American court hearing recordings and interviews - Listen to the SmartFi March 6, 2026 Utah bankruptcy court hearing re trustee appointment

Episode Date: April 10, 2026

This audio recording is docketed in the Power Block Coin bankruptcy proceedings as docket number 471.

The United States Bankruptcy Court for the District of Utah. The Honorable Kathleen D. Parker presiding is now in session. Glad to save the United States of America in this honorable court. Thank you. Good afternoon, everyone. Call the case. Any matter of Power Block Coin LLC? Counsel.

Your Honor, Brian Rothschild for the debtor of Power Block Coim. Your Honor, Annette Jarvis, Abigail Stone from Greenberg-Tarck for the committee. Your Honor, this is a matter. is Melinda Wilden for the United States trustee. Any other council that wants to make an appearance on the record? Yes, good afternoon, Your Honor. Mark Bloom of Baker-McKenzie on behalf of creditor Mason's song, a member of the creditors committee.

Anyone else? Okay, let me begin by apologizing to all the parties. This motion, I think, is a very polite way of kicking the court's butt into gear. I appreciate it, and I apologize that it has come to that. There's just a little bit of miscommunication between our court and the other court and some things fell through the cracks. So let me let the parties know that this is on the forefront of the court's attention and will be being issued in the near future. So with that in mind, Ms. Domus Jarvis, if you want to address anything, I've read the motions and all the responses, anything else you want to bring to the court's attention. And I think, Your Honor, this is meant to be kind of an enabling.

motion you know in the interim and we understand the court you know is was going to rule and I think the parties agree that a trustee needs to be appointed this is meant to be a motion which allows you know in the interim for this to move forward you know because the the committee has done a tremendous amount of work you know in investigating you know possible litigation and and And as you know, when you look at what is asked for, at the relief, the relief requested is that to allow the committee to go forward to bring forth litigation,

but whatever the court decides, whether it is a trustee, you know, in a chapter 11, which of course is what the committee has asked for with all the flexibility that allows for recoveries for creditors and allowing for the appointment than experience cryptocurrency trustee and possibly the confirmation of a plan. And if you get a, you know, a plan trustee for, you know, which we would prefer because of the entire delicto issue, which is also included in there, or the appointment of a Chapter 7 trustee, which the debtor prefers, all of those are included that would be substituted

then that was part of the relief requested for any litigation that is commenced by the committee. So this is interim step, but then would work into whatever the court decides so that we can start this process and allow this to go forward not only because of the looming statute of limitations, but also because there are, you know, there are assets that need to be preserved and that are at risk here. We know there are certain things there are, you know, the committee has investigated. There, as you know, are about $200 million in unsecured claims. The committee has investigated potentially hundreds of millions of dollars,

have cryptocurrency that disappeared before the bankruptcy was filed. There's also a $21 million that we know of, creditor money loan to affiliates at less than market rates, which is the subject to potential litigation. that is currently in the less than market rate notes and there's also as we have pointed out the post-petition co-wingling and transfers of cryptocurrency that could be pursued so there are several you know areas that have been you know that have been investigated by the committee and these aren't just future issues

there are significant active ongoing issues which is why we brought this to the court's attention as you know we we brought to the court's attention, the debtor's failure to disclose to the court and the committee, the post-petition lien that was put on the Salara property, which was bought with part of the money loaned to affiliates, post-petition. And of course, while the committee was getting updates for a while on the status of solar property, the committee has not received updates in months and has no sense of the status of the property. and therefore is concerned that there is no independent oversight of that property at this time of what's going on. The committee also raised the issue of the cryptocurrency transfers from the debtor's fireblocks accounts that was raised and still has no controls over those wallets,

no active monitoring of those. That also is a concern and that's why in the interim that asked for some, you know, ability to move with respect to protecting these as well as well as well as, as you know concern over this upcoming statute of limitations issues and this would not be you know superfluous or go to waste because the committee has done a lot of hard work in investigating these potential causes of action and is prepared to pursue them or to assist any any trustee in pursuing them obviously whether is a Chapter 11 trustee that the committee could work with in a continuing fashion or in a Chapter 7 trustee even though the committee would no longer be in existence, the committee would clearly work to transition the work it has done because this is really the only way

