American court hearing recordings and interviews - Season 6. Episode 24. February 27, 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: March 17, 2024

starting with an update on distributions on claims

Everyone, this is Judge Kaplan. Good morning, Your Honor. Our hearings this morning. I'll let you up to speed. There we go. I can see everyone. Before the Court today, our various block-fi claims issues. The Court is in receipt of the agenda.

Who would like to lead off? Good morning, Your Honor. Kenneth O'Brough Brown-Rudnik, Board of Plan Administrator. First, I'd like to give a status. update on the process of distributions if that's all right with your honor that's fine then both go through the agenda to note all of the issues that have been resolved or are we proposed to be heard off the papers and at that point we can get to the one contested matter which is the objection to the claim of the state

agenda all right feel free to go ahead thank you your honor so as your honor is aware we announced at the end of that we're opening up distributions on unsecured claims. To date, virtually all convenience class claims have been opened up for distribution. These are hundreds of thousands of claims, the large majority of the claims that are going to be receiving a distribution from the blocked by a state. Each of those claims is receiving 50% of their petition date of value on their allowed claim. This week, we anticipate opening up significant non-convenience clapped claims, the larger population claims.

To do that, we expect to file a notice indicating the final distribution percentages for each estate, BlockFi Inc., block by international, and block by lending, as well as the Bitcoin and Ethereum price is going to be used for the purposes of distributions. And since there's been a little confusion on that point, I wanted to clarify. The estate has conducted a rebalancing to ensure that we have the requisite amount of Bitcoin and E to do in-kind distributions for all claims, including claims that are in the dispute claims reserve. And so any claim will receive Bitcoin or Ethereum at the same place, regardless of when it receives its distribution, which is important. as prices have been particularly volatile this month. So we wanted to make sure that everybody was aware that if you get your distribution today or if you get your distribution in two weeks, obviously everybody would prefer not to wait

the two weeks, but they will not be economically prejudiced by being delayed in when they received their distribution. For these non-convenience class distributions, we expect to first open up accounts that have only single asset class. So, for example, only dollars, only Bitcoin, only Ethereum, and then quickly move to the remaining claims. And we also expect to allow substantial numbers of filed claims that have either been modified by a previous order of the court, or that upon review we have determined it could be allowed as asserted. And once those claims are allowed, again, and we expect to file notice on the docket indicating the claims numbers to be allowed.

Those claims will participate in the first interim distribution as well. From that point, after every omnibus objection is ruled upon any claims that can then become allowed, will become allowed, and receive the first interim distribution. What is the rough – if you can explain it again, the rough percentage for the first interim distribution? It's anticipated to be between 20 to 40 percent across all estates, BlockFi Inc. falling on the lower end of the range, and BlockFi International and lending falling at the higher end of the range. Thank you. One other issue to flag in the process of reconciling claims, we've determined that there's a relatively small number of BlockFi private client accounts where the schedule

amounts were mistaken. They undercounted the interest that was due to those claimants. We expect to file a motion seeking authority to modify those schedules in the coming days. The issue being, of course, we're in the middle of the distribution. We can't reopen the claims process. So we're going to be seeking relief to make those modifications. In all cases, people will be receiving more than they're originally scheduled now, but seeking authority to do so without reopening the claims process. Acceptable? And with that, I will turn to the matters that we have going forward today.

So first, we have the 16th omnibus objection to claims where there have been no responses received, and so we would propose that that go forward on an uncontested basis on the papers. All right. Well, we can mark that motion granted. granted. Do we have a proposed order or is it just accompanying the motion? I'll defer to my co-counsel, Lauren Sisson, for all questions on the office objections. Good morning, Your Honor, Lawrence and Sissom, Kings and Boone. We'll be submitting revised proposed orders on the 16th, 15th, and the remaining claims from the 14th today, to Changers.

All right, so we'll mark that granted OTBS. Order to be submitted. Thank you, Ms. Sisson. Okay, and then to go through the other omnibus objections, which is a little out of order, on the 14th omnibus objection to claim number seven, we have discussed with the claimant and they have withdrawn their response and permitted us to move forward with seeking to modify the claim as requested. They did ask us to make a confirmation on the record. When we object to claims as being misstated or different priority levels or different – asserted

against the wrong entity – that's not an accusation that anybody did anything wrong. We recognize that creditors aren't asking to be part of the bankruptcy process, and none of the omnibus objections are intended to pune the honesty of any of the claimants merely to correct the claims register. MR. That is fair. So we'll mark that matter. Is that the last claim on the 14th?

Are there additional claims, Ms. Sisson? There's one additional claim that will be on the order that's also been resolved with the creditor, but there are no outstanding claims anymore. All right, so that resolves the 14th. We'll mark an OTBS. And then on the 15th, omnibus objection, there were a number of creditor responses, but I understand that the court has asked to have those. matters heard all the papers, so unless Your Honor has any questions, we would rest

on our papers on that matter. MR. That's acceptable. The Court's still engaged in reviewing the responses as well as the wind-down debtor's reply. MR. Thank you, Your Honor. MR.

And next, the proposed settlement of the Ryn-NOM adversarial proceeding, the U.S. trustee filed an objection to the ceiling motion for that settlement, which, as noted on the objection has been resolved, and so we proposed that that similarly be heard on the papers. I reviewed the order this morning, the proposed order, which reflects, I believe, the U.S. trustees' concerns. Mr. Sponder, is that correct? You've seen the form of order? Good morning, Your Honor.

Jeff Sponder from the Office of the United States Trustee. We have seen the form of order, and that order is – It can be entered by Your Honor if there aren't any other issues that Your Honor may have. Thank you. All right, thank you, Mr. Sponder. So, Court, we'll add to the order this afternoon. Okay, and the last matter is the contested matter of the planned administrator and the wind-down debtor's objection to the claim of the Connecticut Department of Banking. My co-counsel, Matt Ferris, will be handling the opening and any witness issues, and I will be handling the closing for that.

So I'll turn it over to Matt. All right, thank you. Good morning, Mr. Ferris. Thank you. Let me have appearances just for the Connecticut Department of Banking. Mr. Goldman, I think you need your... Yes, you're quite right, Your Honor. Good morning, Irv Goldman and Connolly,

representing the Department of Banking of the state of Connecticut. With me as my colleague, Kristen Mayhew, also from Pullman Connolly. Good morning. Good morning, Your Honor. All right. And is there anyone else entering an appearance on this particular objection? All right. Mr. Ferris, continue, please.

