American court hearing recordings and interviews - Season 6. Episode 2. January 9, 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 New Jersey, USA #crypto

Episode Date: April 30, 2023

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That's it. First job is to make sure I don't push the wrong button and undo everything everybody's worked on this morning. This is Seth Shapiro, the United States. I can hear you. Okay. I can hear now. All right. Good morning, everyone.

We'll start shortly. Good morning, Your Honor. Good morning. On an omnibus hearing date, I wouldn't take appearances. It would take too long. But today, since it's limited parties, I think it's worthwhile. Let me start with those who are in the courtroom. Let me have appearances.

Richard Cattowitz, Haynes-A-Boon, proposed counsel for the debtors and debtors in possession with me as my partner, Richard Anagan. Good morning. Good morning, Your Honor. Felice Yetkin, Kohl-Shatz P.C., proposed counsel to the debtors as well. Thank you. Good morning. Your Honor, Robert Stark.

I'm here with Mr. Jonas and Mr. Allit from Brown-Rudnik, also Mr. Stoltz from Genova Burns. The gang's back. All right. The gang's back. I propose counsel of the official committee of unsecured creditors. Welcome. Good morning. Good morning, Your Honor. Jeff Sponder and Lauren Bilski from the Office of the United States Trustee. All right. Good morning. Good morning, Your Honor.

Carol Walton, of course, did not open the pairing on behalf of George Chero on the Jerusalem. All right. Thank you. Good morning, Your Honor. Edward Schnitzer from Montgomery McCrack and Walker and Rose on behalf of Samuel Bank and Refried. Good morning. Good morning, Your Honor. Brian Gluckstein, along with James Bromley from Sullivan and Cromwell on behalf. behalf of the F.TX trading and affiliated interests.

Thank you. Good morning. Good morning, Your Honor. Joshua Dorcheck, with Lee Matthew Ziegler, the Morgan Lewis and Bakke of Svalp. On behalf of Angela Barkhouse and Tony Schupler, who are the joint provisional liquidators of the emergent F.TX entity, Immigant Fidelity Technologies,

limit. Thank you. Mouthful. Good morning, Your Honor. To raise Dardy and with me is Caitlin Walsh from Ms. Levin on behalf of the defendant Merrick's Capital Markets. formerly known as ED&F Capital Market Summit.

Great. Thank you. Thank you. Now let me turn to those who are appearing remotely, if anyone wants to enter appearance. During the course of the hearing, if you're appearing remotely and wished to be heard, just use the hand-raise function.

I'll do my best with my law clerks to spot you and have you be heard. Let me start. Mr. Jero, I see you. Your hand raised? I think you need your speaker on. I'm still not hearing. I hope it's, I don't know if it's on my end.

You can hear you, Judge. Okay. Well, this may be problematic. I don't know if it's gero or gero, my apologies, but I'm not hearing you. I hear others on remote. Let me go back to others, and let's see if it's yours or on our end. Mr. Serrota, good morning. Good morning, Your Honor.

Michael Sorolla, Colchots, PC, co-counsel, for the betters. And I see Mr. Susberg. Good morning. Your Honor, Joshua Susberg, Kirkland Ellis proposed counsel to the debtors. I would like, if your honor is okay with it, to provide a brief status update at the outset. And I appreciate your honor entertaining the remote appearance. Thank you. Not a problem. I'll get you when we're ready to start.

Mr. Adler? Good morning, Your Honor. David Adler from a harder on English. With me on the phone, I believe it's a good problem. also respondal. We are proposed deficiency counsel for the official committee. All right. Thank you. Good morning. Good morning. Mr. Pasquale, if I'm pronouncing it correct? You are, Your Honor. Thank you. Ten Pusquale for the official committee of us,

your creditors in the FNX trading case. I'm with the firm of Paul Hayes. Great. Thank you. Good morning. Ms. Koski, Apop. I'm butchering that. You actually got it exactly, Your Honor. Jim Cotsky, Chalmintin-Peper, on behalf of an ad hoc committee of loyalty shareholders. All right, great. And Ms. Parlin? Good morning, Your Honor.

Barbara Parlin home tonight for Silvergate Bank. Thank you. Well, all right, I think I've demonstrated why we won't do that again on the bus days. All right. So. Your Honor, this is Mr. Shapiro. Yes. I accept Shapiro.

We are not appearing in the adversary proceeding on behalf of the United States today, because we are not a party to that proceeding, but I did file notice of appearance in the main case, and I am here to answer whatever questions of the court might have about the notice of the asset seizure that we filed last week in the main bankruptcy. Thank you. Good. I'm glad to have your appearance.

I certainly think it's going to be relevant. All right. Mr. Gerald, you want to try it again? Good morning, Your Honor. I have appearing with audio via remote the phone and on video on the computer. Thank you. All right, thank you. Mr. Banker?

Your Honor, David Banker, Montgomery, the cracker. I'm going to have a single by the food. Mr. Schmitzor is already out here in person and he's now admitted to call back. Thank you, Your Honor. All right, thank you. And I think I have everyone. All right. Let's see.

Now, let me turn back to Mr. Suspert. We can start with the status since we're here on the second, our second hearing in this case. Yeah, thank you, Your Honor. And again, for the record, Joshua Suspert from Kirkland Allis. If I could ask, Your Honor, to share the presenter role with Mr. Jacobson for my firm. We can put the slide on the screen. All right, Maria?

Sure. Easier said than done. They're setting up an easel, Josh. The modern marvels of technology. Well, about 150 remote appearances, it's hard to find people. Mr. Jacobson, you want to raise your hand? There he is.

All right. Mr. Jacobson has presenter status. He needs to share it on his end. And, Your Honor, as you mentioned, today was supposed to be our omnibus second day hearing. Unfortunately, fortunately, and not criticizing, but it took several weeks for the committee to ultimately be appointed, and that was not until December 21st. And obviously, we want to get off to a good start with our committee.

They need some time to digest some of the relief that has been sought. Some will take more time than others. The goal here is to be as consensual as possible, which I'll talk about. And as a result, we move to hearing today and much of the relief that we were seeking to next, week and we'll likely be seeking another hearing from Your Honor for certain relief that I'll get to in a moment. All right. Mr. Jacobson, if you could share the slides.

My apologies. Your Honor, the Zoom is still telling me that the host is the able to participate in screen sharing when I try and share my screen. All right. We need to take a break. Do you want to see if we have Andrew? My apologies. We're just going to take a couple of minutes.

break in our IT person up here. All right. We are ready to go. I see material up on the screen. Mr. Susberg, it's your podium. Thank you, Your Honor. Again, for the record, Joshua Susberg, Kirkland, and Ellis wanted to provide a court with a brief status update, as well as a preview some items in our syllabus and schedules that I think are appropriately served up best in a live conversation. And that's the roadmap, as you'll see on slide two. And we'll get through this fairly quickly so that we can get to the proposed agenda items,

which there are two, and Mr. Canowitz will be handing those for the company. So progress since the first day hearing, Your Honor, hoping to slide four. I think this is important. We talked at the first day hearing about the path forward, and obviously we filed the Chapter 11 plan on a standalone basis on the very first day of the case.

But the thesis all along has been that Molles and Company, our proposed investment bank, would run a comprehensive marketing process for all, substantially all, or some of the company's assets. And that process is well underway. As you see on the slide, 106 different parties, both internationally and here domestically, have been contacted in our various stages of signing confidentiality agreements and ultimately getting access to information. And as we note at the bottom of the slide, we do intend to file a motion seeking approval of bidding procedures so that we have a very strict and robust process that people can understand and look to as we market these assets.

But importantly, and as I'll come back to in the context of committee discussions, it will be incumbent upon the company to demonstrate from an overall business perspective that there is, in fact, a potential standalone option. And the only way in which we'll be able to assess a truly value maximizing path forward is to understand the viability of that standalone and be able to compare it to the results of the auction process. Hence the need for bidding procedures and hence the need for a lot of work on the company side together with the committee. And that will all come and do course. On the next slide, Your Honor, and true to our word, we filed a motion a couple weeks after the filing

to return money that is in the wallet function at the company. We believe, based on the terms of use, that the proceeds and the dollars and the currency in those wallets is the customers. And as a result, our focus is on clients and getting those clients back their money, and we filed that motion to put a stake in the ground. We are closely coordinating with the committee, and there are some diligence items that are important to navigate,

including a preference analysis assessment and making sure that we're holding on the funds that otherwise should not be leaving the system. And so while we very much would like to have this heard on an expedited basis, we absolutely respect the committee's right to better understand this, the ordinary course reconciliation and the like.

And it may be more difficult than we expected to make certain distributions and not fully turn on this function. So we are going to continue to work through this with the committee with the goal of being before your honor as quickly as possible so that we can put money back into clients' pockets. And we understand that there have been some objections to this motion. We will address those in due course.

I think they can all be reconciled and we're going to work with all deliberate speed to get this up in front of your honor with the committee support. Next slide briefly. Just wanted to note we filed several second day motions as well as retention applications. many of those will be heard next week. Others will be adjourned depending upon the committee's diligence and where they stand as far as the relief is concerned. But I did want to make sure to note for your honor what's to come.

There are some issues where we may have a tussle or two with the United States trustee that we are prepared to move forward on all the relief that we've sought again on an expedited basis. As I mentioned on the next slide, the United States trustee appointed the Clients Committee on December 21st, nine individual clients appointed to the committee. The committee went and quickly retained professionals, as you'll see on the next slide. And the committee is being represented by Brown-Rubnick and three, Elementus and Mr. Adler, who I apologize,

I forgot his logo on this slide. Mr. Stark, who I know the court is familiar with, I go back a long time with Mr. Stark, and we've had our fair share of disputes and disagreements, but there's never been a time where I haven't been able to get to a resolution with Mr. Stark. And we talked about this case being different than Voyager and Celsius and F.EX. And I think true to his word, Mr. Stark is committed to working with us to make that a reality. And I'm happy to have him on the other side. Again, someone I know, respect, admire, and consider a friend.

We look forward to working with the committee professionals as well as the committee, because I will note that was important for our management team to be able to sit with the creditors committee at the outset here. And so the committee, again, pointed on December 21st. We had an in-person meeting this past Friday at my office. The entire committee was there, all of their professionals. I think by all accounts, everyone who was there thought it was a very good, constructive meeting. And it's the beginning of what we consider a very, very important relationship, unlike a typical committee better relationship because of what's at stake and how these cases work.

