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you

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you

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you

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you

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you

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you

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you

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all right

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everyone thank you please be seated

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afternoon

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afternoon

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your honor and may it please the court

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Adam Landis from Landis Rath and Cobb on behalf of the FTX Trading Limited Family Debtors

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has everyone signed in? I've got more people here. I've only got five people on my list of people here

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we have another list?

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yes

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okay go ahead Mr. Landis

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thank you your honor

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we're here today for our omnibus hearing and you'll note from the agenda that items one through eight have been continued

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items nine through fourteen have been resolved leaving us with two matters going forward the first is a chapter 11 case update

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and the second is our settlement procedures motion which has been objected to by the United States trustee

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I'm going to yield the podium to Mr. Glexin who will take it away with number 15

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okay

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good afternoon your honor

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afternoon

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for the record Brian Glexin Sullivan and Cromwell for the debtors

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and we do want to thank the court for entering a number of orders on resolved matters prior to today's hearing

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we did want to provide the court and stakeholders an update on the case since we spent a little bit of time before we last appeared for an omnibus hearing before your honor

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your honor the debtors continue to make significant progress every day moving these historic chapter 11 cases forward on every front

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led by Mr. Ray the debtors and their team of professionals remain leisure focused

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on one maximizing the value of these estates for creditors through asset recovery efforts prosecuting legal claims

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and two distributing that value to creditors through a confirmed plan of reorganization

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and your honor notwithstanding some recent rhetoric from the committee these cases have seen the debtors build consensus

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and resolve most issues constructively and efficiently which has resulted in most of the work taking place outside of the purview of this courtroom and your honor

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I therefore want to take a few minutes to provide an overview for stakeholders and the court of the significant developments in both of these areas over the past few months

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and what is coming next

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we do have a few demonstrative slides to aid the discussion if we could bring those up

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your honor this slide is an update of a lot of these slides are kind of an update of slides we've shown previously

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but this slide shows the continued progress of the debtors asset recovery efforts along with those assets known at this point to be recovered and currently held by the United States government

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at current asset pricing which reflects some volatility in the cryptocurrency markets the debtors today have approximately 7 billion of assets that are marshalled and available for distribution from the estates

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including approximately 2.7 billion cash assets

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some of the recent significant events since we've last been before your honor are included in this slide and to highlight a few

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your honor in June we filed the second interim report of Mr. Ray to the board detailing the extent to which the FTX group from its inception

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commingled customer deposits and corporate funds and how Mr. Bankman Fried and the other founders misused those funds at will for speculative trading investments the purchases of luxury properties and political and other donations for personal gain

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the debtors recently filed their 2022 federal tax returns for all of the FTX debtors and herculean tasks given the starting state of the information on the petition date and the information that was necessary to file those returns and that's a significant milestone given the claims that have been asserted by the IRS in these cases

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the debtors have continued to successfully rationalize its workforce exit contracts and leases we've launched an online customer portal for filing customer claims in connection with the upcoming customer bar date which as your honor knows is set for September 29

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thousands of new claims are being submitted daily through the portal the portal allows customers to also review their balances as of the petition date and their historical transaction history

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the debtors are currently pursuing a sale process for the FTX.com exchange which is ongoing and for which there is significant interest we know this is an important issue for the creditors committee and many creditors of these states

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the debtors have been able to return over $150 million of customer segregated funds at FTX Japan pursuant to local law and on July 31st the debtors filed their draft framework plan of reorganization which I will talk more about in a few moments

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on this slide your honor we go through there are a few show some of the detail about the debtors continued progress on major areas of the case in this column first column there's numbers here around asset management the debtors continued work in this area

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the board of directors continues to monitor exposures to the fluctuation of cryptocurrency markets and we spent significant time with the committee on a plan for managing and monetizing the debtors cryptocurrency holdings

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the second column here highlights very significant progress that debtors have been able to make in recent months through their investigation process and turning that work product into actionable litigation claims to highlight a few

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we have stated before your honor that we will hold accountable those individuals responsible for FTX's collapse and we will pursue recovery of funds improperly transferred away from the debtors pre-petition

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and we have started to do that if funds are not returned voluntarily we will pursue them through litigation the debtors filed a 48 count action against Mr. Bankman Fried and other insiders for breach of fiduciary duty and to avoid various transfers

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the debtors have also filed significant fraudulent transfer actions and related claims claims relating to the K-5 investment to recover over $700 million claims relating to the purchase of embed financial to the months prior to bankruptcy

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to recover approximately $300 million a $300 million action relating to FTX Europe a $75 million action relating to an investment in Latona

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the debtors also last week filed a motion that will be heard at the September omnibus hearing seeking approval of an important settlement with the Genesis debtors and their affiliates that will return significant value to the estate and avoids litigating difficult issues involving dueling debtors given their Chapter 11 cases pending in New York

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the debtors continue to analyze the multitude of potential preference claims and expect to soon file a number of large preference actions to return value back to these estates

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the litigation recovery efforts will continue in parallel with the plan confirmation process and our asset recovery work

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there's also been significant M&A and venture book activity over the past few months highlighted by the Ledger X sale and monetizing interest in Sequoia Heritage

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that work continues as well with many more investments still to be monetized

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that brings us to the next slide your honor which is slide five and this depicts our plan timeline

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as the debtors continue to bring in value we are working very hard to get that value into the hands of creditors as soon as possible

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back in April your honor Mr. Dederick provided an update to the court in which he detailed an aspirational plan confirmation timeline that looks extremely similar to the one that's set forth on this slide

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the non-customer claims bar date occurred on July 31st and the customer and government claims bar date is coming up on September 29th

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importantly the debtors filed their draft plan of reorganization on July 31st as targeted the framework for that draft plan and term sheet was discussed at length

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over the course of months with the committee's professionals and also with counsel to credit groups such as the ad hoc committee of non-U.S. creditors

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the debtors and their professionals shared mountains of data and analysis with the committee's professionals and held dozens of calls and meetings in which legal and economic issues were discussed

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and those discussions informed the draft plan term sheet that was filed in July

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as we have said previously the primary purpose of filing the draft plan was to provide a transparent basis for negotiations among diverse stakeholders of which the committee is one but certainly not the only one

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the plan term sheet identified several open issues that the debtors know they need feedback on from that diverse group of stakeholders

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if you look at slide six we show here these are items that were noted in the filing we made on July 31st and include many key issues still to be negotiated

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including the amount of property to be allocated to exchange shortfall claims against the general pool of assets

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the decision in manner in which the FTX.com exchange is sold or reorganized

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the post effective date claims transfer process

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governance issues with respect to offshore exchange, venture trust and other entities contemplated in the plan

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these are important issues your honor

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many of which are inter creditor issues to which different creditors and creditor groups have different views

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that is precisely why the debtors solicited feedback from those groups broadly and that process your honor is working

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we are receiving that feedback the level of engagement from the committee, customer groups and other stakeholders is high and largely constructive

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if we go back to the timeline on slide five here the next step your honor from today in our plan process is meetings that we have scheduled with the UCC

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the ad hoc committee and other stakeholders that are currently scheduled for early September in these cases

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those initial hands on all hands meetings currently scheduled for September 11th and 12th are very important to permit the sharing of positions

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identify issues and begin in earnest the process of negotiating the plan of your organization both with the debtors and among stakeholders

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your honor that is the job of the debtors to lead those negotiations and to build consensus around the plan and we believe we will be able to do that

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on slide seven we have shown here as detailed an agenda we expect to have a comprehensive discussion over these multi-day meetings

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on a wide range of topics with stakeholders some of whom have not been at the table until recently

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if we go back to the timeline on slide five

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September obviously your honor will be an important month as noted the deadline to file customer claims is September 29th

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mediation with the Bahamas JPLs is moving forward and is expected to occur in September

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the rest of this timeline includes an amended plan and disclosure statement to be filed by the end of the year

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with disclosure statement hearing in early 2024 and a plan confirmation hearing no later than the second quarter of 2024

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Mr. Gluskin I'm going to pause you for a moment here do we know what's going on with the zoom here

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can we get these people off

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and can you give me hosting rights too thank you okay I'm sorry Mr. Gluskin go ahead no problem your honor thank you I don't know if you can see it out there but someone put a whiteboard up on the zoom call

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usually can only with the slides I actually can't this time but your honor we remain on track for the schedule that's depicted here on this slide

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and those dates significantly in our view we have not needed to push them back at all from what we unveiled in the case timeline in April

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we are of course always looking for ways to further expedite matters but we believe this timeline remains necessary and appropriate at this point

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the other last point I want to note on this timeline which is noted here that I want to briefly address is the mediation of customer claims and other plan issues

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which of course is the subject of a motion filed by the committee to compel immediate plan mediation that's not before the court today

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we obviously reserve the debtors reserve their rights with respect to that motion

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but this timeline does reflect that in our timeline we do contemplate mediation occurring likely in October as necessary

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and while the committee's motion is as I say is not being heard today I must note that the debtors of course are supportive of plan mediation as part of this process if necessary

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but only after the issues are crystallized and it is clear that the parties cannot resolve them through a good faith negotiation without the assistance of a mediator

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premature mediation doesn't do anybody any good and in the debtors view only would waste resources and a recipe for failure

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the debtors of course have discussed in the connection with this schedule and the upcoming meetings mediation with the UCC professionals

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and those representing the ad hoc committee as well as the class action plaintiffs in these cases

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in fact the debtors have made a proposal for how to structure mediation in phases and are the ones who proposed expanding the scope of Judge Fitzgerald's mandate to address plan disputes beyond those involving only FTX digital markets

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the committee's filing of the motion in recent rhetoric is unfortunate particularly given that the committee's professionals have supported our timeline until last week

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the debtors have worked tirelessly to develop and achieve consensus with the committee and all stakeholders throughout these cases and will continue to do so

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the fact is at this point the committee has not made any practical proposal to move up this timeline as depicted here on slide 5

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although we of course remain open to discussions if they have such suggestions

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in the meantime the debtors look forward to continue engagement with all stakeholders and providing the court a further update on the plan process at the next omnibus hearing scheduled for September 13th

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thank you your honor, it's all I have by way of update, happy to answer any questions that the court may have

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no questions at this time, Mr. Hanson do you want to have an opportunity to respond?