Thank you. Yes, thank you, Your Honor. For the record, Matthew Ferris and Haynes and Boehn on behalf of the Winden Down Debtors. I also anticipate that my colleague, Jordan Chavez, may present on some of the evidentiary issues. Your Honor, also, just by way of introduction, we have appearing virtually two witnesses that we anticipate calling today. The first is Amit Chila, the debtor's chief financial officer, and the second is Michael Nadaka from Cunnington and Burling,

who served as regulatory counsel to the debtors. As noted, Your Honor, we have a contested objection with respect to the proof of claim filed by the Connecticut Department of Banking, which I will refer to in short as either the CBOB or the department. The objection to the claim was filed by the Wyman. down debtors on December 6th, and it's at docket number 1942. That objection was originally set for hearing on January 25th. Your Honor, at the request of the department, the wind down debtors agreed to adjourn that

hearing to today to allow the department additional time, to allow the department to engage bankruptcy counsel and provide additional time for bankruptcy counsel to respond. We are here prepared to go forward on the merits of the claim objection, as I noted at the outset, we do have our witnesses here prepared to give testimony. The wind-down debtors are moving expeditiously to administer claims, and the prop resolution of this claim is an important step to winding up these cases. Unfortunately, Your Honor, we have conferred on a number of occasions with the Department's Council, and we hoped to reach agreement to streamline some of the evidentiary issues for the hearing this morning.

But unfortunately, we weren't able to reach a resolution, So I think we have some gating issues that we're going to need, Your Honor's assistance on. We had requested that the department agreed to the stipulation, to the admission of the declarations that were filed in support of the claim objection and the reply. The department has declined to do that. As I said, again, Your Honor, our witnesses are here that are available for cross-examination. And, you know, for purposes of advancing the hearing, we would propose to admit those two declarations subject to the department's right to cross-examine. The department has indicated that they intend to object to that. But I would note for the court that the department has had notice of the claim objection for now in nearly three months.

The department had ample opportunity to conduct discovery, had it wanted to, which it did not, and prepare for this evidentiary hearing. furthermore, the declarations were filed with both the initial claim objection and the reply. Also, the Michael Nunnaka declaration was filed in connection with the adversary proceeding, which has now been pending for close to six months. The department itself filed a declaration in connection with its response. So I allow the department a chance to respond here, but any suggestion by the department in our view that an evidentiary hearing is inappropriate or cannot go forward in our view is just not correct. We do recognize that the department has raised the issue of permissive abstention,

which we will address as part of our presentation. But it's important to the wind-down debtors that we have a prompt resolution of this claim. It's also important that we stop expending a state resources litigating with the department. And so if the court is inclined to overrule the abstention request, which we think the court should do, and move forward with the claim objection, we don't see any reason not to proceed on the merits today. So with that, Your Honor, before I turn to my opening, I would go ahead and request admission of Michael Menacca's declaration,

which is filed as Exhibit B to the Windown Debtor's Reply. That's at docket number 2147-2, and the declaration of omit-Chila in support of the reply, which is at docket number 2148. All right. Let me hear from Mr. Goldman. Thank you, Your Honor. So let me just turn first to the issue of witness testimony, if I may.

Under local bankruptcy rule of 2007-1a, an objection to the allowance of a claim must be brought by motion or adversary proceeding. That means in this case, the debtor's objection to claim, although stalled as an objection, has to be considered a motion under the local rules, and therefore, the most, practice of the local rules of this court will govern. Under local bankruptcy rule 1913-3E, I quote, a party may not without prior court authorization present oral testimony at a hearing on a motion, except for a motion under Section 363B, C, F, or Section 364 of the code. Obviously, this objection of claim is under neither of those, any of those sections. As far as I'm aware, no court authorization, to present oral testimony at this hearing was even sought, let alone obtained by this court.

In addition, under Bankruptcy Rule 914E, which applies to this objection to claim proceeding, because it is a contested matter, quote, the court shall provide procedures that enable parties to ascertain at a reasonable time before any scheduled hearing, whether the hearing will be an evidentiary hearing at which witnesses may testify. It would appear that one of those people, procedures is to obtain court authorization in advance to present oral testimony so that all parties can, quote, ascertain at a reasonable time before any scheduled hearing whether witnesses will be testified. I had no such reasonable notice. And for any reasonable way to anticipate they would be presenting oral testimony, I didn't receive notice that they wouldn't until last evening.

last evening. In any event, there are legal gatekeeping issues that have to be decided first before the court embarks on a hearing on the merits of the claim objection. The issue of the prima facie validity of the claim has been raised and whether the wind-down debtors have effectively rebutted it is an issue before the court. The issue of whether the administrative proceedings are accepted from the automatic. stay under section 362 before is another one and the issue course the issue of abstention so I was strongly object to presenting witness testimony which I only

received notice they were doing as I indicated last evening as far as the declarations they don't comport with the local or or national bankruptcy rules Let me take first the objection of the declaration that was submitted with the objection to claim of, I believe it was Floreenza Marquez. Now, under the local rules, it is clear that the declarant's testimony has to be based on personal knowledge. that's consistent with the 2015 comment to the local bankruptcy rule 1913-3 and the motion practice rule 1913-1 which states that any motion has to contain a certification complying with local bankruptcy rule 7,07-1, which requires certain, to be on personal knowledge and not contain any argument on the facts.

