American court hearing recordings and interviews - Season 2. Episode 8. November 15, 2023. In re FTX Trading Ltd., et al., chapter 11 bankruptcy case number 22-11068, audio of hearing held in the FTX/Alameda et al. bankruptcy proceedings pending in Delaware, USA #crypto

Episode Date: November 27, 2023

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Before we begin, I just need to make sure that our folks who are on Zoom call, I made this announcement. I don't know if I did it in this case before. It may have been Mallinckrodt. The Judicial Council has instituted new rules post-COVID for participation remotely in bankruptcy and other court proceedings. and the rule is that if you are not a party to the case, and in a bankruptcy case that would include someone who is a customer or a creditor or an investor parties who are represented by cancer, you cannot appear and view the video of the proceeding.

You can only participate by audio. And if there are witnesses, then you have to be off completely. If you want to see the witnesses testify, you have to be in court. So with that announcement, I know Jermaine made an announcement earlier as well, if you are a member of the press, and we have the login sheet, if you haven't dropped off, we're going to move you into the waiting room for Zoom, and you can then dial in without video. to hear most of the proceed.

When a witness testifies, you're going to be kicked back out again. And then we'll bring you back in after the witness is done. So you can hear the arguments, you can hear those things, but you can't hear the witnesses testify. Those aren't my rules. The judicial counsel set those rules, so I have to live with them. So that, as we are, go ahead, Ms. Swines. Good afternoon, Your Honor, I may please the court.

the court. Adam Landis from Landis Rapp and Cobb on behalf of the FTX trading limited debtor and its affiliated debtors. Your Honor, we have a number of matters going forward this morning. One matter in the main case at item number 11 is the amended motion regarding reimbursement agreement. Two matters in the platform life sciences adversary. One matter in the Lorum Ipsom adversary and one status conference requested by the United States Trustee regarding the examiner. I will yield the podium to Mr. Gluckstein, who will handle item number 11 regarding the reverse magazine. Okay, thank you.

Mr. Gluckstein. Good afternoon, Your Honor. For the record, Brian Glofstein, Sullivan and Cromwell for the debtors. Your Honor, I'm here today with two of my partners, Stephen Emermberg and Stephanie Wheeler who will be handling certain matters in the adversary proceedings. Your Honor, this is agenda item 11 is the debtors motion seeing entry of an order authorizing the debtors to enter into and perform under the reimbursement agreements with the specified professionals of the ad hoc committee of non-US customers of FtX.com. Your Honor, we were informed a short time ago this morning that the U.S. trustee is standing

down on its objection to the motion. We of course appreciate this development and are pleased to have the U.S. trustee drop its objection. We were, however, surprised by its timing, given that specifically on Monday we did inquire with the U.S. trustee as to whether Mr. Ray needed to travel and appear today at the hearing for potential cross-examination and we were told that he did. So Mr. Ray is here in the courtroom this afternoon and present, but the only remaining objection that we have to the motion this afternoon is an objection that was filed by an individual creditor mr. Pat Ratpati I will address his objection and the

request of relief briefly but first your honor I think there was an additional one and another pro se claimant has filed an objection that I just followed yesterday I believe mr. Carter in this well mr. okay mr. Carter mr. Carter had I think this is one I'm thinking I've had some had some broader issues as well but to the extent it's looked at as an objection to this you know I think it's the same I don't I think there's new issue circle. We certainly can hear from the, hear from the objectors.

In support of the motion, Your Honor, we did submit the declaration of the debtor's chief executive officer, Mr. Ray, that we filed at docket number 3,700. As I noted, Mr. Ray is here in the courtroom and available if the court has questions, but we would ask that Mr. Ray's declaration be moved into evidence.

Is there any objection? There nothing? It's admitted without objection. Thank you, Your Honor. Your Honor, the ad hoc committee with members currently holding well over $1 billion, I believe it's in excess of $1.2 billion based on the updated 2019 that was filed this morning, of FTX.com claims has been, continues to be, an important

constituency whose active participation in these cases has benefited the debtors in their states. The ad hoc committee was formed very early on in these cases and has continued to both grow and evolve to be representative of the vast and diverse group of FtX.com customers. The Adhoc Committee commenced, as Your Honor knows and will recall, an adversary proceeding early on in these cases asserting property interests in the debtor's digital assets. The fair resolution of those claims has been an important issue for the debtors to discuss and resolve as part of its planned formation process. The FTX.com predators, who constitute the debtor's largest class of predators, are separately

classified in our proposed plan and will be entitled to vote in the plan, the amended plan that will be filed shortly and brought forward before your arm. The AdHoc Committee, of course, is not an estate fiduciary, but the debtors believe that it is representative of the customers of FTX.com, including small and large holders of claims, and includes both initial holders and subsequent claims purchasers. While they will undoubtedly be FtX.com creditors who views differ from the consensus views expressed by the ad hoc committee, the debtors believe that the ad hoc is well situated to negotiate settlements of customer-related issues with the debtors on behalf of a critical mass of customers who can support the relief that results. The alternative, Your Honor, of negotiating individually with every single of the individual. the millions of customers is in practice.

Thus, the debtors have determined, in their business judgment, to agree to reimbursement of reasonable fees and expenses of the ad hoc committee professionals that set forth in the reimbursement agreements and the proposed order that was filed with Your Honor. These agreements have been extensively negotiated and considered before we brought them here today for approval. The UCC has scrutinized these agreements and does not, as they stated in their statement, that does not object to the relief that's being requested today. Mr. Ratapy's objection, as the now abandoned U.S. trustee objection did, wrongly argues that

the request that is before the court is governed by the substantial contribution standard under Section 503B of the Bank of Security. Respectfully, Your Honor, we submit this is not the law. As detailed in our papers, there is clear and persuasive body of recent case law. a decision by Judge Silverstein just last week that draws a distinction between a request by the debtor and a request by the creditor seeking reimbursement and holding that Section 363 is a valid statutory basis for the request of relief when being sought by a debtor. The District Court's opinion affirming this Court in Malacroft examined this exact issue

and arguments and correctly determined in Section 363 and 503 of the Bankruptcy Code are directed at different parties, operated different times, and and serve different purposes. Numerous other courts have examined this exact issue and agreed, including courts in this district in recent decisions in Ketti Fenwall and Amreras. Section 363 is the appropriate legal standard and the uncontroverted evidence that the debtor has submitted demonstrates the debtors have exercised their reasonable business judgment in agreeing to the terms of the reimbursement agreements with the Ad Hoc Committee.

If Mr. Ray's testimony, now uncontroverted, explains the debtors have received substantial benefits from the ad hoc committee's support and cooperation to date, and the cooperation and constructive participation in these cases is important as the plan process moves forward. Mr. Ray's testimony also explains in the debtor's view, there could, at some point, on certain issues, be divergence of interest between the FtX.com customers and general unsecured creditors, whose collective interests are represented by the UCC. In fact, the ad hoc committee and the UCC do represent and serve distinct roles. The committee represents the collective interests of all unsatured credits of FTCTS.com and otherwise.

The ad hoc committee, of course, represents not only the FTX.com creditors, but does so with respect to all claims, including their assertions that those customers hold profit. interest in the debtor's assets. Therefore, the debtor's view the ad hoc committee has an important counterpoint to the UCC on a number of issues and we believe separate representation is appropriate. Critically, Mr. Ray explains in his declaration with the benefits of the ad hoc committee's active participation to date, including the negotiation and entry into a plan support agreement on October 16th. That plan support agreement, which is also supported by the official committee, was reached following

constructive and lengthy negotiations with the ad hoc committee and its professionals. The PSA creates a binding obligation on the ad hoc committee to settle the customer property adversary proceeding and other key disputes with the debtors and to support the debtors' plan process pursuant to the terms contained therein. Ensuring that agreement stays in place is an important consideration as Mr. Ray explains in this declaration. Furthermore, Your Honor, the debtors negotiated the terms of the reimbursement agreement at arm's left and successfully included numerous safeguards, among them, ensuring

that the work that's eligible for the reimbursement is benefiting the estates as a whole, that there are appropriate caps on fees that were carefully and the subject of lengthy negotiations. And of course, that the debtors retain a right to terminate that arrangement at any time if that is in the best interest to the debtor's estate. Additionally, Your Honor, there will be ample opportunity, and we believe very importantly, we negotiated there to be additional safeguards so that both the court and all parties in interests

have the opportunity to evaluate whether the actual fees being sought are reasonable and benefit the estate because the professionals are subject to the court's interim compensation procedures and review by the fee exam with respect to all fees that are submitted for the estate. The evidence before the court, Your Honor, conclusively establishes that the debtors, through Mr. Ray and the Debtors Board of Directors, determined in its business judgment that reimbursement of the Anhock Committee professionals is in the best interest of the debtors in their states. We submit, Your Honor, the debtors carry their burden based on that business judgment through Mr. Ray's testimony, to satisfy Section 363 be with the Bankruptcy Code, and we request that the revised order that we submitted this morning,

which makes a few technical changes that had been part of the U.S. trustees' objection and filed at docket number 3796 of the answer. Let me ask you some questions because I'm struggling with how the ad hoc committee, in their own papers they say, what we did was we sued the debtors, we negotiated with the debtors, we settled that lawsuit through our plant support agreement, which includes providing that our clients and other similarly situated parties have a separate class and we'll receive priority payment over other general and secured creditors. That sounds to me like they were acting in their own self-interest,

and maybe it had an incidental benefit to the estate. But they certainly weren't acting for the benefit of the estate in that context. And I made it clear in Malencroft, and Judge Stark agreed with me in his opinion upholding my decision. That in this context, the business judgment rule, it's not just the debtor's business judgment, but it also has to be something that has to be engaged in something

that is beneficial to the estate, more akin to a 503 standard. And under 503, it's obviously clear that it cannot be just simply incidental. I'm afraid we're opening a Pandora's box here. that any time a creditor says, I have a $100 million claim against the debtor, I've now settled it for $50 million after months of negotiations with the debtor. That opened up $50 million of additional funds for other creditors, so therefore you should

pay my peace. Why should I do that? Your Honor, I understand the concern, and I don't think that's what's happening. I do think the facts here are unique. And under no circumstances that we're suggesting that this should be part for the court or ordinary course approval of fees. What we have here is a situation where we have a class of creditors that numbers in excess of at least a million that are creditors of FDX. The lawsuit that was filed by the ad hoc committee seeking property interest claims is an issue. that needs to be resolved.

We've discussed it before Your Honor. Your Honor has raised questions about these questions, and they need to be resolved, and we need to have somebody to talk to, to resolve those issues and related issues. There are a significant number of issues here affecting the FTX.com creditors that are central to our plan,

how we deal with preferences, how distributions are going to be made. There's an ongoing process, as you ought to know, to deal with the FTX.com exchange. What eligibility are customers going to have? Should there be a successful transaction to take distributions in alternative matters? These are questions where the debtor and their estates

in order to come forward with a plan that is both actionable and that begins to build consensus needs to have a critical mass of those creditors at the negotiating table. It's simply not realistic, to suggest that we're going to be able to negotiate in the first instance a plan of reorganization with such a, you know, a disparate group of a million plus credit.

Well, the A's, the Ad Hoc Committee only represents 38 creditors. They can't act on behalf of the other nine million. They can't act on behalf of them. That is true. And as I stated earlier, they are not certainly acting in a capacity as a, you know, as a fiduciary for them. But we do believe they are representative. And you're going to present your plan and seek to have it approved, and any one of those are multiple number of those 9 million customers might come forward and object.

So how does this, how does dealing with just the ad hoc committee resolve that issue? Well, it does two things. First, we are resolving the litigation. And I understand that simply resolving litigation is not enough for reimbursement. we wouldn't be proposing that. But that is an important milestone in the case to have that litigation result. That is the pending, them,

there's two adversarial proceedings filed on this issue through our plan support agreement. Both have now been resolved on this issue. The, the issues that flow out of that, in terms of plan formation, to know that there is a critical, mass of customers holding a significant value in claims in excess of $1.2 billion that has been subject to NDA, that has been at the negotiating table, that has looked at the issues,

has had arm's length negotiations with the debtor, with the creditors committee, and has looked at all of the different permutations that we have been contemplating before we bring a plan forward is helping to build critical consensus that we need for this point. And we think that is, and Mr. Ray's testimony in his declaration goes to this point, we do think that is providing collective value to the estate on the unique facts of this case, which is that we have such a large, both in terms of number, in terms of volume of claims, value of claims, and just numerosity number of claimants. And you're absolutely right, Ronald.

We will put our plan forward. It will go out for a solicitation. It will be voted on. and undoubtedly there are going to be creditors who have a differing view. But we do believe that the efforts that have been made by the ad hoc committee to work with the debtors, to work with the committee, to build consensus, is shortening the timeline on this case, and it is helping to get towards what we hope ultimately is as a consensual plan as we can possible.

I'm asking another question. It's kind of not necessarily related to this motion. No, it is related, but not. only this motion. The ad hoc committee says in their papers there's an actual conflict of interest with the UCC because the UCC cannot act on the, for the benefit of these customers who are different

from other general unsecured credit because they're arguing that the property actually is theirs and should have been returned that was the basis of their lawsuit. And they've now settled that, obviously, through this plan support agreement. But is there a conflict? with the UCC and how do I deal with that and maybe this is a fair question for you but why didn't they move for appointment of a separate committee well I think we wouldn't have

this problem I think your honor I you know we haven't used the word conflict in that way obviously conflict has a very specific meaning but I think I think is is I touched on earlier and as we explained in our papers from the debtors perspective if the claims that have right the The committee, the official committee represents the interests collectively of unsecured creditors, right? By definition, they need to be unsecured creditors. The rights that have been asserted in the adversary proceeding by the members of the ad hoc committee are that they're not unsecured creditors, that they, in fact, are,

the debtors holding their property, that they want a return of their property. And so by definition, if they are, in fact, property owners and those claims when ultimately litigated were to prevail, they wouldn't be credit in this case. There would be some mechanism to return property right now. There's all kinds of issues here or why that doesn't work in terms of whether we have the property and how that it works, but there are equitable trust and other arguments that we've talked about. And so I think the argument, as I say, we don't, I don't view it as I say, we don't, I don't view

it as. a conflict, I just view it as they're representing different interests. And to the extent that the Ad Hoc Committee is bringing forward and pressing their interests as property holders, and that's the dynamic that we faced in the negotiation of coming up with the structure for the plan, where the committee is representing the interests very well of all unsecured predators, of not only FTEADs.com, but of the other debtors. We have the ad hoc members saying, but we believe we have these property interests, and that would take us outside the purview and the scope of the committee's mandate by statute.

So I don't view it as a conflict as much as that there are differing interests in play in putting these complex puzzle. Okay. All right. Anything else? Anything else? Nothing else. Unless the court has any other questions.

I'm happy to let others. Let me hear from the parties who support the- Good afternoon, Your Honor, and may it please the court, Matthew Harvey from Morris, Nichols-Archton tunnel. of the Ad Hoc Committee. Your Honor, I won't repeat anything from the debtor's well-articulated arguments in support of their motion. However, I set forth in our file reply because the objections we think regrettably were founded on misconceptions about the Ad Hoc Committee's composition and purpose and the crucial roles that we think it's we've played in this case. We'd like the

opportunity to just briefly address those points. The first point, Your Honor, that I would address is that a set-forth our reply filed on Sunday and in our third supplemental 2019 statement filed this morning and I'll note from that your honor the group membership is now actually 66 members 58 of which are original holders the ad hoc group represents a diverse group of FtX.com customers spanning over 31 countries globally and our purpose is outlined in our bylaws and this is a quote is to in a cost-efficient and timely manner maximize recoveries on claims of against FTFS FDX Trading Limited and its affiliated debtors by leveraging the position that debtors have no

equitable interests in the customer assets. In the very next line is membership is open to all creditors aligned with this purpose. So that's number one on the sort of composition and purpose. Number two is on the early contributions and recognition in this case. Your Honor, we were actually formed 13 days before the U.S. trustee appointed the official committee and to an address of point your honor raised. we did actually seek a separate customer-only committee from the US trustees office, which they did not elect to appoint.

From there, we went on with our role with the ad hoc committee. You could have filed a motion asking you to appoint. You could, we could, of course, filed a motion, Your Honor, but we determined at the time that proceeding through an ad hoc committee, including being able to bring the litigation promptly before engaging in motion practice over that was the more prudent course. at that time. But regardless of whether we're an ad hoc committee and this committee,

we set out immediately to try to address this dire situation that FTX customers found themselves in suddenly in early November 2022. We put forth, we think, what were the strongest arguments in favor of FtX.com customers and their property rights. And despite initial challenges and skepticism from others in the case, our customer property rights laid the foundation, our customer property rights, our customer property rights arguments laid the foundation for what became the original draft plan filed over the summer, and eventually through further in-person and other negotiations in September and October, which were extensive and contentious, the settlement plan support agreement and the plan

term sheet that the debtors filed in mid-October. We think that we've contributed substantial value to this case. Contrary the objections, this value is undeniably demonstrated. Our efforts have conserved state resources, advance the cases, achieve favorable outcomes under the PSA and the plan term sheet, and we believe we played a pivotal role in breaking deadlocks and negotiations between other parties in case, including the debtors in the committee. And this goes, I think, part to the point Your Honor was raising about benefits to the estate versus benefit to the constituent. In all of these cases where we have these ad hoc committees, and I'll allude to the government ad hoc committee in the Malingrad case, they of course have their own proephial interests. interests. And I think what your honor recognized, of course, you know you're ruling better than I do, was that they were putting aside those interests and their, and their parochial pursuit of just those

interests. And many of those government entities had pending litigation or investigations against Malencrope before the bankruptcy for their role in the opioid crisis. And some of those were stayed, some probably were not stayed as a result of the police power exceptions, but they held those in abeyance, just as we've done with our litigation. And they went to the mediation in front of Judge Sanchi in that case and they worked out what ultimately was a global settlement. Feinberg. What's that? Mr. Feinberg.