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thank you your honor, Chris Hanson with Paul Hastings on behalf of the official committee of unsecured creditors

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your honor first the creditors committee wants the court to understand that it does appreciate the efforts of the debtors and their professionals to move the cases forward

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to advance things like the schedules, the bar date, the plan term sheet and the numerous other items Mr. Gleckson just referred to

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there are many areas in which the committee and the debtors have been collaborating especially at the professional level

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that said your honor, I am compelled to respond to a few things today

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first there have been a number of unfounded attacks by the debtors on the integrity of the committee members themselves

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it's unfortunate, the debtors have repeatedly made reference to committee member conflicts of interest arising from their status as market makers

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and the debtors have treated the committee members with a misplaced mistrust since the beginning of the cases

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using in our view the poor excuses of potential information leaks and self-interest

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to deprive committee members of the access to information that they need to carry out their fiduciary duties and help the debtors in areas where they lack experience

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and the level of expertise that the committee members themselves have

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the debtors however cannot point to an instance of leaked confidential information by committee members or any real self-interest in the actions of those members

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I would urge the court to ignore these attacks as a thinly veiled attempt to divert the court's attention

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from the fact that the debtors are not truly engaging with the committee members as you asked them to do after the first exclusivity extension

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and that the committee members need in order to do the jobs

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I'd also ask the court to ignore this new mantra that we're hearing

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that it is the ad hoc committee, not the creditors committee that contains the real customers in these cases

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as the court knows the official committee was appointed by the state's trustee as a statutory representative for all unsecured creditors in the cases

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the goal was to have a diverse collection of parties that were representative of the millions of different types of customers and creditors

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of the debtors which is precisely what the official committee has

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and while the committee, official committee appreciates the ad hoc committee role in these cases

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it's important to note that the parties on the ad hoc committee who in their latest 2019 hold almost half of their aggregate claims are investment funds

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who bought the customer claims in the secondary market, not customers whose assets were stolen by FTX

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to be sure, the committee does include a number of members who were original customers and who were victimized by the fraud

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it's important to also understand, Your Honor, that the aggregate claims held by the ad hoc committee are in the $850 million range

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and the claims held by the official committee members themselves are around $700 million

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contrary to the debtors assertion that the ad hoc committee holds a multiple of the claims of the official committee members

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and it's not really important anyway because the official committee has its statutory role

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it's also important to view the statements regarding the ad hoc committee's import through a few different lenses, Your Honor

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one of which is, and I'm sure you'll see it soon to be filed, an agreement between the debtors and the ad hoc committee that has existed since late April or early May

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to seek reimbursement of the fees for the professionals of the ad hoc committee

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to the extent that they engaged in good faith negotiations on a plan and held their customer litigation in advance

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moving to the cases themselves, Your Honor, they are extremely expensive

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they've now moved to a pace of almost $50 million a month in fees with literally hundreds of lawyers, financial advisors, and bankers working on them practically full time

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the debtors really have no revenue producing operations and only minimal investment returns

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so every dollar spent in the case is essentially a dollar that creditors don't receive

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at approximately $1.5 million a day in expenses, every day counts

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for its part, the committee has been doing its job despite the challenges in the relationship between its members and the debtors

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in an effort to capitalize on the debtors vast digital currency holdings and to try to generate some income to offset the fees of the case

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as Mr. Gluckstein pointed out, the committee members and professionals put together a painstaking risk management plan for the hedging and monetization of the debtors' coins

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and worked with the debtors and pushed them very hard to advance that process

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the committee delivered that initial coin proposal in April, it's August and the debtors are now filing the motion to undertake that process

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unfortunately right at the point where the digital currency markets are seeing a broad sell off

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and the advisor being selected by the debtors to assist them in the process was vetted by and recommended to the debtors by the committee

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members themselves, over the debtors' alternative choices which we believed had less relevant experience and whose services would have been far more expensive

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the committee also pushed the debtors to invest in short term treasuries to obtain a higher interest rate than it proceeds through its accounts at Western Alliance

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the committee started this effort in March when the debtors were receiving minimal interest on their cash

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the debtors responded and renegotiated their banking arrangements and now disclose that they are receiving approximately 4% interest on their investments

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which is a growth number and it's certainly far better but it is still a point and a half less than the average yield on short term treasury notes at this point in time

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and the committee still hopes that the debtors can find a way to diversify their investments and increase the yield on their large cash holdings

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to try to offset fees in the case. The committee also pushed the debtors to launch the FTX 2.0 process and to move it quickly to avoid the fast moving efforts

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of other market participants like Coinbase and Gemini to fill the void that was left by the collapse of FTX.com

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while that process is underway, it has not moved as quickly as the debtors or the committee prefer and to date the committee has been troubled by the

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non-disclosure to the committee members of the names of the interested parties and the details of the proposals that they've submitted

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while we're working with the debtors to try to put more process protections in place, mind you your honor, process protections that we don't believe are necessary

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than the robust confidentiality protections in the committee bylaws to which the debtors are expressed third party beneficiaries

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we hope that the normal type of access provided to committee members in most chapter 11 cases will follow so that the committee members can directly participate in the process

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and help create more value for the estate. Again your honor, I really have to stress that this concern that the members of the committee might have some self interest

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in connection with that sale process is not accurate at all and it should never be used to try to prevent the committee members from being helpful in that process

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we all have a common goal of trying to get the best result. The committee has also evaluated the debtors efforts to sell assets and supported them at times

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and pushed back at them at times where it believes that value was left on the table or it was not the right time to sell. For example, as you know your honor

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the committee objected to the Sequoia heritage sale and we wound up through negotiations saving the estate approximately $1.35 million in penalties on the sale

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and improving the net proceeds thereof by about 7.5%. It's a drop in the bucket but it was something. Similarly, the committee did not believe that the debtors

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should sell one of their crown jewel assets which was their investment in the AI company named Anthropic and the committee appreciates that the debtors agreed to

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ultimately step back from that sales process in the wake of additional investments in the market in Anthropic at higher valuations and the markets continued investment

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in the market. The committee is now the primary competitor OpenAI, the owner of Chat GPT at truly dizzy valuations. Here importantly your honor is where a fundamental

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difference in perspective between the committee and the debtors arises. The debtors have the view with respect to our venture book that the customers never consented to their

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deposits being used to acquire assets and so those assets should be monetized quickly and at the best price available even sometimes at below the purchase price in order to create more

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cash to ultimately distribute to creditors. The creditors committee believes that we are where we are and that assets have inherent value whether people originally wanted to invest in them

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or not and that we're looking at an estate that's comprised of those assets and that this case is ultimately about driving up the ultimate creditor recoveries such that if an asset is worth more, if it is held for a longer

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duration, it should be. Anthropic again is a good example. FTX investment therein could be worth a multiple of its original investment and lead to better creditor recoveries over time. The IEX

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transaction is another good example and a good example of committee and debtor collaboration where their combined efforts led to a better negotiated outcome and IEX initially wanted. The committee has also

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worked with the debtors in connection with a number of actions that the debtors have commenced seeking to grow the estate's value. Specifically, the committee has worked with the debtors collaboratively on their investigation of pre-petitioned

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professionals and banks serving multiple joint 2004 motions, joining the meet and confers and allowing the debtors to take the lead where appropriate to avoid duplicative efforts and additional fees and the

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UCC has been lockstep with the debtors in their attempt to deal with the Bahamian JPL's unfounded attempts to wrest control of FTX.com property. Indeed, until mid-July and depending upon the team, until today, the UCC advisors have had a

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constructive dialogue with the debtors litigation team on the various investigations and causes of action brought to date. The committee also took, as you know, Your Honor, the Liebering Ore in connection with the ceiling of customer information where it believes in the

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virtue of its position and is glad that the court agreed. To give you a little bit of a window into how the committee operates, Your Honor, it meets each week and the committee members and professionals review all open work streams in the case. They make decisions collectively and carefully about how to proceed on the venture assets, the numerous litigation issues, the current 2.0 sale process, the planned discussions and issues, the management of tokens and the investment of the debtor's cash, among others. The committee also has a number of subcommittees in place to deal with

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certain of those larger issues and they meet on an even more frequent pace. The committee professionals also participated in planned discussions with the debtors and the ad hoc committee in May and in June and July with the debtors. But as the court is aware, the committee members were not permitted by the debtors to take part in those discussions, nor were any negotiations had at a principal level, even though I personally asked the debtors repeatedly to do so during the month of July. The point there, Your Honor, was,

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we believed that we can't lose time. We recognize that the debtors have a timeline. I think we all want that timeline to be shortened because of how expensive these cases are. And our view was, if the plan structure, which we believed was fairly set at the beginning of July or towards the end of June, was so set, we could bring in the actual committee members. They could meet with the debtors' principals and we could try to advance what's now supposed to be happening in mid-September into July and possibly July.

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We also asked if there was a possibility to have meetings towards the end of August or even Labor Day week because again, Your Honor, every day counts with the amount of fee

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burn that we have in this case. Our view is that the debtors and every party in interest in this case simply have to do better because the cost of waiting harms creditor recoveries. Our motion to mediate, which we'll hear at a different time, Your Honor, I just wanted to give a little background on the

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cause, is a plea to speed things up as part of your diagnostic process and we see eye to eye with every individual there as what agreed to be done in May, which will pair budgets with mass account można and

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p Opposing the debtors ultimately cutting debt every share and paying to buy. For the indebted parties who do not have strong rising credit rates are could I promise to have a

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have a

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You can't support us

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other important tasks and we agree they're important, we don't believe that any of them

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are true gating items to resolving the plan and advancing the process where issues can

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be dealt with along the way to confirmation.

