American court hearing recordings and interviews - Listen to the FTX bankruptcy hearing of 6/18/26 re: reduction of the disputed claims reserve

Episode Date: June 19, 2026

filed on the FTX bankruptcy docket as docket number 35836 (a PDF file with an embedded mp3 file)

Good to see you. Please be seated. Mr. Glockstein. Good morning, Your Honor. Good morning. Brian Glockstein, Sullivan, and Cromwell on behalf of the F.TX Recovery Trust. Your Honor, we only have one matter going forward this morning on our omnibus hearing agenda. There is the trust's third notice proposed reduction of disputed claims reserve amount. We are here to address our request to reduce the dispute of claims deserved by $600 million, down to $1.7,000.

to $1.78 billion of continuing disputed claims reserve. This was noticed today, Your Honor, for hearing in accordance with the court's December 2024 order that established the disputed claims reserve, which provides that once an objection to the request is filed, and one was filed here by Argent Lundation Trust. The matter would be noticed for hearing. In support of the request,

the trust submitted the declaration of Steve P. Covrick filed a docket number 35723. We respectfully request that Mr. Covrick's declaration be admitted into evidence at this time. Mr. Covrick is here in the courtroom today and available for cross-examination. Okay. Well let me ask, does anyone object to the omission of the declaration? No objection. Okay, do you seek to cross-examine the witness? We do not. Okay, it's omitted. Thank you, Your Honor. Your Honor, since this court entered the second reserve reduction order the FTX Recovery Trust has continued its claims

reconciliation allowance and expungement work as is of course required to do in pursuit of its objective to conclude the administration of these cases as detailed in mr. Covrick's declaration since the last reduction order was entered approximately three hundred million dollars in disputed claims have become allowed and another approximately three hundred million in claims have been expunged or modified as a result the FTX Recovery Trust is today seeking to reduce the disputed claims reserve by that net reduction to the disputed claims pool of six hundred million dollars this we submit should not be

controversial and would basically maintain the existing relative aggregate reserve for the remaining disputed claims with all disputed claims continuing to have recourse to the entirety of the disputed claims reserve The reserve amount purposefully takes into account all remaining claims, including all unliquidated claims that remain outstanding. No claim was ignored in sizing the reserve, but in accordance with the terms of the aggregate disputed claims reserve established by order of this court, there are no specific individual claim reserves. That's how the reserve is structured, and this was something that was determined long ago. Notably, as stated by Mr. Kovrick in his now unrefuted testimony, as I noted, all claims have recourse to the entirety of what will be the $1.78 billion reserve.

And the revised reserve amount is intentionally conservative and includes approximately $900 million of disputed claims over and above the amounts that the FTX Recovery Trust projects will, ultimately become allowed claims. That is buffer in the reserve in case we're wrong in our projections. That's a very large number, Your Honor. Mr. Kovrick's testimony is that the trust determined in its business judgment that the requested reduction and the revised reserve of 1.78 billion is reasonable and strikes the appropriate balance of maintaining a reserve while making distribution to creditors. Silvergate could have challenged Mr. Kovirks' testimony or offer some contrary evidence that they have not. not done so. The only evidence before the court today is the testimony from the person closest

to this process on behalf of the trust, Mr. Covert, and it now stands unrefuted. The Argent liquidation trust is nonetheless objecting to the reduction in what appears to be some kind of strategic maneuver, despite Silvergate having stood silent for years as this court approved the FTX debtor's plan, authorized the establishment of an aggregated disputed claims reserve in accordance with section 8.5 of the confirmed plan and authorize two previous reductions in the reserve amount. Arjun seeks some undefined increase in the requested reduced reserve amount. This attempt to hijack the orderly claims administration by the FTX Recovery Trust that we are undertaking for the

benefit of legitimate creditors should be swiftly rejected. The premise of the Silvergate claims as now articulated by Argent is absurd that financial responsibility for Silvergate's own mismanagement and regulatory compliance failure should be shifted to the FTX Recovery Trust creditors on that theory which is inconsistent with representations made to the court in its own Chapter 11 case Argent now asserts that the proposed revised reserve is insufficient to protect their claims this is unsubstantiated and we submit has no basis at all.

