American court hearing recordings and interviews - Bittrex, Inc. October 30, 2023 U.S. bankruptcy court hearing (Delaware bankruptcy case number 23-10597 styled In re Desolation Holdings LLC, et al.) (hearing starts approximately 1 minute 45 seconds in)

Episode Date: November 18, 2023

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Please be seated. Greenhouse, good to see you. Good morning, Your Honor. Very good to see you as well. Kenny knows Young Connoe, Stargant, Taylor, on behalf of the debtors, desolation holdings. I want to say that because I don't... No, we call it Bittrix,

but desolation is just so much more fun. Today we have two matters going forward, obviously confirmation, which is the main event, and then there is one claim of objection in which we received to reply. Thanks to you very much for entering the order. on all the other claimings. Sure.

Very much appreciated. With me today is Patty, Tomasco, and Alangecette from Quinn Emanuel. I think you've met pretty much everyone before. I think so. We have our co-CRO, Evan Hangle. Welcome. And Sedona Claypool from BRG. And then our client is here, David Maria.

Mr. Maria, good to see you. Welcome. As well as my colleagues from Young Conaway, Rebecca Lamb, and that guy. I think you've met before. I know that guy. Your Honor, if it's acceptable to court, I will turn the podium over to Ms. Tomasco at this time, and we can start with confirmation. That's accepted.

Sounds good. Ms. Tomasco? Good morning. Welcome back. Good to see you. Thank you, Your Honor. And very, very good to be here today. Less than six months after we filed, so a pretty good rate of progress for this case.

I've made a point with many of my colleagues to observe that my crypto case has gone very smoothly. Yes, Your Honor, and you deserve a lot of credit. Oh, I'm taking it. Right. So just in terms of the order of business today, I'm just going to go through an opening statement that's going to go in the order very much that looks like the PowerPoint presentation that we've provided to the court. And if you need another copy. No, I have it. I appreciate getting it. All right. So as our opening statement, just running through the PowerPoint presentation, nothing in the first few slides is something that you don't know. We have four debtors.

We have some important affiliated non-debtors of Bittricks Global GMBH and Bittricks Global Bermuda, which currently operate in the international cryptocurrency exchange. In Q1, 2023, the debtors decided to orderly wind down their businesses. The first thing that they did on March 31 was to announce that they were going to shut down the platform, gave customers a chance to withdraw their cryptocurrency and other fiat assets from the platform. The plan that you see before you is substantially similar to the one that was filed

on day one of this case. And that is that it is a pure waterfall plan. It doesn't really have any class skipping or impairment of any classes, albeit they are impaired for very interesting reasons. So we have four impaired classes. and we have a plan that strictly follows the bankruptcy code. Just for purposes of the record, the plan is on file is at docket item 293.

The disclosure statement is docket item 294. The solicitation version of the plan is at docket 391-1. We filed the plan supplement on October 17th, which is found at docket item 449. The proposed confirmation order is a document. is at docket 494. I appreciate getting that in particular in advance of today's hearing. And we have a revised proposed confirmation order

at docket item 504, and you will hear when I start going through the changes to the confirmation order after the evidentiary presentation. We have one additional change that the SEC has requested. So we'll read that into the record. So you'll have yet another revised proposed confirmation order to enter. Turning to slide seven, you'll see that the timeline is essentially that we filed these

cases on May 8th. If the court will recall, the court entered a customer withdrawal order on June 13th, which was a cornerstone of the plan to allow customers' time to get their cryptocurrency off the platform. The platform was indeed reopened on June 15th. The platform remained open officially until August 31st, but it actually remained open a little bit longer than that to allow additional stragglers to get their cryptocurrency off the platform. The court approved the disclosure statement on September 28th, and the solicitation process

happened in the days after that. I will say, Your Honor, the solicitation process involved sending the solicitation package to in excess of 140,000 customers. I recall. Okay. We also know that the hallmark of this case was the customer withdrawals, and if you look on slide 8, you will see the progress that was made after the filing of the case. This does not include the progress that was made in the months and before the case was filed,

precisely the month of April of 2023, where customers were advised to get. their cryptocurrency off the platform. That leads us to a couple of key settlements. When the case was filed, you'll recall, we were facing a large claim by the Securities and Exchange Commission. We filed a motion to estimate that claim. Litigation was pending in the Western District of Washington by the SEC against Bitrex and some of its affiliates. Thankfully, the parties engaged in negotiations we reached a settlement and that settlement is embodied in the plan as well as the 2019 motion that the court approved at docket item 325 based on that settlement we can confidently say that our estimates are that customers the

SEC Finson and OFAC as well as other general unsecured creditors will be paid in full from the assets of the estate We also had a settlement with Endurance. Endurance provided surety bonds to support the money transfer licenses in various states. We asked Endurance to keep those money transfer licenses open to the extent that customers were continuing to withdraw fiat from the platform while we felt like we could operate without complying with state law. Having that belt and suspenders of the surety bond gave us an additional source if we

money went missing in the process of customer withdrawals. Right. As a result, endurance is a release party under the plan. The plan contemplates payment in full of all administrative claims, secured tax claims, priority tax claims, provides for the distribution of cryptocurrency cash and any remaining assets to the holders of claims in classes 2A and 2B. Residual value after that process goes to the general unsecured claims. Again, the claims bar date process and going through the claims, the claims objections indicates

that there will be sufficient funds on hand to pay all general unsecured claims in full. Okay. The plan administrator has been designated via the plan supplement, and that's Mr. Maria, who you see sitting right here. So we'll be coming back to deal with claim objections and de-course. Generally the classes are class one priority claims, 2A and 2B, which are the customers, Class three is general insecure creditors. Class four is unfunded.