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We're also fairly frustrated from the committee perspective with one of the reasons that has

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been cited for the delay, Your Honor.

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One of the reasons is that the ad hoc committee and the class action plaintiffs need more

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time to get up to speed and that the debtor said that the timeline was always longer.

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Our view is that timelines don't need to drive outcomes.

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We all know the general rule of time management.

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If you say something will take a day, it takes a day.

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If you say it'll take six weeks, it'll take six weeks unless you do everything you can

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to try to beat that timeline.

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And neither the ad hoc committee nor the class plaintiffs are newcomers to these cases.

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In fact, each filed their adversary proceedings essentially at the inception of these cases.

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The ad hoc committee also participated in a plan negotiations in May and the ad hoc

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council and certain of its members have been under non-disclosure agreements with the debtors

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for months.

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And the debtors have also had immensely populated virtual data rooms available for parties who

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are subject to an NDA.

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So the committee honestly doesn't understand the need to delay to provide more information

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to the ad hoc committees and the class action parties.

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Returning to our mediation request, Your Honor, from a status perspective, the reason we want

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a mediator there is to help speed things up.

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We believe Judge Fitzgerald is very experienced and even if not in a formal mediation session,

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she should be at and participate in any of the meetings that the parties have with each

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other so that if mediation actually needs to happen, which we believe it does, the debtors

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don't, you'll rule on that.

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If that needs to happen, Your Honor, there's no lead time.

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It's already ready to go.

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And hopefully Judge Fitzgerald being there will help the parties move things along more

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quickly.

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In the end, Your Honor, the committee wants to see the cases move faster to conclusion.

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We want to save money and we want to increase credit or recoveries.

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We believe that all parties in interest want that.

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And we want a collaborative, transparent, and inclusive process between the debtors

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and the committee members at the principal level.

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It is really not a hard ask and it is one that is the norm in most cases.

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Thank you for taking the time to hear the committee's update, Your Honor.

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I'm happy to answer any questions if you have any.

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None at this time.

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Anyone else want to be heard?

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May it please the court, Erin Broderth of Otherset Sutherland, on behalf of the ad

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hoc committee of non-U.S. customers of FTX.com.

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I'd like to begin with an acknowledgement of the invaluable contributions that both

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the debtors and the official committee have made to get us to where we are today.

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The filing of the draft plan at the end of July did mark a pivotal turning point in

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these cases into the plan negotiation phase.

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And the work undertaken by both the committee and the debtors to lay the foundation cannot

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be overstated.

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While there is certainly significant work left to be done to get to a confirmable and

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hopefully consensual plan by year end, the ad hoc committee believes that we are generally

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at the right starting place.

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With an initial plan construct on the table and the appropriate stakeholders now having

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a seat to negotiate.

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The official committee has stressed that the debtors should not pursue a unilateral plan

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approach.

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And we wholeheartedly agree.

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However, we also wholeheartedly agree with the debtors that the draft plan presents anything

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but a unilateral approach.

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It is an initial construct, which notably no stakeholder group, including the official

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committee, has had opposition to.

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The debtors purposely left a number of key inputs open to invite stakeholder feedback,

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and they have expressly committed to amending the plan to accommodate for the feedback that

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was received.

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Indeed, the plan term sheet listed a number of key open items to be negotiated with stakeholders,

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including the official committee.

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And that list includes each point of contention raised by the official committee in opposition

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to the draft plan.

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In short, we think the debtors have made abundantly clear that the draft plan is a start to an

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evolving process, and negotiations will continue.

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Instead the real issue seems to be that the official committee does not trust the debtors

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to actually take its input into account in an efficient and timely manner, given the

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history of negotiations that have occurred to date between the official committee and

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the debtors.

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We respect that the official committee has had a much more involved and longer track

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record with the debtors than has been afforded to the ad hoc committee to date.

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We're really not in a position to take sides with respect to what has transpired in the

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past.

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We can represent, however, that over the last several weeks we have had very productive

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discussions with both the debtors and the official committee regarding open items in

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the draft plan, as well as predicates to getting to a plan confirmation.

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The official committee has every right to voice its frustrations and demand improvements

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to the process going forward.

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But we'd like to now move forward with the right parties in the room and to proceed on

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a path of constructive dialogue to narrow the issues in dispute with some compromise

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in creativity and all the necessary take holders given an opportunity to participate, rather

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than have discussions hijacked to force a premature resolution of what are respectfully

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fairly limited issues of contention that the official committee has raised with respect

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to the draft plan.

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We think it's really important to emphasize that the ad hoc committee is a necessary party

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to these plan negotiations.

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We have over 40 members holding claims of nearly $900 million against the debtors on

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account of the misappropriation of customer assets from the FTX.com exchange.

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It's also worth noting that prior to the court's redaction ruling, we had over $2 billion in

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claims represented by the ad hoc committee and many forced to resign for fear of disclosure.

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Our members also represent a diverse cross section of the FTX.com customer base, from

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crypto industry pioneers to novice investors, from those that have no Chapter 11 familiarity

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to large investment institutions with deeper structuring expertise.

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We speak for both small and large claim holders.

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While Mr. Hanson is correct that we have a handful of secondary purchasers, all the rest

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are original holders.

305
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Our smallest holder has under $100,000 in claims.

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While each member of the official committee is an FTX.com customer, they nonetheless have

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fiduciary duties to all of the debtors' unsecured creditors, which obviously have differing

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and conflicting interests in some respects.

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As the independent voice of FTX.com customers, we are driven exclusively to maximize the

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value for FTX.com customers in recognition of their unique legal rights.

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We believe that the ad hoc committee and the official committee are generally aligned.

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However, as an estate fiduciary, the official committee is simply unable to advocate for

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the FTX.com customers on the key threshold legal issue in these cases of whether the

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FTX.com exchange assets, including the billions of identifiable value that was misappropriated

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from the exchange, belong to the estates, or whether the asset should be deemed held

316
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in trust for the distribution only to FTX.com customers.

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Indeed, despite its extremely active role in these cases, the official committee has

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yet to address the elephant in the room because it cannot do so on behalf of FTX.com customers

319
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as an estate fiduciary representing all general unsecured creditors.

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While there are a multitude of issues that must be resolved to get to confirmation, we

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do believe there's also a logical sequencing.

322
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Specifically it makes sense to us for the Bohemian Joint liquidators' jurisdictional

323
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claims to be addressed first, the customer ownership issues raised by the ad hoc committee

324
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and the class action group to be resolved in the context of a settlement under a plan,

325
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and then to tackle the remaining items in dispute, including those raised by the official

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committee.

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I'd also like to note that as for the claim that we should not wait for the input of other

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stakeholders, including the ad hoc committee, because we've had months of robust discussions

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and amount of information provided to us, respectfully the committee can't have it both

330
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ways.

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They've complained about the lack of negotiations with the debtors.

332
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They've complained about the lack of information given, and the ad hoc committee has been given

333
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significantly less than the official committee.

334
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But again, we want to look forward to collaborating with all stakeholders and ensuring that the

335
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plan negotiation process is fair, transparent, and inclusive, and to move full steam ahead

336
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to reach confirmation as soon as possible.

337
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Thank you.

338
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Thank you.

339
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Anyone else?

340
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All right.

341
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Well, it's obvious that there's some tension between the parties here.

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But it's difficult for me sitting here only seeing the surface of issues as to what's

343
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really going on behind the scenes.

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I don't understand the issue of the conflict that the debtors believe some of the committee

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members have.

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I'm not sure I understand the conflict.

347
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I think I understand the conflict, but I'd like more explanation of the conflict between

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the committee's ability to raise issues about FTX.com and the customer issue, whether the

349
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assets held that were in FTX.com belong to the customers or they belong to the estate.

350
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But I think there definitely needs to be a sharing of information here.

351
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We have NDAs in place, I assume, by everybody, correct?

352
00:43:28,860 --> 00:43:31,140
I mean, everybody are under an NDA.

353
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There are consequences for violating an NDA.

354
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So I expect unless the debtors can tell me why that certain information is not being

355
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shared with the committee because of a concern about a conflict of interest, I would need

356
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to know more about that and understand why the debtor believes they can't share that

357
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information.

358
00:43:56,740 --> 00:44:00,940
On the question of, and I understand there's a huge burn rate here.

359
00:44:00,940 --> 00:44:01,940
I get that.

360
00:44:01,940 --> 00:44:05,980
It's a big case, complex case.

361
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I would suspect that a lot of the burn rate at this point has to do with the marshalling

362
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of assets and the bringing of litigation against various parties.

363
00:44:18,940 --> 00:44:26,380
I'm not sure that the plan negotiations will lessen that burn rate.

364
00:44:26,380 --> 00:44:27,940
I mean, there's still going to have to be litigation.

365
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There's still going to have to be a marshalling of assets.

366
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Obviously everybody wants to see the plan go forward as quickly as possible because

367
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that will help reduce the burn rate to some extent.

368
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And to do that on a consensual basis obviously is the best way to go instead of having to

369
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litigate those issues and spend more money.

370
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So the issue of the mediation is not in front of me.

371
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I understood from the debtor's response to the, maybe I'm wrong.

372
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Correct me if I'm wrong.

373
00:45:00,020 --> 00:45:05,860
The debtor's response to the motion to mediate was that the debtors aren't necessarily opposed

374
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to it.

