American court hearing recordings and interviews - Season 1. Episode 1. November 22, 2022. In re FTX Trading Ltd., et al., chapter 11 bankruptcy case no. 22-11068, audio of the first hearing held in the FTX/Alameda et al. bankruptcy proceedings pending in Delaware, USA #crypto

Episode Date: March 9, 2023

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Thank you. Please be seated. Before we begin, I wanted to make some announcements about conduct and decorum. I know this case has generated a great deal of public interest and publicity and understandably a lot of people are anxious and upset about what happened with this company. but it's important to remain to maintain proper courtroom decor both in the court for those who are here and for those participating remotely at this point we have 535 people on the Zoom call so if you're participating in the courtroom please keep in mind that the proceedings being recorded if you want to speak you'll need to approach the podium or speak from one of the microphones at

the council table so that we can pick up the recording make sure we have a good record. Everyone should have their cell phones on silent. If you haven't done that already, please do so. If you're on the Zoom call, please keep the line muted and your video off unless you are asking to speak. And if you do want to speak, you need to use the raise your hand function on the Zoom call. And I will recognize you and give you an opportunity. But keep in mind that everyone has a right to be heard, but today might not be the day for everyone to be heard because we have a lot of people involved in this case. Any interruptions, of course, will not be tolerated. If you make noise on the Zoom call, I will have you removed from the call and you will not be allowed to reenter.

If you turn your video on before recognized, I will have you removed from the call as well. And for the future, there is on the court's website, we have set up a YouTube channel for this case so that parties who are want to participate but want to listen to what's happening. It's only audio, it's not video. So you can listen to proceedings on YouTube channel going forward from here. One other thing is prior to the hearing, I did conduct a Chambers conference with Debtors Council and counsel for the government and our CRD have people coming on with their videos on. With government counsel and the U.S. Trustees Office,

regarding the motion to seal and the accompanying motion that was filed yesterday, I heard the discussion and I will be granting the relief both on the motion to seal and the underlying requirements. for relief that was requested under seal, but it's on an interim basis only, both of those. The seal motion and the motion for relief is on an interim basis only, and it will probably be lifted relatively quickly, and we'll put this on for the final hearing when we come back in a few weeks. All right, with that, I will turn it over to debtors' counsel to run the agenda. Good morning, Your Honor, and may it please the Court.

Adam Landis from Landis Rath and Cobb proposed co-counsel to the debtors in the FTX Trading Limited group of debtors that we have filed. Let me thank Your Honor for not only hearing us today with respect to the requests for relief filed on the agenda, but also in connection with the Section 105 Chambers Conference that you conducted this morning. With me this morning is a team from Sullivan and Cromwell proposed counsel to the debtors at council table. Andrew Dietrich, James Bromley, Brian Gluckstein, Alexa Cranzley, Julian Pettiford. Our declarants are in the courtroom, Mr. John Ray, Edgar Mosley from A&M. And I would be remiss if I didn't also recognize the Office of the United States trustee who's been here and been working with us tirelessly really over the last several days hours into the wee hours of the night

They've gone above and beyond to work through a number of issues with us and I'm pleased to report that almost everything that has been raised by the United States trustee has been consensual and resolved in connection with the first day motions. Almost everything. I was going to say almost everything. Almost everything. That word almost is doing a lot of work in that sentence. But with that, Your Honor, what I seek to do

and see the podium to Mr. Bromley who will present and we'll work our way through the agenda in due course. Thank you. Mr. Bromley? Good morning, Your Honor. May it please the Court, James Bromley of Sullivan and Cromwell proposed co-counsel to the debtors in these cases. I'd like to echo Mr. Landis's comments and thank the court for the accommodation of hearing us today and for also hearing us earlier in chambers in respect to the motion under seal.

Your Honor, we are here on an unprecedented matter, and I don't say those words lightly. We are dealing with a first-day hearing that is taking place well over a weekend. after these cases were filed. That in and of itself is uncommon. But what we had here with respect to the FDX debtors is a different sort of animal. Before I get into it, Your Honor, and I have a presentation to go through.

I do want to go through in some detail just to talk a little bit about the folks who are in the courtroom and who Mr. Landis has already introduced. First of all, we do have in the courtroom, Mr. John Ray, who is the chief executive officer and chief restructuring officer of the FTCS debtors before you. Mr. Ray has over 40 years of experience in the law and restructuring, including leading the Enron estate, Fruit of the Bloom, Nortel, Residential Capital. Mr. Ray is uniquely...

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Find an agent at CINFIN.com. Dr. Ray says in his first day declaration is we are incredible effort. In addition, Your Honor, we have the team from Sullivan and Cromwell, who Mr. Landis has already introduced, but there are three other individuals I'd like to mention. Because of the issues that we're facing here, we have assembled a team of investigators who are at the top of their fields.

In the courtroom today is Mr. Steve Peekin, who's a former director of enforcement at the SEC and a former U.S. Attorney, assistant U.S. attorney for the Southern District of New York. With him is Jamie McDonald, the former head of enforcement at the CFTC, and also a former AUSA. and the Southern District of New York.

Not here in the courtroom, but an equally important member of the team is Nikki Friedlander, the former chief of complex frauds and the cybercrime unit in the Southern District of New York. These individuals are working tirelessly to help us identify all of the issues that we need to deal with in terms of what has happened. In particular, they are interfacing, as I will indicate, and later in the presentation with the U.S. government and the various regulators around the world, who have taken a very keen interest in this situation. They will be reporting to Mr. Ray as the CEO and CRO.

In addition, we have engaged Nardello and company, which is a leading investigative firm. That was one of the first things that Mr. Ray instructed us to do, and we brought Nardello on, and they are working with us both here in the United States and around the world. We've engaged a firm named Chainalysis, which is the leading consultant, with respect to blockchain analysis,

because all of the issues that we're dealing with in the cyberspace relate to blockchain transactions and chain analysis has been working around the clock with us to secure the assets and identify them. In addition, we've retained a cyber security firm, the identity of which we have not disclosed because of concerns that those who are undertaking cyber attacks on the company and its assets

will use that information to their benefit. We've also engaged Kroll, formerly known as Prime Clerk, to be our noticing claims agent, Joelle Frank to be our communications consultant, and in addition, the law firm of Quinn Emanuel has been retained to provide advice to the Board of Directors, the Independent Board that we have appointed, and I will describe to them in a few moments. With that, Your Honor, that's the team that's been assembled, and we have been working literally around the clock to get to this day.

As I mentioned earlier, unprecedented is the word of the day. The crypto crisis that we're facing in the United States and around the world is well documented. But the FTX situation is both the latest and the largest failure in this space. Beginning in the first week of November, there was effectively a run on the bank, respect to FTX, both with respect to the international exchange, which is operated under the brand

name FtX.com, as well as the U.S. exchange, which was operated under the brand name FTX U.S. At the same time that the run of the bank was occurring, there was a leadership crisis. As I will describe in a moment, the FTX companies were controlled by a very small group of people led by Mr. Sam Bankman Freed. During the run on the bank, Mr. Freed's leadership Freed, and that led to resignations throughout the ranks. This is a developing situation, Your Honor. We recognize that there are millions of customers

around the world and in the United States. We recognize that the debtors have unreliable books and records. We recognize that the debtors have compromised systems and have been subject to cyber attacks. We recognize that press and internet attention is at an all time high with respect to these debtors. It is for that reason, Your Honor, that we have decided that we are going to,

that Mr. Ray has set out five core objectives. And I'm going to go through those objectives. But I think it's fair to say that those who are involved right now today in running FTCS understand the concern and the outrage as to what has happened. when we are working day and night to bring order to disorder. To your honor, as Mr. Ray has set forth in his first day declaration, there are five core objectives that we are pursuing at the moment.

The first is the implementation of controls. As I described, Mr. Ray has been installed as the CEO and the CRO of the debtors, is assembled a impeccable team of advisors and put in place an independent board. This independent board provides, for the first time, in the history of the history of the state, of FTX, a traditional and dependable governance structure. Prior to the commencement of these cases, FTX was in the control of a small group of inexperienced and unsophisticated individuals.

And unfortunately, the evidence seems to indicate that some, or all of them, were also compromised individuals. Now, the types of controls that we're putting in place right now with the assistance in particular of Albares and Marcel are traditional and market standard accounting, audit, cash management, human resource, risk management, and data management standards. In doing this, it's important to note that there are a core group of employees. You've finally broken loose from work. Three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday.