Mr. Feinberg was, I believe, for that one. And Judge Sanchi was the one that my client in that case participated in with the official committee. And to address another point, Your Honor, there were dissidents after that. My client in that case was one of them from the settlement that was reached. But the fact that there may be dissidents to a deal that's broadly supported by the key constituencies and their representatives, I don't think is an impediment this type of motion. We recognize in a case of this size, you're likely to never achieve,

especially a case like this was a free fall bankruptcy without the ability to pre-plan and come up with the instruction support agreements ahead of time and lock in votes through pre-petitioned restructuring support agreements. You're going to have contention. There's over a million FDX.com customers. There will be people that come out of the woodwork,

I'm sure of it. But what we're committed to as an ad-off committee is trying to bring as many of those people into the fold to explain them, because we've all the viewpoints that others are expressing we have on our committee and we've considered those and we've synthesized those into our views recognizing the limitations of the bankruptcy law the law and the facts and the strictures of a way a plan needs to get done and the requirement for equal treatment among similarly situated people to try to find a way that maximizes value respects as many of those

interests as possible and doesn't admire these estates in litigation that was we cost the everybody whether you're an unsecured predator a secured predator customer of ftx.com customer of ftx us whoever you are in the case litigation that is long and drawn out and will not benefit anybody we won't be able to avoid all litigation in this case there might be creditors that on a one-off basis of object but we believe we've already substantially narrowed it and we will be able to continue to substantially narrow it and that'll address another point your honor that our membership has been open to everybody we've never done

denied anybody membership that when we've heard people that didn't want to join the membership, it was earlier on in the case, it was for the free rider problem that they didn't want to have to spend their own resources. Many of these people are very small holders. I think the corality of our holders are very small holders. And many did join the group anyway, but they didn't want to expend their resources. Well, others who get the benefit of the very favorable deal we cut here, or had we litigated to completion, the result that we would have hoped it would have been favorable without expending any of the resources their own. So you had a free rider problem. And the other problem you had was both before and after

reports ruling on the 2019 statement and sealing, which of course we respect. There were nervous about disclosing their identities because of the jurisdictions in which they laid in for other reasons. So we've never been a closed group. We invite people. It's actually in our 2019 statement. We invite people to contact us. Ms. Broderick, my co-counsel's on the phone. It's closer. 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. false distinction, but it's also just untrue what's been raised in some of the commentary out there. Exactly, are you going to seek reimbursement for them? Are you going back to everything you've done since the committee was formed? We are not. In fact, Your Honor, this covers only

from May 1 forward, which is the point at which we, plus or minus when we stayed the litigation and sort of got under the tent with the debtors, signed up NDAs, began negotiating with the debtors, really we're able to bring the bear the varying viewpoints of our members, large and small, primary and secondary, people with preference exposure, people without preference exposure, get access to information, have negotiations with the creditors, have negotiations with the debtors, evaluate their proposals, advocate for our proposals. So this is, I believe, consistent with Your Honor observed in Malincott. You were uncomfortable having the reimbursement continue with things to all.

apart and people said they're litigating or they weren't negotiating in good faith. It's not to say that at some point we reserved the right for the fees prior to, I think it's April, it's the appropriate time to see whether it's substantial contribution otherwise, but that's not before the court today. Before the court today is starting May 1 forward, which is when our engagement with the debtors under NDAs and negotiations formally began. Okay. So I don't have anything else further.

I want to see if I have anything to address your, any of your honors questions that I don't believe that, I believe the debtors council covered that. The conflict. The conflict with the committee. Conflict might be the imperfect word for this judge. I think it's more of a square peg in a round hole for the committee. Committee has a very important role to feel,

to fulfill in any case, in this case in particular, where there's a diverse group of unsecured creditors, just like our group has diversity within the group and there's diversity within the constituency, there's a diversity within the unsecured creditors. My personal view with this is that it would be odd indeed for an official committee to file a lawsuit the way we did did and say that significant assets that someone else may argue

in their estate are in fact out of the estate and unavailable to unsecured creditors and are available only to a subset, although the law largest subset of the constituents in this case, the FtX.com customers, and then to try to litigate something like that to completion, or even in negotiations to push the position that this property, this property of those customers to the exclusion of others who we call general unsecured creditors in the case. So I don't know that conflicts the right word are just that maybe not the appropriate party to advance what we've done in this case.

Okay. Do you want to have any further questions for me? No, no. Thank you. Thank you, Your Honor. The afternoon, Your Honor, Kempasqually from Paul Hastings for the official creditors committee. Your Honor, for the most part, I have nothing to add to the statement that we filed on behalf of the official committee. We have no objection to the ad hoc council fees or to the raw child monthly fees and we reserve whole our rights on the law child transaction fee. But I do want to address the question that Your Honor answered with respect to conflict.

We certainly do not, in our view, have any conflict. The committee can negotiate and in fact has negotiated with the ad hoc committee, with the debtors, with the other class representative, the plant support agreement, which we think is a significant development in the case. But all of the positions can, should be and have been evaluated and addressed in a real way by our committee. There's no conflict. The committee, of course, has a fiduciary duty to represent all of the creditors, and our committee has taken that responsibility extremely seriously and considered the number, the amount of the customers at the international exchange. The non-exchange customers, the U.S. customers, those are all, excuse me, I went too fast,

the U.S. customers. All of those different creditor constituencies are, of course, within our purview and something we take, again, very seriously. So we don't see any conflict, but I do want to emphasize, and I know I said this just a second ago, that the plan support agreement is a significant development, and the A-HAC committee and the others' stakeholders around the table were important parts in getting us to where we are now.

And as we've said over and over again in these cases, the goal of the official committee, and I know it's of the debtors as well, is to maximize recoveries for all of the creditors and to find an exit to bankruptcy at the soon as possible date. And the plan support agreement is an important step in that direction. Okay. Thank you. Thank you, Your Honor. Good afternoon, Your Honor.

I mean, please the court, Manhattan for the U.S. trustee, arise to confirm that our office is not prosecuting our objection here today. Are you withdrawing the objection? I was a little confused by the language you used it. I wouldn't say that, Your Honor. I don't want to prejudice our rights in case there is another request made in the future. I want to reserve any and all objections to any future requests to have professional. There's a future request.

You'd have to file another objection. Maybe you'd have to file another motion and you'd have a right to object to it, huh? Yes, Your Honor. In case future motions are filed, I want to reserve all of my client's rights and objections on those points. Okay. Thank you, Your Honor. Thank you. Anyone else in the courtroom before I...

...to either of the... Mr. Rabbitute. I hope I pronounce your name correctly. That's correct, Your Honor. Good afternoon. Can you hear me clearly? I can, thank you. Firstly, thank you for a long

to be the opportunity to speak to you and your court today. As you know, these cases have affected millions of people around the world, and I'm just one of them. Most definitely not an expert in bankers. and bankruptcy, far from it. But just like many thousands of others who have had significant personal funds tied up this estate, I've had to learn how bankruptcy works

on the way. I, along with countless other effective predators on social media, have been following the case, trying to make sense of how we achieve goals of fund recovery. And as such, we all want to be able to what is best for the collective recovery. When I first read the US Trustee's objection to the fee reimbursement motion to the Adopt Committee,

the points raised by the Trustee made sense to me. As matters have progressed, the transparency of the bankruptcy process is also something that's become clear to me. And with that, I saw that many things get filed on the docket. Some started to do some research. When I first saw statements saying that the ATHoc committee solely represents the interests of dot-com code like he,

to be asked, Your Honor, that didn't make a whole lot of sense concerning what I'd seen on the docket. I'm talking specifically about what the ATHoc identified as their members. It appears that there are claims that represent not only dot-com customers, but also non-customer claims. And Your Honor, I can give you some examples and cite some exam this instance that talk includes claim numbers 3313 and 33 and 36 which account for 17

million in non-customer claims claim numbers 202 and 203 which account for 8.7 million in non-customer and as well as the secure claims against alenada research for 34 and a half million which correspond with claim numbers 4403 and 4297 In addition, a statement made by the AdHoc Committee in August 18 seemed to imply a contradiction of the very legal arguments that were the basis of the property claim they report to represent. Their statement said, and I quote, we generally support the treatment of all FTCX customers equally, irrespective of the type of digital assets held as of the petition date and subordination of claims, respect to FTT tokens to general and secure claims, in quote. valuation of digital assets as of the petition date

will be the item that I'd expect the ad hoc to be firmly against in the better extract plan, rather than it being supportive of it. Lastly, while the ad hoc response indicated no large preference risk, on-train activity would indicate that one of the ad hocs members, namely GSR, withdrew $14 million worth of stable coins from November 6th and 7, before withdrawals were halt. Given the already high fees of this case generally,

it concerned me that adding these reimbursements would increase the fee to get stayed on the one hand. But more importantly, I didn't understand how these fees would be specifically going to represent dot-com. It also appeared that claims fired, had an outsized role on the ad hoc committee based on what I had heard from Richards and that of course concerning on top of all of that the other points that were raised by US trustee logic makes this to me as well so it's on that basis that I decided that I would take this opportunity to object to this motion your honor very much a pretty seem to take the time to hear what I'm not to say today

and for your guidance and wisdom on this Thank you, Mr. Robert. I appreciate your comments. Mr. Carter, are you on the call? Yes, Your Honor. I'm here. Can you hear me? I can. Thank you, Your Honor. My name is Simon Carter for the record. I'm not familiar with speaking in front of such a forum, so I'll do my best. There are, in principle, two points I'd like to make.

First, it seems to me that justification for the fee and reimbursement motion is merit to the performance of the Ad Hoc Committee, what they have done and what they are going to do. The platform upon which the AdHoc Committee stand is, or rather was, the assets held by FtX.com belonged to its customers. That was their adversary complaint. It was not for the benefit of the estate. and it formed the playing field upon which they engaged within these bankruptcy proceedings.

The debtors, on the other hand, continue to allege those assets belong to the estate. Asset ownership is clearly a gating issue and remains the elephant in the room, but there has been no progress by the ad hoc committee in open court. Consequently, the question of who owns the digital assets remains uncertain. And it seems to me that the ad hoc committee have abandoned their platform. And according to the debtors, Some months ago, the AdHoc Committee began negotiating with the debtors for a plan of reorganisation to represent interests of their constituents, and the settlement and plan support agreement to which the AdHoc Committee have now subscribed underlines their adversary complaint will go no further.

You're on a, you know, I'm reminded of the reluctance of the AdHop Committee to get involved in the oral argument about digital asset ownership at the September 13th, us hearing. This, to my mind, reflected a missed opportunity to represent their mandate. It miscalculated that ownership remains a priority issue for customers at large. You know, customers who have their life savings at stake. So taking a step back, has the ad hoc committee achieved the mission they set out to do, to test the ownership of assets in this court? Well, no, they have not. has the AdHoc Committee represented the interests of all customers? I don't believe they have represented the best interests of digital asset holders who are arguably the largest population of customers.

It is evident from the second draft plan of reorganisation that the Ad Hoc Committee has had a positive impact that would benefit some customer groups, including preference customers who withdrew assets in the days before the collapse. but this is an achievement made on a different playing field from the one the ad hoc committee set out to play on. If I was marking their homework, I'd have to say they haven't met the term of their assignment. Therefore, as the ownership question is unresolved, I object to paying legal fees and future disbursements that would be a potential misuse of customer-owned assets which do not belong to the debtor's estate. The second point I want to make is very much related to the first.

To my mind, it's fundamental that the court has opportunity to deliver its opinion on the gating ownership issue. This is why I've been compelled to submit a motion for opinion pro se, so that your honour can do just that, to provide your opinion in answer to the question, whose digital assets are they? It's a matter essentially contained within the four corpus of the Terms of Service. These were the rules which I and thousands of similarly situated customers read and understood to apply to our asset when using the platform. However, the debtors and ad hoc committee are now joined in their thinking that to unravel the ownership issue is too complex, will take too long, be too expensive, and in any case, the assets are now gone.

But that view is primarily focused on the aftermath of the collapse. It skates over the fact that establishing ownership does not turn on the ability to trace the digital asset. Racing or recovery or restitution or a plan of distribution, sorry, a plan of reorganisation, is the step that follows after ownership is nothing. So, Your Honor, regardless of what crypto assets remain in the collapse, the debtor's possession, or not as the case may be, the ownership question could still be answered. For example, title to property is not lost merely because the property has been stolen. And it's important not to lose sight that missing crypto assets are a direct result of

FTX misappropriating customer property. This has now been established beyond reasonable doubt in the criminal and civil courts. But the ad hoc committee if I understand correctly, is now complicit with the debtor's allegation that customer assets fall within the estate. That is, unless a customer can prove a claim to a particular crypto coin in a particular omnibus pool. And I must agree that would be a complex undertaking. But in my opinion, it's also wrong-footed. It fundamentally misstates that the coin in the custodial wallet with the entirety of the digital asset. It was not. Rather, the digital asset, as was defined in the terms of service, was a crypto token issued by the platform and held in my account. And that token remains identifiable in my account today. It's that token which provided an entitlement to an equivalent coin held in the omnibus pool. is to a fungible coin which is an essential to the next, just as a dollar is a dollar,

a bitcoin is a bitcoin is a bitcoin. Your Honor, and I'm not about to rehearse the arguments of my motion, though I'm conscious I've always strayed into some of the merits. But it was necessary ground to cover, to make a point. Your Honor's opinion on the ownership matter may well shake the foundation of these proceedings, and I hope it does for myself and similarly situated customers. Confirming the digital assets belong to the customer and not to the estate is the quickest way to move forward and ensure everyone gets what they are legally entitled to. This ensures everybody is treated fairly. There should be no room for sharp elbows of an individual creditor group trying to advantage themselves over others. But the point

I want to make is this. Before committing to reimburse the past and future legal fees of the AdHoc Committee, whose defined contribution is presently based around the settlement and draft plan of reorganisation, it would be the right order of things to first establish what the future looks like before committing to the players who will play the game. I've been in contact with several customer groups who would seem to have skills and experience that would also bring value to the table. For these reasons, I cannot support a motion to reimburse the legal fees of the ad hoc committee whose working mandate is to invade property that is not considered to form part of the debtor's estate. Respectfully, it would seem premature to enter into such

a commitment until there is clarity on the gating issue. And, Your Honor, while I think of it, there's one final brief point I'd like to make. and that is to look at related bankruptcies of Celsius and BlockFi whose custody services and terms were the same as FDX. These platforms also used crypto tokens and crypto token entitlements as a means to identify fungible coins belonging to customers held in omnipose. But moreover, what is particularly striking is that early on in those bankruptcies, It was the debtors who acknowledged due to the terms of use that those digital assets held in custody in the omnibus pools belonged to customers and not to the estate. Thank you. Thank you, Mr. Carr, just a couple of points.

You talk about the mandate of the ad hoc committee, but the ad hoc committee, as we've been talking in the courtroom, you may not have understood the legal terminology, they are not a fiduciary of the estate. So they don't have an obligation to anyone other than those who are members of the committee itself. And they're acting on their behalf. And the other point I wanted to make is your motion for an opinion. I know that's something they do in the UK. But I'm under the rules and the law, the bankruptcy code here in the United States. I cannot give you an advisory opinion.

I have to have something that is in front of me that gives me the basis for that. And because you're asserting that the property being held by the debtors is your property, that requires under the bankruptcy code the filing of an adversary proceeding, which is what the Adhoc Committee did initially that filed an adversary. It was basically a complaint of lawsuit alleging that the property belonged to the customers, not to the debtors' estates. So I can't rule on your motion for opinion. It would have to be an adversary proceeding that would have to be filed.

And that would have to be litigated, which is why the ad hoc committee came to the conclusion that it was better to resolve the issues through this plan support agreement to avoid the cost of litigation. And the debtors would have vigorously defended that lawsuit, and the costs would have been astronomical compared to being in. able to resolve this in a amicable fashion. So I just wanted to make sure you understood those procedural issues regarding what you filed. Okay. Okay. All right. And with that, I'm going to let's let Mr. Harvey on behalf of the Adopt to respond to the two pro se claims first. For the record, Matthew Harvey from Morris Nichols, Arston Tunnel. Thank you for the opportunity to respond. One thing I'll know Your Honor, my co-counsel, the lead counsel to the Addaq,

Aaron Broderick from Eversheds in Sutherland, is on the phone. And I may ask her to jump in on a couple of the points that she's closer to. But I'll start with saying that we reached out to both of these claimants. I'm not sure that either of them has responded to us, because I think that their viewpoints are valuable. And I think once they talk to us, they'd understand

that we've considered all of those viewpoints, and we've incorporated them into our analysis and evaluated the strengths and weakness of them. And I think Your Honor just touched on this in terms of process. And this goes, particularly, I believe, Mr. Carter, pointed out that, and I think he acknowledged that the effort of tracing these assets would be, and Your Honor just said it would be a very significant undertaking,

probably involving months, if not years of discovery, and undertaking. So we filed the action. We filed a summary judgment motion, our summary judgment motion was on the threshold question of what do the terms of service say and in concept does this provide and a you know what we call legal trust an express trust or does it provide some form of equitable trust to the extent the assets aren't sitting there constructive resulting otherwise there's other theories and these were alluded to in the pro se objector's comments that does it even not become property to state if it's embezzled or stolen but you still have the secondary problem of tracing these and we believe there of course our theories you could try to do that in the aggregate and that in itself is a significant undertaking but on a creditor by creditor basis is even more significant and probably prohibitive

for individual customers and that was certainly a significant factor in what we considered you also have the tension and I'm not sure if they recognize this between what benefits a declaration I heard a criticism I don't remember which one one of them that you might want to go after preference recovery is more but of course the determinations that this is customer property would mean that those were not preferences. So you can't have it both ways. You can't say that these are categorically customer property. Therefore, you know, no one else in the estate should have any piece of it unskered creditors, but let's also go recover what was sent out to people pre-petition. And we, again, these are complex issues. We have people

on our committee that both have preference exposure and don't. And this is things that we, in consultation with those discussing with those people discussing among ourselves professionals with the debtors and the committee and then also with the you know hundreds of other people that we talked to we take those views into account we reach a settlement and you have a settlement now that proposes to distribute 90% or upwards of 90% of all distributable value in the estate recognizing that the strength of the arguments that there is customer property so I think that your honor that if I would encourage

both of these claimants to engage with us and discuss with us and you know and even consider joining our group again the membership is open I think you know these are two customers out of millions the only ones objecting to the relief requested today we're happy to engage with them we don't think that their criticisms of the group are fair as your honor observed we did file an adversary to say we immediately or almost immediately filed a motion for summary judgment we were prepared to go forward on that until invited to try to resolve these issues consensually. And I think as Your Honor has observed in other cases like Malincourt and other complex

cases, the cost-benefit analysis of continuing to litigate can often become prohibitive once you think of the cost of doing that versus the benefit you can get from settling. I'll pause here and see if my co-counsel, Ms. Broder, wants to address anything if that's okay with your honor. That's fine. Thank you, Your Honor. Thank you, Your Honor, and I apologize for technical difficulties joining by my phone and not without video.

