American court hearing recordings and interviews - Bittrex, Inc. December 13, 2023 U.S. bankruptcy court hearing (Delaware bankruptcy case number 23-10597 styled In re Desolation Holdings LLC, et al.)

Episode Date: December 16, 2023

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Good morning. This is a hearing in a matter of desolation holdings, case number 23-10597. I note that we have a number of parties that are participating via Zoom. I would ask that those parties give me either a verbal or a visual thumbs up that they can see and hear me. I do have counsel for the debtor in the present in the courtroom. I see Mr. Hengel. Good morning. All right. I see thumbs. That's good. I'm ready to proceed. Ms. Tomascoe. Good morning and welcome. Good morning, Your Honor, and thank you for giving us time today.

I'm Patty Tomasco with Clinton-Emmanuel on behalf of the debtors. I'm joined by my colleagues, Alangea K., who has been here before, and also Mr. Stephen House from our D.C. office is here to be today. Obviously, David Maria, the plant administrator is here also in the courtroom, and, of course, the esteem Mr. Ken Enos from Young Connolley. to get started we're going to follow the agenda at least for the first part and then I'm going to ask for a little indulgence to switch the order of presentation to do after we do the omnibus claim objections we think it makes sense to do the protective order I was thinking precisely the same thing correct your honor because it's a little bit of a gating issue to the substance and so for that reason we want to do the omnibus claim objections to get as much a wood chop today as we possibly can. For that reason I'm going to turn it over to my

colleague Joanna Ketas who has permission to appear via Zoom because she has a serious leg injury and can't travel and so she's going to handle the omnibus claim objections because she wrote them and she knows them better than everybody else. So with that I would like to turn it over to Ms. Kitas. We will leave it to the pros. Ms. Ketas, good morning and welcome. I hope you're well. Good morning, Your Honor. John Akaita of Queen Emmanuel on behalf of the plan administrator. The first object, obvious objection on the amended agenda is item 8, which was filed at docket's number 542,

it was sealed and 543, redacted, and which is the first omnibus, non-substantive objection to certain exact duplicate claims. And as a householding matter of the court's permission, I would be referring to the docket maps of the redacted versions available on the public docket, which is docket item 543. First, I move into evidence declaration of Evan Hengel in support of debtors' first only was no substantive objection to certain duplicate claims, which was filed as Exhibit B to the objection at docket 543-3. Mr. Hengel is available online across examination.

Very good. Kvenueneu objects to the admission of Mr. Hengel's declaration as part of the debtor's case in chief for purposes of the claim objection pending. Very well. Mr. Hengel's declaration is admitted. Ms. Ketas, you may proceed. Thank you, Your Honor. By this objection, the debtors request disallowing and expanding the exact duplicate claims,

identified on Schedule 1 of the objection. Schedule 1 was filed at Docket 543-2, and it contains 105 claims. The data have reviewed and analyzed the 105 exact duplicate claims listed on Schedule 1 to the proposed order, and have determined that each exact duplicate claim was filed by on behalf of the same claimant, in the same amount and priority on account of the same alleged liability, and against the same data more than once. More specifically, on Schedule 1, the claims listed under the column duplicate claim to be allowed, by exact duplicates of the corresponding claims listed under the column titled Remaining Claim.

Your Honor, the debtors are not required to pay twice of the same obligation. Disallowance of these redundant claims will enable the claims register to reflect more accurately the claims are set against the debtors. And this allowance for expungement of the exact duplicate claims will not prejudice and the claimants in their or their substantive rights. against the debtors because each remaining claim will remain on the claims register subject to the debtors ongoing rights to object to the remaining claims on these or other applicable grants, including other grant set forth in the debtors as subsequent of new objections. Support for this motion was provided in the declaration of Irvine Hengel, which was admitted into evidence and it's filed on document 543-3 at paragraphs 5 through 7.

The other debtors received two informal objections to the motion from individual customers, Mr. Yuki Kato and Mr. Richard Bell Ratti. Mr. Yuki Kato's claim is listed in row 103 of the schedule, and Mr. Richard Bell Rattis claims are listed in row 77 of the schedule. The debtors believe that they have resolved these objections. Additionally, the debtors will submit a revised proposed order, excluding from the objection and not disallowing the claim of Mr. Robert Ker-C-C-C-597-1,000-1-06061 at row 80. Mr. Popram did not submit an objection, but the debtor is determined that his claim,

C-597-10,161, was inadvertently included also in the second – Ombnibnibious objection filed a docket 544, which was sealed and 545, redacted, which the court sustained a docket 658 entered on December 1st. The second omnibus objection claim of Mr. Pobran, number 1, 10,061, is designated as the surviving claim, and as a result, including Mr. Poburn's claim, 10601, also in the first omnibus objection. would result in complete disallowance in Mr. Pogran's claims, which was not the debtor's intention. We would therefore upload a revised order excluding this particular claim from the first omnibus objection. And unless Your Honor has any questions, we request that the Court sustained the objection

and the revised proposed order to be uploaded after the hearing. Very good. I do not have any questions. I would ask if anyone wishes to be heard with the debtor with respect to the debtor, with respect to the debtor's first omnibus non-substantive objection to certain duplicate claims. Very well, hearing no response, I'm satisfied that the relief requested is appropriate and warranted. I will sustain or grant the debtor's first omnibus objection, and I will look for that order to be uploaded. Ms. Ketas, you may proceed.

Thank you, Your Honor. Your Honor, the next objection on the amended agenda is item 9, which was filed on docket's number 540. sealed and 549 redacted, and which is debtors' fourth omnibus non-substantive objection to certain incorrect debtor claims. And again, I will be referring to the docket numbers of the reductive versions, in this case, docket item 548. First, I move into evidence the declaration of Evan Hengel in support of debtors' fourth omnibus, non-substantive objection to certain incorrect debtor claims, which was filed as Exhibit B2Day objection, at the docket 549. 549-3. Mr. Hengel is above on nine for cross-examination. Very good. I would ask if there are any objections to the admission of Mr. Hengel's declaration

in connection with the debtor's fourth on this claim objection. Very well. Mr. Hengel's declaration is admitted. You may proceed. Thank you, Your Honor. By this objection, the debtors requested allowing and expanding the incorrect debtor claims identified on Schedule 1 of the motion and Schedule 1 was filed a docket 549-2 and it contains 274 claims. The debtors have reviewed and analyzed the 274 incorrect data claims listed on Schedule 1 in order and found no evidence indicating that these claimants hold a claim against the asserted data desolation holdings LLC, Bichrex Inc, Bichs Malta, Haldings, LTD as applicable.

As such, the incorrect data claims failed to establish a valid legal or factual basis of a certain claim against the name data. However, the debtors have determined that each in Korea data claim is a customer claim, a property asserted against debtors Bitrex Inc. or BITREXMALTD. Desolation Holdings LLC did not operate a crypto exchange, and did not enroll customers as accept the cryptocurrency or fiat associated with a customer accounts, which were instead held with bettors, BitTex Inc, or BITRs Malta, LTD. And furthermore, desolation Holdings LLC, similarly like B-TRAX-MATA Holdings LTD,

are not jointly and several liable with B-TRAX Inc or B-TRAX-MALTA to be L-D with respect to any liabilities. These cases also have not been substantively consolidated. Reassigning the incorrect data claim as the claim against the data appearing in the correct data column of Schedule 1 to the proposed order, filed a docket 549-2, does not affect the claimant. substantive rights as the claimant will retain its incorrect data claim in the S-file amount but against a different data against whom the claim should have been properly asserted. Resigning the incorrect data claim against the correct data, B.TRAX In or B-Tracks Malta-LTD will enable the data to maintain a more accurate claims register.

The claimants holding the incorrect data claims will not be prejudiced by this relief, as the The incorrect data claim will remain on the claim register, although against the correct debtor, subject to the data's ongoing rights to object to the incorrect data claims on another applicable grants, including grants set forth in the latter's subsequent of new objections. And support for this motion is provided in the already admitted declaration of Evan Hangle, found at Docket 543-59 dash 5-5-7. The notice received two informal responses of Yuki Kato and Flavis Motidino, and one formal response filed at Dr. Docket number 5-617, which is the response of Mr. Stephen Crouch.