That's when you call us, Cincinnati Insurance. We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance. Let us make your bad day better. Find an agent at CINFIN.com. Assisting all of the assets are secured. We have to focus for a moment you're on.

We have identified several silos of the business. and this is for organizational purposes. We'll talk in a moment about the organizational chart. But with respect to these silos, the first is we call the WRS silo, which is the U.S. currency exchange silo. An independent director, Mitchell Sankan, has been appointed to the board of WRS. He is a lawyer. He is the former chief executive of MBIA.

who led the MBA's exposure in the Puerto Rico situation for almost 10 years. He's a member of the Board of Residential Capital. He's also a former partner of King of Spalding with over 40 years of experience. The next silo is the Alameda silo. Alameda Research is a substantial debtor here, and it operated effectively as a hedge fund

within the FTX group of families, a group of companies. Installed as a director at Alameda is Matthew Rosenberg, with expertise in finance. He's an investment banker and investor with Lincoln Park Advisors from Chicago. Before starting Lincoln Park Advisors, he was a partner at Chilmark Partners and advised on matters including Super Media, Coveanta, USG, Nortel, overseas shipholding group, and Conti Group. He has over 30 years of experience. There's a silo that we have identified as the Ventures Silo.

The director at that silo, independent director, is Rishi Jane. Rishi has a background in finance. He is a managing director of the accordion group, which specializes in financial and technology consulting. He also worked for Alvarez and Marcel for over 10 years and was instrumental in the Washington Mutual exercise. At the dot-com silo, which is the international business, we have two directors, Your Honor, independent directors. First is Joseph Farnan, a lawyer from Delaware, former judge and a U.S. attorney with experience in complex financial disputes and investigations.

Joining Mr. Farnan at the dot-com board is Matthew Doheny. Matthew Doheny is a financial expert. He is the chief executive of North Country Capital. He has been either on the board of directors or chief restructuring officer of Yellow Corp, the trucking company, residential capital, Kodak, and Matt Lom Patterson. Prior to that, he worked at HSBC and Deutsche Beck. Our second core objective, Your Honor, is asset protection and recovery. It's important to note that we're not just talking about crypto assets,

or cash assets or physical assets, we're also talking about information. And information here is an asset. Unfortunately, as the debtors have, new advisors have been exercising their investigations so far, a substantial amount of assets have either been stolen or are missing. We are suffering from cyber attacks, both on the petition date and the days following. And we have, as I mentioned earlier, engaged sophisticated expertise to protect against the hacks. But they continue.

The third objective, Your Honor, is transparency and investigation. As I noted, there is a team of investigators who are working tirelessly with the debtors to collect and coordinate information. The debtors will conduct the investigation. We recognize this is not a normal situation, and that there are others who will have to review the facts and the history.

We are going to serve as a central repository. Unlike many debtor cases, where the debtor already knows what information it has, this debtor is accumulating the information in real time. We are also in constant communication with the U.S. Department of Justice and the Southern District of New York Cybercrimes Unit, which is open to criminal investigation with respect to these debtors. We are in communication constantly with the Securities and Exchange Commission, the Commodities Futures Trading Commission. We have received requests, I would say, some might say demands

from the U.S. Congress, both from the Senate and the House, to have Mr. Ray appear during the month of December. We are coordinating with regulators in multiple states around the United States, as well as foreign regulators around the world. I think, Your Honor, it's fair to say we typically would not quote things that happen on Twitter, but there was a quote that I think summarizes this quite well, which is what appears to be taking place is a serious investigation by serious adults, and we would respectfully agree with that characterization. There might be other things on Twitter you wouldn't agree with. Well, that's for sure.

The fourth core objective, Your Honor, is efficiency and coordination. As you will see, Your Honor, this was an enterprise that operated around the world, not only at the time of the petitions, but also during the brief history that it had leading up to the filing of the petitions. There has been joint administration proceeding commenced in Australia. We have already made arrangements to meet with the joint administrators from Australia who are coming to New York in the next couple of weeks, and it is our hope to be able to approach, Your Honor, with a consensual protocol.

respect to the Australian proceedings. I think Your Honor is also aware that there has been a liquidation proceeding commenced in the Bahamas with respect to a single entity, FTX Digital Markets Limited, and representatives of the Joint Provisional Liquidators are here in the courtroom today. Your Honor may also be aware that the Joint Provisional Liquidators had filed a petition before the Southern District of New York Bankruptcy Court to recognize the proceedings in the Bahamas under Chapter 15 of the Bankruptcy Code. We had filed, with your honor, a motion to transfer

that case from the Southern District of New York to the District of Delaware, and we are pleased to report that we have reached an agreement with the Joint Provisional Liquidators to do just that, to bring the case from New York here to Delaware. It is our wish to engage in a constructive dialogue

with the Joint Provisional Liquidators. However, as we noted in our pleadings to transfer, we do have evidence that there have been movement of assets. out of the debtors' estates to the Bahamas, and there have been somewhat cryptic comments that have been issued by the government of the Bahamas as to the actions they have taken with respect

to certain assets. It's sufficient to say, at this point, Your Honor, that the debtors reserve all of their rights with respect to both any requests by the joint provision of liquidators to recognize the proceedings here, and with respect to any relief they may request. I would say, Your Honor, though,

it is essential to keep in mind, that as we are going forward in dealing with any of these foreign entities and with respect to any regulators or liquidators that might be appointed, that we are focusing on a single word, which is reciprocity. It is essential that any of dealings that we have are characterized by reciprocal relationships, both with respect to asset recovery and information sharing. Finally, Your Honor, maximization of value. We realize that there are many people that are looking to get their money back immediately,

and we sympathize with that, and we are working towards being able to do that. It is essential, though, Your Honor, that we first maximize the value of the assets of the estates. We have to identify those assets, we have to collect them, and we have to maximize them, whether that means selling assets, selling businesses, or reorganizing businesses. All of those things are on the table, and we believe, Your Honor, that we will be before you quite quickly. with an attempt to sell certain of the businesses that we understand, at least today, are self-sufficient, robust, and have generated interest from others in the marketplace. So, Your Honor, just I put up on the screen with a slide which duplicates the big board that we have here in the courtroom,

and just before I go further, this does capture from a summary perspective, the four silos that this business operated through. The green silo WRS is the US domestic currency exchange. You'll see that that was ultimately controlled by Mr. Sam Banking Fried. And the control of the WRS silo was also then shared with two other of the founders of the business, Gary Wang and the Shah Singh.

There were approximately 23% of the business that was also owned by third-party investors, and I will get to that in a moment. The Alameda silo, again, relates to Alameda Research. That is effectively the hedge fund within the FTX world. The Alameda silo was controlled by Mr. Sam Bankman-Fried and Gary Wang.

The Venture silo is the most recent addition to the FTX world. That was controlled effectively 100% by Mr. Sam Bankman-Pread. And the dot-com silo silo. is the international exchange. As you can see, Your Honor, that was 75% controlled by Mr. Sam Bankman-Fried and 25% by third-party investors.

Your Honor, I'd like to go through a bit of the history with respect to FTS. This does start with Mr. Sam Bankman-Fried. Bankingfrey went to MIT, and it was at MIT that he met Gary Wang. Mr. Bankman-Fried graduated in 2014, less than 10 years ago. Wang graduated in 2015. The third founder, Ashad Singh, graduates in June of 2017 from the University of California at Berkeley. It's in November of 2017 that Mr. Bankman-Fried and Gary Wang found the Alameda Research Business, which is effectively a crypto hedge fund that is headquartered in Berkeley, California. Fast forward two years, little less than two years, April of 2019, the dot-com

silo or FtX.com is founded. It is founded in Hong Kong. It is founded in Hong Kong because of the regulatory regime that was president in Hong Kong and it was founded with the business FTX Trading Limited and Antiguan company, which is a U.S. debtor in these cases. In July 2019, the FTT token was launched. The FTT token is effectively a credit that is able to be used on the FTX exchanges. and also because of that credit that's able to be used, it also carries with it or did carry with it value in the marketplace and traded separately. In July of 2020, the Clifton Bay Investments LLC was formed here in Delaware.

