American court hearing recordings and interviews - Season 1. Episode 3. December 16, 2022. In re FTX Trading Ltd., et al., chapter 11 bankruptcy case no. 22-11068, audio of hearing held in the FTX/Alameda et al. bankruptcy proceedings pending in Delaware, USA #crypto

Episode Date: March 9, 2023

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Good morning, everyone. This is Judge Dorsey. We're on the record in FTX Trading Limited, case number 22-11068. Before we start, let me just remind everyone this is a formal court proceeding, even though we are pursuing it virtually, so disruptions will not be tolerated. So please keep your lines on mute unless you're speaking and your camera's off unless you're one of the parties participating in the discussion. And with that, I will turn it over to debtors' counsel. Good morning, Your Honor. This is Brian Gluckstein of Sullivan and Cromwell for the debtors. Can you hear me okay? Yes, thank you.

Thank you, Your Honor. Good morning. As reflected on the amended agenda that we filed at docket 232, we have only a short remaining agenda of three matters for today, with the remaining items scheduled, either being resolved or adjourned to the January 11th hearing. Your Honor, proposed to just proceed in, order of what we have remaining on the agenda if that's okay with the court. With

respect to the first item up today, agenda item four is the debtors motion to seal indemnification and exculpation motion. The motion to seal was filed at docket 95. Your Honor will recall that at the November 22nd hearing the court entered an interim order at docket number 141 at the debtors request sealing the debtors motion authorizing certain indemnification and exculpation in connection with the debtor's asset recovery efforts and the interim order granting that motion, which were filed at docket numbers 94 and 140 respectively. The debtors have made significant progress locating and securing digital assets and that work

remains ongoing. Nonetheless, the debtors are comfortable that at this point in their work, when also considering the need for transparency in these Chapter 11 cases that the motion and interim order can be unsealed at this time. As a result, the debtors are not requesting further sealing of the motion and interim order on a final basis and therefore request that the court unsealed on documents at this time. The debtor's request for entry of a final order with respect to the indentification motion itself is scheduled to be heard at our second day hearing on January 11th. Does anyone wish to be heard?

I will enter the order to unseal those pleadings. Thank you, Your Honor. The next item up this morning is agenda item number six, which is the amended motion of certain media outlets to intervene in these proceedings for a limited purpose, and I'll cede the podium to the movements. Mr. Finger? Good morning, Your Honor.

Leave a finger on behalf of the... Opposed intervenors may it please the court. I know I believe your honor has some historical familiarity with access motions I don't know how much how much you tell you what I know what you to go into into the motions intervened aspect of it certainly the courts of this district and the appellate to Third Circuit all recognize intervention as an appropriate means to deal with access case They find a common need. We share an interest with the public as the eyes and the ears of the public and there is no need for an independent basis for jurisdiction.

The claim is under constitutional rights as well as federal common law and therefore we satisfy the requirements for intervention. And turning to the motion to unseal, I note yesterday you're honored that the trust filed the identified the members of the creditors committee and those names were not under seal so we're already starting a process of names dribbling out and a point I made in the motion is that this is things are going to come out eventually and there's no basis for distinction between names that voluntarily come out with those who are on a list that's not that's not the standard for

for seal or unsealing what actions they have taken. Well, Mr. Finger, let me stop you for a second. I think the only thing on the agenda for today was the motion to intervene, and I will be scheduling a hearing on the motion to unseal. And I also saw that the committee was appointed yesterday, so we can now, that was what I was waiting for, for a committee to be appointed. Obviously, they're going to have to retain counsel

and get up to speed before we have a hearing on this, because this is something they're going to want to. to weigh in on. But let me just stick with the amended motion to intervene. And I've read those papers. Is there, is there any objection? I made the objection deadline today at the hearing. Is anyone objecting to the motion to intervene? Your Honor, Brian Gluckstein of Sullivan Cuhran for the debtors, just very briefly. The debtors do not object to the media outlets intervening for the sole purpose of permitting the court to hear their objection to the debtor's motion for an order authorizing the action of individual information.