And at the end of the day, 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. We're serving our clients, and they sit on this committee. So looking forward to working with Mr. Stark and the team, and three, but we know extremely well that by Mr. Meiji, and of course Mr. F. Next section, Your Honor, is a preview of our schedules. and statements. We are filing sofas and schedules

on the 11th of January. And my style, as I told Mr. Stark yesterday, is not to bury a bunch of information in thousands of pages and have people go on a treasure trope hunt to try to find what they may or may not think is important.

And so today, Your Honor, I wanted to preview for you and for everyone else. I've previewed this for Mr. Stark, some items related to insiders in the sofas and the schedules. And I think it's important because, as we've seen in some of the other crypto cases, these issues can become lightning rods, and it sure did in Celsius. This case, as we've said, is unlike any of those other cases, and we are a completely transparent operation.

I want to walk your honor through exactly what happened and how insiders were treated and what went on. On the next slide, I think it's just helpful to level set. So this was the January to November timeframe. And again, remember the company had a settlement, a historic settlement with the SEC back on Valentine's Day of last year. And that was then followed by the Terra Luna collapse, which we spent a lot of time talking about. And then the Celsius and Voyager causing up withdrawals, which created mass confusion and obviously contagion throughout the industry. in order to avoid having to halt withdrawals, right? Blockby entering into an agreement with FDX, or FTX on a junior basis backstop all of our client withdrawals.

And as you'll see, that led us to the ability to process more than $3 billion of withdrawals between June 1st when everyone else was pausing their system and the filing of these cases. The issue and the problem was FTX related and the now known fraud. of FTS. FTCS got into a liquidity crunch. Its native token fell off the planet Earth, and they filed the bankruptcy on the 10th, and Block 5 was not long after.

On the next slide, and I think this is important, and obviously people can spend time with this. This will be in our schedules and statements, and again, this is a preview. But the management team at this company deployed their personal assets on the platform to trade, like all other clients, earn interest or store currencies.

And what we decided to do in an effort to be completely transparent is put the name of each executive and show the activity in their accounts on the BlockFi system each month through to the file. And I want to note, and I don't necessarily ever like to read anything, but the point at the bottom is incredibly important. No member of the BlockFi management team was through any cryptocurrency from the platform

after October 14th, 2020, and no member of Block V management team made a withdrawal greater than 0.2 BTC in value at any time after August 17, 2020. Now, for those not familiar with Bitcoin, I think the way to conceptualize this, if Bitcoin was trading at $20,000, $2.2BTC would be less than $4,000. And I think the important takeaway here is that there was no situation. where insiders were pulling money off the platform on the ebub or anywhere near this bankruptcy final. And that is super important. One other note, and we have a footnote on this slide to this point, but in April of 2022, you'll see a rather large withdrawal by Mr. Prince, the CEO and founder.

That was to pay taxes. And it makes sense. It was in April to effectuate April 15th tax payment. but we wanted to be crystal clear with the activity and how everything else worked. The rest of the chart, when we talk about October and August, shows balances decreasing because of the value of BTC. As you see on the slide how much it went down over the course of the year. Next slide, just briefly, I mentioned this before, but all of 2022, this company processed $7.7 billion of withdrawals, and from June 1st through the platform pause, again, when all the other cryptocurrencies that failed were pausing withdraws, causing mass contagion, we processed $3.3 billion of withdrawals.

And to put this all in context, as we say at the top of the page, the management teams withdrawals are a tenth of one percent of the $7.7 billion in withdrawals. So this is not the Celsius case for management extracted value on either of the file. Next slide. This, again, we talked about this crypto winner, FTX, and the fraud that was FDX. Same thing happened, and I experienced it directly in the Voyager case, where FDX stepped in to try to save Voyager, only really to try to save itself. But this was a deal that allowed us the ability to process withdrawals for customer all summer in a very confused marketplace. And again, this was a $400 million backstop. on a junior basis that again allowed us to process those withdrawals.

I mentioned this because on the next slide, the impact of the FDX transaction was significant on the executives, the employees, and the shareholders. The only way to raise money at the time was on a junior basis to protect the clients. But the company was, in fact, pursuing equity raises and could have pursued senior capital on a secure basis. But it did the safest and the most viable thing, and it took the FDX money, which would ultimately lead, as your honor knows, to a potential FDX transaction. Importantly, though, the company needed to get stabilized after the FDX infusion, and it created massive uncertainty amongst the employees.

And you see the 20% reduction in force, and you'll understand, as we talk about it, the value that was lost for this executive team on pieces of paper from the company. an equity standpoint when this company had been valued six to eight billion just a couple months before all of this. And so it became important to implement a compensation structure that kept people at the company so we could facilitate what we thought would be an FDX acquisition here in 2023. And therefore, as you'll see the next bullet in July of 22, the board of directors approved really a three-pronged strategy to help retain key employees. The next slide, we'll see each of the three prongs.

First, I just think it's worth noting that many employees had paid out of their own pockets or otherwise not financing for shares or options that were all rendered worthless by the F.TX transaction. So prong one was to make these people whole, and in some instances, grossed up for retention. Number two, the board approved a retention program, as you see on the slide, offered an opportunity to earn cash things. Because remember, most of these employees have been compensated in stock or options prior to the FDX transaction. And so up to 50% of their base salary could be earned

if they not only stayed at the company but met certain company-wide goals. And as we note on the bottom, and I think this is important, that retention program will discontinued. No payments were made to insiders, nor will any be made, and no insiders are included in our proposed curb motion. which the committee is in the process of diligence. And number three, Your Honor, Blockin historically times raises compensation

with capital markets activity, but because of the impact on the FDX transaction from a personal standpoint on all these employees, increases in base salaries to ensure that people were maintained and stayed in their seats became necessary. And so as you'll see on the next slide, The first column is the equity, both vested and unvested, that was lost at the time of the FTX transaction.

And some of the numbers are obviously staggered, and it's unfortunate, but this is the reality in which we live. We have a second column of 2003 retention payments that will put in place as part of the FPX stabilization post-the-Summer transaction. None of these payments will be made. And then we have a slide and a column talking about salary changes following the XTX transaction, again, to help ensure that we retain critical employees. As noted at the bottom, the curb that we are seeking approval of has absolutely no insiders included. That was by design.

Okay, slide 17, and Your Honor, you'll remember this timeline. We had attached it to Mr. Renzi's first-day declaration. And I think this will be helpful in putting the last part of our SOFA scheduled preview into appropriate context. And some of this I've covered, and I won't rehash. But this timeline starts with Blockby's success and growth back in 2018 through mid-2020 and the crypto-winter, if you will, that led for the FDX rescue transaction and then ultimately the filing of these cases. And again, I want to use this as a preview for the court and other parties in the case. interest as they're going to see in our schedules and statement certain litigation settlement

payments. And I think this timeline, which will overlay, will help illustrate those litigation payments and the settlement. Because the terms of the litigation settlement that I'm talking about are confidential, I'm going to refer to the counterparty for the settlement as counterparty A. We will share copies with the committee. Obviously, we'll share copies with the United States. trustee, but for public purposes and because of confidentiality arraignment included in our settlement

agreements. For today, we will call it counterparty yet. This timeline demonstrates Blockby successfully raised capital via four different grounds of preferred equity financing. And in July, 2021, for example, Blockby Series O offering was valued at $3.8 billion. and as we'll talk about, and as I mentioned to your honor before, in January of 2022, Blockby received a $6 to $8 billion third-party indicative valuation. Now, as is typical for companies like Blockby, many of the Blockby executives and employees

have been compensated heavily in equity. And that equity obviously appeared to be extremely valuable, especially when you attach a $6 to $8 billion valuation to it. So in this context, as again is typical, several different investors approached the company, including counterparty head, and they approached several members of the management team and offered different transaction structures to provide Blockby executives and employees with liquidity in exchange for their equity upside. And as Your Honor is familiar, this is common for early stage companies like Blockby

and can ultimately be a win-win for both sides. So investors here like Counterparty A are betting that the company will go public or be sold. And so they propose to employees that they take some of their equity off the table in exchange for liquidity, thus acquiring the equity at a material discount. So if the company IPOs or is sold, the counterparty stands to make a significant profit. And the employees, in turn, can reduce their exposure and get some early liquidity. And as a result, they're willing to suffer a discount that's demanded by the investor. And so these types of private security contracts are entered into directly between the employee and the company, and that's important.

So as we note, and you'll see on the slide, they're starting at the end of 2021 and then in March and April of 22, Blockby's board of directors approved certain current and former Blockby execs entering into the first set of private securities contracts with Counterparty A. And we call these on the slide PFCs on the timeline. In the private security contracts, Counterparty A promised to make immediate payments to the relevant individuals in exchange for some of their future rights to payment in the event of an IPO for sale. And as I mentioned, the first of these agreements were entered into in November of 2021. Again, this appeared to be a win-win for all.

And this was effectively an employee benefit from the company standpoint because the company facilitated its employees getting valued further out. equity and taking some of their assets off the table. And at the time, it appeared the employees were transacting at a material discount. In January, 2022, again, a major investment bank indicated a $6 to $8 billion valuation for the company. At the same time, Blockby was seeking to raise additional capital through the series F preferred financing that actually never was effectuated. More of Blockby's current and former employees negotiated PSCs with California. counter party A through April of 2022, and we'll see that on the next click.

And notably and obviously all of these transactions predated the contagion or anyone's knowledge of what was going to happen in this industry and that ultimately caused by its liquidity issues and the bankruptcy file. Now, everything changed as we demonstrate on the slide in May of 2022, when a material downturned in the crypto market began. The collapse of three arrows capital, as we talked about with Your Honor, and more generally the crypto winner, caused contagion that nobody had understood or ever predicted across the sector and led to material withdrawals that we were able to weather through because of the XPX backstop.

That sector contagion, as we talked about, really began in May with the Luna collapse. And although Blockby didn't have any direct exposure to Luna, as everybody else started causing their platforms, Blockby has, immediate request and massive withdrawals. And it was industry-wide and no one was free from. The deterioration of the sector that had an impact, obviously, on Blockby's equity value and Counterparty A's investment,

which had been made at the end of 21 and in March of April of 22. To be very clear, and I think this is super important, counterparty A's recourse against the Blockby executives was contractually limited to Blockby Sheriff and Senate. So Counterparty A had no viable claim against anyone or the employees, but it certainly couldn't sue its contractual party because it had agreed it had no recourse against it. And so what happened in June of 2022?