The purposes of the matter before the court today, which is limited, as Mr. Kovrick has now testified, the aggregate reserve amount more than adequately protects the Silvergate claims if any of the Silbergate disputed claims were to become allowed at some point in the future. While the Silvergate claims will be addressed in due course, the existing record belies any argument from Arjun that those claims have any validity or could ever be allowed in amounts so large as to render the requested reserve amount unreasonable. To be clear, Your Honor, the trust expects that ultimately these claims will be disallowed

in their entirety. Arjun insists that the public record of Sam Bankman's Freed's criminal trial plus the guilty pleas from other FTX insiders established that FTX committed fraud. In fact, the objection that was submitted as before the court today further solidifies what is evident from the Silvergate proofs of claim. Silvergay's claims are entirely premised on the fact that STX insiders committed fraud. As a result, as this Court has repeatedly acknowledged and enforced, all predator claims premised on the purported fraud or misconduct of FTX and its insiders were conclusively settled

and released through the global settlement contained in Section 5.2 of the plan. time to challenge that settlement or its inclusion in the plan passed long ago. With Silvergate having the opportunity to object, did not do so. I submit, Your Honor, there is no clearer example of claims barred by the plan's global settlement than those set forth in Silvergate's proof of claim and detailed in Argent's objection. Well, the court will consider the merits of that argument in due course. It is an important consideration that there are this positive threshold defenses that would result, in the disallowance of Silvergate's claims entirely, which reinforces that the revised reserve amount with $900 million of excess beyond what is currently projected to become allowed is more than sufficient.

Beyond that, even if the global settlement was somehow not this positive, the FTX Recovery Trust has numerous strong defenses to the merits of the speculative Silvergate claims. While those defenses are, of course, still being developed and will be presented in full and will be presented in full and at the appropriate time, our responsive papers provide an overview of the breadth of the different independent bases that are complete defenses to each of the Silvergate claims. Those claims suffer from serious causation and damages deficiencies, amongst other bars. In short, Your Honor, the Silvergate claims, like all other claims, have been considered in sizing the disputed claims reserve amount. The FTX Recovery Trust has provided evidence through Mr. Kovrik that the request of the request

reduction is reasonable and that all disputed claims are adequately protected by the aggregate reserve including the $900 million of cushion currently being conservatively maintained. Argent's request that the trust maintain an undefined larger reserve is neither reasonable nor necessary and should be rejected. It would only serve to unnecessarily delay a portion of the upcoming distribution to creditors that is currently scheduled for July 31st. But may Your Honor just a quick comment on the joinder to the objection that was filed late yesterday on behalf of creditor Zhao Hao Dong.

That claim, like all disputed customer claims that have not yet been subject to a pending objection, is accounted for in full and scheduled amount in the disputed claims reserve. The trust continues to investigate that claim and continues to have serious concerns about its validity. But it will address those in due course. Of course, the trust has time to continue its investigation and file claims objections through the claims objection deadline, which currently is January of next year and remains subject to further extension. The Joinder offers no evidence or basis to conclude that this creditor's $20 million claim is not protected by the $1.78 billion reserve amount that is requested.

and will be continued to be maintained if the requested reduction is granted today. I'm happy to answer any questions the court has, otherwise I will cede the podium to the objectives. I do not, thank you very much. Thank you, Your Honor. Happy to hear from other parties. Good morning, Your Honor. Good morning. Dan Perry from Milbank on behalf of the Argent Liquidation Trust.

With me at Council Table is Lauren Doyle and Hannah Blazac. I'm also virtually joined by my colleague Andy LeBlanc who's participating in these proceedings remotely he apologizes he could not be here in person but the hearing was scheduled recently and and he's abroad this week. Nice to see you Mr. LeBlanc. Good to see you too your honor and I'll echo Mr. Mary's apologies for my not being there in person but it was unavoidable unfortunately. Your Honor, as you may recall, the Argent liquidation trust is a successor to the estates

of the Silvergate debtors, estates that Your Honor is already quite familiar with. On the effective date of Silvergate's bankruptcy, Silvergate's clauses of action and claims against FTX were transferred to the trust that we now represent. The only question today is whether the FTX recovery trust should be allowed now to reduce the disputed claims reserve by a further $600 million, while the Silvergate claims and many others, as we've seen from the objection, remain pending, unresolved, and unadjudicated, we believe the answer should be no. To date, the allowed general unsecured claims, the category that my client is in, have already recovered 100% or nearly 100% of their claim. We and other whole, other whole, holders of disputed claims should not reach a plan distribution process years from now only after the reserve has been drained and as such the dispute before your honor is much narrower than mr. Glucks Dine makes it sound it's not a merits trial

this is not a claims objection and no one is seeking a ruling on the interpretation of section 5.2 of the plan our ask is modest Pause the reduction long enough for our claims to be adjudicated. We're not asking the court to adjudicate those claims today, and we're not asking the FTX Recovery Trust to put aside more money on account of the Silvergate claims. We're only asking that it not reduced the reserve before these significant claims can be resolved.

