American court hearing recordings and interviews - FTX bankruptcy hearing re Binance related litigation, April 8, 2026

Episode Date: April 15, 2026

This is a very interesting hearing, and is available on the bankruptcy court's docket. I am streaming it to make the audio more accessible to the hearing impaired and people domestically and internationally who cannot readily access this publicly available information.Sorry for the volume issues. The volume is low on the court audio. (It's ok on desktop with headphones.) The hearing opens with the defense counsel (the Binance side) trying to get the bankruptcy "clawback" claims decided via Hong Kong (China) arbitration panel as opposed to by the US bankruptcy court. In the US, if the arbitration clause isn't enforced then the litigation against the defense/Binance side would typically be decided without a jury, by a US bankruptcy judge, even though the challenged transfers were allegedly foreign company to foreign company transfers.As such the hearing is a reminder of the many good years FTX had in Hong Kong during its successful period, and the Chinese investment money in and out of FTX, a group of companies that include Alameda entities and many offshore registered companies that are typically depicted as a single American FTX company by association with the Americans among the former FTX executives.

Good morning, Your Honor. Good morning, Your Honor. Good morning. For the record, Robert C. Maddox of Richard's Leighton and Finger on behalf of the plaintiffs. Your Honor, we have five items on today's agenda. The parties have discussed how to handle argument today, and they have agreed that each side of the V will have one hour and 15 minutes for argument. Okay.

I'm so confused right now. Plaintiff? Yeah. Okay. All right. I apologize. I'm all. These little things make me very confused.

Tee-B on your toes, Your Honor. Okay. Everyone get up and switch sides. Joining me in the courtroom today is Chris Schor of Whitenkace, who will be handling argument on behalf of plaintiffs today. Okay. Good morning. Nice to see you.

And unless Your Honor has questions for me, I will turn it over to Move-ins. Okay. Sounds good, thank you. Thank you, Your Honor. Good to see you. Good to see you, too. I rise to Karen Bifarado on behalf of Digital Anchor Holdings Limited, formerly known as Finance Capital Management Company Limited.

I rise to introduce my co-consul who will be handling oral argument today for Digital Anchor. That's Karen King from the law firm Morvillo, Abramowitz, Grand, Iason, and Anello. And we previously moved for her admission pro-Havitia, which was granted. And I would ask that she present our agreement. That would be great. Thank you. Good morning, Your Honor. It's just introduced. I am Karen King from Movillo Abramovitz, and I do represent Digital Anchor,

which was formerly known as Binance Capital Management. And just at the outset, I want to be clear that Binance Capital Management is a completely different entity from Binance Holdings, another entity, another defendant in this case. The plaintiffs have tended to clump people together and call them Binance as a label. But in fact, Binance Capital Management and Digital Anchor is a separate entity, a foreign entity,

a BVI company that is engaged in different business activities, from Binance Holdings, which is the cryptocurrency exchange that's referenced in the complaint. As Your Honor knows, the defendants have coordinated to try to minimize the amount of overlap in our arguments that we each have joined in several of the overlapping arguments. Finance Holdings, Counsel, Mr. Moss from Cahill, and some of my other friends here, will be addressing arguments relating to the bankruptcy claims, challenges to subject matter jurisdiction, challenges to personal jurisdiction, as well as the pleading deficiencies of the complaint. Digital Anchor joins in those arguments, particularly given the

dearth of allegations specific to my client. The reason I am speaking first here today is because there's a threshold issue which we think dispenses with the majority of the litigation here. The crux of this case relates to a $2 billion alleged fraud. transfer relating to the repurchase of certain preferred shares of FTX. All of those transfers are subject to share repurchase agreements from July of 2021. The main one is attached as an exhibit to my declaration. That's on the docket 64 and there's a provision pretty short agreement but the provision 4.7 which clearly lays out an arbitration requirement, arbitration clause.

That provides that any controversy or claim or rising out of or relating to the agreement and this transfer must be arbitrated in Hong Kong under Hong Kong law before a panel of three arbitrators pursuant to the Hong Kong International Arbitration Center's rules. That in turn delegates any question of arbitrability to that arbitration panel. Now, we think that given the extensive precedent and policy reasons out there for enforcement of arbitration clauses, that that really should end the question as to whether or not these claims need to be submitted to the Hong Kong International Arbitration Center. In response, FTX has argued that these claims are inherently bankruptcy-related, that they have

to be presented in the Bankrupted Court and are not arbitrable. Again, that question really turns on whether or not something is arbitrable. And the question of arbitrability itself is something that must be submitted to the arbitration panel. This is clearly set forth in the U.S. Supreme Court case from 2019, the Henry Shine case, which we've cited. And in that case, the court clearly ruled that even where you might think that the grounds for arbitration are wholly groundless, Even then, in that extreme circumstance, the question of arbitrability has to be presented to the arbitration panel. Well, you would agree with me that the question of whether the parties agreed to arbitration is a question that I must answer, correct? Yes, Your Honor.

I think you have to determine whether or not there was an arbitration agreement, but there's been no dispute that FTX signed that agreement, that my client signed, and all the other arbitration provisions and the other repurchase agreements were properly. signed, they all contain an arbitration provision. So hopefully... Right, but the debtor did not sign those, and these are debtor claims. Right. So this is a unique circumstance where we're a post-plan, and this particular circumstance has not arisen before, where the plaintiff now challenging the purchase is,

in fact, the inherited party. It is the original party that signed the agreement. And I think on that ground, and I acknowledge that there's no specific case that has dealt with that particular issue. But logically, we think that because the party that signed the agreement is now really the party challenging or the inheritor of that party, that the arbitration provision should be applied. So there's no cases that you have found where courts have held that fraudulent transfers and preferences are subject, are not subject to an arbitration? There are no... There are no cases that deal with this particular procedural posture of what you,

Your Honor, are dealing with now, which is post-plan, where there are claims that are brought by the, you know, now essentially the party that originally signed, the debtor that signed. Therefore, the question is up in the air. We think we have the better of the argument. in the strong policy reasons and strong legal precedent for enforcing arbitration claims. But in any event, the question of arbitrability under those circumstances is something we submit needs to be brought to the Hong Kong arbitration panel. In the end...

I just want to understand your distinction. I'm not clear on what the distinction is. Because the case was brought post-petition, that is the unique factor about this case? My understanding is that because it is post-planned, because the bankruptcy proceedings have essentially concluded, these are claims that are brought after the fact. That is the distinction in the procedural posture. This will ultimately return to the bankruptcy claim arguments, of course, that my friends will be addressing. So in some ways, it all kind of collapses back down to how you treat the claims that are trying to be broad in this case.

But our main point is the debtor, the FTS itself did sign an agreement agreeing to arbitrate claims related to that transfer. And what they're trying to do now is inherently sort of in violation of that. But you would agree with me that a 548 claim can't exist pre-petition. It can only be brought following the bankruptcy case. Even if it can only be brought following a bankruptcy case, our position is it does not need. to be resolved by the bankruptcy court that an arbitration panel by agreement of the parties can resolve this fraudulent transfer claim and should resolve this fraudulent transfer claim in light of the party's agreement under the transfer itself. So given the existence of the

agreements we submit that the plaintiffs need to be compelled to arbitration to resolve that bulk of what is currently before your honor. Okay with that I'll yield the floor to Mr. Moss. Okay. Good morning, Your Honor. Gregory Strong, Cahill, Gordon, and Rindell, LLP, on behalf of the Binance entities. With me is my colleague, Edward Moss, who's been admitted ProHod-Bee-J, and with the court's permission, he will handle the argument on behalf of the finance defense. That would be great. Thank you, Mr. Strong. Good morning, Your Honor. Again, Edward Moss, and I'm here for the entities that we have been referring to in our briefs as the BHL defendants, and that is Binance Holdings Limited. Finance Holdings IE Limited, and Binance Services Holdings Limited. So Your Honor, like my colleague said, we also adopt and incorporate many of the arguments

from the others that you'll hear today, and the way that we've decided to divide this up, I'll be covering two broad issues. Number one, personal jurisdiction as to the BHL defendants or the lack of, and second, our arguments on the fraudulent transfer claims, both constructive and intentional. So as for personal jurisdiction, plaintiffs try to establish specific jurisdiction against each of the BHL defendants, but they fail. And the main reason that they fail, Your Honor, is because of the relationship problem. The requirement that plaintiffs must show that their claims arise out of or relate to the defendant's contacts with the United States.

I'd like to start with the share repurchase claims. There are six contracts at issue. as the court knows. All of them involved the following. Foreign sellers, purchasers outside the U.S., a Hong Kong choice of law provision, a Hong Kong arbitration provision. The sellers received over $2.5 billion for the shares that they sold. 98.7% of that value was for the shares of FTX trading LTD, the foreign company. Only 1.3% was for the shares, of WRS. And it's the plaintiffs who all one big transaction, and you have to look at it

together. So 1.3% of the value related to the shares of a U.S. entity. These were overwhelmingly and fundamentally foreign transactions, Judge, and it's simply not the case that the claims based on these contracts can arise out of the B.HL defendant's U.S. contacts, because there virtually are no

U.S. contacts with respect to the share repurchases. And there's no specificity about any or each of the three B.HL defendants. None of them, they're alleged to be the ultimate transferees, but they're not actually parties

to the lawsuit. And there's no distinction made when they talk about what the U.S. contacts supposedly were and I'll get to those. There's no distinction about this entity or that entity or that entity having those contacts. They're just lumped all together and lumped together also with Ms. King's

client. So here's what FTX argues in terms of the U.S. related context. First, WRS is all over their papers. That's the FTX U.S. entity, which was a Delaware entity. There's not a case to say that when you engage in sales of shares of two companies, one U.S. and one foreign, that that's enough for personal jurisdiction, let alone when one of them is 99 percent, roughly 99 percent of the value, and you have these contractual provisions that evidence a clear and express intent to not connect the transaction to the United States. And, of course, there are cases that I think others will talk about that say that owning shares in a U.S. company, even if this were only about WRS, and of course it's not, that that would

not be sufficient suit-related contacts on its own. FTX also points to the fact that the finance entities allegedly asked for the payment to be made in BUSD, stable coin, which FTC claims means FTCS would have had to use a New York trust to meet the BUSD. First of all, that's FDX's contact. That's not finances, right? That's not the DHS defendants. That's FTCS would have to use BUSD. But in any event, there's no support for the proposition that simply comes.

asking to be paid in a certain currency can create a connection to the U.S. as a basis for jurisdiction. You know, Your Honor, if anyone who asked to be paid in U.S. dollars submitted to personal jurisdiction based on that because everyone knows U.S. dollars are minted in the United States, then that could impossible to be a basis. That's really a bridge to four. The next argument is, well, Alameda, which is alleged to be the direct transferor, it's a non-U.S. entity. One of them. Right. The one that's alleged to be the direct transferor is a non-U.S. entity.