Counterparty came to block by and threatened to bring unfounded claims against the company directly. Generally, in our view, seeking to use expensive, burdensome litigation to recruit the value of Counterparty A's unsuccessful. bolt investment. The theories that were articulated at time, and this predates my involvement, but it's been conveyed to me that the theories were vague, but generally suggesting that Blockby should have disclosed more information about the damage to its business caused by sector contagion than it otherwise did, and as Counterparty theorized without evidence that Blockby knew more than it did earlier than it did.

Now, Blockby had to assess the threats from Counterpartier, and at the same time it entered into the FDX transaction to backstop those customer withdrawals. Now, the transaction with FDX remember was hugely helpful to Blockby clients, but disrupted to equity holders. FDX agreed on that $400 million junior loan, but essentially backstopping the company and wiping out the millions and hundreds of millions of dollars in proposed equity value that existed just a few months before. And as a result of that FTCS transaction,

FTCS had appointed an observer to Block V's board of directors. And from FDX's perspective, what FDX said both publicly and privately, and I was witness to this in multiple different arenas, a key benefit of the deal with Blockby from FTS's perspective was stabilizing not only Block V, but the sector more broadly. And that was FX's goal,

and TAMBank and Freed, as stated it over and over again, he wanted to be the white knight to try to save the industry when in reality he was someone in a much darker place trying to save himself. But that being said, the Board of Observer was very concerned that litigation around this issue with Counterparty A would be distracting and potentially impair our ability to not only stabilize the business post-the-400 million dollar junior funding, but affect the FTCS transaction. And as a result, with the money funded from the S-DX transaction, the board considered ways in which a settlement could be effectuated with Counterpartier, given that the lawsuit itself could cause harm both to the business and to the employees and at the same time during resources of the company.

So as a result, the threats from Counterparte A were resolved in a confidential settlement agreement that we note was entered into on August 23rd, 2022. It was between counterparty A, Blockby, and each of the executives that were involved. The settlement was brought to and approved by Blockby's then board of directors, including disinterested directors at the time. The claims that were advanced, as I mentioned, Your Honor, were directed against Blockby, and that Blockby had allegedly provided misleading information or not enough information. We all disagree and dispute. We thought these claims were specious. But again, Counterpartier had no recourse against the individuals and all they could do was make noise. Due to the structure of the settlement, certain payments, Your Honor, were rooted through the executives and ultimately made to Counterpartier.

The payments also created tax liabilities for the executives, even though they did not keep the funds. So as you'll see on this slide, and it's essential to understand this, the recipient's name on this slide, did not keep any funds. The company agreed to make these settlement payments, in some instances directly to the employee, but the employee then would pay the taxes associated with the amounts and then distribute the rest to counterparty pay. So when the schedules are filed on Wednesday,

there will be a spreadsheet of all payments made, and some of those payments will have the numbers on this slide and will say litigation settlement. The executives, again, themselves, were mere conduits of those payments to fulfill a settlement were blocked by settled claims made by Counterparty A. And suffice it to say, we, the team at Hayes and Boone and Cole Schatz, and now together with the committee, we'll be looking at all recourse we have with respect to the approximately $15 million

of payments that were made to Counterparty A. And rest assured, Your Honor, that we will do everything we can to make sure these are our whole and spared from specious litigation claims. But I did think this was important enough to spend a few minutes walking the court through, walking our stakeholders through, and really giving everybody a preview of what would otherwise be buried in schedules and statements. We think this is incredibly important. We think this case is different.

We think this management team is different. And case and point, I think up spending the time being transparent and laying out that there really is nothing for people to see when you understand. stand and peel back the onion was important from our perspective. And again, I appreciate, Your Honor, allowing me to time and to appear via remotely. Thank you, Your Honor. Thank you. Bear with me.

Mr. Sussberg, is there anything additional on the status you wish to say before I go to others in and outside of the courtroom? That is all, Your Honor. Thank you. Okay, great. Thank you. And we'll take down the... The slide. Thank you. All right. Let me turn to counsel who are in the present. Committee Council wish to be heard on the status.

I did have a few remarks I wanted to make. Mr. Sussberg stole a little bit of my thunder, but then he went off into a whole lot of really interesting things that I don't have anything to comment on about now as I'm learning about them. As we all are. Can I have a few minutes, please? Absolutely. Yes. Thank you. Again, Robert Stark. proposed counsel to the official committee of unsecured creditors. And I do want to thank Mr. Susberg, and I'll talk a little bit more about him and their approach in a minute. But I do think that's helpful.

I'm thankful for it. As Mr. Susberg said and put on the slide, on December 21, so just before the holiday week, the official committee of unsecured creditors was appointed. We do have nine individuals. They are thoughtful, intelligent individuals. with real-life experiences. They're sophisticated and all matters related to crypto. I'm learning an awful lot from the time that we haven't had a lot of time together,

but they're very good at teaching, and I'm learning an awful lot from them already. And they're varied. They were varied in their investments in terms of the currencies that they invested in, and the kinds of accounts they had at BlockFi. So they're a good representative group, and they are working awfully hard. And I wanted to give your honor, and frankly, if I feel like, will allow me to use the bully pulpit. All those who are listening, and we have a good,

representative, hardworking, intelligent committee. And we're working well together. And I'll continue to update the court if there's any issue, but I don't anticipate any looking at this group as I have already. We have an attitude or an approach to this case. And again, not only for your honor, but for everyone who is listening. We're in a new industry here.

We're in a new industry for bankruptcy here. But there have been a couple of crypto platform bankruptcies that are prelude for what we're doing here in BlockFi. And we've studied them and we've learned from them. Some are good, some are not so good. One of the lessons that we've learned is that financial platforms is a general matter, perhaps cryptocurrency specific today,

don't age well in bankruptcy like a fine line. They can be a little processed. And so moving thoughtfully, diligently, but quickly, being aware of the cost, being aware of the burden, being decisive and being efficient with the court's resources and the Chapter 11 resources, may be more at a premium here than in any other normal bankruptcy case that we would deal with. And that is a very significant part of our theme, which is whichever path we're going on, be thoughtful and diligent about it, but then make a decision and go with it because people are losing money. by delay. We don't intend to be stuck. We met with the company, as Mr. Susper said on Friday. We had a whole day meeting with them. It's a good old-fashioned bankruptcy where everybody saw the whites of each other's eyes

and we had a very frank and very constructive conversation with the management team, with a professional team. It was a good kickoff meeting. And they shared a great deal of information with us and they have since that. And they're clearly being well advised. Some of the best in the business are on the Blockby side. And I have very strong personal relationships with these individuals. I've worked with them, as Mr. Susprey said, in a number of cases. And as true to our past experiences together, we're talking the way that we're supposed to in Chapter 11 and we're learning.

And the executive team shares, seems to share our view. Thoughtful, diligent, quick, efficient, decisive. let's not sit stuck in chapter 11. So we all seem to share that view, and that was a theme that was replete to our meeting on Friday and ever since. We're going to have our disagreements. That's why we have a V that divides us. And we're going to try to minimize them. We have a shared agreement amongst the professionals and the clients

that if we extrapolate litigation and fight over everything, that's not going to be consistent with a thematic approach, shared thematic approach to this Chapter 11 case. so we're going to try to resolve things where we can. When we have disagreements, we're going to do it in a very professional, fair, and orderly manner so that we get things resolved. And I think you saw from Mr. Susford today, the transparency idea is carrying the rule right.

For the customers who are listening in, again, forgive me, Your Honor, for seizing the bully pulpit. But if you allow me just to say a few things for those who are listening. Sure. There are many of you, many of them. And they've lost enormous amounts of money. And I'm aware, not only from my committee, but from others, that very significant portions of people's own personal savings, retirement accounts, and wealth has gone away.

That is a profound responsibility on this committee, and we acknowledge it. We live it every day, full-time job. And we're going to do everything we can to get people their money back as soon and as large in dollar quantum as possible, not about getting stuck in the mud being decisive. and being efficient and keeping costs down and driving this case forward to get people their maximum money we hired m3 and elementus we saw on the screen they are experts as financial advisors and in this particular industry space they're working very very hard to learn everything they can how we got here where we're going that's very unclear to me right now where we're going and how soon and cost-efficiently can we get them

So we're deeply, already working deeply on that with the company. We're going to be communicated with the customers. We've already set up a Twitter account. That one's a little new to me, so I'm going to learn from this. We've set up the website. We're going to be delivering information to the customer group overall. It's their money, and we're going to be talking to them. And we want to deliver not only information as we can,

confidentiality restrictions are very important. and we're going to honor them scrupulously. But if we can get information out, we will. We'll do it timely, and we'll try to be as insightful as we can so that the customer community generally understands what's happening in this case and how it's moving forward. And we're always ready to speak one-on-one with any customer who can call us 24-7 and we'll respond to conflict.

And we're going to answer all questions. With that, Your Honor, I just open up for any questions Your Honor may have for us, but we intend to move this case quickly. with the other folks on the other side of the aisle in a very consensual way and try to get to resolution as Mr. Susberg said. We obviously have a lot to do. Thank you, Mr. Stark. Your comments were especially important for those that aren't here today.

I wanted to address very briefly that the court is in receipt, probably of two to three dozen individual objections that have been filed by customers, and with many of them related motions for a person, appearances. We have done our best, besides the obvious, I read everything. I'm trying to make that clear to all who filed pleadings. They get read. They get read by me. They get read by my law clerks. We're doing our best to direct individual customers to the committee now that has been formed. We're also cognizant that there's an ad hoc committee. that's been formed with respect to certain issues. And I'm hoping between those two committees and counsel representing those committees that the concerns and issues that have been raised, often repetitive, same forms and same briefs and arguments, can be addressed and supported by counsel.

so that the court need not endeavor to allow individual appearances. As much as I look forward to having individual customers share their views, their concerns, their arguments. At this juncture, I'm asking that it be done on a written platform. and they're obviously transparency. They are welcome to watch and engage and engage with counsel for the committees, but it would just be problematic, I think, for all of us to allow a disruption as far as the court proceedings

in having multiple dozens of individuals present views that are shared by those that can represent their views to the court. So not really for your benefit, but for those here, well but for those that are watching uh i'd like uh the customers to understand that the court uh is certainly weighing all of the uh information that's been provided to the court uh subject to arguments that go back and forth uh but uh at this juncture i'm not authorizing any individual uh appearances uh separate apart from actual pending motion practice or adversary proceedings where parties, of course, are their arguments are going to be entertained.