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even when things are in the rough. Cincinnati Insurance. Let us make your bad day better. Find an agent at CINFIN.com. Made sense in this case and classified as interests. I won't go through the distribution type under the plan, but if you look at the liquidation analysis, which is attached to the declaration of Evan Hingle,

who's the chief restructuring officer, you'll see that the best interest of creditors test is met via the plan. in that creditors will receive more in a chapter 11 and they will in chapter 7 as a result of a variety of factors that would occur if the chapter 7 trustee were appointed. I reviewed it. The assumptions for the liquidation analysis are contained on slide 16. They're also in the Evan Hegel Declaration.

I don't feel like I need to repeat them, but in essence if we were to liquidate under a chapter 7, class 3 would not receive any Now the voting results some surprises in there. So we'll go through those. Okay. Class 2a, this is in the Steverson Declaration which has been on file. I have her declaration. Class 2A accepted by a margin, a significant margin. Rejecting amount was 1.47% rejecting number with 7.38% well above all the margins required. In the Bankruptcy Code, class to be rejected. Although we have 75% accepting in number, we don't have that number in the amount.

That is because there are four Iranian citizens that filed multiple high dollar claims. Of course, the Disposure State Order dictates that only one vote per claim. but still even as a result of that because they filed these large dollar amounts claims and we have not objected to those claims yet they get to vote I understand our analysis is that the four Iranian citizens voting against the plan in fact hold cryptocurrency assets of about $15,000 in total so if you took their actual their actual their actual

account balances as opposed to what they've claimed are their damages, we would still have an accepting class in 2B. So the claims, if you, we'll get to them, we're going to object to them. You'll hear about them on December 13th, which is our next omnibus hearing, but the claims primarily deal with the fact that Iranian citizens had assets on the platform. The Office of Foreign Asset Control issued a citation to Bittrix and said, you're doing it wrong. You should not be allowing Iranian citizens to put their assets on this platform. As a result, their accounts were frozen.

Bittricks then sought a license to allow Iranian customers to get their assets off. You're going to hear all about this. Some of them got their assets off during that time period in 2019, and some of them did not. Some of them were able to get their citizenship papers in shape to show that they were now a citizen of a different country. They then got their assets off, but they are now claiming consequential damages as a result of having their assets frozen for a period of time. Which were frozen as a function of engagement with OVAC. Correct. I understand.

Right. So that is the source of the no votes in class 2B. Okay. But of no moment, class 3 accepts in full. So we have two impaired accepting classes. So we still have to go to Cran down. Okay. As I mentioned, the four Iranians, Adel Abhsi, Sharia, Abapur, Amoreh, Amorehalla

Mimzda and Azeem Gader, we've gone through in the slides each of their situations. As I said, Abbasi's claim account balance is zero, our abhor's account balance is 7,198. Momenzada's account balance is 2,869, and Azeem Goddard, whom you've heard of several times, which we will deal with a claim objection hearing set for. for December 13th. The voting language of the disclosure statement order is on slide 22, as I've explained, we count one claimant, one vote,

and obviously we don't count the votes of objected to claims. Mr. Godder falls into that category. And tellingly, there are no formal objections files. to the plan or the confirmation order. We've resolved several comments to the confirmation order, which I will go through in a minute. We've received informal comments from the U.S. trustee, the Department of Justice, SEC,

and the Office of the Texas Attorney General. We had reservations of rights by endurance and the United States of America. Essentially those reservations of rights are, to the extent anybody objects to our language, we reserve the right to come back can save things, which is all time. So we've resolved all of those

informal comments to the plan and the proposed confirmation order. Okay. On slide 25, you'll see a chart of exactly where the language appears in the confirmation order from each of these informal objections.

And I've had an opportunity to track that by getting the order in advance, and again, thank you for that. So we also file the confirmation brief. The docket 503. Yeah, I was going to go back and look at my docket chart. We address all of the elements of 1129 and 1129B and in the brief.

I don't feel like the court needs to be. No, I don't think so. I mean, unless the, again, unless the hearing or issues develop or arise, as is my practice, I'll certainly take the memorandum as well as the declarations, which are pretty comprehensive as well, as part of the debtor's record and I wouldn't I don't think it's productive to walk through each of those elements Thank you your honor And the last slide we would like to Just so we gave you a pictograph so that you can match the declaration to the person in the courtroom

On slide 32, Mr. Evan Hingle They even sat right to left We haven't brought in impostors to support the declarations Mr. Evan Hengel, his declaration is docket item 502, and he's in the courtroom if anybody wants to cross-examine him. We should probably go ahead and move to admit them. Correct, Your Honor. I'm moving to admit the declaration of Mr. Evan Hingle at docket item 502. Any objection to the admission of Mr. Hengel's declaration as part of the debtor's case in chief for purposes of plan confirmation?

Very well. The declaration is admitted. Is there any party that intends or expects to cross-examine Mr. Hengel regarding the contents of his declaration? Very well, that declaration is admitted without contradiction. Thank you, Your Honor. The second declaration is the declaration of David Maria, who's the General Counsel and Chief Legal Officer of the debtors. His declaration is at docket item 501, and we move for the admission of his declaration.

Very good. Is there any objection to the admission of Mr. Maria's declaration again as part of the debtor's case in chief for purposes of plan confirmation? Very well, that declaration is admitted. Is there any party that intends or expects to cross-examine? Mr. Maria regarding the contents of his declaration. Very well, Mr. Maria's declaration is likewise admitted

without contradiction. Well, we should also do this Thieberson declaration. You're right, Your Honor. Ms. Steverson is... I don't want to get ahead of your outline, so... No. Your Honor, Ms. Deverson is available

on Zoom, and we move for the admission of the Steverson Declaration, which is at... 500. Docket item. 500?