But what the plaintiffs argue is that, well, it had a parent company that was a U.S. entity. And again, Your Honor, there's no respect for the corporate form. In that argument, there's no allegation. I'm not sure there was a corporate form. Fair enough, Your Honor. I mean, to be clear, because I think that the allegation of the complaint, if I understand it, is that while the subsidiary made the transfer, the allegation of the complaint was that I was, quote, Alameda's funds, which there's also an allegation that it wasn't out of

as funds because they were taken from customers, but from trading, from the trading platform. But I think the, I think the allegation is clear that it's, quote, Alameda. Yeah, well, well. So what does that mean to you? I think the allegation is that it's, it's, that there are separate entities and that one is the parent company and that the transfers actually came from the non-US entity. And so I think the fact that there's a parent company that's alleged to be the parent of the transfer, I don't think that that's a suit specific contact for the BHL dependents.

They haven't pleaded any knowledge as to any or each of the BHL dependents that, well, we knew that money was ultimately coming from the U.S. entity. I mean, there's nothing like that in the complaint. It's just a conclusory allegation that tries to sort of muddy the corporate firm. And finally, the last principal argument, and, again, I think this is really a stretch, too, that FDX used some U.S. lawyers for the deal. Well, no case law to support that argument. that when the other side of a foreign to foreign transaction about a foreign company that has contracts that say do everything abroad,

that just because the other side, forget about our context because the other side hired U.S. lawyers, that that's a basis for personal jurisdiction, there's no support for that, Your Honor. I think in conclusion these are claims that don't arise from U.S. contacts. They arise from these fundamentally foreign transactions, that are 99% of the value is foreign, and pretty much everyone involved was foreign. And the fact that there are these, I understand that there's a question

about the arbitration provision, but it's in the contract, and it evidences an intent to connect the transactions, regardless of whether you think it's arbitrable in Hong Kong, it evidences an intent to connect the transactions abroad and specifically not to the United States. So as far as the second batch of claims, which are the claims based on the posts on X, the tweets,

I think those will be covered by others, but I want to briefly reference those. They certainly don't arise from U.S. contacts either, and there's really no allegation, specific non-conclusory allegation, to suggest that the publishers of those tweets who are not defined, they're just, you know, it says finance, they don't say which entity, that whoever did that, did anything

to specifically direct contact into the US. They were tweets made by a foreign entity about another foreign entity on a global social media platform that don't mention the United States at all. We cite cases that show that this is enough, and FTX comes back with cases, but we explain, Your Honor, in footnote four of our reply brief on page 8,

that all of their cases involved conduct, U.S. suit-related conduct other than the mere posting of Internet posts. FTC's principal response here is well. FTCS. had a lot of U.S. customers. Finance knew. FTC had a lot of U.S. customers. Binance wanted U.S. customers. And so finance was somehow targeting the United States or the effects were felt in the United States.

But that's all just, it's conclusory. There's no mention in the tweets about the U.S. And this is all based on the conjured speculative allegations about the purpose of the tweets. When you look at the relative value of the FTX U.S. entity and the entity of Prague, it's based on the repurchase contracts, it's about 70x in terms of the value, right? The value of this enterprise was the non-U.S. enterprise. And so to just say that while you were targeting the U.S.

because you knew we had some U.S. customers, that's not enough for effects, and it's not enough to show, directing, purposefully directing your conduct. So I'll move on briefly. They're covered in great deal. detail in the papers, and I just want to highlight just a few arguments, if I may, on the fraudulent transfer claims. What about sticking with personal jurisdiction?

Yes, sure. You didn't address the consent decree that was entered in another proceeding that discussed Bynan's systematic contacts with the United States. So you focused your argument on specific jurisdiction, but there's a second category which would be general. So walk me through why I should disregard the statements that are in the consent. decree. Well, I actually think... And the agreements that you couldn't argue to the contrary about your U.S. contacts. I'm sorry, Your Honor. No, that's... I didn't just speak over here. So, so I think here the papers are clear that they are not trying to plead general jurisdiction. They're trying to plead specific jurisdiction. And so the specific jurisdiction test is,

first, you have sufficient contacts with the jurisdictions. You have minimum contacts. second are their suit related and third the due process inquiry right like is all of that enough to comport with due process to hell you into court here and and and we're not contesting the minimum contacts part of the specific jurisdiction analysis what I was for the reason that you just stated what I was focused on was prong two and I think if you look in both parties briefs they both frame the issue that that way that we're looking at specific jurisdiction and it's this three-part test. Okay. That's helpful. Thank you. And so since you raise it, Your Honor, there are cases that say, you know, you have to look at one and two sort of together, right?

You have to look at it as a sliding scale. And what I would submit here is that the prong two that I focused on is so bankrupt in terms of, to funny to use that word. But, you know, it has nothing really relating to the U.S. And so I think when you look at those together, and you conduct the necessary balancing, I think the right result is that there's just nothing here to tie the suit-related contacts to the United States. Did that sufficiently address your question? Sure.

Okay, so now if I may, I'll briefly address the fraudulent transfer claims. So on constructive fraudulent transfer, I'll start there. And there is a very straightforward argument here under the Safe Harbor Section 546E. that these transactions are barred. They're transactions by a financial participant in connection with a securities contract. No dispute on point two about securities contracts,

that these are securities contracts. FTX doesn't argue that. The issue before the court is whether Alameda is a financial participant. And Plains and Soledge in paragraphs 4 and 43, that Alameda LTD was the direct transfer. So I'll focus on Alameda LTD. Allamate his own document filed with this court on this document demonstrates that it is a financial participant. The requirement is you have to have gross mark-to-market positions of not less than $100 million aggregated across counterparties

in certain specific types of transactions or agreements with anyone at any time in the 15 months before the petition was filed. and the agreements that issue, of course, their securities contracts, which are defined broadly in Section 741.7. So Alameda filed a document in this proceeding, in-ray F-TX trading LTB, number 22B-11068, VII-111-1 at page 17 of 28 on the ECF stamp, and that's cited on page 14 of our opening brief, 38-67. It says Alameda had $631 million of, quote, equity and fund investments,

as well as, quote, equity and fixed income securities. FTX's response is don't consider our own document, judge, because it's not in the complaint. But we cite cases in footnote nine of our opening brief saying that the court can take judicial notice of the debtor's own filings on a 12b-6 motion and we counted at least five times in FTX's opposition brief where they directed the court to documents that they had docketed in the underlying bankruptcy for consideration on this motion. The next argument is, well, our own document is ambiguous. That is their argument. They say, well, how do we know if there's $100 million of securities contracts in this $631 million? Well, the document says equity and fund investments and equity

in fixed income securities. Equities mean securities, and securities mean securities, and they are 6.3 what they need to qualify. So if only 16% of the investments in that chart are securities, the safe harbor would apply. And, you know, FTCS put a lot of information in in declarations and other extrinsic evidence on this motion. They did not put in any proffer about what that document means. They just said, well, it's unclear on the face of it and judge you shouldn't consider it.

And the most plausible inference from reading of that document, especially with the lack of any sort of a proffer from the other side, is that if there are some, $631 million of equity investments and security investments at the safe harbor. Now, on the constructive fraudulent transfer terms, we have other arguments. I just want to highlight reasonably equivalent value briefly. There's no dispute that the share repurched transactions were conducted at market prices. FDX concedes in its complaint that it had massive market value at the time we all know that

from reading the papers, and its SEC filing said, which you can also judicially notice, that the value was about $18 billion of the enterprise at the time in July of 2021 of these shareware purchases. There was no dispute that this was an arm's length transaction and that the B.HL entities or the transferees could have sold the stock that they owned at these prices to anyone who wanted in on FTX.

I mean, they, they, they, could have sold to anyone at these prevailing market prices. And the cases are clear that market value is the way you determine reasonably equivalent value. We cite the Peltz the Hatton case on page 20 of our opposition brief. And we also cite a case called Goreley on page 16 of our reply. It's not a bankruptcy case, but it's a fair value analysis. And what the court there says is, quote, even when the corporation engages in a deliberate mass

of fraud that conceals the true nature of the business. The price at which the stock could be bought and sold on a public exchange on the valuation date remains the fair value of the stock. Now, my point here, Your Honor, is that you don't have to get into the sufficiency of the allegations. I get it.

They have allegations in their complaint. They're conclusory, but they have them, that FDX at the time in July of 2021 was worthless because it was all a big fraud. And then you have the allegations in the complaint on the other side that it was worth billions of dollars and the SEC filing saying that it was worth billions of dollars. I don't think you have to weigh these on a 12 motion. I think you can decide this, Your Honor, on the basis that it was an arm's-length transaction

between two large and sophisticated companies, who, by the way, are alleged to really dislike each other at the time. So no one was giving, you know, the other one a good deal here, that this was a market, transaction that was done at a market price. And I think that under the case law, without weighing the sufficiency of the allegations, those undisputed facts are enough to dismiss based on reasonably equivalent value. And finally, I'll touch very briefly on intentional fraudulent transfer. Plains of the alleged intent based on two things. Number one, they say that FTX paid with stolen customer funds.

so this was all part of the fraud. And second, they argue that this was done by Mr. Bankman for you to portray strength to the market to buy back his own shares. Well, the first one doesn't work because it doesn't matter how the money was obtained. It matters whether the intent of the transfer was to defraud or hinder creditors. And plaintiffs don't even argue that. They just say that these are kind of fruits of the poison tree, but they don't argue with respect to the intent of the transfer.

Their only argument with respect to the intent of the transfer is we were trying to convey, or Mr. Banking Fried was trying to convey strength of the market. It's conclusory. Maybe at the pleading stage, even that could be enough. I understand the liberal standard here. But I think the fundamental problem with this brand of conclusory allegation is that it's pitted against inconsistent, internally inconsistent allegations in the complaint itself. The complaint alleges that it was Mr. Jow who wanted to do this transaction because he wanted

out of FTX. And so not only do you have a conclusory allegation that while this was done to portray strength, you also have the fact that it's internally inconsistent, and the complaint actually pleads the opposite, that it was somebody else's idea. And so I think when you have the combination, kind of the double whammy, of conclusory and internally inconsistent, those are allegations that you need not credit on a motion to dismiss at this stage. Your Honor, unless you're had any questions, that is all I plan to cover today. I do not. Thank you.