375
00:45:06,860 --> 00:45:12,780
I think the timeline is right at this point.

376
00:45:12,780 --> 00:45:14,180
Your Honor, correct.

377
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As I noted in my remarks as we, and we did file a response in response to the motion

378
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to shorten, we embraced mediation, the concept of mediation.

379
00:45:24,940 --> 00:45:28,420
We certainly agree.

380
00:45:28,420 --> 00:45:31,580
The disagreement is simply one of timing.

381
00:45:31,580 --> 00:45:36,340
The committee filed what they deemed to be an emergency motion asking, and in the order

382
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or the proposed order that you submitted to your honor in respect to that motion, they

383
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asked for mediation sessions with a date to be filled in in August, or the 23rd.

384
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Our position has been that we want to have debtor-led plan negotiations with stakeholders

385
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around the table to crystallize the issues.

386
00:46:00,700 --> 00:46:06,220
The committee has a good sense and they've articulated their issues with the plan.

387
00:46:06,220 --> 00:46:08,900
Other stakeholders have had less of an opportunity to do so.

388
00:46:08,900 --> 00:46:12,860
We think issues need to be narrowed, and we think that will facilitate a resolution and

389
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a consensual plan.

390
00:46:13,860 --> 00:46:19,660
We are optimistic, Your Honor, that we will get to a consensual plan in this case.

391
00:46:19,660 --> 00:46:20,660
That's my personal view.

392
00:46:20,660 --> 00:46:25,540
But we need the opportunity to do that, and our position is just simply that we need to

393
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have the opportunity over the course of the next few weeks to have the meetings that are

394
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already scheduled on calendar, identify, discuss narrow issues, go through the agenda that

395
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I outlined on the slide that Mr. Ray has put out to parties, and allow us to function as

396
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the debtor to try to get as far as we can on a plan.

397
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Plan mediation is an important tool.

398
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As I said in my earlier remarks, we suggest that given the fact that these are all plan-related

399
00:46:57,180 --> 00:47:04,220
issues that Judge Fitzgerald expand her mandate, the committee agreed with that suggestion.

400
00:47:04,220 --> 00:47:07,580
So this is simply an issue at this point, Your Honor, as to whether the court should

401
00:47:07,580 --> 00:47:16,700
order mediation immediately versus the parties moving to mediation after a short negotiation

402
00:47:16,700 --> 00:47:19,060
period over the next four to six weeks.

403
00:47:19,060 --> 00:47:22,900
That's all we're talking about here, and I don't think anything Mr. Hanson said this

404
00:47:22,900 --> 00:47:25,820
afternoon differs from that.

405
00:47:25,820 --> 00:47:31,220
And so from the debtor's perspective, all we're asking to do is to continue with the

406
00:47:31,220 --> 00:47:32,220
process we're on.

407
00:47:32,220 --> 00:47:36,220
We are making progress, and despite some of these issues, and I'll address the information

408
00:47:36,220 --> 00:47:41,260
in a moment, Your Honor, based on Your Honor's comments, we are making significant progress.

409
00:47:41,260 --> 00:47:45,860
Despite there being a little bit of airing of the grievances here this afternoon, we're

410
00:47:45,860 --> 00:47:49,940
making tremendous progress in these cases, including, as Mr. Hanson acknowledged, on

411
00:47:49,940 --> 00:47:54,700
the plan and on the framework plan we filed at the end of July.

412
00:47:54,700 --> 00:47:58,820
I understand the committee would like the process to move faster.

413
00:47:58,820 --> 00:48:02,340
We all would like the process to move faster, but we believe the correct process is in place.

414
00:48:02,340 --> 00:48:04,380
So Your Honor is 100% correct.

415
00:48:04,380 --> 00:48:09,580
The only question presented by the motion and the briefing that's already been put in

416
00:48:09,580 --> 00:48:16,460
and more to come on the mediation motion is simply a question of whether we are going

417
00:48:16,460 --> 00:48:21,500
to immediately commence plan mediation or whether we're going to do it on the timeline

418
00:48:21,500 --> 00:48:26,900
that we set out after we've had an opportunity to have discussions with the public.

419
00:48:26,900 --> 00:48:29,780
I wanted to address Your Honor's comments on the information, but-

420
00:48:29,780 --> 00:48:30,780
Yeah.

421
00:48:30,780 --> 00:48:34,700
Is that a withholding information from the committee?

422
00:48:34,700 --> 00:48:40,500
Your Honor, I'm happy to have further conversations with Mr. Hanson.

423
00:48:40,500 --> 00:48:46,940
The only information that I think was the subject of the discussion, and he said in

424
00:48:46,940 --> 00:48:58,620
his comments today, the sale process for the fate of the FTX.com exchange that is still

425
00:48:58,620 --> 00:49:04,300
in relatively early phase has, as I said earlier, significant interest from third parties.

426
00:49:04,300 --> 00:49:09,580
There's information that's starting to come in on that process to Pirella and the other

427
00:49:09,580 --> 00:49:10,740
debtor advisors.

428
00:49:10,740 --> 00:49:18,460
We have asked for an actual NDA to be signed in connection with the receipt of that information.

429
00:49:18,460 --> 00:49:25,100
That process is, if not, I think is actually complete at this point, but I could be mistaken.

430
00:49:25,100 --> 00:49:26,820
If not, it's very close.

431
00:49:26,820 --> 00:49:29,780
Then information on that particular issue will be shared.

432
00:49:29,780 --> 00:49:34,420
There's certainly been no general withholding of information from the committee of any kind.

433
00:49:34,420 --> 00:49:37,340
I think Mr. Hanson alluded to in his comments, there's a data room that's available that

434
00:49:37,340 --> 00:49:40,500
has mountains of information.

435
00:49:40,500 --> 00:49:43,780
Under previous discussions that we've had earlier in the case, where we worked through

436
00:49:43,780 --> 00:49:51,220
a number of issues with the committee, Mr. Wray directed all kinds of documents that

437
00:49:51,220 --> 00:49:55,780
had been held on a professional's basis to be available to the committee.

438
00:49:55,780 --> 00:49:59,900
I think what the comments today are on a very narrow issue that I believe is actually resolved

439
00:49:59,900 --> 00:50:01,940
at this point, but I don't want to speak for Mr. Hanson.

440
00:50:01,940 --> 00:50:10,780
But certainly from the debtor's perspective, we are not withholding information in any

441
00:50:10,780 --> 00:50:11,780
way.

442
00:50:11,780 --> 00:50:12,780
Mr. Hanson.

443
00:50:12,780 --> 00:50:16,780
Thank you, again, Chris Hanson with Paul Hastings on behalf of the official committee.

444
00:50:16,780 --> 00:50:21,740
In the main, Mr. Gluckstein's right, this is on the dot com exchange sale process.

445
00:50:21,740 --> 00:50:28,540
So to give the court a little bit of color, the debtor went out with kind of an RFP process,

446
00:50:28,540 --> 00:50:32,940
trying to get proposals in with respect to that asset.

447
00:50:32,940 --> 00:50:39,460
And from the committee's perspective, the identities of those parties, the terms of

448
00:50:39,460 --> 00:50:44,700
their indications of interest should be available for the committee members' evaluation.

449
00:50:44,700 --> 00:50:48,380
It's very hard to do your fiduciary duty when you don't have access to that information,

450
00:50:48,380 --> 00:50:50,340
and only the professionals do.

451
00:50:50,340 --> 00:50:51,340
That's why.

452
00:50:51,340 --> 00:50:56,900
So what we started to talk about with the debtors was we spell our bylaws under which

453
00:50:56,900 --> 00:51:01,780
you released all of this previously designated PEO information, contained very strict confidentiality

454
00:51:01,780 --> 00:51:07,180
provisions, and they actually make the debtors a third-party beneficiary.

455
00:51:07,180 --> 00:51:11,140
And the debtor said, well, we want you to sign an NDA nonetheless.

456
00:51:11,140 --> 00:51:15,180
And really the reason for the NDA, when you boil it all down, is because they want to

457
00:51:15,180 --> 00:51:20,380
insert a no-contact provision in the NDA, which essentially says, listen, you committee

458
00:51:20,380 --> 00:51:25,220
members are not permitted to have direct contact with any party.

459
00:51:25,220 --> 00:51:26,940
That's not about 2.0.

460
00:51:26,940 --> 00:51:32,060
Any party who demonstrates a written indication of interest with respect to a material asset

461
00:51:32,060 --> 00:51:34,580
of the estate is just not appropriate.

462
00:51:34,580 --> 00:51:40,540
Our response was, how about we ask you if we can speak with them?

463
00:51:40,540 --> 00:51:43,260
If the bidder says yes, you guys can chaperone.

464
00:51:43,260 --> 00:51:44,260
It's totally fine.

465
00:51:44,260 --> 00:51:48,300
To date, the answer to that has been no.

466
00:51:48,300 --> 00:51:51,420
Beyond that, we also wanted to talk a little bit about the process.

467
00:51:51,420 --> 00:51:55,900
There's going to be a clearing of an initial round of parties into a next round, ultimately,

468
00:51:55,900 --> 00:51:58,980
hopefully into a stocking horse, and then an auction process.

469
00:51:58,980 --> 00:52:02,500
In our experience, and personally in my own experience, both representing debtors and

470
00:52:02,500 --> 00:52:07,220
creditors committees, as well as lenders and ad hoc committees, we usually get access to

471
00:52:07,220 --> 00:52:09,540
that process, to the parties in that process.

472
00:52:09,540 --> 00:52:13,020
We have a better fundamental understanding of how the decisions are being made, and we

473
00:52:13,020 --> 00:52:17,420
get to have input on those, especially from a committee perspective, because it's important.

474
00:52:17,420 --> 00:52:19,580
The committee members, again, they have fiduciary duty.