In January of 2020, FTXUS is founded by Sam Bankman-Fried, by Gary Wang, and the Schott Singh. That's founded as well in Berkney, California. In November of 2020, the Bahamas passes the DARE Act, a Digital Assets Act, which is intended to encourage the relocation of crypto businesses to the Bahamas. In July of 2021, FTX Digital Markets, the Bahamian single debtor, is formed. And in September of 2021, Mr. Bankman-Fried announces that FTX digital markets is going to be registered with the Securities Commission. of the Bahamas. In May of 2020, the U.S. SILA, WRS, moves its headquarters from Berkeley, California, and to Chicago, Illinois. And then in September 2022, the U.S. Silo announces that

it's in the process of moving its headquarters from Chicago to Miami. There were a series of investments that were made in FTX. November of 19, finance, a cryptocurrency exchange that operates offshore, enters into a strategic partnership and invests in FTX. Finance will appear later in the script, so to speak. In July of 2021, finance divests the entirety of its equity state. This is a substantial outbound payment that is made by FTX, and it also includes a substantial amount of the FTT token. An investigation will have to take place with respect to the finance. and the amounts of money and tokens that were paid to finance. Also, at the same time in July of 2021, there was an investment of a billion dollars by a series of third-party investors,

including Sequoia, Paradigm, and Toma Brava. Just a few months later in October of 2021, there was an additional investment, series B1 of another 420 million. This included at the time the Ontario Teachers Pension Fund, and BlackRock. At the time, in October of 21, this is again just FtX.com, the international exchange. The market valued the company at $25 billion. In January of 22, two things happened. First, there was an investment into the U.S. silo, a series A $400 million investment by investors including multi-coin paradigm and Sequoia. That valued the U.S. silo, the U.S. currency exchange, at $8 billion.

And at the same time in January of 22, there was an investment of another $500 million in the international business, the dot-com silo, with investors including Paradig, SoftBank, and TAMASIC, the sovereign wealth funds of Singapore. That valued the business at the time, at the dot-com. $32 billion. And when you combine the U.S. silo and the international silo in January 22, just 10 months ago, the overall value of those two businesses was $40 billion from a market cap perspective. Your Honor, I want to talk a little bit about the employee base with respect to the debtors.

And this is as of October 31, 2022, and we picked that date because it was a date that seemed to correspond with sort of the last clear information date that was also a point in time when the business seemed to be stated. So as of October 31, 2022, the debtors, the U.S. debtors, employed 330 employees around the world. This pie chart gives you a sense of where they were located. They were located in many different jurisdictions, but the largest number were located here in the United States.

When you take into account the non-debtor employees, and that would include those who were employed by the Australian business, as well as well as the largest number, the United States, and you take into account the as well as FTX digital markets in the Bahamas, the number increases by 190 to 520 employees. And when you look at the worldwide number of employees as of October 31, 2022, including non-debtors, again, the United States has the largest number of employees. The Bahamas is second, well, other is second,

and these are people who are working remotely, and the Bahamas is third. This chart, Your Honor, focuses on the distribution of customers on a global basis between both the USWRS and the dot-com international silos. This is as of the petition date based on the best information that we have. You'll see, Your Honor, that the largest jurisdictions are the Cayman Islands and the Virgin Islands, with China, Great Britain, and Singapore, following. With respect to the dot-com silo, and this is the international silo,

94% of the customers were customers of FTX trading limited, that is a U.S. debtor, and approximately 6% were customers of FTX digital markets limited, the Bahamian entity that is under jurisdiction of the Joint Provisional Liquidators. The reason for this disparity is that in May of 2022, when FTX Trading Limited was considering transferring its customers over to digital markets, it did not do so. So none of the customers that were pre-existing FTX trading customers as of the middle of May of 2022 transitioned over to being official customers of FTX digital markets.

They remained customers of FTX Trading Limited at U.S. debtor. Which again, Your Honor, brings us back to the recovery silos. The exercise here, Your Honor, is to identify the assets in each of these silos, and you can see that each of these silos has different types of assets. In the, if you look at the dot-com silo and the WRS silo, the assets are relatively similar. Cash and cash equivalence, cryptocurrency, subsidiaries, and that's about it, cash, cash equivalence, cryptocurrency. They were operating as crypto exchanges. The Alameda silo, Your Honor, is somewhat different, right?

That is the hedge fund, substantial funds appear to have been transferred from other silos to El Alameda. and it appears that assets were used for a number of purposes. Substantial investments were made in ventures that were primarily focused on the crypto and technology sphere, but there were also substantial amounts of money that were spent on things that were not related to the business. For instance, one of the U.S. debtors is an entity that is operated that purchased almost $300 million worth of real estate in the Bahamas. Based on preliminary investigations, most of those real estate purchases related to homes

and vacation properties that were used by senior executives of the company. Substantial funds were also spent in the venture silo to make venture investments in a number of different businesses. One of the things that the debtors are doing right now is to identify whether or not any of these venture investments are able to be sold and how much they're able to be sold for. So, Your Honor, what we have is a worldwide organization, but an organization that was run effectively as a personal fiefdom of Sam Bank and Freed. The business only had a short life that was founded in 2017 at Alameda. The currency exchanges were founded in 2019 and

2020 and here we are less than two years later in bankruptcy having collapsed in effect the company during that period of time wandered the world it started in berkeley it went to hong kong it went to chicago it went to miami it went to the bahamas but at all times it was effectively under the control of mr bank and freed and effectively what we had was a lack of corporate controls at a level that none of us in the profession that have looked at it so far have ever seen. Your Honor, this is a slide that gives you a sense of the different investments that exist in the silos.

So no need to focus too much on it, but what we have is a number of different investments that were made in the venture silo, a number that were made in the Alameda silo, a number that were made at the WRS silo, including Lerner. ledger X, which is a license derivatives brokerage business and still operating as a non-debtor, and others at the dot-com silo.

I'd like now, Your Honor, to take you through the collapse. It happened very quickly. It was quite shocking, but I think it's worthwhile to walk through the past couple of weeks. On November 2nd, documents leaked online showing that the FTT token position in the Alameda balance sheet was substantial. substantially larger than most anticipated. So what does that mean? It means the FTT token is a token that is created by FTS. It's an asset that it creates, and it had a substantially larger amount on its balance

sheet than anyone had anticipated. A few days later on November 6th, Caroline Ellison, who was then the CEO of Alameda Research and is no longer the CEO and no longer employed, tweets out information. with respect to the balance sheet of Alameda. In this tweet, she indicates that there are approximately, there are less than, that there are greater than $10 billion of assets that are not reflected on the balance sheet. That same day, Your Honor, is when Changpeng Z,

known in the business as CZ, who is the chief executive officer of finance. Remember, finance has been an initial investor in FTX and also had been taken out entirely from its equity investment. He tweets that as part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion equivalent in cash and FTT. But due to recent revelations that have come to light, we've decided to liquidate any remaining FTT on our books.

This, in effect, tells the market that CZ believes that FTT is worth substantially less than previously anticipated. the value of FTT plummets in the marketplace. Two days later, on November 8th, in the face of a run on the bank, FTX pauses all customer withdrawals, and the FTT price continues to fall by approximately 80% just over a period of two days. On the afternoon of November 8th, CZ, tweeted that FTX, and Mr. Bankman Freed, had asked for help.

for help, that there was in a significant liquidity crunch at FTX generally and to protect users that a non-binding LOI had been signed intending to fully acquire FDX.com and help cover the liquidity crunch. He concludes by saying we will be conducting a full DD, meaning due diligence in the coming days. Just one day later, finance tweets as a result of corporate due diligence as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations we've decided we will not pursue the potential acquisition of FtX.com.

Mr. Bagnafried is an active tweeter throughout this period and indicates online that he is requesting emergency funding from investors to cover up a shortfall of up to $8 billion. The next day, on the 10th, the Bahamas Securities Commission freezes assets of FTX digital markets and appoint points at provisional liquidator. Also on November 10th, Alameda Research announces via tweet that it is winding down trading. During the course of the day of November 10th and into the early morning hours of November 11th, near constant communication is going on with Mr. Bankman Free. He is being interviewed by regulators in the Bahamas.