So with that, I don't know, Mr. Stark, is there anything else you want to add to this structure? Two things. Only that we are solicitous of that, if there are customers out there who are, in fact, interested in filing pleadings to be heard by the court, it might be better if they just call us first. We would be very honored to receive those calls and see if we can't be helpful and, in turn, help the court. if that's responsible. No, I think that's the best approach, and that's what we've been trying to urge them to do.

And second, I think I may have misstepped on something earlier. If you'll allow me just to correct the record. When I was talking earlier about returning people's money to them in sort of quantum and dollar amount, I meant value, it may be in certain respects that returning people in kind is better for tax and other purposes, so I just want to make sure the record is clear on that.

No, it's clear and an important issue. Thank you, thank you, counsel. Council. Thank you, Your Honor. Richard Kanowitz-Bohen-Bom proposed counsel for the debtors and debtors in possession. We have two other items on, as well as some other housekeeping to discuss, but we could discuss the housekeeping at the end of the hearing. I would ask the court to hear that GERO's LISA motion first,

and then we could turn to the adversary proceeding issues. That's fine. Before we get to the general matter, let me just make sure, with respect to the status conference, I didn't know if there's any other party that wanted to be heard. Let me start in the courtroom. I didn't know if the U.S. trustee, Mr. Sponder, did you wish to be heard on the status? Thank you, Your Honor. Jeff Sponder from the Office of the U.S. trustee.

Just very briefly, Your Honor, just for the record, United States trustee continues to discuss with the debtors, the final first day orders, the second day motions, as well as the retention applications. And we hope to have as much resolved as we can prior to the next hearings. All right. Thank you. Ms. Kovsky, A-pop? A-pop. Good morning, you're on a Ted Kovsky, Chapman Pepper, for the AdHop Committee of Wallet account holders. I would just add my voice to Mr. Sirk that if there are individual customers whose interests are aligned with those as the ad hoc committee,

of course, they should feel free to reach all, and I'm more than happy to speak with them. Great, and I thank you for your participation. I think it will be important. anyone else remotely wish to be heard on a status all right then I think we're ready we'll proceed to the Jero stay relief motion let me have appearances for counsel for the movement

Ms. Dalton Oforski and Olten appearing on behalf of the movement George Jereau right and I see I see Mr. Jereau who's going to be presenting argument or is you or Mr. Joreau you are all right

I think is Mr. Doreau's father counsel? Yes, Mr. Doreau's father was counseled to him in the California case. Okay. He has an entry. Okay. That's what I wanted to clarify. Right. Thank you.

Yes, Your Honor. I will allow Mrs. Nolton to present the argument. I'm here just in case I'm called upon or if needed. All right. Thank you. Ms. Nolten, proceed. Yes, Your Honor. the debtors attorneys have filed both an objection and a surre reply and in that their position is we shouldn't waste the money and the time going allowing relief in the stay for mr. Joe to go to California to have his case heard because it's because there are hundreds of thousands of creditors in this case and we should just abide by the claimant

process unfortunately I don't know that the claims process would be applicable here mr. Jereau is his point is because of the fact that there's a forum selection clause and a waiver of right to a jury trial in the contract he needs to go to the California court to have that matter decided he went to the California Court and at the time of the filing of the bankruptcy there was a Court of Appeals order or opinion that granted him the right to have his case heard in California because to do otherwise would possibly deprive him of his right to a jury trial, as well as some other unwaivable rights that are present in California,

but not necessarily present in Delaware or other states. I understand the argument. I see that this is an enormous case, obviously, and I heard Mr. Stark, I heard what he said about, having it be economical and efficient, and I agree with that to some extent, except for the fact that this is not, this is not an administrative or procedural issue. This is an issue about waiving his unwaivable right, his absolute right, and California to a jury trial on the issues of his case. Therefore, I think that it is appropriate to grant him relief from the stay in order to proceed to the Supreme Court of California.

The debtors, when the California Court of Appeals entered their decision that it was actually California that should hear the case, the debtors appeal to the Supreme Court. And that's what's pending right now. But right now, that order from the California Court of Appeals is the standing order. That's the decision. And I know that in their survey reply, the debtor submitted hundreds of pages of pleadings.

One noticeably absent one was that order that the California Court of Appeals provided. That is already, however, and maybe that's why they didn't submit it, but it's already in the motion as Exhibit 3. The original motion that we submitted on behalf of Mr. Dereau has that order in it. And that indicates that the reason that they wouldn't allow it to be heard in Delaware, which is what the contract agreed to, is that they weren't convinced by what the debtors had proposed or had submitted, I should say, they weren't convinced that it would guarantee that Mr. Jourell would get his right to a jury trial and would get any of the other

unwaivable rights, that the debtors hadn't submitted enough evidence to show that he would get that. So I understand that we need to be efficient. I understand that things need to be heard promptly. But I don't know that having it heard in New Jersey or through this court would make it more efficient or make it heard more promptly. On the one hand, the debtors are saying in some of their papers that we should wait. We should wait until the claims process is done. That it's premature to do this. On the other hand, they're saying it would take too long to go to California because you won't be heard in California for a long time. You can't have it both ways.

One of the reasons Mr. Diro wanted to file this now was so that he could get started in California so that he wouldn't be too late once the process here is completed. And also so that he wouldn't by going, you know, if he goes through the claims process, he can't then go to California. So our position is that despite that,

fact that there are many many creditors in this case despite the fact that it's yes it's going to cost money it would cost money here it would cost money here because it's going to be just because the debtors admit it's a disputed claim it's going to it's going to it's going to be a long process and it's our position that his right to a jury trial and the other unwaivable rights is something that he shouldn't be deprived of just because there are hundreds of thousands of creditors and because these are procedural matters that, you know, way against him. But couldn't each of those 100,000 creditors make the same argument? Is there a basis for Mr. Jero to opt out of the claims process that Congress has implemented under 502, the allowance process? isn't this

the forum that Congress selected to displace the burden on debtors to litigate claims issues across the country that's what I'm struggling with we have and I

understand that there are jury rights that have been asserted under state law there are California there are other substantive rights you could point to many claims in this bankruptcy in which that are bottomed on substantive rights under state law which are at loggerheads with the scheme implemented under the code yes sir honor i i understand that the thing that's different here is that the agreement that that exists exists between

block by and mr jerome has a clause in there has a jury waiver clause and a form selection clause. And that makes it Delaware. And what we're worried about is that in the claims process that you, as the bankruptcy judge, would have to look at that agreement and have to honor that agreement, whereas the California court saying, despite that agreement, this should be heard in California. I don't know if there's a solution to that. Why would this court come to a different resolution of a conflict of law issue. Wouldn't that be guided by the applicable law, restatement of law, as we apply it to which is the choice of law, you would think all courts

would reach the same conclusion. I certainly have, and Ms. Nolton, you've litigated in front of me, often enough various state law issues, even outside New Jersey issues. I know that you can do that, Your Honor. I'm confident in your ability to do that. I have been in front of you many times, and I've listened to other cases that you've done. I think what Mr. Joe is worried about is would you feel compelled to comply with the agreement that is at the Delaware Forum? I think if he were confident that you wouldn't, and of course we can't know that,

you can't know that until we're there. But if you were confident that you were going to have the decision made in accordance with California law, he wouldn't be as concerned about the fact that he's not in California. All right. I interrupt you. Do you have anything else? No. No.

I wanted to keep it. short and sweet because I realize that I'm taking up a lot of time here. No, we'll make sure it's comprehensive. Thank you, Ms. Nolton. I'll give you a chance to respond. Ms. Kanoitz. Thank you, Your Honor, for the record, Richard Kanoitz, Ains & Boone proposed counsel for the debtors and debtors in possession. I'll be very quick, Your Honor. There is no cause to lift the stay, whether it's a three-part test, a 12-part test. Mr. Jero's not a creditor here. There's no money owed. He's a creditor in the broadest sense of what's defined as a claim in the bankruptcy

code because he has a unliquidated disputed something. We would just ask that, Your Honor, deny lift stay motion. In fact, I think based on the reply that they filed, they are actually not seeking lift stay. They're asking, Your Honor, to give them certain relief and protections that they're not afforded to. We have a supremacy clause. We have a claims process.

To the extent that Mr. Jiro wants a distribution from this estate, he needs to file a proof of claim, that will impact certain rights that he has. We will proceed accordingly at that time. Everything else that he's requested in his papers is premature, and we ask you not to grant it. Thank you. Thank you, Mr. Kanoitz. Does the committee take a position?

Your Honor, the committee has not considered this matter at this time. We do not take possession on this. Let's stay motion. All right. Is there any other party in interest taking a position? Mr. Jero, your hand is raised. You have counsel, but I'll give you. some latitude. Did you want to weigh in?

I think you're still muted. There you go. Yes. Thank you, Your Honor. I just wanted to note that the distinguishing factor between this claim and other claims is that the case is already pending. That is a relevant factor for purposes of the abstention doctrines. Both abstention doctrines apply to cases that are already pending, and also the rules recognize that a case that's already pending can be removed and proceeded as an adversarial proceeding.

So that is another distinguishing factor that distinguishing. this claim from the other few disputed claims in this case. All right, thank you. Ms. Nolton, does anything else you want to add in response? No, my voice doesn't carry, it certainly didn't carry them back there. No, Your Honor. Oh, all right. I understand the frustrations of a creditor who's in the midst of litigation having it halted

as a result of a bankruptcy, but those frustrations are shared in this case. by other parties and by creditors who are also looking to assert their rights, even if they hadn't been brought before a court. I am also cognizant that there is a pending litigation. I am not hearing a motion for remand if a matter has been removed at this juncture. I am not addressing abstention issues. There is certainly a large and significant body of law which addresses. versus both permissive and mandatory abstention if litigation is brought by removal before the court.

What I have is a, I think Mr. Kenowitz noted, a disputed, unliquidated claim or a potential, well, I think the debtor acknowledges that they're disputing a claim and a claim is very broad, but that's all we have at this juncture. In my view, it would be folly to start lawyers on the path of continuing litigation in other fora, this may have a bearing down the road, when we're not sure as to potential distributions in this case, certainly resolution of litigation must take into account, is this 100% case? Is this a 5% case? that's how you decide whether it makes sense to continue litigation or reach a settlement or even pursue mediation. We are far removed from that stage in this case. And I appreciate all counsel wanting to get there quickly, so does the court, by all means.