That pause is practical. It's not prejudicial. We've proposed with FTX's counsel a coordinated litigation schedule and a procedure to resolve these claims quickly and efficiently. Our initial proposal puts threshold dispositive issues like the 5.2 issue and some of the other issues they raise in their reply before the court in a matter of months. And a short pause here is not prejudice, but a depleted reserve is. Let me just give the court a little bit of context.

The Argent litigation trust was formed a little over two and a half months ago at the end of March, 2026, when Silver Gates' plan went effective. Silver Gates' claims and causes of action against the FTX debtors, those were documented, impulsive claim that were submitted over three years ago in the FTX bankruptcy. were transferred to the trust. Silver Gates bankruptcy was contentious, it was active, and one of the main gating items to confirmation and emergence was how after the claims of Silvergate's creditors were resolved, Silvergate's remaining assets, and particularly these claims would be allocated between Silvergate's two classes of equity holders. So all the parties, at least

in the Silvergate bankruptcy, we're well aware of Silvergate's claims against FTX. FTX was well aware of them as well. There was an extensive proof of claim filed in 2023. It's 19 pages long, and it goes into great detail about those claims. Proof of claim actually invited counsel for FTX to follow up with counsel at the time, cravath with additional questions, requests for documentation, none of that occurred. Since Silvergate's effective date and the formation of the trust, we've moved promptly and in good faith to prosecute these claims. As I noted, we've already reached out to counsel with a process to move this forward quickly

and efficiently. We're committed to that process. We want to do it in a way that's efficient and avoids duplicate costs. The Recovery Trust would not agree to defer or tailor its proposed reduction reserve while that process was being put in place, and that's why we filed our objection. There's a suggestion that we should have objected earlier, but the reserve at that point was several billion dollars, and we didn't believe there was a basis to object earlier.

the cushion is getting very skinny now, and we thought that it was an appropriate time to raise our concerns to the court, so the court was aware of them and everybody else within the process. But I do want to be clear, we don't dispute that FTX has the authority to manage disputed claims reserve, but that authority is not unlimited under the law. in accordance with their plan and the repeated assurances, some of which we heard again, the reserve exists so that disputed claims that later become allowed claims can receive the distributions the plan entitles them to. I want to address Section 5.2 briefly, and if Your Honor's interested, I can go into more depth. Before we get there, can you refresh my recollection? How much were the preferred shares claim in Silvergate?

I thought it was 200. I thought it was 200 was the liquidation preference. Yes, Your Honor. 200 million, I'm told. And how much is the claim that you're seeking in this case? 750 million, Your Honor. Okay. And I do recall a position in Silvergate where the preferred's claim that the equity,

common equity, was out of the money. Yeah, I think, look, from the perspective of prosecuting a claim, you're not limited by the amount of creditor claims you can seek equity value in a claim. And I think we made that point in the proof of claim as well. So if that's the basis of the objection, we're certainly happy to brief that early in the case. No, it was more of an observation to try to reconcile the positions taken in Silvergate with the position taken today on the value of this claim. Understood. The basis for the $750 million number is the losses associated with a fire sale of securities.

There's other smaller aspects of the claim, but that's the main thrust of the damage. Just a word on section 5.2, that's a boilerplate provision. There was a filing put in during the plan process where the other side noted that this is a provision that's common in Delaware cited some other cases. I can give them to your honor if you're curious. We did some looking over the last day, and I identified six more cases that used substantively similar boilerplate language. And the language is important from the perspective

of a claimant that has submitted a proof of claim. It's in consideration of the classification treatment distributions, releases and other benefits provided by the debtors, and it goes on and calls for a release of all claims, interests, and causes of action. And if you follow the definition of causes of action through, that literally captures everything, not just fraud claims, contract claims. So I'd recommend that definition to your honor. Red with the injunction at most.