As Your Honor notes, that motion is not being heard on the merits today. We'll be heard at a future hearing. The debtors do reserve all rights with respect to standing and otherwise in the event that the media interveners seek to intervene more broadly in the case, but with respect to being heard on this motion, we don't have any objection. Anyone else wish to be heard? And Mr. Fringer, I assume the media outlets are all. seeking to interview for purposes of this sealing motion is that correct that's

correct you're okay now they reserve the right to seek to intervene in case there are other ceiling issues that come up or other matters to the media of interest but for now this is limited to objecting to the proposed forward sealing names of names and addresses of credit okay now I will approve that order do we have a form of order uploaded that the parties agree on I am not sure sure that you're on but I will certainly on temperature gluckstein when this is over make sure that we have something that is agreeable to everyone okay and go ahead and confer and upload the order no

need to do it under COC we'll just outland to the order once once it gets uploaded thank you Ron okay okay mr. Gluckstein back and I will come back to the this we'll talk about the scheduling of that motion in a moment but let me go back to mr. Gluckstein the agenda for now. Thank you, Your Honor. The only other item on the agenda for this morning is the status conference with respect to the motion of the JPLs of FTX digital markets. Did you want to address scheduling before we handle that or at the end?

Well, why don't we do that? I mean, the only thing I was going to say about scheduling is, is, I was wondering if you were on, Ms. Harkesian, is to have the parties, meet and confer with the committee once committee council is appointed so that we can get something on the books. I don't want this to linger out there too long. I think it's something that does need to be addressed in a fairly timely manner. Obviously we're going to be into January before that happens. But I also want to make sure the committee's council is comfortable with its ability to properly address that motion. So I, I I just ask Mr. Gluckstein and Ms. Sarkesian if you could meet and confer with the committee's

counsel once we know who they are, and then contact chambers for a hearing date. Your Honor, if I could address the court briefly? Sure, go ahead. Julia Sarkesian for the U.S. Trustee, at the hearing earlier this week, I believe Your Honor suggested scheduling that hearing for starting at 9 a.m. on January of the 11th. Initially, I think there's an omnibus hearing for 10 a.m. And you suggested 9 a.m. because, you know, potentially this hearing could have, there's some aspect of it that will be evidentiary. Is that something that we could sort of put a pin on and have that reserved so that

assuming that date is okay for the committee that we can move forward then? Yeah, I do have. I haven't blocked in my calendar beginning at 930 on the 11th, but we can start at 9. I think you had indicated Ms. Sarkeesian at the last hearing at 930 would work better for you, so I said it for 930, but we can make it 9 if we think this is going to run over with all the other motions are going to be on for that day. I leave that to debtors' counsel to address. I can get, 9 o'clock is manageable for me. I can make it work.

Okay. Mr. Landis? You're muted. You're muted, Mr. Landis. Sorry, no longer. No matter how long we do this, Your Honor, I need to be reminded to click unmute. Adam Lance from Landis,

Draft and Cotton we have the debtors. We were anticipating, Your Honor, starting at 9, Mrs. Sartesian had indicated that she could make it work, and based on the length of the agenda and the nature of the matter is going forward, We thought we were going to need the time, so we would appreciate the court's indulgence to start at nine. Okay. We'll start it at nine, and we'll at least block out, including the seal motion on for that day,

subject to the committee's counsel coming in and saying they need more time. Thank you, Your Honor. Okay. Mr. Brown, did you want to hear? I see you turn to your camera. You're muted, Mr. Brown. I wish I had a dollar for every time I said that in the last three years. You could retire.

Can you run or do you there? You're muted still. It sounded like you had two microphones open at the same time there. You were getting feedback. Can your honor hear me now? Yes. Okay, I'm sorry, Your Honor. My Zoom requires me to dial it as well.

That's a technical issue on my end. You're going to have to speak up there. Your Honor, I represent. You have to speak up a little, Mr. Brown, or get the microphone closer. I represent one of the members of the committee, and not on behalf of the committee, but just reporting to the court that the committee is meeting and going through its processes and expects to select counsel either Monday or Tuesday next week and just wanted the court and

parties to be aware of that. Okay, thank you. Appreciate that, Mr. Brayne. All right, are there any other scheduling issues we need to discuss at this point? I don't have anything on my list that needs to be scheduled. Not from the debtor's perspective, Your Honor. Okay. All right, let's go ahead with the status conference then. Thank you, Your Honor. And I'll for that I'll turn over to my partner, Mr. Bromley. Okay.

Good morning, Your Honor, James Bromley, of Sullivan and Cromwell on behalf of the debtors. We were before, Your Honor, a couple of days ago with respect to the request by the joint – I'm sorry, the joint providental liquidators from the Bahamas. We had a meeting yesterday in New York, which included – representatives of the debtors, the joint provisional liquidators, and the Securities Commission of Bahamas, both principals and counsel. And while we haven't come to any conclusions, we did have a productive exchange of views. We have a proposal from the joint provisional liquidators.

