American court hearing recordings and interviews - Season 6. Episode 22. January 16, 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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Hey, good morning, Dan. Good morning, John. It's still some town in New Jersey? Yeah, yeah. It wasn't too bad this morning, though. I actually got in near record time, which is just odd how things work out. Yeah, everybody stayed home. Yeah. I appreciate everybody's accommodations. We've had some weather issues all over.

and I think it actually works well that we're handling today's matters remotely. We will be hearing the block-fi certain claims, objection issues, and camping issues, with just two matters on the agenda. the first matter, one of the matters, the second matter on the agenda is the plan administrator's motion for an order capping the maximum allowable amounts and establishing a reserve. The court has previously indicated that it will be deciding this matter on the papers without further oral argument. But let me turn to debtors' counsel and ask, first of all, say good morning, and then ask if there's anything the court needs to be aware of with respect to the capping motion. As with all of our remote hearings, should you wish to be heard, please use the raise hand function. We are both recording this on our FTR normal system through the court as well as on video.

So good morning, Mr. Allette. Good morning, Your Honor. For the record, Kenneth Alletta Brown Rudnick for the plan administrator. Nothing substantive to highlight on the capping motion except to tell Your Honor, we expect to file revised schedules just redacting a few further names. No substantive changes to the schedules from what was filed at the end of last week. We just want to remove a few names that were inadvertently left in that were individual names rather than the names of corporations or the like. All right.

With that, there's nothing else besides, I believe, the Van Tubergen objection, which might co-counsel Amy for Napsa's handling. All right. Thank you. So with respect to the second matter on the agenda, the motion will mark it on reserve the court will review the matter. If there are any changes to any proposed order, please advise chambers with respect to that motion. Now let's turn to the objection to the claim of John and make sure I'm pronouncing my Ventubergen. Is that right? Good morning, Mr. Ventubergan.

Let me have appearances first on behalf of the Wind-down debtor. Yes, good morning. I'll let it take his first. Good morning, Your Honor. Daniel Stoltz, Genova Burden's local council to the plan administrator. Good morning, Mr. Stoltz. Good morning. Your Honor, Amy Furness, counsel for the line down debtor.

Good morning, Ms. Furness. And now for Mr. Van Tuprigan. Good morning, Your Honor. Good morning, everyone. Joe McElhays, Connell Foley, on behalf of claimant, John W. Van Tubergan, Jr. here. And good morning, Mr. Van Tuprigan. I see you there. Any other appearances? All right. Well, the courts had the benefit of ample time to do reading, and you've given me ample reading to do. So I have reviewed the underlying certification filed by Mr. Van Tubergen, as well as his supplemental, the

Surreply filed by counsel. The one-down. debtor's reply I believe I have a strong handle on the underlying issues and the facts but let me turn since it is the wind down debtors initial motion although with respect to this claim I certainly I don't think it's a matter of dispute that mr. Van Tubergen has the ultimate burden of persuasion on the motion but let me turn to the debtor I see how you wish to proceed. Your Honor, I have a brief opening argument.

Ms. Marquez is here on the video and is available for cross-examination on her declaration. We'd request that her declaration and all the exhibits be admitted for all purposes. and then I assume that Mr. Mantooverjim would also be available for cross-examination. Mr. Malagaliz, does that make sense? Your Honor, I was hoping to get a sense from the court on how the court would wish to proceed. Generally speaking, Your Honor, we want to give this matter the fullest light of day. We want to air it out. We obviously placed a lot on the record.

I thank the court for carefully reviewing it. I would like to make my opening presentation and then reserve on whether or not to call Mr. Van Tubergen. I would like to sidebar with my client before making that determination. That's fine. As far as Ms. Marquez's declaration, and that same would hold true, obviously, for Mr. Van Tubergen's certification. I see no reason why they shouldn't come in as direct. If you wish to supplement, you'll tell me after you speak with your client. And I don't know if there are any objections to the exhibits.

I'd just rather clarify the record. Do you have any objections to the Wind Down debtor's exhibits coming in? No, Your Honor. All right. Then the exhibits that have been docketed are in as evidence. and Ms. Marquez's declaration is in his evidence. We'll turn, and let me hear an opening from the line to the letter. Thank you, Your Honor. I'll be brief.

In March, Mr. Van Tibergen filed a proof of claim with no legal basis and alleged a $10 million claim based on, quote, false force liquidation. As Your Honor has seen Ms. Marquez in her certification attached to the reply, which is now in evidence, walks through each of the alleged liquidations step by step and demonstrates that each one of those liquidations complied with the agreements between Mr. Van Tubergen and Block 5. The LSA's Mr. Van Tubergen agreed that collateral postage for loans would be posted to a specific depository account. Two, that the required loan to value ratio would be at least 70% at all times, and on one of them required 80% as a low. The value of collateral there would be determined in two ways. One is the last trade price on Gemini, or the market value. as determined by BlockFi in its reasonable discretion.

BlockFi used various paid services to determine value. Key for Ms. Marquez's step-by-step is that the LFAs dictated accelerated maximum LTV or accelerated maximum loan to value of 80 percent, and when that was reached under the LSA, it was an event event of default. Again, under the LSAs, which Mr. Van Tubergen agreed to, once that accelerated maximum was hit, an event of default was called, and the lender could liquidate the collateral in-wholler in part at its discretion. The other important term in the LSA is that when the loan to value reached 70 percent or 80 percent on one of them, the borrower has 72 hours to bring that loan to value down to 50%.

Again, Ms. Marquez's declaration demonstrates that each of these events happened related to the complained about loans and that all the liquidations are proper. Stepping back just for a little bit, Your Honor, Mr. Van Tivergen took out more than $40 million in loans over the course of this relationship from Block 5. he was speculating that the price of his collateral, the crypto, would go up. And often when it did go up, Mr. Ventubergen refinanced those loans and took out cash. When it instead went down, he had option. One option was to post more collateral.

Another option was to repay the debt. The third option was to do nothing in which the collateral would be liquidated. Six months after the filing of the original claim, Mr. Van Tubergen brought to this court new theories in response to Block 5's objections. He claims some $10 million value based on the value of the cryptocurrency at the time of the forced liquidation. To be clear, the funds that were received from the liquidations were all applied to the amounts that Mr. Van Tubergen owed the wind-down debtors, owed block by the collateral is not missing it wasn't stolen from him it wasn't taken the collateral that was sold the dollars from that were directly applied to the amount he owed one of the big points of contention here is what he calls the premature liquidation of one certain loan that's a loan

that has the final three numbers of seven eight as an apple five in the block five documents it's We refer to it as loan number three. Ms. Mark has demonstrated that that liquidation was proper. However, in an effort to accommodate Mr. Van Tevergen, Blocci agreed to a new loan. That new loan was the amount still due on that 7A5 loan three, plus to purchase the EF that had been liquidated, which would then be rolled into a,

new loan. Importantly, Mr. Van Tubergen agreed that Block Vy, quote, shall not be liable for any damages or loss caused as a result of this transaction and providing this one-time accommodation. That's what he agreed to in writing, yet he has brought it here today before, Your Honor. The other major point of contention is lost east. Mr. Van Tubergen alleges that there was some amount of east. That was his. That was somehow, quote, lost. We point the court to the fact that, one, when Mr. Van Tubergen was provided with the liquidation summary,

he didn't respond, and that was in August of 2022. He didn't respond, you're missing. East. Nope. He didn't point it out when he filed his March 2020 claim. It was first mentioned in September of 2023. It is factually false. What Ms. Marquez foreto in her declaration, she lays out and demonstrates all of the collateral that was provided for that. What we have here is a prisoner's error. Mr. Van Tubergen's loan was custom. It was not initiated with 60% loan to value. What the reality was, Your Honor, was that Mr. Van Tubergen, again, in the email where he, in writing, agreed to this new loan and said Block 5 was not going to be responsible for any damages that come as a result of it, was that he was initiating this loan with a loan to value nearly 80%.

There is no missing east. Block Fy's books and records demonstrate the exact amount of east that there was. What's interesting, Your Honor, and I'm confident you've picked up on this, is that on one hand, Mr. Van Tibergen is alleging that Block Fy entered into predatory loan practices because he put him in a loan that had nearly 90% loan to value. the exact same loan that he now alleges had a 60% loan to value, and therefore this missing E is somehow missing. You cannot have it both ways.

It is either a 90% loan to value and allegedly predatory, but again, he took the risk. We warned him of the risk. He agreed to the risk in writing, or it was started with a 60%. And we know that the reality is blocked by substance record demonstrates there is no missing ease. And the final point, Your Honor, is related to another new claim that was completely new. This time in the Surre reply that was filed on the 10th of January. And this relates to finance charges. The argument, frankly, does not make sense.

Unfortunately, I think Mr. Van Tubergen have misread the LSA. And when the LSA says, except if this loan is made to a borrower in Michigan, Mr. Van Tubergen reads that as, if this loan is made to a borrower in Michigan, then X. And in reality, unfortunately, that means unless the borrower is from Michigan. So that second part of the sentence doesn't happen. you live in Michigan, which, by the way, Mr. Van Tubergen does. We think the meaning is clear. Somehow things have been well-to-translation, and Mr. Van Tubergen actually reads it the opposite

of what the contract itself says. Again, Ms. Marquez, points by points by points through each of these alleged loans demonstrate that each of them was above the required loan to value. Not only above the required loan to value, but above the required loan to value, but above the required the required loan to value that allows BlockFi to immediately liquidate collateral to get the loan back into the facebone. Today, Your Honor, we're asking that you sustain the wind-down debtor's objection. Modify the claim. First, there is no claim against BlockFi lending for these alleged impropper, according to Mr. Van Tubergen, liquidation. Submit the claim against

blocked by Inc. for $19.7. And that's for the amount in Mr. Van Tivergen's interest account. 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. All right. Let me turn to Mr. Madeliz. Do you wish to make your opening statement? Yes, Your Honor.