But we're not there yet to allow continued litigation, which, for my understanding, the focal point is simply where it should be litigated. And no court has reached the substance of Mr. Gero's claims or the basis for any defenses. And to spend time and money at this juncture on an appellate process focused on where the case should be litigated, where there is a forum that Congress has put in place in light of the code for allowance and disallowance of claims. and the ability down the road if I want to punt, so to speak, and send it out, those options remain, but it's far too early. And I'm going to deny the motion without prejudice at this juncture, the motion being for stay relief, even with respect to the pending Supreme Court, California Supreme Court matter. I am going to direct that Mr. Jero in his discretion and with consultation in consultation with counsel decide whether to file a proof of claim.

And if the claims are filed, we will address those claims, as with all claims, through the Section 502 allowance process. If the litigation is removed to me, God bless. address that when when the time arises in the appropriate fashion with the appropriate body of law that's applicable. At this juncture, the court will enter an order unless debtors counsel wants to submit any specific form of order. It's up to you, Your Honor. I think we have a proposed form of order, but if Your Honor wants to submit, I mean, enter one by yourself. I will look at the order, Ms. Dalton. let me ask Mr. Kanois, why don't you forward a copy again of the proposed order to Ms. Nolton,

she and her client can review it if there's an issue, we can have a conference call. Thank you, Your Honor. All right. Thank you. Thank you, Mr. Jeryl. The next matter, Your Honor, is, in fact, the... Oh, let me just... Mr. Jeryl, do you want to be heard? Go ahead, very briefly. You need to unmute yourself. Your Honor, I was wondering if... non-debtor scratch that did not oppose the motion for stay relief i was

wondering if the court would entertain allowing that the state to be modified so that it can the case can scratch only the i think scratch is the agent of they at this time there is no automatic stays to them correct we have not sought to extend the automatic state either 362 or 105 to their benefit um and there's no motion in front of you for mr gerro's request if they believe that the stay applies and in abundance of caution they want to make application, they could do so.

I don't know until they file their papers what they put in there that may be or may not be prejudicial to the debtors of state. Counsel, at this juncture, Mr. Jero, you are free to proceed as you think it's appropriate

in consultation with counsel as to scratch. It is not a debtor before me. I think that's the limit. of what I can offer you at this juncture. May we put that in the order denying without prejudice, so it would be granting in part denying in part without prejudice, so that way that the California Supreme Court feels comfortable proceeding

without violating the automatic state? Well, there hasn't been a motion for stay relief with that entity, I don't believe. Your Honor, this motion did request the stay relief for that entity. They were served, and it is in the papers. it is in the moving papers, Your Honor. Mr. Stark? Your Honor, forgive me. Yes.

I know that we said we didn't take a position in this. We can't possibly respond about some litigation that we haven't looked at yet. It's risky to sort of go ahead and continue a litigation with a co-defendant when one of your defendants, at least allegedly, is a debtor. And I think what I understood Mr. Kahnowitz saying is those are the risks you assume if you want to do that, But we as the committee, we cannot, without even studying the litigation, understanding it and the impacts of the state, support any sort of an order that allows for anything along. So I'll be a little bit more blunt than Mr. Pamela's. Your Honor, I'm just concerned about any indemnification rights between our agreement with Scratch.

The motion is not clear that they were seeking relief against Scratch. It was against the debtors. That's why I filed it here. We would just ask, Your Honor, just to deny the motion as requested. and in fact maybe now your honor i revisit my statement maybe you should enter an order so that we don't have satellite litigation over the terms and conditions of what should be a very simple one page order denying without prejudice the list of a request well i think you could enter you can work on the order uh it will be fine i'm not going to including the order any provision

relative to scratch uh i think uh that uh if the california supreme court or mr jero wishes to relay this court's view. I've already given my view. It's in the transcript. And so you're free to provide a transcript to the California Supreme Court with respect to my ruling. Thank you. All right. Thank you.

Thank you, Mr. Gerald. Thank you, Your Honor. You're welcome. All right. Let's move on to the, I think the only remaining. although significant matter is the pending turnover motion filed by the debtor with the plethora of opposition that's been filed. Mr. Kahnowitz, or? Your Honor, thank you. Mr. Annegan will handle this part of the hearing.

All right, thank you. Good morning again, Mr. Anagan. Good morning, Your Honor, for the record, Rick Anagan, with Haynes & Boone, proposed counsel for Blockby, Inc., blocked by lending and Blockby International. Your Honor, I know that you've read all the papers, so I'm not going to address background facts or the procedural status of this unless you have questions. Luckily, there are no football games important. Go ahead. I assume you're aware of this, but the collateral since our December 28th hearing has been seized by the government. What the collateral consists of is approximately 55.2 million shares of Robin Hood Markets' income and stock, and there's approximately $21 million of cash.

it was all seized by the government from Merrick's on January 4th. The turnover motion originally sought to protect all the parties who were claiming an interest in the collateral. The collateral has now been secured. We're not sure it's being protected during our December 28th hearing. If you recall, the parties discussed maximizing value of the property for any and all constituents who may ultimately benefit from the funds that were seized. Council for Blockby, F.T.X, Merricks, the emergent JPLs, and also Mr.

Bankman-Fried, had a discussion. We discussed having an advisor be appointed to give advice as to maximizing value of the collateral. This was somewhat interrupted by the seizure. We have had discussions with the government concerning whether we should have an advisor appointed or at least contemplated to give advice as to maximizing the value of the collateral, which we think that's in the best interest of all parties concerned. No agreements have been reached, discussions are ongoing, and Blockby has reserved all of its rights related to the seizure with respect to actions of the government. One of the purposes of today's or the purpose of today's hearing originally was to determine

whether the collateral would remain at Merrick's or whether it would be transferred to a third party, all subject to this court's jurisdiction, notwithstanding that the government has taken possession of the collateral, we still believe there are important matters for the court to consider today. What we're asking for today is for the court to retain jurisdiction over the rights to these disputes as to title as to rights and priorities in the collateral itself. We would also ask the court to prohibit the emergent JPLs in their action in Antigua from taking further actions that would impact Blockby's rights to this collateral. We would ask that the court prohibit the FTX debtors in their bankruptcy case in Delaware

from taking actions with respect to their stay motion that would impact Blockby. And it was also, we have filed an objection to Mr. Schim's declaration that was filed by the emergent JPLs in support of their objection and we would ask that that objection be sustained your honor the worldwide stay order that you entered on November the 30th has been treated as it never existed block by has been measured and not seeking any relief but it's very concerned that the worldwide stay order has been disrespected and if need be at the appropriate time we'll file motions for content motions if necessary

Without this court enforcing the worldwide stay order, there's going to be complete chaos here, as evidenced by all the objections that have been filed in this case. There have been multiple filings in the FTX proceedings. There's multiple filings in Antigua, and this is all in addition to the actions that the government has taken and its proceeding with respect to the seizure of the property. At this point, we've got the following parties who have asserted interest in his collateral block by the FDX debtors, the Emergent JPLs, the Department of Justice, Mr. Bankman-Fried, and possibly the F.TX trading JPLs who filed a motion in the FDETTX debtors case, but not in this case.

Blockby, as we said on December 28th, is the only documented creditor of Emergent. We've got a pledge agreement. We've got a filed UCC-1 statement. those are presumed to be valid. The F.TX debtors, F.TX trading JPLs, Mr. Bankman-Fried, they're all tainted with alleged and admitted fraudulent or criminal activity of Mr. Bankingfried, of Ms. Ellison, and Mr. Wang. Walkby is not. The emergent JPLs, they're a creation of litigation that was filed after this bankruptcy proceeding was filed.

The JPL, the Antiguan JPLs for emergent weren't appointed until December the 5th, and their application for appointment wasn't filed until December 2nd. So all of that was after the Worldwide Stay Order was in place. Well, these claimants may have rights and assert that the block-by interest in the collateral is invalid. These are all issues that ultimately need to be decided. We think they should be decided in one forum. We believe this court should maintain jurisdiction over that. We will enter into a stipulation with the government that will allow it to reserve all of its rights

and will reserve all of our rights. And this court, we believe, is entitled to maintain jurisdiction because this was the first filed action involving this collateral authority. this collateral under the Princess Lida doctrine. This court therefore has jurisdiction over the collateral. We don't see that there would be any prejudice to any of the parties who are claiming an interest in the collateral from appearing in this court and having this court decide amongst everyone who's entitled to this in terms of priority,

title, etc. It may be us, it may not be us, but these issues should be decided in one place. And we submit that this is the court where it should be done. The court has the right to do this. It should be the gatekeeper. It has these powers under Section 105. It also has inherent powers to conduct proceedings before it in an orderly fashion. And for these issues to be decided, we don't need to be proceeding in three different four in Antigua, in Delaware, and here.

In Antigua, we've got big concerns about due process. process, and in Delaware, we were the first filed action. We've got the direct claim in the collateral and therefore asked that the court maintain control over the collateral here. All right. Would you contemplate, we have a pending adversary proceeding that ostensibly seeks turnover. The United States is not a party.

Would the debtor contemplate, or is the debtor contemplating amending the complaint to add additional parties? Either, yes, we are. We need to amend the complaint just because of the actions that have been taken. We've also sought declaratory relief that BlockFi has priority to the collateral, and so we would amend that there have been, even in the FTX debtor's objection, they said if necessary, they will quickly intervene in this action. the emergent JPLs, they can intervene in this action if they want to assert rights in the collateral.

With respect to the government, I think we'll reserve our rights. We haven't fully analyzed whether they need to be a party to this action. We know that you have certain authority as set forth in your LTL decision with respect to actions that have been taken under an alleged police power, and we continue to analyze those rights as well. But our complaint needs to be amended at this point. if we need to modify our schedule because of the addition of new parties, we're more than happy to do that. I'm aware of the committee's motion to intervene into the adversary proceeding.

We could talk about that when we get to scheduling or next steps. Certainly from the limited notice of seizure that the court was provided with by the Department of Justice, uh... i believe the position is that uh... the government believes the title to the property is tied to the date of the criminal activity

which may or may not i mean i'm certainly today not making any rulings on that but may or may not uh... predate uh... a pledge agreement or and and clearly in a two-page notice there is ample room for discussion as to the rights of third parties in any such property that has been seized so it'll be interesting and I understand mr. Shapiro is not

is appearing remotely the government is not a party to the pending litigation but he'll weigh in as appropriate but thank you let me hear from then why don't we turn to counsel for FTX good morning your honor good morning for the record Brian Gluckstein Sullivan and Cromwell for the F.TX debtors. Your Honor, we did file a response to the motion, opposing the actual turnover motion, consistent with the court's scheduling order. We have not intervened in the adversary proceeding at this point, but appreciate, Your Honor, hearing me this morning. By all means. Your Honor, it was not entirely clear to us what was going to be sought today.