Thank you. Good morning, Your Honor. Good morning, Mr. Lyons. Jeff Lyons from Baker-Hoss Settler on behalf of defendant Cheng Peng Zao, as everyone refers to him. With the Honor's permission, my colleague, Catherine McKnight, will handle argument, also from Baker Haastellar. Great. Thank you so much.

Thank you, Your Honor. May it please the Court, I am Kate McKnight with Baker Hostetler, arguing this morning on behalf of Chung Peng Zhao. I will focus my discussion on three aspects of our briefing and allow our briefs and the other defendants briefs to carry the rest. I'm happy to answer any questions the Court may have as we go along. Specifically, I will start by discussing the issue of extraterritoriality. Next, I will address the issue of personal jurisdiction over Mr. Jow.

And finally, I will address plaintiff's claims that tweets caused the downfall of FDX. Let's begin with the issue of extraterritoriality. Plaintiffs fraudulent transfer claims in this case seek to exert extraterritorial reach, using statutes that apply only domestically. To set the table for the court, plaintiffs seek recovery for the transactions at issue in this adversarial proceeding under sections 544-548 and 550 of the Bankruptcy Code.

Plaintiffs concede as they must that this court must operate under a presumption against extraterritoriality, meaning that these statutes should not. apply to foreign transactions. Our brief cites a number of Supreme Court cases around this issue. I'll identify quotes and sites where appropriate, Your Honor. The first is I'm going to cite from RJR Nabisco.

This is a 2016 case. The site is 579 US 325. In that case, it held that the presumption directs that federal statutes, quote, be construed to have only domestic application absent clearly expressed congressional intent to the contrary. Let's start with the transfers at issue. I heard your Honor ask a co-counsel here, a colleague, friend here, questions about this issue. The complaint makes clear that the transfers at issue here before this court are wholly foreign. They are as between Alameda, which is a British Virgin Islands Company and Binance.

I'm going to put the word finance in quotes because as another friend has already mentioned, there's an issue with the pleading that it lumps a number of finance entities into one. But the finance entities at issue here are all foreign and I'll name them now. They are incorporated in Ireland, Cayman Islands, and the Virgin Islands. Now you may already know, you likely already know from the pleadings that Mr. Jow is identified as a quote unquote nominal transferee and nominal counterparty. There is no allegation that nominal counterparty, Mr. Jiao, received any transfer within the United States.

So as we sit here today, the transfers are wholly foreign. There are other facts that support this finding as well. Some other courts have considered the fact of, well, was the transfer made in U.S. dollars? The answer to that question is no. was made in cryptocurrency and not the United States dollar. Can I just interrupt you for one second? You may. This is a motion to dismiss.

Yes. There are no established facts. I have the allegations of the complaint. So let me ask you, why is this issue appropriate for me to decide on the final basis at the motion to dismiss stage? Courts have regularly decided the issue of extraterritoriality on motions to dismiss, where the allegations are clear and undisputed. The allegations are that the transfers between a foreign entity and a

another foreign entity, period, the end? Well, I know that the Binance Exchange is located in the United States through the consent decree. And I know, through the allegations and the complaint, that several of the cryptocurrencies were exchanged on that exchange. So it's not as open and shut as you would like to, for me to believe. Is not true? Not quite, Your Honor.

I do hear what you're saying, but let me share why we do not share that view. Primarily because of the two Supreme Court cases, R.J.R. Nabisco and Merit Management Group, which both say merit management group comes in and says you have to focus on the transfer. It's as if you have to put blinders on and focus on the transfer at issue. Okay, but I don't have to focus on where the money left the estate. This is a fraudulent transfer which deprives the estate of money that should otherwise go to creditors. Isn't it relevant for me to understand where the transfer was at the time that it left the estate, or left the debtor, excuse me, not the estate?

Right. With respect, Your Honor, to engage in an analysis of those types of facts, you would be going outside what the Supreme Court has told you to look at with blinders, and that's in the Merit Management case, NR. Nabisco. Why is that? Because they want you to focus on the transfer at issue. Okay, the transfer at issue was three separate pieces of assets. Right?

If I'm understanding it, it was FTT currency, and then the finance stable coin and the finance crypto. Sorry for my lack of saying what the abbreviations are. And the allegations of the complaint state that, quote, Alameda transferred the FTT. and Alameda, very unclear what that is and where it was held. Because I know one of the parent companies is the U.S. entity and the subsidiary is not. Then it goes on to state that how the coinage, the crypto coinage, was transferred to finance.

Is it relevant that the transfer that is alleged to be the fraudulent transfer under merit started in the U.S.? on the Binance exchange? We do not believe that the transfer started in the U.S. And why is that? Because the entity that started it is based outside of the U.S. Why is that relevant if the asset was located in the U.S.? The asset was property of the entity belonging, the entity FTX, pardon me, the Alameda entity which is foreign, and what is relevant is that a property.

foreign entity transferred the currency to another foreign entity. But the Supreme Court hasn't, has the Supreme Court told me how to determine whether the transaction was domestic? The Supreme Court has told you I believe the Merit Management case is very insightful. Well, Merit doesn't have anything to do with this issue. It tells you that for purposes of 546E, you look at the transfer from start to finish. I'm very familiar with Merit. I could, in fact, was thinking about it.

merit when I was thinking about this issue but when it comes to determining the second part of extraterritoriality how to determine if the transfer or the transaction was domestic or foreign is it relevant that the asset may have been located in the United States we do not believe the asset was located in the United States okay and why would that determination be appropriate at the motion to dismiss stage because the allegations in the complaint are clear that it it's a foreign transaction. But you allege that the entity

that may have owned the asset is a foreign entity, but the location of its assets could be located in another area. Isn't that an important distinction for purposes of this analysis? I mean, we know that foreign entities own assets in other areas of the country.

And here, the Binance coinage, the stable coin and the coin, were transferred on the exchange. The Binance, they were located on the Binance Exchange. And I believe there's a consent decree that states that

that is in the United States. So putting aside that legal issue, why is this appropriate today to decide? I understand, Your Honor. It's appropriate to decide because it is our view that it is a foreign transfer, and I appreciate what you're saying, Your Honor. It is a foreign transfer between foreign entities, period. Well, it's a transfer between foreign entities.

Why would it be, well, how do you determine it's a foreign transfer? There is no allegation in the complaint that these transfers have occurred within the United States. And are they required to plead? to plead that? I believe so in order to show that extraterritority, the presumption, the very serious presumption against extraterritoriality does not apply there. You don't even need to plead personal jurisdiction in a complaint. Why do you need to plead around extraterritoriality? The state of claim under rule 8? Because they have, they do not have a complaint, they don't have a claim if the transfers didn't occur within the United States. Isn't that a defense?

Yes, it's a defense that's right that the motion to dismiss stage. If it's clear from the face of the allegations of the complaint. Yes. Okay. I appreciate that. Thank you. Sure. Thank you, Your Honor.

And I think we've addressed a couple of these points, Your Honor, but I'll touch lightly on them. Plaintiffs ask this court to apply a standard from two old cases, and I'll identify them now. In-Rae French and the In-Ray French. and the in rate i'll refer to it as in rea faa it's an acronym f a h both of those cases and the in rea faugh was from this court your honor but in re faugh importantly i was looking at judge gross because i think he wrote that and and with respect to judge gross because i looked at the docket in in rea faa to get an understanding of timing briefing on the motion to dismiss and this was an issue at at the motion to dismiss stage in in rea fae briefing on that issue concluded about a month before RJR Reynolds decision was issued. So – and then I looked at the docket to see – did anyone identify this as supplemental

authority? They didn't. And I view that as important because – out of respect for Judge Gross, he was not presented with RJR Reynolds. It was not in the briefs at the time, right? But we view RJR Reynolds, the merit decision, and others – and we've listed a number of others in our – in our brief – as clearly – saying that the approach applied, the center of gravity, this sort of loose, flexible center

of gravity approach applied in those cases, no longer applies. Plaintiffs seek to muddy the waters with United States references and apply this looser standard, but RJR. Nabisco instructs that those United States references are not relevant to this court's analysis, because, and I'm quoting now, regardless of any other conduct that occurred in U.S. territory. If the conduct relevant to the focus, which is here the transfer, occurred in a foreign country, then the case involves an impermissible extraterritorial application. That's an Obisco case at 337. We know from the merit decision that Your Honor is very well familiar with that the focus of the inquiry under the same provisions of the bankruptcy

coded issue here is the transfer the trustee seeks to avoid. I think it's also telling that Mr. Jow raised these cases, R.J.R. Nabisco, and merit management, in his motion to dismiss, and in plaintiff's response, silence. They didn't even address it. They're not cited. Plaintiffs argue in the alternative, that even if this court is to find that the transfer was extra territorial, then the court should deem that Congress intended for these sections of the Bankruptcy Code to apply. The Supreme Court has repeatedly warned against this type of application. No, and, and, warned that you must find a specific assertion of congressional intent and express assertion that Congress intended for these sections to apply extraterritorial, extratory, tarry.

No such, such expression was made here. Can you give me a few examples, if you happen to know, of cases outside the bankruptcy context? in which Congress has used the correct or acceptable verbiage. Sure. Let me, if I can give you an example from a more recent Supreme Court case, the Abbottron Austria case, we cited this. They noted in this case it's 600 U.S. 412, 419, notes three. I'm pausing here, Your Honor, because I'm going to tell you why we cited,

and but I you're asking a very specific question and it's a I don't know that it's all on all fours but it's important for you to know this case exists where they said the analysis applies at the level of the particular provision implicated so when you're looking at these provisions you can't do what plaintiffs ask this court to do and look at an express provision in section 541 and then apply it to other sections in the statute that you really have to focus on this one. So I think there is your example, Your Honor. You asked about outside the bankruptcy context. But Section 541, that provision that it shall apply to property wherever it may be,

pardon me I'm paraphrasing, courts have found that that means that applies that section. 541, which deals with the debtor's property, applies on an extraterritorial basis. Why is it the estate's property? Correct. It's the estate's property. Pardon me, Your Honor, And it's a really important distinction here, right? So courts have found that it applies there, but then look to, when you look at these other sections, there's no such language. And you have plaintiffs coming to you and saying, look, look at 541. They say it.