So let's turn to Ms. Marquez's declaration. There's nothing to indicate she has personal knowledge of anything that's stated in that declaration. She simply claims that she is familiar with the objection and the information on Schedule I of the proposed order, which sets worth no substantive allegations in that schedule. And then she says that, quote, in consultation with the wind down debtors advisors, end quote, she has concluded that the claim is, quote, one for which the wind down debtors are not liable, end quote. She is testifying that she took into account the hearsay statements of the wind down advisors,

not saying what they were. It's clearly not based on personal knowledge. and she certifies none of the facts that are contained in the objection to claim. So it's simply an inadequate certification. Now, I think the wind-down debtors must have recognized the evidentiary gap that was created by that insufficient declaration by submitting two out-of-time declarations on Friday evening. These are the individuals that they want to appear before the court for a witness testimony. So with respect to those declarations, bankruptcy rule 9,06 clearly states D, when a motion is supported by affidavit, shall be served with the motion.

shall be served with the motion, not the Friday evening before a hearing on Tuesday. So these declarations were submitted completely out of time and shouldn't be considered at all. Let me short-circuit this. Thank you, Mr. Goldman. The points are well taken. I intend to hear oral argument. today on the substance of the issues that are before the court. There's an additional hurdle with respect to taking testimony remotely. In the past several months, maybe going on four or five months, not longer. The Judicial Conference has made it clear that while oral argument is acceptable for a remote hearing,

evidentiary proceedings should not be undertaken remotely absent emergent emergence situations or the consent of the parties or where it or where the court believes it's in the beneficial interest of all the parties in other words it's to use colloquially frowned upon to undertake an evidentiary hearing remotely absent compelling circumstances. My suggestion is that we undertake oral argument today on the issues that have been presented that you've been referenced. To the extent this Court deems an evidentiary hearing necessary, will schedule it live,

Let me comment on that further after we have the substantive arguments. I assume the parties are prepared – I've read the papers. I understand the issues. You're welcome to supplement the arguments in the papers today, and then we will discuss where we go from there. All right? So why don't we start – Mr. Ferris, do you want to lead off? with argument?

Yes, Your Honor, thank you. Getting your honor for the record, Matthew Ferris, I'll have to wind down debtors. Your Honor, we are here primarily because, unlike other state regulatory authorities, the Connecticut Department of Banking is unwilling to subordinate its claim to customer recoveries. The reason for that is because there was

a bond in place in the amount of a million dollars, issued by Arch, and the department has made it apparent to us that they want to go after that bond. I think you'll hear from the Department's Council that they should be allowed to proceed with the administrative proceeding that they commenced after the commencement of this bankruptcy was commenced about a year ago, February, 2023, because they assert there is no direct impact to the estate because they're not seeking at this point to enforce the claim against the wind-down debtors. This, first of all, completely ignores the fact that the wind-down denters have and will continue to incur substantial cost of defending this litigation and defending this claim over a potentially protracted administrator proceeding. And I'll talk a little bit more about this in a second, but the administrative proceeding really has not even started.

There has been no substantive briefing in the administrative proceeding. We have had a number of scheduling conference, but no substantive hearings in the administrative proceeding. More fundamentally, though, Your Honor, this position is flawed because Arch asserts indemnification claims against the wind-down debtors on account of payments under that bond. So any payment of the Connecticut Department of Banking's claim from that bond will ultimately affect the estate. It will result in indemnification claim back against the estate. by ARCH and will ultimately affect the amount available for distribution to block by customers. I think it's important to note, again, this is a penalty. This is not some type of restitution claim or anything like that. This is a penalty that the department is seeking, that it be paid.

And so it is a claim that the department is seeking be paid in lieu of distributions or from estate assets that would otherwise be available to go to block by customers. The second fundamental flaw with the department's position is that at no point has the department articulated a basis for the penalty. And Mr. Goldman raised the prima facie issue, and that is a important gating issue here. Other than an amorphous reference to the platform pause constituting what the department calls an unsafe or unsound practice, there has been no description of what the actual violation is or any information provided to support. the amount of the claim. Now, we do know from our discussions with the department's counsel that they are looking for the full amount of the million dollar bond, but in the course of the year that

this matter has been pending in no written correspondence that we've received in none of our discussions with counsel, and certainly not in their reply that was filed to the claim objection. Has there been any description as to why there is actually a valid claim and why that claim amount is in the amount of a million dollars or in the other amount for that matter. Your Honor, this is about the platform pause and whether BlockFICE implementation of the pause forms a basis for a civil penalty, excuse me, under the Connecticut general statutes. I could ask Ms. Chavez to put up the PowerPoint. I want to direct your honor's attention to a couple of points.

So, as I said, there is no detail that has been provided at any point by the department with respect to this alleged violation other than this general reference to the platform pause constituting an unsafe or an unsound practice. This is the section of the general statutes, the Connecticut general statutes that defines what an unsafe or an unsound practices. So there's really two potential components, either conduct that is not. likely to result in a material loss in solvency or dissipation of the licensee's assets. I think, as Your Honor, is well aware, the platform pause was the exact opposite of that. The platform pause was implemented to prevent the withdrawal of wallet funds that would have potentially resulted in an insufficient amount in the wallet accounts to make wallet holders whole. The second part of the definition of unsafe or unsound practice is that it materially

prejudice the interests of purchasers. And here we're talking, or the reference to purchasers in this context would be Connecticut residents that were wallet holders. Next slide, please. So this is, this is, Your Honor, from the notice attached to the Connecticut's proof of claim, the notice that was delivered to block by asserting this violation of the Connecticut General statutes forming the basis for this alleged penalty claim. And this is the most detail that we can find articulating the basis for their claim. And I'll just read you the highlighted language is alleged respondents failure to transmit monetary value received from Connecticut purchasers is conduct that is likely to materially prejudice the interests of purchasers. So it doesn't appear, Your Honor,

that the department is actually asserting a violation based on the first part of the unsafe or unsound practice definition that I just walked through. It appears that it's the material prejudice component. And, Your Honor, the basis for that material prejudice is alleged to be the failure to transmit monetary value back to wallet holders. Well, Your Honor, as you know, that value has now been or isn't in the process of being returned to Connecticut wallet holders and all other wallet holders for that matter. And that was only possible, again, as Your Honor well knows, because of the implementation

of the platform pot. So, Your Honor, the department has the burden of supporting the allowance of its claim. They have failed to do that. They have not provided any evidence to support the prima facie validity of their claim. And as I said, none of their correspondence to the debtors or during the course of our discussions has provided any other clarity or enlightenment as to what the basis of their claim is. Your Honor, that brings me to the abstention argument. Before I turn to abstention specifically, I want to address,

do, in fact, think that this action is not accepted from the police power or from the out of the state by virtue of the police power. Your Honor, if we have outlined the procedural history in our papers, I won't go back through it in detail, but in December, shortly after the commencement of the bankruptcy case and shortly after receipt of a notice of violation by the department, basically, on the cancellation of the arch bond, BlockFi attempted to surrender its money transmitter license. At that point, BlockFi was no longer acting as a money transmitter license. The department declined to accept the surrender of that license. Notwithstanding the commencement of the Chapter 11 case,

the Department then proceeded with the commencement of this administrative proceeding in February of 2023, as I noted earlier. BlockFi ultimately had to file an adversary proceeding to stay that proceeding. And by agreement between the debtors and the department, the parties agreed to stay that action and the adversary proceeding until confirmation of a plan in this case. As soon as the plan went effective, the department recommenced this administrative proceeding.