I think from Mr. Anagan's comments, I don't hear the debtors requesting the relief that's actually contained in the turnover motion, which is to move the shares from what was in a neutral brokerage to another brokerage account, given the seizure in the United States government, we certainly would submit that that relief is not available. It sounds like what Block Fye is seeking to do is have the court. affirm its jurisdiction, certainly there has been an adversary proceeding that's been filed. There's a schedule to respond to that complaint in the adversary proceeding.

Our view at this point, Your Honor, is that we could have a whole discussion if relief is put in front of the court, a motion put in front of the court. As I understand it, there's now no relief before the court today with respect to any of these stay or jurisdictional related issues, I think it's fair to say there's a difference of opinion, and I don't think it's just necessarily between us and BlockFi as to where the ultimate decisions around interest in property potentially should be decided. I think the government has a view on that that might be different from either one of us. And so it certainly seems to us, Your Honor, that at this point that the seizure by the government here is a very significant effect. the suggestion that we're just going to proceed to adjudicate rights and interests in property

that we don't know if the United States government is ever going to release it, in what form is going to release it, is it going to still be shares, is it going to be cash, when is that going to happen? All of those are discussions that need to take place. We do agree with Mr. Anakin, and we had a conversation as he reported last week, about what seems to be the pressing issue here, which is ensuring that the value is maximize for creditors. Blockify is a very significant creditor in the FTX debtors bankruptcy cases.

FTX, one of the FTX debtors is a significant creditor here. But the question around jurisdiction and venue and all of those issues seems to be putting a little bit cart before the horse where the government's in possession of the shares is in position. possession of the cash, we should be, in our view, not litigating at this point rights in ultimate distribution rights in those assets until we figure out what's going to happen with. And so we do think that it makes sense to continue the discussions around how to ensure that the shares are maximized in value for everybody who has an interest. but to immediately have this fight around should, you know, where should evidence effectively be presented into which court, I think that is something that all of the parties we need to weigh in on on appropriate papers.

And I think there are arguments that there are multiple courts that potentially have jurisdiction. I'm just not sure that all of those issues should be teed up now when we have some real gaining issues here that have to be addressed, both in terms of ensuring that the asset is maximized and understanding what the government intends to do. If BlockFi is intending to challenge the actions of the government, they would need to obviously bring some sort of process to do that. And if they're seeking to return the status quo to where we were a couple of weeks ago, that would need to play out in front of a board, obviously, of competent jurisdiction. So from the FTX debtor's perspective, Your Honor, this is a significant asset. We disagree with the characterization of BlockFi that we simply have claims against the asset. The turnover motion and the arguments with respect to the stay that BlockFi have put forward are premised on the idea, of course, that BlockFi has, the property interest, it says it has.

And there are a number of gating issues there that we just respectfully disagree with. Certainly we've asserted the block by, sorry, the FTX data that we have a direct property interest. To the extent we're correct about that, Your Honor, the stay obviously in our case would have attached, which was filed three or so weeks before Block filed this case here. So I think all of the arguments that have been put before, Your Honor, as at least certainly with respect to the competing claims between blockfying of the FTCX, go to the heart of the merits issue. Are merits issues ultimately going to have to be resolved at some point? Presumably yes, assuming there's an asset to distribute, and the government isn't keeping it,

or going to argue that it should be applied to some sort of penalty and going to be distributed. But we think this fight around where a potential fight, and perhaps over time issues will become clearer, and perhaps processes could be agreed upon on what to do with an asset. But if we're talking about having an immediate fight, we think it's premature. mutual. We think there are gating issues that need to be addressed with the government who's in possession of the collateral. They are not appearing, certainly in this adversary proceeding at this point in time, and we think the party should take the time to do that before we unnecessarily press ahead with a jurisdiction. But let me ask this, and I appreciate the

concerns you raised as far as timing, and obviously I'm interested in hearing what the parties think the next step should be. But until notice of the seizure occurred, by the government, there was a pending action in Delaware court, and this goes far beyond a turf battle among courts. We're looking at substantive issues here as to the interest in how best to protect the creditors, both block by and FTX's creditors in this matter. But there were efforts taken in the Delaware court by your client, which would seem on the surface, and I'm going to ask you to explain, offend the automatic stay in this court. There is no question that I've seen that BlockPie doesn't base its claim as having a lien holder interest, a security interest in the shares,

disputed, no doubt, by FTX and by Mr. Bankman-Fried and by the JPL in Antigua. But we're talking about a lienholder interest, a property interest, and it would seem to me pretty clear under the code that a debtor's leanholder interest, let's use simplistic analogy. if BlockFi asserted that it had a mortgage on a commercial office building. Certainly the office building isn't property of the BlockFi estate, but that mortgage is, and any effort to prevent BlockFi from asserting its rights or any pending action, restricting Block FI from fixing its rights in its collateral, certainly to me offends the automatic stay of the debtor in this case.

It's a property interest, a security interest, disputed, no doubt. And whether it's this court or Judge Dorsey or some court in Southern District that decides it we'll see. But I'd like to understand how, and I would pose the same question to the Council for the JPLs, how any effort to restrict BlockFi in asserting its collateral interest to determine those interests, to either prevent this debtor from foreclosing on an interest, or to seek a determination to fix the extent and validity of an interest. how that doesn't run at loggerheads with the automatic stay. And it would seem that this court has under 1334,

certainly jurisdiction over the debtor's interest in the collateral, which is at issue here. And I understand FTS takes a different position, but it seems to be that FTX, their interest in the collateral is bottomed on potential litigation. I understand that. Mr. Bankman-Fried's interest in the collateral, candidly, I'm not sure what it's bottomed on. And I wait to hear that. the

the the JPL liquidators they're pursuing their responsibility to protect the interest of emergence creditors which to my understanding is blocked by and possibly FTCS creditors

which we have two courts here in Delaware and in New Jersey protecting those interests with this court and this is a long-winded question but with this court clearly having authority

and jurisdiction under 30A, USA 1334, and the debtor having a property interest, albeit disputed, a collateral interest. How are these actions pending another four is my question? And what's the next step in your view? Here, Your Honor, let me address that. There is a lot there. So if I could unpack it.

So be clear. The motion that we filed in Delaware is not asking, at this juncture at all to determine the merits of any. What we have asked is to enforce the automatic stay of our debtors. Because you're right, Your Honor. There's a fundamental disagreement here. Black fines come forward and said we have a collateral interest.

The nature of that collateral interest is not only disputing, the existence of it is called into question. And I don't want to argue the facts there, Your Honor. No, I'm cognizant. I've read the briefing and I understand the bases. Right, but to be clear, right, what we have here is, Bluffey say we have an interesting collateral that was granted 24 hours before the FDX debtors filed for bankruptcy. We have those documents signed by somebody, Ms. Caroline Ellison, who has now pled guilty to fraud.

We have Mr. Bankman Free, who was involved in that process, now contestant. whether Ms. Ellison even had the ability to sign the documents that Blackfai is relying on to create that interest in property. Okay, and so Blackfai is absolutely able to argue those points. And as I stated earlier, Your Honor, I do believe that there are arguments that there are multiple courts here that could exercise jurisdiction. We're not suggesting that this court is incapable of hearing these issues. The problem, though, Your Honor, is, again, if we're correct that we have not just some avoidance claim or fraudulent transfer claim, but if we're correct that the property that's now been seized, that Block Pye is claiming is their collateral,

was in fact property of our estate when we filed bankruptcy in earlier November than Block P5F. Then we believe there's an automatic stay issue with them filing on the first day of their case, the adversary proceeding here, which Your Honor did not, those papers, if we go back to the original complaint and the turnover motion that was the subject to this morning's hearing, nowhere in those papers does Block Vy disclose the relationship of what this is about, was this collection of a loan that they had outstanding to Alameda, a very significant loan. And we heard this morning in the debtors update presentation all of the linkage between FTX and Block 5. And so to suggest that this is just a collateral holder and we're seeking to enforce our collateral, the facts here are much more complicated than that. And so, Your Honor, certainly to the extent that the question here is competing stay issues or stay violations, We're happy to brief those issues, but I do think there's just a practical consideration, which ultimately is going to be, is it going to be Your Honor? Is it going to be Judge Dorsey?

Is it going to be a judge in the Southern District of New York, potentially, as the government has suggested, that's going to decide the merits issues? And it might very well be that the parties can sit down and agree on that ultimately in terms of putting some process around. But I think what our concern from the beginning here was that papers were filed two hours into the BlockFie case, which was three and a half weeks after the FTX debtors had filed bankruptcy in Delaware. We were not named as a defendant in that lawsuit. When I didn't mention in that lawsuit, the issue, of course, now is what do we do about it? And I think what's getting lost in this, Your Honor, is we're talking about $55 million. shares of stock and $21 million or so odd million of cash that are in the possession of the

United States government. We haven't heard anything of the United States government other than the statement that they filed in this case, and they made a statement on the record in a status conference in our case last week. They certainly are in possession of those shares. We know that. We know that they are going to safeguard them. But the issues that Mr. Attingen started his remarks with at the outset today, I think when we think about next steps, We think about what should happen. From our perspective, we should not be having a dispute about jurisdiction this week or next week. We don't feel the need, frankly, Your Honor, for our motion to go forward in Delaware that's pending.

If we could all agree that what we're not going to be fighting about right now is jurisdiction, but what we should do is sit down and talk about how to maximize the value of these assets. Get an understanding from the United States government to the extent they're willing to discuss with the parties what their intentions are with respect to these assets over the medium term so that we can get some understanding as to whether the parties get comfortable around the process for ensuring both that those assets are maximized and that when it becomes necessary we have a see if we can reach some sort of process about what you do I certainly don't believe it's in anybody's interest

given that there's nobody's going to get possession of these assets in the immediate term that seems clear to be having the sorts of debates around who filed first, whose stay might be implicated, and what should we do about it? Because from our perspective, that's not really in anybody's best interest. Fair enough. Thank you. Thank you. Let me hear from counsel approaching the podium.

Thank you, Your Honor. Joshua Woodrow-check of Morgan Lewis again for the Joint Provisional Liquidators of Emergent. I think everyone agrees, Your Honor, that the actual relief sought in the motion is mooted or futile or something like that. I don't need to address it. Am I correct? No, Your Honor. We don't agree that it's mooted. We believe it's frustrated and may be delayed, but it's not mooted.