the committee has determined that there is potential recovery for creditors in this case is through litigation and that litigation is critical in this estate and does not want its work that it has done to go to waste. The committee is also well aware of the challenges in this case. It's identified potential trustee candidates and counsel well experienced in cryptocurrency willing to work for the estate on a contingency basis to maximize recoveries for creditors under these difficult circumstances. This motion again is just an interim step, you know, and whenever the court is ready to rule, you know, the committee is willing to work with and facilitate, you know,

that transition. It just wants to be able to use the work it has done to move this forward, to maximize recoveries for creditors, to make sure that the litigation is promptly brought and that the assets are preserved for creditors and feels this urgency to move forward immediately through using interim standing to get a head start. And the work it would do would not be superfluous. It would work hand in hand with any trustee that is appointed to be able to move forward the investigative and tracing work it's done. to be able to pursue recoveries for creditors.

And I would just say finally, we did raise this in our reply brief, that the tolling agreement is not the answer. You know, because it was negotiated entirely among the insiders, did not include creditor representation, does not protect creditors. Under Section 4, it can be terminated but unilaterally with 30 days notice. So it is effectively illusory as a protection to creditors. creditors. It's again just another example of the ongoing lack of transparency, conflicts of interest that the creditors had to deal with in this entire case. And in addition, this tolling agreement only deals with insider transfers. We're dealing with transfers that would include

non-insider transfers as well, which is why we are concerned about the upcoming statute of limitations as well, because in the work that we've done, in looking for potential recovery sources there will be non-insider transfers as well that will be the subject of litigation that will be subject to the statute of limitations that need to be pursued as well so that is of concern as well and of course once a trustee is appointed that will be extended that was part of what was of concern and why part of the thinking and asking for the appointment of a Chapter 11 trustee and also seeking to move still the disclosure statement forward because we do continue to believe that that gives the maximum flexibility for recovery for creditors.

But we do ask as an interim step, if it makes sense to allow the committee to use the work it's done as an interim step to be given this derivative standing to then work with the trustee once one is appointed. So it is both for recoveries and for the statute of limitation but also to preserve assets. So thank you, Your Honor. We can't hear you, Your Honor. Sorry, I muted myself so my papers aren't making noise. Do you, Mr. Rochell, do you want to respond or do you want the other parties to make argument first so you can respond in total? That's probably wise if anyone else has anything to say. I'll note that no one else filed any papers.

Correct. Mr. Blum or Ms. Wilden, did you have anything you wanted to add? Yes, Your Honor, just briefly. Regarding the tolling agreement, the debtor didn't cite any case law that allows the statutory deadline for preference actions to be told. I understand tolling agreements work in general commercial litigation and business context, But for the bankruptcy code, the procedure to get a deadline extended in a bankruptcy case is set forth in Rule 9,06B. It requires a motion and a court order. So without any case law or anything cited that says a tolling agreement works to toll statute or deadline set in the bankruptcy statute itself,

I question whether this tolling agreement is able to accomplish what the debtor believes it's being offered for. Thank you, Your Honor. Thank you. Mr. Bloom. Yes, thank you, Your Honor. Just to add very briefly one further bit of perspective, if you count the days backwards to the November 18th, I believe, hearing and then forwards to the June 26th limitations period, you'll find that half of those days have elapsed already since the November hearing.

And with the understanding that Your Honor does intend to rule promptly on the trustee in conversion motions, we think it pretty particularly important given that the limitations period that remains is only half what it was before, that the committee's motion be granted as what Ms. Jarvis correctly referred to as a stepping stone or a halfway measure just to keep this process moving in a positive direction up to the point when Your Honor can issue that ruling hopefully very soon. Thank you for the opportunity to address the court. Thank you. Mr. Rochell?

Yes. I'd like to take those in reverse order. I don't, and maybe Mr. Bloom can clarify what limitations period he's talking about because 546 provides that upon the appointment of a trustee an additional year is granted. And so I don't know what he's talking about saying that that period is already running or something like that. Can he clarify? Because I can't really address it. Let me ask you that.