475
00:52:19,580 --> 00:52:22,300
They also have unique knowledge within the space.

476
00:52:22,300 --> 00:52:27,060
The answer we got there, too, was no.

477
00:52:27,060 --> 00:52:31,780
We started to try to work on a protocol of, let's try to describe how this might work.

478
00:52:31,780 --> 00:52:35,940
Candidly, Mr. Dietrich and I said, let's just tear that up.

479
00:52:35,940 --> 00:52:40,380
If you want us to sign a non-disclosure agreement, we'll try to get the committee members to

480
00:52:40,380 --> 00:52:41,380
sign that.

481
00:52:41,380 --> 00:52:44,420
Again, we don't think it's necessary, but if that's the process you want, we'll do it.

482
00:52:44,420 --> 00:52:47,500
We've got to get the information flowing, and then take it step by step.

483
00:52:47,500 --> 00:52:52,100
Obviously, our concern is, because the initial answers were no, and mind you, we're not at

484
00:52:52,100 --> 00:52:53,100
that phase yet.

485
00:52:53,100 --> 00:52:55,260
We're not at the phase of selecting a stocking horse.

486
00:52:55,260 --> 00:53:00,340
We're not at the phase of basically talking and figuring out who's clearing from first

487
00:53:00,340 --> 00:53:03,780
round to second round, but that's going to come up, and it's really important for the

488
00:53:03,780 --> 00:53:05,940
committee members themselves to participate in that.

489
00:53:05,940 --> 00:53:10,220
That's one example, but again, it's not just with respect to 2.0.

490
00:53:10,220 --> 00:53:12,780
This no-contact provision is far broader than that.

491
00:53:12,780 --> 00:53:17,060
It's any indication of interest by a party with respect to a material asset of the debtor's

492
00:53:17,060 --> 00:53:19,020
regardless of what that is.

493
00:53:19,020 --> 00:53:24,100
Again, the understanding there is, let's try to work that out.

494
00:53:24,100 --> 00:53:30,900
When we inquired as to what is the heightened concern here, you have the standard concerns

495
00:53:30,900 --> 00:53:35,660
which exist in every situation, which are been chilling, and it's the debtor's process

496
00:53:35,660 --> 00:53:39,300
that they need to control, but obviously the committee has a duty, so there's always a

497
00:53:39,300 --> 00:53:40,300
natural tension.

498
00:53:40,300 --> 00:53:46,060
We were getting a pretty heavy undertone of maybe you have a self-interest in the process.

499
00:53:46,060 --> 00:53:47,060
You have market makers.

500
00:53:47,060 --> 00:53:51,300
The debtor's statement said you have market makers on your committee.

501
00:53:51,300 --> 00:53:55,420
I guess that that was a statement to say the market makers are going to try to talk to

502
00:53:55,420 --> 00:54:00,260
the parties bidding in 2.0 to see if they can be a market maker on their exchange in

503
00:54:00,260 --> 00:54:02,260
the future if they're successful.

504
00:54:02,260 --> 00:54:03,260
That's not going to happen.

505
00:54:03,260 --> 00:54:06,420
The members of this committee have a job to do as committee members.

506
00:54:06,420 --> 00:54:07,420
They understand that.

507
00:54:07,420 --> 00:54:10,380
They recognize what they have to do.

508
00:54:10,380 --> 00:54:19,340
We think that all of these basically guardrails that are trying to be put up to basically

509
00:54:19,340 --> 00:54:22,340
say what the committee can and cannot do are unfair.

510
00:54:22,340 --> 00:54:26,100
They make it hard for us to be able to do our fiduciary duty because, again, we're

511
00:54:26,100 --> 00:54:27,100
just professionals.

512
00:54:27,100 --> 00:54:29,780
We have to take our guidance from our members.

513
00:54:29,780 --> 00:54:32,460
It creates a very complex situation, Judge.

514
00:54:32,460 --> 00:54:35,860
There have been some other instances where we have said, can we share this with the committee

515
00:54:35,860 --> 00:54:36,860
members?

516
00:54:36,860 --> 00:54:37,860
The initial reaction was no.

517
00:54:37,860 --> 00:54:42,420
It's been really hard to get through that, and we've gotten further along.

518
00:54:42,420 --> 00:54:43,420
You'll see a motion from the debtors.

519
00:54:43,420 --> 00:54:47,420
I don't want to say any names, but with respect to coin management and who they've selected,

520
00:54:47,420 --> 00:54:52,940
sure, I assume at appropriate times on a public basis without sharing any private information,

521
00:54:52,940 --> 00:54:56,620
I think our members would like to have access to those parties to be able to ensure that

522
00:54:56,620 --> 00:55:01,420
they understand what the committee members' views are because they're in that world.

523
00:55:01,420 --> 00:55:04,740
The collective professional set here really isn't in that world.

524
00:55:04,740 --> 00:55:05,740
So that's that.

525
00:55:05,740 --> 00:55:12,260
I just wanted to address quickly the conflict that Ms. Broderick brought up.

526
00:55:12,260 --> 00:55:13,940
We don't see that at all.

527
00:55:13,940 --> 00:55:18,080
We don't believe that the official committee has any conflict of interest in analyzing

528
00:55:18,080 --> 00:55:24,460
and making recommendations with respect to essentially how you split up the plan proceeds

529
00:55:24,460 --> 00:55:28,180
between dot-com customers, U.S. customers, other parties.

530
00:55:28,180 --> 00:55:32,060
The debtors and we have been hard at work on those issues constantly.

531
00:55:32,060 --> 00:55:36,860
And candidly, Ms. Broderick said we have yet to make any recommendations.

532
00:55:36,860 --> 00:55:39,740
We have, and we've been in dialogue with the debtors.

533
00:55:39,740 --> 00:55:43,180
It's one of our big issues that we think that we can get through pretty quickly and that

534
00:55:43,180 --> 00:55:46,180
we can advance the plan.

535
00:55:46,180 --> 00:55:47,180
That's a flavor, Your Honor.

536
00:55:47,180 --> 00:55:50,180
I know we're digging pretty deep here today, but I want to make sure you have a flavor

537
00:55:50,180 --> 00:55:51,180
for what's going on.

538
00:55:51,180 --> 00:55:58,220
Where are the committee members on the idea of signing an additional NDA?

539
00:55:58,220 --> 00:56:02,820
We as professionals have worked hard with the debtors' professionals to try to negotiate

540
00:56:02,820 --> 00:56:04,540
an acceptable form.

541
00:56:04,540 --> 00:56:08,140
We don't love this no-contact provision that's in it.

542
00:56:08,140 --> 00:56:11,500
I think we've recommended to the committee members that they should go ahead and sign

543
00:56:11,500 --> 00:56:13,100
it just so that we get it behind us.

544
00:56:13,100 --> 00:56:16,900
If this is really, really critically important to the debtors, our view is, well, let's clear

545
00:56:16,900 --> 00:56:21,220
that issue and let's get to the real meat here, which is get us the bidder names, get

546
00:56:21,220 --> 00:56:26,020
us the terms of the bids, and then let's talk about what happens in round two.

547
00:56:26,020 --> 00:56:30,900
For example, one of the protocol provisions was you don't get access to any of the bidders

548
00:56:30,900 --> 00:56:34,900
until we pick a stocking horse or we're about to pick a stocking horse, and then you get

549
00:56:34,900 --> 00:56:39,860
basically to submit questions in advance, and then you can have one call with that stocking

550
00:56:39,860 --> 00:56:41,860
horse, so they answer those questions in advance.

551
00:56:41,860 --> 00:56:42,860
It's not an earnings call.

552
00:56:42,860 --> 00:56:43,860
It's a fluid process.

553
00:56:43,860 --> 00:56:47,060
This is what our clients have to do.

554
00:56:47,060 --> 00:56:51,460
Our view was, I'm not going to agree to that, but let's all step back, try to build trust

555
00:56:51,460 --> 00:56:55,340
and confidence with each other, and see how this process goes.

556
00:56:55,340 --> 00:56:59,580
What we said to the debtors, and they understand this, is if as we start to move through this

557
00:56:59,580 --> 00:57:04,380
process, we're not getting the access, we'll either go to the mediator if she's available

558
00:57:04,380 --> 00:57:08,180
and is part of this process, because remember, we asked in the motion to expend if we need

559
00:57:08,180 --> 00:57:13,540
to the mediation help to the 2.0 process, and then also if we have to, we'd come back

560
00:57:13,540 --> 00:57:14,540
before your honor.

561
00:57:14,540 --> 00:57:20,860
It's going to start moving fast at some point, so of course, it's an imperfect thing to go

562
00:57:20,860 --> 00:57:22,740
to a mediator or come to a court.

563
00:57:22,740 --> 00:57:26,020
The other thing I'd say on the mediation front, Judge, I agree with Mr. Goldstein.

564
00:57:26,020 --> 00:57:32,060
It's a question of timing for us, and our fear is just that as everything gets staged,

565
00:57:32,060 --> 00:57:34,020
the timeline drags out.

566
00:57:34,020 --> 00:57:37,900
We had thought, honestly, that the disclosure statement was going to be something that,

567
00:57:37,900 --> 00:57:40,820
at least in the timeline that was announced before, that we would be doing that before

568
00:57:40,820 --> 00:57:41,820
the end of the year.

569
00:57:41,820 --> 00:57:46,660
I saw on today's timeline that that's now a January event.

570
00:57:46,660 --> 00:57:50,020
We recognize that obviously there's a lot of notice that goes into a disclosure statement

571
00:57:50,020 --> 00:57:53,820
like this, but we just had the customer bar date, and before that, the non-customer bar

572
00:57:53,820 --> 00:57:54,820
date.

573
00:57:54,820 --> 00:57:57,100
I think those processes weren't perfect.

