American court hearing recordings and interviews - Season 6. Episode 19. October 10, 2023. In re BlockFi Inc. et al., chapter 11 bankruptcy case no. 2022-19361, audio of hearing held in the BlockFi bankruptcy proceedings pending in NJ, USA #crypto

Episode Date: October 11, 2023

publicly available hearing audio

Good morning again. This is Judge Kaplan. We're hearing an array of block by matters this morning. We have counsel both in court and appearing remotely. For the benefit of those who are appearing remotely, I'll remind you to make use of the raise-hand function, and I'll be sure to call on you. For those who are here, let me first just have appearances. For those who are in court, for the benefit of those who appearing remotely. Yes, good morning, Your Honor. May it please the Court, Richard Canowitz of Haynes and Boone on behalf of the Blockfire Debtors. All right. Good morning, Your Honor.

Kenneth Allette of Brown-Rudnik for the Official Committee. I'm joined by my partner, Mike Winnegrat. Nice to see you again. Let's see you, Your Honor. Other appearances in court? Good morning, Your Honor. Adam Goldberg of Blathman-Walkins on behalf of the Joint Liquidators of Three Arrow's Capital, joined in the courtroom by my partner, Marissa Ulter Nelson,

my colleague, Brett Nev, and our pro-count. Council, John Wiese, Pashmanstein. Nice to see you all. Welcome. Thank you. Anyone else entering appearance? Mr. Underwood. Morning, Your Honor.

How are you? Thank you. Thank you. Alan Underwood of the firm of Lake, De Palma, Greenberg, and Fannador, local council to the Chapter, New York, Southern District, Chapter 11 debtor genesis, Global Holdcoe,

LLC, and its affiliates. I'd like to introduce to the court, Court, Luke Gate Barefoot, who is the debtors' counsel in the Genesis case. He's appearing remotely. He has filed, or we have filed on his behalf, a ProHAC feature application, I believe, this morning. If I wasn't filed this morning, it will be filed today. And I would indicate, for the record, though, that this is a very limited appearance with respect to the Chapter 11 debtor, who is an interested party,

and we reserve all rights with respect to jurisdiction. Certainly. Thank you, Ron. Good afternoon, Mr. Barefoot. Welcome to Trenton, at least remotely. Thank you. All right. Anyone else in court?

Are up? Governor Lawrence and Haynes and Boone for the debtors. Thank you. For those who are also appearing remotely, you may, of course, enter your appearances at the time you're called upon. Thank you. All right. Counsel, Mr. Kenowitz.

Thank you, Your Honor. Just so we could go directionally, I just want to map out a couple of things, Your Honor, subject of course to your approval and agreement. First couple of motions are really business-oriented. We are going to have a couple of the Haynes and Boone team in court and out on Zoom present. We'll go very quickly and efficiently because all of them are unopposed. But if Your Honor does have questions, there are three 1990-s settlements, I believe. We next go to the Three Arrows Matters. From my perspective, there are three main things to discuss, multiple ancillary motions, but those are unopposed. Three main issues to discuss. One is the motion to stay, two, the coordination motion as it's entitled, and three,

the proposed scheduling order on the debtor's request to move forward with the estimation motion as well as the claim objection motion. We've agreed with Council to Three Arrows that the declarations of are, I would say, BVI experts, for lack of a better word, not necessarily qualifying them as expert, but for lack of verbiage or something else to call them. We have Mr. Parker on our side, whose presenter status, as well as, I believe, Grant Carroll on behalf of the Oger firm for three hours. We agreed that those should go in as direct testimony, subject to your honor's approval,

and then subject to cross-examination. My partner, Amy Furness, is on Zoom, and she will be handling the evidentiary portion of those issues as well as discovery, and I will be handling, with Your Honor's approval, the argument in court on the motions to consolidate as well as the lift stay. What I suggest is, you know, there's sort of a whole ball of wax on the three arrows matters. A lot of issues that go to both the consolidation motion as well as, or coordination motion, as well as the lift stay. I would ask that, Your Honor, take them at one time so that we don't have to stop, start, stop, start. That's what I would request, unless counsel thinks otherwise. Are there any objection? I anticipated treating them collectively.

They touch on similar issues. Thank you, Your Honor, for the record, Adam Goldberger, Blatham-Walkins on behalf of three errors. We fully agree that the motion to lift stay and what we call the coordination motion would be naturally linked and could be heard together. those would be our motions we're happy to present on those. I think we also have the status conference on the estimation motions and other issues which are somewhat separate and flow from the first two. All right. Then let's thank you, counsel. Thank you. Let's continue. Let's have, let's address the settlements and see if we can, another essentially unopposed matters. Good morning, Your Honor. Lawrence and Henson Haines and Moon for the debtors again. I'm just addressing

the motion to quash rule 2004 subpoenas at docket. number 1447. The subpoena was issued by a creditor in relation to our objection to their claims on the seventh omnibus. The counsel for the creditor had filed an application of consent lawyer seeking to withdraw, which the court did enter this morning, but because that was pending, we agreed to adjourn the objection to his claims. However, the motion to quash, no response was filed, and it's our understanding that it's not opposed. So we would just ask that the court enter the order quashing the subpoena. All right, this is at 1440. Yes. All right, and I'll do this for the benefit of my court recorder.

Wendy, it's number four on the calendar, and the motion will be marked granted. Thank you. I'm just going to turn it over to Jordan Chavez, who will be presenting the deserved settlement motion. Good morning, Ms. Chavez. Good morning, Your Honor, Jordan Chavez of Haines and Boone on behalf of the debtors. I'll be addressing the second item on the agenda, which is the proposed deserved settlement, filed at docket number 1672. I want to thank Your Honor for hearing this matter on short notice.

And here with me today is Ms. Megan Spillane of Goodwin Proctor, who is counsel for Deserve. All right. Please continue. The parties have been in negotiations for some time now, and we're pleased to be before your honor today with a mutually beneficial settlement. As noted in the pleading, Deserve was blocked by business partner in connection with the blocked five credit card program. And the proposed settlement really has three key parts, Your Honor.

The first addresses the fees owed. The second addresses the collateral account, and the third is deserves potential indemnity claim. So I just like to briefly address each part for the record. First is the fees. The parties had a pre-petition master service agreement related to the credit card, and the parties owe each other fees related to that agreement, which the settlement agreement proposes to net. resulting in a payment by deserve to Blockby of $975,592.99.

Let me just stop people one second. Wendy, just in case you need, this is number 15. I'm sorry, continuing, Ms. Chavez. No problem, thank you, Your Honor. On the second part, this addresses the collateral. The parties, when they entered into their business relationship, executed a collateral account agreement through which Blockby established a collateral account and deserves name as security for certain credit card accounts

that were flagged as credit risks or deserve. And that account currently has just over $4.5 million in it, but the current open balances on the collateralized credit card accounts total approximately $1.37 million, leaving deserves significantly over-collateralized. So the proposed settlement agreement provides for deserve to retain in the account an amount that's sufficient to cover those current open balances, so the $1.37 million, and make an initial return to block by of the remaining excess collateral of $3.13 million. So if the settlement is approved, it will result in an initial payment to deserve to block by

of just over $4.1 million. The settlement also provides deserved with the ability to draw down on the collateral account for the current outstanding delinquent receivables owed on the card, after providing notice to block by, and we'll continue to do so if the settlement agreement is approved until there's no longer an open balance. Deserve will provide monthly and quarterly reporting to Blockby and pay Blockby any recoveries that may result from payments made by the cardholders to deserve. The third and final part, Your Honor, is that Deserve did file a proof of claim in this

case regarding its right to seek indemnification under the agreement. The DZERV has not yet established an indemnifiable claim, but the settlement agreement provides that it has 160 days post-effective date to come forward and establish that it has an indemnifiable claim, and Blockbib or the Windown trustee will then have the right to review that claim and object, and any allowed portion of any indemnifiable claim will also be paid out of the collateral account. If there are insufficient funds at that time to cover the allowed indemnity claim, then the remainder would be treated as a general and secured claim of Blockby Inc.

Any excess in the account or to the extent there's not an allowed indemnifiable claim, but the collateralized partner card accounts are paid off, that amount will then be turned back over to the Blockby estate as well. So aside from that potential indemnity claim carved out, The settlement provides for a comprehensive relief by both parties of all other claims and causes of action. The debtors and deserve have submitted that this is the product of a good-based negotiation between the parties. It's supported by the committee, and it's in the best interest of the debtors, the estate, and the blocked by creditors. So I would ask that, Your Honor, approve the settlement motion and that the proposed order submitted with the motion could be entered.

All right. I see a hand raised by Mr. Sponder for the office of the U.S. trustee. Thank you, Your Honor. Good morning. Your Honor, the U.S. trustee objects to this order shortening time, as well as number four on the amended agenda, which we'll get to shortly. This 1919 with D. D.S. was filed on the Friday of a holiday weekend, and the order required objections to be filed at 4 p.m. on the holiday. So it really didn't give much time for anyone to look at and or object to such a 919 motion. There are no reasons really articulated why it was necessary to have a shortened hearing on this motion. The plan is not effective yet. I don't know. I don't believe any payments are contemplated at this time.

So I'm not sure why it was necessary to have an order of shortening time. So that's our objection to that, Your Honor. Thank you. All right. Thank you. Ms. Chavez, do you want to address that? Sure, Your Honor. I'll briefly address that. First, the application shortening time address that there was an immediate need to get this settlement approved. Again, Your Honor, this has been a long time of negotiations with deserve, and it will bring immediate, a significant amount of funds back into the estate, at least accessible funds. you know, it's boss-wise position that this is a state property, and so it will actually just give them access to that property. The U.S. trustee was welcome to reach out to the debtors at any point after receiving notice of the application and the motion, and we have not received any correspondence from them or any issue.

I don't understand, I guess, the issue with approving the settlement since it's such a great result for the estate. All right. Let me ask the committee. Does the committee support the debtor's motion at this point or have any basis to agree with the U.S. trustee to kick this for a couple of weeks? Your Honor, we support the debtor's motion. We don't see really any downside to anyone by approving the settlement. It gets money back into the estate quickly. It resolves an outstanding issue.

and, you know, people have had a chance to look over it. I'm not sure what basis anyone could have to object to the settlement. It's a great result for the estates. All right. Thank you. Mr. Bond, or anything else you wish to add? Thank you, Your Honor. I'm not arguing at this point whether or not it's a great result for the estate

because, as I said, it was filed on Friday over a federal holiday weekend with objections to do at 4 p.m. I take the committee and the debtors at their word that it's a, that it's a, that, it's a good result, but the whole point is for parties to have notice and to have the opportunity to object. The settlement agreement's been signed. I don't know why it's necessary to have it on one business day notice when there's no reason otherwise because the agreement's been signed. Thank you. Thank you. I appreciate the U.S. trustee's concerns. I'm going to overrule the objection. To the extent any party, creditor or other party in interest, is in court with concrete concerns and wishes to raise any issues or wishes additional time to raise any of the issues, the court certainly would have been amenable.

From the way this case has been handled, the parties that likely would have had information on the settlement to raise the concerns would have been the committee or other or, or, or, or, um, other parties during the course of the case. No one has spoken up. It's really been a two-party matter. And absent a party requesting additional time with concrete reasons to look or to raise concerns, I'm going to overrule the objection. I think that it's always better to get the money in.

It's a general rule of thumb. So I appreciate Mr. Spond of the concerns, but I will overrule the objection. Thank you, Your Honor. You're welcome. All right, so the number 15 is granted. There's also with it, I believe. Let me see.

No, I'm sorry. I was looking to see if there was a motion to seal that went with it. No problem, Your Honor. That's the next two matters, actually. So with that, I will turn it over to Mr. Ferris, who has more good news of settlements to address with Your Honor today. All right. Good morning, Mr. Ferris. Good morning, Your Honor. Matt Ferris, with hands of bid on behalf of debtors.

I'll take the next few matters on the agenda. Matter three, Your Honor, is the debtor's motion to approve a settlement agreement with U.S. Farms. That's filed at docket number 1479. Briefly, by way of background, as you know what I recall earlier in this case, the debtor's ran a sale process for a substantial portion of their self-mining machines. U.S. Farms was a successful bidder for those machines, and in March, the court approved the terms of the debtor sale of those machines to U.S. farms. That sale closed in early April. The APA provides for a holdback of $675,000 from the purchase price under the sale agreement.

That amount is still currently being held in escrow. The APA also contemplates a purchase price reduction mechanism in connection with disputes over delivery of the machines. that were purchased. And after the sale close in April, a dispute did arise regarding the type and condition of the machines that were delivered by a debtors in connection with the asset purchase agreement. The debtors, for their part, point to a cap on the purchase price reduction in the APA of 407,500. U.S. farms, on the other hand, asserts that their damages as a result of the machines that were delivered are well in excess of that cap, and also assert that under the circumstances

that cap shouldn't apply to this dispute. The parties have been negotiating for some time and ultimately we're able to reach a resolution of this dispute under which the parties agreed that the total purchase price reduction will be $527,500. So in effect, that is the deduction cap plus an additional $120,000.

And that will be in full and final satisfaction of the damages claims that US Barnes has asserted in the APA. Again, I think importantly for purchase of the estate, those funds are currently being held in escrow. So those funds would just come out of the funds that are in the escrow account. And the balance of the funds in the escrow account would then be able to be released back to the debtor's estate. As noted, there is a mutual release of claims contemplated in the settlement agreement. Your Honor, our papers discussed the Martin factors for approval of settlements.

