That's probably what, I think that's what this new language. I'm just reading for the first time. We're working very fast. Right, I understand. Effectively status. Maybe Anchor Coins Council, I think she just got an opportunity to look at it.

So maybe, yes, certainly. Better understanding of the changes that were just made and whether I discussed on with the council, were resolved on that issue. Okay, thank you. I appreciate that. Excuse me, does that resolve all of Anchor Coins? issues, understanding that you're reserving rights for confirmation hearing.

There should be some more of the disclosure with respect to what things are going to be released in the value and what contribution for current and former directors. I guess just the one sentence that there's an investigation ongoing. I guess I'm a little concerned with the ongoing investigation. What information would you contemplate could be provided that would answer your question in light of the fact that it's an ongoing investigation? If there could be a supplement, there would be a supplement. I guess it was discussed as part of the plan supplement. I think that it would need to be someone in advance. Don't worry, I have an issue with the plan supplement date.

It's not compliant with the local rules. So I think that would give us some comfort, but I understand that there's a confidentiality to there's an ongoing investigation, but there's really no basis for a creditor to read that one sentence and understand what they may or may not be given up by accepting or rejecting the plan. And so I think there just needs to be some kind of, like, no, I mean, there's a serious investigation. I don't know if that.

Also on the flip side of what contribution is being made by the court to be released related to that, would you, like, move to murder? Well, let me, I wouldn't have resolved the one outstanding issue here, since we're claimant mid objection. So is there any additional information that could provide it with respect to investigations? What happens if you have nothing available at the time of the confirmation hearing? That's one of my overall arching concerns here and I appreciate comments that were made to me at the prior hearing about these types of cases lose money and they need to run on a parallel track but as a consequence of that you don't have the information that you might

otherwise have available if you were waiting a couple of weeks but I don't know if that means weeks or months or years for an investigation that investigation goes into the post effective date timeline you know we'll know what we'll have an update when we do the amended disclosure statement but you know we can go two ways right we get access to the 98 if well ever we don't and with respect to the property estate issues there's a number of different types of contracts that have different provisions and we need to analyze all of those to determine whether you know we agree with under a certain contract that there's not like it's not property to state or whether

we want to bring it to your honor for you to decide whether it's property of state based on our analysis so Those motions will be coming. We are serving, we've been active in the 2004 process, and we'll be serving those 2004 motions and bringing as much as we can to your honor to decide before confirmation, but there's a mechanism set up in the plan so that if those continue, there'll be somebody to carry that on.

By the time we get to confirmation, though we will know which type of transaction we have and what the value is of that transaction, So we will have additional information for creditors, but I can't commit to a timeline on the industry. Please. You know, I think the fundamental, it's important to understand a fundamental nature

this plan as it compared against other plans for disclosure purposes today. This is not a reorganizing company plan. You are not rehabilitating a business, going in addition and delivering stock to people, and hoping this is a sale of a company. non-operational business and that may be the path, and maybe a different path.

This is a transitional plan. This is a plan that takes where we are in bankruptcy with all this administrative expense, with all of the burden on your honor's docket, and says let's wrap it up, tie it up, and wind it down according to what's value created going forward. I view those as more transitional plans. Okay?

The nature of disclosure in the former matter, for the typical widget reorganization is, what am I getting, how am I getting it, what is it worth, what can I do with it? In that scenario, if I'm getting stock, if I'm getting a beneficial interest in a liberation trust, if there's gonna be causes of action, of course, you wanna know exactly what it is I'm getting,

how I'm getting it, what it's worth. When you're in a transitional plan, where we're using the means of Chapter 11 to wrap up in a very cost-effective, efficient, and value accretive for the creditors, and we don't yet know those things, respectfully, Your Honor. Nobody knows what's in it, how it's gonna be,

where it's gonna go, because that's not the nature of the plan, it's not the nature of our case. We can't like our fingers stick it up in mirror and know how these things go, because we don't know the answer to those questions, and sit there and say, well, we can't get a disclosure statement approved, and people won't know how to vote on whether or not

wrapping it out is the better way I don't think that's what 1125 does in this context, granted in other context, but that's not us here. Your Honor, I had a few words that I wanted to say about it, about generally what we're doing today, but I wanted to address that. Okay. Is it now at the time? Yeah, go ahead. Okay, thank you. The committee's position for purposes, okay, we follow the reservation of rights.