I think it's 500. 500, correct. Okay. Any objection to Ms. Stevenson's declaration being admitted again as part of the debtor's case in chief in particular to attest to the results of the balloting on the debtor's plan? Very well. Ms. Stevenson's declaration is admitted. Is there any party that intends or expects to cross-examine Ms. Stevenson regarding the contents of her declaration?

Well, again, Ms. Stevenson's declaration is admitted without contradiction. Thank you, Your Honor. With that, we have met the evidentiary burdens of confirming the plan. I would like to read into the record one additional change, the confirmation order. Okay. It is on page 28, new paragraph 61 was old paragraph 63. It should be in the red line that you have. Okay.

the SEC requests the language as a preamble to that subordination except as otherwise provided in the plan and this confirmation order okay that's fine and that'll be baked in correct okay with that your honor we ask that the court enter the confirmation order as amended on the record very good Thank you, Mr. Mosco. Can I hear from the Office of the United States Trustee, and then I'll hear from the FCC. Mr. Shepherd Carter, good morning. Looking sharp. Good morning, Your Honor. Thank you. Always happy the next day after the Eagles actually winning, so.

Mr. Shepherd Carter, you are pandering, but it's working. I know my audience. For the record, Richard Chappercad for the United States, Trustee, just want to bring a couple things to your honor to attention. as council indicated we had discussions previously made a lot of arrangements a lot of revisions to the orders to the different documents we did that with respect to the disclosure statement and then finished that process out through confirmation just want to highlight a couple things if you're on it might turn to what I have is document number 504-1 and I just want to highlight a couple things that weren't

picked up in the red line but were changes okay that's substantial changes if you turn to page 5 and 6 of that document and you'll see that there's type there that's in bold print just wanted to bring a couple things to your honor's attention one is to article it's paragraph B on page 5 and that deals with the US trustee fees that would otherwise have been baked into the plan but it's going to be in the order and it will affect the plan likewise with respect to the next page which is paragraph C and that deals with closing of the cases at the point when the cases need to be closed not always that also would have

been baked into the plan but is baked into the order and and would become part of the plan okay and the last thing I want to turn your honor's attention to is page 30 of that document and it's actually pages 30 and and 31 and it deals with their release exculpation injunction provisions and the reason I highlight them here is a lot of times we see in these confirmation orders what they want to do is they want to recite the entirety of the provisions of the plan in the order not only does it make the order longer but sometimes those provisions you're inconsistent with the plan and it creates a problem

especially if there's an interpretation issue later on down the road this order the preferred order if everybody's listening the preferred order is to just say releases exculpations and junctions are approved that's that fourth of the plan or here by approved and that's that's kind of what we did here so other than I will tell you I actually think that that's an elegant way to approach it I have had at least three different situations where there were word differences between the two and in construing them later whether I'm doing or another court, candidates of construction require that the court give effect to each of the

words and ascribe significance to what is likely just a scrivener's issue. Right. So I appreciate that approach. Other than that, Your Honor, I have nothing else. Well, as always, Mr. Shepgard, I would express my appreciation to you and your college both engaging with the debtor in advance of the filing to have a relatively smooth first day and then engaging and resolving any open issues that you had, many of which were issues that I certainly would have had with the plan so I appreciate that

thank you all right miss Shrake welcome back good to see you good to see you thank you your honor sir I just wanted to to stand up and tell the court that the debtors have made the requested changes even the last requested clarification so we appreciate that and also I just wanted to note your honor that you know we're not objecting to the plan and that the SEC did file a reservation of rights to the disclosure statement and plan and that was docket number 364 and i want to just clarify on the record that the SEC is not opining to as to legality under the federal securities laws

of the transactions in the plan okay thank you thank you i would ask if anyone else wishes to be heard with respect to the debtor's request for an order approving and authorizing plan confirmation miss lerman did you wish to be heard briefly your honor back okay good morning welcome good morning your honor leah lerman on behalf of the united states of america your honor As the debtors have told you, we've resolved all of our issues. The last proposed order I saw docket 504 had all our current language, but it seems like there might be one more revision going up. So I just appreciate seeing a final order before it reaches your honor.

I'm confident the better will circulate the final version. It also sounded like the last comments would have actually been probably right up your alley. In terms of preservation and reservation. Thank you, Ms. Lerman. Thank you, Your Honor. All right, does anyone else wish to be heard with respect to the debtor's request for confirmation of the plan? All right. Hearing no response.

Mr. Dastardier, did you wish to be heard with respect to the debtor's request for an order approving and authorizing the plan? Yes, sir. Actually, I'm an independent guy. I don't have a lawyer right now. So basically, I have some Bitcoin in that BitTex Act. a BitTX account and from that platform they themselves somehow is moved somewhere else and I actually informed to the police and FBI and IRS at the same time ACCC. Now when I see they file the bankruptcy then I actually also file proof of claim with all the report that I filed and I had a chance to talk with FBI several times to follow up or follow up I don't have any update from them from them and they said that they will actually

they they will they're investigating that so anything happens so they will go from there so now as it's in the bankruptcy court and you know like me and my family we are very small family we have one kids nine years old and we is we actually put our deposit money there and suddenly when from BitTex platform this money is actually not in my account I mean Bitcoin is not my account so how we how I am going to how it takes our restructuring officer is going to going to give back to my Bitcoin. So, Mr. Dastardier, I believe the next item that's on for the court this morning is the debtor's

objection to your claim, and I have your response as well, which has been received. But in terms of the treatment of your claim, that is an issue that we're going to address in just a few minutes. Right now, the specific question is the debtor's request for confirmation of the plan. I note that you have not filed any formal objection or response to plan confirmation, and again, we'll get to your claim issues in just a moment, but I want to ask specifically if there are any issues with respect to plan confirmation that you would raise to the extent you would be permitted to do so. In plan confirmation, I'm not, I don't know much about it. Like, if it is effect or not

because related to the amount of Bitcoin and its price, if they include in the plan confirmation, I think I will be okay. Let's say the amount of money I have, are they going to include in the plan? So in later time, if there is any decision, so I will get also my money or Bitcoin back. Okay. I understand the question. I would ask if anyone else wishes to be heard with respect to plan confirmation? Very well.