But it's limited by subject matter qualifiers. It's not any and all causes of action. and it's limited by subject matter qualifiers. I read the subject matter qualifiers as illustrative and not limitations. So my read of 5-2 is, and I think it says this, is in consideration, and then it says all claims, interests and causes of action,

which includes almost everything, against by or among the debtors, including without limitation. So it's an illustrative list. And if what they were intending to do was effectively carve out fraud claims, there are ways to do that that would have been clear and unambiguous. They chose not to do that. that. They could have created a class for fraud claimants that received an allocation of zero. They didn't do any of that. There was nothing in the plan that suggested they intended to

call out fraud claimants and release their claims, expunge them effectively for no value. Again, that would have been possible to do under the plan. They chose not to do it. These are boilerplate provisions. I'm not aware, and we've only had the argument for a day, but I'm not aware of any other case where a court interpreting provisions like 5-2 and 10-8, the injunctive provision, have said, you know, effectively that expunges all fraud claims or any other type of claim. Unfortunately, I've held twice in this case that it did, and you'll have the opportunity to argue again, it seems.

Yeah, I did. It's been taken up on appeal, so we'll – you know, the matter will be – will be fleshed out, it sounds like again. I did read that. I was – this is a little bit dangerous, but I was prepared to distinguish those circumstances, which I do think are a little bit different than this. But, you know, we – it – I do think we need an opportunity to brief it and consider it and make fulsome arguments to Your Honor on it. And as I said, we have a, you know, we'll work with them to come up with the schedule. Has there been a back and forth on that schedule, or is it simply been transmitted to the trust, and there's not been an opportunity for the trust to comment?

Where are you on the schedule? We've made a proposal. We haven't heard back. Oh, okay. But they've indicated that they'll work with us on it, and I don't, I don't, we're not complaining about that. That shouldn't be an issue. The rest of our objection is relatively straightforward. We just want to ensure that the trust retains the ability to satisfy the full amount of our claims.

Just a point on process. The FTX plan does not permit what we would call a general. jeopardizing reduction. And I'll go into that and a point on timing. The timing here is prejudicial because the trust seeks to release value now, while some of the most valuable claims in the case remain unresolved. And so we would urge that a litigation schedule

be put in place and just get to that quickly. rather than put in place a jeopardizing reduction. Section 8.5 of the plan requires that the plan administrator reserve as necessary cash on hand on account of the disputed claims reserve in an amount that would otherwise be distributable to estimated disputed claims pursuant to the plan. The structure only works,

if the reserve is adequate when the later allowed claims get there, obviously. If the reserve is reduced too far today, Argent could prevail on its claims, only to find later that there's not allowed left in the trust. An inequality of distribution among creditors, obviously you can't do that under the code. And I would say at this point the risk is real. The trust here is proposing to reserve by another $600 million. Again, that's a $900 million cushion above the reserve claims. You're getting dangerously close to our claim amount at a point in time

where there's still many other unresolved claims. The fact that the trust did not assign meaning, they really didn't assign any value to Silvergate's claims when it calculated the original disputed claims reserve amount, that matters because again, you know, there was an effort to characterize the claims. These are some of the largest and the largest. and best supported claims in these cases. And the prudent course would be to account for that. Again, it's not just Sam Bankman-Fried's conduct, it's the conduct of the entire senior management team. There was some suggestion in the papers that Silvergate was aware of the conduct

or participated in it. The nature of the conduct alleged were effectively misrepresentations, efforts to, mislead the Silvergate management team, the creation of fake documents, and participation of not just Mr. Bankman-Fried, but lawyers acting on behalf of the company, the creation of Northern Dimension. That's all been a process that's been investigated by Mr. Ray. So a lot of this wrongdoing was set forth in Mr. Ray's report. It also was the subject of an indictment and a criminal trial. And I would say there was an independent investigation on the Silvergate side, which found that the management team was not aware of and not a participant in that fraud. So all of that is to say, we'll have a litigated process.

They can make those arguments, but these are claims that I think are inappropriate to ignore and value at zero. at this point in time. That's doing that with that public record, even before discovery, is, it's not an estimation effort. It's not a, it's not, it's an effort, you know, effectively to build a litigation provision, a litigation position.