The debtors will be responding to that proposal. And at the moment, we don't have a solution, but we're certainly working in good faith to see we can get to a solution. For the moment, I think it makes sense to continue to hold the date of January 6th. It is certainly our hope that we might be able to have a solution prior to that, and notwithstanding the holidays, we'll be working towards trying to come to that conclusion. But at the moment, Your Honor, I think we need to continue to hold that date. Okay.

Thank you. Mr. Joseph Kee? Good morning, Your Honor. Jason Zaki of White and Case on behalf of the joint provisional liquidators. First matter, Mr. Shore sends his apologies. He is about three doors down from you, I think, in a different courtroom on a long-schedged hearing, so you're stuck with me. Mr. Brownlee is correct. We did have a meeting.

Principals and counsel did attend. Mr. Ray attended. We very much appreciated that. And we are hopeful that we'll be able to work this out. but if I just could raise a couple of issues, so Your Honor can understand from our client's perspective in case we do need to move forward. First, we believe that the proposal we made

with respect to the information addresses all of the issues that were raised by Mr. Bromley earlier this week. And so we are hoping that the debtors consider that in good faith and that we are able to come to degree agreement because this is critically important from our client, Your Honor. This is a threshold issue for them. They need access to their debtors books and records in order to do their job as court-appointed fiduciaries. And so from our perspective, it will be really important that this issue with regard to the information

gets considered on its own merits and isn't tied together with other parts of the case. There are a lot of issues in the case that will have to be dealt with. and that will all come in time, but we believe that our request for information, which we believe is quite unremarkable, should be considered on its own and not tied together with other issues. On time, Your Honor, I know that Your Honor to set this for the sixth, and so we will proceed on that schedule. From our perspective, this really is an urgent matter, and so while we are happy to work with the debtors, from our perspective, we cannot have the issue of the information slip past the sixth. And so to the extent we are not able to come to an agreement, what we really need to avoid from our perspective

is having this kind of drag out so that we can't even really begin to do our job in the Bahamas for any longer, because this is really interfering with the ability of the liquidators to do their job. And so that's why the timing from our perspective is so important. And I think it's important to know that in any international case like this, there are a multitude of jurisdictions that have legitimate and important interests. And that certainly includes the Bahamas. Number of these are Bahamian entities.

Our clients are the trustees for a Bahamian entity. And the Bahamian legal system is an independent legal system that should be respected. And there have been a lot of allegations and aspersions thrown around directed at the Bahamas, the Bahamian government, the Bahamian legal system. And we'll deal with that in good time if necessary. If we get to the six, we think the evidence will show that those allegations are wholly without merit. In fact, as Mr. Shore pointed out, one of the allegations that the debtors raised in connection with, in response to this motion to shorten, that the Bahamians were somehow facilitating

payments off the system to Bahamian residents and preference to other creditors. When we look at the evidence, they have that exactly backwards, and our clients were appointed specifically as part of an effort to stop such activity. And so we do think that the extent that there have been allegations of any improper conduct by our clients or by the Bahamian system as a whole, at the right time, the evidence will show that that's entirely unfounded. And then the last point I want to make, Your Honor, just so that you can understand this from my client's perspective. My clients are independent court-appointed fiduciaries for the Bahamian estate that had no involvement in this matter prior to their appointment and the commencement of these bankruptcy proceedings. They are charged under Bahamian law with investigating what happened, and the information that is requested by this motion, which again is the information that belongs to the debtors over which they have been charged in given responsibility, is funded. mental to their ability to do that investigation.

And we found ourselves in a situation which, again, from their perspective, is a little bit upside down, where the debtors, even with regard to the information that belongs to the Bahamian entity, the debtors have set themselves up as a gatekeeper here. And while I'm certainly – MR. Zaki, I'm going to cut you off because we're getting into the merits of the issues here. And we have a hearing date on the 6th.

I'm going to talk a little bit more about that date and what's going to happen leading up to it. But let's, you know, this is not the time to make those arguments. So the evidence will show what the evidence shows if we get to the sixth, and that's what I will base my decision upon at that time. So with that, hold on, Mr. Dackey. So at this point, what I want to know is have, is the brief, complete on the motion to lift the stay and turn over Mr. Bromley-Shafin. I haven't seen a response from the debtors yet.