Before you do that, Mr. Blum, I haven't specifically dealt with that extension. Is that equally apply to a Chapter 11 trustee appointment as it does a Chapter 7 trustee? Okay, Mr. Bloom? I think we all agree that it does. Is that correct, Mr. Rothschild? Yes, absolutely. Yeah, that's right. That's right.

Just for purposes of clarity, the existing statute would expire on the two-year anniversary of the filing unless the court issues are ruling that appoints a Chapter 11 trustee or converts the case to a case under Chapter 7, in which case of trustee similarly as appointed. But right now from where we stand, the existing statute of limitations, absent a ruling on one of those motions that, as Your Honor correctly pointed out, the committee sought to prompt by filing this derivative standing motion, absent a ruling like that, the existing statute expires on, I think, Mr. Rochow, the anniversary date is June 26th.

And so, yeah, so we are halfway fully. halfway from November to that deadline in the intervening time since we had the hearing in November. That's the only point I was trying to make. I do agree with Mr. Rothschild. He's absolutely right. The appointment of a trustee either in a Chapter 11 or in Chapter 7 would extend it for an additional year. And that really is what I think all parties are seeking to avoid the rapidly eroding remaining period of the the original 546 statute that would expire in June. Yes, Roshadra.

Go ahead. Yeah, I just didn't know what he was talking about, about cutting the time period in half and stuff like that. But now I understand what he's saying. Yeah, I think we all agree. As long as the court rules and appoints either grants the seven, you know, conversion, which, you know, the notice conversion and then we filed a motion to do so, or the 11 trustee gets appointed, then everything on,

All of this pressure goes away. And I understand the court's sort of opening statement here to mean that the court has that deadline in mind and is prepared to act. If that's the case, then I don't know that I need to address the tolling agreement issue. We offer that, and those are fully enforceable. I mean, I think Mr. Blumer can confirm that, you know, in districts that he practices in where I practice in Southern District, Texas, in Delaware, and I've seen them in other Tenth Circuit courts.

I think we've done them in Utah as well. It's not about a deadline to file something imposed by the court. It's a statute of limitations that an individual party can waive. Rule 906 don't apply to that. You can enter into a tolling agreement between parties for any reason. But what about, as Ms. Wilden references, deadlines that are imposed by the code and aren't independent of statute that are independent of other statutes of limitation? That operates as an affirmative defense, Your Honor, the statute of limitations.

That's what courts have held. And I didn't cite that because I did not know that was a controversial provision of law. No one I think in my practice has ever questioned whether a tolling agreement on a preference or fraudulent transfer is effective. They just are. And besides, I'd also, look, I'm happy to pull that in brief that. I don't think it's necessary if the court understands and or if the court informed us and tells us that it is intent on ruling prior to June 20th. If that's the case, then I think we don't have a problem with that.

I'm happy to address Ms. Jarvis' comments if we can move beyond that. Please. Okay. I mean, the first three quarters of everything was re-argument of the Chapter 11 motion, and I don't think I need to address that. We've already had a hearing on that. And it's not relevant to the litigation, and the conflation of those two issues is a little bit, I don't think it's quite being honest with the court.

Nothing about commencing a litigation right now does one iota of work towards preserving any assets. But also some absolute misstatements. The idea that the committee doesn't have access to or visibility into the fireblocks, the credentials for logging in, which are still current, they may log in at any time, have been provided to Huron, the committee's financial advisor. And they're welcome to log in and check everything. And also, they're the ones who brought to attention

supposed transfers away of assets out of the debtor's wallet, which we pointed out and showed were actually customer assets, not debtor assets. And those are on the public ledger. They're visible, and hereon is well capable of observing and seeing those. The reason not getting updates is nothing's moving, nothing's changing.