So the department has certainly acted as if there's never been a stay in place. But we are now in a situation where, for well over a year, BlockFi has not acted as a money transmitter. BlockFi has attempted to surrender the license. There is, in my view, no more apparent definition of a pecuniary interest than what the department is now seeking through the continuation of this administrative pursuit. But regardless of whether this action is stayed or not, is not determinative as to whether this court should exercise its discretion to abstain.

There is no dispute in that it can. be no dispute that this claim of objection is a court proceeding. There's also no dispute that the department submitted to this court's jurisdiction by filing its proof of claim. And I will quote from the Austin v. Department of Social Services, Second Circuit opinion 361 F3 760, which says, quote, once a state has voluntarily submitted itself to the court's jurisdiction by filing a proof of claim with a view to reaping financial benefit, there is no longer any danger that. that the state will be subjected to the quote unquote indignity of being hailed into court. Your Honor, the department cannot object to this court's exercise of its court jurisdiction

to determine allowance of their proof of claim. So then the only question becomes, Your Honor, whether the court should exercise its discretion permissibly abstain. The district court for New Jersey in Gibbons v. Stemcourt 186B.R. 841 articulated the general rule that discretionary, quote, discretionary abstention should be exercised cautiously and sparingly. The decision whether to abstain is left to the broad discretion of the bankruptcy court. Courts in the Third Circuit have used a factors-based analysis to determine whether permissive abstention is appropriate. There are three factors that courts have considered to be particularly important, and those are the effect on the administration of the estate, whether the proceeding is core or non-core, and whether the claim involves

only state law issues. I've already addressed the core, non-core, Your Honor. There's no dispute that this is a court proceeding. As far as administration of the estate, I think that there's a number of factors. As I said, there is an ongoing cost here associated with defending against this claim, and it is uncertain how long that cost is likely to go if this claim is litigated in the administrative proceeding as opposed to in front of this court, given the status of the administrative proceeding. Additionally, as I discussed earlier, there is a direct impact on claims against the estate, even if the department says their intent is just to go against the bond because of the

indemnification obligations, that will result in a claim back against the estate, and it directly impacts the amount available for distribution of customers. With respect to the third factor you are, we can see that there are state law issues at play here. Your Honor would have to determine whether the platform pause constitutes a violation, constitutes an unsafe or unsound practice under the Connecticut general statutes. But your honor, the fundamental point here is it's a determination with respect to the platform pause. First of all, the statute's not complicated. I walked through what the definition is under a statute of unsafe or unsound practice and the material prejudice standard. It's

clear. This court is more than capable of interpreting those state law issues related to that. But again, the more fundamental point is that this is a question as to whether the platform pause, which has been extensively litigated in this case, in this court, gave rise to a violation and supports the award of civil penalties against the windout debtors. This court is in the best position to make that determination. Again, this issue has been briefed. and litigated before this court. The court has the background, the institutional background, and understanding of the platform pause.

The court also is well aware of the impact of the platform pause, and the fact that it actually prevented a diminution of what was in those wallet accounts from occurring by virtue of a run-on-the-bank at withdrawal from those accounts, and instead allowed an orderly process, which is now allowing for the return of the full value, of what was in those wallet accounts as of the time of the platform paused to wallet holders, the constituents that are represented in part by this department. Your Honor, all three of the most important factors we think clearly weigh in favor of the court not exercising abstention.

But I think there's a few other factors that I think are worth mentioning. First of all, it would be inefficient to have two proceedings. The cost is unnecessary and unwarranted. We also think that there's a highlight. likelihood of inconsistent results here. Again, many of these issues have not even been addressed at all by the department, and the department lacks the institutional knowledge that this court has with respect to the platform pause. And finally, Your Honor, there is just no prejudice to the department. The department has competent counsel that has now appeared in the bankruptcy case

and is more than capable of defending against the claim objection in this bankruptcy proceeding. Your Honor, for all those reasons, we think that the court should, and we ask that the court exercise its fraud discretion not to abstain and to continue hearing this court proceeding in the bankruptcy court. And I would just reiterate, Your Honor, in wrapping up, I believe there is no other tribunal that is better equipped to determine the effect of the platform pause on customers, which is the fundamental issue that is relevant to the determination of this penalty claim.

Thank you, Thank you, Mr. Ferris. Mr. Goldman or Ms. Mayhew. Yeah, that would be, Your Honor. Thank you. Your Honor, in the department's view, this objection to claim proceeding is an improper gambit to effectively remove to this court the administrative enforcement proceedings that were initiated by the department over a year ago. and also to end run the adversary proceeding that the wind down debtors commenced to determine the applicability of the automatic stay to that proceeding.

Now, by way of further procedural background, as noted in our papers, we did commence this administrative enforcement proceeding over a year ago in February based on cancellation of the debtor's surety bond and what has been called the platform and pause. The hearing was scheduled after the wind-out debtors requested one for July of 2023. And after we filed our proof of claim on May 30th of 2023, the wind-out debtors responded not by filing an objection to claim, but an adversary proceeding about two weeks later in June that had three counts. One, a request for declaratory judgment the automatic stay applied to the enforcement proceeding. Two, an injunction under Section 105 in joining its prosecution. And three, a claim for

discrimination under Section 525 of the Bankruptcy Code. I mentioned these counts because two of them relate directly to the point we made in our papers that the objection to claim was improperly repackaging counts one and three in the adversary proceeding and asserting them in the context of the claim objection, which is not permitted under bankruptcy rule 307B, which says an objector, objector to a claim, cannot submit in its objection relief of a kind specified in Rule 7,001. Black Phi anomalously contended in its reply that these claims are valid grounds for objecting to the claim, even though they themselves had brought them initially by adversary proceeding. In any event, those claims are nowhere found as grounds for disallowance under Section 502B,

and therefore they can't be used to disallow our claim. As to be, well, let me first mention, in connection with the adversary proceeding, they also filed a motion to enforce the stay or in the alternative to enjoin the administrative enforcement proceeding from going forward. The parties then entered into a standstill agreement on July 13, 23, pursuant to which Block 5 moved to stay the adversary proceeding. representing that its request was, quote, the result of significant good faith arms length negotiations among counsel for BlockFi and the department, end quote. And Connecticut at the same time requested the hearing officer to stay the proceedings in Connecticut. Blockfly also withdrew the motion to enforce the stay. It had filed in the adversary proceeding. Then after we received notice of plan confirmation on October 24th, 2023, the hearing officer rescheduled the hearing for December

7, 2023. Not coincidentally, one day before that, it was actually a status conference. On December 6th, they filed their objection to claim, which we view as an attempt to form shop the issues involved in the state law administrative proceedings to this court. And as I mentioned, completely doesn't end run around the adversary proceeding. Now, as to the prima facie evidentiary effect issue that has been raised by the debtors, let me first start by noting that attached to the proof of claim was a six-page notice of automatic suspension. a projected part of that on the screen. And it included a request to impose civil penalties.