Mr. Katos claims are listed in rows 240 and 241 of Schedule 1, and the debtors believed that they resolved the response of Mr. Kato. Mr. Crouch's claim is listed in row 21515 of Schedule 1, that's claim C-597-209, and Mr. Dino's claim is listed in row 61 of Schedule 1, that's claim C-597-10232. In spite of efforts, which included phone calls, voice messages, and emails, the data's were unable to establish contact with Mr. Crouch or Mr. Dino. Additionally, the data has received a response from – I can – I can explain more about the substance of the responses of Mr. Crouch and Mitt Tadino. Or I can – if the court wishes to hear about it, otherwise I will proceed to address another –

No, I've had an opportunity to review Mr. Crouch's response, and obviously the court would afford Mr. Crouch an opportunity to be heard if he's attending today. Is Mr. Crouch or anyone on his behalf present in the courtroom or participating virtually via Zoom? Very well. Ms. Ketas, you may proceed. Thank you, Your Honor. Additionally, the data has received a response from Mr. Michael Koch filed at Dockard 660.

The data's believes that this is a response to the individual objection of Mr. Koch. Mr. Koch claims it was filed at Docket 613, and it was also docketed as a response to objection at docket 613. However, to clarify, Mr. Koch's claim was also inadvertently included on the fourth omnibus objection to imperative claims at Rule 153 at claim 597.53. The response of Mr. Koch does not address the substance of the four omnibus objection. the response alleges that Mr. Corr was simply hacked. And the data's belief that it is appropriate to sustain the objection and consider the merits of the claim of Mr. Corr at the hearing of the individual objections scheduled for December 20th.

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And unless you know has any questions, we request that they could sustain the fourth omnibus time objection and enter the proposed order filed at 549-2. I do not have any questions. anyone wishes to be heard with respect to the debtor's fourth omnibus objection to incorrect debtor claims appearing at docket number 548. Hearing no response, I'm satisfied the debtors have carried their burden as to the relief requested I will sustain or grant the objection and I will look for that order to be uploaded. You may proceed, Ms. KTas.

Thank you, Your Honor. The next objection on the amended agenda is item 11, which was filed at dockets number 550, and 551, the redacted version, which is the debtor's fifth omnibus substantive objection to certain misclassified claims. And again, I will be referring to the redacted versions on the public docket, which is docket item 551. First, I move into evidence the declaration of Mr. Evan Engel in support of debtor's fifth omnibus substantive objection to certain misclassified claims, which was filed as Exhibit B to the motion, document 551-3. Mr. Hengel is available online for cross-examination. All right. I would ask if there is any objection to the admission of Mr. Hengel's

declaration in connection with the debtor's fifth omnibus substantive objection. Farewell, Mr. Hengel's declaration is admitted. Ms. Ketas, you may proceed. Thank you, Your Honor. By this motion, by this objection, the debtors requested the misclassified claims be reclassified to the extent set forth on Schedule 1 of the objection. was filed at docket 551-2 and 8 contains 97 claims. Based upon the review and analysis of the misclassified claims listed on Schedule 1 to the proposed order, the data has determined that each such misclassified claim was filed incorrectly as administrative,

priority or secured claim, where such claim cannot be properly classified as an end of the foregoing. All of the misclassified claims submitted by customers, where balances of cryptocurrency and Fiat associated with the B-Chicks accounts have status of general unsecured claims based on the nature of the relationship between the debtors and their customers. As such, asserting security claims has no legal basis with respect to balances associated with customer accounts. Failure to reclassify the misclassified claims will result in creditors receiving recoveries on account of those misclassified claims to the detriment of other similarly situated creditors. Support for this motion was provided in the declaration of Evan Hengel, which was

admitted into evidence, was filed at docket 551-3 at Paragraphs 5 and 6. Yeah, hon, that was perceived two letter responses of Anita Broadway Skiller and of Dockett and of Diana Savedra, docket 637, as one informal response of Mr. Troy Matthews. Mr. Matthew's claim is listed in row 92 of Schedule 1, that's claim C-59, the data's believed that they have resolved Mr. Matthew's response. Mr. Scillern's claim is listed in row 10 of Schedule 1, that's claim C-597-10,144. The data discussed the letter response with Mr. Scillern at length, but were unable to to reach an agreement to withdraw the response.

Ms. Savedra's claim is listed in row 26 of Schedule 1, that's claim C-598-941. She filed a priority claim in the amount of $3,350 and unsecute amount of $3,569 for a total amount of nearly $7,000. In spite of efforts, the status were unable to establish any contact with Ms. Savedra. I can go over the details of the responses or – No, I think we can proceed. I will afford the respondents or the claimant's an opportunity to be heard if they wish at the appropriate time. So, as Your Honor has said, the questions, we request that the court overrule and objections and sustain the fifth only was claim objection and entered the proposed or they filed a docket

551-2. MR. Very good. Thank you. I have no questions. I would ask – again, we've identified a number of parties that have responded. I would ask if anyone is present in the courtroom or participating virtually via Zoom for Ms. Broadway-Skilern, Ms. Saiave-Vedra or Mr. Matthews.

Hearing no response, I am satisfied that the debtors have carried their burden as to the relief requested, and I would be prepared to enter an order granting and sustaining the debtor. matters, fifth omnibus objection to claims. I'll look for that order to be uploaded. Thank you, Your Honor. And I will turn now the virtual volume to Mr. Masco. Very good. Mr. Mosca?

Thank you, Ms. Katas. Thank you, Your Honor. As predicted, we're going to ask to take up now the item number 14 on the agenda, which is the omnibus motion for protective order. found at docket item 631 that we filed on November 27th of 2023 okay with respect to the motion for protective order we proposed taking this out of order because in certain unfiled motions to continue from the three Iranian claimants that's mr. Momenzada Arapur and Abbasi they've argued

that the reason why they in their responses to the claim objection. Their primary objection to the claim objection is that they did not get discovery from the debtors. As detailed in the motion, that discovery was served one week before the November 27th deadline to response to the claim objection. The discovery consists of various items

that are requiring voluminous production, with respect to the claims of every single individual that was subject to the interaction between Bitrex and OFAC. That would include all of the other customers from Iran, customers from various other sanctioned countries such as Cuba, Crimea, and other countries. They are asking for all of that to be produced. They're also asking to be produced the correspondence and the interactions between OFAC and But it has nothing to do with these claim objections.

So our primary objection to the discovery that was positive by these claimants is that it was positive for an improper purpose. And it has nothing to do with what the court has to determine here. I've invited Mr. Stephen Howes from our D.C. office who regularly deals with OFAC regulations. He's going to describe how the claimants' various allegations about Bittrix and reaction to the OFAC subpoena that was issued in November of 2017, I'm sorry, October of 2017, has nothing to do with how the customers and BITRICs interact with each other. It has solely to do with the regulatory environment here in the U.S. In 2017, Bittrick's engaged in the back and forth

with OFAC and determined to self-report, sought what's called an OFAC license, saw what's called an OFAC license, published that OFAC license, and sent emails to all of the affected customers. And finally, that OFAC license was granted in 2019, and it was for a period of six months, and it expired at the end of March of 2020. Iranian customers were told that they could withdraw their crypto. Several of them, I mean, hundreds of them did, and some of them did not. So we had 440 Iranians withdrew $1.5 million. worth of crypto. Some Iranians did not. And you'll hear that Mr. Abasi was one of the Iranians that

did withdraw all of the crypto in his account. With respect to the Iranians who did not take advantage of the OFAC license, that crypto is still there. As the port knows, none of the crypto has moved from this debtor. It has a completely matched book. And under the terms of the plan, the customers, if they comply, with regulatory requirements and KYC so that we do not violate U.S. law, they'll be allowed to get their crypto back. And that's the same for these three Iranian claimants. And Mr. House can explain how the OFAC regulations don't give them a private right of action,

and this regulatory environment, Bittrick's did what it was supposed to do, given the circumstances that existed in 2017. We have made three substantive claim objections to the three Iranian claimant's claims. If you reviewed the claim, you know that they allege $300,000 worth of damages, $200,000 worth of damages, $100,000 worth of damages, or 10 bitcoins, 5 bitcoins. These are very round numbers that have nothing to do with the exact cryptocurrency holdings in those accounts. So what does the claim objection say?