But for the benefit of the customers that are listening on the phone and to address the threshold question of the benefit of the estates and the debtors, I think it's important to recognize here that there's no dispute that the FtX.com customers constitute the vast majority of the residual beneficiaries of the estates. But as Mr. Carter properly points out, the estates here are in question whether or not the assets that are being administered by the debtors belong to them or should we return to customers.

The ad hoc committee has deeply analyzed these customer property ownership rights from the outset of the cases, as a command of the factual context and of bankruptcy law, and has analyzed the hurdles to judgment, the attendant costs and delay associated with the student's adjustment from the vantage point of very diverse customers. We have done so because our membership is composed of those viewpoints and interest. And it's important to recognize that the position around which we acknowledge is growing dissent among different corporate groups,

whether they hold digital assets or fiat, whether they have preference exposure, are not, knowingly are not by those advancing them, they turn on customer property rights arguments. Again, from preferences to valuation dates and methodology, to in-time distributions, to ability for customers that have an upside in the estates. We want customers to understand that we have not only well understood these arguments, but we've articulated them to the debtors and to the official committee, with being able to

objectively evaluate their arguments, and with all of us having the expertise and experience in Chapter 11 basis. And again, the purpose in our bylaws is in a cost-efficient and timely manner to increase returns to all holders of FTCX claim claims. The distinctions that are recognizable, we're acutely aware of, and I think will continue to be heard in these cases, have nothing to do with the holder of the claim, being an original our secondary holding. They have to do with the claim itself. And as co-counsel, I think, well put forward, but I want customers to understand that in order to get a judgment that they

are seeking from diverse vantage points, there will be uncertain litigation that will delay these proceedings in our plan process, have an impact on 2.0 exchange, et cetera. So what we've done, I think it has been not only a substantial contribution in the station. 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. And come up with creative solutions that have a consensual path forward where all at the X.com customers are going to be better than the alternative. Thank you. Thank you, all right.

Hold on, Mr. Ravzi, I'm going to let the committee, I'm sorry, yeah, the committee and the debtors respond first and then I'll come back and let you make... Brian Glockstein for the debtors. A couple of points. Just taking a half step back. We're not asking for approval today of any settlement or any compromise of the customer property issue. The debtor is going to be filing an amended plan, as we've said, and a disclosure statement for that plan in December. Those documents are going to explain the plan terms, the terms of the proposed resolution of the ad hoc's customer property litigation, what the result of that means for creditors of FDX.com

and the other estates. We'll have information with respect to estimates in terms of what for the first time, of what people are likely to see out of this case. That's part of the process. And of course, as your honor knows, in the plan process solicitation, the disclosure statement's approval, proceed.

And creditors who are entitled to vote will have the opportunity to weigh in on what we've proposed, what the ad hoc, that we've negotiated with the ad hoc and the committee on these issues. And they all have an ability to voice their view. The question for today is whether or not the debt, who is the move in here, has satisfied its burden

under Section 363, as Your Honor has articulated in the context of these types of requests. that on the unique facts of this case is appropriate for the debtor and use the state resources to perform under the reimbursement agreement. And again, we submit that we have. The unrefuted testimony of Mr. Ray is clear that the debtors believe there's been a collective benefit to these states by organizing this plan formation process, by having a counterparty to speak based on a representative group of the FTX.com creditors to negotiate

these issues with. And in doing so, come to a resolution of the pending adversary proceedings, which are the pending litigation, on these questions. And of course, there has not been an abandonment of that litigation. There's been a proposed settlement of that litigation. And that settlement includes certain benefits, substantial benefits, to the customers of the FTX.com exchange, as a result of those arguments. The debtors have defenses to those arguments. As your Hunter pointed out, there would be protracted litigation

if we need to litigate those issues. So what we have here is a settlement that is part of a larger puzzle where we're putting together a plan. That to Mr. Pesquale's points, we're trying to get the debtor out of bankruptcy and get all of the value that the debtor has been successfully,

marshaling, recovering and bring back into the estate out to customers and to other creditors in accordance with that plan and that process is going to move forward the plan support agreement is a substantial milestone in this case having the support of the ad hoc committee of the official committee and of the debtor provides the framework that will allow us to bring a plan forward in short order before the court so again we submit your honor that on the facts of this case we think it is appropriate to permit the debtor to perform under the reimbursement agreements and certainly all issues with respect and all parties rights with

respect to the plan issues and the settlement of litigation orders. Thank you. Thank you. Pasquale, anything for it? Nothing to add, Your Honor, unless you have questions. No questions. Mr. Rabatty, I'll give you an opportunity to briefly make additional comments. Thank you, Your Honor.

I just have to come back in briefly with two counterpoints. Council for the Atock mentioned the Enorms. the enormous difficulty in tracing digital assets. I may not know much about bankruptcy process or bankruptcy law, but I do understand cryptocurrency and cryptocurrency is fungible. And so that arduous task can be set aside because Bitcoin is Bitcoin, the same as one dollar is fungible as opposed to another dollar. I just want to make that point that it's not necessarily because,

doesn't have to be this arduous in surmountable problem. And my second point is that the ad hoc approach this process with a very serious issue and what is a very serious issue for the 1.4 million creditors that are out there, which is property rights and digital asset rights. And to my mind, if they're not challenging, date valuations when they approach with that argument, then they're not prosecuting on that basis at all.

Be candid, Your Honor, and I'll be this is my final comment. What creditors believe, what many creditors believe, is they've taken a very serious issue and they're using that as leverage on the basis of negotiating for references. That is what many creditors believe, and I just want to be. with those funds, the opportunity.

Thank you, Mr. Revenue. You know, I don't want to get into specifics on too much of this, but the issue of tracing is one that is, the fact that you said that crypto is fungible actually creates the tracing problem, because once fungible assets are consolidated into another account, then there's all kinds of legal ramifications to that that require unwinding of the issues,

and sometimes it's not even possible to trace. So that's why the tracing issue is a problem. The other thing, Mr. Rabbiti, is that you will have the opportunity when the debtors filed their disclosure statement and plan of our organization to object to both of those, the disclosure statement and to the plan of your organization if you believe that something in there is inappropriate.

Okay. If that's honor. Thank you. Mr. Carter, you want to be here? Yes, Your Honor. I just want to echo to a degree what Mr. Rabatty was saying, reemphasizing the fungibility of the assets. It was a comment that was made. In the terms of the assets we're talking about, when a customer placed there, deposited their money with FTA,

FTX took that and issued them with a token. A token represented whatever the particular coin was they were buying, let's say Bitcoin. And that's the crypto token is what the customer held in their account. The terms of service relates to those that particular token is held in the account as belonging to the customer. And that token provided an entitlement to, an underlying asset, the fungible asset that is Bitcoin. So we don't need to look at what was in the omnibus course to understand who owned what. We only have to look at the token that was in the customer account because that was the asset, that was the starting point of describing to a customer

what they owned. What the ad hoc, the committee, what the debtors are doing is they're looking at what's left in the custodial course. And that's the wrong way about it. We're not, not starting at the first position and starting at the somewhere down the chain they're not looking at what was the asset that was owned that's the first point I wanted to make the second point is the legal point the legal point of ownership these assets are owned by customers then how can they be within the debtors estate how can that rightfully those assets right for be used in a plan of settlement. If they're not supposed to be in the estates, then why is the estate

using them? And the only way to me it seems to get to the bottom of that is by having the matter decided in court. So my final question that I will ask you is, Your Honor, you mentioned that adversary judgment is the way to go forward with this. Will the court accept a pro se submission to that effect? Certainly you can file anything you wish as a pro se claim Mr. Carter in the case.

Okay. And so it would be an adversary proceeding is what it's called, which is initiated through a complaint. I can't give you advice on how to do that. That's something you'll have to. I would recommend you might want to have

counsel help you with that because it can be complicated. Okay. Thank you, Your Honor. And as I said to Mr. Bavity, you also will have the opportunity to object to the disclosure of your statement and the plan of an organization when that comes down the road. Thank you, Your Honor. Thank you. Anything further. I was a little bit concerned about approving this, given what I asked Mr. Klexstein about at the beginning,

about whether or not this wasn't just the ad hoc committee acting on behalf of itself and having an incident benefit on the estate as a whole. But I'm satisfied under the unique facts and circumstances of this case, not the least of which is the millions of customers that are involved here, that it makes sense that there be at least one voice, or in this case 66, I guess, voices, who can act through counsel to help steer this process. to a plan of reorganization, given the diversity of the interests, as Mr. Klexstein pointed out, and Mr. Harvey pointed out, there's this diversity of interest between those who are creditors and also customers and those who are just creditors. And I think having the ad hoc

committee involved in that process is beneficial to the estate as a whole. And therefore, I will overrule the objections and we'll approve the debtors agreeing to pay the fees as outlined in their reimbursement agreement would be out of committee. Thank you very much, Your Honor. Do we have a clean version? I saw the revised version that came up with a black line. Do you have the clean version uploaded for entry? Your Honor, I'm going to need to check if it's not already uploaded it will be uploaded

this afternoon. As soon as it gets uploaded, we'll get that entered. Thank you, Your Honor. Great. I think that brings us then to the adversary matters portion of the agenda, and I think the first item going forward is item 13, which is the motion brought by platform life sciences, so we'll turn it over to them.

That's going to take a little bit longer. Do we have, I don't want to hold up those who have just, are there any of these that are going to be short? I don't want to have people just stick them out if they don't need to. Hard to say, Your Honor. I think it's certainly the, That one, I think, at least has evidence. I think the other items on the agenda are a motion for protective order,

which is argument and a short status conference, so we could take them out of the border if you're going to do the status conference at least first. Get that out of the way, and then we'll turn up to the U.S. trustee then. Good afternoon, Your Honor. Before we turned to other matters on the agenda, Matthew Harvey from Morris Nichols, Nichols, Ars Fentonnell on behalf of the ad hoc committee. In this spirit of efficiency, which we've also tried to accomplish here, May I and my colleague be excused for the remainder of the beginning?

Yes, sir. Thank you, Your Honor. Always like to save money. Good afternoon, Your Honor. Ben Hapin for the U.S. Trustee. The U.S. trustee asked for a status conference today to briefly discuss Morgan Lewis's fees in the Emergent Fidelity Technologies Limited case. It's number 23-10149, vis-a-vis F-TX, the Examiner.

Your Honor approved Morgan Lewis's retention as Emergence Bankruptcy Council. on April 10th, 2020, effective as of emergence petition date. On September 20th, 2020, Your Honor entered an order approving Morgan Lewis's first interim fee application. That's docket item 2647. Although the fee examiner order does not currently cover the emergent debtors professionals, that order preserves the U.S. trustee's right

to request a status conference with the court regarding an extension of the fee examiner order. It's covered with Morgan Lewis's fee applications as counsel for Emergent. Morgan Lewis has now voluntarily agreed to the U.S. trustees' request that Morgan Lewis's fee applications to the bankruptcy court beyond Morgan Lewis's retainer will be subject to the FTCV examiner order. This agreement does not apply with respect to any of Emergence's offshore professionals. Our office understands that Emergent expects to file in the near future a proposed cross-border

protocol that will address the compensation of emergence offshore professionals. The U.S. trustee's right to object to the proposed protocol, including whether offshore professionals should be subject to the fee examiner order is reserved. Emergence counsel authorized me to communicate this to your honor. Unless your honor has any questions, that's all I have. No questions, thank you. Thank you.

Thank you. board a motion. That'll be as long as the other one because there's two motions there. Motion dismiss and a motion. Well, two motions to dismiss, one for. Yeah, although I think one is, one is substantive on the 12b2 issue. I'm not sure the other one is, but yes, they are both they are, but we'll turn it over to counsel for the movements on the protected board. Okay. Good afternoon, Your Honor. Gregory Arbigh asked on behalf of Brandon Williams and the adversary proceeding of FDX trading and the court and investments against Branden Williams at all. If it pleases the court, my colleague Lawrence Gephardt, will be arguing the motion.

He's admitted Prohawk. Okay, thank you. Good afternoon, Your Honor. This suit, at least as pertains specifically to Brandon Williams, a defendant, alleges actual and constructive fraudulent transfers by FTX trading, and the Antiguan Corporation in its acquisition of digital assets, a Swiss corporation in July and November of 2021. The defendants have all moved to dismiss for lack of subject matter jurisdiction in the court due to the improper and unauthorized filing of the bankruptcy petition, which of course then carries over to the institution of the adversary proceeding

and the lack of subject matter jurisdiction of this court to adjudicate the adversary proceeding. All of the defendants have moved to dismiss for failure to state a claim. Brandon Williams specifically is alternatively moved for summary judgment as to the counts pertaining to him. Those motions are not a basis, at least as to Brandon Williams, for requesting a protective order, but solely the aspect pertaining to the lack of subject matter jurisdiction. Now, Brandon Williams has moved for a protective order under Rule 26C to defer discovery until the court has ruled impending motions to dismiss for lack of subject matter jurisdiction. The other defendants, as of yesterday, joined in this motion,

and they are the principal proponents of the lack of subject matter jurisdiction of the court in motions they filed in the main bankruptcy case, as well as a portion of their motion in the adversary proceeding. The basis of the motion for a protective order is federal rule. 26 to avoid undue burden and inordinate expense that discovery will entail until the subject matter jurisdiction issue has been resolved. The case is at its inception. Complaint has been filed and responded to with motions. A case management plan was agreed to before the motions were filed. Initial disclosures have been made. The plaintiffs have filed discovery requests

that have been timely responded to by all of the defendants, basically document production requests. The other defendants have served discovery on the plaintiffs. Brandon Williams has prepared it but has not filed it. We have extensive document requests, interrogatories, and requests for admission to file once there's a resolution of the motion for protective order. The motions to dismiss have been filed,

but there's been no response yet. Instead, the debtors in both the main case have requested additional time to respond to the lack of subject matter jurisdiction for the filing of the bankruptcy petition under the case management order their response to the motions to dismiss including subject matter jurisdiction

in this case will not accrue until December 1. The discovery in this case will be extensive and will be expensive. digital assets, the purchased entity, is a Swiss corporation subject to Swiss law, including the blocking statute, which is Article 271, of the Swiss Criminal Code. Even though digital assets may be owned by a non-Swiss entity, that criminal statute still applies and can prevent us from getting documents that are pertinent to the acquisition and to the operation of digital assets before it was acquired by FTX and after it was acquired by FTX and operated for years.

There are other entities that are involved, all European based, for instance, CM Equity, a German brokerage, which might be analogous to Charles Schwab and R DNA, which, excuse me, KDNA, which is a brokerage that was a Cyprus licensed brokerage, which was a FACRIS license brokerage, required as contemplated in the original acquisition post digital assets purchased by FTX trading. There are many individuals who have personal knowledge and will need to be deposed. Reliable contact information is not available in most of them. We will require extensive investigation to locate just where they are so that subpoenas or other deposition notices and so on can be served.

They're all over the United States to the extent they're United States citizens. Daniel Friedberg, who was F.TX's general counsel representing FTX in the acquisition is based in Washington. Kansan, General Counsel of F.TX, apparently is located in the Bahamas. In Europe, the people that are there get the protection of the European General Data Protection Regulation, regulation, which can be very tricky to comply with,

and will probably involve letters rogatory to the State Department to get them to even come to a discovery proceeding. In the Caribbean, which includes Bahamas and Antigua, there are people that will need to be deposed. Sam Bankman Free, who's a critical witness in this case, is in prison. He's testified, so probably he can't take the Fifth Amendment.

But we've now got to figure out how to get a death in the prison system. And for instance, in his testimony, one of the most ridiculous assertions in the complaint is that Samuel Bankman-Fried was a personal friend of Brandon Williams and paid exorbitant excess amounts of money to financially benefit Brandon Williams. Bankman-Feed will testify to the contrary. Those two have never met in person. They've never spoke on the phone one-on-one.

Their only interaction basically was the F-TX deal. But we must depose them. We must oppose the other FTX people who have testified in the criminal proceedings and are available and are around. Attorneys in this action from Sullivan Cromwell will need to be deposed. Mr. Diderick, for example, who contends that FTX was insolvent at the time the bankruptcy petition was filed.