He has hired lawyers in the United States at the Paul Weiss Law firm. He's also engaged a professor at Stanford Law School, Mr. David Mills, and it's consulting with his father, who's also a professor at Stanford Law School. Throughout the day, consideration is being given by Mr. Bankman-Fried as to whether or not he should relinquish control over the entities. It is during that time that Sullivan and Cromwell and Alvarez and Marcel had been engaged on an emergency basis to consult on contingency planning. the first reach out to Mr. Ray and other potential candidates to come in as CRO were made,

and at 4.30 a.m. on November 11th, Mr. Bankman Fried resigned. And he signed documentation authorizing Mr. Ray to take control of the businesses and having full power of any officer at any of the entities, including, among other things, to commence these Chapter 11 cases. And then starting on the morning of the traditional morning, the traditional rather than the 4.30 a.m. morning of November 11th, these Chapter 11 cases began to be filed after Mr. Ray had authorized it. This graph, Your Honor, gives you a sense of what the market was doing with respect to the FTT token.

This gives you a sense of market cap over time, and it shows the complete collapse of the value of the FTT token at the time of the bankruptcy filing. At the peak, the market cap was $9.6 billion. $6 billion. Right now, the market cap is approximately $422 million. So, Your Honor, that's where we are. We have witnessed probably one of the most abrupt and difficult collapses in the history of corporate America, the history of the corporate entities around the world. When Mr. Bangman-Fried signed over control of these businesses, he signed over control in a way that

allowed everyone for the first time to really see under the covers and recognize that the emperor had no clothes. These businesses were not operated in a manner that was consistent with any sort of traditional best practices. And since that time, under Mr. Ray's direction, the advisors and the remaining loyal employees at FTX have worked day and night to identify the assets, to secure those assets wherever they are located, to start applying the controls that are necessary, and substantial progress has been made. But we stand here today, Your Honor, with an absence of information. We do not have the traditional amount of information

that it better would traditionally have, but every day we generate more and more. So we do have, finally, before Your Honor, a series of traditional first-day motions. We're ready to request that relief. And I will now hand over the dais to my colleagues. I would ask, Your Honor, though, before doing that, if we could move the declarations that have been submitted

in support of the relief into evidence. There are two declarations by Mr. Ray and two declarations by Mr. Mosby of Alvarez and Marcel. Is there any objection? They're admitted without objection. Thank you very much, Your Honor. Before you sit down, Mr. Bromley. How many employees remain?

I can check your honors. Okay. Roughly 260. Okay. Okay, thank you very much, Your Honor. I'm handling with my partner, Brian Gluckstein. Thank you very much. Good morning, Your Honor.

Brian Gluckstein, of Sullivan and Cromwell on behalf of the debtors. Your Honor, with the court's indulgence, we will largely take today's agenda as it appeared, today's matters as they appear on the agenda with a couple of exceptions. But starting at the top, Your Honor, the first motion that we have is agenda item two which was filed at docket number three and it's our motion for joint administration by this motion the debtors requested the hundred and two debtors that have been filed cases be joined the administrator under the caption of XTX Trading Limited to allow for efficient administration pursuant to rule 1015b

the debtors are affiliates here a hundred and two entities fall into the four silos that mr. Bromley just walked through all of which have common ownership And prior to the filing of these cases were under common control, Mr. Bankingree. The debtors believe joint administration of these cases, of course, will permit the efficient and convenient administration of these matters. Most, if not all of the notices, applications, hearings in these cases will affect each and every one of the debtors. Absent joint administration, it would result in numerous duplicative filings. The motion, Your Honor, of course, only requests administrative and not substantive consolidation. of the debtors of states.

Thus, joint administration will not adversely affect the debtors, creditors, or their stakeholders, and rather, constituents stand only to benefit from joint administration through cost reductions and efficiency gains. Your Honor, the U.S. trustee did provide, reviewed the motion, provided minor comments that are reflected in the revised form of order that was filed overnight, that document number 98 at Exhibit A. And unless, Your Honor, has any questions we request entry of the joint. administration. I have no questions. Anyone else wish to be heard? I'm satisfied the

request of relief is appropriate and I'll grant the relief. Thank you, Your Honor. The next item on the agenda, which is item number three, is the debtor's motion for entry of an order of modifying certain predator list requirements and authorizing the service of creditors by email. And I would suggest, Your Honor, if it pleases the court, that we consider agenda item seven. in connection with agenda item 3. That is the debtor's motion, authorize and consolidated creditor matrix, and to redact certain customer information

as that relief is quite related. That's fine. Thank you. With respect to agenda item 3, Your Honor, in that motion, the debtors are requesting that we be permitted to file a consolidated list of top 50 creditors and to serve the debtor's customers by email. With respect to the creditor list, Your Honor, there have been 102 debtors filed in these cases, many of which are expected to have very few creditors, and many others expected to have overlapping creditors.

In addition, as detailed in Mr. Ray's declaration, the state of the debtors' historical books and records has been substandard. Thus, the exercise of compiling separate creditor lists for each debtor would be particularly time, consuming, and resource intensive. and this critical as the debtors team works to protect assets and maximize value. We submit the consolidated top 50 creditors list is appropriate under the circumstances. Furthermore, Your Honor, as reflected in the revised form of order that was filed at Docket 98 Exhibit B, the debtors have now agreed at the request of the United States trustee to file a consolidated top 50 creditors list for each of the four main debtors. and as it's citiaries so-called silos for WRS alameda ventures and dot com separately as applicable so to the extent that each of those silos have individual creditors we will file a consolidated list

effectively for each site and that's reflected in the amended order that was filed late in this last night I did say it thank you as noted in paragraph 75 of mr. Ray's declaration debtors have struggled to gain access to their customer data due to ongoing security risks in accessing that information. The debtors have now succeeded in finding a way to safely view the necessary customer information to prepare and file the consolidated top 50 list that was filed in redacted form at docket number 51, despite the debtors still not having full access to their customer data.

We will now work to promptly file the local. four creditor lists for each of the main debtors assuming the relief in this motion is granted today. Presenting the information on a consolidated basis will ensure the most relevant and reliable information can be promptly disclosed. With respect to the second part of agenda three, Your Honor, the email service request. The motion seeks to modify the service requirements under Bankruptcy Rule 2002G to permit email service to customers. unless they have designated a mailing address or come forward and request hard copy service. The court has significant discretion to modify the general rule pursuant to Bankruptcy Rule 2002M

and has permitted email service in similar situations, including in the Cred case involving customers of a cryptocurrency platform. The number of customers and former customers to be noticed in these cases could certainly number in the millions. The debtors operate cryptocurrency platforms, and all of the debtors' customers interact online and through email in the ordinary course. In fact, with respect to the exchange customers, both FTXUS and FTX.com user agreements, expressly provide that notice or other communications will be by email or through online applications. Following discussions with the United States Trustee, we have revised a form of order to make clear that email service is permitted for customers on less hard-copy service by mail is requested. As we understand it, there is no continuing concerns with respect to the relief from the United States Trustee with respect to that motion. The other piece of the relief, Your Honor, is set forth in the motion docketed at agenda item number seven. pursuant to that motion, the debtors are seeking authority to file a single consolidated creditor

matrix in lieu of separate lists for each debtor to establish procedures for providing notice of commencement, and only on an interim basis, Your Honor, at this time, redact confidential customer creditor information from public viewing of court filings. Your Honor, FTX's customers were the lifeblood of the company. The debtors are very cognizant of customers' concerns, particularly with respect to privacy, and intend to try to protect customers and their interests as these cases progress. The revised form of order filed at docket number 98 at Exhibit E incorporates a number of comments from the United States trustee. As we understand it, the only open issue is whether to redact on an interim basis the confidential customer

information in the scope that is requested. And Your Honor, the requested redactions include that we would be permitted to redact, again, only on an interim basis at this time, confidential names and addresses of customers from all court files, addresses and email addresses of individual non-customer creditors and shareholders, and the names and addresses of all creditors who are citizens of the United Kingdom or a European Union member country subject to local data privacy protections. It's my understanding that the United States trustee has agreed, for purposes of this,

motion today, that the redaction of information for customers residing in the European Union, covered by the GDPR, is appropriate, and is willing to permit the redaction of individual customer addresses, but not names. submit, Your Honor, that there is no basis at this point in the case to treat some customers worse and to immediately reveal their customer's sensitive personal information. These cases present very unusual circumstances as Mr. Bromley just walked through this morning. And thus the complete redaction relief on an interim basis we submit is appropriate here. The debtor's customer records include the names and email addresses of millions of individuals

and entities. There are two independent reasons, Your Honor, why redaction, at least on an interim basis, is in the best interest of the estates and their stakeholders. First, Your Honor, the debtor's customer list, numbering in the millions, is an asset of the estate that is important to any potential reorganization or sale to maximize value for all stakeholders. These cases are in their infancy. Mr. Ray states in his declaration in paragraph 6, as Mr. Brownlee walked through this morning,

that one of the core objectives of these cases is asset protection and recovery. Public release of the debtor's customer list and identifying information would give the debtors competitors a free opportunity to poach the debtor's customers and would interfere with the ability to sell assets and maximize value as these cases progress. There is no counter reason to eliminate a potentially significant source of value on the very first hearing before Your Honor in the very first week of these cases. Mr. Mosley states in his declaration in paragraph 18 that the debtor's customer list and related data is a valuable asset.