574
00:57:57,100 --> 00:57:58,100
It's not anybody's fault.

575
00:57:58,100 --> 00:58:02,140
The portal had some issues, but those get fixed regularly.

576
00:58:02,140 --> 00:58:06,460
That moved pretty quickly, so we think there's no reason to delay that, but coming back to

577
00:58:06,460 --> 00:58:10,180
the mediation point, I've been involved in a lot of mediations, your honor.

578
00:58:10,180 --> 00:58:13,780
Some of them are very formal, where the mediator wants to hear from one side, they want to

579
00:58:13,780 --> 00:58:14,780
hear from another side.

580
00:58:14,780 --> 00:58:17,820
There's a shuttle diplomacy process that plays out.

581
00:58:17,820 --> 00:58:22,060
I've also been in plenty of more fluid mediations, where the mediator attends meetings between

582
00:58:22,060 --> 00:58:26,740
parties, listens to the parties as they discuss issues so that the mediator understands what

583
00:58:26,740 --> 00:58:30,860
everybody's concerns are, and then the parties use that mediator as a potential sounding

584
00:58:30,860 --> 00:58:35,180
board if they feel that they're at a position where they're stuck.

585
00:58:35,180 --> 00:58:38,700
We do feel that we're a little bit stuck, because again, we asked to meet with the debtors

586
00:58:38,700 --> 00:58:39,700
for the entirety of July.

587
00:58:39,700 --> 00:58:44,100
At first, the requests were ignored, and at the end, the debtors told us, I think it was

588
00:58:44,100 --> 00:58:47,740
probably two or three days before they filed their plan, we can meet on a Saturday.

589
00:58:47,740 --> 00:58:51,380
I think our response to that was, we're not going to check that box, it's fine.

590
00:58:51,380 --> 00:58:54,780
You can file the plan term sheet, and we'll try and talk right away, but can we please

591
00:58:54,780 --> 00:58:56,140
meet in August?

592
00:58:56,140 --> 00:58:57,860
Nothing happened for the entirety of August.

593
00:58:57,860 --> 00:58:58,860
Now we're having our first meetings in mid-September.

594
00:58:58,860 --> 00:59:03,340
It's not early September, it's the 11th and 12th, and we're flying people in from all

595
00:59:03,340 --> 00:59:04,540
over the world for that.

596
00:59:04,540 --> 00:59:11,140
I think our quest on the side of the mediation is, get Judge Fitzgerald up to speed on these

597
00:59:11,140 --> 00:59:12,140
plan issues.

598
00:59:12,140 --> 00:59:13,700
Let her attend these meetings.

599
00:59:13,700 --> 00:59:14,700
I get it.

600
00:59:14,700 --> 00:59:18,100
We're at the end of August now, it's hard to get anything on the calendar for next week

601
00:59:18,100 --> 00:59:21,580
or the Labor Day week, it would have been great if we could, but have her attend and

602
00:59:21,580 --> 00:59:25,340
have her be a part of the process so that she can learn and be there, and so what we

603
00:59:25,340 --> 00:59:28,980
don't have to do, it's not that big of an additional expense.

604
00:59:28,980 --> 00:59:33,860
So what we don't have to do is wind up talking amongst ourselves, potentially reaching an

605
00:59:33,860 --> 00:59:38,020
impasse, then educating the mediator, writing position statements, setting ourselves up

606
00:59:38,020 --> 00:59:42,780
for that shuttle diplomacy process that then somehow otherwise delays the plan timeline.

607
00:59:42,780 --> 00:59:45,940
That would be a travesty with the amount of money that's being spent here, and I agree

608
00:59:45,940 --> 00:59:47,180
with Your Honor.

609
00:59:47,180 --> 00:59:51,700
I don't mean to imply that money is being spent on things that are not important.

610
00:59:51,700 --> 00:59:57,140
It is, but it's not going to stop, and the only thing that we feel that'll really slow

611
00:59:57,140 --> 01:00:02,420
it down or end it effectively is getting to confirmation more quickly and getting to the

612
01:00:02,420 --> 01:00:05,460
effective date more quickly, because then when we get to the post-reorder state, there's

613
01:00:05,460 --> 01:00:11,900
obviously a lot less of courtroom issues, multitude of professionals, et cetera.

614
01:00:11,900 --> 01:00:16,380
Well, let me ask both parties about the information issue.

615
01:00:16,380 --> 01:00:21,700
Are you close to resolving that issue, or is that something that you need me to resolve,

616
01:00:21,700 --> 01:00:25,580
or is it something that the mediator could get involved in and resolve as you collect

617
01:00:25,580 --> 01:00:26,580
steam?

618
01:00:26,580 --> 01:00:31,580
Well, Your Honor, I would say before Mr. Collection speaks, I think we're close.

619
01:00:31,580 --> 01:00:34,580
I mean, we, I sent over a couple of comments to the debtor last night on the NDA.

620
01:00:34,580 --> 01:00:35,580
They were not controversial.

621
01:00:35,580 --> 01:00:39,860
I think they're going to be okay with them, and we would recommend that our members sign

622
01:00:39,860 --> 01:00:44,780
them, and the debtors have already committed to then giving the members the information

623
01:00:44,780 --> 01:00:46,400
at the initial stage.

624
01:00:46,400 --> 01:00:49,900
It's really what comes next, and I think, to be honest, Judge, we're going to try not

625
01:00:49,900 --> 01:00:50,900
to bother you.

626
01:00:50,900 --> 01:00:53,340
I think we've all committed to work with each other to try to get through that process.

627
01:00:53,340 --> 01:00:56,460
It's just that I wanted you to have a flavor for that protocol, because if we do run into

628
01:00:56,460 --> 01:01:01,220
a situation which is, no, you can't talk to a bitter period, not even with us being around,

629
01:01:01,220 --> 01:01:03,580
we don't think this is appropriate, and so we're going to be right back in front of you

630
01:01:03,580 --> 01:01:04,580
or the mediator.

631
01:01:04,580 --> 01:01:10,460
My request would be, let us see if we can work it out, understand.

632
01:01:10,460 --> 01:01:13,980
Now you have a bit more of a flavor for what we think we're going to face, and I hope we

633
01:01:13,980 --> 01:01:14,980
don't face it.

634
01:01:14,980 --> 01:01:15,980
But, Mr. Gwaston, I'm sorry.

635
01:01:15,980 --> 01:01:19,060
Let me ask one more question, though, Mr. Hanson.

636
01:01:19,060 --> 01:01:23,460
This is not information that you think you need to have for the plan negotiation process,

637
01:01:23,460 --> 01:01:25,460
is that right, or is it?

638
01:01:25,460 --> 01:01:26,460
No, Your Honor.

639
01:01:26,460 --> 01:01:30,380
On the plan negotiation process, I think we're good.

640
01:01:30,380 --> 01:01:35,980
We, from a creditors' committee perspective, are kind of in violent agreement on a lot of

641
01:01:35,980 --> 01:01:37,260
what's in the plan with the debtors.

642
01:01:37,260 --> 01:01:39,820
We worked very hard together on that.

643
01:01:39,820 --> 01:01:44,180
There's a few issues that we've highlighted in our pleading.

644
01:01:44,180 --> 01:01:46,300
One is this split between customers, non-customers.

645
01:01:46,300 --> 01:01:48,020
Let's just call it that.

646
01:01:48,020 --> 01:01:50,100
It's more complex than that, but we'll call it that.

647
01:01:50,100 --> 01:01:55,240
The other one is the use of a recovery rights sober or some type of tokenized distribution

648
01:01:55,240 --> 01:01:58,100
in connection with the plan.

649
01:01:58,100 --> 01:02:01,820
And then the other one is post reorganization governance, which everybody wants to put at

650
01:02:01,820 --> 01:02:05,580
the end of the timeline, but it's an important issue for everyone.

651
01:02:05,580 --> 01:02:10,980
And that's who compromises the board of directors, who's the actual liquidating trustee, who's

652
01:02:10,980 --> 01:02:16,900
in charge of the venture book, the coins that are left over, things like that, the litigation.

653
01:02:16,900 --> 01:02:19,300
That's a pretty integral part of the process.

654
01:02:19,300 --> 01:02:20,300
We have our views.

655
01:02:20,300 --> 01:02:21,300
We don't want to air them here.

656
01:02:21,300 --> 01:02:22,300
It's not appropriate.

657
01:02:22,300 --> 01:02:23,300
We should talk about them with the debtors.

658
01:02:23,300 --> 01:02:25,780
But those are the main issues that we had, Your Honor.

659
01:02:25,780 --> 01:02:30,020
So no, I think from an information perspective, we have what we need at a committee member

660
01:02:30,020 --> 01:02:33,220
level for the plan.

661
01:02:33,220 --> 01:02:38,580
The dot com exchange sale process, it plays into the plan.

662
01:02:38,580 --> 01:02:40,980
It's another key asset.

663
01:02:40,980 --> 01:02:46,500
And participating in that process on behalf of committee members independently is important

664
01:02:46,500 --> 01:02:49,380
for them to be able to carry out the fiduciary duty.

665
01:02:49,380 --> 01:02:54,800
But it's also important for them so that they can really candidly talk to bidders and understand

666
01:02:54,800 --> 01:02:59,820
their view of what a post reorg exchange looks like so that they can understand better these

667
01:02:59,820 --> 01:03:02,180
issues about recovery tokens and other things.

668
01:03:02,180 --> 01:03:05,660
So they do overlap a bit as well.

669
01:03:05,660 --> 01:03:09,060
So I'm happy to give the parties then the opportunity to work out the issues on the

670
01:03:09,060 --> 01:03:10,620
information sharing side.