We believe that the settlement qualifies and should be approved. The settlement is the product of robust arms-length negotiations between the parties. The debtors in consultation with the Unsecure Creditors Committee believe that the settlement is in the best interest of the debtors of state's creditors and stakeholders. There were no formal or informal objections received to the motion to open to the settlement. And unless Your Honor has any questions before I see the podium, we would request that the Court approved the settlement. One housekeeping matter, Your Honor, there is a declaration that was filed as an attachment,

of Mark Renzi in support of the settlement agreement. Mr. Renzi is in the courtroom virtually and has presenters' status. We would ask that Mr. Renzi's certification be admitted for purposes of the motion. All right, thank you. I will accept into evidence his declaration. I will open up Mr. Renzi to any cross-examination of any party who wishes to make inquiry. As with the prior motion, and with all the settlements, the court has reviewed the the underlying documentation in order to assure itself that the N. Ray Martin standards have been

met. Certainly from the submissions made in support of the proposed settlements, the court has no basis to object or to make a finding otherwise that the N. Ray Martin standards have been met. Is there any one who wishes to be heard? This is on number five. When on our calendar with respect to the proposed settlement with U.S. farms and mining? All right. The court will grant the motion and approve the settlement. Thank you, counsel. That takes us...

Thank you, Your Honor. Moving on to matter number four, this is the debtor's motion to approve a settlement with Digistar, Norway, Massim, Serio-Ga-on, and Theoremto-Mangellano. This motion was filed on October 2nd at docket number 1637. 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. set on expedited notice for today's hearing. In connection with this motion, we've also filed a certification of Mark Renzi in support. That was filed on October 6th at docket number 1680.

And before I get into the substance of the motion, would ask that that declaration should be admitted for purposes of this motion. All right. Similar to the last matter, the court will accept the declaration in support of the proposed settlement into evidence. and provide anyone either in court or remotely the opportunity to cross-examine Mr. Renzi for respect to his declaration. All right. Thank you, Your Honor. Please continue.

This settlement relates to one of the institutional loans made by Blockby lending to DigiStar Norway, which is an operator of digital mining machines and a related parent guarantee, or at least what we refer to as a parent guarantee with two individual principles of DigiStar Norway. In addition to the disputes with respect to that specific loan agreement, this settlement also resolves issues related to a pre-bankruptcy filing assignment of the loan agreement. So prior to the bankruptcy filing, this loan had gone into default in connection with working out the loan block-fye lending had initially entered into a loan assignment agreement with a third party by the name of Brickling. That assignment was only partially implemented, and there was a dispute related to that as to whether the assignment was ever effectuated. So this, as I'll get into in just a moment, this agreement resolves any issues related to that as well as to the underlying loan agreement.

Your Honor, this was filed as a standalone motion. Your Honor may recall, we do have institutional loan procedures and institutional loan procedures order. We have sought approval of a number of these prior loan settlements under that procedure's order. but because the structure of this is a little different in that we're actually assigning the loan as opposed to just entering into a settlement agreement. We felt that it was appropriate to do this as a standalone motion. That being said, there are notice procedures under the institutional loan procedures order that we attempted to comply with specifically providing advance notice to the U.S. trustee in office and the SEC, as well as to the Unsecured Predators Committee of unsealed terms of the settlement agreement. So that actually turns to the issue, Your Honor, let me address that briefly. As mentioned, unsealed copies of the settlement or the assignment agreement, more properly called,

have been provided to the Unsecured Craters Committee, the U.S. Trustees Office and the SEC consistent with the loan settlement procedures. Your Honor, we do have a number of continuing loan collection actions that are pending and remain pending. each of those loans is a standalone loan. The circumstances are different. So notwithstanding that we are settling this one, we think it's important that the terms of the settlement in this particular instance remain confidential

so as not to affect our ongoing prosecution and negotiation of settlements with respect to some of these other loans in the institutional loan portfolio. Your Honor, the settlement and the assignment is the product of extensive arm's-length negotiations. that we believe provides substantial value to the debtors of the state. As I mentioned, we do want to keep the specific terms of the assignment payment amount confidential, but it does provide for a meaningful cash settlement payment to the estate.

It also resolves complex and multi-jurisdictional litigation. Not only do we have the pending adversary proceeding in the bankruptcy proceeding, which was commenced back in February, but there are also proceedings in Norway, which were commenced in March. Based on the history to date, we have every reason to believe that those would continue to be heavily contested and would continue to resolve in substantial cost to the estate to prosecute. And then lastly, Your Honor, there is a comprehensive belief of claims by the settling parties against the estate.

So it results potential claims against the estate, not only in connection with the loan agreement, but also, as I mentioned in connection with the pre-position assignment to Brickland. Your Honor, again, our papers discussed the Martin factors, and we believe that this satisfies the standards for approval of the settlement agreement. As said forth, Mr. Reggie's declaration, the settlement is in the best interest of the debtors of the state's and creditors. If I may, just for a minute, Your Honor, to specifically address the assignment, because, again,

although this contemplates both relief under 1990-19, it's also a sale and assignment of the loan, and that's how we're effectuating this settlement agreement. Under the terms of the assignment, the assignee, which is an enemy called G75 Capital, which is as discussed in the papers, is an affiliate of the defendants in this case. The assigning will pay the assignment payment, which is a substantial payment to the estate. Subject two and conditional upon Blocked by lending is received of the assignment payment. Blocked by lending will then assign all of its interest in the Digistar Loan and the relating loan documents to the assignee. Each of the borrower parties as we define in our papers and Brick Lane, who is the pre-petition of finy,

will provide comprehensive releases of all claims against blocked by lending and blocked by lending estate. And then, again, as noted promptly after the closing date of the settlement, the various jurisdictional litigation will be promptly dismissed. Your Honor, in respect to the specific assignment and the release that we request were under 363, I said board in Mr. Renzi's declaration, the assignment is a sound exercise of the various business judgment. We believe that the assignment should be approved free and clear of all leads, claims and encumbrances. Because of the nature of what's being assigned here, which is a loan agreement, we don't actually believe that there are any encumbrances, but to the extent that there are, there are cash proceeds of this assignment that those encumbrances can attach to and be adequately

protected. And then lastly, Your Honor, is reflected in Mr. Renzi's declaration. We believe that the parties have acted in good faith. The debtors are not aware of any collision by any parties, and so for that reason, we believe that G75, the assignee is entitled to the protection under Section 363M. Your Honor, just lastly, let me briefly address the expedite hearing and the issues raised by the U.S. trustee. Your Honor, first of all, the effectiveness of this assignment agreement is conditioned on entry of an order approved the assignment. And also that starts the cost taking on the assignment's obligation to pay the assignment payment.

There is, you know, very importantly to the estate, there's no financing contingency in this. So as soon as or very promptly after this order approving the assignment goes final, the assigning would be obligated to make that assignment payment to the estate. working back from those timelines, we expect that this would close before the end of this month. So, resulting in a substantial recovery to the estate within the next few weeks. And also, Your Honor, again, because of the multiple venues that we have litigation going on, one, we don't want to dismiss anything until obviously the assignment goes final and the assignment payment has been funded. but we also need to make sure that that's put on pause while this has time to close.

So we've asked the courts in Norway to pause those proceedings. We've adjourned the matters in the adversary proceeding until early November to allow this process to close. But obviously, there's multiple moving pieces here, and the more times we have to go back and request additional extensions or pauses. One, you know, the way as to how that's handled. and two, there's, of course, there's a cost to that. So not only are we anxious to get the settlement payment in as soon as possible to stop pushing off the litigation and just have this resolved, hopefully by, hopefully, hopefully.

I think we're having a little trouble. And I will see the podium here, but unless your honor has any additional questions for me, we would ask that, Your Honor, approve the settlement and assignment in substantially the form of the proposed order attached to the motion. All right, thank you. We had a little problem with Internet connectivity, possibly on our end, but I certainly got, I think, 99% of what was being argued. Wendy, for our record, these are numbers 13 and 14 on the calendar,

14 being the motion to seal. Let me turn to Mr. Sponder. Good morning again. Good morning again, Your Honor. Jeff Sponder from the Office of the United States Trustee. Your Honor, the same objection that we raised with respect to the deserve is that we don't think this should have been on short in time. I'll leave it at that. I've already argued it. Your Honor has already ruled on the deserve motion, and I'll leave it at that. Thank you, Your Honor.

Thank you, Mr. Sponder. Let me ask, Mr. Ferris, is there also, with the application, a waiver of the 6,04H requirement? There is your honor. All right. Given that this was done in short notice, and you're looking to close before months end, the 14 days would expire if I enter an order tomorrow on the 25th, leaving time.

It's a means to balance the concern of the trustee if somebody wishes to come in, ask for reconsideration or a stay or an appeal. With respect to the U.S. trustee's objection, I note the same, all it would have taken is one party in interest or creditor or otherwise to come before the court today to give notice to express a concern that their additional time was warranted to investigate, to review the transaction. The court would have accommodated to some extent, even if it was for a week. But, your honor, and Mr. Watson's on for the defendants, and I'll let him speak for his client,

but it's all understanding, Kimberly, Your Honor, that the defendants would not have closed until after the order has gone final anyway. So I think that that's, I think where you're going is certainly acceptable to the parties, and that still allows us to close, assuming no issues with the order going final, that would still allow us to be in a position to close before the end of the month. at least if it offers an avenue for parties to come back to the court. The doors are always open in case there is an emergent issue or an opportunity to make inquiry into the merits of the settlement. The court has reviewed the settlement, the declaration supporting it, and finds no basis,

certainly to contest that it satisfies the NRA Martin test, and certainly, represents meaningful dollars into the estate and the avoidance of complex litigation, multiple fora, and at a substantial cost. I assume the committee is on board with the sale, with the settlement. Yes, sir. Actually, there's a sale and assignment. So the court will approve absent and will strike the waiver of the Rule 6,04H requirement. assuming we have the order tomorrow will we'll enter the order as appropriate mr.

is there mr. Sponder was there an objection to the motion to seal as well with respect to this one no your honor thank you then the motion to seal will be granted as well that's number of at docket number 1680 number 14 on our calendar well Wait, nope, wrong. Dogget number 1638. Number 14 on the calendar. All right.

I think that takes us to the 3AC matters. Yes, it does, Your Honor, and it is 3AC's motion and burden. So to the extent that they're ready to move forward, so are we. I would just ask that the witnesses and the declarations go first before there's any argument. you know, this is not a jury trial, Your Honor, you've read the papers. You see everything before we launch into argument. I think you should have the declarations in and the cross-examination heard.

Both witnesses. I'll certainly defer to the parties. I question the need for cross-examination as well. But let me hear from move-ins. Thank you, Your Honor. For the record, Adam Goldberg, or Blayton-Walkins for three arrows. We agree with Your Honor. We look, we've moved to have the declarations admitted.

We're happy to have them admitted without cross-examination. We don't see a need for cross-examination either, but Mr. Candleys would like to. Our witness will be available via Zoom. All right. Is there an agreement or do... No, Your Honor. We believe that Mr. Grand Carroll's declaration needs to be illuminated for your honor.

There are some vague and missing pieces to that that I believe is key to some of the arguments being made by three arrows. So I just think that Ms. Furness will handle that and she'll do it expeditiously. All right. Well, then what's good for the goose, as they say, in the gander, it's open for all sides. Why don't we then there's no objection to the declaration coming in as direct testimony. That leads simply the cross of Mr. Carroll, correct? Correct.

And do we have Mr. Carroll remotely? There you are. Good morning, Your Honor. Good morning. There you go. Welcome again remotely to New Jersey. Let me do the perfunctory virtual swearing you in. Please raise your right hand.

Do you swear or affirm to tell the truth, the whole truth, and nothing but the truth under penalty of perjury? I do. All right. Thank you, Mr. Carroll. Your declaration has come in into evidence. Do you have your declaration in front of you? I did my honor, you're on your turn to do off. Okay, great.

And we have Ms. Furness. You're going to undertake cross-examination? Yes, thank you, Your Honor. And Your Honor, I'm Rassalt for Nelson from Lathan Watkins. I will be objecting to the extent necessary. Absolutely, and redirect if appropriate, either as well. All right. So, Ms. Perness, please proceed.

Thank you, Your Honor. Mr. Carroll, I'll keep this as short as possible and have a couple of questions. Your law firm, Ogier, am I saying that correctly? OSHA, but it doesn't matter. We all know who we're talking about. Very good. Oger. And I just want to clarify, Oger and you actually represent the joint liquidators in the BBI matter, correct?

Yes, the joint liquidators are the clients of Asia. So in fact, you are actually their legal counsel, correct? Correct, in the BVI. That's not mentioned anywhere in your declaration. Is there a reason you've excluded that? No reason. I thought it was well known. I want to talk briefly about the claims that the joint liquidators

had alleged against BlockFi. In paragraph nine of your declaration, you talk about the recovery of average. assets subject to purported foreclosure. Do you see where I'm reading from? So most of three-o-c claims arise as a matter of B-I-LOR that paragraph? Yes, sir. Yes, I see that paragraph.

And in this matter, or in the BDI matter, do the joint liquidators have claims against Blockfine to recover assets subject to purported foreclosure? Well, no claims have been filed because of the automatic stay, so there's no live claims in the BVI. You understand that there

is a proof of claim that has been filed in blocked by bankruptcy, correct? Yes, yes, I understand that. And are you aware of whether or not that proof of claim includes any claim for the recovery of assets subject to purported foreclosure?