How valuable, Your Honor, is to be determined, but the debtors in all of their states, stakeholders have an interest in preserving that asset today. The circumstances are similar to those considered by the court in CRED, but we would submit, respectfully, on a much larger scale. We submit that under the circumstances, Section 107B1 provides a basis consistent with the court's prior decision in the Craig case to permit the redaction of the customer's personal information on an interim basis. Second, Your Honor, there are significant privacy concerns raised by the disclosure of this customer and protected predator information.

The debtor's customer base is global. Those customers who reside in the United Kingdom and the European Union member countries have additional data privacy protections under local law. But privacy concerns are not limited to the customers in those jurisdictions. Customers in the cryptocurrency space are not the typical creditors. Many customers invest in cryptocurrency, in part, to not be publicly identified. This is a highly sensitive issue for the customer community, and we've heard from numerous customers in that community, both individuals and entities already in these cases,

requesting their personal information be protected. Many of the debtors' creditors are high-net-worth individuals, and entities with significant positions in digital assets. As explained in Mr. Ray's declaration, the debtors have been the targets of ongoing, hacking, and unauthorized access to their systems. Identifying the personal contact information of the debtor's customers, particularly at this time, while emotions are running high, could put them in the crosshairs of bad actors.

In addition, the immediate identification of the debtor's customers, with exposure to FDX could have the effect of further destabilizing the broader crypto markets. Section 107C of the Bankruptcy Code provides that the court may, for cause, protect personal information from disclosure, which would create a risk of injury to the individual's property. Courts in this district have taken a strong stance with respect to the protection of customer and personally identifiable information. In contrast, Your Honor, there is minimal benefit, in our opinion, to requiring the immediate mass disclosure of the debtor's customer and individual creditor personal information. The Court and the U.S. trustee have been and will continue to be provided the unredacted information, as will any statutory committee appointed in these cases. Thus we submit there is no prejudice to any party in interest by granting this relief on an interim basis.

Creditors will be noticed through our claims agent and receive all notices that they're entitled to under the bankruptcy code and rules. Finally, Your Honor, on this issue, the debtors have included language in the proposed order before Your Honor today, consistent with the language the court suggested in the Craig case, reserving rights and providing that upon the request of any party in interest, the court may revisit this issue. Upon a showing of good cause, release some or all of the redacted information. Under the circumstances, Your Honor,

we suspectfully request that the entirety of the relief requested in this motion be granted in its entirety. Thank you. You hear from the U.S. trustee. trustee. We object to two aspects of the creditor matrix motion. First, in order paragraph four, we oppose the redaction of the names and addresses of creditors and customers who are not individuals. We see no basis to redact that information for legal or business entities. There's should be transparency about who those entities are, including on the top 50 lists that are

to be filed. Second, we object to order paragraph 7, in particular, order paragraph subpart C, which would authorize the claims a noticing agent to withhold publication of proofs of claim filed by the debtor's customers. But I'm entirely sure what that means. We submit respectfully that proofs of claims should not be withheld from being published on the claims register wholesale. If Your Honor authorizes certain types of relief of other information to be redacted in other

papers that are filed with the court, such as individual customer addresses, we take no position on that same information being redacted in the court. filed proofs of claim. But there should not be redactions beyond that in prusive claim. The claims register paints a picture and in a case with over 100,000, potentially over a million creditors, that picture may be substantial. Pursive claim allowed creditors to tell their story and we submit that those proofs of claims should not be withheld or sealed wholesale. In the Altera healthcare decision, Judge Walrath wrote that there is a strong presumption in favor of public access to bankruptcy proceedings and records.

During a Chapter 11 reorganization, a debtor's affairs are an open book, and the debtor operates in a fishbowl. The Supreme Court has written that it is clear that the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents in the Nixon versus Warner Communications case. The Third Circuit has likewise recognized that there is a strong presumption. I apologize, the District of Delaware has recognized there's a strong presumption in favor of public access to judicial records and papers, which has statutory, common law,

and First Amendment underpinnings in the Continental Airlines decision, 150 BR at 334, in site 341. I believe Mr. Bromley described this case as one of the most of the most of the most of the most abrupt collapses in the history of corporate America. And in counsel's presentation earlier, they indicated that one of Mr. Ray's five core objectives in this case is transparency and investigation. We submit that overbroad redactions do not serve transparency in these cases. We're also concerned that presently the top 50 list contains no information identifying who,

the creditors are. And if our office appoints a creditors committee, we'll need to identify who we're appointing to that committee or those committees. And we need to be able to do that with transparency. Any redaction or sealing relief should not prevent us from filing those notices.

I would also point out, Your Honor, that we do object to the names of individuals being redact. We take no position about their individual's address as being redacted, but as to their names, we respectfully submit they should not be redacted unless they are citizens of members of the European Union and are covered by the GDPR. Unless Your Honor has any questions, that's all I have. Thank you, Mr. Chairman. Can you address the issue about the proof of the claim?

I can't hear me. We have requested in the motion at this point that the idea of all of this is to ensure that credit customers are not having their information involuntarily disclosed. No bar date has been set yet in this case. It will be at some point. And creditors will need to file claims in order to preserve those claims. with the disclosure issue at this point, there are some folks,

I think there have been a couple of people who have voluntarily come forward and have started to put claims on the docket. That is their prerogative. But from the first, that's self-identification. But what we're trying to protect, again, Your Honor, just for this interim period, is to ensure that nobody's personal information

is being involuntarily disclosed And to your honor, that the debtor's customer list is not being compromised in a significant way before we're able to marshal that asset. Both of those issues are in play. I think the proof of claim issue can be avoided for the interim period because we haven't set up our date. And so I think at this point we could table that portion of the relief. has voluntarily filed a proof of claim on the docket. We haven't yet sought to take any action with respect to that claim. It's very few.

The issue that's raised by counsel with respect to the Creditor's Committee, I think, is a good example of how we see this playing out there are. We don't believe the top 50 lists should be unredacted, including names. The names of customers, once you have customer names, it's not very difficult to solicit those customers find information about them and know that they are customers of FTIX. The United States Trustees Office, of course, is presumably going to form a creditors committee, and those members of that committee will have come forward voluntarily to serve on that committee, and presumably are comfortable with the requirements of service that are necessary,

including the disclosure of their names and their participation in this process. That will be a handful of customers who agree to serve on a creditors committee. That's very different, and again, that's voluntary, very different, than the millions of customers that are sitting in a database that need to be noticed in this case and will appear on the debtor's creditor matrix. That is a very different situation. And again, Your Honor, there's no need, certainly at this time, in the first month of the case we submit, for the world to have all.

all of those names and addresses. And understanding, Your Honor, for most of our customers, we don't have physical addresses. These are folks who conducted business with the debtors entirely online through applications. For many of these customers, we have email addresses or other contact information, identifiable information, but not necessarily

brick and mortar mailing addresses. And so, and I think many people would view email addresses and the ability to contact people with some of the most valuable customer information. So I don't think there's absolutely a balance. We are very cognizant of the need for transparency in these cases. The debtors intend to provide that transparency

to its stakeholders, including the customer base. What's being asked here today, Your Honor, is simply to ensure. for now on an interim basis that the customer information, its entirety, individuals and entities, many times are individuals behind those entities in this space. Those are all valuable customers. And the identifiable information of customers including email addresses be redacted from all filings.

I think for purposes of the interim order, we could remove the proof of the claimation. Anyone else is you heard? I got some other folks standing here. Come on forward. Good afternoon. This is Matthew Kelsey of Alston Berg. We represent an ad hoc group of account holders. The relief requested in the motion which we support, you know, by implication, affects

our group in the sense of 2019 requirements, Your Honor. I think both confidentiality and privacy are implicated here. Our group was formed yesterday. We have not found the 2019 yet, but we were hoping for some guys. from the court in connection with your resolution as to the ability to redact names and addresses, particularly of individual holders, especially given what we've heard today, the risk of cyber attack. The risk of cyber attack and the lack of controls, at least that was handed to the current management now. I have no doubt that they're working hard to put those controls into place, but at least on an interim basis,

redacting this sort of information on 2019 seems appropriate. seems appropriate. Any time? All right. Thank you. Thank you. Good afternoon, Your Honor. Mike Frashton, from Whiteford, Taylor, and Preston.