So to be clear that that's not, we are, we're not trying to insert ourselves into the reserve methodology. But zero is plainly not appropriate at this point in time. Let me just ask, and you asked, and that was the number that was given? I didn't pick that up from the paper, so if it is in the papers that it was estimated for the purposes of the claims reserve at zero, I did not see that, but was there some discussion? That was in Mr. Covrick's testimony, and that we frankly intended to cross-examine him on that subject, and he disliked.

He disclosed that they were allocating no value. Okay, that's helpful. Thank you. So if your claim is 750 and there's an excess of 900, why are you not adequately protected? So I would say we have a claim of 750. There's additional aspects of that that are not as large. For example, certain of the settlement,

payments paid to regulators were significant. We also have RICO claims that would involve trebling. And I would say the cushion, I think it's uncommon, even if you just limited it to 750, the cushion becomes uncomfortably small, especially when you have a large pool of claims that have not been allowed and are pending. And we did see somebody come in and object, and that sort of underscores the issue for us in terms of the concern.

So we thought this was the appropriate time to raise it. And again, the timing here is not prejudicial. If at the end of the day, they're right, there'll be a distribution. It just we're asking for more time and process so we can address what I think is one of the largest and most significant claims left in the estate. I've done with my prepared remarks. If Your Honor, has any questions. I have to go through. I don't think I have anything at this time that you haven't already answered.

Thank you. Thank you, Your Honor. Good morning, Your Honor. Good morning. Dennis O'Donnell, D.A. Piper. On behalf of Zau Haidong, Mr. Haidong is. an FTX customer who has had a claim pending for some time. He claimed about approximately $20 million.

It was scheduled to $20 million as to which he received confirmation and a unique customer number back in March of 2023. And the problem, Your Honor, and the reason we filed this Joindor and what we see is a plea that raises similar issues is that he's been stuck in the debtor's KYC process ever since. I have a chronology here that runs 15 pages. 15 pages of all his efforts to find his way out of that morass of back and forth with various advisors at the debtors.

There's no end in sight. We did finally engage with the debtors in February of this year, provided very detailed answers to a set of questions and have not heard back. And so we're here because we don't know what other recourse we have, and we don't think we're alone. I mean, there are probably hundreds, many hundreds of creditors out there in the same place. who are essentially lost in this black box with respect to which there's no clear avenue of recourse. If there was, we would have used it before.

This appeared, this presented itself as a potential way of bringing the issue to the court's attention. Because the issue is that, you know, if there was an objection pending, there'd be a process for dealing with. And there'd be a back and a forth in a briefing and a decision. The KYC process is sort of a shadow objection process, whereby issues, questions are raised, and answers are, request and we're effectively briefing what might be an objection down the road but with no clarity as to how it will be decided we we unless we want to make an separate application appears we're appearing today we can't challenge the fact that we've been sitting for four months waiting for an answer so the question

the issue is a process issue more than an issue going to the size of reserve clearly we've been sitting for three years and we've watched ten billion dollars go out the door and we've watched the claim for reserve be reduced. At 20 million, it's less likely that we're at risk. But one never knows. The claims objection deadline at this point is January of next year. It was extended last year, with 27,000 claims still to resolve it could be extended again. And so the question for my client, and I'm glad to resolve this just for my client, is what should we do? Should we just sit in this limbo? Or is there some kind of recourse for us with respect to involving the court in situations that don't appear to have an exit.

You're not, sadly, you're not, I shouldn't say sadly, it is what it is, you are not the first counsel or creditor to come and ask me to expedite this process, but it's the process that's been established by the plan and the trust agreements. So to date, I have not had a remedy. Right, well. But I am, you know, you're entitled to bring what you think is appropriate, and I will consider it at the time. I'm sorry, Your Honor. You are entitled to bring a motion for relief to the extent you think it's appropriate, and you may seek a remedy, but what may I do, given the plan reconciliation process and the ordinary course of that?

One possible producing reports of resolved claims, some kind of reporting with respect to how claims are actually still subject to KYC as part of that. Brian, Mr. Glickstein said earlier that our claim is accounted for in the claims that have yet to make resolve, but there is a subset within there that's stuck in this shadow world that I believe some reporting should be required as to. And I don't think that would do any real damage to the plan structure if that type of reporting reporting was required. Okay.