And we are, we have no issue with the legal question by the debtor today. And in saying that, I want to acknowledge something to these folks have worked awful to home and they have met us more than halfway to accommodate the committee's informational needs negotiating requests make concessions achieve a deal that I think from a plan perspective we're not today on board with the plan and that's not that there's things in the plan that are making us uncomfortable is that this case is moving extremely quickly for reasons I have to do with, as I just mentioned before, we're not reorganizing and rehabilitating

business, but when we're self-processing up the case. But it's kind of the old novel theory. It's what's below the surface of the water, you know, you write a good novel, it's only a little bit easy, it's what's below the surface. This is complicated. This is a complicated case.

And this company historically operated in a complicated, an important way in a rather large, we're trying to get to all of that. So here, and there's an M&A process going on. We think we're going to be supported, and we think that would be in a position to announce that support very quickly,

days a week or two, but we're not there just today. We have some tie down what we have to do just yet. We provided debtors council with a draft of a letter of support, you know, the typical creditors committee letter of support. I do not believe it's been presenting presented to your honor for approval. My understanding of the way that we've been operating under this is that,

first off, I don't have authority to release that letter or authorize the debtor to release its creditors just yet. We're working to achieve that. And I understand from the other perspective that their view would be that the letter, since they have signed off, I believe, on the letter form, would be acceptable from their perspective. I just don't want to be in 1125 risk of having either we submit that letter directly or the debtor do it that I know. I've certainly been involved in cases before many judges in Delaware

where it was fine as long as you better approved it didn't need judicial increment or but I don't want to be presumptuous all of those lines. So that procedure was for us if it works for your honor. If you would like to... I'd like to review it before it goes out. I'd like to review it before it goes out. Certainly.

Any questions for me? I don't. Not now. Once you finalize, I don't want to see it. I don't want to see it. until because I understand the committee hasn't approved it yet, correct? We, I believe the committee has approved the form of the letter, but we're not yet positioned to announce that we're publicly supporting from.

We have some things that we have to do first. Assuming that we get to that point, then we would, I would be authorized to tender it to the debtors for solicitation or otherwise publicize it. But if your honor wants, it believes it then we, that makes a lot sense. Should we do it under sort of certification of counsel or, or, you know, we do it under sort of certification of counsel or, or notice? A notice is fine. Okay, and then as long as,

we'll be sure that whatever order we're doing or today would enable. And I'm a little confused procedure if I notice it up or do I file a motion for a motion for the resolution? If you're inclined to approve the letter, they can include it and the revised proposal. Yeah, I just want to see it. Yes, let's walk through them.

And I understand that Anchor Coim still has an open. issue but let's walk through the change. I'm actually because we defined, we created a defined term called exquisite positive action, a sort of simplified their sandwich. So that's a cleanup. The creditors litigation trusted in it.

We agreed that the credit is can prepare it. How it was originally drafted in a prior urban was that they had to be, it had to be reasonably accessible to the committee, but now it's just to us. So they're sort of spearheading. that agreement as well as the plan to finish straighter agreement. Okay. 1.45, that was a change of the...

Bear with me just a second. The change by the media as well as we work with is just clarifying in 1.149, again we deleted the phrase because we corrected that with another defined term that's the same in 1.165, the US, I mean sorry, the committee. I mean, sorry, the committee, but we've also strapped. So when we file a friend after this hearing, I'll make there's changes.

But essentially, in the wind-down better assets, for A, with respect to the cryptocurrency and the 98th wallet, the insurance policies in C, and the booking records, and there's something to the contrary in the plan supplement document or the restructuring transactions memorandum around them just to account for whatever the transaction ends up looking like, maybe there's a policy that needs to stay with the buyer.