I'm here with my colleague, Rich Riley. We, too, are here on behalf of a significant number of customers, some of which, based on what's been disclosed so far, will likely be on that consolidated 50 list of the of unsecured creditors. We certainly join in the debtor's motion. This is a case about cryptocurrency. So obviously confidentiality is candidly part of the benefit of the bargain for those that

participate in this space. We think the disclosures being sought by the Office the United States trustee could actually disincentivize participation in the case. By extension, impairs the ability of creditors to recover from this case, which of course would be contrary to the best interest of the creditors. So we join in the debtor's motion. Thank you. Thank you.

Anyone else? Well, there certainly is a pull and tug here between the the right to privacy and the right to everybody involved in this case to have transparency. As I did in the Cred Inc. case, let's deal first with the modified creditors list of 50. I think the only issue there from the U.S. trustee is the disclosure of the names. Is that right, Mr. Hackman? We would submit, Your Honor, that for institutional entities, names and addresses should not be redacted, for any individuals later addresses should be redacted.

All right, here's what I'm going to do on that. I'm going to, on an interim basis, I'll enter the order as the debtors have requested. But it does raise a factual issue, and there may be a factual basis for why those claims need to be disclosed. So we'll reserve that for the final hearing, and if there is still an objection by the U.S. trustee, at that time once they've seen the list and know who these parties are, if they think there should be disclosure of those entities, we'll revisit it at that time. But on an interim basis, I'll enter the order allowing the redaction of the names and addresses of the top 50 list.

The same goes for the consolidated creditor list. Again, I need to make sure I'm protecting the interests of these individuals. This is a space where it's all done over the internet. And everyone in this room knows the internet is wrought with potential dangers. Hacking happens all the time. People's individual accounts get hacked. And I think it's important that we protect those individuals who are seeking, want to participate in this case, want to file their proofs of claim, but also want to protect

their assets. So again, on an interim basis, I will grant them. the relief requested by the debtor excluding the proof of claim. We'll take that out of the formal order. We'll deal with that once we set a bar date. Because as debtors counsel pointed out, if someone wants to voluntarily disclose who they are, that's perfectly okay.

They can do that. Certainly, Mr. Hackman, on the, when you come to the time of appointing a statutory committee, they have to be disclosed. And I would assume that anybody who's coming forward who wants to serve on the committee is voluntarily agreeing to disclose their names. I would not, under any circumstances, allow a committee member to withhold their information. They have to disclose. But again, on an interim basis, we can revisit this on the final.

Again, if there's some evidentiary basis for why you think, I should not allow this relief, Mr. Hacker. And you can come back and we'll deal with it at the final period. Thank you, Your Honor. So with that, based on my comments, I will approve both the motion regarding the modification of the creditors list and the consolidated creditors list, items 3 and 7. Thank you very much, Your Honor. Continuing to move through the agenda on the next item on the list on the agenda is agenda item 4, which was the debtor's emergency motions. transfer the Chapter 15 case of FTX digital markets to this court as filed on the docket yesterday and as Mr. Bromley touched on in his opening remarks there is we have reached

an agreed form of order with counsel for the joint provisional liquidators to in fact permit and have the Chapter 15 case transfer to this court with the rights of all parties reserved so absent any questions from the court we would ask that to be entered I have no questions. The liquidators wish to be heard on that. Your Honor, Chris Shore from Waiton Case on behalf of the three JPLs. We have nothing to address.

I will note, because I am going to stand on one motion in a bit, that we're going to need a recognition hearing setting, but we can discuss that in the context of the setting of the second days. We'll get to that. Okay. All right, I will answer that word. Thank you. Has it been uploaded, by the way?

Yes, Your Honor. Yes, Your Honor. Okay, we can go ahead and enter that one. Thank you, Your Honor. That brings us the next item on the agenda, which is agenda item 5, is the motion of the debtors for entry of an order. File, the motion filed document 25 for an order with respect to the automatic stay. By this motion, Your Honor, the debtors are requesting entry of an order enforcing and restating the worldwide stay.

As a result of the debtors' international business operations, Your Honor, the debtors have many foreign creditors, contract counterparties, and other parties in interests in countries who are not and may not be as well-versed in the protections and restrictions of the Bankruptcy Code. These creditors and parties and interests may be unfamiliar with the operation of the stay and the other provisions, operative provisions of the Bankruptcy Code. Upon commencement of the cases, non-U.S. parties may in fact try to take action to violate the protections afforded the debtors under the Code, and we have started to see some notices in that regard. We are responding to those, but accordingly, the debtors submit that such circumstances warrant in order of prising all parties in such protections as set forth in the Code. Importantly, Your Honor, the debtors are not seeking to expand the protections provided by the

code, rather only seeking an order to be able to notify parties in a standalone order of these court who are unfamiliar with the code of the scope and effect of Section 362 and related provisions, including 365, E1, and 541. Your Honor, the debtors did receive some comments from the United States trustee and other parties on the proposed form of order that we incorporated in the form file in docket number 98, exhibit C. And we would ask that under the circumstances, Your Honor, enter that order,

unless the Court has any questions. Mr. Shore. Thank you again, Your Honor. Chris Shore from White and Case on behalf of the three JPLs, Brian Sims, Peter Graves, and Kevin Cambridge, who have all been appointed as joint provisional liquidators of FTX digital marketing, or digital markets, a Bahamian company and a Bahamian Windown proceeding.

I'll note that some of what Mr. Bromley said when he put the charts up is not in the evidentiary record. I understand. And we have some disagreements, which will work out over time as to how we fit in and what portion of customers sat where within the organization. But for now, as noted, we had started a Chapter 15 in New York. We've consented to have it coming down here. And we'll need to get a scheduling date, which we can do at the end of the hearing. For now, the 15 isn't being called. It's just the 11. We're only appearing. We're not seeking any provisional relief.

We're just participating to make sure that what's happening today isn't impinging upon any relief that the JTLs might need pending recognition. We've been working with the debtors to begin the process of coordinating our efforts. on information flow, asset containment, and ultimately judicial coordination, and we worked out everything except for the automatic stay. We're not objecting to the relief. We're actually asking for a comfort clarification on a comfort order. There is a tension that's going on right now between the automatic stay. The automatic stay is what the automatic stay is, but also Mr. Ray's guiding principles that went up. There is a lot that needs to get done even between now and a recognition hearing and now and second day hearings with respect to information gathering, asset containment, developing information, sharing information, coordinating information. You heard Mr. Bromley say information is property.

It can't be that the JPL seeking to access information of their debtor. is a stay violation in a Chapter 11 case. We're going to try to work this out. We were able to work out everything else. We weren't able to put language in the order with respect to the automatic stay. We're going to continue to work with them. My caveat on provisional relief is we can't get to a place

where we can develop an information flow between the dot-com silo and the JPLs. We may have to come back. and get provision or relief because from the perspective of the JPL's order number one in this case is to make sure that all assets are protected and all information is protected. We can figure out later what that information means or where those assets get mapped, but we can't have assets being dissipated, nor can we have information sitting there unaccessed because we can't get out of our own ways to come up with a protocol to share information.

So, again, we don't object to the order being entered, but we're going to have to work out some arrangement between ourselves. Otherwise, we may have to come back and address it with Your Honor. Okay, Ms. Glaxia. Thank you, Your Honor. I don't think there's, we don't have, I don't have any agreement with anything Mr. Schor said in the perspective. I think you mean disagree. You said I don't have any agreement with it. I'm sorry, any disagreed.

We might have disagreements later. You know, sometimes we have disagreements, but I'd like working with Mr. Shore. I think that the issue here, everything you say goes both ways, right? They're going to be looking for information from us. We're going to be looking from information from them. We are actually looking forward to the possibility of coming up with a protocol that makes sense. It's something we suggested to prior counsel for the joint liquidators. Didn't get traction last week.

