American court hearing recordings and interviews - Season 6. Episode 21. January 11, 2024. In re BlockFi Inc. et al., chapter 11 bankruptcy case no. 2022-19361, audio of hearing held in the BlockFi bankruptcy proceedings pending in NJ, USA #crypto

Episode Date: January 30, 2024

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Okay, good, I guess it's still morning. Good morning, everyone. I'll give everyone a chance to put their video on, those who are registered as panelists, and including me. There we go. Back again. All right. This morning, we have the block fies, actually the, the, motion 12th Amendment was objection to claims filed against the BlockFi Wallet LLC. My understanding from reading the submissions that were focused today on claims against BlockFi Wallet LLC by those who seek distributions beyond the digital assets held in Blockby Wallet, or those who still contend that they had transferred funds into the wallet from their investment accounts. There have been a limited number of responses. I have the wind-down bidders reply in response to certain responses. as well as the initial men's certification of Mr. Chila

in support of the Wind Down debtor's motion. Let me turn to the Wind Down Debtors Council. Who's going to run with it today? Good morning, Your Honor. This is Kenneth Alled at a Brown Runneck Council for the plan administrator. My colleague or my co-counsel, Lauren Sisson, will be handling the Barrett's of the 12th omnibus

objection, but I wanted to just address two preliminary issues. Sure. First, there were two objections filed by the Archicino firm, Jason Archicino specifically. Mr. Archicino does not appear to be admitted in New Jersey, and we know to find him of that. We're prepared to go forward with the objections on the merits, but we wanted to highlight that issue for your honor. And relatedly, to give some context to avoid any impression, we're trying to leave out context to the first point.

Mr. Archicino requested separately that block five sanction for attempting to utilize the court to commit additional fraud. To the extent there's anything that needs to be discussed about that particular claim, I request that we handle that after we handle the merits of the 12,000 mis-ejection? I think that makes the most sense. To my knowledge, we have not received a request by that counsel for presenter status,

nor would we likely have granted it given his admission issue. But let's proceed. Okay, and with that, I'll turn it over to my co-counsel. Good morning, Ms. Good morning, Your Honor. Lawrence is in the Pains and Boone for the plan administrator. We're here today on the Wyandown debtor's 12th omnibus objection to claims filed against BlockFi Wallet LLC, which is at docket number 1878.

As a preliminary matter, we'd ask that the declaration of Mr. Chila in support of the objection be admitted, and that's at docket 2009. Well, all right, without objection, it's admitted. Thank you. Good morning, Mr. Sheila. We received 24 responses that were filed through the parole portal and then two responses filed directly on the docket. Those are at docket numbers, 233, 2027, and 2028, respectively. As you recall, Your Honor, the wind-down debtors filed this objection to about 12,000 proofs of claim that creditors had filed against debtor entity BlockFi Wallet LLC.

And those actually comprise about a third of all of the proofs of claim that were filed. in the case. The wind-down debtors filed the objection seeking to expunge those claims, pursuant to the court's ruling in May that funds in wallet are not a state property and that BlockFi could allow creditors to withdraw the funds in the wallet portions of their accounts. The expungement of these claims will not affect the ability of any predator who filed a proof of claim contained in this objection to receive distributions on any scheduled claims that they have against Blocked by ink, blocked by lending, or blocked by international. What expunging these claims will do, however, is allow the wind-down debtors to complete

the claims reconciliation process much more quickly as we move toward making initial distributions to creditors. We received 26 total responses to the objection, which we summarized in our reply that was filed at docket 2034. To the extent of response contained a question or a creditor seemed to misunderstand something, we did reach out by email to attempt to provide clarity, and we were able to resolve a number of the responses. I will not go through each individual response, but if the court has any questions about a particular response or the objection generally, I'd be happy to answer it. Otherwise, we would request

that the court sustain the objection and enter the proposed order, allowing the wind-down debtors to disallow and expunge the claims on Schedule 1 to the objection. Thank you, Your Honor. Thank you, Ms. System. The court has satire. satisfied that the process that we put in place as far as being able to administer and entertain the objections has worked remarkably well, given the thousands of claims that were filed and what was boiled down to a few dozen responses. I think the process offers meaningful transparency for parties and interest in creditors and an understanding of what's at issue. Here, what's at issue is we have a debtor entity that has no assets, no creditors, and claims against these entities serve no purpose. The rights and the ability to pursue claims against Block Buy Inc. and other related entities that will have assets for which there will be some distribution are retained.