I'm going to confirm the debtor's plan, and I don't believe that there are any formal objections. If there are informal objections that have been posited, they are overruled. I will give you my reasons for confirming the plan. I would note that I will address it in relatively summary fashion, given as Ms. Tomasco noted, that there are no formal or informal objections currently pending. The court notes that at docket number 389, the court entered an order. approving the disclosure statement, finding that it had information sufficient to allow a hypothetical stakeholder to make an informed decision to vote for or against the plan. Likewise, in the context

of the same order, the court approved and authorized both a schedule for solicitation, as well as the form and manner of notice of solicitation. The record reflects, and in particular Ms. Steverson's admitted declaration, reflects that the debtors have scrupulously complied with the requirements and the mechanics of the court's disclosure and solicitation procedures order. Ms. Deverson's declaration reflects certainly adequate balloting support from stakeholders entitled to vote on the plan to approve and carry confirmation on a cram-down basis. The Court notes that Classes 2A and 3 have both accepted overwhelmingly. Class 2B has rejected the plan. Council has noted that there may be issues with respect to the claims in Class 2B.

Those issues are not before me today. and the court is considering those ballots on the merits and without contradiction. Nevertheless, the court has had an opportunity to review the two declarations that have been submitted in connection with the debtor's request for plan confirmation. First is Mr. Hengel's declaration serving as the CRO, and second is Mr. Muriel's declaration serving as essentially the client and general counsel. The court notes that both of those declarations are thorough and comprehensive, and I will deal with them together. Together they lay out the circumstances under which the bankruptcy proceedings were commenced, the way in which they have been prosecuted since the beginning of these cases, the structure of the plan, the treatment of various claims and creditors, and also the debtor's compliance

with the various provisions of Bankruptcy Code Section 1129A, 1129B, and 1123 for purposes of obtaining plan confirmation. Finally, the court notes that the debtor has filed a comprehensive memorandum at docket number 503. That memorandum is obviously not evidence, but is certainly part of the record before me, and describes in exhaustive detail the debtor's argument and factual record for purposes of demonstrating compliance with applicable provisions of the bankruptcy code and the bankruptcy rules in order to approve and authorize plan confirmation. So based upon the record before me, I am satisfied that the debtors have carried their burden, and I would enter an order approving and authorizing plan confirmation.

Counsel has advised that there are small final changes being made. I would expect to see that order uploaded shortly after the United States and any other party has had an opportunity to review, but I would expect to enter that order timely. In addition, I believe I have in my notes, Ms. Tomasco, are you looking for a waiver of the Rule 6,004 stay? when are you expecting to go effective? Your Honor, I believe that's built into the confirmation order. I believe that it is. I think I'm obliged to make a particular reference to it,

and I am satisfied that the debtors have carried their burden, particularly given the absence of any formal objection, and it is manifestly this court's policy with a sale or with a plan confirmation. If you can go effective, go effective. So the debtor's request for a waiver of the two-week Rule 6,004 stay is hereby granted. And again, I would look for that order submitted under certification promptly. Are there any questions? Very well.

Ms. Tomasca, where does that leave us? Your Honor, the last item on the agenda is the debtor's objection to the claims filed by Mr. Disdager. Why don't we do this? Before we turn to that issue, why don't we just take a five-minute break, and then we'll reconvene for the last item on the agenda. Stand in recess five minutes. Thank you. Thank you. Please be seated. Mr. Mosker.

Just a heads up. I don't know how long this will go, but I am a conference at noon with, I'm on a panel with Rochelle via Zoom for the consumer extravaganza. So if we are still going, I will have to break it probably 10-0. Okay? I hope this isn't long, Your Honor. This is a claim objection. It's Mr. Dostager. filed numerous claims against these debtors related to events that happened in well before

the statute limitations ran before the bankruptcy case. Specifically those claims. Hang on before we go much further, Mr. Dessargear, good morning again, sir. I just want to confirm that you're able to hear Ms. Tumosco at the podium. Are you able to hear her, sir? We've had issues with the microphones. I can hear her just fine, but I want to make sure that you're able to on Zoom. Yes, I hear her.

Okay. Ms. DeMosco, sorry for the interruption you may proceed. Okay, thank you. Specifically, Mr. Dostager filed claims at 598, 1698, 598, 1730, 598, 1730, 598, 1791, 59, 59, 59, 59, 59, 599, 599, 599 599-192 600 180-60-60-60-60-60-603 each of these claims requested damages resulting from an account hacking that happened years ago mr. Dostagger opened an account with bus on October 10th 2017 on November 10th of 2017 approximately 4.5 Bitcoin was withdrawn

from Mr. Dostagger's accounts with Buss. The withdrawal originated from an IP address in Turkey. Bus received several messages from Mr. Dostager, alleging that his account had been hacked after these transactions. Bus explained to Mr. Dostager that if this withdrawal was not initiated by him, the fraudster had access to his valid account credentials, and thus, bus would not reimburse him for the tokens transferred. Bus explained to Mr. Dostager that the actions performed on the account

also required that the fraudster have. access to his email account. Buses' platform has never been hacked, and historically any fraud committed against user accounts has been caused by the compromise of account credentials outside of Buses' platform. In support of the objection, the debtors attach the declaration of Evan Hengel at docket number 400, which goes through the books and records confirming this line of events. because this happened in 2017 your honor it's well outside the statute of limitations for a breach of contract claim under tech under Texas where mr. Dostager lives under