671
01:03:10,620 --> 01:03:18,260
So then the only really, and it's not before me today, is the mediation of the plan and

672
01:03:18,260 --> 01:03:22,860
whether to get Judge Fitzgerald involved now or to wait to see if the parties can work

673
01:03:22,860 --> 01:03:27,180
things out.

674
01:03:27,180 --> 01:03:30,580
Not prejudging anything at this point, but I see a couple of problems with getting Judge

675
01:03:30,580 --> 01:03:31,780
Fitzgerald involved now.

676
01:03:31,780 --> 01:03:33,900
One, is it really an official mediation?

677
01:03:33,900 --> 01:03:40,100
If it's not an official mediation, is it covered by the mediation privilege that would be covered

678
01:03:40,100 --> 01:03:41,100
by our local rules?

679
01:03:41,100 --> 01:03:44,820
That would be one concern that I have.

680
01:03:44,820 --> 01:03:49,780
And two, if the parties can work it out on their own, I would rather see that happen

681
01:03:49,780 --> 01:03:59,860
than get Judge Fitzgerald involved now as opposed to maybe a month from now.

682
01:03:59,860 --> 01:04:07,300
But we'll deal with that when we get to the motion, your motion to speed up the mediation

683
01:04:07,300 --> 01:04:08,300
process.

684
01:04:08,300 --> 01:04:13,300
But those are kind of my initial thoughts to think about as we get to that point.

685
01:04:13,300 --> 01:04:16,300
I appreciate that, Your Honor.

686
01:04:16,300 --> 01:04:21,380
I don't want to belabor Brian Gluckstein for the debtors, but just to be clear, and I understand

687
01:04:21,380 --> 01:04:27,140
Mr. Hanson wanted to give the court a flavor of this, and this is taking place obviously

688
01:04:27,140 --> 01:04:28,500
on the record.

689
01:04:28,500 --> 01:04:36,340
As we understand it, the NDA on the exchange sale process, despite the back and forth and

690
01:04:36,340 --> 01:04:39,140
negotiations that happened, is complete.

691
01:04:39,140 --> 01:04:43,700
And so the information will proceed to be shared.

692
01:04:43,700 --> 01:04:47,940
This issue, we did ask for a formal NDA with respect to this process.

693
01:04:47,940 --> 01:04:49,980
Highly sensitive sale information.

694
01:04:49,980 --> 01:04:52,500
We've been relying on the bylaws for other issues.

695
01:04:52,500 --> 01:04:57,460
These are the committee members, no doubt are discharging their fiduciary duties, but

696
01:04:57,460 --> 01:05:00,020
they are unrestricted cryptocurrency traders.

697
01:05:00,020 --> 01:05:01,020
That is a fact.

698
01:05:01,020 --> 01:05:04,460
They have not agreed to restrict themselves for purposes of trading.

699
01:05:04,460 --> 01:05:09,500
And so an NDA that has appropriate use restrictions and the like, we thought was critical before

700
01:05:09,500 --> 01:05:15,220
people are talking to prospective buyers of assets, customer lists, et cetera.

701
01:05:15,220 --> 01:05:16,220
So we asked for that.

702
01:05:16,220 --> 01:05:19,340
We've obviously had a disagreement, as Your Honor has now heard this afternoon over the

703
01:05:19,340 --> 01:05:20,340
contents of that.

704
01:05:20,340 --> 01:05:21,340
I believe that's resolved.

705
01:05:21,340 --> 01:05:25,220
So I don't believe that this issue will continue to be one.

706
01:05:25,220 --> 01:05:30,540
Obviously, to the extent we are unable to resolve these issues, the committee, I have

707
01:05:30,540 --> 01:05:32,140
no doubt, will come back to Your Honor.

708
01:05:32,140 --> 01:05:35,780
But I believe that Your Honor's involvement or mediator's involvement in the information

709
01:05:35,780 --> 01:05:36,780
sharing issues will not be necessary.

710
01:05:36,780 --> 01:05:37,780
Okay.

711
01:05:37,780 --> 01:05:38,780
Thank you.

712
01:05:38,780 --> 01:05:39,780
All right.

713
01:05:39,780 --> 01:05:45,540
So with that, let's move on to the second agenda item for today.

714
01:05:45,540 --> 01:05:46,540
Thank you, Your Honor.

715
01:05:46,540 --> 01:05:47,540
So moving to the-

716
01:05:47,540 --> 01:05:48,540
Your Honor, would it be possible-

717
01:05:48,540 --> 01:05:49,540
Oh, Mr. Accusing.

718
01:05:49,540 --> 01:05:50,540
Yes.

719
01:05:50,540 --> 01:05:51,540
Would it be possible to take a five-minute break?

720
01:05:51,540 --> 01:05:52,540
I'm sorry to request it.

721
01:05:52,540 --> 01:05:53,540
Sure.

722
01:05:53,540 --> 01:05:54,540
No problem.

723
01:05:54,540 --> 01:05:55,540
Let's take a 10-minute recess.

724
01:05:55,540 --> 01:05:56,540
We'll reconvene at 2.15.

725
01:05:56,540 --> 01:05:57,540
Okay.

726
01:05:57,540 --> 01:05:58,540
Come on.

727
01:05:58,540 --> 01:06:14,720
Great.

728
01:06:44,720 --> 01:06:46,720
I'll try to look at my email.

729
01:07:14,720 --> 01:07:17,720
Hey, I'm Tim Brown.

730
01:07:44,720 --> 01:07:47,720
Okay.

731
01:08:14,720 --> 01:08:16,720
So all these guys are able to get visas to come in, right?

732
01:08:16,720 --> 01:08:18,720
What does he say?

733
01:08:18,720 --> 01:08:20,720
How does the KYC process work?

734
01:08:20,720 --> 01:08:22,720
I don't know. This is a TSA.

735
01:08:22,720 --> 01:08:24,720
Yeah, I think so.

736
01:08:24,720 --> 01:08:26,720
They all come with a name.

737
01:08:26,720 --> 01:08:28,720
It's fun to see.

738
01:08:28,720 --> 01:08:30,720
Okay.

739
01:08:30,720 --> 01:08:42,720
So, I'm going to go ahead and start with the

740
01:08:42,720 --> 01:08:44,720
process.

741
01:09:12,720 --> 01:09:14,720
Okay.

742
01:09:42,720 --> 01:09:44,720
Okay.

743
01:10:12,720 --> 01:10:14,720
Okay.

744
01:10:42,720 --> 01:10:44,720
Okay.

745
01:11:12,720 --> 01:11:14,720
Okay.

746
01:11:42,720 --> 01:11:44,720
Okay.

747
01:12:12,720 --> 01:12:14,720
Okay.

748
01:12:42,720 --> 01:12:44,720
Okay.

749
01:13:12,720 --> 01:13:14,720
Okay.

750
01:13:42,720 --> 01:13:44,720
Okay.

751
01:14:12,720 --> 01:14:14,720
Okay.

752
01:15:12,720 --> 01:15:14,720
Okay.

753
01:15:42,720 --> 01:15:44,720
Okay.

754
01:16:12,720 --> 01:16:14,720
Okay.

755
01:16:42,720 --> 01:16:44,720
Okay.

756
01:17:12,720 --> 01:17:14,720
Okay.

757
01:18:12,720 --> 01:18:14,720
Okay.

758
01:18:42,720 --> 01:18:44,720
All right.

759
01:18:44,720 --> 01:18:46,720
Thank you, Your Honor.

760
01:18:46,720 --> 01:18:48,720
Again, for the record, Brian Glexteen, solvent and Cromwell

761
01:18:48,720 --> 01:18:50,720
model.

762
01:18:50,720 --> 01:18:52,720
Thank you.

763
01:18:52,720 --> 01:18:54,720
Thank you.

764
01:18:54,720 --> 01:18:56,720
Thank you.

765
01:18:56,720 --> 01:18:58,720
Thank you.

766
01:18:58,720 --> 01:19:00,720
Thank you.

767
01:19:00,720 --> 01:19:02,720
Thank you.

768
01:19:02,720 --> 01:19:04,720
Thank you.

769
01:19:04,720 --> 01:19:06,720
Thank you.

770
01:19:06,720 --> 01:19:08,720
Thank you.

771
01:19:08,720 --> 01:19:10,720
Thank you.

772
01:19:10,720 --> 01:19:12,720
Thank you.

773
01:19:12,720 --> 01:19:14,720
Thank you.

774
01:19:14,720 --> 01:19:16,720
Thank you.

775
01:19:16,720 --> 01:19:18,720
Again, for the record, Brian Glexteen, solvent and Cromwell

776
01:19:18,720 --> 01:19:20,720
for the debtors.

777
01:19:20,720 --> 01:19:22,720
The only other matter on today's agenda is item 16 on the

778
01:19:22,720 --> 01:19:24,720
agenda, which is the debtors motion for an order authorizing

779
01:19:24,720 --> 01:19:26,720
and approving procedures for settling claims and causes of

780
01:19:26,720 --> 01:19:28,720
action.

781
01:19:28,720 --> 01:19:30,720
Before I get into the motion, Your Honor, the debtors did

782
01:19:30,720 --> 01:19:36,720
file a declaration of Edward Mosley at docket number 2215-1,

783
01:19:36,720 --> 01:19:38,720
which is exhibit A to the reply papers we filed over the

784
01:19:38,720 --> 01:19:40,720
last couple of days.

785
01:19:40,720 --> 01:19:42,720
I would like to request that Mr. Mosley is here in the courtroom

786
01:19:42,720 --> 01:19:44,720
today and available for cross-examination.

787
01:19:44,720 --> 01:19:46,720
I would like to request that Mr. Mosley's declaration be

788
01:19:46,720 --> 01:19:48,720
admitted to evidence.

789
01:19:48,720 --> 01:19:50,720
Any objection?