That's very helpful. Thank you. Thank you, Your Honor. All right. Let me ask if anyone else wishes to be heard before I turn the podium back over to Mr. Glexteine. Okay, I'm not seeing anyone in the courtroom or on Zoom. Your Honor, Brian Glockstein for the FTX Recovery Trust again. I just would like to respond to a few of the points we've heard here from the objectors. The issue before the court today is limited.

I agree to the question of whether we can reduce the reserve. That is the relief that is now being sought. We're seeking to do that by $600 million, as outlined in Mr. Kovrick's testimony that effectively tracks the actual claims resolution since the prior reduction. I want to clarify the record here. Mr. Kovrick, what's in his declaration now is the only evidence that's before the court. It includes an exhibit that shows in detail how the FTCS Recovery Trust has calculated on a class-by-class basis the remaining claims to be reconciled, the amount that's in the reserve for that class of claims,

and the excess to projections, meaning that what we believe is a conservative reserve above what we believe will ultimately become allowed. That's in there because claims could be allowed at a higher amount. It's in there because claims that we believe lack merit are ultimately allowed. And that has been carefully calculated.

on a bottoms up basis, and the only evidence that's unrefuted is Mr. Covrick. Nobody has sought to ask any questions of Mr. Covrick today at this hearing. Mr. Covrick, nowhere in there does Mr. Covrick say that we've attributed no value to the claim. So the representation by Mr. Perry on that is not correct. In fact, what Mr. Covrick would say on this topic, which is consistent with what's in the chart in the reserve, is that, as I said in my opening remarks,

unliquidated claims, just like liquidated claims, have been considered by the trust and are reserved for. And in fact, $230 million approximately in the reserve is there on account of specifically on unliquidated claims. There is no requirement that the face amount of every claim be reserved for in the judgment of the debtor. And what Arden is now suggesting is that, and now we're hearing for the first time that their claim is $750 million.

Their papers that they were filed last week suggested potentially well in excess of that, billions of dollars of claims. Whatever that number might ultimately be, is the trust determination that that claim, like all other claims, is appropriately protected by the aggregate reserve, which is not $900 million, the aggregate reserve, of course, is the $1.7 billion that we are asking if he said at,

that they would have recourse to as all other claims. We are not, this effort has been undertaken in a meticulous fashion to ensure that we keep appropriate reserves so that all allowed claims can be paid in full at the appropriate time, but that money and value is released, so we can make periodic distributions to creditors. And we have, Mr. Ray and the board of the trust

are very focused on ensuring that the value that's come into this estate gets out to creditors in appropriate increments. We have made a number of distributions in this case. We have another one scheduled at the end of July. And to that end, I think I saw a report, and maybe you can remind me. But it was touched upon in council's presentation. Can you walk me through?

I think I had seen that you almost hit the 100% distribution on certain classes. Can you walk me through to the extent you know at the top of your head right now? And I guess my follow-up will be in the next distribution. Are you planning if you've hit 100% a loud amount of the claim? Is this the 9% interest that we're now paying to these folks, or is it going to another class? We will start to pay interest, you're correct, Your Honor, after we will be at 100% par on customer and general and security claims. Okay.

We're starting to get into interest. As the court knows, there's a significant part of the plan recoveries for creditors here is that interest. Right. And we, of course, creditors are looking for that value. Beyond that, we have unpaid claims of governmental and other creditors. we will get to but we're not there yet what we're going to be in for the foreseeable future is distributions to pay that interest component of the claims that have already been paid for so you are not planning on making distributions to lower

class creditors at this point the subordinated governmental entities not a full no I mean it's gonna there's a significant you can imagine your honor on approximately ten billion dollars or so claims the interest component is a significant amount of money that we have not yet to start making distributions on. We will be and we hope and expect to eventually pay all that interest, but that's going to take some time to do it. The interest, yes. The interest, yes. Okay.