Washington or in or anywhere else and so number one it's outside the statute limitations as of the petition date any contract contract claim would have been waived by expiration of the statute of limitations mr. Dostogger did not pursue the civil action against bus in state courts prior to the petition date and second the terms of service of bus that mr. Hingle recites they disclaim any responsibility if a customer's credentials are hacked so it's no different than if somebody takes your ATM card goes to the ATM machine for some reason they have your pen and they withdraw money from your account and if you were responsible for allowing those items of identity to be taken from you while your bank may have a

different term of service under buses term of service you are responsible for protecting your account credentials so for that reason we've objected to mr. Dostogger's claim his response did not come back with any contrary evidence and he has the ultimate burden of proof but in support of our claim objection we move to admit the declaration of Evan Hingell founded docket item 400. Any objection to the admission of Mr. Hangle's declaration as part of the case debtor's case in chief? Yes, objection.

Basically what ma'am is basically saying, it's not true. My account is never, let's say my username, password. It's not given to someone else or anything else. Hang on, Mr. Dester. hear the question I understand and I want to be clear that if you would like to ask Mr. Hengel some questions about his declaration or if you would like to explain to me exactly what happened and expand on the letter that you have provided to the court you'll have an opportunity to do that but Ms. Tamosco's question is whether

or not the testimony of her client which you may disagree with all right and I sit as the trier of facts so I will make a determination of what the facts are but is there any objection to the admission of that declaration again that you may not that you don't agree with it or you allege that it's not true you'll have an opportunity to challenge what he's said but I'm asking specifically if there's an objection to the admission of the declaration sir basically honorable judge I am I'm not in a lawyer, so I have spoke with. I understand, but, and I, and again, I'm certainly, I have no problem and very much appreciate, frankly, you coming and, and again, participating in today's hearing, and I'm glad that we were able to do it by Zoom to save everybody some time and some, and some money.

But, yeah, so that, it's a pretty specific question, again, not necessarily that I'm finding or agreeing with Mr. Hengel on his declaration. Mr. Tomasco simply wants or needs that declaration as part of the debtor's argument that they're having with you. Debtors' argument, basically the last letter, they sent October 25th. I don't have it. It's not, I didn't receive it yet. Okay. I'm going to admit Mr. Hengel's declaration subject to the opportunity to cross-examine at the appropriate time. Ms. Tamasca, you may proceed. Your Honor, we did receive the reply of Mr. Stagir.

It appears that he continues to believe that the fact that he reported this to the FBI and the police was all he needed to do to establish a claim against Bittrex. However, those actions did not constitute a claim against Bittrex, nor are they proof of his claim against Bittrex here. In fact, they don't disprove what Bittricks has put forward in its claim objection.

With that, Your Honor, it is the claimant's burden of proof, ultimate burden of proof, with respect to his claim. The debtors have come forward with their evidence in the declaration of Evan Hingle. I don't know that Mr. Dostogger said, It's a good thing I didn't hear that. I apologize.

I usually have it on mute. But so how would the court like to proceed? Does Mr. Dostager wish to cross-examine Mr. Hingle? Is Mr. Dostogger going to testify on his own behalf, or how is the evidence going to go from here? So, Mr. Dostagir, the debtor is objecting to your claim, and I think he's. you've heard from both their papers as well as from Mr. Mosco today that their position is that to the extent that the account may have been hacked, that's not something that would give

rise to liability, and that, again, to the extent that the account was hacked or that you had a claim under applicable law, you were obliged to act no later than several years ago. Mr. Hengel's declaration has been admitted. If you wish, I would give you the opportunity. to cross-examine to ask him some questions about it. If you wish, I would give you the opportunity to make your argument and case to me if you wish and explain exactly what it is that happened so that I can understand each side and make

my ruling. I'm at your pleasure, sir. Yeah, sure, no problem. So, Honorable Jal, basically I talked with a couple of lawyers and one lawyer, I am not able to hire them because they ask I mean several thousand dollars but what he said me the three basically lawyer that is inside the statute of limitations in under the in the Texas there is ten years statute of limitations for debt or any fraud or any kind of things that's one thing I mean it's under the

statuary of limitations and I also when that happened on 2017 and 2018 and 2018 contacted with one of the lawyer and he suggested me also to contact with FBI and FBI has the full authority. Whatever the conclusion they will give you, I can proceed. So I didn't hear from FBI. So I was not, I mean, that's why that lawyer cannot, he was actually waiting for the FBI replay. Now let me tell you what happened exactly.

Please. In 2017, the time I was had the Bitcoin there are multiple accounts also they are Bitcoin also stolen from their account same like me now what is my situation I have money in my in in stocks in my corporate company stocks my pension fund my 401k fund and other stocks of my company so that time I was seeing that Bitcoin is very good it's a crazy you know then I sold my my portfolio and I bring that money from my bank account to the

beat tax I open an account in beat x and I put that money to the pittex and I bought the bitcoin that day and I was actually doing back and forth as I bought some bit coin converted to other coin that I did I think couple of times maybe and then on November 10th it is very that unfortunate situation I was in a system I mean my my laptop and my entire system is in antivirus and VPN and all these because it's my corporate system even my phone I use the iPhone iPhone that and my phone has no access to anyone else than me so actually incident when happened I was

the system and I see that suddenly something is like a you know like a fishy like something blinking or something that and I have no control on it and when I saw that things that that from my account Bitcoin and I see this something is blinking like that I immediately informed to the bit checks helped him that there are something is going on I don't understand that I can you stop my account or something? And then I had, I think, multiple times I contacted with them. Then in the meantime, actually, I think they froze the account,

but there is no Bitcoin in my account. Then later on, same day I went to our city police department, Detective Grounds, they take all the documents, my bank account, my BitTex account, and all the information. And from detective branch, detective officer, he actually gathered all the information, he investigated that, then he reached to FBI. He reached out to FBI and he reached out to IRS agent also. And you know my situation, the time that happened, me and my wife, both went to the police

station. And I have a son, as I said, like, it's like, it's like. like he's not nine years. That time he was, I think, three years. Okay. So we are very emotional at that point. You can imagine that we are very good citizens here, US citizens, and we oblige everything.