Okay. In that case, I'll start out by saying this, Your Honor. My clients have no legal or practical ability to move these shares that everyone is fighting over, or to to freeze these shares that everyone is fighting over to do anything with them. So we can't do anything about it unless the situation changes. And that's been true since the government took the share. So actually turning them over to someone we can't do. So I'll just leave it at that now.

That's enough on that subject. You can't do because they've been seized? Right. Okay, I just want to clarify. Not because we don't want to. The most important thing I think I need to address is the idea that even though the government state and shares, there's some lingering wrongdoing going on out there, certainly have to address what I think was irresponsible over the weekend accusations that my clients have been sort of

serially violating the automatic stay and acting in contempt of your honor, including some comments at the last hearing. So I need to address that right away. easiest way to explain it I think is to tell you what's going on in Antigua. So that the joint provisional liquidators were appointed on December 5th and the order that appoints them, which is on the record, says that the purposes of the provisional liquidators appointment are to investigate the respondents' affairs and to preserve the value of the respondent's assets for the benefit of those entitled to them, pending the determination

of the petition to wind up the respond. So the task of the JPLs is to investigate what? happened and to figure out how to amass the assets of the company for the benefit of whoever is entitled to them. There's no predetermination of who's entitled to the benefit of these shares or who owns them. And since being appointed, the JPLs have never asked the Antigua Court to make any decision whatsoever about who owns these shares or who should get the value of these shares. As we said the last time we were before you, we're still trying to investigate

what even happened? And we have not been sneaking around in the Caribbean behind your back your honor, trying to get some advantage over the BlockFi estate when it comes to these shares. I hope you believe that me when I'm saying that. What's been going on since we were appointed is there was an attack on the authority of the JPL, but in the first instance by Samuel Banking Fried,

and then BlockFi joined that attack to try and sort of kick my clients off the job. And we responded to that. That was purely defensive. And again, the shares were not at issue, that the shares were in the background, but there has been no activity in Antiqua about these shares. And the hearing that's scheduled toward the end of January is to get a wind-up order out of the judge.

Okay, it doesn't predetermine anything about whose shares these are. So my clients are fiduciaries. What is sought in the wind-up order? What relief is sought in the wind-up order? The wind-up order is sought to conclude the, to give the joint provisional liquidators the authority to administer the estate for the bench of the stakeholders, presumably the creditors, who we have to first figure out who those are, right? And we're done. We're holding this asset, to the extent we're holding it, and the government's holding it, but our ownership of this asset in the hands of these fiduciaries is for the benefit of whoever's entitled to it. And we've never asked for a ruling on who's entitled to these shares away from this court.

Now, we have questions about where the best form to do it is, and we've said that out loud, but we have not taken any affirmative action anywhere to get some other judge besides you to decide this issue. But in order to effectuate the wind-up, do you not need to take steps to determine the extent and validity of either FTC's interest? or block-fiz interest. Sure. So there is a competing proceeding going on in another fora which affects, which other forer, which affects the rights of this debtor. I'm not speaking for the FTX debtor, but it would seem to be parallel in assets.

We have potentially three, if not four different venues, deciding, everybody's respective interests. Your Honor, of course. The estate can't be administered until these issues are decided. The JPLs in Antigua, as I said, have not been asking that judge, just as I feel blocked Vice Counsel sort of implied, we're down there trying to take this decision away from you. We haven't asked that judge to make that decision. We came up here as soon as the counsel, by counsel for the JPL, came up there and contacted all the counsel for the parties in interest in our view was that we should talk about a most efficient way for everyone to get their claims on the table

and hash this all out. We also agree with various people that have said we want the value of the shares to be preserved. We did the opposite of trying to get this decided back down in the Caribbean when nobody was looking. We came up here and said to Merak's, our custodian, because we do own the shares, technically, Your Honor, we asked our custodian to freeze the share,

not to give them to us so we could go off and do something. to freeze them so that we could talk to the other parties in interest. And that was happening. Now the government hasn't, that's changed the playing field a little bit. But we haven't changed our attitude, which is that the parties should talk about how to work this out. So that always has been our position. I just want this court to know that there hasn't been any funny business. No, I appreciate that.

Going on. It's almost done. There was a complaint about a little clause in the order that the judge in Antigua put in for Block FI to, if they want to appear at this hearing, which they're welcome to do at the end of January, to provide the court with a summary of the position, like sort of why they're here. I understand that that's a local procedural thing that's common in every case. It's not an attempt to keep Block FI out of the court in Antigua. They're welcome to come down there and say whatever they want.

And just as a practical matter, Your Honor, we are aware that even if we did go to the judge in Antigua, and get that judge to say, okay, the shares belong to so-and-so, that we have to come up here and contend with all the other judges up here who may have a different opinion. And so it wouldn't even have worked if that was our plan. I just want to make that clear. So if you ask me what we should do next, I'm going to say the same thing I said before,

which is we think there seems to be the government sees and the shares has caused a sort of reset of some sort, okay, if it means that certain people should be impleted into this case, fair enough. We had already asked for more time to respond in this case because we're trying to to fear what's going on. So it seems like a party should continue to talk about that. And if there are rival forms, I don't know, maybe it eventually gets litigated if it can't be negotiated.

But besides the issue of making the shares have their maximum value, which maybe requires an advisor, a very practical issue, I don't think there's a legal issue that requires anything one and some cooperating, there is no legal issue at all that needs to be cited in the near term. I don't think that the JPL is going forward with getting a winding up order would necessarily change anything. It certainly isn't going to somehow simultaneously decide the outcome of the shares, which of course, even the judge in Antigua can't convince the government to do anything with. No threat. So would it make sense to carve out from any wind-up order, steps to determine, fix for an extent, the validity of any interest in it?

I can't speak for the judge. No, I'm throwing that out there. But it's, in my mind, perfectly possible that the judge in Antigua would be open to that, to these key issues disputed amongst a bunch of people up in the United States, that maybe that issue should get decided there, and then the effects of that issue are folded into the line of work. But I don't think the judge would be against that, but of course, So you can't read the judge's mind, Your Honor.

We're actually getting a new judge, the judge that we, has heard the case so far as to me going off the rolls or whatever the expression is, and a new judge are coming in. But either way, Your Honor, I just wanted, just there's nothing that interesting going on in Antigua to put it that way. So that's the main point I wanted to make.

Otherwise, I believe that the motion should be denied because my clients can't be compelled to turn over something. They literally cannot do that. and that we all get some extra time to talk and see if a lot of people can work out a lot of these procedural issues. My sympathies to the new judge coming in, just very briefly, I know my law clerks are cringing at the thought I'd be asking this, but the real important question, is it Antigua or Antigua? Antigua.

That's what the lawyers can Antigua call it. Even that's going to be disputed. Maybe so. I'm not taking a position on it myself. Definitely the Commonwealth community uses Antigua and Antigua. Fair enough. Thank you, counsel. Thank you.

Let me, before I get, thank you. Is there any other appearances? Counsel? Thank you, Your Honor. Edward Schnitzer from Montgomery McCracken on behalf of Samuel Bankman-Fried. Your Honor, as other people have already stated, we believe that most of the most of motion is moot because of the seizure. While the seizure was unexpected from our perspective, it did happen.

It has been effectuated. So if you just simply look at what the relief that was requested in the motion as well as the proposed order, it really can't be granted because the shares in stock are no longer in the possession of Merrick's. I actually agree with FTX counsel, and it may be the one time only in this case that I will agree with FTCS counsel. But as they said, basically, the arguments advance and relief sought earlier today that you heard. was not what was set forth in the motion and it should be denied your honors you saw in our papers the reason we responded is because the motion was going forward notwithstanding this so we needed to make our point with respect to the standard for preliminary injunction we do not think

it's met i put that forth in our papers i believe the jpals also put that forth i won't burden you with repeating what we put forth in our papers the only thing i wanted to add your honor is in part of their presentation they said our position was tainted by the fraud of mr bankman and Ms. Ellison. I just wanted to make two points, Your Honor. First of all, I do want to remind everybody, and Your Honor, I believe you effectively stated this before. It's alleged fraud of Mr. Bankman-Fried. He's been accused. He has his right in court. We will see what happens. Ms. Allison, on the other hand, has pled guilty. I believe there is a different there. Last of your honor, I know you asked, so I thought I would answer the question. You asked, what is Mr. Bankman-Fried interest? He is the 90% shareholder of emergent. I don't believe anyone's disputing that. So my, understanding of how things work in Antigua or Antigua. I'm not sure either the pronunciation. My understanding of how things work there are similar to how things work here in that after creditors, if there are any creditors get paid, the interest in a company do belong to equity. So that is Mr. Bankman-Fried's interest. It is contingent at this point, although I believe

almost everyone's interest here is contingent because they would actually have to prove they are a credit. All right. Thank you. Thank you, Your Honor. Counsel for the committee? Good morning, Your Honor. Kenneth Ollett, Brown-Rudnik, proposed counsel for the committee. The committee supports the debtors today. Our view is that there were two things sought in the turnover motion. There is the demand of turnover, which it is what it is today. But there was also a request to enjoin the transfer use of the collateral pending the court's resolution

of the ad-deserved seating. And that is a great importance to the committee. committee does not want these shares going anywhere. Mr. Bankman-Freed's counsel is in the courtroom. You can imagine that the view of committee on Mr. Banking-Feed having any say where the shares go. Beyond that, Your Honor, we'll leave it to the debtors, but we wanted to register that we join the debtors in this.

All right, thank you. Mr. Shapiro, I'm going to... Oh, before I turn to Mr. Shapiro, council for somebody probably wants out but go ahead thank you ron yes we would like out um we represent marricks and i really don't have much more to add um to what the council today has said but as you recall when we had the hearing before you on the 28th i made very clear that marix had froze this account on november 10th it made very clear to all of the interested parties that these assets would not be moved unless and until a court ordered otherwise

and we did get that order by the warrant of seizure on December 30th. We made all of the parties aware of that warrant before the government actually seized the assets. And on January 4, Marix fully complied with that warrant, and everything is now in the hands of the government. And I do think what we talked about on the conference on the 28th of December was everybody's interest in the next step should be to maximize the value of those assets. and I would request that we be let out of this case since we no longer are a stakeholder and the motion should be denied. All right, thank you. Thank you, Your Honor.