We have some other courts, and I believe it's in Re French and in Reifah, run a similar analysis. They say, well, this other section says it. And what we're saying to your honor, our position, and I think it's not just a position, but it's clear from Supreme Court precedent. is that later cases after In re Fa and Inre France made clear you can't look to these sort of sister sections to borrow the extraterritality language and you have to have the language within the statute itself within that section and what language would I be looking for that's really what I'm trying to I see your honor well is it a statement that

says this applies extraterritorial or this applies it It could be, or it could be something as simple as what you saw on 541. Okay. Right? You could see that language copy and paste it in these sections. And I think, you know, if you want to dig further into congressional intent, I think it's clear that Congress intended for a 541 property property of the estate to be treated in a certain way wherever it may be, but had a different position when it came to property that is now in

the hands of third parties. Pardon me, Your Honor. I want to make sure I make these points, but I want to respect the time of my colleagues here. Plaintiff cite to a couple of other cases that don't quite make sense, and I'll explain why they don't make sense to us. They cite to a case In re Maxis Energy for the proposition that a trustee can still recover fraudulent transfers, even if no relevant conduct occurred in the United States. But the initial transferer in In re Maxis was domestic, and that's at five.

62 of that case. The initial transferor in that case was clearly domestic, not like here. Plaintiffs also cite to a 2012 case related to the Madoff bankruptcy, but that case hinged on the fact that the initial transfer again was from a domestic transferor. Dicta about congressional intent in that case has been overtaken by R.J.R. Nabisco, the later cases that we've cited in our motion to dismiss. to dismiss. In sum, Your Honor, the transfers at issue in this adversarial proceeding are undoubtedly foreign. I understand your point. Our view is they're undoubtedly foreign because they're foreign entities that are transferring, and there are no allegations that the transfer occurred on a U.S. platform. Bankruptcy Code Sections 544, 548, and 550 do not state any congressional intent to apply to wholly foreign transactions.

position that the transfers at issue come under this court's purview invites this court to make a finding that would contradict years of Supreme Court precedent. And those are the RJR case, the merit management case, the Arbitron case, and others. I'm going to move on to my second issue, and I'm going to try to limit this. Again, I want to be respectful of time. The second point I wanted to highlight from our briefing, Your Honor, the trustee has failed to establish personal jurisdiction over Mr. Zhao. The complaint makes no attempt to establish that the court possesses personal jurisdiction

over him. There was a slight colloquy on this issue about specific jurisdiction earlier with my friend, and the same applies here. The Supreme Court in at least Walden v. Fiore, 2014 case, stated the well-known standard that the relationship must arise out of contacts that the defendant himself created with the forum state. You see no such relationship here. Plaintiffs rely on Rule 7,004F to create jurisdiction, personal jurisdiction of Mr.

Jow, but plaintiffs also concede that he was not served pursuant to Rule 7,004F. He was served pursuant to a waiver. Plaintiffs are the party that sought that waiver, Your Honor, and Mr. Jow agreed to it. If plaintiffs had wanted the provisions of Rule 7,004F to apply to Mr. Jow, they should of either foregone the waiver or made sure the waiver language was clear that 7,004F applied. Your Honor, with time, I would like to move on to my third point. We will rely on the remainder of our brief on personal jurisdiction. We believe plaintiffs have wholly failed to allege personal jurisdiction over Mr. Jow.

Plaintiffs claims that social media posts form the basis of claims by FTX against Mr. Jow must fail. It's hard to take these claims seriously, Your Honor, out of... with due respect because at bottom they seek relief from Mr. Jow for a fraud perpetrated by FTX. Plaintiffs first claim injurious falsehood against Mr. Jow for these tweets fail many times over. Let me highlight a few. First, there is no bankruptcy court jurisdiction over false statements acts. You can refer to briefing on this issue, both Digital Anchor briefed it, I believe B HL briefed it. 63 at pages 13 through 21 for digital anchors position ECF 67 pages 23 through 24 Mr. Zhao joined those motions plaintiffs have not engaged in any threshold choice of law inquiry for these claims

if Delaware law applies Delaware does not recognize the tort of injurious falsehood there is a two-year I'm just going to list a few more points of why it fails though there's a suit two-year statute of limitations for defamation claims those had run by the time the action was filed. And finally, the injurious falsehood claim was not pleaded under any cognizable standard. To be clear, FTX, and this is in our brief, but FTX was a fraudulent enterprise whose time had come, starting with at least a November 2nd Coin Desk article that predates any of the tweets at issue. Mr. Jow did not cause the FTX fraud, and that November 2nd coin desk article is cited as alleged in the complaint.

plaintiffs fraud claims fair no better they erroneously blame mr. Jow for FTX's own fraud they failed to satisfy the heightened pleading requirement of rule 9b and they appear to take the position that mr. Jow's tweets somehow prevented FtX from continuing to perpetrate its fraud FTX is not entitled to perpetrate a fraud plaintiffs do not have a cognizable interest in perpetrating that fraud and the fraud theory based on the letter of intent fails in the same way. The same with plaintiff's unjust enrichment claim, Your Honor. Your Honor, I'm going to try to curtail my argument to give the remaining time to my friends here.

If you have any further questions, I'm happy to answer them. I do not. Thank you very much. Thank you. Good morning, Your Honor. Good morning. Walter Hawes from Moly Lamkin on behalf of Samuel Lim, one of the individual management defendants. Many of the arguments you've heard today apply equally to Mr. Lim, but I will focus on two issues. that apply uniquely to Mr. Lim and warrant dismissal of his claims.

I'll try to be narrowly focused on what's relevant to Mr. Lim. The first is personal jurisdiction, and the second is failure to state a claim. With respect to personal jurisdiction, plaintiffs failed to plead any facts establishing the requisite substantial connection between this suit, the forum, and Mr. Lim. The complaint's only factual allegations against Mr. Lim

are that he worked at finance and that he was nominally involved in the purchase and sale of the ship of WRS to U.S. company. Those allegations are insufficient. It is undisputed that Lim, a foreign national and a Singapore resident, only nominally held the WRS shares

on behalf of finance. Lim never engaged in any activity relating to the WRS shares and never created any connection with the U.S. in relation to those shares, as his declaration shows. Numerous courts have found that that type of passive stock ownership in a U.S. company, is insufficient to find personal jurisdiction over a foreign national like Mr. Lim.

Because those are the only suit-related contacts related to Mr. Lim, jurisdiction is lacking. None of the other supposed contacts that plaintiffs point to with respect to Mr. Lim change that outcome. We've already gone over the circumstances of the purchase and sale transactions, since I will not rehash that here except to say that we agree that the circumstances of those transactions indicate the parties wanted to avail themselves a foreign, not U.S. law. But the important point with respect to Mr. Lim and those transactions is that the course of dealing the prior negotiations, the expectation of future involvement or consequences in the forum,

are completely lacking with respect to Mr. Limb. Importantly, if you look at plaintiff's own evidence that they have put in, docket 107, 3 to 7, so exhibits 3 to 7 at adversary docket 107, Those are the negotiations and correspondence relating to the transactions that that result in the agreements bearing Mr. Lim's name. But those communications show that Mr. Lim was not involved in those negotiations or the substance of those transactions, even though they were making material changes to the agreements that Limb was on. Lim's declaration confirms the point that he lacks contacts.

Plaintiffs also point to two agreements to try to fill the gap, but neither are sufficient. The Binance plea agreement with which plaintiffs cite is insufficient because Lim is not a party to the agreement. Plaintiffs can't impute corporate contacts to another defendant, an individual defendant, merely due to his employment. And Lim, it's important to note by plaintiff's own allegations was not in any substantive role employed at finance at the time that the finance. PIN agreement was entered into but even setting that aside the findings in the finance plea agreement are completely unrelated to this suit nowhere does the agreement reference finance investment in FTX WRS Alameda or any of the accused transfers here or any fact relating limb to these claims that is fatal the consent

order is similar it is well established that a consent to personal jurisdiction in one does not waive personal jurisdiction in another case even in the same form. But even if that weren't the case, the consent orders findings are similar to the Binance Plea Agreement's findings in that they are completely unrelated to the subject matter of this suit. All of plaintiffs' additional supposed contacts have already been addressed, including FTX minting BUSD through third parties, routing funds through correspondent banks, engage in U.S. Council, but we won't rehash that here except to say that the relevant point with respect to Mr. Lim, is that personal jurisdiction is about whether defendants conducted, excuse me, defendant's conduct

established the requisite contacts with the forum. Plaintiff's unilateral activity cannot support jurisdiction, and here plaintiffs fail to allege or reduce any evidence that Lim was aware of those supposed other contacts. For those reasons, Lim lacks the sufficient substantial connection to the forum that is suit-related as necessary to establish jurisdiction. and the claims against him should be dismissed on that basis. An independent reason to dismiss the claims against Mr. Lim is that plaintiffs fail to state a claim against him here. It's important to note that plaintiffs only bring counts one through five against Mr. Lim,

unlike some other defendants, so we're only talking about the fraudulent transfer claims. But with respect to those claims, all the plaintiff's claims against Mr. Lim, plaintiffs do not dispute that they must plausibly allege that Lim was either a transferee or a beneficiary of the accused transfer. They can't do either, and their own allegations in the complaint and their own evidence again establish that is the case. With respect to a transferee, the standard is whether the transferee has dominion over the money. Lim did not by the complaint's own allegations.

It was sent directly to Binance, and it was funded by Alameda and sent to Binance, complaint at 43 and 45, paragraphs 43 and 45. And plaintiffs own evidence again affirms the point, if you look at docket 107, if it's 3 to 7. And importantly, in opposing the other defendants' motions, plaintiffs have stated, and I quote, the finance defendants and not the individual defendants were the direct transferees for all of the consideration in connection with the 2021 share repurchase, including the consideration paid for the WRS shares. And that's at docket 106 at 18.

According to plaintiff's own arguments and their own evidence and their own allegations, then, Lim is not a transferee. Nor is he a beneficiary, and plaintiffs fail to even seriously make that argument. There are no facts supporting the theory that Lim obtained any benefit with respect to the transfer. It's again undermined by the allegations and the evidence showing that the consideration went to Binance, not to Lim. LIM, there's even a flow of funds memo establishing the flow of funds in that fact. And courts are clear that conclusive allegations are insufficient. And it is also clear that merely being an employee of a corporation is insufficient.

And plaintiffs have no other theories with respect to LIM being a beneficiary. So for those two reasons, Your Honor, we would request that the court dismiss counsel one through five against Mr. LIM. Okay, thank you very much. I have no questions. Ms. Spence on behalf of Dingwa Zhao. I'm here with my co-counsel from Decker, Matt Mazur, and Mae Schong. With your honor's permission, Mr. Mazur will be handling our arguments today. Okay, great. Thank you.

Good morning, Your Honor. Matthew Mazur, on behalf of the remaining individual defendant, Dean Hua Shao. People sometimes say last but not least. In this case, I'm going last because Mr. Dinghua Shao really is least. He has no contacts with the United States. that could support personal jurisdiction, not even the minimal context, much less suit related contacts.