Or if the cash provided by the buyer satisfies all of the claims, they should be able to retain the value of the wallet access, things like that. So just to sort of caveat it, make sure that it's not, We're not misrepresenting. This is another change. .4. We've made a number of changes before the hearing to this paragraph

to resolve your objections, including with respect to the status quo piece regarding the out and purchase of currency and customer accounts. But these are we added transfer to this for anchor points so that it was clear that it really did maintain the status quo. His transfer was also covered in that final cash management order. Article 3.6, these are

changes by the committee which we agreed to turn to the next page you're going to see in each class of coin of um each of the subclasses in class three the general and spirit cutters we've added at the the um can you's request this sort of subparagraph which my understanding is if some cash for a particular currency is allocated to a particular subclass it's not used they can reshuffle that into another class Which we thought was appropriate. Who described, I mean, I understand what the papers say, but at a more granular level?

Who are the creditors in the three classes? The class three and its subclasses. So it's the general unsuperary creditors for the debtor, and it's the trade creditors and the customers? Right. So it's, are there many trade creditors? Or is this primarily customers? I think between the amount of trade debt and customer debt, it's definitely a customer debt heavy.

Okay. Before you get there, can I just ask you because we're here? Explain to me the convenience class. Class 4. We have a number, a large amount actually of claims that are very small and reasonable creditors, but something that's very small claims. And we wanted to give them the opportunity to select, elect to have the things. elect to have this convenience pass where they can get their money faster, they don't have to participate in the claims reconciliation process or anything like that.

And we thought that given sort of the nature of crypto and the diverse cryptocurrency holder body, that this might be attractive to people with lower like base claims. But it doesn't, does it identify the amount? Yes. I'm sorry. I must have missed it. And maybe it's a definition. It's just not in this, but it is in... Yes, that's...

$300 for that. Oh, okay. And just for context, that's a, you know, more than $20,000. $20,000. Right. Thank you for that clarification. Okay, I think you're at $6.6 maybe.

Yeah, okay. So, of which three, the top, in a prior version, we had given the creditors pay be broad and deadlines, including with respect to, potentially adverse tax consequences to the constituents. And what we've added here is that we can't reduce any of their

standards, the definition of non-released DNL claims to include positive actions related to redemption of equity by the debtors. Also, aren't we agreed that that would be appropriate. A lot of these changes are to clarify that, and also to, at the end of that paragraph, to talk about what we discussed today with respect to the avoiding factions for directors and officers. Rights and duties over planning a year. Same with 46, another one of the cleanup, modified to, you know, .21.

Prior to maybe identify the best of the cost of action, they asked that we picked that out, we were okay with that. Prior insurance section I discussed, we are created for this, so we just agreed to do it. agreed to believe them. Those are all the changes to the questions. Yes, please. Which is, I discussed earlier about, we put an explanation of disclosure statement to try and address and reporting concerns

so that, you know, people didn't have to parse through all the definitions. There will be a second. Just, I think, on page 87, I think each of the release professionals is duplicative of the of the preceding page 0.6. Oh, they're exculpated. I'm sorry. No, no, no. That was my misreading. Sorry. It's what happens when you publicly read things.

I do not. Actually, I don't really want to discuss the order until we go through objections. And I also would like an explanation on the liquidation analysis because I don't understand it. And I understand that that's for another day in terms, but I need to determine that this is, that I don't have a feasibility issue that would preclude solicitation. Much better job than I would. And maybe we should just wait until we hear from an objector,

but at some point I'm going to want to hear from it, pull on it, but I want to hear from objectors first. So I think where we left off with respect to objector, was anchor coin still having an open issue with respect to what was being disclosed with respect to investigation is that correct I think that the changes to changing the card off from the current debtors current directors not being released for only the 90 F wallet causes of action to the broader all-plains going through that just that was very helpful to see

more specifically so it my understanding then is that the only thing that current directors and officers are being released for is the ordinary course of major more than action and so with that your honor I think this is a formation on the investigation because those investigated things are not being released okay and is that her understanding is correct they're not being released for an infection but also if they're not found liable with respect to the 98F issues it will be It's a toggle release. I'm sorry, Mr. Stark.