It says for Mr. Abasi, you withdrew all of your cryptocurrency that could be withdrawn in response to the OFAC license. You withdrew it at the beginning of 2020. You have zero balance in your account. That's what it says. Arab poor. He has four surviving claims. He's claiming $300,000 as a secured claim against $1,000.

bus, Bittrick's Malta. Debtors records show a balance of four different coins, BTC, Doge, SC, B, C, BCH, worth 8, $8,400. I'm using May 8th numbers just for... I understand. Okay. And Mr. Momenzada, he has five surviving claims that he has not withdrawn against Bittrick's U.S., Malta, and Malta Holdings, which, as you heard Ms. Kato say, Malta holdings never did any contracts with Iranian customer. Our objection says, you agree to the terms of service that says we can suspend a coin and we can suspend services and you waive all consequential other damages

and that is in the terms of service 2015 that all three claimants admitted that they entered into. it into. So we're going to dispense with a lot of the noise and try to keep this as streamlined as possible. They agree to the 2015 terms of service. The 2015 terms of service that you will find at Exhibit 70, Part 19, contains the conspicuous limitation of liability, and Part 4.7 of Exhibit 70 permits Vitrix to limit the availability of any currency and disclaims any losses for removing currency from the site. such as defunct crypto.

You will also see in the plan that it also displays liability for defunct crypto. And none of the claim is objected to the plan. So what we are proposing to do is if they make a claim for defunct crypto, that is a piece of crypto that because of the nature of cryptocurrency, it has become uneconomic

or cannot be supported. So some of them may mean that the originator of the crypto, no longer maintains the blockchain. You couldn't move it from one blockchain from one customer to another, even if you tried. Another type of defunct crypto is where the cost of extracting or trading that particular currency

exceeds the value of the currency. So this is sort of like, you know, if you were trading in Italian lira in 1930, and all of a sudden that currency went away, you may have a nice souvenir, but it's not worth anything. So that's what defunct crypto is. But even if we allowed the claims for defunct crypto in these cases, the testimony will show that they're worth $2, $4, very, very small amounts.

So what do we have here? We have claims from customers, $8,400. $300 from airport. And Momenzada has somewhere around $3,000 worth. And Mr. Abasi has zero. And so why are we having to go back and look at our records and pull every single customer that we self-reported to OFAC? why are we having to go back and discuss all of the correspondence back and forth with OFAC? How does that help the court resolve these claims?

So we know that the rules changed in 26B1 states, as it was amended in, I believe, 2015. Parties may obtain discovery proportional to the needs of the case, considering the importance of the issues at stake in the state in the case, the action, the amount and controversy, and the party's relative access to relevant information, the importance of discovery in resolving issues, and whether the burden or expense of the proposed discovery outweighs the likely benefit. This standard can't be met with the discovery that they've served. Now, keep in mind, we, in response to discovery, gave them every single record we had with respect to their account. Their Zen desk history, their account trading history, and any correspondence that we

could find in the system between any of the Bittrick's entities and them. So they got that. We responded within a few days of receiving the discovery that we said to them, hey, we need to talk to you about this other stuff because we don't think it's relevant, we don't think it's proportional, and they refused to get on the phone with us. And so we were not able to resolve. And so we were not able to resolve this consensually. But that being said, we did cooperate to the extent that it was appropriate for these claim objections. So what do we have here? We know they agreed to the 2015 terms of service. They've admitted that in their answers to the claim objection. They've admitted in their answers to the claim objections that they don't want to double recovery.

Each of them has between three and six surviving claims that they have not withdrawn, including against Bintrichs Malta Holdings. But that's what we've asked. Get one recovery of the amount in your account, that's what you get. That's what we're asking the claims to be allowed at. Obviously, we're going to have to deal with the regulatory issues. If they can prove that they live in Turkey, as they've represented in their sworn proofs of claim, and that they would therefore not be subject to the Iranian saying that they can prove that they would therefore not be subject to the Iranian saying that they can prove that they can. the Iranian sanctions that OFAC enforces, then that would be fine.

We could allow, that's what Mr. Goddard did. Goddard successfully proved in the summer of 2023 that he actually resided in Turkey, even though when he opened his account, he was an Iranian citizen and resided in Turkey. So if they can prove that they have moved to Turkey and the term, the regulatory term is ordinarily resident in Turkey or elsewhere that is not a sanction country, then they can withdraw their crypto. But the discovery that they're seeking puts proportionality on its head. We should be able to say to a claimant, this is what our records show we owe you, and if they disagree with it, they can say, well, this is what my records show. I say I put in more Bitcoin than you're

showing and here's a record. That's the kind of exchange we should be having. It should not be a fishing expedition in search of an additional cause of action that they never put in their claim in the first place and that's what they're trying to do these claims are zero three thousand eighty four hundred dollars worth we don't need to examine voluminous evidence in order to resolve them so mr. house is here so I'm gonna turn over the podium to him so he can explain the OFAC issues in this case and how Bittrick's responsibly handled these issues and how they're not relevant to the individual claims of these Iranian citizens.

Very good. Mr. Hauser. Good morning and welcome. Good morning, Your Honor. Thank you. Stephen House, Queen Emanuel, for the planning administrator. I wanted to start with a clarification. One of the arguments the claimants have made as to why they need the discovery is to show

that Bitrix illegally blocked their accounts. And I think that term blocked has been used somewhat loosely. So, Bittrix disabled Iranian accounts and other accounts of sanctioned jurisdictions, and it prevented IP addresses in those jurisdictions from accessing the platform. So in the colloquial sense, it is correct that individuals were blocked from the platform. Is it blocked a term of art? It is a term of art in the sanctions context. So when OFAC places specific individuals or entities on what's known as the specially designated

national or SDN list, those. individuals and entities are subject to blocking sanctions. And what that means is if property comes within the possession of a U.S. person or a U.S. entity, that U.S. person or entity is obligated to, quote, block the property. There are specific procedures that need to be followed, a specific account that needs to be set up, and a report that needs to be filed with OFAC within a certain amount of time. Let me ask you a question. I appreciate the primer on the term.

And I think you've acknowledged it, at least from a layman's point of view, the concept is blocked. I can't get access because I am in a jurisdiction. The sanctions are not directed at me personally, and there's another suite of sanctions or flavor of sanctions that are identifying particular individuals. That's not what we're talking about. Correct. Is there a meaningful distinction for purposes of the relief that the debtor is seeking today? Yeah, so the distinction is that when property is blocked, it is subject to – it can only be released. by OFAC authorization of that release.

Affirmative relief and particular. And that blocking is essentially, the property has been seized by the US government. It's not being held by the US person anymore, it's effectively being held by the US government. That's not what happened here. So there was no blocking. None of these individuals are SDNs.

The property was not blocked. No reports or follow. Of fact, that's not what we're talking about. We're talking about a different regulation. So what we're talking about is 31 CFR 560.204. and 31 CFR 560.206. And what those regulations say is that U.S. persons are prohibited from exporting services to Iran. And the definition of Iran includes individuals who are ordinarily resident in Iran.

Now, as a U.S. person, Bittrex is subject to that very broad restriction of not providing any services to individuals in Iran. But that is especially true after Bittrick's received the subpoena from OFAC. The reason for that is that OFAC has civil administrative authority. And so it's a strict liability basis. If you violate the sanctions even inadvertently, OFAC can impose penalties and sanctions on you. But if you violate the sanctions willfully, and the definition of willfully for these purposes is knowing it to be unlawful, then you're subject to potential criminal penalty by the Department of Justice.