And like Mr. Lim, whose lawyer just spoke, he did not receive anything in the allegedly fraudulent transfers. He wasn't an initial transferee, a subsequent transferee or a beneficiary. If I could just focus first on personal jurisdiction, Mr. Zhao, as alleged in the complaint, was an employee at various, finance subsidiaries in Tokyo and Shanghai. In his declaration, he states that he's an Australian

National who resides in Shanghai and has never owned any property or lived or worked in the United States. He was never implicated in any U.S. government investigation. He's not mentioned in the DOJ agreement. He's not mentioned in the CFTC agreement. He's not mentioned in any of the documents that FTX relies on. His role was in product development, not operations, which is the subject of the U.S. government investigations. And in short, Mr. Schault did nothing directed towards the United States that could justify hailing him into a U.S. court. My friends have already covered the point that mere ownership, passive ownership of shares in a U.S. company is not sufficient. also being an employee of a company that had U.S. contacts is not sufficient. The cases that FTX sites involving share ownership all involve either shareholders who are also directors and involved in the operation of companies

or who had received distributions from the companies. Mr. Schau has none of that. Also, Your Honor, I don't think this has been addressed yet, but exercising jurisdiction over Mr. Schau, an individual halfway, around the world in this case would be unreasonable. He was alleged to have been the nominal shareholder of 0.4% of the WRS shares here. He's not needed in this proceeding for plaintiff to get a full recovery if it's justified. The additional parties, including Mr. Scha, here, are simply going to increase the expense not only for Mr. Schault, but also for all parties. Lastly, plaintiff has access to all of FTX's documents. If Mr. Schaugh had had any involvement in FTX beyond being the nominal shareholder,

they have full access, they could have pled it, they could have provided that evidence in response to Mr. Schault's declaration. They have not, and so there's no basis to allow any further proceedings against Mr. Schell. And the rest of what I have to say, I think, Your Honor, really just is probably repetitive of what Mr. Haas just said on behalf of Mr. Lim regarding the fact that he did not receive anything, any benefit, or any consideration. Thank you, and if there's no further questions, I'll sit down. Not at this time. Thank you.

Mr. Shore. Good morning, Your Honor. Chris Shore, on behalf of the FTX Recovery Trust. Let me start out by just dealing with the evidentiary issue. I didn't hear the other side move in their declarations. I'm not taking a position on it, and I don't think your honor is excluding it, but I will touch on the consequences of that and the jurisdictional consequences of that in a little bit. I'd also like to move into evidence the three Chase declarations at docket entry, 108, 115, and 135,

which we offer to satisfy our burden of establishing personal jurisdiction with reasonable particularity. But let me start as to why we're here because we get to issues of plausibility and a plain statement of the case. By 2020, as alleged to the complaint, the finance defendants owned about 20% of FTX trading and about 20% of West Realm Shires, both of which became debtors. By 2020, the allegations are that SBF was already using customer Fiat and crypto to fund Alameda, essentially using very, very. short-term demand obligation capital to fund long-term illiquid investments, all the while racking up billions of dollars in regulatory liabilities and criminal exposure for the enterprise. Given that state of play, the allegation is that SBF had to get its competitor, Binance, and CZ's eyes out of his enterprise. So 16 months prior to the collapse, Alameda, a debtor,

transferred nearly $2 billion of value to buy back worthless stock in fictional companies. West Realm Shires is from the Hobbit. The Binance platform is alleged to be the initial transferee, which we allege and they admit was in the U.S., and those transfers were done pursuant to a series of purchase agreements with the named, nominal, is the named selling parties, digital anchor, the two management. defendants and CZ. Following that sale, FTX and Binance became unaffiliated

competitors and the allegation is that Binance took a more adversarial role to their former partners. Roll forward one year we believe that CZ and Binance had figured out that SBF and Alameda were using customer funds when, how, and to what extent they learned that is subject to discovery. But with that information, Finance, we believe, leaked the story to CoinDesk that FTX was using customer funds. That did cause some disruptions, but FTX continued to prosper and gain U.S. market share. Then came the November 6 tweets, which were designed to cause customer withdrawals from FTX so that

finance could gain those customers in the U.S. And in November 9 tweets, which are alleged to have been designed to strand FTX in the capital markets. cause a run on the FDX platform so that, again, finance could grow its market share in the U.S. The complaint contains dozens of factually supported paragraphs explaining just why the tweets and contractual commitments to fund FTX were false when made and the direct effect that they had on the FTCS's free fall into bankruptcy. Based upon these facts, the FDX Retrievary Trust has asserted Chapter 5 claims seeking to avoid the Alameda transfers and tort claims seeking to redress the published false statements.

defendants collectively contend that none of the claims can survive and in responding let me start first with arbitration because I think your honor has to deal with that first and then tick through the 12b starting with 12b 1 and ending with 12b6 but an overarching theme here is that I think some of the disconnect that's going on and your honor is raising it in your questions is some confusing of the record of some basic bankruptcy concepts like the difference between a corporation, a debtor in possession, and an estate, the difference between a confirmation order and a plan going effective, the difference between a security or an equity and a securities contract as defined in 541. So as I work through the arguments, I think it bears spending some time making sure that we have all of the terminology correct. And that issue comes up right away in arbitration.

There are multiple share repurchase agreements with FTC executives, FTCS trading, and various defendants. No doubt. They contain arbitration provisions. Okay. One defendant, Digital Anchor, has moved to compel arbitration of the fraudulent convenience claims. Two defendants, Lim and Zhao, seek to dismiss the complaint under an unspecified section of Rule 12B by incorporating digital anchors' arguments on arbitration by reference. reference, one defendant, CZ, has not done either and is therefore waived arbitration by failing

to bring it to the court. And the BHL defendants for the first time on reply argue that even though they're not parties to the contracts, they are entitled to have the arbitration provision enforced in their favor as well. Now, to be clear, none of the defendants have argued that the false tweet claims are arbitrable. So we're just talking about the fraudulent conveyance claims. And all of that, who's moving and who isn't moving and where these claims are going to go forward raises a procedural mass or morass, but we don't have to deal with the issues because fraudulent conveyance claims are not arbitrable.

Here's the key. None of the defendants cite any case in which a debtor or successor to a debtor's claims has ever been compelled to arbitrate a Chapter 5 claim. And that's for one specific reason having to do with the difference between a corporation outside of bankruptcy, a corporate debtor in possession, and a corporate debtor's estate. Outside of Chapter 11, a corporate debtor like Alameda has no legal right to bring a fraudulent conveyance action. It has no Chapter 5 claims at all. Those are the rights of the corporation's creditors under various state laws. But the filing of a Chapter 11 case creates an estate and a corporate debtor in possession to control the estate's claims. The code then gives the estate property that did not exist outside of bankruptcy a statutory claim to avoid transfers for the benefit of creditors.

The claim belongs to the estate. Alameda as the trustee has the right as the trustee to seek to recover on that property through. various sections of Chapter 5 and to assert those claims. Now, factually, Alameda, the transferor, is never alleged to have signed any of these agreements, but that doesn't matter because the question is, did the Alameda estate commit itself to arbitrate the fraudulent conveyance claims? So before we ever get to scope arguments, which counsel made, this court is correct. It has the obligation to determine whether or not a valid agreement to arbitrate exists. And here there was no agreement that the estate would bind itself to arbitrate Chapter 5 claims.

So I think – and to be clear, because we're going to come to this in the next section, the trustee, Alameda, commenced this action while it still had an estate. The action was commenced after the entry of the confirmation order, but before the effective date, and whatever existed in that property was then transferred to the FTX Recovery Trust. So the FTX Recovery Trust got those claims free of any obligation to arbitrate. So moving to 12B1, subject matter jurisdiction. And here's another key concept, the difference between entry of a confirmation order and an effective date of a plan.

I think I already ruled on this issue. Yes, you did. I was just going to bring it in my favorite name case, and I don't know why it didn't get named. I'm kind of a big deal, LLC. So, right, this, like that case, was commenced in the period of time between the confirmation hearing and the effective date. Alameda invoked this court's subject matter jurisdiction,

to resolve those claims. That then meant that the court's subject matter jurisdiction was subject to the close next or sorry, the conceivable effects test under Paycord not the close nexus under resorts. And there is no doubt and no argument and no one's made it that the the application by Alameda to recover two billion dollars of funds for its distribution and to creditors does not have a conceivable effect on the estate. Obviously, it would grow the estate by $2 billion. So I think subject matter, the issue of subject matter goes away unless they showed that there was some intent that by moving to the effective date, this court would be ceding its jurisdiction that it had.

That is, Your Honor, had subject matter jurisdiction at the time under the, under the conceivable effects test and somehow evinced an intent that by moving it, it would view it under some different standard, which raises the issue of, well, have we heard the motion to dismiss in the interstices between the confirmation hearing and the effective date, it would be one test, but we need to do it another.

But Your Honor was very clear in the confirmation order, you preserved all jurisdiction with respect to any adversary proceeding, which was moved to the recovery trust. Jurisdiction is what it is. I could say whatever I wanted in that. Right. So I think it's very clear what I've written in the other adversary,

and I don't really think this should be an open issue, but we can move on. Good. So let me pause for a minute on abstention, which is kind of a related, even though Your Honor has subject matter jurisdiction to hear the false tweet claims, you should defer.