And I would like to touch upon the key issues, Your Honor. So it may be a little bit broader than opening statement, but I will work through it expeditiously, Judge. So Mr. Ventubergen's proof of claim number 7233 was filed to seek recovery against the bankruptcy estate of Blockfly lending on account of cryptocurrency assets that we indeed believe were wrongfully liquidated through falsely called liquidations and or liquidations that were excessive, Your Honor. For reasons that we have placed on the record, we do believe that once a proper, proper, metric is utilized to determine valuation, it is conclusive that there were unauthorized liquidations. Also, taking account of the intent of the LSA's end statements made by Block 5 lending's agents, we also believe that it's evident that there were excessive liquidations as an alternative

or in addition to the wrongfully unauthorized liquidations. We do raise other serious concerns, Your Honor, which I hope to briefly. touch upon. And I couch the first upon information and belief just because I understand there's a potential world of implications. We dub it the finance charges tabulations concerns, Your Honor. I know opposing counsel refer to the appendix A language. There's also Section 1 language, which refers to the statement of a loan in a way that is deeply concerning here. We also believe there's notice concerns, Your Honor. For a entity that engaged, and I'm being respectful here, this is nothing against opposing counsel, this is against the debtor entity,

that engaged in the effective strip mining of Mr. Van Tubergen's collateral, they should be held to every minutia, every formality that is required. Yet there are no notices that were placed on the record. The notices that Mr. Van Tubergen offered up only raise questions, Your Honor, questions about whether or not they could be trusted, and questions about whether or not he was actually. as a matter of fact, given the 72-hour period that was required by the LSAIS. And as we note, Your Honor, for a variety of reasons, their calculations are either unfounded or cannot be trusted. Your Honor, we were unable to make sense of their underlying data.

We were hoping that through their submission, they would kind of part the skies into how they actually formulated their data. But all we have is charts copied and pasted into assert that equate to an averment that we don't believe can sustain the theory that they actually processed everything properly as a lending institution. There's no backup. All their exhibits are emails, Judge, and the certification that purports to justify the liquidation of multiple millions of dollars of collateral. And yes, Your Honor, we did respectfully allege that BlockFi lending engage in predatory practices,

but we certainly don't believe that we need to establish that. That just goes to the totality of the circumstances and colors the case for the court because at the end of the day, Mr. Van Tubergen was the customer. And BlockFi lending was the multi-billion dollar institution that was, you know, and the court can take notice of this that was cited by the SEC and other state-based regulatory agencies and now finds itself in bankruptcy. So we don't believe that they can stand on a high horse as against Mr. Van Tubergen. And, Your Honor, we have sought to establish a record through the analyses we submitted, specifically Exhibit A, A, A, Exhibit B, B, Exhibit C, C. And critically, those analyses are underpinned by the official blockchain pricing data. In our exhibits, we have a chain of custody email and the actual Gemini pricing data.

Gemini was the depository that was expressly referenced by the agreements. So for an entity, Your Honor, in the cryptocurrency sector to not refer to the official blockchain pricing data when calculating the LTVs, we believe that's per se wrong. Now, Your Honor, I want to transition, and I'm trying to work through this concisely and extradiciously judged, but it's very, as Your Honor can appreciate, this is a big claim for my client, Judge, and it's important for me to spend a few minutes just to unpack these areas. Three points before we get into the unauthorized liquidations. Number one, I want to convey, and I know we did this in the papers, Judge, but our plain reading of the LSA terms.

Upon the occurrence of a trigger event under 7A of the LSA's, that is the failure to maintain a required LTV of either 70% or 80% claimant was to be given notice and permitted 72 hours to post additional collateral. If during that time, during that phase, the LTV of either 80% or 90% the max LTV was reached, then in that scenario, the lender had the right to liquidate collateral to establish the required LTV. The debtors are offering a false construct of the reset LTV. The 50% LTV, or in the case of the reinstatement LSA, 60%, that was just the initial LTV. That was not the required LTV. And the liquidation terms reference, not the original LTV, but the required LTV. And this was This reading is backed on the record as a matter of evidence by statements made by BlockFi

Lending's agents. And specifically, Your Honor, I'll refer to exhibits EE and FF, which annex text messages from agents three and seven, whereby they state in plain English, again, to a customer. Mr. Van Tubergen is not a bank. He's not some, you know, billion-dollar commercial entity. they say it needs to be just under the required LTV. And Agent 7 states that a reasonable, it's in the record, Your Honor, in terms of his precise language, but he states 10% in terms of the type of liquidation tranche that would be occasioned if the max LTV was reached.

And one final point before I get into the unauthorized liquidations, Your Honor. Again, just the word of methodology. Our collateral loss breakdown, Exhibit AA, is backed by the very pricing exchange data associated with Gemini Trust Company, which was the depository under each LSA. That data is annexed as Exhibit D, together with the chain of custody email it came from a verifiable and well-known entity that monitors blockchain pricing data. and again, for the debtors to not even offer in their papers an explanation of how they arrived at these LTVs, I don't, my light just went off. One second. There we go. All right.

Sorry about that. So, Your Honor, in terms of the unauthorized liquidations, yes, we will begin with what we believe started the snowball effect, started this calamity of unfairness and errors that they, my client, $1 million in collateral. Loan number 558-20785. First, Your Honor, a word on when this liquidation actually took place. The debtor state that it took place on May 19th for reasons that were articulated, Your Honor read them in the client certification. Specifically, paragraph 23 of the supplemental certification, we state that it actually took place on May 20th. He was receiving pre-liquidation warnings up until the evening hours of May 19th.

And on May 20th the morning thereof, Agent 3 told him, everything's okay. So it was preposterous for them to continue to allege that it took place on May 19th. The reason why this is material judge is if the court engages in estimation proceedings, which we are respectfully requesting, then that would have a material impact on the LTV because the price of ETH went up markedly on the morning of May 20th. when my client was told that everything was okay. With that said, even putting aside the additional collateral post of my claimant, we'll get to that in a moment, Judge.

As shown by the collateral law summary, it does appear that the max LTV was not reached on either May 19th, it was 73.74% LTV on May 19th, and on May 20th the LTV per our calculations, Your Honor, which we welcome the court, the scrutinized during the court of estimation proceedings, the LTV was 70.6%. Again, the max LTV was not reached. Yet, once the surplus 558207A5 collateral is factored in, then the LTV's reached the point of not even sustaining a trigger event. The trigger event was, I think we can say, disarmed, right? That'd be appropriate to characterize it as such. On May 19th, and again, this is backed up by Exhibit AA Judge in our papers, the surreply. On May 19th, the LTV would have been 60,000.

point 22% and on May 20th, it would have been 51.11%. I think it's absurd for the debtors to try to cast aside the surplus collateral as meaningless because my client was working with Agent 3 to post it. We thought we put on the record confirmations from BlockFi that it was posted and we have text exchanges from Agent 3 acknowledging that it was posted. And this is an agent of BlockFi lending that my client was entitled to rely upon. So, Ms. Madaglius, let me stop you because I want to understand. The thrust of your position with respect to what the wind-down debtor refers to as loan number three, the 55820785.

The difference is you challenge, A, the date of liquidation, correct? Repeat that, Judge. You're challenging the date of liquidation? Correct? It's a preliminary point, Judge. And not this positive to our argument, but preliminary point. That could be material. And also, you are challenging whether or not there was additional collateral taken into account.

That's how you come up with the difference in the loan value ratio, correct? The additional collateral? Not necessarily, Judge. So in our exhibit AA, Judge. And I'll pull it out. And, Judge, by the way, I have, I had to truncate them to process the electronic filing. I have excels that the court wants to look at it to manipulate the data. But if you go to the column, Judge, specifically, we go to the row.

I'll wait, Your Honor. I have it. Oh, great, Judge. Thank you, Judge. If we go to the row for 558-207-85, and then we go to the column, loan to value, at liquidation, and we make no bones upon relying upon the Gemini data, the depository data, judge, you'll see that there's multiple calculations provided. For the May 19th date, judge, we have 73.74% if the surplus collateral is not taking account of, ergo the max LTV of 80%

was not reached. In the brackets, judge, you'll see the calculation for if the surplus collateral is account of and then there's the alternative May 20th date again outside the brackets as if the surplus collateral is not taken account of and in the brackets as if the surplus collateral is taken account of all right thank you got a judge and therefore your honor as a matter of fact and you know people use that as almost a slogan but here it's on the record as as evidentiary material judge it fully to claim it in Agent 3 that by the afternoon of May 19th, any cause for alarm had subsided,

with Agent 3 informing claimant that he was still in safe territory. That's Exhibit EE, Slide 33. If, however, Your Honor, something were amiss via the required LTV, meaning the trigger event not being disarmed, or the max LTV, you know, being reached, claim it fully and fairly expected that the surplus collateral would be tapped into and swept over as needed. That is in supplemental certification, paragraphs 18 and 20, and Exhibit E.E. Slide 33. Again, this is all cited, Judge, so you don't have to necessarily take notes, although obviously welcome to do so. And then, Your Honor, we have another admission. On the morning,

I don't mean to get so excited, Judge, but again, this is just so important to us. On the morning of May 20th, 2021, blocked by lending through Agent 3, admitted that everything was fine as to LTVs. Exhibit EE, slide 38. Yep. Incredibly, they proceeded to not only liquidate, but do so in massive, startling slash and burn fashion. So that's why, Judge, we believe that 558-207-85 was wrong. liquidation. We move on to loan number 250568 F4. On the date of liquidation, June 22nd, 2021, the max LTV had not been reached because we believe the LTV was approximately 75.09%. That's below 80%.