I'd like to turn to Mr. Shapiro. Good morning. It's still morning for the next three minutes. I appreciate that the government is not a named party in the adversary proceeding at this juncture. My understanding is that in reading the notice of a seizure, that I guess with a pending or contemplated in REM proceeding, that's coexistent with the criminal prosecution of Mr. Bankman-Fried, the government has seized the shares. it would seem to me that there can be many months and many market changes before the government gets to the point of whether a forfeiture goes into effect. And the concern that I have probably shared by every other judge who has this in front of these issues,

in front of them is that there not be a loss in value of the shares during this time period until ownership, entitlement, whether it be as an owner, as a lien holder, or on the basis of forfeiture, is determined by the appropriate court. What are your thoughts on working or reaching a consensus with the stakeholders to ensure that the value for the creditor body. All of the retail and larger institutional creditors are furthered. Thank you. Good morning, Your Honor. As I indicated earlier, the United States is not a party to the Advertocert proceeding,

and I'm not appearing in the Absent's proceeding, but I am here to answer your Honor's questions as a cruise to the court. And we would greatly appreciate the opportunity to be able to submit a brief in conjunction with any accusation of allegations against the government before Your Honor rules at the appropriate time. In the interim, Your Honor should know that we have been having discussions, some confidential discussions with counsel of the debtors in both this case and the FTC case as well as others. and hopefully we would be able to resolve these issues, but if we can't, there will be an appropriate time where Your Honor can hear the arguments of the government as to why we believe that what the government did was appropriate. And, of course, ultimately, if the matter went forward in New York and the Southern District, it would be a criminal and or civil asset forfeiture proceeding.

In the interim, as part of the discussions to answer your honors to our question, that issue that Your Honor has gone up has been the subject of discussions, and we haven't reached a conclusion yet, so I can't tell Your Honor what that conclusion is, but we are talking with counsel for the parties about how to address Your Honor's concern. All right. Thank you, Mr. Shapiro. Mr. Kahnowitz or Mr. Andrian, let me, so I know going for, Anigian or Anagian? Anagan. Easier than it looks. Easier than Anaghan. All right. Your Honor, a couple of things are really clear.

There's multiple parties claiming interest in this property that likely will be the subject of some government or action at some point in the future. Whether civil, whether criminal. But before that really can go forward, I mean, there needs to be a resolution of the rights and interests of the parties who are claiming interest in this collateral today. And it's unworkable that it goes forward in these multiple forms. We filed the first action. We think that under the Princess Light of Doctrine, it should stay in this court. We don't know exactly what's going on in Antigua.

I mean, our local council there asked that certain provisions of the order that sets this hearing on January the 27th not be included, and that request was rejected. So we believe, or at least there's some indication to us, that on January 27th, the court in Antigua may be deciding what the rights of BlockFi are pursuant to its pledge agreement with the Merchant. We don't think that should go forward. Now, if the Antiguan court wants to go forward with appointing JPLs in some wind-up order,

As long as it doesn't impact BlockFi, that's fine with us. The same in Delaware, as long as they want to go forward with their stay motion, to the extent that it doesn't impact BlockFi's rights in the collateral, that's okay with us, but I believe they said they're willing to push off that hearing on January 20th. We don't think that should go forward on that day. With respect to Merrick's, we haven't released, BlockFi has claims against Merrick's, and it will continue to assert those claims. We don't see a point in waiting for resolution of any criminal actions against Mr. Bankman-Fried

and the ultimate filing of some type of forfeiture action before some court, hopefully this one, goes forward and make some – at least the parties can move forward with whatever agreements or ultimate fights they have over who's entitled to and what rights and benefits and priorities we have in the collateral. And for those purposes, we would ask that the court entering order that takes control over this matter and it joins any action of the emergent JPLs in Antigua to the extent they're going to affect Wattai and the same with respect to the action in Delaware. All right. Thank you.

I don't see if there's anyone else remotely who wishes to be heard. heard on these issues? I don't see any hands raised. All right. I think all of the stakeholders and the parties have argued well their respective positions. These are interesting and challenging issues that I'm sure all the judges appreciate having on their respective plates. At this juncture, it's clear that this court is not a position to enter any terms. order of any type. The shares are being held by the government, pursuant to a warrant of seizure, and the government is not a party to the pending adversary proceeding.

The government wasn't a party to the motion, and the government, the U.S. government's actions changed the landscape for all involved here. So the turnover motion itself is going to be denied. without prejudice. I have a pending adversary proceeding, which I would expect the complaint needs to be amended.

It provides for jurisdiction by this court, and this court intends to pursue its jurisdiction and authority in the pending adversary proceeding. It is always subject to a consensus, consensual resolution

otherwise, as to the proper forum for adjudicating the rights here, but this court has identified a property interest held by this debtor, subject to dispute, but still a property interest under 11 U.S.C. Section 541A that is deserving of protection under 11 U.S.C. 362A. And this court is well-equipped. God, that sounds awful.

pretentious. This court is equipped to handle the litigation going forward, if it makes sense to the parties, and I will certainly afford the parties the opportunity to brief and argue if such assertion of jurisdiction is inappropriate. But right now there's a pending adversary proceeding. There is also a pending order of this court which just implements the statutory rights under 362A, this court's November 30th, I think it's been referred to as a worldwide order, reinforcing the automatic stay. The court intends to enforce that order with either the content powers it has or other authority under Section 105 to the extent that there are violations going forward. the doors are open for parties seeking the appropriate relief from the automatic stay.

The court is cognizant that in this circuit we still view actions taken in violation of the automatic stay is void ab initio. I don't believe there's a need to enter an order directing a sister court, including an Tegan court, or Delaware court, on what actions they should be taken. The law is straightforward. And if there are actions which are challenged, they can be challenged in this court or other courts as appropriate. But at this juncture, I think we need to move forward with the adversary proceeding and motion practice in that adversary proceeding as appropriate to address the needs of the respective parties. With respect to the committee's motion to intervene, I'm going to schedule that for the 17th. I think that should probably be resolved through a consent order. And as to other parties' actions going forward, this court is here to address the issues as needed.

But there is no specific relief today that I can provide on the... pending motion. So again, the pending motion for turnover is denied without prejudice. The adversary proceeding continues. All parties have their respective rights and abilities to make argument wherever you all want to. All right. Any questions or concerns? For the record, Richard Kenowitz on behalf of the debtors in the state, Your Honor. No, we will speak with the parties, including the F.TX debtors and the JPLs to talk about how they want to proceed in the adversary proceeding. We also look forward to talking to them about moving the January 20th hearing or completely withdrawing that motion. Just so you know, January 20th is our

341 meeting in this case. So we're not available that day anyway, but we will discuss with them a constructive way of moving the disputes forward in this court if possible. And we will also continue talking to the government about the proper way to handle the seizure and the benefit to the victims. And let's be clear. I just want to make it clear for the record for everybody. Block 5 was defrauded by FTX and its affiliates and maybe the insiders

of FTX and its affiliates. We are a victim. FTX is not a victim. FTX, to the extent that creditors overlap with our creditors, are the victims. And we're here to protect the victims, and Mr. Stark and his team are well equipped to assist

or work with us to do that. But that is our fiduciary duty. The gamesmanship really needs to stop, as I said to every council, and as I said to you, Your Honor, at the first hearing. We are fiduciaries. We are here to protect client interest and get them the best value, not to have skirmishes and litigations and gamesmanship over jurisdiction, automatic stay versus automatic stay, or something else. So we're going to try to work as cooperatively with all the constituents and adversaries and objectors in this case, in this adversary proceeding, and try to craft something that is,

sensible, commercial, and efficient to have the dispute, as everyone has said, about whether or not BlockFi has a guarantee and a pledge from Emergent and what that means for this estate. So we're going to endeavor to do that. Two other points, just to clean up. The DOJ has, in fact, served warrants of seizure on Blockby for certain customers or clients who are obligated to the government to turn over property. So it's customer property that we're holding. We don't think we need an order from this court to actually comply with those seizure orders, but I know Mr. Shapiro is on the phone and we have had communications about those. They emanate out of the state of Washington, and there's about two or three clients of ours impacted.

It is client money. It is not property of the state money. And we are going to cooperate and do what we need to do through counsel to turn over that money to the government based on those seizure ones. office. All right. Thank you. Thank you. And the second thing I think that we need to address housekeeping is further dates. Right now we have January 17th. We also have January 30th, but we will need dates, I would believe, in late February and March, subject to any other type of proceeding that needs to be brought before your honor. We have a February 21 date already

included. You think earlier? I think that a little later, since we have January 30th. It could be earlier, but that week, the President's week, is vacation, among other things. So I think that that week is probably not the best week to do it. Are we scheduling an omnibus date, you think? I think it would be an omnibus state. We have 130. I am actually away the week of the, the chunk of the week of the 13th to the end. The best I can offer you all is the week of the 6th, or if we're basically eliminating, well, let me see here, if we're eliminating the week of the 20th and the week of, well, the week of the 13th, I believe,

is the President's weekend. Are we eliminating both those weeks? I think the President's weekend's the 20th here. Right, that's why I'm saying that week on the 21st is an issue. Okay. For certain people, I think. Maria, do you know why we don't have court on the 13th? Was that Lincoln's birthday?

It is the government. L.T.L. Well, why don't we do this? Why don't we caucus the estate parties and get back with chambers? Because the prior week of the 13th has issues, the week of the 20th has issues, and we don't know what we're going to need potentially, so maybe we keep the 21st. Let's keep the 21st for now.

It looks like the – no, I didn't – yeah. Let's leave it for now. We're running out of days. Or I'll have to push something else. Yes, I think that can... If the Third Circuit doesn't rule in LTF, I have a whole day I can move for them. So we'll see. All right.

Then just reach out for chambers. We will, Your Honor. I don't believe we have anything else on the agenda. We thank you for your time. Thank you. Mr. Stoltz? Your Honor, Daniel Stoltz, proposed local council of the committee. On the motion to intervene, shall we submit an order shortening time listing it for the 17th?

We submitted it without date. I'll just schedule it. Let's avoid the paperwork. And will Your Honor enter a text order after when objections will be about? Yeah, we'll do that. We're talking about having it on the 17th, correct? Correct. So we'll have objections by, let's see, objections by the 16th.

And Your Honor, just so Your Honor knows, the debtor has graciously consented to share Kroll with us, so both the debtor and the committee will be using one noticing it just so that people will get confused. I think that's great. All right. Anybody else wish to be heard on any matters? All right, folks. Thank you for your time. Take care.

Thank you, Your Honor. Thank you.