I can't hear you. Oh, are you talking? Oh, do you need a minute? No. So he was asking if it was related to the release of the ex-location. I think the excolation is related to, you know, post-position activities. That's our concern are concerns with the release. And hearing that if the investigation shows that a current director and officer is not law,

for a 98x wallet cause of action, I think it comes back to our client and other creditors' concern of how do we know what that investigation entails, what causes and things of action were looked at, and the value we didn't have found to not be liable for if, you know, want to need to accept a claim that would release them before we know the outcome of what steps were taken.

Yes, please. All that's happening is it's channeled to insurance. It's a mechanic that is used, the disclosure statement, what and how, in cases where the knowledge is ready and available, we don't have to do that, and we don't have the information ready and available. People are voting as whether or not, on the whole, the deal is sufficient. If you don't like the deal vote against it, you want to do something else, let us know. But there isn't information to add, and no one's getting releases.

It's just if they're found liable, it's done by the insurance, not their own personal balance. I don't think that's what the plan says. My point was not that they're being released, it was that if they're not liable and they're not being at quality issues, then they're decided that, you know. You're saying under the plan, they are not released. If there's subsequent litigation post-effective date and they are found not liable, it is what it is.

Exactly. But they are not getting a release. No, that are a presentation. Thank you. Other objectors. Your Honor, John Weiss of Patrick and Steine, Walter Hayden, on behalf of both Teague Labs, and Allegheny Casualty Company. Good afternoon, Mr. Weiss. Thank you, Judge Bickles.

With respect to Allegheny Casualty, whom I'll speak for today, and then I will see the podium to my co-counsel, Tracy Schafferoff from the Keller Bend the Moody Fund. With respect to Alligator Casualty, we appreciate the debtors adding the secure class to the plan. We do have issues that we'll have to address in connection with the plan with respect to overall treatment and collateral that we're holding, et cetera. We anticipate continuing to work with the debtors. Those discussions have begun, and we'll simply preserve rights vis-a-vis-vis plan issues to be addressed at that time, if necessary. And other than that, if I could just turn the podium over please to my co-counsel, and with that introduction, I believe she'll be speaking for Tracy Labs. Okay, thank you. Thank you.

Ms. Schaffer? Ms. Schaffer, thank you, Your Honor. I'm sorry, pronounce that again? Tracy Schaffra. Okay. Good afternoon. Good afternoon, Your Honor. I'm with Keller Ben, Vanity Kim, LLP.

As Mr. Weiss mentioned, we represent Tiki Labs, Incorporated, doing business as Audius, Incorporated. So we appreciate all of the work that the debtors have done to address the objections to the extent they can at this point. point, it's a closure statement, but we did want to make sure we preserved our rights with respect to those objections. Tiki Labs holds a significant amount of cryptocurrency and a customer custody account. And so the determination of not estate assets and the account treatment issues are of paramount importance to Tiki. We appreciate that the debtor's added language

making it clear that they would not take tokens subject to customer agreement without a court order. But at this point, without an understanding of the debtors, you know, the debtors have not taken a position yet on whether customer custody accounts or the cryptocurrencies in those accounts or a state property and how those will be treated. So without that information, Tiki Labs doesn't have adequate information to be able to make an informed vote on the plan. So at this point, we just wanted to make sure that we preserve Tiki Labs' rights to, raise those objections to the adequacy of the information in conjunction with the final approval of the disclosure statement and the confirmation of the plan.