Five days earlier is ensuring the creditors committee attorney in the Voyager bankruptcy in an email, that FTX is financially solid as a rock. So we want to find out what happened in that year between November of 2021 and October of 2022 that caused FTX to become insolvent. What happened? What was the change and what justified the statement

that you made? There are experts that will need to be both interviewed and deposed, experts that pertain to the transaction, such as BDO, which did a valuation, of the DAG acquisition at the insistence of FTX shortly after the acquisition was made and found basically reasonable equivalence. Prager Metis, an international accounting firm, it audited financial statements of FTX, and those financial statements did not show insolvency.

There's other evidence of solvency of FTX, such as Mr. Ray's first day declaration in which he ascribes solvency to FTX trading. The parties will be retaining experts to supplement those transactional people that were part of the transaction. Other potential purchasers of DAG existed, and they will need to be deposed because they essentially were prepared

to pay roughly the same price as FTX paid, except the deals couldn't go through because FTX already owned 20,000 owned 20% and didn't want competitors owning part of the transaction. The bottom line is that discovery in this case will be expensive, it will be time-consuming, and it will involve extensive travel. Now, federal rule of civil procedure 26C1 authorizes the court to enter an order to protect a party from undue burden or expense. Burden or expense, and that's the basis for the request that discovery be delayed.

We readily concede that just filing a motion to dismiss is not sufficient to get a motion for protective order. That is why when Brandon Williams filed his motion to dismiss or for summary judgment, we did not ask for a protective order to defer discovery because a motion to dismiss for failure to state a claim depends on the interpretation of words. Summary judgment motions can question whether a material. fact is or is not in genuine dispute did not justify but subject matter of jurisdiction if it does not exist ends the case it's all over if it's all over

you don't have to do all those expensive burdensome things now to get the motion for protective order we clearly and we acknowledge we must establish good cause the grant is in the discretion of this court based on the evaluation of the cause that's been shown and the reasonableness of the relief that sought. Now, factors that are regularly considered in making this decision, the strength of the motion to dismiss. I believe it's not only strong that subject matter jurisdiction is lacking, but basically it's uncontestable.

The facts are not in dispute. Mr. Dieter had put an affidavit into the record when he was trying to confirm his retention saying, gee, I didn't have time to get the board. board of directors to approve the filing of the bankruptcy petitions or the appointment of Mr. Ray. There may have been a hundred corporations, but FTF was the main one. They were there. He never looked, but he knew that he had to do that, yet he didn't do it. Instead, he had Bankman Freed executed omnibus corporate power that essentially ran an omnipotent powers to John Ray, even though Bankman Freed did not have the authority to do that. The law is

clear from Wago in the Supreme Court case of Price v. Gurney that's been cited as to what the need is for that corporate approval and authorization under the organizational documents and under local law. So the issue is not one of fact that's going to have to be resolved by this court, but it's one of law, basically under Antiguan law, could John Ray be unilaterally appointed by Samuel Bank

freed without authorization from the board of directors despite what the International Business Act provides and despite what the charter and bylaws of FTX provide. The grant of this motion will end the case that it will all be over and there will be no discovery needed, nothing further going on. The plaintiffs furthermore will suffer no prejudice if there's a delay in discovery. So if discovery is delayed for a month or two months, how does that cause distinct prejudice. The plaintiffs do not need discovery to respond

to the motion to dismiss. They don't need to depose anybody. The bylaws are there. There's no dispute as to what they are. Mr. Dieterick is around. He can say what he did and why he did it, representing the corporation. The delay will be slight unless the motion is granted,

and then the case will be in and end. The extensive nature of the defense discovery, which we've already said, those will require an extensive time commitment and a huge expense, not just on the part of the defendants, but also in the part of the estate. And they've got to, this thing will be contested and the depositions will be taken,

and a lot of money will be spent having Sullivan and Cromwell participate in the discovery. The elements of the claim are extremely involved. Lots of people there, the big factual disputes if it has to go and if those factual disputes don't have to be resolved in discovery then all will be better. Now I'd like to just briefly respond to some of the ad hominin acquisition that was filed by FTX. It recites events that were prior to discovery, to our Brandon Williams discovery of the lack of subject matter jurisdiction

of the court. That issue was raised by the other two defendants after extensive research, and frankly, I didn't come upon it until we saw their motion to dismiss in the main bankruptcy case and in the adversary proceeding, and it looked irrefutable. So with that, we joined in the motion in the main case and filed an additional motion in this case because motions challenging subject matter jurisdiction may be filed at any time, even on appeal after a case has been tried. Williams has timely responded to the discovery served upon him under the federal rules. The defendants have our response, and we've said we will produce the documents promptly if the court denies the motion for protective order or denies the motion to dismiss.

We're prepared to do that if necessary. An argument is made that, gee, they said you have 30 days to produce all these documents, which is what their discovery requests said. That's not the federal rule. Federal Rule 36 says we have 30 days to respond in writing, and a reasonable time in place for the production of documents is what to be decided. FTX, through its lawyers, doesn't get to dictate when and where the documents are produced. and we have responded to it.

It was a case management order in place. Yes, there is a case, but the case management order was discussed and negotiated before the motion to dismiss for lack of subject matter jurisdiction was filed. And frankly, we did very little negotiating on the case management order. Most of it was by the other defendants.

We were prepared to file a motion to dismiss in September when the rules normally provided for it, but the other parties asked for the motions to dismiss and not be due until the end of October, and when that happened, we got a copy of the financial statements and the BDO valuation and modified the motion to also include an alternative for summary judgment. But there are dates that have been agreed upon if there's a stay of discovery, maybe they can be adjusted, maybe they need to, maybe they can still be complied with. Trial is not under the schedule that's there,

would not be occurring until 2024, at the end of 2024. The defendants contend, excuse me, the plaintiffs contend that there was clear authority for John Ray. Yet if that authority is so clear and so undisputable, why did they need an extension of time to respond to the motion? They do, and they're not going to be. be able to substantively correctly respond. They never addressed the merits of the motion

for a protective order in their opposition. Instead, what they do is they argue things that are irrelevant to it based on basically insults and disparagement, not reasoning for a basis that the motion should not be granted. So we're here to ask the motion for stay, a temporary limited stay of discovery, granted because good cause exists and the relief requested is reasonable neither the

defendants nor the estate should have to bear the burden of extensive time being spent on a case that may end or inordinate expense pursuing a discovery that may be of no use thank your honor thank you better by the way mr. getpard I don't see where you signed in did you and you're you guys signed in no that's just to get into the building this is for a record who appeared at the hearing. You can take it back over there and then bring it back. Your Honor, would you like to hear from supporting parties? Oh, yes.

Father joined right. Yeah, go ahead. Yeah. I'll try and be brief. For the record, Peter Keene and Pacholsky, Stan Zeeleon, on behalf of Defendants Lorham, Ipsom, Eugene, Patrick Bron, and Robin Mattsky. Your Honor, our co-counsel at Morrison Cohen, Mr. Heath, Rose and Blatt is by Zoom in case I miss anything, Your Honor, he may wish to speak up.

But we echo Mr. Gaphart's comments regarding the motion of stay. We filed a joinder at adversary docket number 39. Your Honor, we joined in the motion for stay, primarily from a logistics standpoint. As Mr. Gaphart mentioned, we filed a motion to dismiss the adversary on October the 27th as required by the case management order. And on that date, we also filed two motions

to dismiss the Chapter 11 cases of FTCS Trading Limited and McLaren Investments Limited, as our main case docket numbers 3399 at 3,400. Those motions to dismiss have not been fully briefed. For the main case motions to dismiss, because the debtors said in their opposition, we agreed to a briefing schedule, whereby the debtors would respond to those motions

by December 13th, and our reply would be due by January 5, and with the expectation of having a hearing at the January 17th hearing on those motions. Your Honor, the request for a statement, stay here is very, very limited, and it's for a specified purpose. It's to permit the court to first consider the dispositive issue of subject matter jurisdiction that we've raised, and we believe this day makes sense the purposes of the judicial economy and to save time and expense for both these states and, of course, our clients and the other

defendant, Mr. Williams. With a hearing set for January of the 17, and all the motion seeks as a stay for approximately 60 days, I believe the proposed order on the motion to stay asked for additional 30 days beyond when the court rules. So approximately 90 days or so. The motions are dismissed or denied, of course the cases will go on for likely years, Your Honor. Mr. Gavard did a very good job of articulating why discovery is very complex. Of course, there are other factors the court considers when assessing a motion to stay.

And I think the purposes of today, I think the court can look primarily at the prejudice to the plaintiff, which we don't believe there is any here for today's purposes, or for my other reasons I've just mentioned. In addition, Your Honor, I'd just briefly like to respond to some of the statements in the debtor's opposition to clarify the record and highlight three points and try to be brief. To begin, I don't think any of us really understand

some of the accusations the debtors made in their opposition and where it's coming from. The debtors used terms to describe the defendant's conduct such as gamesmanship and their suggestions of bad faith, But we think those accusations are misplaced and incorrect and I'll explain why. Our clients filed proofs of claim on June 30th of 2023, and the debtors sued us two weeks later in July. And as any litigator knows, Your Honor, the first thing we tended to focus on was negotiating a case management order for the litigation. And we did, but we did so largely in a vacuum.

The case management order was entered August 23rd, and it set a deadline for the motions to dismiss on in the adversary proceeding on August the 27th. So we didn't even begin the serious analysis until late August or early September. And we got to work doing what any good lawyers would do, which would be analyzing the facts and causes of action asserted, investigating potential defenses, and generally doing a deeper investigation. And it was at that point that we discovered the lack of a corporate authority issue that we raised in the motions to dismiss. And as Your Honor knows, and as Mr. Gabbard mentioned, that's a subject matter jurisdiction defense, which can be raised at any time by anyone. anyone, including the court on its own. We believe it's a meritorious defense, so we included it in the motion to dismiss that we filed

in the adversary and also as the basis for the main case motions to dismiss. So that defense came about organically. We were not hiding a ball or trying to sandbag the debtors in any way. We raised it timely when it became relevant, and we did so in good faith. The debtors also make some additional suggestions or complaints in their opposition, one of which was that we didn't expressly negotiate a reservation of rights in the case management order to file a motion for stay of discovery, and they point to a different adversary proceeding that had such a provision as if we're omniscient and supposed to know the nuances of every other

litigation. But the debtors don't say in their opposition is that we waived it because they can't. The case management order is silent on that, about the ability to move for a stay, and we believe it's appropriate to live so. The debtors also indicated that we already enjoyed approximately 100 days to draft the motions to dismiss without any disagreement about the schedule. 100 days being measured from the time the complaint was served, but that's not entirely accurate as I understand it, Your Honor, because the complaint was never formally served. Our clients agreed to waive the service requirements as part of the case management order that would have otherwise been necessary under the Hague Convention.

Two of our clients are in Germany, Mattsky and Lauren Ifson. So we could have asserted those rights, but we didn't. chose to comply with the case management order and waive those and we've complied with the case management order since. And I raised that simply because I recently had to do that in another case on behalf of the plaintiff, Your Honor, go through hate convention service actually onto defendants in Germany, and it took 18 months. So the litigation could be dragging on even slower than it is right now.

So in that context, I don't think a stay-of-request of being asked of Your Honor is in the context the litigation is that much. And finally, the case management order dates are really not that compressed. Fact discovery doesn't end until May 17th, 2024. Export reports start in July. Expert depositions have to be completed in October. 2024, we don't even have a trial date set. So all the stay would do, Your Honor,

is it would essentially roll back those deadlines by approximately 90 days or so if Your Honor did grant this day. So in the context of the proceeding and within the larger context of the cases, we don't think it's much been asked, and we do think it's appropriate here, Your Honor. So, unless Your Honor asked any questions. No question. Thank you, Your Honor. Good afternoon, Your Honor. Stephen Aaronberg from Sullivan Cromwell on behalf of the plaintiffs in this action.

Mr. Gampard said that the facts are not in dispute on the motions for dismissal on the basis of a lack of subject matter of jurisdiction. That is simply not accurate. the facts are contested, and the plaintiffs will brief that motion on the agreed schedule and demonstrate those factual and legal errors in the motions to dismiss in the main case on the agreed schedule, which is now the same schedule as the schedule for the adversary proceeding motion to dismiss. So no reason those two motions to dismiss couldn't be heard on the same day in the same hearing in January. So we're not that far away. Obviously, all of the facts upon which that motion to dismiss is based were known to all stakeholders in this action a year ago when the case was filed.

Nothing new has happened. Nothing has changed. All that the defendants are saying is they didn't discover this purported silver bullet until now. And in fact, Mr. Williams didn't find it until someone else found it for him. Your Honor, we submit that that is not an excuse for delaying a motion that could have been brought back in August long before the plaintiffs in this action started expending substantial estate resources to meet their discovery obligations in this case and to prepare to take discovery in this case. So the notion that no prejudice will happen in the few weeks or months that this stay is in place is, first of all, nonsense, but putting that aside, we have already been prejudiced if the stay is entered, because we have already done a tremendous amount of work, which we describe in the brief. So the bottom line here, Your Honor, is that this motion is egregiously untimable, and from

our perspective, it appears that it has been delayed to obtain a tactical advantage and to cause maximum disruption to our case and our efforts to recover assets that are. that have been fraudulently conveyed to these defendants. And the parties discussed the possibility of a stay. In August, August 3rd, to be exact, in a meet and confer our first, the defendants asked for an agreed stay of discovery pending motions to dismiss for all of the reasons that have been articulated

here today other than subject matter. And we said flat no. Absolutely. not. We need to move this case forward and we intend to do so expeditiously. And we're going to seek discovery in the ordinary course. Now, the scope of discovery that they describe, I'm not going to try to redefine their scope. They think it is what it is. But whatever they think it is, it hasn't changed since August 3rd. If they thought that they would be prejudiced by engaging in discover prior to a decision on the motion to dismiss,

their time to join issue on that was early August, not after we have done a lot of work that I'll describe. And during the 100 days that they asked for to respond, we could have easily dealt with this a long time ago, and we wouldn't be here today. But they didn't do that. Instead, they delayed this motion until days before their discovery responses to us were due, and at a time when, of course, we're working on our opposition to their motions to dismiss.

In between August 3rd and the time that they have filed their motion, there were a lot of events that called for the defendants to raise their hands and say, you know what? Something has happened. we have a new idea, stop what you're doing, don't spend any more estate resources, let's talk about a stay again. But they didn't do that.

Instead, they negotiated a case management order with us, and we worked out dates, and that was a negotiation. So the idea here now that, well, we can just extend them. That's not how a negotiation works. We gave things up, they gave things up, and we reached an agreement. That's why the cases that we cite talk about the entering of a scheduling order being important to the issuance of a motion to stay. Because those dates should be reliable. Everybody should be able to count on them unless something changes.

So they negotiated a CMO with us, and that CMO includes a substantial completion date for documents, which is not in May, it's January 31, which is rapidly approaching. And that was a negotiated point. We negotiated hard for a substantial completion deadline because it's important to us to be able to know when we will have most of the documents and begin to plan out our deposition schedule. So after negotiating the CMO,

and I think Your Honor mentioned that a CMO isn't in place and would guide when productions are required, it also requires rolling productions in advance of that substantial completion date. After the CMO was entered, while we certainly did not anticipate a motion to stay, because we kind of dealt with that issue already, we certainly anticipated that the defendants

might do something to try to extend the schedule here. So we wrote them a letter on September 21. Now, I think it's interesting that council has acknowledged that they discovered the silver bullet in September. We sent them a letter on September 21 and said, the plaintiffs are preparing for discovery. We're doing a lot of work. We're gathering data, gathering documents, processing them, reviewing them, identifying things that are going to be responsive to your request, figuring out who our custodians are, sending substantial state resources.

And we said, we expect you to do the same, because we are going to be prepared to produce documents to you promptly upon the service of doc requests. On the schedule agreed in the CMO. And we don't want to have a situation where we serve our doc requests, you wait 30 days, you serve objections, and we meet and confer, we figure out our search terms, and we're in March before in one of one.

before anyone's producing documents. We wrote all this out, and we asked them at the end of that letter, we assume you're doing the same, please confirm that you are. And if you're not, tell us and tell us why you're not. So if they had discovered at that point that they had a new motion they wanted to file and that maybe there was going to be a stay, it was incumbent upon them to say that, at least by then. And maybe we could have joined issue in September, because we've done a lot of work between

September and then. Mr. Gebhardt said the case is at its inception. It's not at its inception. Discovery has started. We have a CMO in place. Everybody has served initial disclosures. We have served discovery on non-parties. Those non-parties are now expending their own resources to respond to our

discovery requests. We've met and conferred with both of those non-parties and worked out what is being done. One of them is actually represented by the same counsel as Mr. Grun and Mr. Mattsky. So there are no surprises here. A lot of work is being done. We have served discovery on the defendants. Both have objected. Mr. Williams has granted himself a stay of discovery until this court decides this motion. It's unclear whether Mr. Grunner or Mr. Mattsky intend to produce in advance of a decision on this motion, but either way, we think that is inconsistent with the law. The defendants, in fact, have served voluminous discovery requests on plaintiffs.

Well after the time that they decided they had another motion to file. They have served 77 requests for documents, 12 requests for admissions, 18 interrogatories, and since the day they arrived, the plaintiffs have been working on responding to them. We have substantial drafts that are in progress, and we intend to respond on the due date, which is the day after Thanksgiving for what that's worth. So, Your Honor, we've done a lot of work here to prepare for discovery, and we are ready today. to produce thousands of documents to the defendants. The only reason we haven't, and we have advised them as such,

is that they haven't signed a protective order. Now, there's a protective order under negotiation, but we gave them the opportunity to sign the protective order in the main case in September when we sent them the letter. We said, you know, it's part of our preparations, you should sign this order, so we can make productions to you. They didn't. Not only did they not raise their hands,

Did they not raise their hand in September? They did not respond to that letter in any way, shape, or form. Nothing. Silence. So in addition to the thousands of documents that we have identified through our searches and our work, we have also undertaken substantial work to make a document review platform available to all of the defendants in all of the avoidance actions that will have certain of the materials that were produced to the criminal authorities in the Southern District of New York.