I mean, we respect everything, whatever we can do good, we do all the time. Now that comes very emotional. And I was, then I wrote after that, detective officer, he told us that IRS and FBA has the tool and FBA has the jurisdiction to go over anywhere. And he also said that it's, I think the IP address shows the turkey, but someone can use the VPN. And using the VPN, they can use anywhere in the world IP address.

And I am working in an IT area. So can I ask a question though? I do understand the issue or the, or the mechanics of of using alternative VPNs and concealing a location or coming up with a different location. One of the points that the company is making is that the proper credentials for withdrawal of the Bitcoin were presented to BitTrex, which means that your, from the company's point of view, I think their argument is that your information must have been compromised or hacked because they're, I think their argument is that the platform was not hacked, someone showed up with your account

information. I'd like to make sure I understand that point. Yes, Honorable Jazz, it's never, it's never happened like my ID or cadentials is compromised. Only BIT has the sole authority, and I am an IT expert, I'm a software engineer, associate manager, and I work 20 years in IT. not possible at any point that someone can estupe my cadentias except platform itself let's say VTex has the platform BTEX has the security system VTex has the security expert without they are behind the door or they have

two three systems without without their acknowledgement without something someone from there it's impossible to take client account money to somewhere else. And, Honorable Judge, I am expert in fraud area. Like if you, I was working in the

AT&T, like if any client has an issue, then we know before anything happens. So from that standpoint, my expertise and all this, if I tell you, it's impossible without BitTex and BitTex security team, or BitTex and if you look at it they have four different companies set up to two two or three set up outside of the United States and I have no knowledge on it so

that's even the time is happening there are multiple YouTube video many people claim that they have seven bitcoins lost from BTX they have five Bitcoin lost the BTX I share this information with the detective brands here also in their So whatever the chief restructuring officer is talking, it's completely baseless. It's from IT standpoint, from the risk point of things, from cybersecurity, it's completely baseless. Its bit checks itself has the sole authority from their platform. They can make one, two, three, six, they can make prototype, they can make, you

some gateway and that can be the access or there can be some users in behind the back they can there can be some fake account created there from their own people behind the and they have the access all the all the clients information without there without them it's impossible to anyone to go there and as I said I can I can present my credential. I work for a company, and 20 years I have expertise in this area. All right, I understand.

Ms. Tomasca? Here's what we're going to do. I would actually, I very much appreciate hearing from Mr. Dostagir. Our rules actually specifically provide that a claimant is entitled to represent him or herself in connection with a claim objection. So we are proceeding on the merits.

I've admitted Mr. Hengel's declaration, again, as part of the debtor's case in its objection. I realize it's a little odd or a little informal, but if you wish, I would be willing to give you the opportunity to examine Mr. Dostargear. I recognize that he is not here, but again, under our rules, I would not have directed that he travel up here regardless.

If you wish to make argument, you're welcome to do so. if you have questions for him that based upon his comments and what I'm accepting essentially is his testimony today, then I would certainly be prepared to give you leave to do that. Okay, I'll give it a roll. Mr. Dostager. Hang on just a second. I'm going to ask that we swear the witness, Mr. Dustergear. You have provided an explanation and response to the court, which as I mentioned a moment ago,

I'm taking essentially as your sworn testimony. Ms. Tomasco is counsel for the company. She is going to ask you some questions, but before we do that, we're going to swear you in as a witness, and I appreciate you raising your right hand. I'll ask the court reporter to proceed. Thank you. Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth? So help you God?

Yes. Please state your name for the record and spell it. ZM. Golam, Dastaget. It's spelling is Z for Zebra. then space, then M for Mike, then space, then Z for Girl, O, L, A, M, Goulin, Goulam, and last name is Dastigie, D-A-S-T-A-A-Z-I-R. Very good. Before Ms. Tomasco proceeds, as I mentioned a moment ago, Mr. Dastagir, I'm accepting your comments as essentially being sworn testimony, but I would ask you to confirm for me now that the statements that you made to me and the explanation that you provided a moment ago would be your

sworn testimony if we went through it again. Go on. Very good. Thank you, sir. Ms. Tomasco, you may proceed. Okay. Mr. Dostag, are you aware of how many claims you filed against these debtors? Yes, it was I filed multiple because I did not –

know that I think I made mistake and then when I check it up and then I think I made mistake so that's why actually multiple multiple claim but it's basically only it it will be the amount is 4.5 to Bitcoin the number is there so that's the only the number it will be one claim it's correct that you filed one two three, four, five, six, seven, eight, nine, ten, eleven claims against these debtors? I think the documents you have, that should be correct, I think. And how many accounts did you have with Bitrix U.S.? Oh, only one account, myself only one account.

Okay, and how much Bitcoin did you have in that one account? It was four point five to some, five to plus Bitcoin. Okay, and so four point five five five five. Bitcoin. Yeah, 4.5. Okay. So when you filed claim number 597-221 against desolation holdings, do you recall filing that claim? Yes. Now, when you filed that claim, you said that the amount of your claim was $275,000. Yes. You also said that it was for contributions to an employee benefit plan. That part, yeah, I understand.