I'm happy to tick through the factors. I didn't even hear it today, but I think it fails for two reasons. There is no parallel proceeding to abstain to if this court decides it doesn't want to hear it. They haven't pointed to anything that Your Honor is deferring to. But this action, to be clear, is brought for the benefit of FTC's creditors, all of whom can and often do participate through Zoom, and have over time demonstrated a keen interest in learning what happened here. And this court is best positioned by hearing these claims to allow that process

to continue even though we're past the effective date. All right, so let's go to jurisdiction 12b2, and I'm going to make five points with respect to personal jurisdiction. What conduct counts, two, the consequences of the plea agreements and the consent decrees. Three, the relevant conduct in a fraudulent conveyance case, the jurisdictional consequences of the, I did not do it, declarations submitted by the two management defendants and our request for jurisdictional discovery. And of course, I'm happy to answer any other questions around personal

jurisdiction. But one, let's be clear. When we talk about what conduct counts, it's any conduct in the United States. We're not talking about conduct in Delaware in a bankruptcy adversary proceeding. Your Honor is looking at any conduct by any of the defendants in the United States. Farmington, the plea agreements and the consent decrees. The B.HL defendants, Mr. Lim and CZ are all parties to plea agreements attached to the Chase declarations, which it sounds like your honor is read. In each, the defendants in one way or another admit to conducting activities in the U.S. to attract U.S. citizens to invest in the Binance platform with the intent of growing that

platform in the U.S. and each did so through a maze of entities designed to hide who who was doing what and who was responsible for it. All of that conduct was admitted to be sufficient to expose them to criminal liability in the United States and allow a U.S. federal court to enter orders which provided them with relief from the criminal laws in the United States. In other words, they did enough business in the U.S. to be hailed here to respond to criminal allegations such that they went to a federal court and said, for my conduct in the U.S., I admit to doing the following, and I accept the following consequences for it. None of them have explained

in any way how that conduct does not expose them to civil liability in a U.S. federal court, or how that activity is unconnected to the false tweet claims published in the United States, which as alleged were intended to drive customers away from FTX and onto the Binance platform. So when we go through the traditional test of minimum conducts and conduct related, the false tweak claims are directly related to the allegation that what was happening here was an intent to garner more U.S. customers for the finance platform. And third, none of them have explained why it would offend justice that they respond civilly in the same court system that resolved their criminal liability. In other words, they got a benefit by admitting that they did work in the United States that exposed them to criminal penalties and regulatory penalties in the United States. They can certainly appear and be heard in this court for the civil.

implications of what they did. Third, what do we mean by conduct in the form related to a fraudulent conveyance? When a debtor brings a fraudulent conveyance claim, the only conduct that is relevant by the defendant is the defendant's receipt of the transfer. So when we're talking about specific jurisdiction with respect to the fraudulent conveyance claims, these The conduct was the transfer of money from Alameda, whatever that means, or FTX, whatever that means. Again, that'll be an issue for trial to the finance platform. Where it went from there is obscured. I'll come back to that in the group pleading issues, but there's no question that that's what the allegation is,

and it's not to be resolved at this point. So the only conduct, which is legally relevant to the fraudulent conveyance claims, is to whom was it transferred and where was it transferred, which is the allegation is that that all occurred in the U.S. Now, I can tick through the other allegations in the fraudulent conveyance claims that establish enough to bring it to the United States. But again, these are people who availed themselves of the – at least those who plea – or parties to the plea agreements or the consent degrees availed themselves of the U.S. The question is, is there any other conduct in the transaction related to that conduct? And we have – the transfers were of a U.S. company, West Realm Shires, by shareholders of that U.S. entity. The transfers required Alameda – it's not that – that Alameda – it's not that – Alameda just did this, the transfers required that Alameda meant BUSD or have BUSD

minted for use as consideration in the transaction and negotiations occurred in the U.S. It's not just that there was U.S. Council, U.S. Council was involved in communications with the defendants in connection with the share of repurchases. Let me come to the management defendant declarations in the government defendant declarations and their implication to personal jurisdiction. If Your Honor finds that Mr. Zhao didn't do or admit anything in the U.S., right, he's really the one party outside those pleas and consent decrees that received anything in the transfers, and find that somehow, whether it's a nominal party or an agent or a conduit or anything else,

He did submit a declaration. And in that declaration, he alleges, and you just heard counsel say, I'm just the nominal party. I didn't really actually get it. You should dismiss the case because I am just the nominal party. That declaration has a jurisdictional consequence. FRCP 12D says the result of presenting matters outside the pleadings. If on a motion under Rule 12B6 or 12C matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.

Here, Mr. Zhao and Mr. Lim moved under 12B6 saying, you don't have a claim against me because I was just a nominal transferee. And he presented the declaration to the court, and the court has not excluded it. that means that it's two consequences. Rule, their motions now are Rule 56 motions, right? And under Rule 56D, which we now invoke, we are entitled to discovery to determine just how nominal this was. And by seeking affirmative relief, he's waived his jurisdictional defense. You can't come into a court and ask the court for affirmative relief

and say if the court doesn't grant me affirmative relief, you have no jurisdiction over me. You're allowed to plead in the alternative, but you can't submit a Rule 56 motion and then claim that the court does not have personal jurisdiction. The last point on the jurisdictional defenses and the need for jurisdictional discovery. I don't quite understand the argument

that we would not be entitled to any jurisdictional discovery if Your Honor needs more facts in order to say that we've met our burden, of establishing personal jurisdiction. But that would include deposing the two management declarants to just determine whether their statements are true. Once the stay on discovery that Your Honor put in place is lifted, we are entitled to find out just what contacts they had in the U.S. The connection between the tweets and the intent to attract U.S. customers. If they want to say that this had nothing to do with their ongoing fraud they were committing in the United States,

States, they're going to have to establish that. The connections between the underlying fraud of SBF and the defendant's agreement to exit in the share repurchases, the defendant's knowledge of the U.S. activities necessary to complete the repurchases, the connections between the defendant's activities in the U.S. and their desire to exit WRS and FTX trading. So I don't think we need it, but if Your Honor were to find it. that based upon the allegations of the complaint and all the materials that were submitted in the Chase declarations, there isn't enough to establish personal jurisdiction.

I think we are entitled to jurisdictional discovery. Let me turn to 12 before. This is raised by only one defendant, CZ, with this argument that somehow service was improper. this one is easy. If Your Honor looks at docket entry 82, which is your approval of the party's stipulation, in paragraph two, counsel stipulated that CZ, quote, waives service through the means articulated in the service plan and accepted service through his counsel in this adversary proceeding.

So they have, regardless of how we attempted to serve, whether prior, whether prior to your Honor's order in connection with your prior's order, they stipulated that they accepted service, or he accepted service in this case. All right, let me get to the 12B6 claims, and there's a whole series of 12b6 arguments that are raised, all of which we addressed in the briefing. I'm not going to go through every issue that was raised. I'll try to focus on the ones that were brought to your honor's attention today. but if you have questions about any of the 12b6 arguments, I'm again happy to answer them.

Let's start with group pleading. All of the defendants in one way or another complain that we don't specify exactly which person or entity received a transfer or made a tweet. If you look at what we've said about the consent decrees, the consent decrees point out that defendant finance holdings and at least certain finance affiliates, including finance IE and finance services, that's the finance defendants, have co-mingled funds, relied on shared technical infrastructure, and engaged activities to collectively advertise and promote the finance brand.

Binance's reliance on a maze of corporate entities to operate the finance platform is deliberate. It is designed to obscure the ownership control and location of the finance platform. So our allegation that it went to the finance platform, And some of the defendants received it puts them on notice as to what's going to happen. And, of course, two of the defendants have come in and said, I didn't receive anything. So they know the claim has been made against them. But I think in light of your Honor's ruling in the Zohar cases on group pleading, where you get an allegation and not just an allegation, admissions by the other side,

that we've got a web of entities and there are things moving around, the failure to specify exactly which entity received what off the Binance platform as a either direct transferee or a 550 defendant is premature at this point. I think we do need to get into discovery on that. And if it turns out that no, someone didn't receive anything, we're not going to pursue a fraudulent conveyance claim against them. But it is going to bind all the other defendants from saying that, in fact, that defendant did receive.

You talk very fast, and I'm trying to process it. No, no, sorry. So, and there's a lot of group pleading in every adversary I have on this case, and so it's, it's very cumbersome to parse through what is a proper group pleading and what is not. So it's very clear to me that it seems like group pleading occurred with this Binance definition. And when I look at the definition of Binance, it doesn't include all the defendants. So what do I make of that?

Because the individual defendants are not included in the definition of finance. So I understand, and I can wrap my head around because of the consent. I call it the consents, but the plea agreements, I guess, why you would agree plea finance and the entities included in that definition of finance. I understand the anchor is going to stand up and say

we weren't party to the consent degrees. But put that issue aside for now. Just focusing on the individuals, maybe not CZ, but the others, are you trying to say today that you group-led the recipients to include these individuals who are not really the focus of the consensus? No, we've, with respect to the fraudulent conveyance claims, we have specifically pleaded who the transferees were and where the transferees went. The defense that, well, we were just a nominal party and we did not receive anything is one that does not need to be resolved at this point.

They can handle it through the transfer to the Binance platform. I'm just not right now. Well, it says on the complaint, Binance received it. So, and the defined term of Binance does not include all these defendants. No, I think the actual allegation, as laid out in the complaint, lists the transfer. and the transferee and the transferees are listed individually the question is to some extent whether they are 548 defendants or 550 defendants as a subsequent transferee and what happened to the funds when they went on the platform and things

like that we're just not allegations regarding that I apologize because I read the complaint and there's the way I read the complaint it just went to finance and finance is a defined term and so Are there allegations that would give rise to an inference that it went further to other folks? The allegation, no, that's fine. I know there's allegations that CZ controlled and that maybe there's some alter ego issues there. Well, that's, that's part of, what about everybody else? That's part, well, let's, again, I'm going to separate out the, the false tweet claims,

and I'm going to come to why that's group pled in one respect and the fraudulent conveyance claims. And to be clear, my understanding of the state of home. the state law claims, let's just say. It says it's against Binance and CZ. My impression was that unless you're in the defined term, Binance and your CZ, you're not subject to those false claims. Right, and that's why, that's why I'm saying, Binance is a term.

Binance is a term. Look, if the issue is one of pleading deficiency, I thought in paragraph 38, where we define the specific agreements pursuant, to which they were transferred, that was sufficient to put the defendants on notice that they were transferees. And obviously, since this is really a notice issue, the defendants perceived it that way because the individual defendants have come forward and said, Your Honor, I just want to be clear, I didn't receive the transfer. So they were on notice that we were seeking

to get their transfer. But that's something that could be fixed with pleading. Because for the purpose of the fraudulent conveyance allegations, we see the money moving to the Binance platform and under the agreements that money should have moved that way whether it ultimately moved that way is subject to further inquiry maybe CZ took all of it for himself maybe you know digital anchor took it and did something with it we can't see on that side of the transaction so so we're and by the way just to be clear we're also the successor to an estate which doesn't have access to the individuals who participated

in the transaction in any meaningful way so when we talk about notice pleading that you know there is a general rule that we get a little more lenience on but I that's something I could fix the finance with respect to the false tweet claims the problem is is if you look for example at the I think it's the November the first of the the November 6th tweet at 1047 a.m. As part of Binance's exit from FTX last year, Binance received roughly $2.1 billion.

We have decided to liquidate any remaining FTT on our books. First of all, who's speaking there? When it comes off the Binance platform, Binance tweet, who's authorized that, who has accepted, it. But if you followed the share repurchase agreements, and that's what happened, what this says, is part of the fraudulent conveyance defendants' exit from FTX last year, the transferees received roughly $2.1 billion, and they have decided to liquidate any remaining FTT on their books. I don't know. I just can't see on the other side of that veil who's there. And when we're

talking about notice pleading, the parties are on notice. at least of having been named here, that they are. I don't anticipate that the two individual defendants authorized that tweet on their behalf, but that's one interpretation of the tweet is that the individuals are saying we are liquidating our positions. We're authorized to have him say that. And I apologize, maybe talking past each other. The individual defendants that you're referencing are not defendants. I know.