Next, Your Honor, as to loan number 176 FCB, B.C. C3 on the date of liquidation, June 22nd, 2021. The max LTV had not been reached because we calculate the LTV as having been approximately 74.64%. As to loan number 1A118E43, there were two offending liquidations, Your Honor. On July 13th, 2021, had the missing EF been properly posted? I understand it's a material issue and dispute. I'll get there. The max LTV would not have been reached, but rather the LTV would have been 72.19%, below 90%. And then later on, my notes have an incorrect date. Your Honor, apologies. On July 19th, the missing ETH was not even necessary to avert liquidation because the LTV was approximately 86.99. percent. Again, the max LTV was 90%. Separately, Your Honor, from arguing that these unauthorized liquidations took place, we also have the point that there were excessive liquidations

that were conducting. For reasons noted, Your Honor, principally our reading of the LSA as only allowing BlockFi lending to reestablish the required LTV and statements made by BlockFi lending's 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. agents, we believe that claimant fully and fairly expected that if the max LTV was reached, that such liquidations will be performed in a reasonable manner to reestablish the required LTV. Yet, Your Honor, when we look at the percentage of collateral liquidated column of the collateral loss breakdown, exhibit A, we see percentages of four, and I'll just rattle off the first three numbers of each loan, and I apologize for not following the nomenclature adopted by the wind-down debtors.

For 558, they sold 47.67% of the collateral for loan 1A11. On July 13th, they sold 53.41% of the collateral. On July 13th, and then on July 19th, again, with regard to 1A1, they sold 52.68% of the collateral. As to loan 736, on January 21st, they sold 43.52% of the collateral. Chart Exhibit AA, some other examples, those are the ones that seek to highlight you. judge. And then perhaps even more interesting, Your Honor, there's a separate way to think about this. And I want to verbalize it because maybe it's not so clear in the papers. So we first talk about the percentage of the collateral that was sold off. But also, if you look at the Gemini percent

of U.S.D. Collateral sold column, that is a very interesting data point, Your Honor, because that assesses the ratio, express in percentage format of a percentage form of a very interesting data point, Your Honor, because that assesses the ratio, the fair market value, and indeed Gemini was the fair market value. This is the cryptocurrency sector. What is on the blockchain is the fair market value by definition. It tracks that. Again, Gemini percent of U.S.D. collateral sold column, the ratio of the fair market value relative to the pre-liquidation outstanding loan balance.

And, Your Honor, we believe that if a court engages in estimation proceedings, which, We believe it should after this hearing. All these numbers will check out. Otherwise, we've been out of put them in. The numbers we get in this ratio for 558, for May 19th, that's the date. It would have been 64.6%. May 20th is the date. We get 67.5%.

For 1A1, liquidated on July 13th, we get 58.33%. For 1A1, liquidated on July 19th, 61%. And for loan number 736, liquidated January 21, 2022, 52.8%. Those data points, in total, Your Honor, evidence that, yes, this was predatory lending. I see no other interpretation than to say that BlockFie lending was in the business of wrongfully seizing my client's collateral as a means not to reestablish or require an LTV as per the terms of the LSA's and the party's expectations, but just to gobble up all of their finance charges on an early basis and then thrust my client into another LSA and another LSA.

And you're on, I'll touch briefly upon in a moment some of the prior information you put in where they did encourage him, hey, just refinance, man, just do it again. And that's how we get to, Judge, 35 LSAs. Next, Your Honor, I want to get into the finance charges, tabulation concerns. And, Your Honor, I note that both my client and I submitted these under the ledger of upon information and belief. Because we want to be careful, Judge. You know, we're advocating for our client's claim. But, you know, a number of aspersions were cast against BlockFile lending by the SEC and other regulatory bodies.

So we want to be careful because this argument does implicate other concerns in terms of whether or not BlockFi lending was, you know, incorrectly tabulating these items for its customer base and large and mass. And so we submit these points, Your Honor, to the court with confidence that the court will know how to interpret them and how to apply them. We're just noting them, Judge, most respectfully. So, pardon me, Your Honor, I'll just take a water break. Section 1 of each LSA judge provides that upon disbursement of the loan proceeds, lender shall deduct the fee applicable to the loan as shown on the statement of loan, refer to herein the fee. And that, again, quote, lender shall deduct the fee from the loan proceeds

and disperse the remaining loan proceeds. to the borrower on the closing date. Now, one of the problems here, Your Honor, in terms of interpretation, is that the fee is, it's not extrapolated any further. We're just referred to the statement alone. So then we go to the statement alone, Your Honor, as a customer, like Mr. Van Tubergen would, and on the statement alone, it appears that the fee, in our reading, is that would have set forth thereon as the finance charge.

that finance charge was not, as Section 1 states, deducted from the loan proceeds pursuant to Section 1, but rather was added to the amount financed. Now we get to Appendix Ed, which separately, Your Honor, has language in reference to borrowers in Michigan. After referencing borrowers in Michigan, that provides, then lender shall deduct all in interest due from the loan proceeds and disperse the remaining loan proceeds to the borrower on the closing date. Ostensibly, Your Honor, and the court could take notice of the Michigan law on this matter, if further briefing is required on that, we'll do it.

But ostensibly, it's because in Michigan they don't want consumers to get duped by saying, oh, here's a $6.3 million loan, but it's really $6.9, or it's really seven. that would be the common sense reading them. Even if the court reads it different than us, Judge, then we saw the Section 1 problem. And that's why in our Surreply, Judge, we note that we don't believe the debtors can find solace through an alternative reading of Appendix A

because you revert back to what Section 1 says in terms of the fee shall be deducted. Then you go to the statement of loan, a truth and lending act disclosure, which doesn't say, here's the fee, here's a finance charges. One would common sense reading say, okay, so the fee, what they're charging is these finance charges.

That's what lender does, Judge. You know, we don't have to go back to, you know, Venice in the 1300s to understand how interest is tabulated and customs and trades and practices. You know, they're charging a fee. The fee consists of finance charges. Section 1 says they're supposed to be backed out. They were not judged. Then we get to appendix A, which ostensibly incorporates me.

Michigan law protect people like my client by saying, no, you're not going to charge an inflated amount, you have to back it out. But they didn't judge. And there's critical implications for this. First of all, is the double dipping concern. That is, Your Honor, that by not backing it out and adding it on top and still having my client make payments to scratch, ergo we have double-dipped payments. Separately, it's the perverse impact that this could have on LTVs.

Now, Your Honor, to be clear, we're trying to stitch this as many ways as we can to the court finding that there were unauthorized liquidations, there were excessive liquidations, we use of Gemini data, the surplus collateral, the missing Eath, all these arguments, right, that have to be carefully considered in their place. But separately, the specter of this finance charge's argument hangs over it because that would further affect the LTVs in a manner. manner favorable to my client, specifically judge, going to the finance charges analysis, Exhibit B, B, under the column, loan to value, at liquidation, if fee slash interest

deducted from loan proceeds, and yes, per Gemini pricing data, it shows that the LTV percentages go further down. And I won't take up the court's time. I've already cited the column in Exhibit BB, Judge, but that's. That's our point with regard to finance charges, Your Honor. Next, Your Honor, we do not believe that Blockfly lending's computations can be relied upon by the court. We believe they're questionable at best. First, Your Honor, as we just spoke about, we have this finance charges arguing.

I won't repeat a judge. Second, no method of valuation was identified or utilized in formulating the debtor proposed LTV percentages. So there to have this court, I think they're the first secured creditor that I've ever been aware of, to say, well, the value is what we say it is after selling it. That's ridiculous. Whatever type of asset we have, just like, let me restate that, Judge. Just because we have a new type of asset doesn't mean they get to make up the rules

and depart from all precedent that existed before it. Your Honor, imagine if this asset was real estate, Judge, and they sold it without an appraising, or they sold it without the advice of a competent business broker. Let's say that asset, Judge, was worth approximately $10 million plus. Now we're getting to what happened here. And they sold it without a valuation. Oh, it appears to me, Judge, that they calculated their LTVs based upon what they sold it for. That's preposterous, Your Honor.

and as a matter of fact, the record is devoid of anything, stating what their valuation scheme or method was. Alternatively, Judge, even if they did offer anything, we're the ones offering the depositories pricing data. This whole sector is predicated on the blockchain, and I don't mean to get excited, Your Honor, but to us, this is a central point. because the Gemini data is per se accurate. Next, Your Honor, with regard to loan number 558-207-A-5, we do believe that it is a material mistake that the debtor's calculations not to account of a surplus collateral.

I won't believe for the point they further judge. It's in our paper. Somebody said it. But there are communications from one of their agents, essentially, and it's Exhibit E, text messages, facilitating, assisting my client in facilitating the posting this collateral, we then provide the confirmations from BlockFi that it was posted to his account. They should have looked to that.

So now we're going to, are they trying to say that AI was in charge of everything and they had no say to look to the surplus collateral? We've posted evidence, I'm sorry, we filed evidence, rather, that show that these were manual liquidations. They can't try to disclaim their responsibility because the court has evidence that these were manual liquidations. With regard to loan number 1A118E43, I guess is a third point, Judge, as to why their computations are questionable at best. It expressly called on the face of the document for 4,230.120Eth. The notion that you would have a Scrivener's era,

the equivalent of over 800 ETH is absurd. As someone, Your Honor, that I'll just say it, this is not here nor there, as someone that invested a little bit of cryptocurrency at these times, one Eth was made, meaningful the average American. By ETH was a European vacation. More than that was potentially a year's college education.