Bear with me a second. Let me ask the debtors. I'm looking at Local Rule 372. Objections not made at the time of the hearing on voting procedures form a notice and form a ballot aren't considered at the time of confirmation. Is it the debtor's position that Tiki can reserve its right with respect to customer accounts to the hearing, the confirmation hearing, to address the adequacy of the disclosure statement? Yes, we see our school board with that between on that, but to the extent they're still not satisfied with the disclosures, it's our position that those are reserved. Okay.

Does U.S. Trustee have any issue with that position or the committee? Yes, just a duty for the United States Trustee. Yes. Again, I did want to thank Debtors' Council for working with us to get most of our issues resolved. As far as disclosure statement issues, they are resolved as far as we're concerned. We do want to reserve our rights as far as confirmation issues, which we do have some. But again, a lot of hard work on their part. Okay.

But as to Tiki, the U.S. trustee doesn't take a position whether those issues are reserved regarding adequacy of the disclosure statement. No, we're not taking the decision. Okay. Terrific. Thank you. And Mr. Kudia, let me thank you. I can tell the U.S. Trustee had a hand in many of the modifications, and I appreciate that. Which is concerned.

We're perfectly fine with the preservation of rights to make sense that we're sure. Okay. All right. Were there any other issues with respect to Tiki? No, that was it, Your Honor. Thank you. Okay.

Thank you. Other... Your honor, this is David Newman. On behalf of CoinBet. I filed a joined her to Ms. Schaffroth's objection. It was just very well written and really encapsulated the concerns that my client has. My client and its users are the owners of about a little over 100 Bitcoins out of, I believe, a pool of 300 bitcoins that the debtors have under their trust. under various trust agreements.

And our only concern is that we know that, as far as we can tell from the disclosure statement, that Bitcoin, BTC, was never involved at all in this wallet issue. And so our concern is without knowing the timing of the supplement, and then knowing at least a statement as to where the matter is currently, just where the investigation is, is it ongoing, what stage it's at. It's really hard to get over our objections to the fact that our ownership in VTC

and the process with regards to resolving the ownership issues as to BTC are not disclosed in any way in the disclosure statement. as those BTC issues, the Bitcoin issues, are unique to Bitcoin holders, as it doesn't seem like anything was that any issues in this case affected the BTC. The BTC rights under the fireblocks technology that was used to maintain wallets in this case. Let me hear for the debtors. Mr. Stark, yes. That's sufficient for us, Your Honor.

Okay, so I would encourage you to continue to talk, and your issue is reserved for the final hearing. No, actually, sorry. And let me just reiterate to Mr. Newman. Today's approval of a disclosure statement would be only on the interim basis. So it will be readdressed. Your Honor, I really do appreciate it.

Thank you so much for the opportunity to appear for you. I do appreciate it. Certainly. I would like explanation. I appreciate liquidity. I mean, the liquidation analysis is not before me today, but I could not or did not understand, and I'm afraid I didn't bring it out here with me,

how parties, accreditors receive more. and an 11 and a 7 based on the analysis that was attached. Okay. Could you just wait a second while I find the report that was actually provided? I can't find my copy of the report. That's all. I'm just, give me a second. Okay, I have it.

Good afternoon, I don't, wait one second, Maddie. Since he's a financial advisor, I would have him sworn in. You can stand there, sir, but you're going to be sworn in. Could you please raise your right hand? Do you affirm your word that you will tell the truth, the whole truth, and nothing but the truth to the best of your knowledge and ability? Yes. And could you please state your full name and spell your last name for the record?

William D. Murphy and you are the H-1. Thank you. Thank you, Mr. Murphy. I had a question about the liquidation analysis because I don't, appreciate how I understand this says there would be a creditor would receive more an 11 than a 7 but I don't understand based on the numbers that are attached particularly I'm looking at the chapter 11 orderly wind down that's on page 13 of 14 versus the chapter 7 liquidation that's on page 14 of 14

where it reflects an 81.4% recovery as a midcase to Chapter 7, and yet if I look at the Chapter 11 orderly wind down, it breaks it out for customer claims trade convenience contract, and it seems to be a lesser percentage to me. I'd like to recalculate that, Your Honor. That is the best in error. Oh, okay, because I'm like, all right. You know what, would it be helpful if we took a quick break?