I'm just saying. We have not named them as defendants on the false tweet claims, but the reason we're using Binance there is because that's the terminology they're using in the tweets, whether it's coming off of CZ's personal account or the Binance account. Got it. And so finally, with respect to, no, let's go back. So I guess finally on this group pleading point, if Your Honor is concerned that you need specific allegations that say each of the named defendants on the first. fraudulent conveyance claims was named as a transferor and upon information and belief they received the consideration I don't have a problem with that I think it's in the complaint and as I said I think they certainly have noticed of that

because if they didn't they wouldn't be here arguing that they didn't receive anything issue two on on 12b6 inadequate specificity around the fraudulent conveyance claims each of the defendants makes a combination of a rule 7,008 argument and a plausibility plausibility challenge to both the intentional and constructive fraudulent conveyance claims. First, with respect to intentional fraud, we plead the fraud explicitly. SBF engaged in the share repurchase to hide his misuse of customer funds from an existing shareholder and competitor and to project confidence to the market.

In so doing, he intended to hinder delay and defraud the many customers who left their fiat and crypto on the platform, and those who sub-exempts. he subsequently attracted. All of that is buttressed with citations to contemporaneous documents and press reports and testimony, the credibility of which the court's going to have to determine a trial. As this court recently held in the Goodly case and the Patel case, his SBF's attempt to hide his fraud by entering into transactions with the intent to hide that fraud is sufficient to,

meet the pleading standard, even heightened under Rule 9. Second, some of the defendants argue that the allegation of insolvency at the time of the share repurchase is implausible, one of them putting 16 months in bold and italics several times in the papers. Obviously, solvency is an issue for the experts at trial, and will be clear at that time that by 2021, SBF had misappropriated so much customer fiat and crypto that the burgeoning regulatory liabilities alone, which ended up getting liquidated at around $10 billion, had sunk FTX. For now, defendants can preserve for trial their novel argument that SBF was the first person ever to run a solvent Ponsie scheme. Third, a few defendants challenged the plausibility of the allegations that FTX stock and FTT were worthless because SBF sold the stock later or did this in an arm's-length transaction.

This is a variant of the last point with the basic contention that the Ponzi scheme wasn't insolvent because the mastermind could go out and sell additional interests in the Ponzi scheme. I want to be clear. Yeah. There are no allegations as like a Ponzi scheme. No. I want to be careful because I don't want to get this Ponzi scheme assumption, presumption. I think that's – I don't want to deal with that, and it sounds like I don't have to. You know, I'm not.

I'm just using that as a rhetorical device. point out that the mere fact that somebody can sell stock in a fictional entity like West Realm Shires to the market without making an adequate disclosure is not relevant at the pleading stage. They can come in and try to establish that a hypothetical arm length buyer and seller with equal access to information would have transacted at that price but we're also entitled to prove to your honor that had SBF told everybody what he was doing like he was doing at the time he was seeking rescue finance nobody would have been buying equity in FTX trading

or Western Rome Shars pleading issue number three the implausible tweet claims one defendant CZ argues that the notion that FTX was harmed by the tweets fails Iqbal because a fraudulent enterprise can't legally be harmed. Obviously, that's not true and no cases are cited, but I think the argument is that CZ was privileged to say false things about FTX. There are certain true things he said about FDX. That's not disputed. There are also some false things. he said about FTX, but somehow he had some legal privilege to say false things because what the company was doing was wrong. So there's a, I mean, this is such a basic question, and I apologize, but people can say false things. Yeah.

It doesn't arise. It doesn't lead to civil liability. So what is, what are the elements of these claims that would require him that would impose liability for saying false things? Okay. If he said false things with the intent to cause a run on the FDX bank and to then make false claims that he was going to purchase the company in good faith, subject to due diligence, when he had no intent to do that, that caused injury to the corporation or the enterprise. The enterprise was injured in two ways. One, because with the accelerating withdrawals of FTX customer funds, we ended up having the free fall bankruptcy. And because CZ took a right to prevent additional finance, right?

He had a no shop while the LOI was in effect. The parties with whom, as we'll show at trial, SBF was negotiating to get rescue finance disappeared. So if it turns out that he said false things with an intent to cause harm to the corporation, and it was a causative factor in the corporation, whether you call that common law fraud, injurious falsehood, or unjust enrichment, it is a, it is a tort. that is compensable. He didn't owe them a duty, did he?

He did not, if he had not... He's not a controller, he's not a director, officer, controller, sold his shares. He was always a minority holder, so, and he's a competitor, so I'm struggling. He had no obligation, well, I don't know which way the no obligation cuts, that's right. He didn't have to go out to the market and say, I'm going to liquidate FTT in an orderly fit, programmatic orderly fashion over time when in fact he had already liquidated the FTT. He didn't have to do not to say that either. Well, you do have a duty not to spread injurious falsehoods about a competitor

with the intent of driving competition away from your competitor to you. If in fact that has the causative effect of doing exactly what it did, that's what happened here. He posted the tweets, created a run on the bank, prevented any other party from coming in to rescue the enterprise, and the enterprise then filed for bankruptcy in a complete free fall rather than some kind of orderly process, which would have ultimately tried to do two things, match the long-term nature of the anthrable. investment, for example, with the short-term obligation of customer funds and dealing with the regulatory obligations that ultimately got liquidated in the amount of $10 billion, but through the process, we're able to be subordinated to creditor recovers. So the harm arose in the 11 out from November 6th until November 9th? No. It's not, we're not, we're not saying, and I don't want to undertake the

obligation to prove that FTX the enterprise would not have gone into bankruptcy but for this that was a company that was in serious need of reorganization and was going to require the bankruptcy code to assist it in doing that CZ just made the problem infinitely worse because there was no way after what he did to manage the process appropriately parties get calls for redemptions all the The private credit industry is exploding with that right now. It's the motive that you have a problem with? It's no, the motive, well, I have a problem with the tweets.

I have a problem with the motive for the tweets. I have the problem with the damages caused by the tweets. But if we can establish that his motive was to take all the customers away from FTX and destroy a competitor that is compensable. Pleading issue 4, 546E, which we would be. which we just heard about again two defendants have asserted 546 the B HL defendants and NCZ the B HL defendants offer no evidence to support the application other than the allegations of the complaint so we're not even dealing with the the schedules that are cited by CZ so that's that's an issue for them that has to has to wait factual development

But what you heard counsel say is look at the schedules, Your Honor, that show that Alameda owned equity securities in excess of $100 million. That's not the test. The test is whether the debt – whether the financial participant had securities contracts. Securities contracts are not naked equity positions. They are a very defined series of contracts about securities. And as far as we can tell, no court has ever had. held that, much less at the pleading stage, that if a debtor holds shares of equity in a company that exceed $100 million, Chapter 5 is curtailed, and that's going to obviously

revolutionize any holding company bankruptcy, because if a holding company owns $100 million of non-debtor subsidiaries, the argument would be that they cannot be a proper plaintiff in a securities lawsuit. Pleading issue number five, I wasn't planning on dealing with extraterritoriality, but given the time spent on it by CZ's counsel, let me address it quickly. In that argument and in the briefs, counsel cites no case in this district or at the Third Circuit, which holds that Chapter 5 is not intended by Congress to have extraterritorial effect. Rather, the cases we cite at paragraphs 56, 57, and 58 of our opposition, docket 134, that have looked at the intent issue have made clear that Congress did intent. Let's focus on what the statute is.

As the Supreme Court keeps telling us, Chapter 11 is a comprehensive statutory scheme, which needs to be read together. You cannot look at a provision of the code. in isolation. It all needs to be held together. And the courts that have looked at this issue, including Judge Sanchi, long after RJR and Abisco, have said that 1334, 541, 548, 549, 550, none of that makes sense if the court is given worldwide jurisdiction over the assets of the debtor, but no power to bring those assets back in a voidable transaction. Because if the transaction is voided, it's the debtor's property.

And the distinction was trying to be made between, well, the debtor transfer it, so it's no longer the debtor's property. Think about what it means for 549. The debtor, this court has worldwide jurisdiction over a debtor's assets. The debtor takes assets in France and sends it to an insider in Italy. The argument that's being made is because 549 doesn't say the court has the power. to avoid a transfer of property outside the U.S., that occurs wholly outside the U.S., you can't recover it.

So the courts have come to, the statute doesn't hold together if what you want to say is Congress intended 548, for example, or 550 to say that the trustee may avoid a transaction, but can only do so if that if that transaction occurred in the United States. So whether this court says the allegations of the complaint are that the transfer occurred in the U.S. or if they say it occurred wholly outside of the U.S., the Chapter 5 applies to that transfer. 549 addresses 8 talks about property of the debtor.

There would be a distinction, correct? There would be a distinction, but to say that by using the word debtor, in one instance and estate and another, that's the curative language which causes you to say that 549 can be applied extraterritorially and 548 can't? Yes, I'm saying that despite your disbelief. Okay, no, I'm just, no. There's a distinction between the definition of property of the estate and property of the debtor. Right, but the question is, in looking at the comprehensive statutory scheme, Are we, is Congress sufficiently evinced its intent that the code, the code apply extraterritorially?

I think the answer is yes, the code applies extraterritorially. The question then is, do we want to go through the comprehensive statutory scheme and say each provision of the code that relates to a right of a debtor must say that it applies only in the U.S. or is intended to apply extraterritorially for the court to take an action. And I'm saying that the right frame is the code, not the individual sections. And I'm saying it would seem to me to be if Congress intended to restrict the application of one provision. That is to make 549 apply worldwide, but 548 to apply only to transfers which occurred inside the territorial U.S. That's not the way that it would do it. Because it's really what, and Your Honor was asking the questions, how would Congress do it?