So once Bittrick's received the subpoena and discovered the compliance gap, if it had continued to violate the sanctions, for example, by operating the accounts or transferring the funds, it faced potential criminal liability. So I understand. So what the claimants point to is frequently asked question 37. So this is guidance that is put out by OFAC itself. on its website. And what that frequently asked question asks is,

if a bank account is being operated for an individual living in Iran, is it blocked? And the answer to that provided by OFAC, consistent with what I just explained, is no, it's not blocked, it's restricted. And it says, the Iranian sanctions prohibit the export of goods or services to Iran. By operating an account for an individual or company in Iran,

the bank would be exporting services to that. exporting services to that person or entity in violation of the Iranian transactions regulations. So that's, as I just explained, that violation of those prohibitions and the regulations. What I think the claimants are focusing on is the next part that says, the accounts, however, are not blocked. The account holder can close the account and have the funds transferred to his or her account outside the United States. So they're trying to show that Bitrix could have simply, without a license, transferred their currency outside of Bitrix, outside the United States. Now, the reason that that reliance on that frequently asked question is incorrect,

is because that's focusing on a bank and the transfer of fiat currency. So when a bank transfers an Iranian residence funds outside of the bank, it has three obligations. Number one has to go to a bank outside the United States. Number two, it cannot go to a bank in a sanction jurisdiction. They couldn't send it to a Cuban or North Korean bank. And number three, the bank to which its transfer can't be on the SDIT list. But we're not talking about a bank with a Fiat currency.

Digital currency is different. And because of the fact that the addresses are on a server, on a computer, and it's not obvious from the address of where the digital currency would be sent, that it is, in fact, outside the United States, and not in a sanction jurisdiction, and not of a sanctioned platform. Bitrix would be required to engage in the thought process there, if I understand, would be that financial institutions and banks have been around for a long time, their structure and their legal

responsibilities to the host, to wherever they are based, and to whoever their host is, is well defined by both statute and regulation. in cryptocurrency, to your point, is different, even if, you know, we know that banks aren't necessarily moving bags of money from one place to another or from New York to Montreal or something like that. When money lands in an account, it is, as a matter of law, located somewhere. That's right. Is that a fair assessment? I think that's right. And so, for example, if Citibank in New York is holding the sanction funds and the Iranian resident or Cuban resident or any other sanctioned person says

please transfer it to my account at Credit Suisse in Zurich City Bank can verify that Credit Suisse is not on the sanctions list that it's not in a sanction jurisdiction and that it's not in the United States it's very clear from the instructions of where it's going and that the individual making the request is not in fact locked correct okay by contrast providing a new wallet address because of the nature of a wallet address, it would not be obvious that it's not in North Korea or Cuba or Crimea. It's not obvious. It's not in the U.S., it's not sanctioned. It's not blocked. So because of that, Bittrick's assessment was that it would have to provide additional services or activities beyond what this frequently asked question envisions of simply transferring the funds outside the United States. which is why in consultation with OFAC itself.

And so as reflected in the license application, the OFAC enforcement division told BITRICS to go apply for a license, allowing it to withdraw and transfer the digital currencies because of the unique nature of digital currency. And that's what Bittricks did. In April of 2018, it applied for a license, and a license was ultimately granted, which is important because OFAC could have responded to the application by saying, oh no, you don't need a license, just go ahead and transfer it outside the US. But they didn't. They said you may transfer it in the following way for the following specified period of time.

It was very specific what you are allowed to do. And by application, what you are not allowed to do. So the fact that they granted that specific license confirms that Bittrix was correct in its assessment that a license was needed. Now, they couldn't, BITRICS could not make any transfers while that license was pending, and the OTH Act process is extremely long and arduous. In this case, it took 18 months to get the license. Nor can they make any transfers after that five-month period expired. That's by the terms of the license itself. So as of today, it would be unlawful for BITRICs to engage in the services that would be necessary to withdraw and transfer the digital currency.

Now, the claimants or any other individual who's, you know, in the extension jurisdiction, whose currency is still on the platform, is free to go themselves to OFAC and apply for an additional license, allowing BitTRAX to engage in the services that it was previously licensed to engage in. But no one has done that. So as of today, with no license in place and the period having expired, BITRICS cannot withdraw and transfer the funds. Now, the final thing I will say is the claimants seem to be seeking discovery to show that the manner in which Bittrix went about applying for the license, getting the license, and dealing with the situation was incorrect and violated the OFAC rules. Number one, we would submit that that's not correct, given, again, the fact that they consulted with OFAC, they applied for and were granted a license, and ultimately reached a settlement with OFAC that acknowledged that what they did. did was mitigation and remediated the situation. So we believe that pictures handled it the right way. But even assuming that their position was correct,

that somehow the manner in which they apply for the license or how they went about this procedure was not correct, that wouldn't be relevant to their claims. Because the sanctions do not create any private right of actions. What the sanctions say is a US person, you cannot do the following. They do not provide any rights or entitlements to the sanction persons.

And indeed, that would go against the entire purpose of the sanctions. If a sanction people could act as police and essentially be deputized to enforce the OFAC rules and could bring lawsuits arguing that the manner in which US persons attempted to comply with the sanctions was improper, that would really defeat the purposes of the sanctions

to cut these people off in the US system. So even we submit that they are wrong, that Bittrick's handled this the right way, but even if they you know it for purposes of argument that they were correct there would be no basis for their claims because there's no private right of action under the OVAC regulations okay I understand great thank you your honor thank you mr. Houser all right I do believe that the affected claimants that are identified in a

motion for a protective order are participating today via Zoom I believe that that is Mr. Arbpore, Mr. Abasi, and Mr. Momanzata, and I would be prepared to hear from you in response to the issues that, the specific threshold issue raised by the debtor, which is a request for a protective order from certain discovery requests that have been interposed in connection with the claim objection. Are the claimants present or participating by Zoom? Yes. I am here. MR. All right, Mr. Momenzada, this is Judge Shannon. I assume you can hear me.

I can see you. Oh, sir, I'm sorry, your microphone is muted. Can you unmute? MR. Greating. Greating. My name is Adela Bosse. And I'm – greating.

My name is Adela Bossee. And I am here. And I am the credited. I may be fixed. I am CIFICS, and B-FIX. Malta. I would like to preface my speech to expressing my apologize for potential language barriers. MR. That's fine, sir. I can hear you just fine, and I can certainly understand

you. You may proceed. This is Judge Shannon. MR. As my primary language is not English, having been born and raised in Iran. I regret any misunderstanding or issue that may have arisen due to data and their legal counsels opting for a hearing without before discussing and appointing a mediator. I was in fact open to resolving the matter through mediation which could have been beneficial beneficial for both parties to saving time and preserving the bankruptcy state. I appreciate your understanding and thank you for your time. In light of my language limitation and potential accent misunderstanding,

I request your permission to play prepared voice recorded of me. Yes, if you have a recording, I would ask you before you would play it, can you tell me how long the recording is just so that the court understands what we're starting? Yes, it is about 10 minutes. Okay. Here's what we're going to do. I'm going to ask that we, everybody just stay on the line for just a moment. we're going to have to take a short break. I think counsel in the courtroom were informed.

I have another hearing that should be about five minutes. I don't want to risk having people, particularly those that are not in the country, get off of the Zoom and try to get back in, so I want to leave the Zoom open. It may be that I can do that from my desk, it's a status conference, or I would do it from the courtroom. I'm going to consult for a moment. We're going to take a very short break. I'm going to consult with the court reporter just to make sure, but I'm going to ask nobody

turn off your cameras or, I'm sorry, nobody leave the Zoom line just because we've had issues, you know, obviously over the years in the past, and I don't want to take any risk that we lose some of the people that are participating remotely, acknowledging that they are in other countries. So, Mr. Abasi, you have made a request to present a recording. I assume, sir, this is a recording that you have made, and it's a recording of you. Is that correct? Yes.

Okay. I think that's fine with me. I will permit that, but I want to take just a moment, so I'm going to ask everyone to sit tight. I'm going to confer with the court reporter, and I will be back to you in just a moment with what our plan is. We are briefly adjourned. Thank you. Good morning again. This is Judge Shannon.

I have conferred with the court reporter in order to avoid. any risk of disruption to the parties that are in today's hearing I'm going to take my 11 a.m. status conference in chambers and I expect it to be very brief. I'm going to ask the parties simply remain on the Zoom line and we will be able to reconvene again presumably and hopefully without disruption. I think when we reconvene, Mr. Mr. Abasi has asked for the opportunity to present a recording that he has made. The Court has permitted or will permit that to occur, but I'm just going to ask everyone to be patient while I deal with another particular matter.