And we're to believe that over 800 ETH, Your Honor, is a Scribner's error. That's absurd. They signed the LSA. They are seeking to hold my client to an offensive reading of the LSA. Yet they're trying to get out of one of the most critical terms of one of most critical LSA's, that just doesn't pass the smell test judge. And on top of that, we have the breakdown that was provided by my client, Mr.

Antubergen. It's in a certification. It's also in paragraph 10 of the server plan. You're right. I'm just going to reference it. I believe I have that latitude. I'm not going to put these computations. I'll lose my breath at this point, Judge.

And again, I'm getting to the end of the tunnel, I promise, Your Honor. But it's been quite an open statement, but go ahead. Yeah, I know, I know, Judge. I know, Judge. I'm just going to incorporate that by reference, Judge. You know, it mathematically shows how any notion that this was the intent to not post the 4,230.120, we believe just mathematically bunk. A smaller point that's revealing, Judge.

Again, opposing counsel said it. They keep insisting, and this is just revealing that only $19.7. $7 is owed to my client if we're to assume that what's in a BlockFi account is what's owed. Even that's wrong, Judge. We have it at about $1,500. Whatever the precise dollars and cents are, we put a sprint. capture image of this account, even the wrong name of that judge. And fifth and vitally, Judge, Mrs. Marquez's certification is not backed by any underlying

data. We just have charts with her reverence. That is insufficient to sustain what is being proffered here. And my client and I, in 107 of their reply, Judge, they review the material that was provided to us. My client went through that material with a fine-tooth comb and it doesn't make any sense. There's data missing, Judge. And we think it's no surprise that that bedrock of data is missing.

Judge, similarly, just like their data should not be trusted, Dr. And they should not be given the benefit of the doubt. We don't believe they should be given any benefit of the doubt as to whether or not they comply with the LSA notice requirements. They should have been, they should be required to put on a record any and all notices that were required by the LSA. They have not. Standing alone, that should entitle my client to prevail. Some of these notices were previously discussed and proffered by my client, but that was in regards to the haphazard nature of Block 5 lending's operations.

I cite the original certification, paragraphs 11, 12, and the notices that were provided by way of his supplemental certification, paragraph 17 to 22. They're just to flesh out his due diligence. And they show that he was not provided to send him to our window that was necessary. I'll begin wrapping up, Judge. We can get into this at another point today, Your Honor, or on another day. but for reasons previously noted, we do believe that the totality of the circumstances established that Mr. Van Tubergan is effectively railroaded. What I mean by that judge is that everything I've discussed up until now is either a four-corner

of the document argument or referring to documents in record as to why the liquidations were unauthorized or excessive. But there's also facts that show that block-fired lending did not treat Mr. Van Tubergen reasonably and effectively violated his rights as a consumer. That's when we get into the predatory lending argument, Your Honor. And one of the first things that I said is that, yes, we do allege predatory lending, but that's certainly not the crux of our claim, judge. ergo, I'll just reserve these points for another time, including, for example, that it did look like they were giving him investment advice. And, Judge, finally, we did request certain alternative request for relief, Judge. Your Honor, I got involved in this matter at the 11th hour.

Therefore, I just wanted to make sure that I properly invoked all rights and privileges that one could, under the bankruptcy code and the bankruptcy rules. I know the court's read my papers. Again, Your Honor, we are requesting estimation proceedings. We do believe, Your Honor, for reasons stated in detail by Mr. Van Tubergen, that his claim was appropriately filed under the circumstances with information, i.e. the liquidation summary, capital L, capital S. That was directly provided by BlockFile Lending's agents.

And we believe that the analyses that were provided in surplus show that the 10 million was not just a good faith estimation, Your Honor. It actually warrants an upward adjustment. We did request the right to kind of engage in discovery on that. I'll say that it was wonderful to work with Ms. Lawrence Assone, had an opportunity to speak with Ms. Bernice also at the time that we issued a subpoena. we did agree not to file a motion to enforce a subpoena, Your Honor. That was in connection with their accommodation of another adjournment that I requested for personal reasons. I thank them very much, Your Honor. But that does not do away with the point that we have been fighting,

and my client has been fighting before the bankruptcy, during the bankruptcy, for additional account records. We were never able to make sense to the judge. To this day, we're still not able to make sense of Blockby Lending's records. We recently, because they told us that Scratch is a separate company, we believe them. We went to Scratch. This is in my client's certification judge, but it's such an important point because to this day, we have not been given full and complete account records. Your Honor, I'll just note to the court that we did issue a subpoena to Scratch, Your Honor.

The times did not match up in the sense that it is returnable after this hearing, but we hope that if the court engages in estimation proceedings for that we have a hearing. hearing after this hearing, supplemental hearings that the subpoena is returnable by such time. That's the case with discovery, Your Honor. We did ask for part seven of the bankruptcy rules to be applicable. Our main point there, Your Honor, was that if the court finds that the only route is to rescind the LSAs, given the sum and substance, totality of the circumstances, everything going on, and we allege we believe that the court has the power pursuant to bankruptcy rules, Rule 94C to rescind the LSA's.

And lastly, Your Honor, and you know, Your Honor, I was going to do this to cover myself. I did ask the Court for the right to amend with relation back if the Court finds that such is necessary. But we believe, Your Honor, that the claim, given everything that was going on, given how my client was placed in the dark, given how my client was not previously represented by counsel, we do believe the claim was appropriate in the first instance. Thank you, Your Honor. Thank you, Mr. Magalese.

All right. Certainly have enough to chew on. Ms. Furness, how do you wish to proceed? Your Honor, as you've already admitted, Ms. Marquez's declaration, I just have a couple of questions for her in direct response to Mr. McAlli. Sure.

Ms. Marquez, good morning. If you would unmute yourself, there you go. I'm going to ask you to raise your right hand. Do you swear or affirm to tell the truth, the whole truth and nothing by the truth? true under penalty of perjury. I do. All right.

Please state your name and a business address for the record. Florentia Marquez and 5-6-1-5th Street, Brooklyn, New York, 11215. All right. Thank you. Ms. Farness, you may continue. Thank you, Your Honor. May I and share my screen, please? Yes, we'll let you.

And also, Ms. Marquez, let me just confirm there's no one else in the room with you? There's no one else in the room. And you're not reading off any particular sets of materials? I do have the certifications printed out. All right. No other handwritten notes apart from what's already on the docket? Correct. Okay, thank you.

Ms. Marquez, I'm going to show you a document, and Your Honor, we presented this or was sent us to Chambers this morning. Yes, I haven't. This is a document that Mr. Van Tubergen's counsel received as an Excel, and then two months ago, in connection with the documents that blocked by produced, and we have marked it as Exhibit J. Ms. Marquez, let me go down for the purposes of today's hearing. we put this indicator here, loan one, with the loan number. Can you see, excuse me, the document that have columns and headers? Yes, I can.

Are you familiar with this document? Have you seen it before? I believe I have. What is this? This is based off of an Excel spreadsheet that the company, I believe helped put together, which shows customer unique IDs and then timestamps at which certain emails are system sent to the client went out. And it also includes some of the information that was in those emails.

So for example, on the document that's in front of you, do you know, because of the the collection issues which customer this relates to um yes it's it shows the customer ID on the left hand side and are you aware this relates to mr. van Tubergen yes and can you explain to the court that the fourth column says email type um for example what is lTV max what does that mean so our system put together a variety of emails that alerted clients to what was happening with the loans that they had in relation to the price of crypto. So LTV Max meant that an email went out to the client, letting them know that their max LTV had been breached, and therefore their loan was likely in the

process of having their collateral being sold. And what does LTV reminder mean? LTV reminder was an email that went out to clients to let them know that their loan was still in a margin call or at risk of being sold because the client had not posted the sufficient collateral to avoid a sale. And then the final type, at least on the page, seems to be LTV trick. What does that mean? LTV trigger was, I believe, when a loan hit the 70% LTV, which then let them know they had 72 hours to post additional collateral or the loan would be sold. That email also let the client know that if at any point in time the loan hit 80%, the loan

would be sold. So for example, on Biblin, on 519, 1337, Mr. Van Tubergen received an email that said your loan has hit the 80% your collateral will be so. Correct. And then he got another similar max email at 1412 on that same day. Correct. Then another one on the 21st? Yes. And then another one on the 23rd? Yes. And then a bunch of reminders. Correct. And then what is the red entry?

This was an email alerting the client of a sale that had already occurred and what the proceeds of that sale were and how the cash that we had raised during that liquidation had been applied to pay down their loan to therefore lower their LTV. And so for the purposes of the court, are these what you would call notices that were provided to Mr. Van Tuprigan? Yes. And then, again, this is a different loan. Is this also for Mr. Van Tubergen? Yes. This loan also had a partial liquidation. Am I reading that correctly?

That's correct. And again, we note that this is loan number three. Are these, is it an Excel that would demonstrate the emails that were sent to Mr. Van Tubergen on that loan? Yes. This is for loan ID 1A118E443. This is the liquidation that occurred on July 13. Are these the emails that were sent to Mr. Van Tivergen on that loan?

Yes. Loan number five. Are these the emails that were sent to Mr. St. Tubergen related to this denominated loan of 736-435-A-7? Yes. This is for loan number six. Are these the emails that were sent in relation to that loan? Yes, they are. And this is on loan number seven.