Congress wouldn't try to draw that distinction, it seems to me, by using the difference between estate and debtor, in that instance rather than making an explicit statement that 548 only applies within the bounds of the United States. But I have to respect Congress's use of different words. And so the issue really, I think, is the line of cases that discuss it's just a matter of timing. because in 541, there's a distinction between property as of the position date and property that brought in after the fact. And so I guess my question is why is it appropriate to complete the two? Why is it just a matter of timing? Because you're given world, well, let's work through 1334, which gives you exclusive worldwide jurisdiction over property estate and 548, which gives the right, which gives the right to avoid.

and it makes the right to avoid an action a transfer property of the estate, which may be brought by the trustee. The argument is that what Congress needed to do there was say, but if the debtor is trying to take the position that the transaction is voided and the property is returned, right? What is the consequence of a fraudulent conveyance? You need to get damages or you can void the transaction. If the transaction was void, the transfer of the property never happened. The property was property of the debtor. And so to say that the court doesn't have the power to only has the power to return to U.S. borders,

that which was at the time the suit was initiated, property of the estate, but if it later determines that it is still property of the estate and was property of the estate because the transaction was voided, it doesn't have the power. It just seems. Well, it's avoided. There's a difference. Right. And it's treated then as if.

transaction that has left the estate, which is recognized by 541 in its discussion of how property of the debtor, once recovered, becomes property of the estate. So I think we have to respect the difference between avoided and recovered and avoided. I'm not saying that we don't need to respect those differences, but the issue is not what those differences mean as much is what is Congress evincing, right? Congress can handle this with respect to all their statutes. This statute is intended to apply extraterritorial in all respects. That's not how Congress does it and that's not what happens in the cases. There is a statutory interpretation that has to take place, first instance, at the trial court level in which the court tries to

divine what Congress was thinking based upon the, in this case, the comprehensive statutory scheme. I just think trying to parse what it intended that it would apply in 549 but not apply in 548 and would apply in 550 you could trace against subsequent transferees but the moment the transfer leaves the United States which is I think how Judge Gross dealt with it and saying it doesn't make sense that that also doesn't make any sense. The purpose of 545 50 is you trace the money to the ultimate transferee if Congress's point was provided that the ultimate transferee is within the United States, right?

Because in that instance where 550 claim, if it's brought against somebody in the United States, there's not an extraterritorial issue. Or if it all occurred in the United States, there's not an extraterritorial issue. But 550 makes no sense. if the court's inquiry into avoidance stops at the boarders. And that's so, so it's not an easy process, like everything else in the code, it would be nice if Congress got together and told us what it meant, but your honor has to try to piece it together.

And I haven't seen a court yet that has pieced it together that has said the intent of Congress with respect to the code is that chapter five of the code only applies within the board. of the United States. One last pleading issue is this issue that the statute of limitation passed on the false tweet claims. There's no discussion of Section 108 of the code. These happened days before the filing. The claim was brought while the estate was still in effect.

So I don't know how the statute of limitations apply. With respect to leave to amend, I've addressed that with Your Honor. If there are additional – I think we've pleaded enough for personal jurisdiction, particularly with respect to the parties to the consent decrees and plea agreements. The – but if Your Honor needs additional specificity, we've asked for leave, and I think we're entitled to have that freely given. So I don't know whether there are other issues Your Honor wants me to address, but that's what I have. No, I think you've covered it. Thank you very much. Did you reserve time for reply? Yes, Your Honor.

Okay. Yes, we did. Great. Would you like to proceed, Your Honor? If you would like a break, I'm happy to take a short break, otherwise we can get right to it. I think we wouldn't mind that. A break? Okay.

How much would you like? Just five minutes. Five minutes? Okay, great. Thank you. Thank you. Are we ready to proceed? Yes, Your Honor.

My colleagues on this side have graciously agreed to allow me to go first just for two very small points I'd like to raise on behalf of the defendant, Deng Hua Shao. Okay. You know, I sat and listened to what sounded like a clever argument about a submission of a declaration going outside the four corners of the complaint on Rule 12b-6 and therefore to be converted to a summary judgment motion.

But I went back and looked at the actual declaration and first of all, it's very clear it says that it's in support of a motion to dismiss for lack of personal jurisdiction. It has nothing to do with the 12 motion. And I heard somehow that somewhere in the declaration it said that Mr. Schau did not receive anything. In fact, it's not in the declaration.

He does not say in the declaration anything about that. Where that comes from is the argument and the four corners of the complaint, which say no way, that Mr. Schau received anything in the fraudulent transfers. And the notion that FTX should be able to go and add the words upon information and belief is kind of shocking.

There's no information that they have. They've said it's behind the veil. They have no good faith belief. And so the claims should simply be dismissed because within the four corners of their own complaint, they allege that the transfers went to Binance and they do not allege that anything or any benefit went to Mr. Scha.

Okay, thank you. Thank you. Your Honor, Walter Hawes on behalf of Samuel Lim, the other individual defendant, and I would just make the point that Mr. Lim's declaration is the same, and so those same arguments apply to Mr. Linley. Thank you. Thank you. Your Honor, the question of arbitration clauses, what's critical here is whether or not

there are two parties and whether or not there's an agreement. And the plaintiff here is the successor in interest and the inheritor of the rights and obligations of the party that signed the arbitration agreement. So both parties signed an agreement, there's no dispute that there's an arbitration clause in that agreement, their own brief at paragraph 55 does not dispute that they are the successor in interest. Given that there is an arbitration agreement,

all other questions about whether the claims here apply, whether these claims are arbitrable under that agreement, are questions of arbitrability. And I just want to make sure that's clear, and not twisted to put under a different label. Questions of arbitrability go to the arbitration panel. And the Shine case made very, very clear that when you have an arbitration agreement,

even if you think that the arbitration claim is wholly groundless, that question is properly brought before the arbitration panel. And I acknowledge that this is a unique circumstance. There are cases that deal with post-confirmation disputes before, but the tension here between the arbitration policies and the bankruptcy policies are things that need to be resolved by the arbitration panel and far from groundless the the notion that there can be

attention and whether or not the bankruptcy policy precludes arbitration clauses has been addressed before we cited the case from the District of New Jersey in re microbuilt in our brief on page four and in that in that case the court held that the mere fact that the claim arise under the bankruptcy code does not preclude application of the arbitration mandate so this question of how these two policies intersect and you know what results from that is an open question far from groundless and that is a question of arbitrability that must go to the panel thank you your honor

may it please the court two additional points the first point is regarding a point your honor discussed with me when I was up earlier about the plea agreement attached to plaintiff's opposition. I heard your honor to say that the plea agreement established that Binance had a US platform. And I just want to be clear that while we dispute the relevance of the plea agreement here, it's important to note that in the plea agreement itself,

it never says that Binance had a US platform. The plea agreement at page seven, so this is docket item 135 is the declaration that attaches the plea agreement, and it's page seven. Seven to the plea agreement at line three says that Binance was a foreign located MSB, money services business. It also says that Binance.com was an online exchange. That's that line 26.

So I just want to make it clear for the record that the plea agreement did not suggest that finance had a U.S.-based platform. Finally, the second issue I'd like to raise is that plaintiffs seem to invert the presumption against extraterritoriality. This is what they finished discussing. They asked you to presume that the whole code applies worldwide unless otherwise stated within the code. That's what I heard plaintiffs counsel to say.

And that's not how a presumption against something works. You don't presume it applies everywhere unless so stated. And that's clear in RJ Reynolds and replete in other case law governing this. if Congress intended the whole code to apply worldwide, it wouldn't have felt it necessary to distinguish 541, and it knew how to do so. And that's the holding an RJR specifically

that Congress knows how to express its intent, and the RJR really guides courts to say you can't start looking outside of the clearly expressed intent inside the statute. Thank you, Your Honor. Thank you. Your Honor, Edward Moss, for the record, for the BHL defendants,

I'll be very brief. There were a lot of things I heard that were inaccurate. Things they said were not in briefs that are in briefs, things they said we're in the complaint that are not in the complaint. But let me just cover a couple, just for the record. I heard a comment that the BHL defendants did not argue arbitration until reply. That's incorrect. Docket number 67, our opening brief, footnote 8, paragraph 13.

we adopt and incorporate the arbitration arguments by digital anchor in our opening group. On the personal jurisdiction point with respect to the transfer claims, Council just talked about the platform. I heard a lot of discussion about, well, there are two things that are relevant to personal jurisdiction in a fraudulent conveyance claim. To whom and where. That's what counsel said. Kind of abandoned all the other stuff about the lawyers and everything and said,

to whom and where. To whom foreign transferes, all alleged to be foreign transferees. And then the where? And he said, well, we allege that the money went to the U.S. finance platform in the complaint, and it's in our brief. It's not. I just read pages 13 to 20 of their opposition brief. That was not a basis for jurisdiction alleged at all.

And the reason it was not a basis for jurisdiction is because, Because what Ms. McNight said, the consent decree did not say that the BHL Binance platform was located in the U.S. It is an outside U.S. platform operated by an outside U.S. entity. What it said was that there were U.S. customers allowed to reach that platform. But that doesn't say anything about where the money, and this is the issue that they focus on, did the money go. The money did not go onto some U.S.-based platform. That is the basis for jurisdiction that was argued it's not in the complaint, it's not in the brief, and it's the reason I would submit it's not there is because it's wrong. Finally on the tweets, I think

Your Honor was correct when you said, well you can say you can say false things, right, without a duty. But what we didn't focus on was the falsity at all. I mean these were These were not adequately alleged to be false. It was we have a non-binding agreement, a non-binding look, it's subject to due diligence, and we could pull out at any time. And so I think the hook for trying to put Binance or the HL entities and CZ onto this was,

well, you planted the Coinbase article. You must have leaked the Coinbase article, because if the Coinbase article came out first, the tweets are completely innocuous because they were just piggybacking off what was already out there in the market. And I'll note that although counsel framed the allegations in the complaint as, you know, centering on, well, there was this leak. They don't even have the – they don't even allege it in the complaint.

In paragraph 55, they say, within FTX, it was strongly suspected that Binance and Ja were involved in the leak. I mean, they don't even allege that this was the league because they don't have, it's conclusive. It's entirely speculative as are everything really about the so-called false tweets claims. That's all I have, Your Honor. Thank you. Anything else from the move-ins? We heard on one thing because there was some confusion created about what we're doing on personal jurisdiction with respect to the platform.

Okay. Okay. The Washington State plea agreement. which was entered, says that as part of a deliberate and calculated effort to profit from the U.S. market without implementing controls required by law, Binance operated a cryptocurrency exchange wholly or substantial part in the United States over which trillions of dollars of transactions were conducted. That satisfies our burden of giving you a plausible basis for personal jurisdiction. on that if they want to show later that that that platform what actually happened with this transaction is there's a computer sitting somewhere else okay but that's that's not what they've that's not what they've done i think at the end of the that's not the relevant test anyway but but the allegation that is made supported right the allegation is made supported by information and belief and then they're supporting evidence out of their own mouths with respect to that if they want to draw a distinction that the washington state plea agreement didn't have this finance entity or didn't have that

finance entity that's also something they can deal with at a later date that's all I have it your honor all right well thank you all very much I will take this matter under advisement appreciate all the thorough briefing and time you devoted to this today I wish you safe travels back to your respective homes and offices and with that we're adjourned thank you