We're glad that Mr. Schwer and his colleagues are now on the scene, and we hope to make some progress in that regard. With respect to this motion, paragraph 7, as revised with input from other parties, makes very clear that this order is simply declarative and attended to simply state what is in the statute in all parties' rights and reserve. So I think with respect to the relief today, Your Honor, I didn't hear any objection really from Mr. Shore on this order being entered. We would ask this order be entered, and we look forward to working with them on the issues that we're going to. related to the Bahamas and the Chapter 15 versus the Chapter 11 is removal. Okay. I didn't hear Mr. Schor saying he actually said he doesn't object to the entry of the order.

And I will enter the order. It obviously is a comfort order that gives the debtors an opportunity to send something under the signature of a judge to parties outside the United States who might not understand the automatic stay. What the automatic stay is, but the automatic stay is. And if someone violates it, they do so with their own risk. Thank you very much, Your Honor. The next item on the agenda, item number six, is the debtor's application,

which was filed at document number 28 to retain parole restructuring the administration LLC. The debtors, by this motion, are seeking to employ and retain parole as claims a noticing agent, effective non-protong to the petition date, pursuant to 28 U.S.C. 156C. Appended to the motion as Exhibit B

was the Declaration of Benjamin Jay Steele, the management director at Crowell. The debtors also filed a supplemental declaration for Mr. Steele at docket number 96, which includes additional disclosures that were requested by the United States trustee. Mr. Steele is on the Zoom hearing today. The debtors, Your Honor, anticipate, as we've been discussing

this morning and now this afternoon, that there will be millions of creditors in these Chapter 11 cases. In light of the number of anticipated claimants in the complexity of the debtors' businesses, the debtors submit that appointment of a claims and noticing agent required by Local Rule 2002 1F, and otherwise is in the best interest both the debtors' estates and their predators. By appointing parole, the distribution of notices and processing claims will be expedited, and the Office of the Clerk of the Bankruptcy Court will be relieved of an administrative burden

or otherwise could be an overwhelming number of claims and contacts. In selecting parole, Your Honor, the debtors obtained and reviewed proposals from two other court-approved claims in noticing agents to ensure selection was through a competitive process. The debtors believe that Quoll is qualified due to a significant experience in both legal and administrative aspects of large complex Chapter 11 cases. The debtors further submit, Your Honor, that Numbra-Tonk relief is appropriate because Crull has provided and continues to provide valuable services to the debtors, the states in interim period the debtors did receive informal comments on proles retention

applications from the United States trustee which the debt is addressed in the revised order that was filed the docket number 98 certificate and the supplemental declaration of mr. Steele unless your honor has any questions we would request respectfully entry of that order and otherwise we should be heard satisfied the retention is appropriate I will enter the order thank you very much your honor I think we're going to go with Your Honor's indulgence slightly out of order and would take next the cash management, which is item number eight on the agenda, and I would turn it over to Mr. Dieterick to present that motion. Why don't we, we're going about an hour and a half. Why don't we take a 10 minute recess, allow people a little break and we'll come back and we'll take up that next to it.

Sounds great. Thank you, Your Honor. We had some entertainment while we were on break. use a claim over that system. May it please the court, Andy Dietrich, Sullivan and Cromwell. Your Honor, I present the cash management motion today. We have, I think, a consensual motion. We have one objection on the record.

I think it's been rendered moot by language we put into the order last night. Maybe when I'm through, we can confirm that on the record. Your Honor, the cash management motion takes the debtor's current accounts. There are 216 bank accounts, 36 institutions, 19 countries, and creates on top of those a new set of five pooling accounts that are compliant with the U.S. trustee guidelines.

I put up on the screen, for your honor, the snapshot of liquidity that we have in all four silos as of today. Your Honor, there was a revised declaration of Ed Mosley we filed overnight, which shows the additional cash the debtors have been able to verify. This process will continue. we find additional cash, additional marketable securities, and other liquid assets. So we hope our cash situation does approve or improve. What you have in front of you is the cash projections we're using for the five-week period that was our initial estimation for an interim period of relief.

And you'll see, Your Honor, that at the end of the period, each of the silos has positive cash. Now, Your Honor, very important that this is unincumbered or unrestricted cash. So within the debtor system, there's restricted cash. consists of cash held in custodial accounts, FOB accounts, cash necessary to keep it regulated entities for regulatory capital purposes. All of that is excluded from these calculations for this shows only unincumbered cash. Your Honor, we do have a revised form of order we put in last night. I think that's been reviewed by all the applicable parties.

And then I have two comments that came in this morning that we resolved. One is from the SEC, the Securities Exchange Commission, which has some additional reservation of rights language. And the second is a comment from the U.S. trustee who's asked us to reduce the amount, excuse me, the amount we can move from the master pooling account into the silo pooling accounts from the $25 million initially requested in the motion

to $5 million. And, Your Honor, the debtors are fine with that given the robust liquidity picture in each of the silos. So with that, Your Honor, I'd ask for entry of the order. Anyone else we should be here? Good afternoon, Your Honor. Scott Cousins on behalf of the Evolved Bank. We're close.

We did file an objection this morning. When we first saw the motion, we were concerned about with respect to the Evoled Bank these FBO accounts, which according to our agreement with WRS, our property, property of the estate, the debtors have made some additional language. We're not quite there. We saw the filing last night.

Footnote 3 says the FBO accounts, these are the accounts that are concerning the Volve Bank, are frozen. But paragraph 11 allows the existing bank accounts to be closed. And exhibit C of the motion includes the Evolve FBO accounts. So we've given the debtors of language that would say that the identified FBO accounts, 0,06. 0.0078 and 0082 shall remain frozen and shall not be closed or accessed until we can

determine a final order of the court, presumably the next cash management order, that determines it's our property. So we want to avoid a situation where these accounts which belong to the bank, it's in fiat currency, it's used for credit cards of our customers. So in other words, when customer uses a credit card, it's fee out currency. It's not an RV property of the state. So we've asked to punt it, but we still need that reservation of rights

so that the bank accounts aren't closed since we believe these are not property of the estate. I think we have somebody else wants to speak as well. Why don't we get both the... No, are you all right? Yeah, go ahead. Now I'll have you addressed both. Your Honor, Gaston Loomis from Michael O'Doitte

Deutsch here on behalf of Philadelphia Indemnity Insurance Company. I'm joined today by co-counsel to Philadelphia indemnity Scott Williams, who is appearing remotely, and he's based in the law firm of Monier-Harrie based in National Tennessee. My client conveyed a limited objection to the debtors about the cash management motion, which I'm glad to announce has been resolved, at least for purposes of this interim order.

As background, Philadelphia is a surety that issued $7 million in money transmittal and other surety bonds connected to various state licenses. The debtors possessed that allow it to operate custodial fund and other accounts in those states. Philadelphia had concerns about the motion as it related to funds in those accounts, as well as the debtors' management of those accounts

and compliance with trust fund and other state laws. Philadelphia reached out to the debtors to address these concerns, and again, I'm pleased to say the parties have reached an agreement on language to include in the interim order that is addressed in footnote three that counsel just talked about, Your Honor.

Again, I wish to thank the debtors for working with my client at this point, point on this issue, especially given all the other matters we're having to deal with at this time in this case. Thank you, Mr. Lund. Mr. Nader. You want to address Mr. Cousins' proposed additional change, I guess? Yes, thank you, Your Honor. We can confirm on the record we will not close any accounts at Evolve Bank during the interim period.

Okay. Thank you. Does that satisfy you, Mr. Cousins? Or do you need something in the order? I would like something. I apologize. Scott Cousins on behalf of the U.S. bank. I'd like something in the order, Your Honor.

Your Honor, we have 36 banks in 216 bank accounts. I think by negative implication I'm like just concerned others. I'm just a little bit loath to put specific bank names in the order. We're happy to have Alboriz and us all look at the particular account numbers that you've referenced and confirmed you in writing

that those accounts are FBO accounts as specified in the order. With that, Your Honor, maybe we'll see you at the final hearing, but I think that representation I think the representation on a record is sufficient to address the issues. Thank you, Your Honor. Thank you, Your Honor.