I don't have the proof of claim in front of me, I'm afraid. And you also talk in paragraph 13 about section 274A of the BBI and Solvency. Do you see that section? Yes. And is that a claim that the joint liquidators allege as against Blackfine? That's a mechanism to recover assets that a party says belongs to it. So that's a statutory mechanism by which. which to recover.

And are the joint liquidators using that statutory mechanism to recover as against blockbys? Well, there's no claims filed. If we were to go towards claims, and that is one of the statutory provisions that could be relied upon to recover assets, but there are no current claims. Oh, sorry, other than the proof of claim filed in the Chapter 11. proceedings, what I mean is we've got no claims on foot in the BVI against BlockFi. And are you aware that there is no Section 274A claim against BlockFi in the proof of claim

in the BlockFi bankruptcy? As I said, I don't have that document in front of me, I'm afraid. Is that a claim that the Joint Liquidator's plan to bring, but just haven't fled in the BlockFi bankruptcy here in the United States? Well, objection. Oh, wait, don't answer. That would be doving into privilege and what claims are going to be brought prior to the state being lifted and those claims actually being brought. And, Your Honor, Mr. Carroll has submitted a declaration that talks about Section 274A. It's not in the proof of claim.

To the extent it was privileged, then maybe their lawyer shouldn't have been one to draft and submit this declaration. He's submitting it as this is what the BBI law is. these are the claims that the joint liquidators have, and this is the reason that this court should do two things. One is to lift the stay and choose to consolidate those in the BVI court. Well, that's fine, and you can argue that. What's in the proof of claim speaks for itself and the impact, but I'm not going to have you delve into what their intentions are at this point. Thank you. Are you aware that the Section 274A claims are specifically alleged as against

Genesis in the proof of claim filed in that bankruptcy? Objection, Your Honor, outside the scope of his declaration. I'll overrule it. Again, I don't have the Genesis document in front of me. I can't tell we, if I see it, I can confirm or otherwise. You also, in the motion to list say and the motion for consolidation, the joint liquidators take the position that a complete resolution of the claims against block fine can be had in the BVI court.

Is that your position? As a matter of BVI law, yes. Okay, but you agree, and it's in your declaration, but you agree that the BVI court will not review U.S. safe harbor defenses, correct? I think it's incredibly unlikely, yes, that the BVI court would deal with a claim, a U.S. procedural claim, I think. And you also agree that the BVI court

will not review equitable subordination. That's not a concept that we would look at. And so instead, as I understand your position, that if the BVI determines that there is a preference claim here, then the claim itself actually has to be carried back to the United States for complete resolution, right, to determine the safe harbor defenses and equitable subordination, correct? Objection.

Well, to be very quickly, before you answer? To the extent she's asking him to testify about U.S. law procedures that he's not familiar with, we would just object on that basis to the extent he can answer fine, but if he can't answer, somebody is not here to testify about U.S. law procedures. Thank you. And, Your Honor, may I respond just briefly, Your Honor,

because what Mr. Carroll swore to in his declaration, and I'll quote this is a very sentence in the declaration. I understand from the liquidators U.S. attorneys that such defense may only potentially become relevant in the context of this court's determination, following the entry of the judgment by the BDI court on the 3AC claim as to whether such judgment may serve as the basis of an allowing the debtors in their Chapter 11 cases. He swore to that.

I'm going to rule the objection. Mr. Carroll, you can answer the question to the best of your ability. You need to repeat the question. Absolutely. Thank you. If the BIA court determines that there are preferences here, that decision has to be carried back to the United States for, complete resolution of the safe harbor defenses and the equitable

subordination, correct? Well, from a BVI perspective, the end of the matter would be the claim. So there'd be the unfair preference claim and if the court makes a determination to the extent that there are any U.S. law issues that the BV.I court don't deal with. And yes, I agree that they would have to be dealt with elsewhere. So in the BVI proceeding, BQ5 would lose its ability there to argue safe harbor or equitable coordination. Well, whether or not it loses, I don't know if it loses its ability to argue that before

the U.S. court, but in the BVI court, I don't think that they would be relevant defenses for the BVI judge to consider. Are you aware that Bokxai has claimed also against the three arrows of state? Yes. Will the BBI court recognize a set-off of the amounts owed to Boxi has. by three arrows. Objection beyond the scope of his direct testimony and his affidavit. Your Honor, his direct testimony in the declaration talks about matters of BDI law. He sets himself out as an expert on BDI law.

That's what he's been presented to this court of, and as well as what a BDI court will do with these claims. And I think it's only fair, especially considering the issues that the three arrows joint liquidators are trying to take away substantive rights from block fine to investigate us. We'd obviously disagree with the characterization that Three Arrows is trying to take away any substantive rights from Block fee. But again, the issue of set off is not something that he is here to testify about. If we need to have BVI law experts on a very specific issue, that's fine. but it's just well outside of the scope of his testifying. I'm going to overrule the objection.

Set off is possible as a matter of BVI law. I'd have to look at the exact nature of the claims. I can't remember the exact claim that BlockFi has into the BVI estate at this time. The claim is for deficiency on a loan. Okay. Is this one for $1? I'm sorry. I believe if the claim for $1 has been submitted, if I'm recalling this one dollar has been

submitted, if I'm recalling this one correct. That's correct. There's a stakeholder claims for $1, but there is a claim for a deficiency on loan. So it is, there are, there are mechanisms under BVI law in the Insolvency Act to provide for set-off as between mutual dealings between companies. things. But I haven't, again, I haven't got in front of me an analysis of the blockfire claims. I'm going to struggle to answer if it is appropriate in this exact circumstance. Thank you, Mr. Carroll. Just a few more questions. You talk in paragraph 17 about

what you call potential statutory defenses. Please let me know when you've made it to that paragraph of your declaration. Yes. And is. Tell me, under the BVI insolvency law, whose burden is it to prove insolvency? Is it the person claiming the preference? So under that the act itself doesn't speak to burden at all.

And what the court would do is look at the expert, evidence on when insolvency occurred, because it's a matter of fact. And how about the burden to prove that a transaction is not in the ordinary course of business? Whose burden is that? Again, the act is silent on who bears that burden in a non-connected party. And the procedure the court adopts is to look at the entire course of dealing between the parties to ascertain, first of all, what was their ordinary course of business, and then it's for the court to determine if that the particular transaction falls inside or outside of that course of dealing.

Just a few more questions, Mr. Kerr, I want to talk about efficiency. The joint liquidators have asserted that this can be more efficiently addressed in a court, separate and apart from the one that you are in today. How much approximately in legal fees have the joint liquidators incurred so far? in their totality on the way of that I'm going to object it's clearly not relevant it's not something with company's declaration as well aside the scope sustained and are you aware mr. carroll the estimated distribution to unsecured creditors in the three ac matter again same objection your honor sustained and just for clarification sake mr carroll are you the type of

in the BVI system that actually argue in front of the bar to the court. Am I, yes, my background is as a barrister in England. I then moved to the BVI so I appeared before the commercial court, court of the appeal. So you are a barrister in BVI? Yes. Okay, that's all we have. Thank you, Your Honor. Thank you, Ms. Perness. Thank you, Ms. Furness.

Any redirect? No, no redirect, Your Honor, thank you. All right, well, we thank you, Mr. Carroll, for your time. I don't know whose accent I enjoyed more, Ms. Frennesses or Mr. Carroll's? Great for you, Your Honor, thank you. Thank you.

Goodbye. Your Honor, we also have Mr. Parker's declaration to go into evidence, and we subject him to cross-examination if three arrows wishes or anybody else. All right, any objection to the declaration? No, Your Honor, no objection to the declaration. Do you wish to cross-examine? We don't have any questions for Mr. Parker.

All right, thank you. Is the record closed then as far as factual basis, submissions? Just the two declarations and the cross-examination? Yes, sir. All right, thank. Thank you. Then let's proceed to argument. Let me hear from the little bit.

Thank you, Your Honor, for the record out in Goldberg, Blinken, Latham-Lockens on behalf of Three Roe's Capital. I'd like to break down this situation in light of the objections that were raised by the parties here to explain more simply, what are the claims at issue before the court? What is it that we're asking of this court, and why should the court grant it? So what are the claims at issue? Three-Rs has asserted essentially two types of claims against Block VIII. which were described in detail in our amended proof of claim filed on September 13th of this year about a month ago.

The first is for unfair preference under Section 245 of the BBI Insolvency Act. The second is a contract and turnover claim in the amount of approximately $10 million that is valued based on the amount of a loan that was made on April 7, 2022, which was denominated in Bitcoin, approximately $2,300 Bitcoin. net of a collateral position of approximately 31,000 ether tokens. And so the net value of that, depending upon the data valuation, we put at approximately $10.4 million. The preference claims are the lion's share of the claims, and those are we've set forth a value in the amount of roughly $270 million.

I think Mr. Carroll's declaration has described the elements of a unfair preference claim under BBI law. In his declaration, I'm happy to outline those for the court or move on for the sake of expedience. No, I read through it. I understand them. Okay. Thank you, Your Honor. Thank you. There are a number of transfers that are the basis for those preference claims. Those spanned the period from May 5th, 2022, which was a transfer of $29 million U.S. dollars,

and continued until June 3rd, which was a transfer of $29,000. of approximately six million US dollar coin tokens. The total of those transfers at various points over that time was we put at $272 million in our proof of claim. And I'm happy to go into more details, but I think that suffices for now. Thank you. So we anticipate that Block V will seek to defend

against those claims on the basis of whether three arrows was insolvent under BBI law at the time of any one of those. transfers whether the transactions were in the ordinary course of business which is an affirmative defense under BBI law and whether whether the safe harbors under U.S. law apply to those transfers and potentially other issues of U.S. or BBI law that that may not have been crystallized yet I should note it's also very relevant as was described in our papers that three errors is asserting BBI

preference claims against Genesis which is a chapter 11 debtor and in the Southern District of New York. And I would highlight that the earliest transfer at issue there was a transfer valued in the amount of roughly $115 million on May 6th, 2022. And that is the day after the first transfer at issue. In this case, the May 5th transfer of $29 million. To be clear, Three Eros has an array of other claims

against Genesis as well, which I'm happy to outline for your honor, but for this of expedience, I can move on unless you'd like to hear that. No, it's fine. Thank you. Thank you. So I think that I would highlight, though, that the common issues that arise between the claims that we have in this case and the claims that exist in Genesis are particularly when did three errors become insolvent under VDI law. And as it relates to these debtors, May 5th is the earliest relevant date as it relates

to Genesis, May 6th. Also, other common issues that will arise are whether the transactions occurred in the ordinary course of business, and whether the safe harbors of the U.S. Bankruptcy Code apply, which are both issues that the Genesis debtors are also raising. But that is essentially a brief survey of the claims that are currently relevant before Your Honor today for our motion for relief from stay and the coordination motion. So let me be more specific as well of what are we asking from Your Honor today. I think this is an important part of clarity for the purposes of this year.

First and foremost, we are seeking relief from the automatic stay so that we may prosecute claims against BlockFi in another form. Our preference, being debtors in a BVI liquidation proceeding, is to bring that litigation in the BBI. That is the home court for our liquidation proceeding. It's, in our view, the one most naturally suited to decide the issues of the issue of the court. of insolvency under BVI law, ordinary course, under BVI law as well. And indeed, it will be deciding issues related to the date of insolvency of three errors

as it relates to other parties that are not debtors in their own Chapter 11 proceedings. And I believe we put some of those facts before your honor under seal. But that is not the only option. It is not necessary in our view that these issues be litigated in the BBI. We acknowledge that there are competing interests here of what we view as co-equal bankruptcy estates between these debtors,

ourselves as a debtor, the Genesis debtors, and that may lead this court and other relevant courts to determine that on balance, the BVI court may not be the best place to adjudicate these issues. So in alternative to the BVI court, we would also seek relief from the automatic stay to have these issues litigate. in our Chapter 15 case, which is before Chief Judge Martin Glenn of the Southern District of New York. In that scenario, upon relief from the automatic stay, we would commence an adversary proceeding that would be the basis for a complete resolution of all of the issues that are raised as it relates to claims against Blockby and the defenses they have asserted. That procedure of an adversary proceeding would also permit consolidation, in whole or in part of an adversary proceeding against Genesis if relief from the stay is also

granted in the Genesis Chapter 11 case. So that is our motion for relief from stay. As to coordination, today we're only seeking coordination and communication. Ultimately, if successful, we would seek consolidation in whole or in part of our claims against BlockFi and Genentee. together. We are not seeking coordination or consolidation as it released to FTX or Celsius at this time, which was initially described in our motion. As to FTX, we have reached an agreement with them to adjourn our motion for relief from stay and the motion for coordination that we filed in the FTX bankruptcy cases. The parties have agreed on an information sharing period and a standstill in litigation of our claims until at least February 1st of next year.

There is a prospect that information development will provide the basis for a settlement or narrowing of the issues that may lead to the possibility that insolvency may not need to be litigated with those debtors. As to Celsius, we are not seeking judicial cooperation or consolidation at this time but for different reasons. We have co-counsel at Holland and who I believe are on the Zoom and can address the issues related to Celsius now or at the appropriate time in your honor's view. So that limits our request for coordination and communication to two other debtors, Blockby and Genesis. And to be absolutely clear, we are not asking this court to order any other court to do anything whatsoever. We filed a revised proposed order just before the hearing last night in an effort to make that clear in preparation for the hearing, and that's at docket number 1693.