So I actually did you say that? Mr. Dostager, did you say that? And did you file that claim under penalty of perjury? Yes, but there is a way to correct it. So if you look at it, each of the claim, I also. Mr. Dostager, you can answer my question, and then you need to stop, okay? Is that all right? Mr. Stegger, you'll have an opportunity to essentially report to the court, but right now,

all you need to do is answer the questions that are provided. If there's a further explanation, I commit to you, sir, you will have an opportunity to make that explanation to me, okay? Yes. All right. Ms. Tamosco, you may proceed. Sorry for the interruption. Mr. Dostager, you also claim that you were claiming additional types of priority with respect to your claim against desolation. holdings. Do you recall that?

Yes. And you said that the amount of your other priority claims was $200,000. I think so. So I cut up the point. It's correct. Have you ever had a contract with desolation holdings? I don't know that because it's very hard.

Because from V-Tex to desolation, so I don't know that. OK, but you filed a claim against desolation holdings under oath, did you not? Because if you look at it, that dissolution and all other three of your company, it's basically all together, right? It's combining the claim. And I talk with the Omniagent, and they said that file the claim.

Okay, but you realize that you had to file a claim against the debtor with whom you had a contractual relationship. Did you not? But it's a all four company marched together, and it's a continuous. claim one of the lawyer also wrote me that I have to file the claim under the I think dissolution and I these all all claims that I file I even sent the multiple lawyers that I contacted I send them as well as as you know ma'am I am

not a lawyer so based on my knowledge so I put it that and the amount that you see that differences because it was it is based on the the Bitcoin price that time, the $275,000. I think I wrote the letter to IRS, 275,000, based on the calculation that Bitcoin was $69,000, about $70,000. That was the calculation that I put in the Bitcoin price, and that's how I calculated it, and even I sent that letter to IRS. Same thing, I also explained when I filed a claim, as well as in my explain, I wrote it down that it's basically Bitcoin price is fluctuation. So correct number will be 4.5 to Bitcoin.

And in your form, there is no option that I can write 4.5 to Bitcoin. I think so. That's why I put the number, approximate number there, ma'am. Mr. Dostager, in claim number 599-65, you've also filed a claim against Bitrix, Malta Opco. Have you ever had a contract with Bittrick's Malta Opco? Yes or no? I don't know that if there is any contract with VTACS Marta or no. But I came to know from your... Mr. Dostagir, you have answered her question. Again, I'll give you an opportunity to explain

right now her questions will often simply require a yes or a answer okay okay mr. distogger you also filed a claim against Bittrich Malta Holdings in claim number 600-196 yes have you ever had a contractual relationship with Bittrick's Malta holdings I don't know that ma'am but you have not for each of the claims for each of the claim no one you understand that you filed them under penalty of perjury correct Yes, because all four companies are claiming is together. So that's why there is a...

Mr. Dostager, in each of the claims, you claimed that you were claiming priority as a result of a contribution to an employee benefit plan. Is that correct? I filled it up, but I haven't... Mr. Dostager? Yes.

All right. Have you ever been a participant in an employee benefit plan of the debtors? No. Okay. You've answered the question. Do you have any other legal basis to claim that you have a priority claim against the debtors? Yes, I don't know, ma'am, because this is a legal thing, I have no idea on that.

Okay. All right. Mr. Dostager, you also claim that you have a security interest in property of the debtors. Do you enter? That's also, yes, ma'am. And do you have any legal basis for asserting a security interest in property of the debtors? Sometimes, like Bitcoin, many experts, they say it's security. So based on that understanding, I put security.

All right. Mr. Dostager, you claim that this event where your account credentials were compromised or your bitrix was taken from your account happened in what year? 20 November 10 2017 all right now you reported that at the time to the FBI correct I reported the same day to detective branch our city police department and they contacted with FBI and IRS later on I I also contacted with the BIA and you you also reported this to the Corinth Police Department yes the same day same same day I reported to Corrine Police Department. Okay and how many years has it been since she

reported this identity theft to the FBI and the Corinth Police Department? Corrine Police Department I talked I mean I November 2017 so it's it's like three years it's like I think six years plus. Okay is it fair to say that you understood all of the things that had happened to you that might give rise to a claim in 2017 sorry ma'am did you understand that all of the facts that might give rise to a claim in 2017 it i mean the situation i mean the event happened the accident or incident happened on november that's that's true november 2017 but i don't know that how a lawyer basically they calculate the time and all these.

All right. Do you agree that when you signed up for your account with Bittrick's US, that you agreed to a terms of service? I asked terms of service. I think there are terms of service there, but you know that that thousands of pages, I think it's almost impossible to anyone to go on the terms and service these thousands pages.

We are layman user, right? Lehman user on the platform. Did you agree to the terms of service when you opened your Bitrix US account? Yes, of course I agree on the terms of service. That's why they allow me to open the account, right? Okay. Do you have any basis to disagree that you signed up

to the Bitrix terms of service that says that Bitrix US will have no responsibility or liability with respect to unauthorized access to your account. I didn't read that and as I said that, let's say when, you know it also, like when terms and conditions come, thousands of pages, we go down the pages and we just, the question is a yes or no. Do you have any reason to dispute that you agreed

to the Bittrick's terms of service that state that you are responsible for any unauthorized access to your account? That's a legal I think that's a lawyer can tell that I have no I don't know how to how to how to answer them I will take because it's a you we are in a scenario that's basically for me. All right you've answered that you've answered the question you may proceed. Um, Mr. Dostager, do you have any reason to dispute that you also agree to section

17 of Bittrick's US's current terms of service that disclaim liability for consequential or punitive damages? Consequential and punitive damages for the form that I filled up? Do you dispute that Bitrick's terms of service that you agree to when you opened your account disclaim consequential or punitive damages against Bitrex? That's a disclaimer, but, ma'am, it's very hard to tell anybody like that. Do you have any basis to dispute it? Yes or no?