Are these the notices sent in relation to that loan? Yes. And are these notices automatic? Yes, the majority of the time they're automatic. And when an email is sent, is it logged in this system that allowed you to pull it out via the Excel? The system keeps a record of which loans or sorry, which notices were sent and the time and the template that was used, and we can export that and put that data into. Excel. And these are the books and records of Block 5. Yes, they are. Your Honor, we've moved to admit Exhibit J. Any objection? Um, Your Honor, do

have some questions about this document. I'll give you a chance. Well, is it going to your cross-examination or is to the admission of the document? As a courtesy, Your Honor, I'll grant it to be admitted with some, with the right to ask Ms. Mark has some questions, sir. That's fine. You have the right cross. Thank you. Ms. Marquez, I have a question. The column that says liquidation dates, there's a date and a time.

Where would that be drawn from that information as to the time of liquidation? It depended on which year. you're talking about. We had two methods of doing liquidation. So prior to, I believe, November of 2021, our institutional team would process liquidations using over-the-counter trading. And then the loan, the proceeds of those liquidations would be applied to the loans that were in default. When the cash allocation

was uploaded into the system, that would be the timestamp, I believe, that you see on liquidation date. And then after November of 2021, the system started to sell loans on an automated basis. So that liquidation time that you see, so for example, in the row we're looking at here, that would have been exactly the time that our system automatically traded that specific loan.

So is that the reason for the difference in nomenclature where it says partial liquidation occurred versus automated liquidation? In other words, there's different terminology. Yeah, I think that that's likely the reason for the different terminology. All right, thank you. Mr. Farnasse, you can continue? Thank you. Ms. Mark has, you heard the argument related to the finance charge.

Did Block FI collect the finance charge, in other words, the interest from Mr. Van Tewrigan upfront on these loans? I think that there is a, can I explain my understanding of the finance charge? Because I think there's a misconduct. communication here. So the way that we applied the finance charge was in addition to the loan amount applied. There's two different ways to apply finance charges when you're making a loan. You can either deduct it from the amount that the client applied for, or you can add it to the loan amount. We decided as a platform to add it to the loan amount so that

clients would receive the exact amount of cash in their bank account that they had applied for. So I was confused by Mr. Magalais' description earlier because there was only ever one finance charge and it was collected at the maturity of the loan or whenever the loan was paid back. If I may, Your Honor and share my screen, just for a reason. And Your Honor, for your purposes, this is exhibit to Mr. Vancouver's response, which is document number 1496-3. And this is the 558-207-85 loan, and so that we are all clear. Ms. Marquez, are you talking on a finance charge? This amount indicated here is $614,579?

$10? Sorry. Yeah. So there's, yeah, the finance charge in this is the what's called the TILA. That's the total amount that will ultimately be paid back to BlockFi if the loan is held to maturity, inclusive of all interest and origination fees. And so that's the question I have is, did BlockFi collect? this $614,000 up front? No, it would have been collected when the loan was paid off at maturity. Talk about pricing. Sorry, please. Or when the loan was paid off. Thank you.

I want to talk about pricing. What pricing metric did the WAPFI use to make these determinations of whether the loan to value was 70%, 80%, how was that calculation done? We used a variety of best in-class pricing feeds that were fed in to our institutional team, and that was connected to the loan platform, and then LTV values were calculated off of those pricing feeds. And so was that from Gemini? It may have been from Gemini at certain points in time, but over time we used multiple pricing feeds to ensure the data was accurate. Mr. Van Tubergen's counsel talked about official blockchain pricing and points to crypto data download.

Prior to Mr. Van Tubergen's dispute here, had you ever heard of crypto data downloads? No, I had not. Is there anything else discussed in that opening that you think we should clear up factually? I think the concept of the price that's used is complicated because typically when a client Google's Ethereum price, you're seeing the spot price for Bitcoin, which could be, it's the last trade that happened, and that could have been someone buying 10 cents worth of Ethereum. So that price isn't necessarily what's available to the market. Let's say if you're trying to sell millions of dollars worth of crypto.

So I think the idea of spot pricing versus the price that we get when you execute a trade, there's a difference there based on the volume that you're trying to trade, and of course, every single trade has trading fees. In addition, I do understand that the loan math is very confusing, and I think there might be a miscommunication in terms of how different councils are calculating LTVs. I think in one document that I read, there was a mention of the price being used as the average price for that, day when in reality, when you're calculating the LTV at which alone would have hit a trigger, you have to look at the low price of that day. So for example, on one of the days in question,

we were talking about the price of Ethereum, I believe, on May 19th, 2021. If you took Ethereum's closed that day versus the low, I believe there was a 25% difference in price just for that day. And that's because when the price of crypto starts to fall, it falls very drastically in one day. And so the pricing, not only the pricing source that you're using, but exactly which price you're pulling for the day in question matters materially when you're looking at what was the loans LTV that caused the default on the day in question. Final question. Your certification, your declaration includes data regarding the liquidation price, the LTV percentage, the trigger price. Did you look at Block 5 Books and Records to set out those charts that are in your certification?

Yes, I looked thoroughly at Block Fies Books and Records, and in addition, we had our finance team, re-review all of the data that was submitted to ensure that it was accurate. Last question relates to the collateral. That was posted by or for Mr. Van Tupurgen related to what we call loans number three and number four. Did you also look at Blockbite Books and Records to confirm that that information is correct? Yes, I did. Thank you, Your Honor. I'll pass this more, Ted.

Before I turn the witness over Mr. Malaginese, Ms. Marquez, a couple of questions. You would reference certain multiple pricing feeds beyond Gemini. Can you be more specific? What would these pricing sources have been in order to calculate LTVs? I can't remember off the top of my head. there might have been one called crypto facilities, but I can't remember off the top of my head. But were they industry-related? In other words, who was producing this data for pricing?

Yes, they were pricing feeds that we contracted out for. And that was on the institutional side of the platform that I wasn't as close with, but we looked for. the most robust data we could find. All right. And when collateral was liquidated to reduce the loan to value ratio, in looking at your declaration and the wind-down reply, often it seemed after the liquidation of the collateral, the loan to value was still somewhat high.

In other words, sometimes over 80% or just below 79%. Why were more funds liquidated, more assets liquidated to bring it down to a more comfortable level? So as a business, it was really important for us to do two things, one to take into account our clients' perspective when possible and also to just have as healthy of a business as possible. And so our goal was to try to liquidate as few times as possible and avoid a liquidation whenever possible. Because BlockFi, like Mr. Van Tubergen, we believed in the fact that over, we thought that crypto would go up over a long period of time. And so when it came time to liquidate loans, our only goal was to ensure that we always had more collapse. than the value of the loan outstanding. And within that, we preferred to try to do smaller batches of liquidation

rather than, let's say, oversell and wipe out much more collateral. Because we also knew that our clients really, we thought our clients would prefer that method of operation. And even though it was within our rights to, as you said, liquidate far more and bring them back to them back to a 50% LTV. If because of a dramatic drop in the price of certain cryptocurrency, the LTV ratio shot up to above 80% or 90% on a particular loan, was Blockfire required to give the 72 hours notice? No. If a client hit an 80% LTV, we were allowed to.

to liquidate instantly given based on the loan agreement. Can you tell me that that situation occurred in any of these loans or was there always advance warning of the 72 hour requirement met? To my knowledge, there was always advanced warning and it's not only because we had an email at 70%, but we also had an automated email at 65% LTV that went out to clients letting them know that they were approaching a margin call. We did that intentionally to make sure that clients would have as much time as possible, knowing that sometimes, as you said, the price would drop precipitously.

And so by setting an LTV warning, even before the 70%, we were making sure that people were getting emails to let them know that the price was dropping. All right. Thank you. Mr. Malagos? Thanks, Your Honor. Ms. Marcus, thank you very much for making yourself available. We really appreciate that.

Just as a side, I'll say, you know, whenever a company goes into bankruptcy, it takes a lot of character to come forward and answer questions. So I appreciate that very much. I'm not going to post it on the screen. The wind-down debtor's attorney shared exhibit J. When you were describing exhibit J, Ms. Marquez, I heard you say, it correct me from wrong, that the team prepared it? Is that correct? I can't remember. Okay.

But I'll take your word for it. No, I mean, sure. Do you know who prepared Exhibit J? Most work that is put together by the team goes through a review process, so there isn't typically a single individual that prepares data. Do you have personal knowledge of Exhibit J? Yes. How?

How? I was part of the team that helped pull the information that was provided to the court. And what were your functions as part of that team? The same as my functions in a regular day-to-day capacity helping run the Block 5 team. Okay. Could you be a little bit more specific in terms of how you know that that data is accurate? So in general, if we're providing data for the court, I will ask two separate teams to either one be a maker and one be a checker. And so you have one team pull the data and then another team review the data through our and verify it against our books and records to ensure that it is accurate.

And this team, are they employees of BlockFi or BlockFi lending towards affiliates? Depending on what we're working on today, because there are various requests for the court, the team can include BlockFi employees. It can also include our outside advisors, including our financial advisors, and it can also sometimes include attorneys review in our work as well. Who did this team include? I believe that for the data that was

submitted for this in particular, it at least included BlockFi employees and outside attorneys as well. Where are the notices themselves? Can you be more specific? So the chart, Exhibit J, and this is my

interpretation, it purports to illustrate when notices were issued. But, like, for example, when I issue, let's say I issue a notice, Ms. Marquez, if it's either a letter that's saved to a database or it's an email that I can go into my outbox and pull up the email. Where are the actual copies, digital or hard copy, of the actual notices themselves? So the way the system worked is through APIs, and we used a partner called SendGrid. And so when you see on that Excel spreadsheet, for example, LTV trigger sent, that meant that our system sent an API kind of instruction to send grid, which then would distribute those emails to all of our clients.