We need not also relitigate or offer the opportunity to relitigate the platform pause issues for which a considerable amount of time, effort of money was spent with respect to its resolution. I am satisfied that these claims should be expunged, that such action is necessary to move ahead with distributions, which are long-awaited. Our chambers and your offices have received substantial number of emails from individuals looking for distribution, looking for access. The wallet holders have had access. those that did not have digital assets in the wallets are not entitled to any return beyond their distributions as their own secure creditors that's contemplated in the future.

So with that being said, based on the wind-down debtors' responses and Mr. Chilean's amended declaration, the court will grant the objections in total and we will overrule any objections. With respect to Mr. Alllitz's reference to counsel's cross-motion or motion for sanctions under Rule 1911, there's no basis in fact or law to support that, but procedurally is improper. If counsel wishes to file a new motion seeking sanctions, counsel certainly has that right, but should be guided by the requirements under Rule 9011 and the substantive law with respect to applicability, and that such motions themselves can be reviewed under Rule 9011 for propriety. So with that being said, do I have a final form of order or will you be submitted one?

The proposed order that was filed is the order, but we can submit it again to chambers directly if you prefer. We'll have it. If we need it, we'll reach out for you. So with that being said, I don't believe we have anything else on for today's calendar. I did want to discuss the 1116 calendar with the, I think it's the seventh omnibus objection, in which we can anticipate some substantial involvement by claimholders. Needless to say, I'm reluctant to open the Zoom process to the remote process to a free-wheeled town hall forum. And I want to hear your thoughts.

Your Honor, in regards to the seventh omnibus, there's actually only one claim that we've adjourned several times that's going to be heard. So I'm sure I know counsel for that claimant and that claimant himself will likely be on the Zoom. But what I suspect you may get a number of requests for are possibly the claim capping motion that's on for that deadline. which is the other matter. Right.

Okay. We're referring to Mr. Van derbyr. Yeah. That I've seen and there were recent filings. So that's the one contested matter. And then we have the other matters with respect to, I'm sorry, how do you reference it? We have a motion to cap the claims.

have to cap in the claims. Yeah, that does contain, it was served on about 18,000 creditors, so your chambers may be getting presenter status response, the request for that. Right, and obviously we don't have the capacity to hear from thousands of individuals. Arguments are likely to be repetitive from what's already in their written submissions, which the court has already seen based on the portal. I'm inclined, and I need to be fair, I can't let the debtor have oral argument and

permit or the want-down debtor permit respondents the same opportunity, but yet the volume of respondents and the repetitiveness will impede administration of the case. So I'm inclined to do it just simply on the papers, but I also wanted you to hear any thoughts on that if there was a need to have more than just submissions on papers. And you can think about it. You don't have to give me an answer today, but we need to prepare. Yes, Your Honor, I can address the capping motion. As you are aware, there were a number of objections filed to that, a large number of those objections are non-substantive or don't even contain an objection. I think we would be happy to move.

forward on the papers, we expect to file or apply that will categorize those objections and address each of them largely by category. I should note that there will be one substantive change that based on a negotiation from an informal objection by Ankara Trust Company, we will be proposing additional language with respect to the capping of their unsecured claim at zero. We have resolved that issue with them, but to the extent that Your Honor wants any discussion on that, we could always have discussion on that. I don't believe that any other objections that were filed require oral argument. Let me let the court have the opportunity to review the reply, and then I'll decide on the

what makes sense practically and equitably as far as how we move forward, whether we have it on the papers or a limited oral argument. When do you anticipate filing the reply? I believe we anticipate filing tomorrow, and we're working on a submission to, of all of the objections that can be docketed. However, as your honor may have noted, some people uploaded identification documents, other information that requires very careful scrubbing to make sure that we don't post anything publicly that shouldn't be posted. So we'll get that as quickly as possible. All right. Once you do that, the Corps will make a decision will probably enter a text order on how we move forward. All right.

I appreciate all of your efforts. Thank you. Is there anything else? Anybody needs? No, Your Honor. All right, take care of them. Thank you. We are adjourned.