With that, we are adjourned for a few minutes. We will reconvene at the conclusion of my status conference. Stand in recess. Please be seated. Okay. Good morning again. This is Judge Shannon. I understand from the Court reporter that all parties remain on the line.

I have debtors counsel in the courtroom as well as the debtors representative. I apologize again for the interruption. I have dealt with my other matter. And again, the court asked that the parties simply wait on the line in order to reconvene. I would ask Mr. Abasi, are you still on the line, sir? Mr. Abbasi. Mr. Abbasi, this is Judge Shannon. You're on, correct?

Yes. Yes. Your Honor, about Opac, I have some comment and I'm using translator to present here. Before I play, get a mentioned voice. May I? I'm sorry, hang on. Before we broke, you advised that you had a recording that you were asking to play that would take about 10 minutes that would set out your argument and your position.

Is that correct? Yes, yes, it's correct, but I want to mention a small note about Opac. I want to note small note about Opak before playing that voice. If possible. Okay. You may proceed. Yes. The USA regularities have extended the definition of bank to crypto exchanges.

As Bank Secrecy Act applies to a Finn, Sen and SEC. C. Another regulatory have jurisdiction over Bitrickson. It proves that definition of bank is extended to the crypto. Exchanges. Considering the fact that this FAQ is explained by AFIC in 2002, at that particular time there was no crypto exchange. Does it conclude it? It can't resolve financial-related vehicles of future. Otherwise, Ophick would delete that FAQ. It means this explained issue is inclusive that debtors councils use debtors products. He should use discovery to prove that AFA. required a license okay now I want to delete that mentioned voice may I yes but I think I need to understand what you are going to be providing the you have asked to present a recording and I think from your comments it was a recording that you have prepared because of your concern that English is not your first language is that correct yes it's correct I prepare a note in Persia and all and after that I use the

application to translate to present here okay so I just want to be clear of what we're doing you have prepared a statement in your native language Farsi or Persian correct yes and then you have used a translation soft to translate it and you would ask to present that today, correct? Yes. Okay. I am going to permit that and I will make a couple observations in connection with this. First is that as a practical matter, federal courts are encouraged to treat individuals

that are representing themselves with a measure of flexibility. And I will permit you to do that because I think that it will assist the court in understanding the issues that are being presented and allowing for the development of a full record. There are obviously concerns with respect to the presentation of evidence that is essentially being run through a translation application. translation application but cognizant I'm aware of that but I will permit you to do so the following observation I am doesn't necessarily affect you mr. Abasi but I think I'm obliged to say that my ruling today does not impact how the court would deal with this kind of a question at any point in the future. And it's important that I make that observation because we are in something

of a brave new world that is evolving rapidly, both with, certainly with translation, but even more importantly with artificial intelligence, and courts are struggling to deal with that. You have represented that you have prepared a statement and you have run it through a translation software in hopes that I would be able to understand more clearly your presentation, for purposes of this hearing, I will permit that to occur. You may proceed, Mr. Abasi. Thank you for this chance. Okay, now I play a mention voice.

This was a voice reporting, Mr. Adela Adhasa, delivered in an American accent to maintain clear communication for the quoted battered desolation holdings. Case number 23-10597, the recording highlighted is objections to the debtors about men ongoing production and incorporated a statement for the proof of claim here. I respectfully challenged the depiction and assertions that the debtor's counsel is attempting to make of me in things.

To begin with, I am unsure about how the debtor or non-debtor entities have managed my assets and accounts since 2017. Therefore, safeguard my interests and claims. I personally submitted several claims through the authorized agent, Omnage and Solutions website. In the spirit of good faith, I have withdrawn duplicate claims, leaving only four claims currently under dispute. Furthermore, I have two customer claims and two general claims. Nonetheless, the debtors council appears to dismiss the general claims concerning the damages I have incur. As an act of good faith, I am setting the cap of my general claim to 140,000 USD.

This is designed to be a single recovery from the debtors, and no duplicate claims are to be made. As a result, I am open to negotiations and assessments concerning the precise figure. As part of the customer claims, I own LMC Lama coin, a type of digital currency, which I exchanged for Bitcoin in 2017. As a consequence, Lama coin, as a customer asset, belongs to me, and Bitris, Inc. and the tricks Malta Opco should be held viable for it. Finally, regarding the general claims, I experienced the, damages due to the ticks in porpoch's actions and misleading points from Beatrix founders in 2017.

Patrix now and late, intentionally, purposefully provided services to Iranian Rep. For which we have evidence to substantiate. Thus, the off-up issue is beyond the presented proceedings, and we first need to comprehend how Beatrix and its founders targeted Iranian users residing in the RAM. Your Honor, we have evidence demonstrating Patricksonist's founders' intentions, But this cannot be fully explored in this short period. Your Honor, given a limited time frame, it is challenging for me to defend my rights as English is not my first language. Moreover, the opposing party is equipped with numerous lawyers, and they amended the hearing and should have just a few hours before it commenced.

Docket number 761. Your Honor, they did not produce all documents that support my throughput claim and their objections while they had them all in possession. Instead, they threaten me with sanctions. At this hearing, I am respectfully seeking. 1. To compel them to produce the documentation in question docket number 632, Exhibits 1 and Exhibit C2, 2. They request to adjourn the herringing relation to the response to the objection docket.

Docket number 632 Exhibit S1 and Exhibit S2. 3. To seek sanctions against the debtors councils. Debtors in its plan and ministry. This is because, one, the debtors' counsel is attempting trucks to a disbankruptcy case with false statements in misleading the court. I have Lama coin, LNC, a type of digital currency in my account. The council stated that LNC is non-recoverable and non-transferable. Objection paragraph 23, and also August 14,

2023 letters signed by Ms. Patricia Tamasco. However, there are many transactions related to Lama coin, and other much delisted coins in docket number 22, some of which were transferred to debtors' customers and some of which were transferred to a debtor entity districts global a few months ago. The aforementioned docket not E2 filed by Mr. Ginnis. Kenneth expresses that all of debtors' counsel were cognizant of the fact that the LMC was transferable and recoverable post-June 21st. 2019.

Debtors transferred assets to non-debtor entities and also to customer. wallets which contradicts Mr. Beez, Kenneth and Ms. Patricia Tomasco claimed to the court that the LNC was non-transferable or unrecoverable, which statement is true and which is false. If Mr. Damasco's initial statement is true, it implies that docket number 92 is filled with false transactions and inaccurate accounting records and Mr. Beans. Kenet statement in docket 92 is false, If docket number 92 is accurate and true, then Mr. Masco's statement on objection and her letter P is false and incorrect, if these assets are transferable to other customers or to Beatrix's non-debtor entities that shut down a few days ago, why can they be transferred to me? I request Mr. Masco provide a clear statement on this matter as docket number 632 Exhibit E and Exhibit F. Also to answer these questions and as I asked on November 30th the following questions by email. 1. When was the most recent transaction

involving LOMA point? LMC conducted on Vitrix according to docket number 92.2, would the LMC assets transfer to customer wallets for an affiliate entity of the tricks? As for bucket number 92 3, what kind of evidence was taken into consideration when filing docket 92 and the objection to claims? 2. Your Honor? I'm Iranian. I was living in Iran in 2017, an open an account with an Iranian phone number, Iranian passport, and Iranian IP, Internet critical. The trick was founded by four technical experts who had all the information needed to reject transactions as pro-optic rules and regulation.

From meeting these 30,000 other Iranian users before opening accounts. However, the tricks now only intentional need provided crypto and trading services to Iranian residents. For example, I personally asked Bill, who I recently understood Bill is the former CEO of Petricks Incorporated and his full name is Bill Shaharate in 2017 on Slack platform. If I could trade from an Iranian, answer was yes. He confirmed that I could trade without limitations and many other Iranians did the same on Slack or on a support ticket.

Thus I asked debtors council to provide Patrick's Slack communication, but debtors council refused to do so because they knew it to go against the same. them, Your Honor, we also have evidence that shows Iranians betrayed and be permitted by Bittrick's founders. Your Honor, as an Iranian, I have been a country where failing to validate simple things can pause to your life. So we trusted Bittrix's statements as a regulated exchange and relied on the statements of Bittricks' former CEO. Mr. Belshara and Director of Support, Mr. Ryan heads to open an account and use Bittrix and trade on Bittrix Exchange. 2. Exhibit T3-Day and blocked us without notice, causing damage and numerous issues and distresses to me in all Iranian users.