What we're asking in terms of coordination and communication is that Your Honor would confer with the other courts prior to a ruling on our motion for relief from stay. If Your Honor determines that coordination is appropriate, we would think that that would only actually occur that coordination if the other courts agree. We can't make them talk to Your Honor, of course. So at this stage, all we're asking to decide today is whether Your Honor would like to have coordination or communication in any form with the other relevant courts, which would be Judge Sean Lane in the SCNY overseeing the Genesis Chapter 11 cases, Chief Judge Martin Glenn in the SCNY overseeing our Chapter 15 case, and Justice Ingrid Mangatoll of the BVI Corps. We've been intentionally open-ended about exactly how that coordination or communication could occur

because we wanted to give, Your Honor, the opportunity and the other courts the opportunity to exercise your discretion as to the appropriate. appropriate format for any communication. The court, the options that would be available could be a joint hearing involving all of the relevant courts where issues are decided on the questions of relief from the automatic stay in particular. There could be a joint status conference in which issues of scheduling and options of procedures could be discussed before coming back here for a decision by your honor.

potentially there could be a judicial conference in-camera without the parties. So those are our request, Your Honor. Why should they be granted? Cause exists for relief from the automatic stay. This is an extraordinary situation involving not just one dueling debtor, but multiple dueling debtors. And on that basis, relief from the stay should be granted using either the three-part test or the Sonax factors. So let me first address the three-part test and then we can get into the son-ax factors if your honor would like to hear details on those the three-part test is prejudice hardship and probability of success in our view your honor prejudice weighs strongly in favor of three arrows in granting for relief

relief from this day the block by plan has been confirmed and it is actively seeking to litigate these claims there can be no prejudice to block five from the litigating these claims. And that's actually the issue that is facing most courts on a question of relief from the automatic stay to litigate claims and cause of action. The only question before this court is what should be the forum for that litigation. Three arrows will face far greater prejudice from continuing the stay than Block FI would face in granting relief. Three arrows is a debtor in its own liquidation. Its claims against block by and very similar claims against Genesis comprise some of its largest assets with

a face value over $1 billion U.S. dollars. These are preference claims. They're intended to create parity among three arrows creditors. Whichever court adjudicates these claims will have to decide a number of issues that are central and core to the three arrows estate. For example, the date of insolvency is one of, if not the most important legal question for the for the three arrows liquidation because it will be dispositive, not only to the claims in this case and in the Genesis case, but in other cases which Your Honor is partially aware of, a risk of inconsistent outcomes would indeed be prejudicial,

deeply prejudicial to the three errors estate. We have not identified any case, and neither has blocked by pointed to any either, where a bankruptcy court has decided preference claims arising from another bankruptcy estate, much less preference claims of a foreign insolvency estate arising under foreign law. The key element of prejudice that Blockfire articulates

is that it would lose defenses. But if the issues are litigated in our Chapter 15 case, the bankruptcy court would be fully capable of adjudicating all of the issues just as this court would. And if the issues are litigated in the BVI and the BVI court decides not adjudicate a particular issue, the matter could return to this court for allowance, for those issues, such as rulings on allowance under the U.S. safe harbors or subordination under the supposed

equitable subordination arguments that BlockFi seeks to bring. Second, hardship, likewise weighs in favor of Three Arrows. BlockFi and Three Arrows will both incur the costs of litigating this matter in any form. BlockFi has already created a situation where they will be litigating preference issues before another court through their settlement with FTX. That settlement provides for FTX's preference claims against BlockFi to be litigated in the FTX bankruptcy court. BlockFi should not now be entitled to claim that litigating preference claims before another bankruptcy court is some undue hardship. granting relief from the stay would allow three errors to avoid the very meaningful hardship of having multiple courts hold trials on very similar issues on a very parallel timetable,

which both strains resources of the professionals involved. We only have so much time and also imposes duplicative expenses. And that hardship would far outweigh any incremental to hardship to block by from appearing in another bankruptcy case, particularly now that its plan has been confirmed. Third, as to the probability of success, three euros has demonstrated a probability of success through the prima facie case established in its proof of claim filed on an amended basis on September 13th. BlockPie has not provided any substantive response to that proof of claim whatsoever.

And the detail in our view of that proof of claim satisfies this element in accordance with the cases of Continental, 15375 Memorial, and the other cases cited in our reply. I'm happy to go through the detail on the Sonics factors, if your court would like, or we can move along. You briefed it? I have no issue. I don't need a repetition of it. I appreciate it. Thank you, Your Honor.

So I would simply kind of conclude a presentation on this day with a brief summation and then move on to the coordination issues. Essentially, this is a very challenging situation on relief from the automatic stay. There are multiple bankruptcy cases involved, which in our view should be viewed as co-equal, having co-equal rights to decide the destiny of their own bankruptcy cases. In our view, however, the balance weighs decisively in favor of three errors. If relief from the stay is denied, we will face at least two trials on similar time-taping on similar issues in different courts, all the while yet another court, the BVI court,

will also have to adjudicate some of the same issues, particularly the date of insolvency of three euros, against yet more non-debtor parties. This disjointed approach would minimize judicial economy, maximize the cost for the three euros of states, and risk inconsistent outcomes on some of the most critical and largest assets that remain for the three hours of state. In contrast, if relief from the stay is granted, BlockFi will still have the ability to be heard on all of the issues that it seeks to present. We cannot even be sure that granting relief from the stay would be more expensive for BlockFi. A consolidated trial could potentially reduce expenses for all parties depending upon the procedures that are used.

I'd like to turn more briefly to the premise of coordination and how we would see that unfolding. Essentially, the idea is that upon relief from the stay, we would prosecute the actions either in the Chapter 15 Court or in the BBI Court. And the authority for that process is very straightforward, particularly as it relates to an adversary proceeding before the Chapter 15 Court, which should be readily understood. understandable by the parties and your honor. Just to walk through that. Relief from the automatic stay is permitted by section 362 of the bankruptcy code. This court has authority to coordinate and communicate

with the other relevant courts pursuances to sections 105, 1517, and 1525 of the US bankruptcy code. There is ample authority for cross-court communication protocols in Chapter 11 cases, as well as Chapter 15 cases. cases. Those have been approved in our own Chapter 15 case before Judge Glenn as it relates to other foreign courts abroad. They've been approved in the Latam Airlines Chapter 11 case and a series of other cases that were cited in our motion. We also cited a variety of other examples

where bankruptcy courts have employed bespoke procedures to address various extraordinary and idiosyncratic situations. One particular example was a joint hearing that It was held before two different U.S. bankruptcy courts overseeing different Chapter 11 cases, but for the same debtor where one case was filed in 2016, that led to a plan, and later another Chapter 11 case was filed in 2020. That was Chaparral Energy. So we don't think that the idea of judges having the opportunity to communicate is an extraordinary matter as it relates to the statutory authority.

we think the extraordinary situation presented here justifies it. In the context of an adversary proceeding, should that be permitted to proceed as it relates to our claims against both blockifying genesis, bankruptcy rule 7042 expressly permits the consolidation, and that would be the basis for joint proceedings if relief from the stay is granted. To be clear, however, Your Honor, the decision on consolidation is not necessary for you to decide. today and if relief from the stay is granted here and in the Genesis case whether and what extent to consolidate would be an issue for the court presiding over that litigation in short your honor this is the extraordinary situation in which relief from the stay should be granted in which a practical solution should be

crafted to address a very complex situation where you have multiple dueling debtors litigating the same issues on the same timeline in different courts with the prospect of multiplication of costs for the one debtor that has the least resources that's three arrows it creates the likelihood of highly inefficient use of judicial resources and a risk of inconsistent outcomes there is a statutory basis and a path under the rules to permit consolidation of the block-fying genesis litigation we filed the coordination motion as a way to tee up this court and the other relevant

courts to have the opportunity to communicate about what a process should look like and with an opportunity for notice and all the parties to be heard on how that communication should occur as well. So we look forward to your Honor's direction. All right, thank you. Let me have a quick question. Yes. It would seem that certainly insolvency is the primary issue with respect to prosecuting a preference action. But whether or not, even if there were a claim for a preference recovery, whether or not that claim is subject to the Safe Harbor Defense or subordination, it still has to be resolved either by this court or by, it has to be resolved outside of the BBI, correct?

According to the testimony that we have from our BBI law experts, yes, the issues, the U.S. law issues of the safe harbor defenses and the equitable subordination issues would have to be addressed by a U.S. court that could be done here or in the Chapter 15 court. And we think, Your Honor, there are advantages to having those issues determined by the Chapter 15th court because the questions of the safe harbors as well as equitable subordination will involve common issues of law and facts. As it relates to the safe harbors, I don't think anyone's aware of a case in which the U.S. safe harbors have been applied to cryptocurrency lending transactions and related transfers. Those are going to be complex and unprecedented questions. It likewise creates the prospect of inconsistent outcomes to have two bankruptcy courts simultaneously adjudicating those issues. And we have inconsistent rulings on issues of law across every bankruptcy court on some of the most, significant issues as we stand. That's a risk courts face and parties face every day. It is, Your Honor, but rarely, and it shouldn't be in the same bankruptcy case, which is the

bankruptcy case of three arrows. The three arrows estate will be facing inconsistent outcomes where it should be a debtor entitled to have those issues that are common and central to its own claims, decided by one court, and applied in a consistent manner for its own estate. And not only would it avoid inconsistent outcomes, but having one judge decide those issues would conserve judicial resources, because only one judge would have to take all of the briefing, consider those issues, determine them, and adjudicate the common issues of fact and law that span across those issues. Of course, another court could just find persuasive the reasoning of one court, and there won't be inconsistency.

All right. That's certainly possible, Your Honor. I mean, that happens as well. All right. I appreciate the argument. Thank you. Thank you, Your Honor. Mr. Kavanawitz.

Yes, Your Honor. Thank you. I'm not going to regurgitate our briefs. I know you've read them. I know you looked at the issues and the cases carefully, but I just want to put it in a framework, a discussion, really, because we're problem solvers, right? This is, we're fiduciaries.

We have to get going to get a distribution to the committee who has tirelessly fought for distributions to be made sooner rather than later. So some big picture issues, right? Coming out of the September 20th hearing, I really thought we were going to get on with it. We adjourned the motion for estimation as well as the motion for claim objection from hearing that date to this date so that we could coordinate on moving forward in this court. And then what happened? Well, we got to lift the stay motion.

we got a coordination motion. And look, I get that three arrows is trying to protect our state, but they're doing it from our perspective the wrong way. And the reason they're doing it the wrong way is because they first allege that, you know, you have Celsius, then you have FTX, and then you have Genesis, and they have BlockFi. And now most of those have gone away, right? You just heard it. FTX issues that may be common aren't going to get even teed up until February 24. and Mr. Parker made it clear that if you go to the BDI, you're not getting a preference determination till 2025. So how do you move these things forward?

Well, you move these things forward by filing a claim here because you're seeking a distribution here. Let's be very clear. FDX went away. They reduced billions of dollars of claims against us to zero, and they're going to use it defensively. Three errors could do the same here, Your Honor. just won't. What they want is to prosecute claims against us in, that should be heard in this

court, in another court. That is extraordinary. That is unheard of. Really what they want, Your Honor, even though there's a lot of paper out there, really what they want is something simple. They want you to not resolve their claims against this estate in this court. They want you to read out, strike out, or abstain, however you think about it, the key language in section 502 of the bankruptcy code, which says, the court shall determine the amount of such claim which is objected to and shall allow. They want to read out under 502C, see the estimation.

Again, there shall be estimated for purposes of allowance under Section 1, any contingent or unliquidated claim. They want to take that away, Your Honor. They want to take away your core in-REM jurisdiction and basically have you say, you know, go fight somewhere else. We'll see what happens years from now. from now under whatever protocol some other judge decides, and then come back here and then we'll have further litigation. That just doesn't work, Your Honor. The bottom line is, and these

fiduciaries, and they are fiduciaries, remember, there's no company here. Their executives are in jail or maybe in jail. They've been chasing them and they've spent upwards of $16.5 million already, and they can't answer under oath what expected distributions are for unsecured creditors. we have a $140 million claim against three hours, Your Honor. And if we have a $273 million perference clawback, that means we're close to a half a billion dollars. How much legal fees are going to go to get to that number? How much are they going to pay us once we haven't allowed claim? None of that is discussed to Your Honor.

But Mr. Parker's declaration goes into all of that, how difficult is going to be for us into the BVI court. and so we do not think that going to BVI makes any sense, putting aside the jurisdiction issues. Now, does it make sense to go into Chapter 15 court? I don't believe so either, Your Honor. This is in your interim jurisdiction. If they want a distribution from their court, they should proceed here under the federal rules as well as the bankruptcy code. They talk about insolvency, insolvency, insolvency. I thought Your Honor was going to go down a path, and again, I'm not suggesting this.

but it's a way of thinking about it. Why do we have to talk about insolvency in a preference? In the chapter 7, you get a presumption that cannot be challenged. And I'm not saying we're going to give them that presumption. But couldn't Your Honor determine on a facts and circumstances basis what our defenses are first without even talking about insolvency? It has nothing to do with Genesis. We had specific loan agreements with margin calls,

factually completely opposite of what Genesis is doing. We don't even know what Genesis was doing. We don't care what Genesis was doing. We care about the facts and circumstances of what Block 5 and Three Arrows was doing. That's what Your Honor should focus on. So this insolvency point is really a red herring and could be dealt with in a timing situation. Your Honor could find, through estimation, for example, that their claim is rough, rough X, and we have a set of a Y and cap that claim.

Estimation allows us to move forward with distributions to unsecured creditors immediately. The standard for estimation is completely different than the standard for an objection to claim, which is really a trial on the merits that has legal and factual issues. So what we want to do is we want to get to estimation as soon as possible. Three arrows really doesn't want that. They put up roadblocks. What have they done? They suggested that we must prove under 502C there is going to be undue deluxe.