It specifically cited the statutory sections that Block 5 violated, quotes from them in relevant part, and then specifies the grounds for the violations as the platform suspension, which quote, suspended the ability of its customers, including Connecticut purchasers, withdraw virtual and fiat currency from its platform and which is conduct that is likely to materially prejudice the interests of purchasers and constitutes an unsafe and unsound practice within the meaning of section 36 a dash 608 of the Connecticut general statutes so what Bocke fly where the wind down debtors

contend we should be doing to give the proof of claim prima facie validity is to plead argument as to why its actions were unsafe and unsound when according to the objection they brought about so many wonderful things to the other constituents in this case. That simply is not the standard for pleading a proof of claim. Bankruptcy Rule 3,001 states that a proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim. Now, in a decision that was cited favorably in the Malancroot decision, the wind-down debtor cited in their reply, and I'll refer, Your Honor, to in-ray F-squared investment

management, 546, 546, BR-538. Judge Silberstein of the Delaware Bankruptcy Court found that the pleading standard for alleging facts sufficient to state a claim under the Third Circuit's decision in Allegheny is, quote, a relatively low threshold that is less burdensome than the federal pleading standard, end quote, and stated further that as long as a proof of claim provides fair notice and the court can glean an actionable claim from the complaint, the court must entertain the party's case. That was at page 544 of that decision. Now, the wind-down debtors clearly have fair notice of what this claim is because they put together an extensive reply and an objection to claim that goes directly to our claim that there was an unsound and unsafe banking practice. They submitted or tried to submit to detailed declarations on that topic. So they clearly had fair notice of this claim. And we have clearly

met our burden of pleading, which doesn't need to satisfy the rule 12b-6 standard that you would have in ordinary civil litigation. And that would bring into play, of course, the Supreme Court decisions in Iqbal and Twombly on pleading facts. That's not the standard. And so we believe we clearly met the standard of raising the prima facie validity of the claim. The cases cited by the wind-down debtors in support of their argument are just inapposite. They either, they deal with the situation for the most part where the assignee of credit card debt fails to attach an assignment for supporting documentation of a claim. And that, of course, implicates bankruptcy rule 2007C, which provides that when a claim

is based on a writing, the writing has to be attached. Well, our claim is not based on a writing. So those claims, those cases just simply don't apply. The other cases they cited are in opposite as well. The biotech case out of this district concerned a claim filed by an insider of the debtor one day before the bankruptcy filing, which was based on an assignment that was signed by the principal of the debtor for both parties to the assignment, was not notarized or witnesses, witnessed. Clearly not the situation we have here.

The Malancrook case dealt with proofs of claim that were filed against 62 debtors that, quote, failed to allege any activity, end quote, by any of them relating to the claim. Clearly, in opposite to what we have here. And as I pointed out in the initial argument on witness testimony, the declaration they submitted. to support the factual allegations in their objection is completely non-compliant with the federal rules of evidence rule 602, which requires that a witness can only testify to a matter if evidence is introduced sufficient to support of finding that the witness has personal knowledge. There was no submission of that type of evidence.

you examine further the declaration, and this is what they've got to be relying on, to rebut the prima facie validity of our claim, because it's the only attempt to submit any evidence. It states that paragraph four, quote, except as otherwise indicated herein, the facts set forth in this certification are based upon my personal knowledge, my review of relevant documents, information provided to me by the professionals in this case and or employees working under my supervision or my opinion based on my experience knowledge and information concerning the wind down debtors operations, end quote. You can't tell which one of those bases for her certification applies because they're all stated in the disjunct of it. So it's completely inadequate. It's not person.

knowledge, it can't be considered as evidence sufficient to rebut the prima facie validity of our claim for that reason. And I've already explained why I don't think the other two declarations do the job. So as the record stands right now, we have a prima facie evidentiary effect to our proof of claim that hasn't been rebutted by any admissible evidence. So the claim should not be disallowed. And what we have are just arguments of counsel contained in their papers and editorial argument as to why the platformer pause was not an unsafe and unsound banking practice. Now, as to the exception to the automatic stake, I would maintain that the administrative enforcement proceedings are a classic example of the

exercise by state government of a police and regulatory power to enforce consumer protection or similar police and regulatory laws. Here are the banking laws of the state of Connecticut by imposing penalties for their violation, even for past conduct that a case law and other authority that we cited in our papers supports that proposition and has not even been challenged in the wind down debtor's reply paper. Well, let me stop you there, Mr. Goldman. Yeah. Let me ask you to articulate for me how the pursuit of a penalty, which is not going to be paid by the corporate debtor defendant,

but it's going to come out of the pockets of all other long-suffering creditors, and certainly who view themselves as victims in this case, including Connecticut residents, How is the pursuit of a penalty against a company that is no longer operating will not be operating, a benefit or an action to further the public welfare? It seems to me to suggest that it's all about dollars for the state of Connecticut. Your Honor, that is not the case. the interest of the state in seeing that violators

of Connecticut banking law are penalized with penalties for past conduct it comports with public policy but you're not penalizing the conduct of the company you're penalizing actually the account holders the very and many of whom are the very residents that you are

directed to protect and pursue. It seems that, and it's been brought up, and I know you were going to get to it, but it's just startling to me that there's a failure by the Department of Banking, Connecticut, Department of Banking, to recognize what virtually every other state, including the federal government, is recognized, that pursuit of penalties shouldn't come at the cost of innocent creditors. Your Honor, penalties are very often in the context of applying the exception to the automatic stay at issue. The legislative history of 362 makes reference to pursuing governmental actions to enforce consumer protection laws or to fix a monetary penalty.