So for the record, I will enter the order. I did say it. Thank you. Good afternoon, Your Honor. Alexa Cranthley from Sullivan and Conwell, the proposed counsel for the debtors. Your Honor, I'll take the remaining items on the agenda, going back to item number eight, which is the vendor motion at docket number 46. Your Honor, the debtors are seeking authority to pay pre-petitioning.

claims of certain critical domestic vendors, foreign vendors, 503b9 claimants, and potential lien claimants. Notwithstanding that the debtors and their advisors do not currently have full books and records, the debtors and their advisors have identified certain vendors who are critical to their business. Given the nature of the business, most of these vendors relate to data systems, data storage, and security measures. As such, the debtor's businesses do not require a material amount of physical goods or

shipments and primarily rely on these services. Additionally, as Mr. Bromley discussed earlier, the debtors' businesses are international and involve foreign vendors all over the world. Your Honor, we had requested in the motion authorization to pay critical vendors up to an interim cap of 9.3 million, to pay foreign vendors with no cap, to pay 503B9 claimants with no cap,

and to pay potential lien claimants up to a cap of 125,000. Your Honor, further to discussions with the U.S. trustee, the debtors have agreed to make a number of revisions as follows. First, the debtors will reduce the critical interim cap from $9.3 million to $8.5 million. Second, to include a foreign vendor interim cap of $1 million. Third, to include an interim cap of $200,000 for 503B9 claimants, and fourth, to remain and leave the cap for lien claimants at 125,000. With those changes, Your Honor, we understand that the U.S. trustees' issues with respect to this motion and order are resolved.

And unless Your Honor has any questions, we request that the relief you were entered. I don't have any questions, Mr. Hackman? Yes, Your Honor. I rise to confirm that our comments on this motion resolved. Okay, thank you. All right. With that I'm satisfied, the request of relief is appropriate. I will enter the order.

Thank you, Your Honor. This is one order where we do not file. last evening, so we'll submit a new order. Okay, thank you. Item number 10 on the agenda and docket number 49 is the equity NOL motion. By this motion, the debtors are requesting entry of an interim order to establish two things.

First, notice and objection procedures related to certain transfers and declarations of worthlessness for federal or state tax purposes with respect to common or preferred or equity interests in seven debtors for US taxpayers. And second, to direct that any purchase, sale, transfer, or declaration of worthlessness in violation of the procedures to be null and void. Your Honor, we did serve this motion on all the shareholders of these seven debtors based on the contact information available to the debtors.

Similar to the other motions, we've discussed with the U.S. trustee, there were limited comments made to the revised form of order filed last evening at docket number 98, Exhibit. If Your Honor doesn't have any questions, we request entry of this order. Mr. Hackman, anything from the U.S. trustee? This has been Hackman for the U.S. trustee. Our comments are resolved on this motion, Your Honor. The change we requested was increasing the number of days from 14 to 30 that current substantial shareholders are required to make their initial disclosures. Okay, thank you.

All right. I don't have any questions. I'm satisfied the request of reliefs. appropriate and the order. Thank you, Your Honor. Last item on the agenda is item number 11 and docket number 50, the employee in wages motion. Your Honor, we're seeking limited relief with respect to the dedicated employees and the newly appointed officers working under the direction of the newly appointed chief executive officer. The debtors are not seeking approval of any severance, retention, incentive, or bonus payments for any employees or insiders.

The debtors are also not seeking to make any payments to Mr. San Bankman-Fried, Mr. Gary Wang, Mr. Nashad Singh, or Ms. Caroline Ellison. The debtor's limited relief includes payment of pre-petition wages, salary, and compensation and benefits, and continuing the compensation and benefit programs in the ordinary course and making any changes as necessary. The Honor, we've likewise worked with the U.S. trustee and resolved all their objections. There are a number of changes that were reflected in the revised form of order filed last evening. First, the debtors have agreed that the relief in this motion will be sought on an interim

basis and then on a final basis at the second day hearing. In paragraph two of the proposed form of order, we've clarified that the debtors are only seeking authority to pay amounts above the 15,000 statutory cap by no more than 40,000 in the aggregate. We've incorporated a new paragraph three that the new non-employment, employee director compensation is approved on an interim basis. And finally, we've agreed with the U.S. trustee that with respect to the advisory firm obligations to Al Hill and RLKS executive solutions, that we have agreed to remove the request

from this motion and we'll seek approval of these obligations by a separate motion. Okay. Thank you. Your Honor, with that, we ask you to enter the proposed order. I confirm that our informal comments are resolved, Your Honor. Thank you. Okay, again, I'm satisfied the request of relief is appropriate, and I will enter the word. Thank you very much, Your Honor.

I believe that that concludes the agenda, so I think the only item is a housekeeping one of scheduling the second day hearing. Okay. We've been in touch with your chambers and understand that Your Honor is available on January 11th at 10 a.m. Well, if Mr. Cavello says I'm available, I guess I'm available. January 11th it is. Your Honor, Adam Landis Svitt. I can confirm that. You were a bit.

Okay. All right. I think we have another housekeeping matter. We need to schedule the recognition. Or the U.S. trustees. I have some... I'm sorry. Let me take this off.

I'll say that again in case it wasn't picked up. Juliet, Sarkesian, on behalf of the U.S. trustee. Your Honor, I'm worried about waiting until January the 11th wasn't. To have the second day hearing, that means that the ceiling or the items that are sealed, will continue to be sealed through that date. So, Your Honor, I would ask that there be, if possible, a hearing date set, you know, maybe in the week of December the 12th to address at least that and, you know, potentially other final orders on some of the other

first day. Actually, I don't really see why we shouldn't have the final order and all the rest of the first day relief in December because the interim order stays in place until we have that final hearing. Your Honor, James Brownlee of Sullivan and Cromwell. Just to be clear, Ms. Rikiziner, are you suggesting only with respect to the ceiling would go forward on an earlier date or are you suggesting all of the second day? Because I think we can accommodate with moving, if we could find a date perhaps in the middle

of December just to deal with the ceiling and then on the rest of the second day. we could deal with January 11. Right, that's fine. And in the meantime, Mr. Shore, you wanted to schedule a recognition? Have you conferred with the other side about potential dates on that one? No, I thought we were talking about everything in the middle of December, but it just sounded like we're fine in the mid-Dcember. I have a conflict 14, 15, 16 in front of Judge Owens and Judge Goldblatt.

But other than that, we're kind of available at your honors convenience. convenience probably have any I apologize mr. Shore I think we were talking about numbers and not months I thought we were talking about January you know for recognition for recognition well we're gonna have to have a yeah why you meet and confer on it is gonna be an evidentiary hearing obviously I need to make findings of fact and conclusions of law so make sure you've left yourself enough time for whatever discovery and you coordinate with other witnesses you're going to need to bring and so forth so we'll schedule the recognition hearing you can

contact chambers once you've conferred second question December for just the ceiling okay just so that we're clear what we're talking about ceiling we're seeing we're talking to the ceiling with respect to the the motion that we dealt with at the chip before the hearing right well your honor the issues with respect to the creditor matrix and I believe are going to require an evidentiary hearing, assuming that we're not going to be able to get over the hump with the U.S. Justice Office. And I do understand that the U.S.

trustee's office has a policy position on this, so I don't think we're anticipating we're going to get past it. So I guess the question is whether we think that that's enough time to have an evidentiary be prepared for and to have an evidentiary hearing on those issues. What, Mr. Hueson, I'm sorry, what date did you suggest? Well, the week of December 12th? That's almost, that's a month from today, so. I should be enough time, I would think.

Do you have, I'm sorry, Your Honor, during that week, is it the, this is your calendar, that I can do it the rest, no, this is my count. I can do it any time during the week of the 12th. I could, I'm fairly jammed up that week other than the 16th. That's, it's the way, there's a work for you. Okay. That would be wonderful, Your Honor. Thank you so much.

16th, and we'll start at 10 a.m. Thank you, Your Honor. All right, I was going so smoothly until. Yes. I was just looking for an objection deadline for the hearing on 16th, in case others wanted to weigh in on the issues. Let's set it for the ninth with replies due on the 14th. Thank you.

Okay. Anything else, Mr. Bromley? That is it for the debtors, Your Honor. I want to thank you very much for your time and attention. We appreciate the opportunity. Thank you all for a smooth presentation and a very thorough presentation. I appreciate it. It brought me up to speed on the case.

And I'm glad to hear the parties are cooperating, particularly with the liquidators and the debtors here in the Chapter 11. Hopefully that will continue and can come to a resolution about how to proceed forward with the sharing of information and recognition. And maybe you can avoid the whole hearing in January. Or whenever it's going to be, because we don't have a date yet for right. Okay, well thank you all very much. We're yours.

I have a question. When does the sound back?