So we said in our schedule, and Ms. Furness will get to it, assuming Your Honor wants to go to that route, why we bifurcated the issues. We bifurcated it for them so that they could have their day in court so that we could show through Mr. Meiji, who's going to be the wind-down, you know, plant administrator or some other witness, why a contingent on liquidated preference claim, or now that I heard for the first time, a lien challenge to everything that went on pre-bankruptcy, where we recovered $800 million of collapse. and are still at 140. Okay, why we need to resolve the three arrows claim.

Three arrows right now is the biggest unsecured claim in this estate now that FTX has gone away and is the biggest impediment, biggest impediment for making an interim distribution or a final distribution to creditors quickly, not later. So if you go down the path of estimation, we are going to have a cap number for a reserve and we could move on. We can then deal with the claim objection process that deals with all of these other issues at another time. Now, Three Arrows doesn't like what we propose, and they say, we're ready to go forward in December. Your Honor, they're not ready to go forward in December.

They have two document demands out to us that we've been writing love letters back and forth about the types of discovery and what's outstanding and what's needed. They refuse to produce any documents on an expedited basis, and in fact are waiting for October 24. fifth to produce documents to us, and I'm sure we'll have some skirmishes along the way about what gets produced, what doesn't get produced. Then we need fact depositions, and then we need witness, expert witnesses, and then reports. So what we propose, Your Honor, is that you tee up the estimation motion first in a legal fashion to satisfy them, to show them that under 502C estimation is appropriate, and then we go to a trial, okay? And the trial should be a merits trial on every issue that anybody wants to have, and it should be in this court.

And what we proposed was first an estimation trial, and then later on in February, an objection trial. They oppose that. They think that in the estimation trial, they're going to throw the kitchen saying, fine. Why don't we just do one marriage trial where Your Honor determines findings of fact and conclusions of law in January after all the discovery is done, and therefore you use that determination, that ruling, after hearing all of the evidence, as to estimation, as well as claim objection. It gets us expeditiously to the place we need to go. They subjected themselves to this court's jurisdiction.

They're asking you to wave a wand and act like there's no bankruptcy case or there's no harm here. So that's why there's no cause to lift this stay, because we're prejudiced at every turn. We either have a more expensive, time-consuming, never-ending quagmire of litigation in some other court, whether it be BVI or Chapter 15, we're joined with other defendants who have nothing to do with us. We have no concern whatsoever what the relationship was between Genesis or Three Arrows, because it doesn't concern us. They're not triparty agreements. They're direct one-on-one.

So why are we getting involved in the minutia of their problems? We have our own. And so my view is there's no cost to lift the state. It's highly prejudicial. It's costly. They haven't cited one case

to say to your honor, give up your interim jurisdiction on the most fundamental thing. The most fundamental thing of bankruptcy is the compromise of claims so creditors could get the residual value of this estate. And what they want to do is hijack it and tie it up. As to coordination,

Your Honor is free to go caucus with other judges about what's the best way of handling these complicated issues. But there's not one case that they cite, not one federal rule that they cite, that authorizes this grand scheme or complex way of handling things. Again, we started out. It was an urgency. The sky is. falling. We got five debtors. You turn around. They want to join us with a Southern District of a New York case. And you're on the head. You can make rulings. The Southern District of New York can make rulings. They could be, you know, persuasive, but they're not binding, right? This is in the Third Circuit last time I checked. They're in the Second Circuit. Courts all the time come to

different decisions based on fact patterns that are similar. And again, I go back to the bottom line. This is of their own making. They're a plaintiff and they want to pursue recovery and damages. They got to file the claims here to get a recovery here. They got to file claims against Genesis to get a Genus recovery. They got to file claims again FTX to get an FTCS recovery. That's what the federal rules and the bankruptcy code provide. And if they don't want a distribution, then none of the parade of horribles that they're talking about will happen to them. Or they can picking shoes, which is a better case to go after? These types of litigation decisions, as Your Honor knows, are decided all the time by plaintiffs.

What we have, unfortunately, is a runaway professional. They have spent $16.5 million to date, Judge. Okay? And they're going to spend millions more doing the things. And if BlockFi is half a billion dollar creditor ultimately, because we do get tagged, we're going to want some answers as to what they're doing and what the strategy is behind it. So I come back, there's a path forward. Should the parties be talking about resolution?

Absolutely. Olive branch is always there. But to come to this court, seek stay relief with no basis. We ask you to deny it with prejudice, to ask for coordination that is vague. There's no rules. There's no understanding of how it's going to proceed. And ask us to be locked down for months, if not years, and somebody else's proceeding. Just not appropriate, given we are poised.

now with a confirmed plan to move and make distributions to unsecure creditors sooner rather than later. What they ask is for us to wait until they get ready to prosecute claims against us. So that, Your Honor, is my argument on lift stay as well as coordination. And obviously, Your Honor, the evidence that they put forward and the cross-examination showed the problems that we have with what they're suggesting both as a lift stay motion as well as a co-conciliation. So unless you have questions. Mr. Kanois, let me just ask. So the basis for the block by debtor to seek through its motion estimation is, for the most part, to allow distributions?

Absolutely, because there is a huge difference under the standards as well as even, and we're thinking they're going to appeal. Like we know they're going to appeal. Whatever your honor rules, they're going to appeal. But the standards on estimation, really, is a summary proceeding. Your Honor could canvass the issue. You don't need full briefing. People want to get full briefing. You can do basically whatever you'd like,

provided you see a contingent or liquidated claim that causes undue delay in distribution. And so that is completely different than the type of trial on the merits of a claim objection with defenses there too. Some of which are their burden under BVI law and some of which obviously will raise as defenses, whether it's 546E, 502D, 502H.

But another way of looking at estimation is also essentially a hearing to fix a proper reserve, if anything. Correct? Yeah, it's only for distribution purposes. So, again, for example, Your Honor, I'll get it. I'm just throwing it out there. It's not binding. I'm not suggesting. Your Honor can say, look, 283 is your top number.

They have $140 million. I don't think you're going to win on preference. and the loan documents say what they say, I'm going to reserve it for $100 million. Now go litigate to get that $100 million. You can do that because it's within your discretion to do it. That is far different than us litigating to the death that they have zero claim because they don't have the ability

to tag us on a preference. And this is key, Judge, and it's slippery. They want to challenge liens on our foreclosure. They're going to bring other claims. Whatever they filed in their amended approval claim, we believe, is inappropriate. They didn't seek relief from, Your Honor. The initial estimation and claim objection was their original claims filed. They just filed a reply and put new claims in.

So we have that burden to deal with, and we will. But I assume, Your Honor, may let them amend their claim and get on with it as opposed to the procedural types of things that they just took for. granted and just filed claims and now stand up to your honor and say, oh, my amended claims support lifting the state. No, your amended claims were actually in violation of the bankruptcy code and the borrower letter. But putting that aside, okay, the answer is estimation is for a specific purpose that allows us to make distributions to creditors because we box in, box in, our downside risk to three arrows. That's why we want estimation. You can't estimate a lien

challenge. You could estimate the preference. As to the lien challenge, if they're really asserting it, that it goes directly to your honor's interim jurisdiction. You said it before with the Emergent Robin Hood pledge. Your honor has core determination over what is property of the estate, including collateral that served as the underlying loan that we recovered over $800 million before they slipped into bankruptcy. So, you know, I'm literally aware of it. of you just lifting the stay or agreeing to coordination. And next thing you know, we have a ton of other claims now filed against us because Your Honor allowed it. They, if they wanted, again, I'll harken, I'll just keep sure.

If they want a distribution, they have to abide by the bankruptcy code. They have to abide by the bankruptcy rules. And only if your Honor wants to abstain or not enforce 502 and the jurisdiction granted you by Congress, we'll deal with that if Your Honor makes that rule. All right, thank you. Before you respond, I'll let you respond to anybody else who wants to weigh in. For the committee? Yes, Your Honor.

Were you going to say something else, Your Honor? No. I was going to see who wants to be heard. I have a couple of hands up remotely as well. Your Honor, Michael Winnegrad from Brown-Rodnik on behalf of the UCC. Your Honor, I won't repeat the arguments that Mr. Kahnowitz made. I know how slippery that slope can be. The creditors here want their money back.

They want it without any undue delay. This idea of some open-ended concept that maybe we'll figure it out as we go in terms of coordination. And by the way, we just dropped two out of the four parties that we're supposed to be part of that coordination is just going to delay and won't achieve anything now.

We'll talk about that in a moment. And the bifurcation of a single issue. This is a single issue in a case and only a part, a single claim in a case, and only a single issue within that claim, as Your Honor actually pointed out previously, is what they're asking to bifurc. None of that is going to be more efficient. It's just going to cause delay. 3A.C liquidate, as Your Honor, want one court to decide what they claim is the same issue. When was 3AC insolvent? It's not really the same. There are different transactions. You'll have to look at each transaction date. So the whole process. premise is flawed to begin with. And again, it's, again, not the only issue, even with respect to the preference claim. And it coincidentally, the liquidators want that one court to be one of their courts. They suggest not, hey, let's figure out amongst all of us which court should do this. They coincidentally say it should either be the BVI court or our Chapter 15 court. They make

two arguments, Your Honor. The first is efficiency, and the second is consistency. Neither of them hold water here. And before I get to that, I want to state again, which I think is dispositive here, even if you were to accept there were any efficiency, and I think it's the exact opposite, the fact that they've now, on the eve of this argument, dropped two out of the four debtors that were part of this alleged scheme to coordinate defeats the entire purpose of the motion. I don't see how that is in and of itself not dispositive here without even getting to anything else. I do want to talk about efficiency and consistency. And just a few points on efficiency, Your Honor.

What they are asking for is effectively, and they actually mentioned this in their brief, a partial MDL. They call it an MDL. They cite, or at least they cite to the MDL statute. They concede it doesn't apply here. Talk about that a moment. But this, again, is a partial MDL for one court to review a narrow issue that is one part of one claim in bigger cases. The remainder of that claim, the remainder of the other claims, will continue on in the other courts at whatever pace they continue on it.

That is not efficient, Your Honor. With respect to discovery and briefing, again, it's not exactly the same discovery, so the premise is sort of flawed. But in any event, the discovery and briefing is the same either way. Each debtor will have the opportunity to serve requests for production and take depositions, whether we're in one court or multiple courts. each debtor will have the opportunity to file its briefs, whether we're in one court or multiple courts. There's simply no logic to what the other side is asking for. A stay or concordination does not solve any of this. And by the way, all it really does is raise practical questions of if you are going to make discovery more efficient, is there going to be a lead debtor?

They reference the MDL. I've had experience in MDL is quite a bit of it. The MDL achieves efficiency because there is an MDL panel that selects which court is going to do that. I don't know if they're going to create their own MDL panel for this to decide which court should do others. And within each case, and by the way,

it's not issues or claims in a case. It is the entire case that goes to MDL courts. Within there, you have lead plaintiffs, lead counsel, handling things to try and create efficiency. None of that, there's no process. There's no precedent for any of that. With respect, Your Honor, and again, I will say it again for maybe the third time, none of this is applicable, given we're only at two out of the four debtors at this point. With respect to consistency, Your Honor, I'll just take a brief moment on that.

This court is obviously capable of ruling on this issues. It's not necessarily the same legal issue, so you won't necessarily have inconsistent rulings, even if courts look differently. but either way, as your honor said, and I was going to point out as well, the same legal issue is decided in multiple courts all of the time. And in fact, three AC liquidators admit that in their own papers. In fact, they criticized BlockFi saying BlockFi created a situation where they will necessary be litigating preference claims simultaneously in multiple forms. Well, apparently it's fine when the shoe's on the other foot. But the reality is when litigants file claims in multiple courts, sometimes by choice, sometimes by necessity, they are forced to litigate those in multiple fora.

And you run the risk of inconsistent rulings. And that is not to say, as Mr. Kanoitz pointed out, that the court can't reach out and coordinated if it so desires or the subsequent courts can't look at the initial decisions and decide whether they agree or not with these. The last point I want to make, Your Honor, moving from the lack of efficiency and the lack of concerns or risk of inconsistency, what the liquidators are asking for is simply not within the rules. They have not provided a single case where any court orders what they are asking for. Not a single case.

They provide cases on general powers and talk about that. Nothing is applicable or even analogous to what's going on here. They cite the MDL statute, but again, they can see that doesn't apply. We've talked about how none of that really transfers here. This is just, Your Honor, a pie-in-the-sky fantasy. It's not efficient. It's not sensible, and it's actually not practical. There's no basis to award this extraordinary relief, Your Honor,

and we would request that the motions be denied. Thank you, Mr. Woodard. Let me turn. I see hands raised remotely. I don't know if they're arguing in support of. or in opposition to the relief, we'll find out. Mr. Barefoot. Good morning, Your Honor.

Luke Fairfoot for the Genesis Debtors from Cleary about me. Your Honor, I won't repeat the arguments that have been made by the committee in the debtors, and I'll be very brief and just want to make two points. The first is why the Genesis debtors are before, Your Honor, today. And that's because we did not want silence before, Your Honor, to somehow be misconstrued to leave the impression that the Genesis debtors were consenting to the parallel list stay or coordination relief, such that it was really this court's determination alone that would either achieve or not achieve the coordinated result that the three Eros liquidators are touting. That is certainly not the case.