That has taken a fair amount of time and expense as well. It is up and running, and we could grant them access to it today if they had signed a protective order. We continue to do substantial work to respond to the discovery requests that have been propounded on the plaintiffs, and we'll continue to do so until ordered otherwise or the due date arrives, and we respond.

All the while, our substantial completion deadline of January 31 is approaching. And at no point, anywhere in this timeline until last Wednesday, did the plaintiffs say anything about any change in view on the schedule for discovery, anything about a stay motion, nothing. So, Your Honor, we think that the delay in bringing this motion, which could have been brought a year ago,

at least the underlying motions dismissed for subject matter jurisdiction, could have been brought a year ago. That alone warrants an inference that, This motion is an attempt to gain a tactical advantage, which is improper. The defendants want to talk about the merits of their motion to dismiss for lack of subject-manor jurisdiction. They cite a lot of cases from New York, not clear why. There's perfectly good cases in the District of Delaware about the standard for issuing a stay of discovery. And those cases expressly say you don't look at the merits of the court.

the motion to dismiss. I think there's a good reason for that, right? Because if the standard was, well, I got a really good motion to dismiss, everybody would want to stay at discovery pending the motion to dismiss. And then the court is going to be in the position of always trying to sort of predict the outcome of the motion. That's just not what the cases call for. The cases call for an analysis of the prejudice against the moving party, sorry, against the non-moving party, the status of the litigation, where it is and where discovery is proceeded, and whether a stay would simplify issues for the trial, which is really about when you're sort of working with multiple litigations

and the decision and one would have an effect on the other. So really we think what matters here is what's the status of this litigation, what's the status of discovery, and what's the prejudice to the plaintiffs of granting this stay? And Your Honor, we submit that we would be deeply prejudiced. by a stay here, given all the work that we have already done, the amount of discovery that has taken place so far. And from our perspective, if they're right about the scope of discovery, that is a reason to

get started, not to delay further. And the courts expressly say we should not be looking at the underlying merits. You can look at the Petro case, the Cavo case, the CIPLA case that we cite in our brief. All of them stand for that proposition. Let's see if there's any other notes from... Your Honor, unless you have questions for me, I think that's all I have. We would ask that the court deny the motion,

order the defendants to begin producing under the CMO as they're obligated to do and to deny any requests for an extension of the carefully negotiated schedule and to award expenses incurred in responding to this untimely motion. response. One thing, Your Honor, that the plaintiffs like to gloss over is who the defendants are. Brandon Williams, while he is a defendant, is not the same as the other three defendants. Brandon Williams was gone from the company in November of 2021. The other defendants stayed with the company and had access to what was going on.

Brandon Williams' claim was over at that point. Now, you'll hear about the defendants, and they lump Brandon Williams in with everyone else, except there's a complete distinction. The claims against Brandon Williams, particularly in that complaint that was filed, order on the preposterous. The things like saying Brandon Williams

was given millions of dollars because he was a personal friend of Samuel Bankman-Fried are ridiculous. I don't know that. You're testifying. I don't know any of that. All I got to go is what's in the complaint, and I got to accept what's in the complaint as true. Well, I understand that, Your Honor, and we certainly will,

we have a motion for summary judgment, which basically negates that. But apart from it, when we negotiated or discussed the case management order, We simply had the complaint, we had a due date of September, which in September, like 25th or something, which was under the rules after Brandon Williams was properly served. We were prepared to respond to it. When the discussions went on about a case management order, we planned to file a motion to dismiss for failure to state a claim, and it didn't seem worthwhile. We thought staying discovery might be a sensible thing to do. weren't going we didn't argue for it when the did you respond to that why didn't you respond to the September 21st letter that they sent to you I don't

think I got it September 21 we I'm not even sure we were served in I mean we may have we may have been served a letter off the top of my head I can't respond to that at the moment your honor but the case management order was negotiated principally by the other defendants and their lawyer with the exception of a couple minor suggestions we may have made. We didn't argue about anything more. Now, you agreed to it? Well, we agreed to it, yes, because what we saw was a complaint that was facially defective

and we believe would not stand on its own. When they asked for things to carry over until the end of October for response to be filed, we didn't ask for that, but we agreed to it, and that's why we raised the sum of judgment motion. The question about whether subject matter jurisdiction should have been known to us, remember, this is an Antiguan corporation. We knew Bankman Free had big order and principal ownership, but we didn't know the level of his ownership. We didn't have a copy of a corporate charter which the other defendants were able to get. We had no knowledge of what the international business corporation law was, nor do we see a need to do that at that time.

We saw a defective complaint and we planned to respond to it. And then when we got some information, we converted that both to a motion to dismiss and a motion for summary judgment. Have you been preparing to respond to the discovery requests? We filed our response to the motion, to the document request. We have documents gathered. Yes, if you told us we have to respond next week, we can produce our documents. Brandon Williams has very little documentation on these things. He was out of the organization.

He didn't do the negotiating for the purchase in the second transactions. Where we're going to get hurt is not so much in producing what we have because it's not that large, but all these documents that supposedly the plaintiff's head, we now have to go through them. We've got to go over them. The other defendants have to produce documents. I haven't seen what they have. All these other things, it's not just what we've got to gather, we've got to go do the reviewing and do the work like that.

And frankly, these plaintiffs say, well, gee, look at all the work we've done. They're going to have to do a lot of additional work. It's not just that, gee, here's some documents. They're all done. It won't work like that. But we responded, we did what we thought was right, when the motion, the subject matter jurisdiction motion came up, we looked at it and said,

there is no way based on what's been filed that subject matter jurisdiction exists in the bankruptcy case or in this court, and we're going to join in, and we suggested stay in discovery until it's done because it harmed no one. And they refused, we filed the motion, and we're here. But if the court says you've got to go forward,

frankly, our motion and our response to the document request said, if the court denies the motion for a protective order, we'll produce documents. But they don't get under the federal rules. They don't get to tell us how many days after our 30-day response is filed. We have to give them the documents. They don't get to tell us where we have to give them. We don't have to deliver them to New York,

which is what the document request said. We'll work on and arrange. We have an e-discovery person that can do. exchange the platforms. But wasting money should not be, it's not in our best interest and it certainly shouldn't be in the best interest of the estate.

So we ask the court to grant this limited protective order and keep us all from wasting time, money, and effort an undue burden and expensive transaction. Thank you. Thank you. My response from the other defendants?

Your Honor, Heath Rosenblatt of Morrison Cohen on behalf of Patrick Burrne, Robin Mattsky in Laura Midsom, U.G. Do you want to, do you have something? Go ahead, Mr. Rosenblatt. Briefly. Thank you, Your Honor.

Well, I don't know why we're switching counsel here on making the argument, but I'll give you like 30 seconds. The reason, Your Honor, is because Mr. Keene was not engaged at the time that the CMO was negotiated, and I thought there were a few points that could be highlighted for Your Honor. for your honor, that's all your honor. So very, very quickly. Dates in the CMO and the substantial compliance

of January 31 is under section, I think it's B six of the CMO, is with respect to the initial request, and that is the first request. I think it's clear that this is gonna be a very big case and there'd be a number of requests. So that January date is kind of a false negative, it's a false positive as to the,

the timeframe in which things are going to be produced. As Mr. Keene laid out, fact discovery ends at the end of May, and expert discovery is May, 24, and expert discovery ends in October of 2024. So there's still a significant time out there. With response to why, I guess Mr. Aaronberg said, no one replied to his letter. There was complete silence.

That's inaccurate in their own papers. highlight that at page 55 of 50th and 42-2, which is, Mr. Arirginberg and I had a phone conversation about it. The September 21 letter is pretty much a statement of what they're doing, and while there's a statement at the end of it about what, you know, what's going on on your end, it wasn't really asking a question of us. It was telling us what we were supposed to do. It didn't need to respond to, and that is what I told Mr. Arirnberg in our particular phone call. So it was responded to, it just wasn't responded to in writing. As to the protective order, we submitted a red line to them and are awaiting comments back. It's being negotiated. No deadline in the CMO has been missed.

Everything has been complied with. And I just want to one last point, Your Honor. The emphasis on the one year, and everybody, this case has been going on for one year, we fully appreciate that, and we applaud the Herculean effort of Sullivan and, crime one, what they've done to this date. We were not involved in this matter. I need to emphasize this. We were not involved in this matter until July. The defense of subject matter jurisdiction, as all litigators know, developed organically as we were putting our papers together. There was no looking at this case a year ago. There was July, and as Mr. Keene represented to the

court, the first month and a half was negotiating the CMO and getting things in place like that. And then once we got into briefing, that's when it developed, Your Honor. Those are the only points I would like to highlight for the court. Thank you for the opportunity to speak. All right, thank you. Thank you, Your Honor. All right, I'm going to deny the motion for protective order. I think the CMO is already in place.

The parties agreed to it. Discovery has already begun while documents that have not been exchanged. The debtors have indicated that they have undertaken a lot of work in order to respond to discovery requests that were issued by the defendants. The defendants have indicated that they have prepared to produce documents in accordance with the case management of voter. And therefore, I found that there would be prejudice to the debtors, plaintiffs, if they had to stay this.

And I'm also, I agree with the comment that if the discovery is as complex as it's going to be, then it needs to get started now. There's no reason to delay it. All I have in front of me at this point is the motion to dismiss and the brief in support. They haven't seen the response. So even if I had to consider whether the merits of the motion are valid or not, I don't have any basis to do that. So at this point, the motion is denied.

I'm not going to award fees or costs, but I will direct the defendants to respond to discovery as set forth in the CMO. That means you have to produce documents on a rolling basis beginning next week. beginning next week and do it anything else party should be conferred submit a formal order in CMOC thank you your honor we will go okay yes you excuse your honor let's take a short recess before we go to the last item on the agenda and we'll go from reconvene let's make it just take a tent well we've got quite a few people I'll take we'll reconvene at three three clock as well.

It is wrong. Thank you. Whenever you're ready. Good afternoon, Your Honor, Alan Cornfield, Pachelsky, Sange, Ziland Jones for POS Canada on number 13. With me at Council Table is my partner, James O'Neill, and also at Council Table, Your Honor, I have the pleasure of introducing to the core PLS Canada's founder and President CEO, Dr. Edward Bill's.

Your Honor, we're happy to do this any way you'd like to do it, but we do have evidence, and the evidence in connection with motion number 13 from PLS candidate's standpoint is Dr. Mills' declaration, which is at docket number 36, and his supplemental declaration, which is at docket number 46, and exhibits 1 through 10, which is at docket number 46, and exhibits 1 through 10, which which are the exhibits that were referenced in connection with the original declaration at document number 36 and exhibits A through I, which are attached to the supplemental declaration. All of these exhibits are on the witness and exhibit list that we submitted to the court. I did have the opportunity to confer with Ms. Wheeler before the hearing,

and there are no objection to any of those exhibits. I would add, Your Honor, with respect to the exhibits submitted by the debtors in opposition, there are no objections by PLS Canada to those exhibits, so we don't have any evidentiary disputes today. In terms of testimony, we would proper Dr. Mills' original declaration at document number 36 and supplemental declaration at Docket Number 46 has his direct text to vote and move those declarations and his exhibits into evidence. He is available for cross-examination and Consul has advised that they wish to cross-examine. Okay. Any objection?

No, Your Honor. Declarations and the exhibits are admitted without objection. Your Honor, would you like Dr. Mills? Yes, let's go ahead and do the cross and we'll go from that. Dr. Millsby, please come up, take the stand and remain standing for the people. Please raise your right hand. Please state your full name and spell your last name for the court record, please. Do you affirm that you tell the truth, the whole truth, and none the but the truth to invest your knowledge and abilities?

You may be seated. Your Honor. Good afternoon, Your Honor. Stephanie Wheeler from Sullivan and Cromwell for the FTX debtor plaintiffs. I apologize, I'm a bit under the weather, so I will try to keep my voice up. I've also lived far too much of my life in New York, so I say, speak too fast so please let me know if you need me to slow down your honor may i approach to hand the court and mr mills a copy of the binders of exhibits i intend to use on his cross-examination

mr mills if you'll please turn to tab one of the binder it's a copy of your first declaration dated september 15th 2023 that was submitted in support of pls's motion to dismiss for lack of personal jurisdiction is that correct you have to verbalize your answer Yeah, that's right. Okay. And you may want to move the microphone closer to you. There you go. Now, in submitting your declaration, you endeavored to make sure that the statements were accurate, correct?

Correct. You didn't want to make any misstatements in your declaration submitted to the court, right? That's correct. If you turn to page six of your declaration, the last page, that's your electronic signature on the declaration. Is that right? It is. And you understood that in the declaration? signing this declaration you declared under penalty of perjury that to the best of your

knowledge information and belief the information and the declaration is true and correct right that's correct okay we'll do the same with exhibit two which is your supplemental declaration dated October 6th submitted in connection with PLS's reply brief is that accurate that's correct okay and as with your first declaration you endeavored to make sure the statements in this supplemental declaration were accurate, correct? Correct. You didn't want to make any misstatements in your supplemental declaration, correct? That's correct.

And on page 10 of tab 2 of your supplemental declaration is your electronic signature, correct? That's correct. Again, in signing the supplemental declaration, you declared under penalty of perjury that to the best of your knowledge, information and belief, the foregoing information is true and correct, right? That's correct. Mr. Mills, I'd like to begin by asking you some questions about the PLS leadership team. If you'll turn to tab 2, which is your supplemental declaration, and go to paragraph 12, please. It's on page 5.

In the second sentence, you state, PLS Canada's leadership team headed by me and Mr. Zimmerman until his departure in May, 2023, has been based in Canada and includes Chief Operating Officer Dr. Jamie Forrest and CFO Chris Clark, both of whom are Canadian citizens and residents. You see that? Yeah. That wasn't the composition of the PLS leadership team as of June 1st, 2023, was it?

No, it was not. And that wasn't the composition of the PLS leadership as of July 19, 2023 when the complaint was filed. That's correct. If you go to paragraph 13 of your supplemental declaration, just the next paragraph. The parenthetical at the very end of paragraph 13 says, for example, Bob Batista, Twana Davis, and KT. Winter

do not hold executive leadership positions with the company. You see that? Yes. And then staying on. on paragraph 13, you say in a parenthetical four lines up from the bottom of paragraph 13, for example, Melissa Bombin is no longer with the company, correct? That's correct.

Is it your testimony that Melissa Bombin did not hold an executive leadership position at PLS during the time she was at the company? No, she did. If you go to paragraph 10 of your supplemental declaration, the last sentence of Perkins, paragraph 10 says he referring to Dr. Mark Dybul is not a member of management or an employee of PLS Canada.

You see that? That's correct. Okay. Now I'd like you to turn to tab 3 of the binder. It's a June 1st, 2023 email attaching a document that you sent to debtors investment bankers at Porella Weinberg Partners and Debtors Council at Sullivan and Cromwell. Do you see that? Yes.

Okay. In the email at the bottom, Sam Safferstein of Porella Weinberg Partners, the Debtors Investment Bankers, emailed you and Michael Zimmerman, who until May of 2023 had been the CEO of PLS. Is that correct? That's correct. And in the second paragraph of his email, Mr. Safferstein asked for a call to discuss Letona's $50 million investment in PLS and to learn more about PLS, correct? Correct.

And then in the top email you reply to Mr. Saferstein that you'd be delighted to discuss that with him. And in the last line, you say, I am attaching a deck here that I hope will be helpful to you to learn more about the company. You see that, sir? Yes. And if you look at the line and sort of email header, the two from CC, you know, and the from CC part of the email where it says attachments are you following me yes okay the

attachment to your email is entitled PLS overview June 1 2023.pf see that yes and that attachment PLS overview June 1 2023 is the presentation deck that's the rest of tab 3 is that correct that's correct okay so if you turn to page 34 of the presentation deck at tab 3. Page 34 is entitled Leadership Team, is that correct? That's correct. And the logo of PLS is in the upper left-hand corner on that page, correct? That's correct. Now Bob Batista is listed as a member of the PLS leadership team, correct?

In this slide. In this slide. And he was the Chief Strategy and Commercial Officer of PLS, correct? Correct. Correct. And Bob Batista resides and works in the U.S., correct? That's correct. Tawanna Davis is listed as a member of the PLS leadership team on this slide, correct?

That's correct. And she's the chief of clinical operations, correct? That's correct. And Ms. Davis resides and works in the U.S., correct? That's correct. And Melissa Baumett is listed as a member of the PLS leadership team on this slide, correct? Correct. And she was the chief operating officer at the time, correct?

That's correct. and she resided in the US, correct? Correct. And Mark Dybul is listed as a member of the PLS leadership team on this slide, correct? Correct. And he is the executive chairperson of PLS. Correct.

And Mr. DiBel, sorry, Dr. DiBel resides and works in the US, correct? Correct. And Chris Clark is not listed as a member of the leadership team on this slide, correct? Correct. And James Forrest is not listed as a member of the leadership team on this slide, correct? Correct.

Correct. He turned to tab 4 of the binder. This is a copy of a PLS press release dated May 23, 2023, titled Bob Batista joins Platform Life Sciences as EVP, Chief Strategy and Commercial Officer. Do you see that? I see it. And the title of the press relief says Bob Batista is joining as an EVP. That's Executive Vice President, right?

I presume so. I'd like to direct you to the second paragraph of the press release, the first sentence. There's a quote from you that says, I've worked with Bob Batista for over a decade, and I'm thrilled that he's joined the executive leadership team at PLS, said Dr. Ed Mills, founder and CEO of Platform Life Sciences. Do you see that? I do. Now I'd like you to turn to tab six of the binder.