And so Mr. Van Tubergen should, for each of those notices, in his inbox, have a copy of the notice that was sent. as well as all of the fields in the email, which would have included the price at the time it was sent, his loans LTV, the address at which he had to send the crypto, all that other information. You may or may not know the answer to this question. Did the debtors block five, however you want to refer to it, did they request the notices from SendGrid? My understanding is that SendGrid actually didn't keep a copy of the email that you could export themselves. They just kind of keep similar fields as to what you can see, which is the template, the date that it was sent, and the email that should have received it. So no one kept copies of the notices? The client should have a copy of the notice in his inbox.

Okay, but no one at the debtor has kept copies of the notices or its agents. I think at some point, SendGrid started keeping copies of the emails, but I don't think that they had copies at the time that we're talking about now. And I'm also not sure what sort of contract we have with them in bankruptcy, because that also might limit the amount of data that's available to us, given the fact that we kind of cut down a lot of our costs. Understood. In paragraph four of your certification and in your testimony, you referred that you reviewed books and records. Could you be a little bit more specific? Because we've been struggling to obtain and review books and records. Can you inform me what books and records you reviewed in setting forth the charts that were in your certification?

Yep. So there's records that were. exported directly from our system, which showed different activities that were happening on the loan system. We also had a separate system for books and records specifically for loan activity, and our finance team also has separate accounting that also accounts for loan balances and activity that happens on that end. And I think the client also has access to loan activity by logging into the BlockFi app and there you can navigate to each one of the loans and click on the historical transactions for those loans,

which might be helpful. And lastly, I do think the client also should have access to login to scratch, which would have information on the cash payments. made on the loan. And Scratch also mirrored our loan accounting books and records to ensure that we were always matched up. Just to be clear on the books and records, Ms. Marquez, was it you that personally looked through them, or was it the finance team? In this case, I look through the loans, books and the loans transaction history and our books and records. Did you prepare the charts that were included in your certification?

Yes, I was part of the team that helped prepare the charts. Okay. And who was this team composed of? As I said earlier, we had a team composed of people on the operations and the finance team, and we had a maker-checker system set up to ensure that the transaction history was accurate. With regard to the finance charges, you stated there was only one. finance charge. Can you explain that a little bit for me? I think we might have been using language that might have been a bit confusing. So I was talking about specifically the origination

fee, which is the fee that lenders typically use to originate a loan. And our origination fees varied from zero to two percent for loans depending on the loan product that the client was using. As I mentioned earlier, the way that was calculated is, let's say, you signed up for a $10,000 loan, and there was a $200 origination fee. We structured our loans so that the amount that you applied for as a client would be the amount that you received in your bank account because we thought that was the best client experience. So what would functionally happen is you would apply for a $10,000 loan. Your total loan amount at payoff, ignoring interest, $10,200, and you would receive $10,000 in your bank account, and then when you wanted to pay off

your loan, you'd have to pay us back $10,200. Thank you, Ms. Marquez. Let me should review my notes. Regarding the – I couldn't tell if you said pricing feeds. I wasn't sure what terminology you're using there, but whatever pricing metric you're utilizing, did you ever inform Mr. Van Tubergan? of the pricing metric that you were utilizing? I'm not sure I would have been corresponding with Mr. Van Tuber again directly.

Okay. I'm no further questions, Ron. All right. Ms. Marquez, just a couple more follow-up. Would there be, with respect to any of the consumer loans, a situation where the origination fee was taken out on the front end as opposed to being added to a loan? Did that policy change in any form?

I don't think it ever changed to my knowledge, and this was in place since we made our first loan in 2018. All right. Thank you. I have no further questions as well. Thank you, Ms. Marquez. You may virtually step down. Ms. Ferdes, do you have any other witnesses? We do not, Your Honor.

All right. Mr. Malaghanes, well, so, well, actually, before I get to Mr. Malaginese, you just cut out on my end,

Judge. Okay. Ms. Frenness, is there, apart from any closing, is there any further argument or evidence you should put in? No,

thank you, Your Honor. All right. Then, Mr. Magalese, do you wish to take that time to speak with your client at this point? I would, most welcome that, Judge. A 10-minute break would be wonderful the court can afford it.

All right. It's 1135. Why don't we reconvene? We'll take a 15-minute at 1150. Thank you, Judge. All right. Thank you. We are back on. Mr. Magalese, have you spoken with your client, and how do you wish to proceed? I have, Your Honor. And, Your Honor, first, just let me confirm out of abundance of caution, Judge. Judge, because who knows where this is going, and mindful of appeal and all that. I just want to confirm that the certification and exhibits are on the record. Yes. Excellent, Judge.

The certifications that have been, your client certification is part of the record, all exhibits attached to it, are part of the record. Excellent, Judge. Your Honor, anything that I would ask, Mr. Van Tubergen, it would be redundant. We've really tried in the papers in my opening to lay it out there. I do want to reserve closing, Judge. But the way we proceed is I have no questions to my client, Judge, but if the court sua sponte has any questions, then the court is free to ask Mr. Vantor. All right.

Well, I have a question for you. If you wish to refer to your client, you may do so, and I'll put them under oath. My question goes to the theory of damages because we have a situation where, let's assume claimant's arguments the court accepts and there were improper liquidations. The proceeds were applied against the loans. if we rescinded LTVs and it creates a situation at least to the court

that per damages were relying a lot on conjecture as to what would have happened with the proceeds had they not been liquidated at what point would loans have been paid off would loans have been paid off

we know the values fluctuated dramatically during this period of time all the way up through the petition date. The one certainty we have is the values on the petition date. So I'm trying to get a handle on how you come up with the claim amount, and I know you've estimated it at 10 million, but how do you, what's the basis for that? And of course, I'm hoping we all recognize that a $10 million claim here in this case is only being paid a fraction on the dollar as it is. So that being said, do you want to make the argument? Just as to that final point, Judge, our claim is as to blockify lending in particular.

That was the contractual relationship. And I believe it's a higher percentage as to block by lending than it may be as to. vanilla block five. But, Your Honor, we do have a direct answer for that, and it's on record, and I'll refer the court to the supplemental certification, paragraph 10. And I can pull it up on my screen, Judge. I have it in front of me. Okay. Why don't you go through it? So as we've articulated, Judge, the 10 million was a good faith estimation under circumstances, and now, as we site, we believe the record substantiates that. The first theory of the potential calculation of damages, and Judge, let me say, I am mindful of the difficulty here, which is one of the

reasons why I expressly request estimation proceedings. And let me, if you'll allow me, judge, a couple moments just to wax here. You know, claim litigations in bank are a strange creature. You know, like all contested matters, I think, Judge. They're not quite full-bone litigations under Part 7 of the rules. They're not an adversary case. But they're also not an ordinary motion. Judge, coming into this, we didn't know if it was a one-stop shot,

Judge, today's hearing, or if there was going to be a par one or part two. I would. And when I threw out the request for estimation proceedings, I mean that literally, Judge. If the court finds that there's, so to speak, liability, then we would want a full opportunity to revisit the damages aspect for the court. Because going into today, I didn't know where the court was. I still don't. I know Your Honor has not issued anything.

This is just contingent discussion. But we do have math set forth that me and Mr. Van Tubergen have worked through carefully that is set forth in paragraph 10 and in exhibit CC. And I don't want to stumble on the record or have my client stumble on the record. I'm formally requesting estimation proceedings if Your Honor finds liability to delve into these figures. And, of course, again, the light of day,

to vet them and to ensure that they're accurate. We believe that they are. That's paragraph 10, which is, reflected by Exhibit CC. Now I'll note, Your Honor, there is one concern I have with Exhibit CC. And Mr. Van Tuprigan, who's smart as a whip picked this up. It has certain references to line 8, line 9. That's in the Excel file.

So after this hearing, what I'm going to do is I'm going to email to Chambers or the opposing counsel copy the raw Excel files. That's as to paragraph 10, Exhibit C. we then, Your Honor, set forth a separate alternative primary damages theory that's reflected by paragraph 11. And that speaks to, and I was very clear, this is, you know, attorney client, but Mr. Ventubrigan will welcome me saying this. You know, I was very clear that we need to figure out what was the non-repeating collateral that was involved here, because you have refinanced loans. And so you can't just simply tabulate with all the obvious judge. You know, you have to figure out what was original collateral. And we tabulated that as 120.05 Bitcoin and 4,300.0618.

And we actually have a record, Your Honor. Hold on one second. Let me verify this because I know we put something into the record. pardon me, Judge. Give me all of 10 seconds here. Yeah, in Exhibit Y, Judge. This is Exhibit Y? Because there was some debate over where the liquidation summary came from. And I don't want to mischaracterize the reply from the debtors, but I thought there was some kind of feigning ignorance to the liquidation summary

that was next to the claim in the first instance. And we proved that our surreply exhibits Z and Y that it actually came. directly from Blockby Lennon's agents. At the end of Exhibit Y, there's a chart that shows all of the ETH sold and BTC sold by BlockFY LEND. And so it didn't even. In paragraph 11 of supplemental certification, we come up with this alternative theory of valuing damages in terms of but four of these liquidations, how much of Mr. Bantubergen have. And we put a value as of January 8th,

2024. If the court were to say, what was the value of the bankruptcy filing? That value would be less, I believe, Judge. But that's up to the court, right? Again, we're asking for estimation proceedings, Your Honor. That's up to the court what value you want to ascribe to it. And then, Your Honor, we also know that there's some other factors at play here. In paragraph 12 of the supplemental certification,

we note that we do believe double billing occurred because of the finance charges issue. The court will either accept that argument or reject that argument. If the court accepts that argument, then we tabulate the double billing as to the LSAs that were implicated at 129,703.13. Here, though, Judge, I have to note, and again, this speaks to, I don't know if Your Honor wants to close up shop today or if it's going to keep going. If Your Honor were to accept the finance charges tabulation issue, then there is a matter that all of his LSAs would have been affected.