The Genesis debtors have briefed and fully briefed. brief, their opposition to the parallel live stay motion, and intend to vigorously impose the coordination motion for all the reasons that you've heard today and that were the brief that we filed yesterday, Your Honor. And all of that will be heard by Judge Lane on October 24th in the Southern District. Second, Your Honor, the second one I want to make is the reason that that's important is because unless each and every court orders this relief, this stated goal that a centralized determination that the liquidators say is animating this entire exercise will not be achieved. And on that point, as you've heard, the revised proposed order now excludes

the FTX debtors and the Celsius debtors, against whom, with respect to FDX, against whom three arrows has asserted parallel preference claims that will require determinations of solving and all of the other issues that you've heard. The decision on their part not to pursue coordination relief as to FDX is effectively a concession that the stated goal of the coordination motion will not be achieved. Your Honor, unless you have any questions, that was the reason that we wanted to appear before you today to make clear the Genesis' debtor's opposition.

And unless Your Honor has any questions, we reserve all of our friends. No, thank you. Thank you for appearing. Mr. Latona? Good morning, Your Honor. Dan Latona of Kirklandanellis on behalf of Celsius Network Limited and affiliated debtors. Your Honor, Celsius submitted a very limited reservation of rights to your chambers this morning. As has been mentioned, the Celsius debtors are mentioned in the motion and included in the definition of debtor defendants,

but the motion does not seek relief with respect to the Celsius debtors. Three arrows also filed a motion in our case. and we're reserving all rights. Our objection deadline is October 17th. The reason for our limited appearance today is simply to reserve all rights that to the extent the motion is granted, that Celsius reserves all rights to intervene and or object to any relief sought, including coordination of the Celsius debtors, either in the BVI proceedings or the Chapter 15 proceedings. That's really all we wanted to say, Your Honor, on the record. Happy to answer any questions, otherwise. We'll see the virtual lectern.

Thank you very much. Mr. Gluck. Good morning, Your Honor. And I will also be brief, Warren Gluck of Holland and Knight. We are both co-counsel and under certain circumstances, conflicts counsel to the Joint Effectal Liquidators of Three Arrows. The circumstance of Celsius is one of those conflicts items, and therefore it is our firm that has filed the petition for relief, the motion for relief in the Celsius matter. and it is incumbent upon us to speak regarding Celsius today. I want to simply note our support of the motion

because first and foremost, the core and crux of it, the date of solvency under circumstances of a crash in the crypto market is a complex issue. And it's a complex issue that if our motion for relief in the Celsius matter is granted, will be at least determined in the BVI court. I'm in a very luxurious position. We don't have a lot of the interplay and water under the bridge

that exists both in this case and in other cases. In the Celsius matter, I did want to make clear why that matter has been removed from the order and the relief we've sought. It's a lucky situation. What we realized in Celsius, and this does vote towards efficiency and making good distributions, is that the numbers in relation to the preference claim and Celsius's primary claim in our estate line up almost exactly. And in BVI, there is a set-off right, which is the basis of the relief sought in Celsius matter.

All that is being requested before Judge Glenn, who is co-eastern, who is co-eastern, incidentally, both the Celsius Chapter 11 judge and the Three Arrows, Chapter 15, Judge, is to relief from stay, much like here, which is why we do urge coordination, but solely for the purposes of allowing what is going to, what should happen anyway, which is the standard set-off process in the BVI and which this bankruptcy code recognizes, in fact, the plan in Celsius supports. So it is a narrow issue, but I raised my hand toward the sentiment that the withdrawal of Celsius is somehow a concession regarding efficiency. In fact, coordination is requested. at least coordination is requested.

And as to the issue of stay, there are certain overlaps. But in terms of efficiency, it is only because of the fortuitous circumstance that this is kind of all-handleable within the set-off process of the BVI, that the Celsius plan envisages anyway, that this was removed. And so I did not think it was appropriate or fair for the withholding. draw of the Celsius component of this application to color against its granting, as opposed to at minimum being a neutral. But in fact, the emphasis here is that it was encouraging to hear counsel in this case talk about presumptions and insolvencies, and we certainly hope those exist one day, but from the perspective of a debtor faced with an important threshold question

under BVI law that, as far as we know, doesn't contain the same sorts of agents, these are big deal issues and the numbers are enormous. The sorts of overlap costs, at least from going anywhere other than the BVI, are enormous. There have been comments, which I would obviously dispute, but comments about the spend to date and likely output to the creditors. This is the sort of thing that will, of failure rather, to coordinate, have these complex issues of data insolvency determined once under circumstances of a market crash are precisely the sort of thing that would run out cause as opposed to avoid it. And that is the position of kind of home to night in respect of our role in the Celsius matter.

Of course, there's any questions? All right. Thank you. So, in essence, the joint liquidators in Celsius reached an accord similar to the manner in which Blockbire reached an accord with FTX in agreeing to address issues in a particular form and undertake a netting or at least reserving their rights, but limiting the issues. I didn't mean to suggest an accord. I just meant to suggest that the totality of the relief sought was and is a set-off that we

believe and submit is in accord with both the U.S. bankruptcy code and the plan. All right. Thank you, counsel. Mr. Latona, one quick, and then I'll go back to J.L. Counsel. Yeah, briefly, Your Honor, Dan Latona of trickleine and analysis for Celsius Network. Just to address Mr. Glucks, that motion is still set for hearing on October 24th. Our objection deadline is October 17.

So just want to make the record clear that we have not reached an agreement with the joint liquidators. That's all. All right. Fair enough. Counsel for the J.L. replies? Thank you, Your Honor, for the record, Adam Goldberg of Latham and Watkins. I'd like to begin, I want regretfully so, by simply saying that Mr. Kahnowitz's remarks about the legal fees incurred by,

and the professional fees incurred by the three-olds of the states are completely inappropriate and reckless. They completely ignore the amount of work. that has gone into an extremely challenged liquidation. The three arrows liquidation was thrust upon the liquidators on a variety of bases in June 2022. That process has been going on for a very long time, far longer than these Chapter 11 cases. It was thrust upon the liquidators in a situation

where the founders fled and completely ignored any attempt to engage with them, obtain information about the estate. The estate comprised digital assets, which are highly movable, extremely difficult to track down. There was an extensive effort that had to undergo to find those assets, secure them, ensure that they are protected for the benefit of creditors,

and then go about reconstructing all of the books and records of three arrows because there were none. So it is completely reckless and irresponsible to suggest that somehow the amount of fees that Mr. Cannonwitz's reference was related to this case. There's an incredible amount of work going on, in the three-euroes bankruptcy case. And I must say that if it's any relative matter,

I can assure Your Honor that, although I don't think we've seen the final fee applications yet in this case, the fees of the liquidation process in the BVI case are a fraction of what the fees are for this Chapter 11 process. And I don't mean to criticize anyone's fees, but it is completely reckless and irresponsible to criticize those of the liquidators.

I'd like to address a couple other points as well. First, the suggestion that somehow we're asking to take away this court's jurisdiction under Section 502. Mr. Canewis did not cite any case that supports that reasoning. Section 362 of the Bankruptcy Code expressly authorizes this court to grant relief from the stay to liquidate a claim, which is what we're seeking to do. Mr. Canewicz, still has not, and nor has any other party provided any case in which a preference claim by one bankruptcy estate has not been litigated. in the before the court of that bankruptcy estate, especially in the context of a foreign bankruptcy case and claims arising under foreign law. I'd also like to address the point that somehow dropping FTX and Celsius from the request for coordination somehow defeats the

purpose. Well, on this issue, Your Honor, we're damned if we do and damned if we dealt. If we had them in the motion, we'd be hearing and we did hear that the requests that we're making is so complex and impossible to administer that it can never be granted. Now that they're out of it, we're hearing that, oh, because those parties aren't included, well, there's no point to coordination. Well, there remains a really good point to this coordination, Your Honor. We're trying to find the right practical solution balancing the equities and the co-equal rights of these bankruptcy estates in an efficient adjudication. And just because we have proposed one good solution, the idea of a theoretically perfect solution shouldn't be the enemy of what is a better solution than the current situation

of having multiple trials addressing very similar and the same issues in multiple different courts. I'd also like to make clear we are not seeking an MDL. We mentioned that in our paper simply as an analogy of other circumstances where matters can be coordinated. All we're seeking today, Your Honor, is relief from the automatic stay, although we're actually asking you not to rule on that issue today, what we're asking for is for this court to have communication and coordination with other courts. And I believe Mr. Kanoitz admitted in his remarks that that is something Your Honor is entitled to do. And I'd like to say there is ample authority that we explained in our papers. And then I explained before, Your Honor, before Mr. Kanois and the

committee spoke, that the debtors in the committee simply refused to recognize and prefer to ignore. There are many precedents for bankruptcy courts in Chapter 11 cases as well as Chapter 15 cases to communicate with other Chapter 11 courts, to communicate between Chapter 15, Chapter 11, and foreign courts. And yes, we are ultimately seeking consolidation of preference claims, but that is not what's before you, Your Honor. And contrary to the remarks of the debtors and the committee, something that they prefer to ignore, there are precedents for that approach that we cited in our papers. That's at paragraph 28 of our motion at the docket number 1623. We cited the Enron case as an example of which 32 separate preference actions were consolidated for the purposes

of determining insolvency. So yes, there are ample precedents. But they were within one case. They were within one case, just as the preference claims of three arrows are within one case and could be put before the Chapter 15 case and litigated on a consolidated basis there. You know, I would also make one other point. Mr. Kahnowitz remarked about the claim asserted for $140 million. They've not filed that claim in the BVI. They've filed what they describe as a placeholder claim for $1. So, you know, we invite them to bring their claims and they can be adjudicated in the BVI as well.

I'd also like to just see some guidance from your Honorary. Mr. Kanois' remarked strayed from time to time into the issues of estimates. and the status conference that we have on those matters. I have some argument to make on those issues as well, but I'm not sure if this is the right time or if we are moving on to that now. No, I think it would be appropriate. Let me hear. I'm addressing all of these collectively.

Yes, it definitely seems to be one issue. So I'd like to be clear. Several remarks that Mr. Kenowitz has made. essentially he said that they're looking to make distributions sooner rather than later, but we don't know when that will be. And that I think is really fatal to the schedule that they're looking for on estimation because it is the debtor's burden to show undue delay in distributions as the basis for the highly prejudicial relief that they're seeking.

Mr. Kanoits made clear what they're seeking is some kind of summary proceeding that does not involve the federal rules of evidence. that addresses some of the largest assets that our bankruptcy estate has, and they're seeking to box in an amount so that we are essentially, for all practical and equitable purposes, limited in the upward amount of our recovery before a full and fair hearing on those issues after all of the discovery and evidence can be submitted to Your Honor. That is an extremely prejudicial outcome.

It is not simply available to all debtors in bankruptcy. They have to show undue delay. And so, and not only are they seeking, you know, Mr. Cannonwood said, I think $100 million was an example of a number Your Honor could pick, and that would somehow just cap our distributions without all of the evidence. But to be clear, they're seeking to estimate our claims at zero on the, on, through a summary proceeding without all of the evidence yet. And we think they've made a number of admissions in their process that is fatal to that request. We don't see how they can meet that burden because really we have the ongoing claim litigation, which whether that's determined by this court or another court in December, January, or February, it's actually a pretty narrow bandwidth in which those issues could be decided.

And that does not create an undue delay. What we need to know is when will distributions be made? In the debtor's motion, they said declining to estimate could, materially delay distributions to creditors. The key there is could, not will, not has, and that's in paragraph 26 of their motion at docket 1346. They don't cite any facts or admissible evidence to cite support such a contention. The debtors also make clear that they're going to change the declarant in favor of their estimation motion to Mr. Meiji. We haven't yet seen that declaration, we should have the opportunity to test it. We've not yet seen a single piece of

evidence to support any of the debtor statements regarding undue delay. They don't specify when will they start distributing if estimation is allowed. When will they start distributing if estimation is not allowed? How liquid is the estate will be when they do start distributing? How quickly could they distribute the assets of the estate? What type of the reserves are they planning for in the absence of a reserve for three arrows? Or what portion of a reserve would three arrows claims constitute if they were fully reserved? The limited information that we've seen from Mr. Renzi's declaration on file doesn't address any of these issues. It simply looks at the timeline for confirmation. And as I understand it, that's no longer

are going to be relevant. More critically, there cannot possibly be undue delay here when BlockFi has proposed a trial on our claims objection going forward on February 5th. We'll get to the details of the scheduling with Your Honor, but that admission really is fatal to undue delay. We're talking about the difference in one or two months, and there is no basis to suggest that any of that delay is undue, nor has the debtor presented any case to suggest that that amount of delay is undue delay. So I think in other words, really what we're talking about is that estimation would occur about a month before a merits determination in the debtor's proposed schedule. There's simply no evidence to support that. And, pardon me, obviously you're right.

I covered a lot of ground. I just want to make sure I've gotten the points. And I'd like to also make the point that as we sit here today, the landscape, or stand here for myself, the landscape is very different than when the debtors filed the motion. They complained that our claims were not specific enough. But since the motion was filed, we've gotten the discovery, some of the discovery, and we're seeking more. That's allowed us to express our claims as we did on September 13th.