All right. Thank you. The, in addition, Your Honor, just a couple of other points. This idea that somehow the $900 million buffer now is getting, you know too close to their asserted now amount of the $750 million claim i submit that it's not the the proper calculation what we what we have seen today is we have unliquidated claims now we're being told maybe it's billions maybe it's 750 million dollars of claims that they want to assert those claims are obviously contested we believe those claims are not ultimately going to be allowed

but the questions before the court is if those claims are ultimately allowed do the debtors do the does the trust have the ability to pay those claims and we submit that certainly the reserve as revised provides more than a value if there's a claim that's going to be allowed the trust of course also has other assets on its balance sheet and I will note in our order we reserve the right in the original order establishing the claim to deserve to increase the claims reserve if we needed to at some point time in the future there are assets on our balance sheet that are unliquidated that have not yet been monetized so this is not simply a melting iceberg but what we have is a reserve that is the the recourse of creditors to the plan the trust continues to look at this and update this on a regular basis we have been making for a case of this magnitude we've been making frequent distributions and and of course in associated with that we've been trying to adjust the reserve as appropriate and so again we've heard a lot of speculation this morning this is the first we're hearing you know Argin is

only the trust was only created when they emerged from bankruptcy relatively recently but the reality is Silvergate filed these claims. Silvergate has competent counsel. Silvergate has been getting notice of these bankruptcy proceedings. If Silvergate had any concerns with any component of anything that's happened here, they had the right to speak up. What Argent does not get to do is come in here with a blank slate, and I understand that counsel is new to this,

and I just want to touch for a second on Section 5.2. The suggestion that Section 5.2 and the global settlement in this plan and some boilerplate provision is simply not reflective of the long and detailed history of this case. The global settlement agreement from which Section 5.2 arises was a central component of the confirmed plan. If Silvergate had a problem or an objection to that settlement of those claims, including fraud claims of these types, they had an obligation, not just an opportunity, but an obligation to object to that at plan confirmation. That's not where they are. They'll have an opportunity, I suppose, to argue that these claims somehow don't fit within its scope.

But what that settlement is and what that provision does is this court has interpreted and opined on on numerous occasions already is not happening on a blank slate. There is law of the case here as to what this settlement is, what it did, what it was intended to do. And so we'll get to that at the appropriate time, but it certainly is factoring into the trust, decision-making process that we don't believe these claims ultimately be allowed. But at the end of the day, the indisputed, unrefuted and indisputed evidence that's before the court shows that the trust believes in its reasonable business judgment that this is an appropriate reserve. What Arjun is now asking is that we just put this all on pause.

And that's not practically, Your Honor. That's not fair to the creditors here. We have an obligation to get distributions out to creditors. We are talking and will continue to, I believe we'll reach an agreement on a litigation schedule, these claims. But the schedule they're proposing, if our threshold motions on the global settlement or anything else are unsuccessful, it contemplates a year or more to resolve these claims on the merits. And the suggestion that we're hearing now is we should just pause any further reduction of the reserve until we litigate those claims. It's certainly not practical for this creditor or any other creditor to come in before your honor and say we should put up a complete halt on any potential reduction of the reserve until we litigate that creditor's individual claims.

They suggest their claims are large. We dispute that, but that in and of itself does not dictate the result to your honor. So I would submit that, again, Mr. Kovrick's testimony on behalf of the trust is unrefuted, makes clear that this is an appropriate reduction, given the development, in the case given the last since the last reduction approximately $600 million of claims resolved coincided with the 600 million we're asking to bring this down and we believe that that value should be available for July 31st upcoming distribution just one final word your honor on mr. O'Donnell's argument of behalf of his client most of what he said really has nothing to do with the distributed claims reserve I don't actually hear an objection

to the reduction of the disputed claims reserve what I hear is is a continuing frustration from Mr. O'Donnell that his client's claim is not yet been adjudicated on the merits. As your honor is well aware, we are working through that process. We are engaged with Mr. O'Donnell on this particular claim as we are with many creditors on others.

As I said earlier, we have concerns about this claim. This isn't simply a KYC issue, but we are getting the information that we believe we need in order to evaluate that claim. And if there is a claim objection to be filed, we will file it in a time that's necessary to do so. But before we do that, we want to work through the process of claims reconciliation, as we're doing with thousands of claims.

So I understand that there are creditors that have frustration, that this process is ongoing and is taking time. That is a function of the number of claims that we're dealing with and the complexity of some of the issues embedded in them. And frankly, what we don't want to do is prematurely file objections, put them on track for attention by the court before we have determined that that's absolutely necessary. And remind me you have 27,000 claims left to reconcile, is that correct? Or have you addressed 20 seconds?

We've certainly, no, we've certainly made progress, I believe the number's a little bit lower than that. I can get an answer. You can give me one second, right? That is correct, right? We have approximately 27,000 or so claims still to be, that remain in a disputed claims category. that we're still working through. Okay. Understood.