This is a printout from the About Us page from the PLS website that was printed on September 26, 2023. You can see that date in the upper left-hand corner. Do you see that, Mr. Mills? I do. Okay. And just to orient you, sorry, September 26, 2023, it was three days before you before you plaintiffs filed their opposition to PLS's personal jurisdiction motion.

Now if you turn to page 3 of 8 and go to the very bottom of the page, you'll see the heading Our Team. Are you with me? I am. Okay. Then if you turn to page 4, 5, and 6, it lists 6 PLS employees who are part of our team. You see that? I do.

On page four, Mark Diebel, is listed on the Our Team page of PLS's website as of September 26, 2023, correct? Correct. And he lives and works in the U.S.? Yes, it does. And Melissa Bombin is listed on the Our Team page of PLS's website as of September 26, 2023, correct? That's correct.

And she lives in the U.S., right? Yes, she does. I'm not exactly sure if she was with us at that time. Okay. Bob Batista is listed on the Our Team page of PLS's website as of September 26, correct? Correct. He lives and works in the U.S., correct? That's correct.

And Tijuana Davis on page 5, 6, page 6, page 6, is listed on the Our Team page of PLS's website as of September 26, correct? Correct. Correct. And she lives and works in the U.S., correct? Correct. And finally on page 6, Katie Winter is listed on the Our Team page of PLS's website, as of September 26. Correct.

And she lives and works in the US. Correct. Now if you turn to tab seven of the binder, please. This is a printout of the same About Us page of the PLS website that we just looked at tab six, except this version was printed on October 7, 2023, as you can see in the upper left-hand corner. Okay?

And to orient you, October 7, 2023, is this. the day after you executed your supplemental declaration that we looked at at tab two. Correct. Agreed? Okay. If you look at the bottom of page 3 of 7, again, you'll see the Our Team heading of the PLS website as it existed on October 7, 2023. Do you see that?

Yes. And then on pages 4 and 5, it lists four members of our team as of October 7, 2023. 23, correct? Correct. So PLS removed Bob Batista from the Our Team page of its website sometime between September 26th and October 7, 2023, correct? And PLS removed Juana Davis from the Our Team page of its website during the same period of time, correct?

Correct. And PLS removed Katie Winter from the Our Team page of its website during the same period of time, correct? Correct. Bob Batista, Tijuana Davis, and Katie Winter all live and work in the U.S., correct? Correct. And at page 5, PLS added Jamie Forrest to the Our Team page of its website, sometime between September 26th and October 7, 2023, correct?

Correct. And PLS also added Chris Clark to the Our Team page of its website during the same period, correct? Correct. And Jamie Forrest and Chris Clark are both Canadians, correct? Correct. Okay. I'd like to switch gears and turn to the transfers of funds from plaintiffs to PLS. If you'll turn back to tab 1, which is your original declaration, and go to paragraph 10,

please. Three lines up from the bottom, you state that the funds from plaintiff FTX trading were from a non-U.S. bank account, correct? Correct. And if you go to paragraph 13, three lines up from the bottom again, you state that the funds from plaintiff Alameda were from a non-U.S. bank account, correct? Correct.

And in paragraph 15, you state three lines up from the bottom that the funds from plaintiff Alameda were from a U.S. bank account, correct? It must be. Mr. Mills, are you aware that the plaintiffs included in their opposition papers evidence that each of these transfers originated from a plaintiff bank account? account located in the U.S.? I was not. But you're aware of that now?

You just told me. Okay. Well, did you not see plaintiff's papers? I did, but I'm not a lawyer. Let me ask me a different way. As you sit here today, Mr. Mills, you don't have any basis to dispute that the transfers were in fact from bank accounts of plaintiffs that were located in the United States. So as I sit here today,

it has not been my knowledge and I am not aware that that occurred. That that occurred, meaning the money came from the U.S. Bank account? You don't know where the money came from is what you're saying. I was not CEO at the time. Okay. You don't dispute that each of the transfers from plaintiffs to PLS was in U.S. dollars, correct? Correct. Okay.

If you turn to tab two of your supplemental declaration and go to paragraph four, please, the very last sentence of telegraph four says PLF had no hand in directing the process by which the funds flowed into its Canadian bank. Do you see that, sir? I do. And if you go to tab nine, please, the top email is an email from you to an FTX group employee on January 31st, 2022. Do you see that? I do. And if you turn to the third page of tab 9, you attached to your email an invoice for a $3.25 million philanthropic gift from FTX trading to PLS, correct? POS.

Possible. I'm not sure. What part about that are you not sure about it? No, it must be guess so. Correct. And at the bottom of the invoice, you included wire instructions for the transfer from FTX trading to PLS, correct? Correct. You don't dispute that you sent plaintiffs' wire instructions directing plaintiffs to send U.S. dollar transfers through Wells Fargo as a correspondent bank, correct? I do not dispute it.

If you turn to tab 10 of the binder, please. This is a February 3rd, 2022 email you sent to the same FTX Group employee, three days after you sent the wire instructions we just looked at. Agreed? Agreed. And in this email, you asked the FTX group employee to let you know when the wire transfer is made for the invoice, correct? Correct.

And that's because, in your experience, sometimes these transfers get stuck in the U.S.-Canadian banking system and don't arrive until you inquire, correct? Correct. So you don't dispute that you knew that the transfers from plaintiffs to PLS were going through the U.S. banking system, correct? No, I do. I perhaps did not understand it, but I was an impression

that this is coming from a Caribbean bank account, and CIVC has a Caribbean a Caribbean bank called First Caribbean. CIVC, First Caribbean, that's the name of it. So I was on the impression that was the case. I simply did a cut and paste from the information that was given to me by my banker,

and then the invoice would have been prepared by somebody else. Mr. Mills, can we get his This supplemental declaration can be. May I first Your Honor. Yes. Are wire instructions from CIBC that you attached. Do you recall that?

I don't recall. Well, could you look and find exhibit? I apologize that it does not have tabs. It would be the first exhibit after your signature page, I presume. Okay. Okay. So attached to your supplemental declaration are the wire instructions. from CIBC.

Do you recall that? I don't recall it. I didn't prepare it, but... But you signed it? I signed it. Okay. And on the second page of the C.IBC wire instructions, it says about a third of the way down the page, if you are receiving funds in U.S.D. currency from the U.S., please

use Wells Fargo as an intermediary bank. Do you see that? I do. So if the funds were coming from a Caribbean bank in the Caribbean, these would not be the wire That may be. I'm going to switch gears again and ask you to go back to tab two, which is your supplemental declaration, and I'll direct you to paragraph six. In the third line down from the top, you say the draft presentation on which this allegation

is based reflects PLS Canada's existing business and ideas for future business, including including its hopes for future expansion into the U.S. Do you see that? I do. And the draft presentation that you're referring to there is the June 1st, 2023 presentation deck that you sent to the debtors investment bankers, which is attached at tab 3 of your binder, correct? Correct.

And if you turn to tab 3 and look at the June 1st, 2023 email that covers the presentation deck, In your email at the top to the investment bankers, you say, I'm attaching a deck here that I hope will be hopeful for you to learn more about the company, correct? Correct. You don't say in your email that the attachment is a draft presentation, correct? Well, we discussed it. It doesn't say it in your email. It's not in the email.

And the presentation itself does not have the word. does not have the word draft on it, correct? It appears not to. I did not prepare it. And you don't say anywhere in the email that the presentation contains inaccurate information, do you? I think we discussed that on the phone with them. But your email doesn't say that.

That's correct. And your email doesn't say that the presentation contains PLS's ideas for future business, does it? The email does not. And the email doesn't say that the presentation contains PLS's hopes for future expansion into the U.S., does it? It does not. If you flip back to tab two, which is your supplemental declaration, please,

and refer to paragraph six again. The second and third sentences of paragraph six state, the plaintiffs incorrectly allege that PLS Canada operates 83 clinical trial sites in the U.S., including in collaboration with CVS. It does not. Do you see that, sir? I do. Now if you'll turn back to tab 3, which is the June 2023

presentation deck, I'd like you to focus on page 5 of the presentation deck. Yes, I'm familiar with that. On the left-hand side of the page where the United States is on the map, the presentation says US 83 sites plus CVS trial sites. Do you see that? Yes, it should have said 83 plus CBS sites.

Plus, I'll take that. 83 is a very specific number. Wouldn't you agree, Mr. Mills? I agree. The presentation doesn't say 83 planned sites, does it? No, but I'll be happy to explain to this here. The presentation doesn't say PLS hopes to have 83 sites in the U.S. in the future, does it? No.

If you turn back to tab two of your supplemental declaration and refer to paragraph 6 again, there's a long website that takes up an entire line about halfway down paragraph 6. The sentence after that very long website reads, PLS Canada has never had a business affiliation with CVS or the potential experts and access sites in the U.S. identified in the draft presentation. Do you see that? I do. And if you turn back to tab three, which is the presentation,

and go to page six, please. Okay. In the upper right-hand corner, the presentation says, experts and site access, correct? Mm-hmm. And page six identifies in turquoise blue, by name, certain universities,

U.S. government agencies, and hospitals in the U.S. in the U.S., doesn't it? I'm sorry, I can't read it. I'll read it to you. University of Virginia, that's in the U.S., right? It is. Tufts University is in the U.S., Boston University is in the U.S.

NIH is in the U.S., yes? Yep. Okay. UNICEF is in the U.S., University of Maryland. I could go on. There are 23 of them that we list in our brief. So this page lists certain you. lists certain universities, hospitals, and government agencies in the United States, right?

I do understand where this figure came from. This page doesn't say potential experts and access sites, does it? Well, when you give a presentation to someone, you usually also narrate what the meaning of the figures are. This page doesn't say future experts and access sites, does it? It reflects people we have co-authored articles with. I'd like to turn now to the subject of PLS's incorporation of a Delaware entity. The Delaware entity was incorporated with exactly the same name as the Canadian entity, right?

You're telling me. You don't know that? I wasn't CEO at the time. You had no involvement in the incorporation of the Delaware entity whatsoever? I'm sure it was discussed with me, but I was not a decision maker. If you turn to tab one, your first declaration and refer to paragraph seven, please. You say in the first sentence, PLS Delaware was incorporated for the sole and exclusive purpose of processing payroll and providing benefits to the employees of PLS Canada that work remotely from the US.

Do you see that? I do. And are you aware, Mr. Mills, that in their opposition, papers, plaintiffs included an email from a Latona person asking whether Latona should require PLS incorporate in Delaware? I am. Okay. You then turn to tab 11 of the binder.

This is an email that you sent to Ross Ryan Gansu of Latona on April 4, 2022, four days after the Delaware entity was incorporated on March 31, 2022, correct? Correct. The subject line of the email you sent reads, Delaware, Inc., correct? Correct. And in the email, you inform Ross Ryan Gansu of Latona that, quote, we have now incorporated in Delaware and have all the necessary registrations, could you advise on how to proceed? Correct.

If you turn back to tab two, which is your supplemental declaration, and refer to paragraph seven, please. the second sentence of paragraph 7, you now state in your supplemental declaration that PLS Delaware was formed in March 2022 around the same time as the transactions at Latona's request. Do you see that? I do. Okay. I want to switch topics again and talk about the David Sackett Award for the clinical trial of the year for the together trial. I think we're still on tab too. We are. So if you go to paragraph 18 of your supplemental declaration, the first two sentences, you state, the plaintiffs are also incorrect in their assertion that I traveled to the U.S. in May 2022 on behalf of PLS. Canada. To clarify, I traveled to the U.S. to receive an award from the Society of Clinical Trials for McMastered University's work on the Together trial. Do you see that? I do.

And the award that you're referring to in those sentences is the David Sackett Award for the Clinical Trial of the Year for the Together Trial, correct? Correct. Now later in paragraph 18, six lines down from the top, you say, PLSACETA, Canada itself was not part of the initial together trial. Do you see that? I do. Okay. If you turn back to tab one, which is your first declaration and refer to paragraph five, please, the second sentence of paragraph five says in May 2023 PLS Canada was awarded the clinical trial of the year for its accelerated clinical trial work and cost-effective approaches to drug evaluations and efficacy. Do you see that?

I do. And if you turn to tab 12, please. This is a May 24th, 2023 PLS press release entitled Purpose Life Sciences celebrates prestigious David Sackett Trial of the Year award win in 2022. extends congratulations to new awardee. Do you see that? I do. And if you look at the first full paragraph that's not in italics,

the first sentence reads, Purpose Life Sciences, a global impact research organization, is delighted to announce that it was honored with the esteemed David Sackett Trial of the Year award in 2022 by the Society for Clinical Trials. Do you see that? I do. And the next paragraph, the first sentence reads,

the David Sackett Annual Trial of the Year Award was given to Platform Life Science in 2022 for its outstanding contributions to the 2021 Together trial. Do you see that? I do. And if you go to the top of page two, Mr. Mills, you're quoted as saying, quote,

in winning the 22 David Sackett trial of the year award, we're humbled and grateful to have been chosen from a pool of highly accomplished contenders, and we extend our deepest appreciation to the judges and the Society for Clinical Trials for this remarkable honor, said Dr. Ed Mills, founder and CEO of Purpose Life Sciences. Do you see that? I do.

And if you go to tab four, which is the press release we looked at earlier announcing the hiring of Bob Batista, if you look at the very last sentence of the press release, which begins at the bottom of page two and carries over to the top of page three. It reads, Platform Life Sciences designed and implemented an innovative adaptive platform trial called the Together trial, receiving global recognition, including the 2021 awarded in 2022 David Sackett Trial of the Year award by the Society for Clinical Trials.

Do you see that? I do. Last subject, Mr. Mills. If you'll go back to exhibit, sorry, tab two, your supplemental declaration and go to paragraph 15, please. It starts at the bottom of page five and carries over to page six. I want to go to page six, and it's five lines down from the top. There's a sentence that starts, I have not to date. Everybody with me?

You with me as well? Yes. Okay. I have not to date been active as a senior scientist with VIRX at Stanford, which is a global pandemic response initiative made up of academics from all over the world. It is not a position at Stanford University in Palo Alto. Do you see that? I do. So I'd like you to turn to tab one, which is your first declaration, and refer to paragraph one on page two.

seven lines down from the top. It says, you state, I am also a senior scientist at VIRX at Stanford, developing new antiviral agents. Do you see that? I do. And if you go to tab three, which is the June 1st deck,

and turn to page 35, please. Underneath the picture of you on the left-hand side, side. This second entry says, senior scientist Stanford University. Do you see that? I do. And if you go to tab 13, this is your LinkedIn profile, Mr. Mills. At the bottom of page one under the heading experience, the first entry reads, Senior Scientist, VIRX at Stanford, June 2020 through present, Stanford, Stanford, California, United States. Do you see that? I do. I have no further question. Thank you. Re-direct.

Anybody else wish to cross? Yes. Reader. Thank you, Your Honor. We have some exhibits. They may be repetitive, so I'll try to stay with what counsel already used, but in the interest of not interrupting the flow of the redirect, may we distribute them.

There are exhibits that are on our list. In the event of future hearings, I prefer the exhibits be provided in electronic. electronic binders so I can just bring it up on my screen rather than having piles of documents up here we did that too okay yeah they're all exhibits that you have on your electronic screen all right all you got it I'll take okay may I proceed go ahead council of college you mr. Mills do you have a doctorate degree I do you tell the court what that degree is It's in clinical epidemiology. From what university?

From McMaster University. Are you a university professor, Dr. Mills? I'm a full professor. Where are you University of Professor? McMaster University. Are you affiliated with any other universities? I am affiliated with the University of Rwanda, and that is the only thing I've signed a contract on. So let's talk about Varex at Stanford.

Are you employed by Stanford University? No. So what is your affiliation with Varex at Stanford? So Vyrex at Stanford was an international collaboration of people all working in antiviral agents, and it was a way for those collaborators to communicate with one another. It has unfortunately not turned into much, and although it sounds like it's an impressive institution, they haven't even had a single meeting yet. Have you done anything for Virix at Stanford?

No. Has PLS ever been affiliated with Virx at Stanford? No. Has PLS ever done a clinical trial for Virx at Stanford? No. Has PLS ever entered any contracts with Virx at Stanford? No. Council asked you a series of questions about the Together trial.

What was your personal involvement in the Together? trial. So my personal involvement was in 2020 at the beginning of the pandemic. I had been involved in multiple clinical trials around the world and at some point I realized that they were all quite deficient in their aims to do outpatient treatment of COVID. Hence I put together what it's called an adaptive platform trial. It's a very unique type of clinical trial where you can evaluate multiple interventions at the same time. This would be unusual for you to see. But you might be familiar with the Oxford University recovery trial, the reason we know that Dexanethosone saves lives, that's a similar kind of trial. And interestingly, in 2020, they won the clinical

trial of the year, we won the 2022 for using a similar design, but we were using outpatient treatment. In 2020, was there a PLS Canada? No, there was not. Was there any PLS? You're shaking your head. You have to answer? No, there was not. You were nice enough to give credit to PLS for the work on the together trial. Why did you do that? Well, midway through the trial, we became PLS because we had multiple funders who were coming forward, and we thought that we might be able to engage biotex also that would put interventions and money into evaluating different interventions for COVID. Can you pull the microphone?

I'm having a hard time hearing. I want to make sure we pick you up on the recording. Sure, I'm sorry about that. So PLS was incorporated, I think, in 2021 at some point. I had begun the trial via McMaster University, where I hold my academic position. And at some point, we realized that the university didn't want to continue doing the trial because there wasn't much overhead

for them. Unfortunately, that's the way the universities worked. And so we were interested in moving as quickly as we could, that we could evaluate multiple interventions in the trial. And that was done most easily as a company, as a commercial entity. And that was the reason we established PLS. Was that together trial done in the United States? No, not a single patient was ever recruited there.

Where was the together trial done? Predominantly in Brazil and Canada and subsequently a little bit in South Africa. And as long as we're talking about trials done in the United States, Has POS Canada ever done a single trial in the United States? No, we have not. Has POS Canada ever done any business whatsoever in the United States? Yes, we have. What was that business?