But we've not yet seen any substantive response from the debtors. They actually said in their own papers that they've been too busy to fully review our claims and respond to them. That's at docket number 1688, paragraph 7. If they're too busy to spend time on reviewing the substance of our claim, that really undermines any suggestion that dealing with our claims is somehow close. causing undue delay to this process because they are not dedicating the resources necessary to address it. So essentially, Your Honor, I think just to finalize, based on this deeply murky situation as it relates to estimation, if there is going to be any estimation, there should be first a hearing after the debtors file a declaration in support of why estimation is necessary.

there should be first a hearing on whether estimation is appropriate after we've had the opportunity to depose their proposed declarant and then determine whether estimation should go forward and if so through what procedures. All right. Thank you. Thank you, Your Honor. Just briefly, Your Honor, because I believe that some of the discussion that I thought I was having with, Your Honor, that must have landed wrong. exactly what we're going to do. What I said was our initial proposal had two major trials, right? But they said we don't want two major trials. We want to put everything in front of, Your Honor, on evidentiary basis for estimation and claim objection.

Okay, we'll do that. The first issue is going to be the legal issue. We'll provide evidence of why there's under delay. Your Honor, you know this case well. We're going to try to make, if we can, in-kind distributions. To make in-kind distributions, you need a platform. To have a platform, you need people. For people, you need money to pay them.

Every day this case continues in terms of litigation to get a final universe of creditor claims so we can make distributions, delays it, costs more, it's undue delay. In any event, we are going to go forward on our estimation, and we're going to provide the appropriate evidence, and we will carry our burdens. So what our schedule was, and I'm tweaking it, and Ms. Furness could walk you through all the timelines in detail, is exactly what counsel said. We will put forth a more fulsome determination on undue delay

because that's what they want to have first. We will provide the appropriate witness or witnesses. They can depose it. We will then come before, Your Honor, at a hearing. I believe that hearing in the schedule somewhere, and it's not in front of me, is in December. Your Honor will make a ruling. Can you go forward on your estimation motion or you can? If you can, fine. When should we have the trial? We will have the trial, not in February, as we suggested, because we're taking away the claim objection trial and the estimated trial. We're going to have one trial. The one trial in facts and circumstances where all the evidence goes forth, everything goes to Your Honor, and Your Honor gets to decide estimation for distribution purposes under the law and under the precedence for that. completely different than whatever Your Honor decides on the merits of their claim objection.

Now, that doesn't prejudice them. That's exactly what they want. That's exactly what we want. And it is a quick time frame. So you're suggesting estimation hearing itself to be after the new year sometime in... In January, to coincide with the merits determination on the objection claim. It's probably the most efficient way to do it. But once we get that estimation, determination, and we hope you're on a rule in our favor,

and we hope it's a very low number because we don't believe there's any merit whatsoever, then we can move forward. Okay? They can appeal. They're going to appeal. But the determination on all of these complex issues that you heard from multiple counsel on 546E and 502H and 502D, and I could go into all of those why they apply in claim objections but don't apply in estimation are not going to be appeal abolition.

You will have determined, based on the evidence before you, and under the process and the standards, you're entitled to apply under 502C different, different, okay, than 502A objection to claim type of, or 502B type of objection. So my point is, is that we can move forward and we can get creditors their money. The longer, the longer litigation happens, the more cost this estate incurs, and the less distribution is going to be made available to creditors. It's that simple. And that is why we want to move forward.

We filed our motions weeks ago. We accommodated three arrows with an adjournment, professional courtesy. We've been providing them thousands of pages of documents. They haven't given us one thing. To allow them, okay, to amend

claims without Your Honor's approval, we're ready to go on an appropriate time frame that doesn't prejudice them and doesn't prejudice us. and gets your honor every piece of evidence and every brief on every legal item that anyone wants a brief in an appropriate fashion and lets us move on. And that's the purpose of the bankruptcy and that's the implementation of the plan. And that's what we should be focusing on today. How do we move forward to move this case to implement the plan and creditors their money back?

Thank you. All right. Thank you. Your Honor, may I? Well, in case you're going to respond to both, let me hear. Thank you, Your Honor. Your Honor, Michael Winograd from Brown-Rudnik on behalf of the UCC, and I really just want to touch on four quick points.

One, this idea that the dropping of two out of the four debtors from the motion doesn't really matter because they were damned if they do, they were damned if they didn't, is nonsense, Your Honor. All of this, first of all, was their doing. Their motion as it stood before yesterday should have been denied because there was no efficiency. It was impractical and there really wasn't that much of a risk of inconsistent rulings for the reasons several of us have talked about today. When they went ahead and dropped two out of the four debtors, they undercut even their own flawed arguments in a way that I would propose, Your Honor, was dispositive.

Number two, counsel for the joint liquidators mentioned, well, we're not asking for an MDL, an MDL, exactly. They're not asking for an MDL in name because they don't have a right to it. They're asking for it in substance, but again, they don't have a right to it. There is no process for it, and it simply doesn't apply on its face. Number three, this idea that they do have precedent for what they are asking this court to do, they are the movements. They cited one case, the Enron case, as Your Honor pointed out, that was all in the same court. If you look at their briefing, all of the cases they cite to,

where they talk about consolidating preference motions, et cetera, or claims, We're all in the same court, either same parties or not, but all within the same court. And number two, with respect to precedence, again, you don't need a motion or anything for one court to pick up the phone and call another court, if any court deems that potentially helpful. The last point I want to touch on, Your Honor, is this idea of estimation. You don't need a date right now, given the variables of when the estimation will actually take place. From the creditor's perspective, estimation needs to happen so money can get out the door to them. The sooner it happens, the better. It is a threshold issue.

It cannot be eliminated, as we'll talk about later. There should be an estimation, and that will enable distributions. Whether, as Mr. Kanoit said, is it one hearing or not, we propose, and we are perfectly fine with the debtor's proposed order, which bifurcates them and says we'll do a summary proceeding early. and then when we can actually have a reasonable amount of time to put on the actual merits case, we'll do that, whether it's a month or two months later, we'll do it that. But the estimation is a threshold issue. It should happen so that money can get out the door to the creditors who still continue to wait. Thank you, Your Honor.

All right. Thank you, Your Honor. Adam Goldberg of Latham-Walkins for the record. I'll be very brief and just want to clarify what it is where we're asking for. I'm not trying to go back and forth and back and forth here. First, we are not seeking one hearing on both estimation and the claim objection. We think that would be inappropriate. If there is going to be a hearing on the claim objection at the same time of estimation,

our view is that that would completely defeat the notion that there's somehow undue delay that requires estimation because if we're going forward with the claim objection, there's no delay to resolving the claims. And the sole reason in which estimation would therefore be requested at that point would be for an improper litigation advantage to have two bites at the apple to not only seek to contest our claims on the merits, but have somehow some kind of summary proceeding that undermines our ability to recover, even if after proper due process, the claims are determined to be allowed. So I think what we have heard here, other than continuing to be no evidence about when distributions are occurred and when actually things need to happen, we've heard a lot of sooner the better. We agree with that. Let's get on with it. We're ready to go forward with the claim objection.

We don't think estimation is needed. But if Your Honor does think estimation should go forward, we should have a hearing first on whether there's on due delay. Thank you, all right. All right. Thank you. There with me one second. So let me address the motion to seek consolidation, but coordination and the stay relief motion itself. At this juncture and at the outset, the authority in the jurisdiction of the court to grant the relief requested in the consolidation is suspect.

I am leery of a process which will cause this bankruptcy estate. Additional delays as legal interests and facts are pursued involving other defendants such as Genesis. I don't believe Genesis regards that as appropriate for its bankruptcy estate either. In other words, a process in which we're layering additional issues, which by necessity and facts, which by necessity arise from multiple transactions among multiple debtors, can only slow this process down for this bankruptcy estate and increase the costs to be incurred by this bankruptcy estate. And that has to be this court's primary focus. is not inclined to handcuff the creditors of this bankruptcy estate with respect to the opportunity to receive distributions,

while litigation is being pursued against multiple defendants in foreign fora, whether it be the Chapter 15 court, whether it be in front of Judge Lane in the Genesis bankruptcy, whether it be, in the BVI court. The court cannot see a pathway where that is expedient or serves the purposes sought, which would be to reduce the time and costs. In fact, I think it would increase the burden on this estate. I don't find that the legal issues

are so complex and so dependent upon foreign law. Yes, the insolvency of 3AC is critical in establishing a preference, but there are other issues and other issues of law and facts which are important as well, which will have to be decided. including the subordination, potential for subordination, including Safe Harbor, or fact-specific defenses relative to each transaction at issue. The court is concerned with any coordination, which will have the effect of stripping or retarding the ability of the block-fired debtor to assert defenses or pursue procedures that are available in the ordinary course, and especially

simply the fact that even a coordination won't resolve all issues. Even a coordination of BVI, for instance, will not resolve all issues. At issue here are large sums. By all means. We're talking about hundreds of millions of dollars. in potential preference recoveries, claims, buying among these debtors. But what also is a stark reality is that payments against these claims are going to be in fractions of dollars. So money's just not there, whether it be the Genesis bankruptcy, whether it be the Celsius bankruptcy, whether it be blocked by.

These are not situations where creditors are getting paid, at least to this court's understanding, 100 cents on the dollar. or anywhere near that. It's incumbent upon, I think, this court to try to lead the parties to a pathway which will reduce the time and expense in reaching the fair resolution of the claims. I don't see it happening through granting stay relief to pursue claims in the BVI that have not yet even been brought

that cannot be pursued until possibly 2025, nor layering additional proceedings in an existing Chapter 15. I'm always open to discussing these issues with Judge Glenn. I know there are multiple stay relief motions pending on these issues. This court had the benefit of having Judge Glenn go first with respect to property of these state issues. So I guess I go first with respect to stay relief. It's only fair. I don't believe stay relief is appropriate at this juncture.

I am willing to carry the motion because I have some other thoughts in conjunction on where we should go. In my view, this matter should proceed towards mediation. It's essentially a dispute between 3AC and BlockFi on reconciling potential claims. it is fit for mediation. It makes sense to do so. It can only happen after appropriate discovery. So I am looking forward to allowing discovery. The question is how to then progress.

I was inclined to simply have an estimation hearing on that December 18th date. To allow discovery through December 1, allow parties to exchange briefing, exchange of exhibits. And when I refer to estimation, I do look at it as, I know it's nomenclature, but I view it as really adhering to fix the proper reserve. Because the number one priority for this court is to facilitate the debtor in its ability to distribute funds to all claimants, which would include 3AC at this point. But there are customers, there are creditors out there

who are waiting desperately for every dollar. And resolution of this claim stands in the way at this juncture. So I hear the party saying that they would like to brief the issue of whether or not there should be estimation first. I can accommodate that. I would think that it would be, and I want to hear from you well, which is why I'm going to be asking. I would think it would just be part and parcel of the estimation hearing. It will be one point in the brief. Why make it more complicated?

What I would intend it to do is once we have the estimation hearing, send you off to mediation. I would even reserve if the parties are so inclined on that and to see if there can be a resolution. So the schedule I had in my mind was to have on December 19th the estimation proceeding to fix the reserve, if appropriate, to have discovery continue through December 1st, to have exhibits exchanged on December 6th, to have contemporaneous submissions of law and disputed facts on December 11th with the ability to respond on December 18th. We would have the hearing. We would probably schedule a conference call in advance just to have a pretrial. We'd make sure everything is proceeding. and to have the parties brief the appropriateness of the estimation hearing as part of their briefing.

If the court is persuaded that there is not a need for estimation, we won't have an evidentiary hearing on the 19th. It'll be that simple. But I assume it'll be briefed and argued as part of the December 19th trial. That gives ample time to continue discovery. And then I would send you all to mediation. So I'm going to ask you all to meet and confer to see if you can agree upon mediators, a mediator. Now, I also believe that the joint liquidates are seeking a more amplified objection to their claim.

In order to guide discovery, I'm going to direct the debtor to do that. that in 15 days if there is and we're not going to schedule a merits hearing at this point will wait to see how mediation fares I'm content to carry the stay relief motion to December 18th as well see how see how and just to keep that in case rather than have jails have to renew it just to keep it there because at some point coordination may make sense. But at least let's get the party started on discovery and let's get you all into an attempt

at mediation. I think both the states would be served by avoiding unnecessary litigation. At least we'll give it an opportunity. Those are my thoughts and I took a little bit

of everybody's schedule. Let me hear from you all. Mr. Kenowitz? Yes, Your Honor. That's perfectly acceptable to the debtors, Your Honor, I'm sure with the committee, we're ready to move forward. The only question I have for you is, you know, when we talk about briefing and evidence and stuff like that, are we talking about expert reports, for example?

Because if we're going to put on an estimation, right, I'd like to do it a summary, streamlined fashion, but if you really want to get the full flavor of what reserve to do and understand how strong our defenses are, we might need some expert to the extent that it's the their burden, which it is under BVL law, to prove its solvency, to prove, you know, outside the ordinary course of business, they're going to need by expert testimony. That burdens all of us, and that's an expense. So I just throw it out there, which is we'll do it. Probably need two or three experts to talk about the safe harbor, among other things. And it's in process, Judge. It's not like we haven't thought about it. It's just can it come together to do this all by

December 18th to make it so that the hearing as well as the potential mediation, because that's really key, right, is false so that everybody's cards are laid out on the table as opposed to, oh, we're going to add some more issues later, which defeats the whole purpose. So what I'm hearing, and I want to hear from you as well, is that we may move back the calendar to allow four experts if you need it. I don't want to make it into a merits hearing, but I do want to have a fulsome estimation, and I do think it would benefit you all for mediation. But let me hear from you. I'm sorry, counsel.

Thank you, Your Honor. Mars Altrenelson for three arrows. So, you know, we hear your honor on wanting to move forward. We agree with Mr. Kanoitz that... Stop there. Right? That here, the best course of the... of action would be to have one hearing, right?