Thank you. Okay. Thank you, Your Honor. Thank you. Very briefly, Your Honor? Sure. Two points. On the subject of the valuation of our claim, we were, I just draw your

Honor's attention to paragraph two of their reply. They write, nonetheless, because the Silvergate claims are facially deficient, unliquidated claims, they have not been and do not need to be. accorded any specific value and it goes on I interpreted that to be zero I think it means zero I understand there was a little more nuance offered at the podium on that the other point I want to make is we had proposed the schedule of a year we're happy to go more quickly we thought we wanted to be reasonable this is obviously a dispute where there's a lot of evidentiary material that's both

been produced and testimony that's been given. So we're happy to go more quickly if that's a concern. Do you contemplate adjudicating at the FTX Trust against Silvergate at the same time? I think that that makes the most sense, particularly, you know, oftentimes you have this and you have two separate judges and it's more complicated, but we have the good fortune of having your honor involved in both. Maybe your honor doesn't view it that way, but I think it makes the most sense and is most efficient to do it all at the same time okay all right well I will wait to

receive information on that thank you very briefly as well I hear what mr. Gluckstein says I understand the burden on him as well but one further suggestion is that it could be more triage than appears to be going on here 20 million is a relatively large claim somehow I don't believe there are many claims in that at that level and to the extent that there was way of prioritizing to what they turned their attention it would be helpful Hopefully we can continue to talk and get to some kind of resolution, at least as to the KYC stage. If there's an objection to come, there's an objection to come, but being stuck in KYC is the problem.

We don't know where we are. Thank you. Okay. Well, thank you all very much for the arguments today in the submissions. I, however, believe based on the evidence that has been submitted that the reduction is appropriate, I understand and appreciate Silvergate's argument on this, and perhaps with further reductions, I might start, I might start to feel uncomfortable. However, as we sit here today with the evidence of the $900 million cushion

plus the $230, approximately $230 million worth of funds sitting in the reserve for unliquidated claims, it seems as if you are protected. Now, again, there is no further evidence for me to consider on that issue, such as how many unliquidated claims are trying to seek recovery to the $230 million worth of funds that are sitting in the reserve. I don't know, but maybe this is an issue for the future, but regardless, as I see here today, I think the reduction is appropriate, given the evidence. Mr. O'Donnell, I certainly am sympathetic to you and all the creditors here. it's been a pervasive issue throughout the case that the customers want to return first of their of their alleged cryptocurrency on the exchange and now their payment of their claim on account

of the cryptocurrency. But I have to just simply receive no evidence that this trust is somewhat performing in any manner inappropriately with respect to the claims. And perhaps you may say, well, we just simply don't know, but I don't know. either there is no evidence that the decisions they're making are inappropriate with respect to the claims and the fact is there was 37,000 claims submitted and 27,000 left plus all of the adversary proceedings that they are pursuing to bring assets into the estate and to maximize the claims so it is a tremendous amount of

work and it sounds like to me that they're trying to move forward as expeditiously as possible because the goal here has been to try to return the value to the creditors, and I'm not seeing anything that would contradict that, although there have been individual creditors that have come forth and expressed concerns, but there, it's only been a few, and there's been 37,000 claims, so I must always keep that in perspective. It's been a very minor amount of people that are unhappy. So I continue to encourage you to work with the trust, and hopefully there can be either a point in time where it gets

resolved or it is teed up for my consideration which has been occurring on creditors who have come to me and expressed concerns. The trust has moved forward with those. It's taken a year or so, but we've gotten there. But we're moving forward

on it. So if there's any other tools in your toolbox that you would like to bring as I mentioned to try to expedite your claim resolution, you may do so, but I'm not seeing any that I can exercise at this moment. I certainly haven't memorized the trust documents. With that, I will wait for the order.

There's an order, correct, that will be uploaded on the reduction of the reserve. We will now submit an order, Your Honor. Okay, I appreciate that. If any disputes arise with respect to the meeting and conferring on the litigation schedule with respect to the FTX claim against Silvergate Trust and Silvergate's claim against the FTX trust, please schedule it I'm happy to jump on a remote hearing to discuss it if it can't if it needs to occur outside the omnibus hearing dates but with that I will leave you to the work okay all right we'll stand adjourned thank you thank you your honor