Yes. Okay. All right. All right. That would be very helpful because I didn't want to make a representation about something being patently unconfirmable if there's an error. So why don't we take ten minutes? Okay. All right.

Let's take a – we'll stand in recess for ten minutes. Okay. Okay. Okay. Okay. So, the chapter 11 orderly one down column, that is 68.2 percent. It will be delivered if you are current. Okay.

So, um, the Chapter 11 orderly one down column, that is 68.2 percent. And the Chapter 7 recommendation column should be 66.9. Wait, hold on one second. I'm sorry, I was writing with a dead pen. So it should be 68.2 with respect to Chapter 11 orderly wind down, and then with respect to Chapter 7 liquidation, it should be what? Okay, so the international preference forgeries, it indicated up here earlier in the column,

and it did the actual formula it was not included. Okay, so the 66.9, that replaces what number? 81.4? Okay, just want to make sure. So, wait a minute. So it's 68.2 recovery under 11. And 81.4 under 7? No, so the 81.4 is not, I think that's, no, that's not correct.

You should be 66.9. And the 70% is convenient class. 6.9 so it's the differential between 68.2 and 66 so it's a 2% differential all right thank you for that clarity appreciate it let me ask before we proceed any further is there anyone else who wishes to be heard with respect to the solicitation motion the disclosure statement or the proposed form of order Okay, I hear none. Let's proceed forward with the order.

This is based on the We have a change to the person with filed through this morning. Okay. Has your honor had a chance to review or do you walk through? I did review them. Yeah, a lot of paper.

I have a preemptive change. I worked on very brief. Well, I have my comments typed out, so I might have to work with you a little bit on what paragraph because when the revised was filed, it changed the page numbers. And I made my comments last night, but I did look at it this morning, what was filed. Do you know the docket number?

I'm just going to pull it up right now. So I think this will be probably more efficient. So I can tell you as probably the biggest issue that I have, and it's going to change a lot of things, is that the schedule doesn't work, because of two fundamental things. One, November 10 is a court holiday. The court is closed. I apologize to.

No, it's okay. And as a consequence, the earliest I can schedule something is November 14 now, 1 o'clock. So that's going to kind of trigger some date changes. But the other fundamental issue I had is that I am, I'm going to request. compliance with the local rule regarding a plan supplement. This is a very big issue often expressed by the United States trustees office that plant supplements have to be in seven days the earlier of the deadline to vote or the deadline to objective plan and in this case it's just it's too close it would

have to be your plan supplements if you maintain this schedule is going to have to be filed by October 27. Oh okay terrific. In the right here in the right you landed up moving at 14 that might shift down a bit? Yeah, I didn't know if you wanted to keep it. So if we have a hearing on the 14th, I'm working back up, but if you have the hearing at 14th at 1, your agenda is going to be due the 9th at noon.

So your brief declarations, et cetera, have to be the 8th at 4 o'clock. So I don't know how you want to work. I think so. The only other question I had, and I can be convinced on this, but the debtor in this case, okay, so the bar date hasn't occurred yet, right? I mean, we have a bar date, but it has expired. And the debtor just filed, or I entered an order, allowing the filing in the schedules as late as October 10th. Oh, you did?

Okay, so 3018 is not going to be an issue then. I had a concern with 3018 and I had a concern with tabulation. So they are... I remember letters ago? Okay. All right. I didn't check. I just knew I entered an order that's provided for a later date.

Okay. All right. So with respect to the order itself, let me... I didn't know if you need to update the intro to address your revised documents. Let me just get the case number here. Oh, that would be terrific. So let me get your most recent order. Do you know the docket number?

I think you just said it. Oh, that would be great. Oh, that'd be great. Thank you. I know you all have been working really hard. This is the most colorful black line I think I've ever seen. And it obviously reflects a lot of work going into it. Okay, so I didn't know if you will need to update.