It's stated directly in the legislative history to that section. And to oppose a penalty, and I hear, Your Honor, that if this is coming out of the bond, but that's the purpose of the bond to cover penalties like this. And as they note, the surety may make an indemnification claim. So when you take it one step further, it's still at the end of the day, comes out of the other remaining account holders and creditors and customers who are at best, from what I heard earlier today, receiving a distribution of 20 to 40 percent.

So they're already suffering a loss. And it seems to me that the other state agencies, virtually every other state agency, and also the federal government has recognizes the impropriety of pursuing penalties in a situation other than as a subordinated claims. But, Your Honor, since penalties like this are so often at play when the Section 362 before exception is in effect, that is really an argument that would apply to really any type of penalty. proceeding. So a government's claim for a penalty will always have a dilutive effect on unsecured

creditors. So it seems to me that that just swallows the rule. Well, the rule makes sense when there are ongoing operations or there's a threat of future continuing operations or in those situations where there are sufficient funds to protect the interest of the creditor body. This is not one of those situations. But even in the operating situation, Your Honor, where creditors are getting some type of distribution and the debtor remains operating, the claim would still have a dilutive effect. And so, and as we know, there's Supreme Court jurisprudence on this. that a penalty claim can't automatically be subordinated by virtue of its the nature of being a penalty,

although that's what their plan proposes or actually provides. So I just, my answer to your honor is that it is an argument that can be made in every case where these penalty claims are asserted by the government. And the penalty claims were a judgment by the state of Connecticut that they're necessary to deter would-be violators, that they know, and I recognize that the source of payment is made from the bond, or whether it's from the debtors or the bond, the imposition of these penalties serves a deterrent effect to would-be violators, which has also been recognized as a legitimate public policy concerns. in applying the Section 362 before exception. So how did the Department of Banking calculate that a million dollar penalty versus a $10,000 penalty, which will come out of credit or funds and dilute those funds, is the right amount to deter conduct that is unlikely to occur again?

and conduct that this court hasn't determined, in quite the opposite, this court previously determined was proper and in the best interest of the customer base. So, Your Honor, the million, first of all, it wasn't accurate to say that we're demanding a million dollar penalty. We were engaging in negotiations with the wind-down debtors to resolve this,

as they themselves acknowledged by representing that in their papers. So the million dollars wasn't even a number that we left off with. It was much lower when we were talking to them. And we haven't really, I don't think the state has formulated yet the penalty that they would be seeking. We are at the investigative stages of that administrative proceeding. and we certainly are going to look into that further if we're permitted to go forward with it. So this million-dollar number that they've thrown about is certainly not absolute. We never demanded that or pound sand.

We always stated that we were open to negotiations over this, and we just couldn't get there. They wouldn't respond to our last proposal, which was lower than a million dollars. So I would also make the point that, you know, I recognize there are a handful of other states that chose to stand down on this and subordinating their claims. But I don't think that's any reason to chastise the state of Connecticut for not doing the same. because it just used the policy arguments or issues differently than the other claims and then the other states may have different banking laws. So this is just a matter of discretion among the states. And it's certainly not a ground for disallowance of the claim.

And there is no evidence that this is just for the pecuniary purpose that the debtors maintain it is for. The cases that we cited, which haven't been or abutting, all say that penalties for past conduct are come within the 364B4 exception. So the fact that this conduct is no longer occurring is really, really not relevant to the analysis. And let me address further, the debtor's argument that we were required to file some sort of separate motion to,

invoke the 362B4 exception. I would note it's self-executing, as one bankruptcy court stated it, quote, nothing in Section 362B4's police or regulatory power exception to the automatic state conditions its application upon the court making a gatekeeping determination

as to whether an exercise of police and regulatory power is proper in the first instance. end quote, that was in re cracked egg, 624 BR 84 at 90, Western District of Pennsylvania. Nor has that exception been waived by the filing of a proof of claim. The cases cited by the debtors for that argument did not even involve a governmental unit or the section 362 before exception. So they can't stand for the remarkable proposition that a governmental unit, waives 362 before rights by the mere after filing a proof of claim.

Let me now turn to abstention, Your Honor. I would submit that this case is a compellingly suited for permissive abstention. The factors to consider are, as Sethworth in our papers, we're taking from the New Jersey District Court's decision in GI Holdings, And as noted there, they're applied flexibly and applied for their relevance of importance. We believe the most salient factors here are the predominance of state law issues, comity and respect for state law and policy in the regulation of state banking activities, the lack of relatedness of the administrative proceedings to the main case,

which the wind down debtors themselves acknowledge in their objection at paragraph 41 by stating that, quote, the administrative proceeding is completely unrelated to the Chapter 11 cases, end quote, and the lack of any effect on the efficient administration of the case. As for the state-inistrated proceeding, the wind-out debtors will have a right to appeal any decision of the hearing officer to the Connecticut Superior Court under Connecticut General Statute, Section 4-183A, and from there to the Connecticut Appellate Courts. The factor of comedy is further supported by the Section 362B4 exception to the automatic stay itself. As the Ninth Circuit best put it in city and county of San Francisco versus P&E, C.G and E Corp. 433F3 at 1.115 at page 1127, quote, through various provisions of the bankruptcy code, Congress has evidenced its intent that a governmental unit's police or

regulatory action not be litigated in federal bankruptcy court, end quote. There will be no adverse effect on the efficient administration of the estate as the resolution of the claim is not going to hold up plan confirmation, which already has occurred. And whatever the amount of the claim is determined to be, it will receive or not receive the treatment that is provided for. for it in the plan. And as has been noted, if the surety is compelled to pay the claim, they will become entitled to treatment as a general unsecured creditor. Mr. Goldman, my apologies, just a quick question. The hearing officer appointed under the Connecticut Administrative Procedures Act, any decisions by or findings by the hearing officer,

Am I correct that Commissioner Perez can reject those? In other words, the steps would be the hearing officer makes proposed findings and rulings, but the commissioner can reject those findings, and then that ruling, that decision by the commissioner can be appealed to the Superior Court in Connecticut under an arbitrary or capricious standard? Well, it is subject to appeal. Yes, on that standard. On an arbitrary, so that's a higher threshold. So I guess my concern is that what we have is the claimant, the commissioner of banking,

who's the claimant in this case, actually the one to decide whether or not the hearing officer's ruling goes into effect. That seems to certainly counter the competing shifting of burdens that we find under Allegheny in the circuit. And it doesn't reflect a neutrality with respect to many of the cases where it was a neutral, it was either a court or an arbitration tribunal. But we have a hearing officer that my understanding is employed by the executive branch within Connecticut and with an ultimate ruling determined by the commissioner.