3. Your Honor, my account was disabled, blocked, and barred in October. 2017, after which I didn't use any services from Vitrix, Inc. for Vitrix Malta Locko. The Council argues that I accepted new terms of service in 2018. Firstly, I don't remember doing so. I was uneligible thus unable to accept such terms as my account was suspended, and I was residing in Iran at the time. Last and foremost, referring to Patrix 2018 terms of services wrong, because account opening and blocking in 2017 occurred before releasing that N cannot apply to my relationship with the Caprix incorporated. So all objections in this regard are irrelevant. If they are providing any records contrary to my belief, they are false and merely an attempt to

constrained me with updated terms and conditions. For your honor, my account and assets were blocked in October 2017. According to Lopock Rules, these assets accounts should have remained with Utrecht, Incorporated. However, the council states that my assets and accounts were transferred to Bittreys Malta Occo, under which rules and regulations was this transfer in block assets to an offshore entity, Patrick's Malta, authorized. If we accept that this transfer is It implies that both Pitricks Incorporated and Betricks Malta Alty to violated offer rules again in 2018. Your Honor, this objection is filled with false statements.

Petricks, Incorporated is the entity that obtained the license, not Bittrix Malta. In the objection, Mr. Mastro states that Dittrits Malta obtained the license. Your Honor, this is false and misstating to the court document number 632 Exhibit I and Exhibit J. I am seeking answers from Mr. Masco on this statement. Based on which document and evidence did she claim that Matrix Malta obtained the license, even though the entity was spent four months after the license application, Your Honor, I am requesting priority from the debtor's counsel and seeking sanctions against these false statements by Mr. McSko.

Five, Your Honor, I understand the importance of the bankruptcy estate, and it is apparent that you and any other bankruptcy judge are sensitive about it. And it's equally significant to all of us because it represents the assets for all creditors. I am not seeking assets or damages outside my relationship with the Patrick's entities. I've demonstrated my good faith by reporting discrepancies in the assets belong into debtors, which led to the immediate shutdown of Vitrix Global's operations after my report, provided evidence that the estate reported to the bankruptcy, 40s of millions of dollars less than what is only a portion of debtors' vitrox entities,

having the session assets. Docket number 632 Exhibit K and Incivit L. This is blockchain, and everything is transparent to every one. Simple calculations demonstrate us which I did and sent to the debtors' counsel. Docket number 632 Exhibit K and InCidavit I respectfully ask, please ask the examiner or counsel to provide information. This false statement of the debtors would matter the rights to all creditors, the court, and U.S. Pankity, Your Honor, Mr. David Maria should be aware of the assets belonging to debtors as he's working with it a trick since May. 2021, he is well-bursed in blockchain, and he was the person on email. If he was informed, why did he conceal this point? 6. Your Honor, as thoroughly outlined in Doc Number 632, Exhibit G and Exhibit H, I have submitted all my claims here the authorized agent's website.

This submission was done in accordance with the guidelines stipulated on the aforementioned site and was signed electronically to clarify. All these proofs of claim were submitted through the dashboard and were appropriately signed and authorizing, in line with the omnigated platform requirements. Despite this, debtors and the debtors council now and way intentional that he chose to object all claims due to signature issues with. Even though they are aware that all of them were digitally signed via the case management website by typing the name as mandated. However, they are will-boy and now only using this objection as a recent to disregard of claims, a pattern of behavior that has been consistent since 2017 with my account. Your Honor, again, this short period is not one in which we can defend ourselves, especially with any document production, and full of false statements by the debtors.

Finally, in closing, I respectfully request the court to issue an order instructing the debtors. There are legal counsels at the plan administrator two, one, to compel them to produce the documentation in question document number 632, exhibit C1 and exhibit C2, two, to adjourn the hearing in relation to the response to the objection docket. document number 632 exhibit S1 and exhibit S2. Three, I am seeking clarity on points provided with evidence to debtors councils for exhibits of docket number 632. 4. Lastly, I'm advocating for the court to impose sanctions on the debtors. There are legal councils and the plan administrator from misledings and false statements. Your honor, thank you once again, your time and the opportunity. I feel it's important to clarify that I disagree with you.

image of me picture before the court had a debtor and their counsel regarding the enemy claims. I have four claims and set a limit of 132,000 U.S.T for one recovery and am open to negotiation and mediation. Thank you. Thank you, Mr. Abasi. I appreciate the presentation and I actually think that that was probably helpful compared to trying to do that directly yourself. Again, I think I would note that the Court might deal with such a request differently in a different proceeding. But I appreciate the comments, and I was able to follow the argument and to take careful notes in your presentation.

Thank you, Your Honor. The debtor – the issue that's before the Court is the debtor's request for a protective order limiting discovery. I've heard from Mr. Abbasi. The relief requested is also directed at Mr. Arapur and Mr. Momanzata, and I would be happy to hear from those gentlemen at this point. Do you hear my voice? Yes, I can hear you. This is Judge Shannon, and would you please identify yourself for the record? Yes.

Dear Honorable Judge, I am Shahriah Arapur, and grateful to the Honorable Court for giving me the opportunity to speak. Okay. The question that's the specific issue that's before us is the debtor's request to not be required to provide documentation and discovery that's been requested by you and some of the other claimants. I would be happy to hear from you at this point if you wish to be heard. Yes, I have a statement and I answer these objections in my case. statement I have a brief from my case may I to read this I yes you may proceed thank you I became a member of B-Tracks website on June 2020 at June 3 2017 at this time I easily joined B-tracks mean an Iranian IP and

and was trading on this website. In 2017, BITREX readily accepted Iranian users and even included Iran in the list of selectable countries in the registration form. And they also accepted Iranian mobile numbers. I can't provide the court with a photo of my profile and a file sent by B-Trek which contains my Iranian IP lock. At the time, B-Trekts,

didn't mention Iran as a country from which membership is not possible in their term of service section, only stating any country to which the United States has embargoed goods or services. In fact, trust Betrecks knowingly violated US laws by providing services to Iranian users and try not to lose the large Iranian user market. At that time, many Iranian users asked them if they also provided services to Iranians, which B-Rex confirmed, knowing that it was illegal. I was an ordinary user with no affiliation to the Iranian government or government-affiliated companies. I brought my life saving to B-Rex for trading and investing.

When I stopped a website mentioning US-based exchange and compliance with US regulations as evidence, I thought that if BITREX, an American company is easily working with Iranian users, then there must be no legal problem in this regard. But BITREX deceived Iranian users and ignored American laws. I was trading on the B-Trek site until October 2017. When my account was disabled without any prior notice, and there was no possibility of withdrawing assets. In ticket number 304131, I asked why my account was closed.

Spocker replied that first sent a picture and your identity information like a password. And after 24 hours, the information will be reviewed and your account will be activated. But after sending the requested item, this didn't happen. I follow up again and Mr. Brian Lee from the trick support said they were investigating and not to open a new ticket.

After a few days, the ticket steps changed to solve. I thought no answer had been given to me. They even didn't answer my question about what the problem was and why the change ticket status to solve. Four months after what I was unaware that the account closure was due to the sanction and OFAC. And BITRQ initially hide this issue from me and other Iranian users to stop them from hitting

to OFAC and revealing their truth. BITREX claims to have frauds accounts based on OFFAC's request, but BITRX not only froze the accounts. It's also limited accounts as to withdrawable. Unlike many other exchanges like Binance, which in compliance with OFAC's FAQ number 37 restricted services to Iranians, they let them withdraw their digital access

and later close the icons. Offack FAQ number 37 explains, My bank operates accounts for individual living in Iran. Ofak has told us that these accounts cannot be operated. Does this mean that the accounts are blocked? No, the accounts are restricted. The Iranian sanctions prohibited export of goods or services to the Iran. By operating an account for an individual or company in Iran,

the bank would be exporting services to the personnel or anti-signation. for NTC in the violation of the Iranian transactions, regulations. The accounts, however, are not blocked. The account holder can close the account and have the funds transferred to his or her accounts outside the United States. It released September 10, 22, 2002. But in contracts of OFAC regulations, BITREC has held his last large amount of Iranian capital in the exchange for years.