I think you do say amended or supplemented, so probably not necessary. On paragraph A, I'm going to make, I'm not making any change the order. I'm just telling you on the ballot voting ballots, I'm going to ask you to make a modification, but I'll wait until we get there. So paragraph three have to modify the confirmation hearing date. You're going to have to modify dates in paragraph four, the disclosure statement, objection and plan objection deadline. Paragraph six, no change needed, but I am going to, like I said, make it added to the balance. Balance, excuse me.

The confirmation schedule, as we just discussed, as long as you update to reflect the plan, supplement date and the actual hearing date. Sorry. Okay. Okay. Paragraph 10, how are solicitation materials with respect to the voting class or primarily email, correct? Right, right. Okay. So my question is, and I know this is really granular,

but is this going to be a single email with PDFs in it, Or is it going to be like multiple PDFs attached to a file? And my thinking here goes to the ballot and we'll get to that in a minute. Like is... Okay. All right. All right. There are also going to be hyperlinks in the notices.

Oh, so they'll get both? Yeah. So hyperlinks and we are in some of the exhibits to this order, we have the hyperlinks. we let me as trustee notice due to the cost, they wanted us to list out to the release parties and we did in a lot of places, but certain places we used to hyperlink, and that's the ballots. But we do, all we have to do is click on it, and then they can see all of the releases, and there'll be a PDF that go there, they'll be sent directly to that, which just has releases,

and we'll be one that just has this got to. Okay. And is there a hyperlink, like, if you want to do electron? validing you can do it right go all right all right oh in paragraph 11 and I know we discussed this at the last hearing about return email and mailing I would just ask that there be a commercially reasonable effort to resend a ballot that comes back and paragraph 12 we'll have to update I guess it's now paragraph 13 the voting deadline and paragraph 14

You just answered the question I had. 15, I don't know if your voting declaration deadline's going to change with the change of hearing date. And the same, just so you know, there are two paragraph 15th in this order. When it was blacklined, it wasn't before, it just became that way this today. and so it may just reflect that way on the black line but yeah and of course the plan supplement date's going to have to change all right here's my comment with respect to the ballot and this is my last comment I permit opt out and but I'm always concerned that it be obvious early in the ballot not on page seven or eight that there's an opt-out

contained within the document so I just think there should be a more prominent disclosure of the release op-out on the front of the ballot and I don't know if it goes in the title I'll leave it to your discretion but I want it to be obvious and then on the ballots and I appreciate this in the notice and the reason I mean that's the reason I asked about how this was being presented and an email but With respect to the ballots, the release language is in here, but not the definition. But I think you're telling me now that you've edited it for that.

Directly to the current version of the releases. Okay. It's a separate, the outset, if they'll go directly to it, they don't have to, it's not sending them to the plan tab, go find it, it's not sending them to the whole plan, it's sending them directly to that language in an excerpt. Okay. Okay. All right.

of the comments from the business office that we flip the chart with all the deadlines given our we suggested a hyperlinked staff and vote as well and and for the purpose of the record these are people who have chose to do business with the debtor via email mr. Cudia do you have the US trustee have any issue with this process okay does anyone else wish to be heard With respect to the form of order and the comments we just addressed. Okay, having not heard any comments, unsatisfied, the debtors carried its burden, and the relief sought in the motion is appropriate, subject to the modifications that we discussed here this afternoon.

Specifically, in accordance with the Local Rule 3017-2, I will grant the motion and improve the disclosure statement on an interim basis with the reservations that were set forth on the record today. the solicitation procedures to be utilized, the form of notice, the confirmation, hearing, and ballots, and approve the revised schedule. So if you could submit that under certification of counsel, we'll get it approved. Certainly. All right. Thank you all.

I appreciate everyone's time this afternoon. And I do appreciate this has been very fluid, and I understand the amount of work that went into this, and I do appreciate the parties work together. Thank you all. Have a great afternoon. We stand ajar.