And to date, he's not been able to get the payment history on those other LSAs. We document that in terms of our recent efforts to go to scratch to get those account records. And so, Your Honor, just simply stated, if the court were to accept the finance charges tabulation argument, then we would want to wait for the scratch subpoena to come current, to review those account records, and to tabulate potential double billing as to all the LSAs. Lastly, Your Honor, because we believe that we have proffered the blockchain pricing data from Gemini, and key point here, Judge, it's in the papers I want to articulate it. The liquidation summary that came from BlockFi lending, again, an exhibit, why,

and Z, we show the chain of custody that it did actually come from BlockFi lending. That has timestamps. The Gemini pricing data that we procured, and again, the crypto download company, is just one company that services, you know, and can obtain information from the blockchain, the court can independently verify if it so seeks. We believe that we have verified it. But that data was keyed off of the timestamps on liquidation summary. I just want to make that point, because there was some discussion by Ms. Marquez that, well, you really got to look at the low point and the date. We went to the price at the time stamps.

We thought there was no better figure than what was it actually worth at the time of liquidation on the blockchain from general. If you utilize that, then as we calculate in paragraph 13 of the supplemental certification, that's backed up by the final column of Exhibit A.A., the Collateral Loss breakdown, down, we tabulate the below fair market value sell-offs of the collateral at 629,000 approximately. With all that said, Judge, we believe that the original amount was a good faith estimate. We believe that it's backed by either of Mr. Van Tubergen's primary damages theories as reflected by or summarized by paragraphs 10 and 11 of a supplemental certification. and throughout the analyses that we submitted, we believe there's other factors the court could look at,

other data points, rather, in the course of estimation proceedings. All right. Thank you. Then I have, at this juncture, no further questions. So let's proceed to closings. Ms. Ferdes? And thank you, Mr. Ventureen. Thank you, Your Honor.

To start, we don't believe there's a triable issue back here with all of our to the documents and testimony demonstrate there is no claim. Ms. Marquez's testimony, the documents before the court show that BlockFi absolutely complied with the LSAs. When a loan reaches 80 percent, BlockFi is entitled to liquidate, period. No question, it is entitled to liquidate the collateral under all but one. one loan that we've been discussing that a 90% that 90% trigger was hit and it also had the collateral liquidated to be clear your honor I know you have a look through

all of these things I just want to point to a couple of things that are already in the record one is that mr. Ransubergen you know said that again we've got two sworn to contrary claims. One is that EAS is missing because he did some sort of calculation related to a 60% loan to value. And the other, again, sworn to alleged fact is that same loan was predatory because it required an initial 90% loan to value. You cannot have both of those at the same time. Evernor, I would point you to, first of all, Exhibit L and the LSA itself. Again, this is Exhibit L from Mr. Van Tubergen's response, which is docket 1496-13.

there was some discussion and also in the pleadings about the, quote, supplemental collateral. The loan documents themselves and as emailed to Mr. Van Tubergen by Block 5, the collateral has to be the same type of collateral on the loan, period. So he talks about chain link. He talked about this. He talks about different types of collateral, and that's not proper under the loan. And the collateral had to be posted to the specific account identified in the LSA. Mr. Van Tubergen is not put forth in the effort or the evidence that demonstrates that the collateral was actually posted to that account.

Another point I just want to focus your honor on is exhibit J-J to Mr. Van Tivergen's Sirreply, which is docket number 2039-13. That is an email on its face dated May 19, 2021 at 839 a.m., that his loan had reached an LTV of greater than 80%. Again, Your Honor, under the LSA, at the moment a loan reaches, that trigger point, then the collateral may be liquidated, period. Even if it somehow bounces under, bounces above, and that's what you saw, Your Honor, on the Excel that Ms. Mark has talked about, it would go up and down, but once that 80% is hit,

Blocky has the legal right under the LSA to liquidate the collateral. I also would like, Your Honor, to particularly focus on exhibit C, as in cap, to Voxi's reply, which is at docket 19663-3. That's the email that lays out this custom loan. It goes through points by point exactly what would happen. one, the new loan would pay off the old loan at a price of $2.8 million. Two, Block 5 would purchase EF and the value of that ETH would be added to the loan amount. And it specifically says that this client, Mr. Bantubergen, understands that the starting loan to value will immediately put the client in risk of margin

territories estimated at approximately 79% LTV. One, Mr. Van Tubergen expressly agreed to that. He says, below is confirmed except for the date. He expressly agreed to it. And two, again, this demonstrates this was not initiated with a 60% loan to value. It was initiated with almost 80% loan to value. there is no missing each period. Finally, Your Honor, as to the damages,

we have had some difficulty, admittedly, trying to make heads or tails of the damages alleged by Mr. Van Tubergen. But I want to be clear that when these loans were initiated, for example, the first loan, one, between the time it was initiated and the first liquidation, A month and a half later, there was a 43% drop in the value of Bitcoin.

This is what happened. So what Mr. Van Tubergen is asking for specifically in the paragraph that was pointed to earlier is the value of the collateral as of, quote, originating the LF base. So what he's acting for is all to go back in time and for him to get the value as when the loan was originated. And again, the numbers of the deltas. So for example, that's 7A5, that's loan number three that we've been talking about. The liquidation occurred about a week after entry and the price or the value had dropped by 35%. At that point, Jeff, as you saw, as we see in the email, as he was warned, the loan to value hit 91%.

Your Honor, that is the reality of what happened in this case. Again, Mr. Van Supergen refinanced his loans based on collateral and pulled out cash. That worked as the collateral pricing was going out, but it didn't. but the price of value of Bitcoin, the value of E's dropped. The damages that he is asking for are related to the original value. And first of all, he is not entitled to any damages, but I completely complied with the LSA's. One point, again, I just want Your Honor to be aware of.

This crypto data downloads, as you know, pricing data, Ms. Morka's never heard of it, and she's certainly more versed in this than I could ever be. I would also like the court to note that the data that you have been provided does not include volume. I've looked at the volume. The volume for these minutes is teeny tiny, and Your Honor, if you would like to see that, Mr. Van Tubergens exhibit NN, they keep you know, quoting this as blockchain pricing data. They've demonstrated the volume on that exhibit N to his certification, which is 2039-17.

The volumes there, and that's an e-chart, are tiny, you know, for example, 0.39.9. And what we're talking about here on the sales, for example, of E's, are 1,565. As Your Honor, I'm 100% if confident understands when you're selling 1565 East, as opposed to 0.39 east, there may be price deferentials. So this, you know, constant insistence on, again, really an unauthenticated, data source. We've got nothing here that would authenticate this information, but nonetheless, the LSA itself, as the BlockFi, can reasonably rely on other data points. Market value determined by BlockFi in its reasonable discretion. That's the language in the LSA. So finally, in closing, Your Honor, again, we do not believe there is any triable, um,

issue with fact. We believe Your Honor should and could rule today. The undisputed, frankly, evidence other than a bunch of conjecture and unauthenticated data is that Block Viprored properly follows the LSA for each of these liquidations, and Mr. Vantubergen is entitled to, again, we would request the claim against lending, that there is no claim against lending, and that the claim against Inc. for his, the balance of his BIA of $19. And seven cents is what this court entered on his claim. All right. Thank you, Ms. Farnas. Mr. Magales.

Thank you, Your Honor. So, obviously, we see the world completely different, Judge. And I don't know how anybody could look at this and be okay with what transpired. as to my client, Mr. Van Tubergen's property. There's a lot more here than just conjection. And whatever they say about the Gemini data, the court on its own, we believe we have authenticated it, Judge, because this crypto dowel.com, it's a very, it's a company,

and that's blockchain data. So to the extent, it's not Exhibit NN, it's Exhibit DD. Your Honor, to the extent that the court has any doubts, as to the authenticity of the exhibit DD, then pursuant to the bankruptcy rolls, and specifically the rules entitling estimation proceedings, I would ask the court to go on the blockchain and verify that itself. Because I think it's kind of a, and I don't mean this in a bad way, Ms. Ferness Apologies, I think it's a cheap shot, just to say,

oh, who is this company? There's a lot of companies that don't know the name of, Judge. It doesn't mean that it's not a legitimate company. We provide a link to their website. And again, the point is, no one needs to speculate. It's blockchain data with timestamps matching the liquidation points in time that were received from Block 5 Lending's agents. So, as to the missing, ETH, Your Honor. you know, it's an interesting way that, because Ms. Furness is obviously a skilled advocate,

and it's an interesting way that she's trying to approach this. She's trying to put the burden on us on the back end to substantiate why it was $4,000 plus $1,000 instead of in the low of $3,000. Because again, we argue that it's missing $819. The LSA stated 4, $4,200, Judge. So the burden as to that issue was always on them. Because we're arguing that the LSA meant what it said. In a negotiation email, parole evidence, when you look at everything,

doesn't trump the face of the LSA combined with the mathematics submitted by Mr. Van Tubergen. And one cherry-picked statement from a prior cert about how it was 90%. Let's be clear about what he meant. And Your Honor, I'm not testifying for Mr. Van Tureberg, and Your Honor can review the certifications. The point was that rather than reversing the wrongful liquidation of 558, because we say it was premature, they admitted it by offering the reinstatement loan. That was that whole exercise. But rather than simply reverse it, they forced them into a red-lined LSA.

That's what we're trying to save it. The cherry picked the 90% level and say, well, how could it be 4,200? It's 4,200, Judge. I'm sorry for getting excited because that's what the LSA said. And parole evidence doesn't trump the LSA when you combine the LSA with the mathematics submitted by Mr. Van Tubergen, and that speaks for itself, Judge. It's in the sub-sert. It's in a surreply.