This capital is a significant amount for any exchange that plays the rule for a liquidity provider for crypto tokens. Matrix announced that based on OFACs permission, it holds open a period for users to withdraw their assets. I didn't understand this matter at the time. At the time, due to the global COVID pandemic and the problem it caused for me, including unemployment, financial difficulties, and my mother's contraction of the virus, I acted later than the stated deadline. July 8th, 2020, I messaged Beatrix and sent a field out for explaining why I was delayed, but they didn't accept the release of my capital because of the delaying sending.

On November 1st, 2022, before BITREX had declared bankruptcy, I informed BITREX support in ticket number 307-9-816. I am currently residing in Turkey. I'm not living in Iraq. However, they responded that due to sanctions and OFFAC regulations, my account would remain deactivated. I asked again under Vatlau can you close the account of someone who resides on a country not on the sanctions list. They didn't respond again. I even sent a picture of my Turkish driving license as a legal document. Dietrich claims that I didn't go through the process of verification, identity and residence in Turkey.

But my account was inactive, and I didn't have the appointment. opportunity to go through these processes like regular users through the website. I made this request to support and they announced that the account would remain closed and they didn't pay attention to my request. The question is, how does BITREX close users' accounts based on their nationality and not their place of residence at its discretion? and block their assets. Is their action based on the race and block of the users or legal grounds?

I had requested certain documents from BTX for these complaints, which they didn't provide in the specified time. In return, they argued that based on federal rules, the time period for document production is, 13 days, 30 days why they gave me just 14 days for response. Response deadline, November 27, 20, 23 at 4 p.m. Ironically, they emailed me a few documents on 20th of November, leaving me less than seven days

to respond. This was unfair despite of facts that these documents were incomplete, for example, when did it be tracked in form of fact about the closure of Iranian accounts? Or has my account specifically been reported of fact or not? Even access as a user to profile information

and previous ticket on the site had been closed and I couldn't see the amount of token I had and I could only see the amount of tokens I had on one page. It tracks registered different companies to ease its legal and tax problems. And as an ordinary user who register on their site in 2017, I was on fear of how these companies

operated and handled my assets. I only knew that I registered, I registered on bitrix.com and that my assets were with this website. Even when the feeling the claim, giving my back experience with BITREC, I felt complete to register the claim in various ways available on Omniagent's solution to ensure my request was filled due. I later withdrew the duplicate claims to show good faith and say that I am only seeking to receive my rights and not to disrupt the bankruptcy proceeding.

My assets, including the policy tokens, Doshcoin, Zem, S, C, Repel, BTC, and VSTH, at their peak value, these assets were worth about $19,000. This money represents the years of worth for me, living in a country where the local currency had significantly less value to compare, compared to the dollar.

In essence, it was all my saving and capital for the life of my child. Betrex, by blocking my assets, caused serious financial and emotional damage to me, my family life. At the time when I had just had a child suffered sever damage and I am still suffering from this familial and emotional injuries. I'm prospective the argument of death force. concept in regards to the terms of service are not saying as it doesn't mean anything that I was obligated to accept terms and condition. Thus I am under governance of those terms. So in my perspective, one, my relationship with the debtors are not under general rules and regulation of U.S.A. I repeat again, my relationship with the debtors are under general rules and regulation of use.

Two, the contracts are unenforceable because I didn't sign them, as expressed in the debtors' objection to my claims. I was resident of a sanctioned country so providing services to me and insuring into agreements with me by a US entity was prohibited by laws. Thus, such contracts are against US law and are unenforced them. Three, in case the court find those terms legal and enforceable in such case, I would like to emphasize that the account opening and blocking happened in 2017 and it's not covered by Bittrex 2018. terms and conditions but Mr. Tomasco knowingly and intentionally mentioned the 2018 terms mislead me on the honorable court eventually so these are my

causes of action one unfair and illegal account disabling and assets freezing back to 2017 honorable judge if the intention of LITREX was complianced with OFAC rules and regulations, they would let me know that my account is disabled for the reason of my Iranian sanction from beginning, not concerning security or account review. We report my account to OFAC in 10 days, legal period of time, not in April of 20, rent districts, field and application with Ophak. Wood lets me withdraw after I provide my full residency document

providing I live outside Iran on November 1, 2020. In brief, I'm seeking damage in the amount of 300,000, thousands, these figures is to compensate. compensates for the loss resulting from the inability to access my assets since 2017, triple damage and the emotional and psychological harm I experience due to the B-Rex Actam and emissions. It's also set a positive purpose against the debtors,

and I'm not asking for anything more as far. As thought, I humbly request to the court to appoint a mediator and adjourn this learning, so I will have enough time for discussion with the doctors in hope for reaching the resolution, and they would have 13 days required time to produce our required documents. Very good. Thank you, Mr. Aroport. You're welcome. I believe is Mr. Momenzada also on the line? line? Yes, I am online. MR.

Welcome, sir. MR. I hope that you were able to hear and understand Mr. Abasi and Mr. Arapur, and obviously to have heard counsel for Bitrex for the company. I would be happy to hear from you at this time. I have had the opportunity to review your submissions. MR. Okay, thank you very much.

Dear Honourable Judge, I'm humphily presenting my case before this esteem court, seeking your fair consideration. I am a user of BitTRAC and Beatrix and Cryptocurrency Exchange, where my account was illegally disabled back to 2020-17. I was residing in Iran, causing significant financial and emotional damage. I cannot, right now I cannot in English fluently, so I read, from a written document. Isn't that a problem, right? That's fine. Thank you very much.

The EU's regulators have extended the definition of bank to crypto exchanges as Bank Secrex Act applies to it and FinC and SECC and other regulators have jurisdiction over DITREX and it proves that definition of bank is extended to the crypto exchanger. Considered the fact that this FAQAQ is an issue, explained by OFAC in 2002, at that particular time, there was no gift to exchange. Thus, it concludes all financial related vehicles of future. Otherwise, OFFAC would delete this FAQ.

It means this explanation is inclusive. The debtors' cancers use debtor's products. You should use discovery to prove that OFAC required a license. In addition, I think Mrs. Tomasco was talking about Malta holding company, not multi-altiD, do not the assets are transferred to Bikrix, multi-LTD. The crucial documents related to my enhanced verification process of my account, which Bistrix client, I did not complete, were not provided in a timely manner. When they provided, they were incomplete. I I finally asked the court to consider granting additional time

for these important documents to be produced as the council of the debtors asked for a 30 days interval to produce all of such documents in their objection. And I have just seven days to file a response because they provided the affirmation documents which had in their position lay. Moreover, there is a lack of clarity regarding when and why my assets were transced from BIT-X to BITREX,

to BITREs, as I couldn't find my assets on BITS. I request the court's help in compelling BITREC to provide the necessary documents that can shed light on this illicit transaction. The fact is they could not move an asset which is frozen because of OFFAC regulations to an offshore entity outside of USA. My claim comprises four different ones. Due to unclear situation of my assets, include both customer proofs of clients for the coins

and general proofs of client for the damages I sustain. I have prepared to put a cap on my claims, valuing up to $23,839. I'm sorry, I'm sorry, could you repeat? I'm sorry, could you repeat that? number yes 23,839 dollars which values which includes actualized based on conversion theory and emotional and unit damages my holding on betricks include 0.1104 Bitcoin 5.2.8 stability tokens or swampsic tokens and 143 NBT

coins token at their peak value their asset total $7,946. I am seeking three times this amount as compensation for emotional and psychological harm caused by Bittrick's actions based on the tremble damage and conversion theory or whatever legal grounds that the court finds just and proper. The disabling law my account has caused me significant stress leading to health issues such as high-term. issues such as high blood pressure and chronic depression. It has also strained my relationships with my family and friends. I registered on B-16 January 2017 as an Iranian resident. There was no mention of Iran's status or sanction in terms of conditions. After reaching out to B-TRIK's

support, I received misleading guidance from co-founder of Bittrix, Brian Hens. I upgraded my account, passed verification in June 2017, using my Iranian passport, mobile number, and residential attest. However, in October 2017, my account was inexplicably made inactive. In September in September 22, as a Turkish resident, I provided all necessary documents to Petraith. Despite proving my residency, the threats denied my rebequess without God, marking a second violation of my rights. Even the short preparation time for the court and incomplete documents produced, I can't request the court consideration for another hearing.