Rather than estimation and claims objection, everybody agrees claims objection can be ready to go early next year, right? And so to do an estimation hearing, which respectfully is our belief that we should have the opportunity to actually put on evidence rather than have lawyers sit up here and say what the evidence might be, not have people have the opportunity to raise objections to the evidence.

not, basically not put on the case, right, not have the expert out there. We're going to do all the discovery anyway. We would propose that we have one joint hearing on estimation and claims objection, right? And then at that point, the court can force us into mediation, can make a ruling on estimation, decide not to estimate because the court has enough information to rule on the claims objection, and that that would be the most efficient path for all. because for three arrows to properly be able to demonstrate to this court a proper amount for estimation, right, what that reserve should be set on, we really do need the opportunity to present the evidence,

not in a summary proceeding, not in lawyers making argument, but really for your honor to actually see the evidence, especially on some of the major issues here like insolvency, safe harbor, ordinary course, and the like. all right and we would be prepared to work with the debtors on a schedule for that and map out sort of the dates for the exchange of

legal briefing, experts, fact witnesses, discovering the like the parties are already engaged in discovery and have been moving forward on that once we get the new amended claims objection in 15 days we'll certainly be in a position

to see what additional discovery needs to be requested. So it makes sense to go through all that if I'm sending you to, and I am sending you to mediation at some point. I think so, Your Honor. I mean, do you need all that or should we? I think we do. Do it after, just send you to mediation after discovery.

So I think, Your Honor, we. Before you start, I'm just the briefing and the hearing. Yeah, I think, Your Honor. I think we'd be fine with mediation, or early mediation after the close of discovery, and then a hearing on joint estes. estimation and the claims objection. But to save resources of everybody here having two separate an estimation, then a mediation, and then a claims objection falling right behind, we just don't think would be efficient.

All right. Let me hear from counsel. Thank you. Your Honor, Mike Wittigrad from Brown Rudnick on behalf of the UCC. Your Honor, we think that your proposal would work. We don't think that there should be a close of discovery and then some mediation without an actual estimation hearing where there is a number to. set aside a reserve to make it real and exert some leverage in the mediation so we all know

what we're talking about. We think that is critical. The federal rules provide for estimation. It is a simple fact under the rules that you can have a summary proceeding, then complete the expert reports and whatever discovery else is necessary and have a merits hearing. We don't see any reason to eliminate the estimation proceeding or conflate the two. We think that doing it quicker as Your Honor proposed and getting into mediation with that number will actually help. And if the mediation fails, then a distribution based on that reserve can take place and money can finally get out the door to some of these contractors. But then I, in order to do the estimation, and from what Mr. Kanoits had suggested, we need to

build in the opportunity to have experts in discovery. So, Your Honor, not to disagree with Mr. Kanoitz, I don't know that experts are now. for the estimation hearing to fix the reserve. You know, these are going to be, you know, points that lawyers can argue in briefs. The court can, the court can reserve final decision until there's an actual merits hearing. But the idea of estimation and this summary proceeding is to say, let's get what we can, get it in front of the court when we can, so that we can fix a number on a reserve, and I think that will help.

If the mediation fails, get money out the door. And then if we need to, we can have a final hearing on the merits with everything that the court would be accustomed to in terms of experts and full discovery. Okay. Thank you, Your Honor. Last comment? Yes, if I may be heard, Your Honor. I just want to ensure that we're all talking about the same thing here. A summary proceeding, what does that look like?

Again, everyone just gets up and presents, Your Honor, what they think, the evidence. is going to show, makes legal arguments to your honor about that evidence, without the evidence actually being properly presented, without admissibility being considered. I mean, this is a massive estate. This is a massive estimation hearing. I recently did an estimation hearing before Judge Dorsey on a much, much smaller amount. I think he estimated it at $25 million down in Delaware. And we had a week-long estimation traditional evidentiary hearing. Now, there were certainly procedures to cabinet, right, declarations instead of direct testimony

and those type of limitations to keep things tight, which the party certainly can agree to here. But to prohibit us, as the committee is suggesting, from putting on actual evidence on a $280 million claim, is patently unfair. It's just, and quite frankly, I'm not sure what evidence we could possibly give you for you to make an estimation and set this reserve without the, Your Honor, hearing the underlying evidence. And the easiest way to do that is to have testimony, right, about the documents and information and a submission to the court on what that means in accordance with the law, right? And so, you know, the Celsius bankruptcy has an estimation hearing that's been scheduled. It's a week-long hearing with experts and testimony and the like. We cited in our, I believe, our response, docket 1484 at footnote 2, two similarly situated

bankruptcy estates where estimation hearings are proceeding. One was the Celsius, the other is Matlin Patterson, which is before Judge Jones and the SD&Y. And that also has a five-day estimation hearing, which has experts, a Brazilian law expert, fact witnesses, argument, and the like. And so that is the type of hearing that needs to occur here. Anything less than that would be very prejudicial to three arrows. And why the debtors and and the committee like this is because they think they're going to get away with a lesser standard, right? They can just come in, get a low number, and then, what, two months later, do this again, where we have to prove our claims, and we come in with a much higher number, but there's not money left.

So the fact that, one, they don't have to prove undue delay to get estimation, right, is quite frankly shocking here, given that we can have this hearing in early next year, but also if we're going to have it, it has to be fair. We have to be able to present evidence to the court in connection with any reserve that gets set. All right. Thank you. Yes, Ms. Cowell's. Since I opened Pandora's box with the expert suggestion only because I knew that's where, that's why I said we should have one trial for the merits because I know they want to throw the kitchen sink at it. Look, if we're going to mediation, we just should have a,

a fulsome record. We don't need experts. Again, there could be presumptions made. And if Your Honor is not ruling on that day anyway until after mediation, if parties believe after the oral argument and Your Honor says, okay, I heard enough, there is grounds for estimation, we can have another potential hearing within a certain period of time if mediation fails with the experts on a timeline. So we could do fact discovery.

we could get our case, private facie cases and defenses laid out for your honor as a matter of law with presumptions of this is how the evidence would go in. And Your Honor could rule on the 18th that I've heard enough. I believe the estimation should go forward, but I'm sending you a mediation. And if you fail in mediation, we'll reschedule estimation slash claim objection on a narrow time frame where you've got to have to take what you learned in fact discovery and get your witness. this is lined up on experts and then have a trial. I think that is what I'm hearing,

and that makes sense to avoid the burn, to avoid delay, and to give three arrows at least the ability to present to your honor, you shouldn't go forward with estimation anyway, which is what they're saying. We don't believe that's gonna be your ruling, but if we could have the full estimation claim objection hearing after estimation

with experts built in after mediation successful, we don't have to worry about it, if it fails, that'll be the secondary part phase of discovery. So now we go back, and I have to also build into my calendar what works. Do we go back to simply having a hearing on December, in December about whether there should be estimation, legal argument, I send you all, you have discovery through that, I send you to mediation, and then if mediation's unsuccessful, I will quickly schedule an estimation hearing. Your Honor, we would certainly agree with that schedule. Your Honor, Mike would regret again from Brown Rudnick on behalf of the UCC.

What I understood, Your Honor, to be saying what I think makes more sense in terms of making the prospects of a mediation more likely to succeed and being in a position where we can then move forward if it doesn't, is, and I don't mean to suggest that there would be no evidence put on at a at a at a at a hearing on the 19th what I would what I was simply suggesting is document discovery can get done we don't need if if folks want to bring in witnesses we can bring in witnesses as mr. Canowitz said we can probably present the evidence in ways that folks can object if they'd like but this is what how we expect it to come in but the big piece of this puzzle is experts experts getting experts done on that time frame given that we haven't received any documents from

the other side is near impossible but we don't think we know need experts for an estimation hearing. And so what we would envision is put in the evidence that we have gathered. We can talk about what we think experts and make legal arguments as to how we think this would play out. The court would hear that, presumably if it decided that estimation made sense and it had the authority to do it, it would rule on estimation and give us a number. Without a number, it's hard to imagine how the mediation really will be effective. And if the mediation fails, based on that number, we can then go ahead and make a distribution. The second part of that, the second part of that, as I would envision it, at least,

and I thought I heard Your Honor saying this, this was if the mediation fails, we can make whatever distribution we can based on the reserve, but then we can move forward, get expert witnesses. We can all work on that in the meantime, so we're not losing time, and work towards a hearing early next year on the merits to determine this fully and final. But I think it's important at that estimation hearing, if Your Honor moves forward with estimation to provide a number, will enable the mediation and a distribution if the mediation comes. Thank you, Your Honor. All right.

Give me 10 minutes. I want to review it with my well clerks. All right. Thank you, Your Honor. We'll come back in 10, 15 minutes. Thank you. And are we back on, Wendy? All right, thank you.

Please, counsel. Your Honor, Adam Goldberger, Blitzman, Walker. for the record I just wanted to make one quick comment in case there's any ambiguity as it relates to the need for a reserve to permit distributions from our perspective we are fine with having a reserve in the amount of our claim of 284 million dollars a claim amount of 284 million uses the basis to set a reserve I'm sure you are yes I just wanted to make that clear in case that was somehow not in case there was a thought that there needed to be some other amount that was used as the basis for a resort. Okay. I'm not sure how helpful that is for them, but they'll decide. But I appreciate it. Thank you. I've done my best probably to try to make you all unhappy. It's my job. But also, and I'm going to be very candid.

Part of what I had to build in is the Christmas holidays, but also I'm traveling. A good deal of January. So it makes it difficult. I also believe that mediation without sufficient factual information has been discussed won't be productive. Everybody needs to know the strengths and weaknesses of their cases. So I'm going to, Christoph, deny the consolidation motion or a coordination motion without prejudice. I'm going to carry the stay relief motion. And ultimately, it's going to be carried to Monday, February 5th. That is the date we're going to have a combined estimation hearing and merits hearing.

If the court, at that point, if the hearing, we'll start it. I'll give two days for it, fifth and sixth, and we'll go from there. The court may be in a position to estimate, even if the trial needs to be continued after that. I'm going to direct mediation to take place, well, backwards, the week of January 8th. I had to build in time for you all in case mediation is unsuccessful to do the briefing and get ready for the the trial, for the actual hearing. I'm going to have a discovery deadline of January 5th. So you'll go into the mediation armed with discovery, armed with information that will hopefully

assist you all in reaching a resolution. If there's no resolution, well, then we'll continue. Then you'll have the briefing. As far as briefing, I'm going to have contemporaneous submissions. on January 26th and Replies, Contemporaneous replies, close the business February 2nd. It'll give me the weekend to read.

It's longer than, it's pushed out further than I would like. As I said, I am concerned with the ability of the debtor to make distributions, but I'm not, I'm not persuaded that the debtor is going to be in a position to make distributions in the month of January as it is, but I am committed to getting this resolved. So we'll get it resolved by that first week in February, at a bare minimum. I'm pretty confident I'll be able to estimate the claim

after the February 5th hearing, if not resolved the merits. If you all want to meet and confer and discuss a schedule for depositions and experts and the like, you can layer that on top. I'll ask debtor's counsel to submit a scheduling order. But frankly, this is the best I can do to accommodate. I want to make mediation fruitful. I want to give the parties time,

and we're dealing in a very difficult period between holidays coming up in December travels and my travels and the like. So, counsel. Thank you, Your Honor. We do appreciate your guidance and time you spend with us. One question. The 15-day to object to the amended claim still stands.

We're happy to do it. We'll put it out another pleading. And then just some clean-up. We have various different motions that are circulating on the docket today. And, in fact, I saw earlier today, while we adjourned the FTX estimation hearing, objection to claim hearing to the 116 hearing because we're expecting Judge Dorsey to grant it on October 19th, It also picked up the three arrows, motions.

So all I'll say is, based on your ruling, and we'll submit, like I said, the scheduling order and proposed order, coordination motion denied, state relief motion carried to the 25 date. We'll grant the other miscellaneous sealing motions and stuff like that. We'll carry the estimation motion to claim objection motion to 25.

Correct. And that should encompass everything. And then, of course, we'll meet and confer on depositions and experts and time frames for that. Just to clarify, I'm not hearing oral argument on whether or not estimation is appropriate. You can build that into the briefs for the February 5th hearing. It'll be the whole thing. A whole package.

Thank you very much, Your Honor. We appreciate your time and figuring out that schedule. I believe there's just one pending motion that was on the calendar for today, which I think is moot, but that was a motion to quash for a protective order on the deposition notices issued by three arrows to debtors. Why don't we just have that motion to withdraw and you work out a schedule? Provided deposition notices are withdrawn, having this new schedule that we're going to have to meet and confer on. Can the parties agree to meet and confer on a deposition schedule? Absolutely, Your Honor. We just wanted to make sure that that was noted as put in abeyance or however

we're going to. We could move it, Judge. Thank you. Thank you. Thank you. Counsel? Yes, Your Honor. There are a bright name, I believe, from Wachensford of the record. There are just three more items, I believe, on the agenda. And I promise to be very, very brief. Those are the motions of seal filed by three arrows. Granted. Okay. Done.

I'm not sure. Wait a bit, but I'm sorry. I got to apologize to Mr. Spondor with the hand raised. Mr. Spondor? Thank you, Your Honor. I believe counsel is standing up with respect to the seal motions to advise that we've reached some, some alternate language to be included in the ceiling orders.

Thank you, Your Honor. We'll send it. We'll submit it. We'll submit an advised order. Thank you. Mr. Sponsor, thank you. Thank you, Your Honor. You're welcome.

Does that take care of it? I believe it does your honor.