I think that's only lawyer can tell about that because I am 11 person I cannot comment on it. Do you have any basis to dispute that when you signed up to the Bittrick's U.S. terms of service that you agree that the limitation of liability would be limited to the amount of commissions earned by Bittrex with respect to your account? Again, I mean, especially in this part at the only lawyer, I think I have, I can factor the lawyer and take a yes. Yes, sir. Do you have any basis to dispute that you agree to the terms of service that have a limitation of liability in paragraph 18? It's only lawyer can answer that, ma'am? I'll pass the witness, Your Honor. All right.

All right, that concludes the examination, Mr. Dastrogear. I believe that there were a number of questions that Ms. Tamosco asked that you were going to, that you wish to sort of expand on your answer and I would give you that opportunity right now essentially his argument if you wish argument honorable jazz basically I have the money right and they write this contract and all these agreements definitely what the scenario happened like bit checks itself has the authority on the platform no one is so if there is any third party in that they have they are the solely responsible on the terms and conditions they have written or shown its conflict

of interest with the clients interest so I think that that's that's one of the that I can thought of okay and anything further sir Yes, now the scenario is like if you kindly give me an opportunity and I can find a lawyer who can actually represent that all in a good way and legal way, you know. Also, honorable judge, there is multiple claims that I filed and also it's like one link to other. So please give me the opportunity if there is anything that I need to correct it. So I need to correct the claim. My only claim is that 4.5 to Bitcoin and the company is BitTex. Now if it bit takes with all four companies together, that's, you know, that's, I think that just you can consider it. As opposition, it raised a lot of questions.

I have no idea all of this, only lawyer can answer that question. And my claim is very simple that I had a account with BitTex and I have only 4.5 Bitcoin. So it's all up to you honorable judge and also the opposition as they are dealing with a lot of clients. So I think that and I have a small family. I don't want to go like I don't want to make a lot of things and hours and all this. Just it's honorable judge and V-checks or the council up to them if they decide that this is a It's a small amount for them, but it's a huge amount for me and my small family So that's all I can say I can request that if they can take that and if they allow us and if they can give

You know this thing so I think that will be fine otherwise you know like If I go attorney general FBI and IRS. So it's a lot of, a lot of hectic things for me. Honorable Jas. Okay. All right. Here's what we're going to do. I will give you my reasons, but I'm going to sustain the objection to Mr. Dostagir's claims,

and I will expunge and disallow those claims. But I will give you my reasons, sir. First, as I mentioned at the outset, our rules specifically provide and contemplate that individual claimants, Claimants will have an opportunity to participate and are not required to have an attorney and can appear remotely and I want to be clear how much I appreciate you taking the time today I realize that this is not a familiar process to you and that you're not a lawyer and I also realize that it is a stressful and challenging experience But I am going to sustain the debtor's objection to your claims and I will disallow your claims In so ruling, I would make an observation consistent with what you said a minute ago, which is that your claim is really very simple.

You had purchased Bitcoin 4.52 in 2017, placed it on the platform, and that at some point within six months or so from that, that Bitcoin was removed, whether it was hacked or stolen or taken, with or without the credentials that are, provided there is a dispute about the mechanics of that. I will tell you that at least based upon the record that's before me today, the record demonstrates that the debtor's platform has actually never been hacked. And so the debtor's presumptive argument is that if access is afforded to the platform, that is a function of obtaining of the credential outside of the BITREC structure. But that is a factual dispute between the parties, and I'm not going to rule upon that, because, again, going back to your comment that this is a relatively simple structure, to the extent that there was harm or loss suffered, it occurred in 2017. Under the law, there is a limited period of time to seek redress on account of a loss.

That period is either three years or four years. In any event, it is beyond dispute in this case before me that this claim is barred by the applicable statute of limitation, and therefore the claim itself must be disallowed. In addition, I would note that as Ms. Tomasco reflected in her examination of with you and in the argument, You have filed a number of claims. I certainly don't fault you for doing so. It's a confusing process, and I assume that you wanted to ensure that you had covered every base. But it does seem to me that there is no basis for an employee stock option or an employee benefit program claim,

and likewise, there is nothing in the record before me today, even without considering the statute. of limitation that would give rise to either a secured claim or a priority claim. So at most we would be dealing with a general unsecured claim. And again, there is a factual dispute about the mechanics by which the hack or the loss occurred. But from my point of view, again, I think the law is clear and requires the court to expunge and disallow the claim on the grounds that it is not timely. Do you have any questions, sir? Yeah, thank you, thank you, sir.

So would you allow, I mean, I understand the timing, but I don't, I personally don't know and you understand that I have no idea, but when I contacted with multiple, multiple lawyer and one lawyer says that it's under the statute of the, he actually checked the Texas law and Texas law is, I think, he told like 10 years limitations because as is a debt, If it's a debt, then it's 10 years, and a fraud or something, so it's also under Texas law, it's 10 years. Okay. Mr. Dostegier, I understand. I cannot give you legal advice.

I have made a ruling with respect to your claim, and order will be entered that provides for that. The debtor will email you that order as soon as it is signed by the court. If you wish to seek reconsideration or appeal that, you have whatever rights you have. and I appreciate the question. I'm not trying to duck it. But again, it's not my position to give you legal advice, nor do I have the power because this is a civil proceeding to direct the appointment of counsel. With that, I would turn to Ms. Tomasco, I would ask that the debtor file a proposed form of order under certification. The court will deal with that promptly, and I trust that you will ensure that Mr.

Dostagir gets that by email immediately upon entry, okay? Thank you, Your Honor. All right. Are there any other matters that we have? All right, I appreciate everyone's time. Mr. Dostagir, again, I realize that this is not the result that you had hoped for, but I appreciate your engagement with the hearing, and I wish you all the best. With that, we stand in recess.

Thank you. Thank you.