The monthly operating reports show static, just a static situation where nothing is moving. So by commencing a litigation, it does not one thing towards preserving the assets. I agree that we need a trustee here because, well, for various reasons that we pointed out, but a trustee is going to solve those problems, whether it's a seven or an 11, a litigation

and spinning the wheels of the committee and running up additional fees, which we understand are well in excess of a million dollars on the committee side, perhaps three X what the debtor has spent on this case. is not productive. The litigation is not the only path here, and we had settlements and we had a settlement, and the trustee may want to do with its own evaluation

and pursue a settlement without expending all of the estate's resources and running up a bunch of admin claims prior to that by commencing a bunch of litigation, starting to prosecuting, seeking depositions, and doing discovery requests, and starting all of the clocks and calendars and time pressures to do with litigation, which you can get a lot done in three and four months. And we don't need that where the trustee is going to make his or her own independent decision

on that and they should. So for those reasons, I'd like to focus on not the conversion motions but the derivative standing motion. I'll also point out that the standard, we don't have a standard in the 10th circuit on this, but I'll point out the standard under STN Enterprises and other similar persuasive cases on the issue out of New York, Delaware, and other jurisdictions are that the committee has made a demand, and that demand to commence litigation on the debtor, and that demand has been unjustifiably refused. No such demand has ever been made, and no such demand has been unjustifiably refused,

and there's no representation supporting that in the committee's motion of any kind, no evidence in front of the court supporting that. Bottom line, Your Honor, if the court is, intent on ruling on the conversion motion, there is no urgency here, and the harm that could be caused is fairly great. Commencing litigation does absolutely zero to commence to preserve assets, and we just respectfully request that the court and the committee exercise some patience and we get the trustee in here. Thank you. So there was representations made by the committee that their discussions had occurred about the need or the identification of these assets and

nothing has been done. Identification of assets or commencement? Or the transfers. I mean, the discussions have been out there about these potentially avoidable transfers. Well, certainly, there have been discussions about them, and we settled that. But the committee has walked off of that settlement. So I don't know. So for me to find that there's been a refusal by the debtor to do so, what do you think I

I need to have in a record? Some sort of a demand. they had, for instance, said, you need to commence this. Look, if we get close to that date, I would certainly be commencing all the litigation, the ones that they have identified. Now, they may have other, I've not heard of any non-insider targets that there are any plausible causes of action against. And we laid all of those, set those all forth and did an analysis in our plan, in our plan,

which we submitted, and explained why some of them were viable and what some of them were not. preserve those causes of action, we would either told them or commence causes of action. That's my obligation as debtors counsel. But I don't think we're going to get there unless the court's not going to rule on the motions that were filed or argued in November until June. So, again, I don't think any of this comes up. I don't think any of it matters. Okay, thank you.

Any response, Ms. Charles? Yeah, Your Honor, I would say in response, I mean, In the debtor's disclosure statement, they very clearly did identify that the committee had claimed alleged that these insider transfers were fraudulent evidences and they believed that they were not, that it would be cosplayitive and they were not going to bring them. So, you know, I think there is evidence that they refused to bring them. But I would say, you know. I'm sorry, Mr. Arvskine, do I have like letters or emails that are attached to the motion?

Yeah, it's in our motion. It's stated in our motion. I know it's stated in the motion, but do I have anything? Yeah, it's referenced to the docket. Okay. Because it's in the docket. It's in the debtor's disclosure statement they filed with their plan. But, Your Honor, I would say I'm in agreement.

If the court is ready to rule, we don't want any unnecessary steps taken. Like I've said, this is an important. step. We just don't want all the work that the committee has done to prepare, you know, for litigation to, for recoveries, for creditors because that's really where the creditors are going to get paid in this state to go to waste. And so we're offering this really as an interim step for the court at the court's discretion. We just need, you know, something, You know, the committee to be able to act to both, you know, protect assets as well as to make sure litigation is timely, you know, commenced. And so we're giving this as an option to the debtor or to the court, you know, whatever the court feels like.

I mean, if the court is ready to rule immediately on a trustee, you know, please do that. If the court feels like this would be an interim step to assist the court as the court makes a decision on the trustee, then this is an option for the court to do that as well. We just need to make sure that the litigation is time to commence, that the assets are protected, and that the committee's work in all the investigation that is done in preparing for litigation for recoveries for creditors doesn't go for a comment. We don't disagree, Your Honor, with most of that sentence.

I appreciate all the parties patient. and input and the court will take the matter under advisement and will issue a decision at a later point. Thank you, Your Honor. Thank you. Thank you.