We engaged with two companies to do clinical trials outside of the United States. One was a company called Iger, where we had done a clinical trial in Brazil, and they gave a small amount of money to finish up that clinical trial. And another one was called Greenlight Bio, where we were doing a trial for them in Rwanda, and subsequently that trial never occurred. Other than those two transactions, has PLS ever done a transaction with U.S. companies? No. I'm going in reverse order than what counsel did, but it seems to make sense. Council asks you about a Delaware entity, which is also but sued, that's PLS Delaware.

What does PLS Delaware do? The PLS Delaware doesn't do a lot, but it manages the salaries of the aid employees who are U.S.-based and covers somehow paying their health insurance. Does PLS. Delaware do anything else? It does not. Now, counsel showed you a series of emails where there was a discussion of forming PLS Delaware. It sounded like to do more than that. What happened?

Well, I wasn't CEO at the time, but I think that you're referring to the communication with Ross Rheingen. We had communication with him. He was not sure. He represented Latona, and the lawyer for Latona happened to be a Canadian and said no, actually would rather do this deal in British Columbia. And by this deal, what are you referring to? Oh, sorry, the investment and service contract. And that was the investment in service contract with Latona. Between Latona and PLF Canada.

Was that the investment and service contract just to put a pin in it? that was funded you discovered by FTX trading and Alameda trading? I believe so. So you remember Council's sort of longer series of questions about what has been marked as Exhibit 3, which is the draft presentation that you sent to Mr. Saperstein at Perilla Weinberg. Can you describe the circumstances that led you to send that draft presentation to Mr. Safferstein? Certainly. I received an email from Mr. Safferstein, indicating he wanted to talk about the company that they were with, at Perot, some company I was unfamiliar with, and he requested a discussion.

The CEO at the time advised that I sent this slide deck to him. The slide deck is an aspirational slide deck that any company utilizes to feed, you know, potentially what our narrative is on what the future of the company looks like. So, counsel asked you questions about the slide deck not having the word draft on it, and you wanted to explain why it did. have the word draft on it, weren't given that opportunity. Would you explain to the judge now why exhibit three, the draft presentation, doesn't have the word draft on it, and the conversations that you had with Perilla Weinberg regarding that exhibit?

Certainly. Well, you know, it's a slide deck that every company keeps some sort of a slide deck about what their aspirations are. Some of it has been, you know, some of it is how we currently are and some of it is how we'd like to project ourselves. But that slide deck was never for public consumption. And when we discussed it with them, we also discussed that this was with that prejudice. You said it was never for public consumption. Did that slide deck go to anybody other than the investment backers of Farilla Weinberg?

Not to my knowledge. The slide net talks about 83 clinical trial sites in the United States. Were there 83 clinical trial sites in the United States? No, we do not have 83. We don't have any clinical trials. Was there ever in PLS's history a single trial site in the United States? No. When you were talking to Mr. Saperstein, did you explain to him that this is an animal?

aspirational slide deck that you really don't have a signal site in the United States? Well, it was a very strange phone call because there were several people from his team, but they were all calling in from, I think, Grand Central Station or somewhere on their way home, so it wasn't a highly organized phone call. Could have been for Delaware. Who knows? And you said it wasn't a highly organized call. Was it only one call about that person?

about that presentation? Only one call. Was that ever, did that presentation ever become in any way a reality? Some elements of that are a reality. Within a very short period of time, the 83 sites that that's referring to, which is at CVS, CVS decided, the CBS was open just as anybody here was welcome to approach, at the time was welcome to approach CBS and ask about access to 83 clinical trial sites. they subsequently closed it very shortly after them. So there's no component of their company that currently runs trial. So they never had one of your trial sites, if I understood you.

That's correct. And they never ended up doing trial sites. No. Counsel asked you questions about all of the academics that are referenced in that draft presentation. All of the academics, of course, being American academics as she read, as you recall that testimony. Yes.

What were you referring to on that page of the draft deck? So in our industry, in clinical medicine and clinical research, your expertise and in particular publications have value. They demonstrate that you can complete a project. And so I've been fortunate to work with some of the leading academics in the world, And that particular figure reflects a network of all of the core scientists within our team and people that they have collaborated with. So it illustrates the network of academics that we would have access to. But you didn't enter into contracts with those academics, did you?

No. You said in your world of clinical trials, your role of science and attempting to bring cures to disease. Publishing in journals is important. Why is that? So it's a very important component of advancing intellectual knowledge and access to scientific information.

So it would be considered unethical to not publish if you've done original research. Why would that be unethical? We do research to save lives, we do research to benefit the lives of those who are more misfortune and covering up findings, which of course happens within the commercial industry, does happen within the environment and collaborators that I have, that would be not permissible. How many times have you personally published and recognized scientific and medical journals? I don't keep exact track of it, but I'm one of the most...

published scientists in Canada, and so at least 550 publications. Has PLS as a company ever published an article in any journal, whether it be an American journal or any other journal? Not for the purpose of PLS, Canada, no. What do you mean by that? I mean that, as I mentioned, credibility and demonstrating non-biased and being entirely transparent is important. is important. So we will always, you know, these are individuals who publish, not just because

you're from a company do you get the right to publish, individuals must contribute in a meaningful way and then they must disclose any conflicts that they might have, such as taking a salary from a company like BLS. Have you published during your academic career in American journals? Of course. Have you published in British journals? Yes. Have you published in journals that are published throughout the world? Of course, yeah. Did you list some of those in your supplemental declaration for the court to review. I did. Counsel asked you about the Wells Fargo correspondent account that CIVC uses for its dollar transfers. Let me ask me a couple of questions about that. Is that a special account that

Wells Fargo only uses for PLS? I don't know. I have no familiarity with that. And did POS tell Wells Fargo that, I'm sorry, did POS tell CIBC, that CIBC had to use Wells Fargo as a conduit in order to receive the dollar transfers from FGX and Al-NEDA? No, it did not. Did PLS have any control of how CIBC receives dollar transfers from anybody? No, we had no control. And when you gave wire instructions to Mr. Reington's U on behalf of Latona, did you simply cut and paste the wire transfer instructions from the CIPC website and then forward those to Mr. Reington's you?

Something like that, yeah. Does PLS have an account at an American Bank? It does. What is that account? Chase Bank. And what is that account used for? Oh, I'm sorry. Did you say T.L.S.

Well, okay. So let's, and I confuse you, I apologize. Does PLS Delaware have an account at an American bank? Yes, it does. What is that account use for? For transfer of payments of salaries and benefits. To employees. To employees.

to the PLS Canada employees that are in the US. That's correct. Does PLS Delaware use that Chase account for anything else other than to pay employees? No. Does PLS Canada have an account at an American bank? No. You were asked a lot of questions about the team

and the evolution. of leadership team at various times at the company. Let's get to that in just one minute, but let's first focus on PLS as an entity, not the individuals who work for it. POS as an entity ever done anything in America? Yes. What is it done?

PLS as an entity. picked up the award for clinical trial of the year where I attended and some staff have attended conferences. Other than that, no. In terms of Mr. Batiste, Ms. Davis, Ms. Winter, people who at various times were listed as being part of leadership, did they try to develop business in the United States? I'm sure that they did. So yes. Did they ever obtain any business in the United States?

With the exception of, no, those individuals, no, they never did. And you were to say with the exception, you previously testified there were two funding transactions over PLS's history that were used to fund trials that were done in Brazil, if I recall? Brazil and Rwanda, Iger and Greenlight. So what are these American remote employees do for PLS Canada? At the moment, they predominantly help with building education for an initiative we are leading throughout Africa. And so their entire focus is on Africa. Does PLS have employees in places other than Canada and the United States?

Yes. Where are those employees? Rwanda, Nigeria, Kenya, South Africa. Approximately how many PLS employees work in Africa? Approximately 20. Approximately how many employees this PLS have? Approximately 59. Was Mr. Batista and Miss Davis and this winter ever sea-sweet leaders for PLS?

No. Who were the C-Suite leaders over time? Over time, it arguably has been Dr. Jamie Forrest, currently Mr. Chris Clark, previously Melissa Bombin, Michael Zimmerman, and myself. and myself. How long did this bond been work for PLS Canada? Approximately three months. Why so short? I believe she was taking the company in the wrong direction. Have any of those American employees of PLS ever done an American clinical trial for PLS? No. Your Honor, may I have a moment. Thank you, Your Honor. No further questions at this time.

Thank you. I have a couple questions. When you conduct clinical trials outside the United States, do you use U.S. Food and Drug Administration rules and regulations to conduct those trials? Thank you, Your Honor. I love that question. There are international standards, and the U.S. FDA is one of about eight different countries that have agreed to share those standards, and for the trials in Brazil, for example, they have their own FDA that you must have passed the regulations for.

In order to meet FDA regulations, quality of clinical care, it will be dependent on whether or not you're trying a new drug for the purpose of registration of a new drug, or you can also do repurposing of drugs. Let's just imagine you're using aspirin, for example. for some condition. If aspirin's already been available in that particular country, then you don't need to get the equivalent FDA approval. In Africa, they've just begun the African Medicines Agency, which will be the FDA equivalent for Africa. And the U.S. Delaware entity, you said that they pay the salaries of the employees and health insurance. So they also pay the payroll tax for those employees? Yes. And how does, in your declaration it would indicate PLS Delaware has no,

operations, no income, doesn't produce anything, has no employees. So where does the money come from? It gets transferred from PLS Canada. It goes from a Canadian bank to the US bank. That's correct. Okay. I'll ask some questions so I'll open it up to the parties if they want to follow up on that. Nothing further. Nothing further, Your Honor. Thank you. Thank you. Thank you. Your Honor, PLS Canada RETS. Okay, thank you. Your Honor, given the very late hour, I want to make a couple very quick legal points. First, because there's been no jurisdictional discovery, plaintiffs need only make

a prima facie showing of personal jurisdiction over PLS based on competent evidence. We believe we've done that with the 66 exhibits attached to Mr. McGuire's declaration. Second, in deciding a motion to dismiss for personal jurisdiction, the court considers PLS's contacts. at the time the complaint is filed or within a short period of time before that. And this point wasn't briefed, Your Honor, so I can give you authorities on that. Well, we're, I think we're getting an argument

and it's their motion, so. Sorry, I thought he arrested meeting, he wasn't in motion. No, no further evidence. I apologize, I apologize, I was getting out of my thoughts. Do you have any evidence? No. Okay.

Just, Your Honor, we've already, I guess, moved in the Declaration of McGuire. I don't think you did. Well, I thought you did for me, but I'm happy to do it if you don't think you do. Why don't we do it? All right, Your Honor. I'd like to move into evidence the attorney declaration of Matthew McGuire, which is docket entry 42, and the 66 exhibits attached there to, and the notice of filing of a corrected exhibit to the declaration of Matthew McGuire,

which is docket entry 47, and that attaches a corrected. exhibit three that June 2023 deck okay and as I said your honor no objections all those are all admitted without objection thank you your honor may we argue yes and by the way we can't stay hopefully it won't take 530 but we do have some extra time if we need to go past yeah and we and and and and I I understand that and I just want to alert the court we have the need for about 10 minutes on number 14. That's not going to be long and there's not going to be evidence.

Okay. Your Honor, here's where we are on jurisdiction. It's a story of a transaction or transactions between companies on the one hand that are from the islands. Latona is Barbados, Alameda is British Virgin Island, FTX is Antiguan, Barbuda, and POS Canada. There's no dispute that the transactions and issue here did not touch the United States. The transactions weren't for the purpose of touching the United States. they were for the purpose of clinical trials that would be conducted in developing and underrepresented countries that need clinical trials in order to fight disease in those countries. The transactions weren't for the purpose of raising money in the United States, conducting trials in the United States, doing business in the United States.

we've extensively briefed and the plaintiffs have extensively briefed the cases in this area. There's a commonality to the cases when dealing with specific jurisdiction. And the commonality is where the transaction has something to do with the jurisdiction or touches the people in the jurisdiction. like when money is raised in the jurisdiction, when securities offerings are made in the jurisdiction. In the case of the Dorsey case versus about the management of tennis clubs and golf clubs,

there was jurisdiction in that case because the California corporation went to Michigan and opened tennis clubs and golf clubs and used its employees to run those clubs and manage those clubs. So not only were the transactions in the forum, but the employees were in the forum, the business was in the forum, and in essence the California corporation had done what the cases talked about. They had purposely avail themselves of the forum. That is not what has happened here. There has been no purposeful availment of the United States. This entity has not done the transactions at issue in the United States. Now, has its employees touched the United States? Yes. They went there,

they got a award because they did a great trial. They published it an American Journal, the New England Journal of Medicine. A great honor in itself. They published in Lancet, a British journal, and they published in African journals and journals throughout the world. But that doesn't be PLS purposely availed itself

of the United States. It doesn't be that PLS consented to journal. jurisdiction, PLS scientists go to conferences in the United States. They go to conferences all over the world. When you're running clinical trials and you're trying to cure disease, you've got to stay current. But if a conference is in the United States, you're going to go to the United States. Does that mean you've consented to jurisdiction on behalf of the entity that you work for? Absolutely not. Not a single case says that.

Let me turn to the banking issues because there was a lot of briefing and a significant amount of cross-examination on the banking issues. We thought as the exhibits to Dr. Bill's original declaration shows, we thought based on wire confirmations that the money came from Tortola, that the money came from the British versions and islands. That's what the wire confirmation said. Quainos, were kind enough to tell us the money actually came from an American bank account. Let's first stop right there and talk about the money coming from American bank account. We cited the Gargano versus Cayman National Corporation case. It's a district court case from New York. almost on all fours as this case. It was an argument made that there was jurisdiction in the United States because the money came by wire transfer from an American bank account. And the money came from the American bank account

to the Cayman Bank. And the court there said, the fact that the money came by wire from an American bank to the bank, to the Cayman National Bank doesn't create jurisdiction. The payover could have walked into the Cayman Banking and deposited a check there. So the fact that the money came from the American account,

that wasn't intentionally directed. The recipient of the money didn't say, make sure you send it from your American account, American bank account, it could have come from the Cayman bank account in cash. So the court said there, defendant's receipt of the funds by means of a wire transfer that originated in the United States is fortuitous contact between defendants in the United States, which could not constitute a basis for the exercise of personal jurisdiction. Like here, the fact that the money came from an American bank account.

instead of an island bank account is a fortuitous contact. It was not a contact that we had any control over. And even if the funds were routed as we found out that they were routed through Wells Fargo because CIBC uses that in every receipt of dollars by wire, PLS Canada had no control over that process. That's the banks process. The bank uses a correspondent bank, apparently these correspondent banks is something we all learned is used frequently. So that doesn't equal consent to jurisdiction.

Canadian group Underwriters Company versus MV Arctic Traders, in 1998 US District Court case, said, when you use a New York bank in that case, that case only is a conduit for defendants account with a London bank that does not create jurisdiction because the court reason defendants do not maintain an account in New York and they had no part in selecting the New York bank another New York bank as a correspondent bank as an intermediary in this situation PLS Canada does not maintain a New York account It has no part in selecting Wells Fargo, has an intermediary correspondent bank.

It is analogous facts to Canadian Group underwriting company versus MV Arctic Trader. There was no jurisdiction there. There was no, there's no jurisdiction here based on the use of the correspondent bank. Wire instructions. Wire instructions are what we all do was done in this. case. When you said wire instructions, you take a screen shot or you cut and paste so you get the wire instructions right and you send them to the entity that's going to wire you. That was exactly what was done here.

Cutting and pasting wire instructions does not mean that PLS had a hand in controlling the process by which fund flowed into its Canadian bank account. The cases that the plaintiff's site, without exception, are cases where foreign banks who were sued in the U.S. fought jurisdiction, basically saying we're a foreign bank who shouldn't be subject to jurisdiction in the United States. In every one of those cases, there was jurisdiction. I'm talking about Archipeda, which is a case dealing with jurisdiction over the Bahraini Islamic Bank, and I'm talking about Liki v. Leibis Canadian Bank and SIPC versus Madov. In each of those cases, by contrast to our case, the foreign banks told the wire or, the payor,

We have an American bank account, use the American bank account to get us money, wire the money into the American bank account. They control the process. They told the payor how to wire. The payor was told to use the U.S. banking system, and that's distinguishable. The classic case that shows how distinguishable these cases are is the Liky v. Levitis Canadian Bank, which is a second circuit case in 2013, where personal jurisdiction was found over defendant Leiboutis Canadian Bank. In that case, what was the bank doing? The bank was actually gathering money and wiring it to Hezbollah.

The bank had been sued by Israeli survivors of terrorist attacks. The bank made a 12v2 motion and said, we're not here. We're in Canada. We're in Lebanon. We should be hailed into an American court. And the court said, you're alleged to a vote. violated American banking laws by funneling money to terrorists. You used American bank accounts, you use dollars, you use your corresponding account to wire money

to terrorists. That's the allegation. There is jurisdiction. That's not what we have here. We don't have a case in the native series of cases where there was jurisdiction over the foreign bank because of foreign bank, again, directed that its correspondent account be used to put dollars in that were obtained for made off investors. None of those bank accounts are on point. PLS, Canada neither chose to use a U.S. bank or received

funds in a U.S. bank. There is no personal jurisdiction. POS Canada doesn't have continuous or systematic contact. There is no general jurisdiction. POS Canada doesn't do anything in the United States from a business standpoint. It doesn't do its business, which is running clinical trials. It runs clinical trials in the countries that Dr. Mills talked about. Brazil, Pakistan, Ronda, South Africa. It is running trials all over Africa and underrepresented and or underdeveloped countries. It is doing that good work, but it is not doing that good work in the United States. Yes, it has employees.