This is crucial for the protection of my rights and the pursuit of fair resolution with debtors. I appreciate the court's attention for this matter. Thank you very much. Sincerty, Amin Ali, Momenzade. Thank you, sir. Ms. Tomaska? Your Honor, the matter before the court specifically is whether or not BITREC should be subjected to far-flung discovery with respect to the OFAC regulations or other transactions with other

Iranians or other sanctioned residents. We are here to talk about proportionality. And proportionality under the cases that we cite has various components. is, does the information that the claimants seek bear any relationship to the matters before the court? We've explained, and part of this also has to do with, even if they got the information, would it create, would it be more burdensome rather than probative of the issues before the court?

So I want to point out a couple of things. All three Iranian claimants have stated in their... Claim objection responses, those are at exhibits 18, 24, and 31, that they signed the 2015 terms of service. That is a judicial admission or a statement against interest. They have admitted that they signed those terms of service. We can also prove that they signed the 2018 terms of service. We can put up a screenshot that's going to show that when they logged in on X-state,

they accepted them. But we don't need to go there. We're going to go with what they have admitted in their plea. right the 2015 terms of service disclaimed consequential damages so anything to do with emotional distress or the fact that you couldn't trade your coins when they were at their peak or that you couldn't withdraw your coins is specifically disclaimed under the 2015 terms of service they had their accounts blocked wrong term disabled in 2017 as a result of the OFAC

So Bitrix voluntarily disclose their trading information to OFAC. That's the exact documents that they've already gotten, which is a line by line, itemization of every trade they ever made. So they have all of that information anyway. So delving into the OFAC issues is irrelevant because it's not going to change the fact that they signed the 2015 terms of service. Proportionality also concerns the amount of the claims. What you have heard from the claimants are wildly speculative, unsupported with no documentation to support claims that are round amounts, 300,000, 200,000. This is clearly lottery-seeking behavior.

trying to hit the lottery here. We have made it clear. If they can come back with documents that show that they are no longer ordinarily resident in rent, they can show us what Mr. Goddard showed us. A lease, a utility bill, not just a driver's license, but this is what is required so that we are not inadvertently violating the oak back sanctions. Now, That is the claim objection. And so the question before your honor on this agenda item, which is only the motion for protective order,

is does Bittrick's or the plan administrator have to produce volumes of information with respect to the OFAC sanctions that have nothing to do with whether or not these claims can be allowed? Because this is simply a terms of sanctions. service, what kind of coins you have in there, and what is it that we're supposed to do for you as a customer. So we've already said, we still have your crypto. It's still there.

With respect to the defunct crypto, we have a plan provision that says that we will not pay out defunct crypto. We can't be paying fees to third parties to deliver crypto that is not worth the process of mining that coin and delivering it to somebody else. That's a given fact. The lo-mo coin issue that Mr. Abasi alleges, it's between $2 and $4 worth of coin. He seems to think that the fact that it was transferred

from Bitrix Inc. to Bitrix Malta to Bitrix Global is of some moment, but the transfer doesn't actually occur. When customers transferred off of Bitrix Inc. to Bitrix Global, as they were allowed to do as part of this process if they were not resident in the US. That was an accounting entry because there is a single omnibus wallet that covers all Bittrick's entities. So it's an accounting entry.

The coin doesn't actually move. It's all still there at the same wallet address. And so the fact that those transferred, defunct coins, transferred with those customers, doesn't prove anything. Mr. Abasi also seems to think that Bittrix is engaged. in some kind of depletion of its assets. Well, as the Court well knows, Bittrix allowed from June 15th to August 31st

its customers to withdraw their cryptocurrency, something that Mr. Goddard took advantage of during that period. And so those wallet amounts are going to decrease. It doesn't mean that anything is happening with these crypto customers, crypto. Their crypto is still there. So what do we have to decide? This is about proportionality

and about getting some boundaries around what we are going to decide with respect to the claim objection. We cannot be engaging in volumes of discovery. They're requesting a privilege log that's hundreds of thousands of dollars worth of costs to the debtors to produce something that cannot support a cause of action because they signed the 2015 terms of service and the 2018 but I don't need to go there

so what is it that we're doing here by providing discovery to discover unavailable causes of action that they have signed away already and for that reason your honor we ask that you grant the motion for the Tech Report okay here's what we're going to do The matter that's before the court today, there are several matters. The first are claim objections to claims, a collection of claims filed by creditors, Mr. Abasi, Mr. Momenzada, and Mr. Arab Port. And I very much appreciate those parties participating today and taking the significant steps

to try to advise the court of their positions, and obviously we will turn to their claim objections at the appropriate time. The threshold question, though, that is raised by the debtor, the gating question, is the extent to which additional discovery is necessary or appropriating connection with the claim objections. I am going to grant the debtor's request

for a protective order that would preclude the discovery that has been identified and requested either formally or informally by the claimants. And I will give you my reasons. First, discovery is subject to regulation by the court within the sound discretion of the court, managing the litigation that is before the court. And I'm satisfied, actually.

I do believe that Ms. Tomasco's description is, in fact, accurate that the claim objections themselves present relatively narrow, disputes before the court. Hotly contested, but nevertheless primarily narrow disputes about the status of certain claims and the treatment of those claims from when the investments were made, really all the way to today. But I'm not satisfied that the proceeding would be meaningfully informed or aided by what is clearly broad and expansive discovery that would be both voluminous, may involve third parties, and by the court's experience would certainly be an expensive exercise posited against asserted claims that, at least in nominal terms, are relatively modest.

And it is not beyond the court's assessment that while there are additional claims that have been challenged by the debtor, that might be for consequential damages or injury suffered because of a lack of ability to access accounts or investment on the debtor's representation, that inability was a function of government action, not a corporate policy or an executive's decision, but that is a decision or that is an issue that is before the court in the context of the claim objections. But I don't believe that extensive inquiry into the how or how the OFAC regulations came into effect the debtor's engagement or involvement with OFAC or its internal communications regarding compliance with applicable government regulation, I'm not satisfied that that would meaningfully inform the court's analysis of the claim objections.

And so based upon the record before me, I have. I'm satisfied that the debtors have carried their burden, and the court would be prepared to enter an order providing for a protective order, precluding additional further discovery beyond that which is identified in the debtor's response. That leaves us, though, with having ruled on the protective order, we will need to reschedule the claim objection hearings with respect to Mr. Arapore, Mr. Abasi, and Mr. Momenzada, the court has another matter scheduled for 10 and or I'm sorry for noon East Coast time and another matter scheduled for one I apologize for the inconvenience and the disruption but I agree with debtors counsel that the question of available or appropriate discovery was in fact a gating question today had the court directed additional further discovery under any

circumstances these matters would have been adjourned while precluding additional further discovery I see simply don't have time today to deal with the claim objections on the merits. I acknowledge and note that the claimants have gone to significant personal effort to engage in this proceeding, and I would again express my appreciation to those parties for their efforts in doing so, and I want to make sure that I have the opportunity to conduct a hearing in which they can challenge the debtor's objection to their claims on a record and in a proceeding that I simply do not have time to accommodate today.

So where we are is that the debtor's motion for a protective order is granted, and I would direct that the debtor promptly provide a form of order under certification of counsel. So providing, I would ask further that the debtor coordinate and communicate with the claimants that I've identified that have been the subject of our colloquy today and identify a convenient time for a hearing. I believe we have given the holidays, it seems to me unlikely that we would be able to gather before year end. I believe the debtor already has dates on my calendar in January. And again, the court would confirm that those parties that would wish to participate by Zoom will be permitted to do so.

And that would afford me then the opportunity to conduct a hearing on the merits. But again, circling back, the debtors, Ms. Tomasco's suggestion that today that the discovery question was a gating question, I agree. I have answered that question for the parties, and I would look for the parties to confer regarding scheduling a hearing on the substance or merits of the claim objections. With that, we are adjourned. Thank you, Counsel. Thank you, Your Honor.