Debtors are wrong on this. As a minimum position of damages, my client is owed, 820Eath. And, you know, let's get back to the totality of what exactly was going on in this reinstatement loan. When you look at that combined with other indicia of predatory loans, and I kind of backed off this in my opening statement, Judge, but, you know, I said the totality of circumstances evidence that Mr. Van Tubergan was effectively railroaded. In this prior cert, in his supplemental cert and throughout, we've documented. I believe, Judge, and it's up to the court, obviously. Lack of access and control over his accounts. Constant pressure to refinance, including express statements urging him to refinance,

along the lines of myriad financial advice. Inconsistent standards and protocols, understaffed customer support, the inability to make changes off hours, yet they reserved the right to liquidate off hours. Myriad technical system errors. that's in the cert. And so when you combine that with the fact that they did not give them an out when they inequivocally

prematurely liquidated 5-58, that's what we're referring to when we speak to the 90% red line reinstatement loan. They should have just reversed liquidation. And in fact, Your Honor, I found these nuggets from the prior cert that I'm glad I recall.

They had the ability to reverse, and they chose not Specifically, Your Honor, we previously in the original cert annex an exhibit N, not NN, single N, which was a March 13th, 2020 email from Agent 2, admitting that the liquidation and connection with a separate loan that we haven't spoken about, but it's so interesting how it becomes relevant. It was loan number 2 for F055B9. Essentially, he indicated that it could be reversed.

And lo and behold, it was reversed. And we submitted some additional emails, specifically Exhibit O and Exhibit R, around that time, when they did execute an erroneous liquidation and they reversed it. Yet in 558, when they liquidate, and again, this speaks to Mrs. Marquette's point that we always wanted to liquidate as least as possible, I just don't know how we can take that seriously because with 5-5-8 on, this is our math judge, we implore the court, respectfully implore, right? I've got to be careful of that word, but we respectfully implore the court to look at it, connection and estimation proceedings.

On May 19th, 2021, at 3.39 p.m., and again, we got the timestamp Gemini data that we offer, that we ask the court to verify on the blockchain. They liquidated 47.67% of his collateral, using their figures, of USD percent, this is a USD percent of collateral soul versus loan amount. This is per Block FI's unknown valuation. Side note, they're taking shots at our valuation. They've offered none. It's not on the record.

Today it's still not on the record. We knew we're going to have this hearing. No specific metrics were provided. That ratio was 56.2%. Using Gemini data, the percent of collateral sold versus the loan balance was 64.6%. It was executed on May 19th, and 67.5% it was executed on May 20th. And this is the loan that they implicitly admit

the prematurely liquidated by offering the reinstatement loan. So these arguments, to me, they don't add up, Judge, but obviously I'm not the jurist here. As to the supplemental collateral judge, my client worked with an agent of Block Fyel lending to post that. And it was posted. to a BlockFi account acknowledged by Agent 3.

And, Your Honor, Ms. Furness said that it had to be in the same type of collateral. She mentioned, oh, there was some kind of chain link. Yes, there was chain link. There was USD coin, which tracks the United States dollar, but there was also EF in the surplus collateral. And the low number 5582085, A5 in connection with which the surplus collateral was posted was alone where the collateral was ETH.

And specifically in terms of how much surplus collateral was posted, it was, Your Honor, bear with me. I know I have this in our footnote here. There was two tranches of ETH placed in the supplemental collateral. And this is in the supplemental certification and in our surplus reply. First, there was over 150 E. And then there was 132 E. And no matter how you slice it and diced it, just round numbers, Judge, when we're talking ETH, we're always talking something, you know, 1,500 to 2000 plus.

From then until the years that passed, so that's not in consequence. That surplus collateral had it been tapped into, would have obviated even the LTV triggered. let alone the max lTV. In conclusion, Your Honor, we asked the court to, again, carefully scrutinize our documents. We welcome that, carefully scrutinize what was placed on the record. And, Your Honor, we know that we were dealing with an asset that was going up and down. That's a red herring, though. Every asset goes up and down in value.

In 2024, the question is going to be perhaps not about crypto, but perhaps about loans that are backstop by commercial properties like your or sees outside my window. The question is not whether they fluctuate value. The question is whether or not the secured lender operated reasonably in connection with the governing documents. And to that point, Your Honor, we invoked Michigan

law in terms of breach of contract. It's statutorily codified, apply covenant of good faith and fair dealing. It's the doctrines of impossibility and incontability. to frame an argument that no reasonable reading of the LLC would allow them to do what they did, that the notion of a reset LTV is a farce,

that the party's expectations were breached, the words that came out and the written messages that came out from their agents are evidence and they have to count for something. They have made no arguments that these folks did not have authority that has not been made.

They were agents and employees of Blockify lending. Your Honor, we at least offered a methodology to our evaluations. They did not. Therefore, Your Honor, what we have here is not a case of the markets going down. We know they went down a little bit, Judge. They've recovered since, by the way. I believe, and the court can take judicial notice of this or do its own due diligence connection with estimation proceedings, the value of ETH is up vis-a-vis these points and die.

What we have is a lender that abused its rights under the LSA, abused the party's expectations, and in some respects did engage in predatory lending. That's our argument, Your Honor. Thank you for the court's time. I thank everyone for their patience. I know we have some folks watching. Sorry for going along. Thank you.

Thank you, Mr. Magales. I do want to delve a little bit further. I'm going to turn to Ms. Furness. The issue that was raised about the posting of additional collateral, and I don't believe there's a dispute that additional collateral was available in other accounts held by Mr. Van Turbin, and I'm sorry, mispronouncing the name. I'm butchering the name. Mr. Tubergen.

Did the LSAs have a methodology or a mechanism that was required for posting additional collateral, how it was to be posted, what accounts it was supposed to be posted, what ability did the debtor have to tap into other non-loan accounts, etc.? Your Honor, under the LSA, it specifically says boroughs in Section 4 of the LSA, and for your court, for your honor's information, I am looking at exhibit B to Mr. Van Tivergen's response, which relates to Blockby Loan 558-20785. It specifically says under 4D, the borrower shall have transferred the collateral into lenders' digital depository account at Gemini Trust Company. Then it's defined deposit address on the filed version with accord that deposit address is redacted. But on the actual document itself, it has a bunch of letters and numbers, which indicates that you can go. look at it on the blockchain, a specific address.

So under the LFA, under the strict terms of the LSA, absolutely. It requires that the collateral, first of all, be in that account. And then if, for example, it discusses at any time, this is again, section 7 of the same LSA, the market value of the collateral in the depository. account and it discusses how to do that. And then if there is a trigger event event that we've discussed with the 72-hour notice period and the borrower shall promptly deposit additional collateral into the depository account. So yes, Your Honor, it was required to be in the account.

But I want to move it even separate and apart from that. One, once the account reaches 80%, if I had the right to liquidate collateral, two, even if you include this, you know, extra collateral, the account was still out of compliance with the loan to value ratio. All right. Mr. McAleys, anything you want to respond to? Yeah, absolutely, Judge. Exhibit EE speaks for itself, Your Honor. my client certified and was backed up by communications from a block five lending agent that he posted the additional collateral as erected. And they were aware.

Agent 3 acknowledged it. And Agent 3 told him he was in safe territory. And the next day, Agent 3 told him everything was okay. And by Agent 3, I mean Block 5 London. If you obviously catch my meeting, Judge. Yes. All right. Thank you.

Is there anything else? Either counsel wishes to put before the court or including the record. So here's where. Thank you. Thank you both. And thank you for facilitating this hearing in this manner as a virtual hearing. Here's where we're going. It is not my intention to do an.

estimation hearing. I do not see a purpose under the code or the rules for an estimation hearing per se. First step, we're past confirmation of a plan. We're at the distribution stages, or the anticipated distribution stages. We need to resolve claims. Now, in doing so, the first step will be to determine whether or not claimant has met its burden with respect to establishing liability on a claim. In other words, in this situation, is the claimant entitled to recovery greater than the $19 in change that has been put forward by the wind down debtor in the debtor's book, based on the debtor's books and records? If the court is to determine, that there is a basis for a claim,

that there is liability over and above the $19. And the court requires a further hearing to quantify the claim. The court will schedule further proceedings. And we'll have a conference call and we'll discuss what's required. If based on this record, the court can quantify the claim, the court will do so.

But first, there has to be a determination that there is liability on a claim. That, in other words, put simply, the debtor's actions in the administering blows give rise to liability over and above the $19 that remains that's asserted. So I'm going to reserve because I want to take obviously a further look at all of the exhibits and the supplemental certifications. We'll first determine whether or not I believe the debtor, I'm sorry, the claimant has met its burden by a preponderance of evidence to establish a claim. and whether or not the record, which is closed at this structure, is sufficient in the court's view, to quantify the claim. If the court does not believe it has the capacity to do so, that if there is a claim, the court will contact the parties to determine the next steps in continued hearings. I urge the parties not to spend more dollars now on discovery and litigation because no matter what you anticipate BlockFi lending is paying, it's not going to be enough to continue to spend actual dollars compared to the fractions of dollars that will be paid. I also urge the parties to continue discussions as to an amicable resolution, a reasonable resolution, in advance of my making a determination or ruling.

I certainly am going to turn my attention to this matter sooner than later because I want to facilitate distributions. So there's not a lot of time. But honestly, I think we're all sophisticated and experienced enough in Chapter 11 practices to understand when it makes sense to negotiate an amicable resolution rather than run the risk of a judicial determination one way or the other. So with that, I'm going to carry this, mark this matter on reserve, subject to reopening for continued damage hearings if warranted. Any questions or concerns? No, Your Honor. All right.

And everybody, take care.