Yes, it goes to conferences. Yes, it has a presentation where a scientist who was based in the United States. States is listed as a leader. Yes, it has a chairman, an executive chairman on the board who is a very, very distinguished medical doctor on the Georgetown staff. But it doesn't have a business in the United States. The transaction didn't have anything to do with the United States. And the cases that are cited by the plaintiffs with respect to the remote employees just it's like I mentioned the Dorsey versus American Golf Corp case the other case that sort of epitomizes what is not going on here his functional

pathways of Tennessee versus Wilson Senior Care District Court case from Tennessee from 2012, South Carolina Corporation goes to Tennessee. That South Carolina Corporation happens to provide therapy to seniors in complicit hospitals. South Carolina Corporation says we're South Carolina Corporation. There's no jurisdiction over us in Tennessee. And the court says, well, your employees work in Tennessee. Your employees were resident in Tennessee.

Your contract was signed in Tennessee, and you profited from a lot of work in Tennessee. There is jurisdiction. We don't have that. We haven't profited from the United States. We haven't worked in the United States. We're not working in the United States. As close as we got to the United States and work

was an aspirational deck that was sent to an investment banker and was the subject of one conversation. That jurisdiction does not make. I would submit, Your Honor, unless you have any questions, there is no general or specific jurisdiction here. Okay, thank you. No questions for you. Ms. Wheeler?

So I wanted to begin with three very simple principles of law, that I think required denial of this motion. The first one, Your Honor, is that where, as here, there's been no jurisdictional discovery. The plaintiffs need only make out a prima facie case of personal jurisdiction over PLS, and we think we've done that. I'll get into that in a second. Second, in deciding a motion to dismiss for lack of personal jurisdiction, the court considers PLS's contacts at the time the complaint is filed for a short period of time before that.

and that wasn't briefed i can give your honor the points on that it's clinghofer versus s nc achille loro uh in the second circuit nine thirty seven fed second forty four fifty two second circuit nineteen ninety one and mace q u e e e n versus union carbide corp 2014 Westlaw, 680, 98, 11 at Star 6, District Delaware, December 3, 2014. And the reason that point has become relevant, Your Honor, is because, as you saw in Mr. Mills' cross-examination, the PLS has changed its website after the complaint was filed in a transparent attempt to claim that its leadership team, was based in Canada and not in the US. So any 11th hour shenanigans by PLS to try to defeat jurisdiction are legally irrelevant on this motion.

And third, because there hasn't been an evidentiary hearing on PLS's motion, and in fact no discovery or any other things, the plaintiffs are entitled to have all of their allegations taken as true, and any conflicting facts must be resolved in plaintiff's favor on this. motion and PLS concedes as much at paragraph 20 of its moving brief where it cites Pinker versus Roche Holdings in the Third Circuit. And the law is clear that where plaintiffs have sustained their burden of producing competent evidence showing jurisdiction is proper, the 12 motion must be denied despite any controverting presentation by the defendant. And that's Goto, Caisha, IP Bridge, 2016, Westlaw, 441, 314.

Now, we talked about this earlier, but in support of its motion, PLS submitted two declarations of Edward Mills. And as we hope, we demonstrated on cross, those declarations not only contradict each other, but they contain demonstrable misstatements so that they don't constitute credible. evidence that the court should consider on this motion. Mr. Mills is not credible on the big points, who the leadership team was and where they were located, and he's not credible on the small points, whether he is a senior scientist at Stanford and whether his company won the PLS, sorry, the David Sackett Award. Seems like Mr. Mills will say whatever is convenient to whatever audience he's speaking to at the

time. But even if the court were to consider the Mills Declaration, to the extent of the court were to extent there are factual discrepancies between the evidence plaintiffs have submitted and what Mr. Mills said in his declaration, the court has to resolve all factual disputes in plaintiff's favor in deciding this motion. Because Mr. Cornfield spent a lot of time on wire transfers, I'll start there. We've cited cases at pages 22 to 23 of our opposition brief that hold that a defendant's use of a correspondent bank account in the U.S.

subjects that foreign defendant to specific jurisdiction in the U.S. because the foreign defendant purposely availed itself of the U.S. banking system. PLS. doesn't dispute that for each of the three transfers, and they totaled $53 million, Your Honor, plaintiffs sent wire instructions ordering the plaintiffs to send the funds through a correspondent bank. The sending of those wire instructions directing

that the funds go through a US correspondent bank is an intentional act that constitutes purposeful availment of the US banking system. Mills was aware that he was using the banking system as that email we showed, it's McGuire Exhibit 65 where he tells an FTX employee, let me know when the wire goes through because sometimes they get stuck in the U.S.

US Canadian banking system and they don't arrive until we inquire. You know, despite sending those wire instructions, PLS contends that it had no hand in directing the process and no control over CIBC's use of Wells Fargo as a correspondent bank. PLS did have choices that would have avoided U.S. jurisdiction. They just didn't utilize them. So for example, if PLS had wanted to avoid, specific jurisdiction in the US it could have chosen to receive the funds in Canadian dollars it is a Canadian corporation after all Bahamian dollars

Latona was a Bahamian company that was entering into these agreements with it or any other non-U.S. currency but they chose US dollars had they chosen non-US dollar currency it wouldn't have gone through Wells Fargo we looked at the wire instructions Those are wire instructions for US dollars originating from the US. Alternatively, PS could have avoided PLS could have avoided specific jurisdiction by receiving the funds in a non-US currency and then utilizing banks outside of the US to convert the funds to US dollars using foreign exchange transactions. Those transactions wouldn't have utilized a US correspondent bank. But those options wouldn't have allowed PLS, I'm sorry, but the options that would have allowed PLS to avoid the U.S. banking system take longer, and they involve transaction costs and therefore make the transactions more expensive.

So PLS did the fastest and least expensive thing. it affirmatively directed plaintiffs to transfer the U.S. dollars through Wells Fargo as the U.S. Correspondent Bank and thereby purposely availed itself of the U.S. banking system. PLS. tries to distinguish the cases that we cited on the grounds that the defendants in those cases were foreign banks, not foreign corporations. But the reasoning in those cases applies whether defendant is a bank or a corporation. The reason of those cases is that it is the purposeful or intentional use of a U.S. Correspondent bank that subjects a foreign defendant to personal jurisdiction, not the status of the defendant. The cases that PLS cites and Mr. Cornfield spoke about Gargano and Canadian Group underwriters insurance company are readily distinguishable.

In those cases, there is no evidence that. that the defendants directed the wire transfers through a US correspondent bank. There wasn't even a US correspondent bank in Gargano. In Gargano, the court noted that for defendants' purposes, it did not matter where the money came from or how it got to them. But here, it mattered to PLS how the money got to them. They sent wire instructions directing

that the US dollars go through the correspondent bank at Wells Fargo. PLS cites Gargano for the proposition that the receipt of a wire transfer is an inherently passive action that is a fortuitous contact between the defendant in the United States that can't establish specific jurisdiction. But unlike the defendants in Gargano, PLS's actions were not inherently passive. PLS affirmatively directed plaintiffs to wire the U.S. dollars through Wells Fargo. Similarly, in Canadian group underwriters, there was no evidence defendants directed

plaintiff to use Unibank in New York as the correspondent bank. The court said the defendant had no part in selecting the New York Bank as the intermediary. Here, by affirmatively sending the wire instructions directing plaintiffs to send the funds through Wells Fargo as Correspondent Bank, PLS purposely availed itself of the United States banking system. But we don't just have the wires. We also have PLS affirmatively invoking the protections of the U.S. securities and tax laws in the safe, and we have PLS agreeing to New York arbitration provisions and New York choice of law in the services agreement.

So if you agree to arbitrate in New York and you agree to New York law, you should at least foresee the possibility of litigation in the United States. And they also used New York lawyers to negotiate these agreements. And plaintiffs make the point that it's not exclusively New York lawyers, but it's exclusively U.S. connections that matter to this motion, and nobody disputes that they use U.S. lawyers. We talked about the Delaware entity. Whatever the reason it was created, there's now no dispute that it was created in connection with this transaction at Latona's intent.

And so that's another, you know, the creation of a Delaware entity in connection with this transaction is purposeful availment. Turning to general jurisdiction, there are an awful lot of contacts that PLS doesn't dispute. And it's the totality of the circumstances that matters for general jurisdiction. So just to go down the list quickly, PLS doesn't dispute that 43% of its employees reside in work in the U.S. That's a really large percent, Your Honor, 43 percent. PLS doesn't dispute that it actively solicits employees

to work in the U.S. And it's not, as Dr. Mills contends in his reply declaration, that some employees just happen to work in the U.S. If you look at Exhibit 36 to the McGuire Declaration, it's a PLS job posting for a senior director of business development in Boston, Massachusetts. Not anywhere in the US, not robust, Boston, Massachusetts. You must live in Boston, Massachusetts,

to do this job for PLS. That's not just some employees happen to work in the US. PLS doesn't dispute that its employees regularly publish articles in US medical journals, that they publish articles with other US academics and doctors, and that PLS post those journal articles, on its website. PLS doesn't dispute that its employees regularly attend conferences in the U.S. and that those employees have one-on-one business meetings with conference attendees

in the U.S. at those conferences. And those are McGuire exhibits 40, 41, and 43. Each of the attendees says, you know, please contact us to arrange a one-on-one meeting with us at the conference. What do you think they're doing at those meetings? They're soliciting business on behalf of PLS in the US. PLS doesn't dispute it partner with Greenlight and IGIR, which are US companies for clinical trials outside of the US. It doesn't dispute that the Together trial received funding from US investors, and it doesn't dispute

that Ed Mills traveled to the US to accept the award for the clinical trial of the year. There are really only four facts that plaintiffs have presented that PLS disres. disputes and we've covered each of those on cross, Your Honor. The first one is that five of the six members of the leadership team at the time the complaint was filed were in the US and so they were directing PLS's activities from the US.

We talked about the 83 clinical sites and 23 experts that it told the debtors investment bankers it had in the US. You can't tell the bankers you have these and then deny them when it's inconvenient for your personal jurisdiction motion. The dispute about whether PLS won the David Sackett Award, whether it did or it didn't, that's what PLS is out touting to the world in its press release, including quotes from Mr. Mills.

And finally, whether Mr. Mills is a senior scientist at Stanford. Again, he's touting it on his LinkedIn and his deck to the debtors. I don't want to belabor. any of those other things. I would say in closing, Mr. Cornfield's sort of opened by saying that this is a case about an Antiguan company and a British Virgin Islands company, a Bahamian company, a Canadian company. That's not what this case is. We filed a complaint against

six life sciences companies. Five of them are in the U.S. Sam Bankman-Fried, a U.S. citizen. Ross Reingansu, a U.S. citizen. Nick Bextead, a U.S. citizen. F.T.X Foundation, a Delaware nonprofit, and PLS. This is a case that should be heard in this bankruptcy court in the U.S. The court and the debtors have an interest in litigating this adversary proceeding here and having the fraudulent transfers adjudicated in the United States. Thank you.

Short response, Your Honor. Sure. Your Honor, the safe is Exhibit 5. That's the transaction document for the $35 million transfer. Council left out what the safe says about jurisdiction and choice of law, which is on page 7 of the safe at Section 7F. That rates.

The parties agree that this safe, and all the rights and obligations hereunder, shall be governed by the laws of the province of Bridge Columbia and the federal laws of Canada applicable therein. Each party hereby submits to the exclusive jurisdiction of the courts of Vancouver and British Columbia. Council left that out, Council also, left out the provisions of the services agreement, which is exhibit eight of our exhibit

list that talk about Canadian securities laws, that talk about Canadian jurisdiction, that was left out too. The council talks about what we don't dispute. The plaintiffs don't dispute that this is a case about a business who, doesn't have any business activity in the U.S. Council doesn't focus on the big picture here, which is, however, counsel tries to minimize it, this is transactions between companies that don't have anything to do with the U.S.

Yes, the FTC's bankruptcy case has a lot to do with the U.S. Samuel Bankman-Fried at all have a lot to do with the U.S. We're talking about what POS Canada has to do with the U.S. And POS Canada doesn't have very much to do with the U.S. It doesn't do its trials here. It doesn't operate here. Yes, it has some employees.

Yes, it gets some awards. Yes, it talks to academics. Not to talk to academics throughout the world when you're trying to cure disease would be scientific. malpractice. Now, a couple of points from counsel's argument struck me. In particular, the point about foreign currency, which was a point that nobody breathed. Nobody said that if you're a Canadian entity who gets money in dollars, you purposely availed yourself with the United States jurisdiction, until counsel argued.

So if counsel's argument is taken to its conclusion and it's not an absurd stretch, every dollar transfer to a Canadian bank account would constitute purposeful availability of the United States jurisdiction. You would then be subject as a Canadian who received a wire transfer denominated in dollars to jurisdiction of American

courts. Again, not a logical stretch to take a Japanese citizen who received a dollar transfer. You would then be subject to the jurisdiction of American courts. Receiving dollar transfers in a Canadian bank account does not under any stretch of the imagination or under any case ever constitute consent to jurisdiction.

The Delaware entity in this case was not used. The Delaware entity, it was contemplated as we see from the emails as Dr. Mills candidly testified. The Delaware entity was

an entity that was formed that could have been used. It was not used. Nobody has made any allegations against the Delaware entity. In fact, as we will see when we get to number 14, plaintiff is saying now that it does not have any claims against the Delaware entity. The Delaware entity doesn't run trials, and most importantly, was it a part of the transactions at issue?

The Delaware entity did not receive. any of the transfers that form the basis of the alleged fraudulent transfers. So you can say that because PLS Canada has touched and continues to touch the United States in various shapes and forms, it has purposely availed itself of the United States law and there is jurisdiction. But if you say that, you're making an argument that is contrary to every argument. argument in every case about jurisdiction. There's no case that says if you touch the forum, whether it be in this case, the United States,

or whether it be in many of the cases, we all both cited cases where the resident of one state is fighting jurisdiction and the other state. Touching the forum doesn't get jurisdiction. Continuous and systematic contact with the jurisdiction gets you general jurisdiction. That's the law. What is continuous and systematic contact? The epitome of it is your headquarters are in the jurisdiction or you're incorporated in the jurisdiction.

You're at home, as the case is saying, in the jurisdiction. That's general jurisdiction. PLS Canada is not incorporated in the United States. It's incorporated in Canada. PLS Canada is not headquartered in the United States. It's headquartered in Canada. PLS is not at home in the United States. It's at home in Canada.

PLS received the transfers at issue in Canada. It does its business throughout the world, but not in the United States. There is no jurisdiction, whether it's general jurisdiction or specific jurisdiction. The fact that PLS cut and pasted wire instructions does not constitute jurisdiction because, again, not a stretch. a stretch, CIBC still uses Wells Fargo as a correspondent bank for dollar transfers. Are we to say to every CIBC account holder who receives a transfer in American dollars that that account holder has consented to jurisdiction in the United States? We can't say that without being accused of having no legal basis whatsoever to support that.

There is no legal basis to support that. There is no legal basis for jurisdiction. Thank you, Your Honor. All right, I'm going to take the matter under advisement. I'll issue a ruling in due course. Move on to item number 14. I've read the papers on this, so let's not take a whole lot of time. Okay, I'm going to do it in under five.

minutes your honor so our position is that POS Delaware didn't do anything in connection with any of the transactions PLS Delaware is sued in the complaint they're named in paragraph 21 of they said they're not pursuing they're not pursuing you Delaware they're not pursuing it and so we have a difference of opinion only about one think. The difference of opinion is what should you do when you hear, as they wrote in their papers, that they're not pursuing PLS Delaware. The PLS Delaware's position is you should grant the motion to dismiss under 12b6 without leave to amend. The plaintiff's position is we've said we're not pursuing Delaware, and that's good enough.

therefore this is all moot will take out any reference to pursuing Delaware from the complaint Here's my problem with that you're on they could decide Tomorrow or in six months to make a motion to amend to say they are pursuing Delaware there's a basis for that in my view, but they're still stopping them from doing that Unless you would issue a decision that they have failed to stay at a claim against Delaware and they can't amend to state that claim. That's why I'm asking you to grant the motion without leave to amend. We never sued PLS Delaware so there's no motion to dismiss with respect to PLS Delaware.

The motion to dismiss should be denied as moot. You can't dismiss someone without prejudice when there's been no briefing, no discovery. If we find six months from now some basis to sue PLS Delaware, we'll sue PLS Delaware. But he's asking for at this fairly early stage of the case seems unnecessary. Paragraph, 21 of the complaint. Let me read it to you. PLS is a company incorporated at British Columbia, Canada, February 2021, and in Delaware, March 22, that supports clinical trials, including Intertherapeutics Research.

research. We read that to say they sued both of the entities. Who's in the caption? In the caption is Platform Life Sciences Inc. That's it. Well, I'm not going to grant the motion to dismiss with prejudice because as as Wheeler pointed out, six months from now, they might find some additional information that gives them a basis to sue them. But I do think the, uh, the debtors need to file an amended complaint to make clear that you're not pursuing PLS Delaware in this complaint. So I will, it's kind of a chicken and the egg kind of thing because I don't think they have actually sued PLS Delaware,

but maybe they did. I don't know. Hard to tell. So I think the best way to approach this is just, as I said, file an amended complaint to make it clear that you're only suing PLS Canada, not PLS Delaware. Your Honor, can we do that after you decide the motion to dismiss for lack of jurisdiction? I don't want to spend my one amendment as of right deleting four words from paragraph 21 until I see Your Honor's ruling on this motion. That makes sense. Thank you. That is all we have, Your Honor. Okay, thank you.

Anything else from the debtors today? Not today, Judge. Thank you. Your Honor. Your Honor, I might just note that we did upload this Adam Landis for the record. We did upload that order. connection with item number 11 so we'll be waiting for it okay okay all right thank you all very much we're adjourned thank you thank you thank you your honor