Why should a bankruptcy court give comity to such a process when there lacks the neutrality that a court, whether it be a state court or here, the federal court can offer? Well, that standard, Your Honor, I believe it comes from the Uniform Administrative Procedures Act, which is adopted by many states. And so I would think that this is a common standard for administrative proceedings of this nature. And so that gets back to the very point of deferring under 362B4, 262B4 exception, to police power claims and fixing the amount of penalties, whatever procedures, come with that under state law, they come with it. And the very nature of comity is to recognize the laws of another sovereign, such as the state of Connecticut, whatever those laws may be.

So that would be my response to your honors in inquiry. As to the merits of the claim, my understanding is that Your Honor's ruling on this Wallet withdrawal motion did not address at all whether the terms of service that the debtors were relying on in getting authority to withdraw. as they did in the Wall of Withdrawal order, Your Honor was not presented with whether those terms of service and what they did actually complied with any state banking laws. That simply wasn't an issue before the court. So I don't see how there could be any inconsistent results on an issue that the court. you know, as to the additional burden that they claim they will have in litigating before the administrative enforcement proceeding, they've already articulated and framed out and fleshed out all of their arguments on this, which can easily be repackaged in the context of the administrative proceeding. So that claim, I don't think, is valid.

The proceeding is not in any way protracted. I would say it's more in the nature of like an arbitration proceeding. We don't see it as being protracted at all. There is a right of discovery as there would be in connection with this objection to claim, but we don't see this taking any significant. amount of time to complete. And I don't think you can divorce what occurred with respect to the platform pause as being an unsafe and unsound practice from the actions of the debtor that were taken that led

to that platform pause. The report of the Unsecured Creditors Committee covers this. this in some detail. It was in large part based on the irresponsible activities of these debtors in connection with FTX and their inadequate safeguards as to how the cryptocurrency was kept in these various accounts that were apparently commingled and which led to the need to, initiate the platform pause to begin with. So you can't divorce the activities that occurred that led to that platform pause from the calculus of whether what they did was unsafe and unsound.

So with that, Your Honor, I would conclude my remarks unless you're on hand. It has any other questions. No, I thank you, Mr. Goldman. Yeah. Mr. Ferris. Thank you. MR. Any response from Mr. Allett? MR. Yes, Your Honor. So I'd like to address Mr. Goldman's remarks, and I think they fall into two main

categories that we need to discuss. First, permissive abstention. Should you, Your Honor, deal with this core matter of how much money is the State of Connecticut entitled to from the block by the State? Mr. Goldman spent a lot of time discussing the various other issues, for example, the automatic stay. But we've tried to cut through those issues to bring this to your honor for a merits ruling today.

And Mr. – we are not seeking sanctions or violation of the automatic stay. We're not seeking to enforce the automatic stay. But those are all key issues that go to – should this matter be heard before your honor, or should this matter be heard before – the – hearing officer in Connecticut. And there, the department has just failed to meet its burden of showing that this court should permissively abstain over a core matter in this case. Block FI is a liquidating entity.

Every dollar that's spent on this hearing, on the hearings in Connecticut, is a waste of money that ought to go to customers. This court – the bankruptcy courts exist to centralize. these disputes so that they can be resolved efficiently. And needing to go out to Connecticut to relitigate all these issues when, your honor, at great expense to the estate, spent a great deal of time delving into the exact issue here, the platform pause, simply not in the interests of the estate. The state of Connecticut alleges essentially two main factors, that state laws at issue,

State law is at issue in virtually every single proof of claim that's resolved. State law is the default. It's not really a strong factor here. And second, the issue of comity – I think that folds back into the issue of public policy. What is the state of Connecticut really looking to do here? It's not to seize Block Fai's license – Block FI offer to surrender the license. not to issue a ruling that something improper happened here, it's to get money. And that is not a valid basis for this court to grant comedy to the Connecticut proceeding because

the issue to be centralized in this court is, where should the money if the dinners go? And that brings me to the issue of the Promethacia case of the claim of the state of Connecticut. Mr. Goldman argued that essentially the standard is below the federal pleading standard, which in practice means that it doesn't involve plausibility. That Mr. Goldman asserts that the state of Connecticut was not required to show that it has a plausible claim besides simply asserting a claim form. And for the reasons we set forth our papers, I don't think that's correct. But I'll go into the argument he tried.

tried to make four wide private cases make here. First, the only actual allegation made by the state of Connecticut relates to the platform clause. Mr. Goldman attempts to import in the issues identified in the UCC report, but the UCC report does not challenge the platform clause. And Mr. Goldman's efforts to import those issues into the platform clause fail because, as Your Honor is aware, this is about wallet accounts. The State of Connecticut is regulating the wallet accounts, the allegations in their proof of

claim are clear that what they are challenging is the denial of the ability of wallet accounts to withdraw. It is not that BIA accounts now are unsecured claims and are unlikely to receive full distributions in kind like wallet accounts. accounts have, including every single Connecticut resident who, just like everybody else, aside from the handful of wallet claims that have remained frozen because of preference liability, wallet accounts are open for withdrawal, and everybody who has submitted a request and filled out the necessary paperwork has gotten their wallet back.

So what we have is we have the State of Connecticut's bare assertion that the platform pause constitute an unsafe and business preference. And the state of Connecticut is seeking to block us from introducing the evidence today, but I will point to Your Honor's fact finding in the Wallet Motion, where Your Honor discussed how you were essentially being asked to find winners and losers with regard to the to the post-pause transfers because what was at issue was did the people who transferred assets after the pause was implemented into wallet, were they entitled to share in the segregated funds in that wallet?

They would have been winners because they would have had access to funds that had been segregated. The existing wallet holders would have been the losers because there would have been insufficient assets to satisfy their claims. That was a key factual finding of the court in the Wall of Motion. And finally, Mr. Goldman discusses the amount of the penalty. I'm not going to go into the confidential settlement negotiations. What I will say is they have a certainty claim for a million dollars. And the amounts that they've pointed to in the statute are $100,000 per violation.