Is that correct, Mr. Bromley? That's correct, Your Honor. We did file an objection to the motion to shorten. We have not filed an objection to the motion to compel. And we would like to have a schedule to do that. And Your Honor, just on that point, if I, and this might help with Mr. Bromley's response, one of the things that we will do if we proceed on the sixth, Your Honor, I know that the live access versus static access was a hot issue, and while, again, we don't agree with the debtor's

concerns. In order to simplify this hearing, for purposes of the sixth, what we will be seeking, is static access, not live access. We think that that makes the issues simpler, and, you know, cleaner. And so we would be amending the relief we sought in the motion to seek at this point without prejudice to seek live access later, simply static access at this point. Hopefully that makes the issue simpler. It sounds like it might, but I'll leave that to Mr. Bromley. That's an issue for him to address with his clients. So for the briefing schedule, we have a hearing date on the 6th. Mr. Brownlee, when do you want

to file your response to the motion to compel? Your Honor, the 6th is a Friday. We would like to be able to file our response on the morning of the 4th, which is Wednesday.

So 9 a.m. on the 4th. I won't get much time for Mr. Zaki to file a reply brief. Why don't we make a with my mind, Your Honor. Why don't we make it, I only make your brief due, Mr. Brownlee, on the 30th. And then if there's a reply, that will be on the fourth.

And that gives me a couple days to review it before I have to go into the hearing. Certainly that we will meet those dates, sir. Okay. And we have, this will obviously be a live hearing with, well, hybrid, I guess, people who want to participate, who aren't going to be actively participating in the hearing. on the sixth can appear virtually but the main parties to the to the case and certainly the witnesses must appear live in the courtroom under the same goes for I think the second day hearings just to go off this issue for a while

second day hearings mr. Bromney where we anticipating well now that we may have the issue of the on ceiling I assume we're gonna have witnesses so that will probably have to be a hybrid hearing as well. So just so everybody knows ahead of the time. Yes, sure. Okay. All right. So anything else before, on the scheduling, before we adjourn?

Just on, with respect to the hearing on the 6th, if we do have to go forward, what I would propose, Your Honor, is on the 30th when we file our response, that also be the date that the parties would exchange names of testifying witnesses for the hearing on the sixth. Yes. And to the extent you can agree on stipulated facts and exhibits and the admissibility of exhibits, we should also do that on the 30th as well. So we can have, why don't we just go ahead and have kind of a pretrial order that lays out what the disputed, what they agreed upon facts are, what the disputed facts are, what the witnesses are in a brief statement of what they're going to testify about and exhibits, lists of exhibits, whether they're agreed to or not.

And that way I can address any objections to the exhibits at the beginning of the hearing on the 6th. Very good, Your Honor. Okay. Your Honor, just with regard to scheduling, and I don't know if you want to deal with this now, we spoke, I think, on Wednesday as to the scheduling of the recognition hearing. I asked about the chambers. Yeah, I thought. chambers had given us the 13th of January as a date for that.

I didn't know if that still works for the court or the tenders. It's not on my calendar. I didn't know if you wanted to set that now or if we should work with chambers offline to accomplish that. Work with chambers and debtors' counsel. And obviously you're going to have to have the committee's counsel as well on that one. Your Honor, with respect to the recognition, certainly it is our hope that we'll be able to resolve issues that exist.

between the parties. But if we are not able to, we do not consent to go forward on the 13th. We will need discovery with respect to the recognition hearing. So our view is that what we should do at best is have a scheduling hearing with respect to discovery. We will need to take discovery not only of the joint provisional liquid orders, but also other parties in the Bahamas if we do decide to go forward on that basis. All right, well, not the parties meet and confer, along with the committee council, and then if you need to have a scheduling conference come back and we'll do that. Yeah, and I would just suggest, Mr. Bromley, if there's discovery they need and they want to get started, they can get started. Again, we're going to want, Your Honor, to be able to deal with these issues in a timely manner, and I know we don't have to resolve that here, but it's going to prejudice our clients if these things just get pushed up indefinitely.

Well, it sounds like the parties are talking to each other, and hopefully the cooperation will continue, including discovery issues. I have to spend my holiday while I'm traveling having to have a conference call about a discovery dispute. So hopefully the parties can agree on discovery issues. Anything else before we adjourn? Nothing from the debtors, Your Honor. Okay. All right. Thank you all very much.

We're adjourned. I guess I will, I guess our next, we won't get together until the sixth if we, if that goes forward. Hopefully the parties can resolve it, but if not, I'm prepared to go forward on the sixth. All right. Well, thank you all very much. Enjoy the holidays, and I will see everybody next year. We're adjourned. Thank you, Your Honor.