They've identified one alleged violation, a platform pause. They have not, even if you ignore, they have to assert a plausible claim, they have not asserted nine additional violations. We have a claim for one violation, which based on the Department of Connecticut's loan pleadings has a maximum five of $100,000. So we've got this claim for a million dollars. It simply fails to even establish an entitlement to that million dollars. Again, it doesn't establish, based on the previous factual findings in ruling to this court,

a plausible or prima facie case that the platform pause entirely divorced from the losses to beyond wallet customers constitute an unsafe business practice with respect to wallet customers. We protected wallet customers, and that we can establish from the previous findings of this court. Your Honor, I just want to reiterate, we represent the Planning Administrator. We are not here to defend the honor of free petition block five. We are trying to maximize the return for creditors. This is all just a waste of creditor money. For that reason, we urge the Court to decline the invitation permissively to stay and require

wind down debtors to litigate this in front of a hearing officer who will need to have the distinction between the IA and wallet accounts explain will require us to reprove up all of the issues that were involved in this court's previous ruling will risk inconsistent findings with respect to the question and simply waste additional money for somehow deterring other potential violators of Connecticut law. And the state of Connecticut is given no rational reason why any company in business is going to look at Block-Fi, a liquidating company, a company that is out of business, never go back into business, and say, well, that was all fine, but when they took a million more dollars away from the creditors, that's what deters. Thank you, Your

Honor. All right. Mr. Goldman, anything you wanted to respond to? Yes, Your Honor. Just a few points. This idea that we've asserted a million-dollar claim is just simply not correct. The claim was filed as an unliquidated claim. We are still not through with the investigation, and the enforcement proceeding hasn't been heard. So it simply is inaccurate to state that it's a million-dollar claim. that we've asserted. There are as to the number of violations, I would disagree. It's one based on a

single platform pause. There were a number of Connecticut purchasers involved that could potentially serve as a basis for multiple violations. I would also note in terms of the pleading requirements that the notice that the state served is in compliance with the applicable section of the Uniform Administrative Procedures Act, which is Connecticut General Statute Section 4-177. I would again make the point that there is a public policy benefit to imposing a penalty so that other would be violators are aware. that if they engage in this type of misconduct, they will be penalized, even if the company later has to file a Chapter 11. I would disagree with the point that anybody looking at this

from the outside would just dismiss it as nothing they need to be concerned about. That is a compelling public policy determined. that was made by the state that I believe should be given deference by by the court and that is all I have your honor this time thank you counsel I believe there's no no one else looking to argue so I appreciate the arguments well done you certainly put a lot on my plate let me see if I can cut through some of the issues. Number one, the court is not in a position based on this record to make a merits resolution

of this claim by the Department of Banking. The claim is bottomed on the act in pausing the platform and the cancellation of the surety bond and whether those acts contravene the applicable statutes and regulations. The court has no difficulty finding that there is a prima facie case established. But likewise, the court has no difficulty in determining that, based on prior findings by this court in related proceedings, based on the declaration submitted, that the prima facie aspects, the prime and fash of nature of the claim has been rebutted and that there has to be a resolution of the claim. The resolution of the claim is going to be pursued before this court.

This court is not inclined to abstain permissively from hearing a core matter in a situation where the claimant has certainly subjected itself to the court's jurisdiction. And by filing a proof of claim, the Cabino argument is prejudice to proceeding in the federal court, that there is certainly a risk of inconsistent results, given this court's prior rulings. Most importantly, this court does not find that allowing this matter to be resolved before a hearing officer, which would at best give rise to multiple appeals in the state court is the most efficient manner to administer the estate for the benefit of creditors. The court has concerns that any hearing officer is equipped with the knowledge factually,

but more importantly, also the knowledge as to the impact of the bankruptcy laws. The pause that was undertaken by Blockby, in some respects, it is clear, prevented certain withdrawals and transfers that would be recoverable as preferential transfers. That has to be taken into account as to the propriety of the action. I'm not convinced that a hearing officer employed by the Department of Banking and reportable to the commissioner is in the best position to gauge the propriety of the actions. The issues are, of course, state law, but that is not uncommon before the bankruptcy courts. The laws are certainly not complex. The court is well equipped to interpret and

apply the state law. This court does it virtually every day. And overall, overall, The standards that have been laid out in both pleadings do not have not been met to warrant permissive abstention. This court is not inclined to do that. Recognizing, of course, I don't have an actual motion for extension, but I am not inclined to abstain. The court recognizes that there was a pending action and motion to enforce this day and join the hearing under Section 105

If the parties need, the court can take that matter up on short notice. I don't believe there's a need to do that. What we need is to have a hearing on the merits. The court will consult in chambers first with my staff to see available dates in the next few weeks. In the interim, the court, would make a plea to counsel for both parties to sit down. You've hashed out the issues. You certainly have commentary from the court.

It would seem that there is a viable pathway for the Department of Banking to enforce its regulations, but not to the prejudice and harm of other customers, creditors, and security. your creditors of this estate who are already seeing their recoveries diminish. And we'll continue to see their diminish. Every day we have to spend more time litigating these issues. So you have a few weeks to continue the discussions that you have started. The court is always happy to assist in a mediation or to – I'm looking to – ensure that we don't spend unnecessary dollars, but that the state of Connecticut can preserve

its interest, but again, not at the prejudice of innocent parties. So with that, the court will advise the parties of a date for a live, in-person hearing. The parties, of course, are free to take discussion. I would suggest that before you do that, you sit down and talk and try to pursue a viable resolution that probably fails to meet the expectations of both sides. So with that, Mr. Alled, is there anything else we need to address on these matters? No, Your Honor. Thank you.

All right. Right. Mr. Goldman? Yeah, I'm sorry, Your Honor. I would just ask when your honor considers the date to give us. Yes. We may, in fact, want to take some discovery. I'm not suggesting there's going to be an onslaught of discovery here, but I would just ask Your Honor to consider that when you're setting the date.

Fair enough. If the parties need, it's always, One benefit of having live hearings is that I could drag you all back into chambers and we can talk and hash out some of these issues. We can't do that as easily remotely. But if the parties need to discuss the direction of the case for timing and process, feel free we can have a more limited telephone conference or remote call off record. All right. Thank you. And I think we're done for this morning.

Thank you, counsel. Thank you, Your Honor.