790
01:19:50,720 --> 01:19:52,720
Is it admitted without objection?

791
01:19:52,720 --> 01:19:54,720
Anyone wish to cross, Mr. Mosley?

792
01:19:54,720 --> 01:19:56,720
Your Honor, Juliet Sarkisian for the U.S.

793
01:19:56,720 --> 01:19:58,720
Trustee.

794
01:19:58,720 --> 01:20:00,720
No, we do not have any cross-examination.

795
01:20:00,720 --> 01:20:02,720
Thank you.

796
01:20:02,720 --> 01:20:04,720
Your Honor, the debtors through this motion are seeking an

797
01:20:04,720 --> 01:20:06,720
order approving and establishing omnibus settlement

798
01:20:06,720 --> 01:20:08,720
procedures, which would permit the debtors to resolve the

799
01:20:08,720 --> 01:20:10,720
large volume of smaller claims, primarily the debtors'

800
01:20:10,720 --> 01:20:12,720
avoidance claims in the requisite settlement amounts.

801
01:20:12,720 --> 01:20:14,720
But any claims are eligible.

802
01:20:14,720 --> 01:20:16,720
And this would allow the debtors to resolve this high

803
01:20:16,720 --> 01:20:18,720
volume of claims quickly, efficiently, cost-effectively,

804
01:20:18,720 --> 01:20:20,720
up to the settlement value cap.

805
01:20:20,720 --> 01:20:22,720
The alternative, Your Honor, is the need to prepare and file

806
01:20:22,720 --> 01:20:24,720
a claim for a settlement.

807
01:20:24,720 --> 01:20:26,720
The debtors' claim is to be a settlement that is not

808
01:20:26,720 --> 01:20:28,720
subject to any settlement.

809
01:20:28,720 --> 01:20:30,720
The debtors' claim is to be a settlement that is not subject

810
01:20:30,720 --> 01:20:32,720
to any settlement.

811
01:20:32,720 --> 01:20:34,720
The debtors' claim is to be a settlement that is not subject

812
01:20:34,720 --> 01:20:36,720
to any settlement.

813
01:20:36,720 --> 01:20:38,720
The alternative, Your Honor, is the need to prepare and file

814
01:20:38,720 --> 01:20:40,720
individual motions pursuant to Rule 1919A, send notice to

815
01:20:40,720 --> 01:20:42,720
creditors, seek approval from this Court for each and every

816
01:20:42,720 --> 01:20:44,720
settlement, irrespective of the size of the settlement and

817
01:20:44,720 --> 01:20:46,720
the value being returned to the estates.

818
01:20:46,720 --> 01:20:48,720
The estates.

819
01:20:48,720 --> 01:20:50,720
These procedures reflect discussion and input from the

820
01:20:50,720 --> 01:20:52,720
creditors' committee and the ad hoc committee who we

821
01:20:52,720 --> 01:20:54,720
consulted with prior to filing this motion.

822
01:20:54,720 --> 01:20:56,720
As Mr. Mosley said, the debtors' claim is to be a

823
01:20:56,720 --> 01:20:58,720
settlement that is not subject to any settlement.

824
01:20:58,720 --> 01:21:00,720
The debtors' claim is to be a settlement that is not subject

825
01:21:00,720 --> 01:21:02,720
to any settlement.

826
01:21:02,720 --> 01:21:04,720
As Mr. Mosley states in his declaration, the debtors expect

827
01:21:04,720 --> 01:21:06,720
the total number of avoidance claims, including

828
01:21:06,720 --> 01:21:08,720
preferences, recovery of asset transfers, political and

829
01:21:08,720 --> 01:21:10,720
charitable donations, to ultimately number in the

830
01:21:10,720 --> 01:21:12,720
thousands.

831
01:21:12,720 --> 01:21:14,720
This is not surprising, given the facts and circumstances

832
01:21:14,720 --> 01:21:16,720
of these Chapter 11 cases.

833
01:21:16,720 --> 01:21:18,720
Mr. Mosley states his view that the administration of

834
01:21:18,720 --> 01:21:20,720
the debtors' estates will be facilitated and value

835
01:21:20,720 --> 01:21:22,720
maximized at these settlements, as the

836
01:21:22,720 --> 01:21:24,720
settlement is to be a settlement that is not subject to

837
01:21:24,720 --> 01:21:26,720
any settlement.

838
01:21:26,720 --> 01:21:28,720
The debtors' claim is to be a settlement that is not subject

839
01:21:28,720 --> 01:21:30,720
to any settlement.

840
01:21:30,720 --> 01:21:36,020
and value maximize that these settlement procedures are implemented.

841
01:21:36,020 --> 01:21:41,160
The only objection to the motion was the one filed by the U.S. trustee, which we submit

842
01:21:41,160 --> 01:21:43,620
should be overruled.

843
01:21:43,620 --> 01:21:50,620
Bankruptcy Rule 1919b expressly provides that the court may authorize the debtor to settle

844
01:21:50,620 --> 01:21:54,320
classes of claims without a further hearing or notice.

845
01:21:54,320 --> 01:22:00,700
Furthermore, Rule 2002a3, as your honor knows, expressly grants the court discretion to waive

846
01:22:00,700 --> 01:22:04,520
any notice of a hearing on approval of a settlement.

847
01:22:04,520 --> 01:22:10,520
The U.S. trustee ignores the clear authority for the court to grant this relief that is

848
01:22:10,520 --> 01:22:12,520
present in the rules.

849
01:22:12,520 --> 01:22:19,320
The U.S. trustee also ignores this objection that these types of orders are often granted

850
01:22:19,320 --> 01:22:26,320
when case circumstances warrant them, even up to substantial settlement values in appropriate

851
01:22:26,320 --> 01:22:33,360
circumstances, and we cite some examples in our papers of cases where limits of settlement

852
01:22:33,360 --> 01:22:37,160
value go into the multiple millions of dollars.

853
01:22:37,160 --> 01:22:40,680
And your honor, that makes sense.

854
01:22:40,680 --> 01:22:45,880
Here the debtors have proposed procedures that permit settlements without individual

855
01:22:45,880 --> 01:22:51,000
settlement motions only after notice to the official committee and the ad hoc committee

856
01:22:51,000 --> 01:22:52,680
of creditors.

857
01:22:52,680 --> 01:22:57,080
Each will have the opportunity to independently ask questions and test the proposed settlements

858
01:22:57,080 --> 01:23:00,720
before the debtors proceed with any settlement.

859
01:23:00,720 --> 01:23:06,040
We've agreed after discussions with the official committee, which is actually somewhat unusual

860
01:23:06,040 --> 01:23:11,360
in these procedures adopted by courts in this district, that we will provide notice for

861
01:23:11,360 --> 01:23:15,440
every settlement, regardless of how small.

862
01:23:15,440 --> 01:23:20,440
There's no ability for the debtors to settle claims completely on its own.

863
01:23:20,440 --> 01:23:24,560
So the idea that we would take a claim that has substantial value and settle it for some

864
01:23:24,560 --> 01:23:28,600
low amount and nobody would ever know about it, besides that being a breach of our fiduciary

865
01:23:28,600 --> 01:23:32,760
duties, which would never happen, is not possible here.

866
01:23:32,760 --> 01:23:38,240
Every settlement will be noticed to the committee and to the ad hoc committee, and only if they

867
01:23:38,240 --> 01:23:42,720
don't have any concerns will we be able to proceed without the administrative expense

868
01:23:42,720 --> 01:23:48,720
and burden of noticing all other creditors and filing an individualized motion under

869
01:23:48,720 --> 01:23:51,800
Bill 9019A.

870
01:23:51,800 --> 01:23:56,200
These procedures provide an opportunity for the debtors to significantly streamline what

871
01:23:56,200 --> 01:24:02,400
would be uncontroversial settlements and bring that value quickly into the estates.

872
01:24:02,400 --> 01:24:07,440
We did carefully review the U.S. trustee's concerns, and after doing so, the debtors

873
01:24:07,440 --> 01:24:13,520
determined to make certain modifications that are reflected in the revised settlement procedures

874
01:24:13,520 --> 01:24:20,680
contained in the revised order filed at docket 2215-2 that was filed in connection with the

875
01:24:20,680 --> 01:24:23,560
debtors' reply papers.

876
01:24:23,560 --> 01:24:28,280
Your Honor, those changes include reducing the cap on the settled value of claims, qualifying

877
01:24:28,280 --> 01:24:34,120
under these procedures to a maximum of $7 million, adding the U.S. trustee as a notice

878
01:24:34,120 --> 01:24:40,080
party with the expectation that the U.S. trustee will only interpose objections going forward

879
01:24:40,080 --> 01:24:44,120
based on merits of the claims and not the notice issues that are raised in the objection

880
01:24:44,120 --> 01:24:51,320
today, and specify that the debtors will file for purposes of providing additional transparency

881
01:24:51,320 --> 01:24:54,680
into what has been happening with respect to settlements.

882
01:24:54,680 --> 01:24:59,920
We will file monthly reports disclosing claim counterparties and the amounts of settlements

883
01:24:59,920 --> 01:25:06,520
that were consummated in the prior month pursuant to these settlement procedures.

884
01:25:06,520 --> 01:25:13,680
Nonetheless, we understand the U.S. trustee is pursuing their objection, suggesting that

885
01:25:13,680 --> 01:25:18,760
no settlement procedures of this sort are appropriate without the need, without notice

886
01:25:18,760 --> 01:25:24,760
being sent out to a broad set of creditors, and much more detailed disclosure on each

887
01:25:24,760 --> 01:25:27,640
individual claim that's being settled.

888
01:25:27,640 --> 01:25:32,840
We would submit, Your Honor, that that's not required under the rules, and certainly under

889
01:25:32,840 --> 01:25:37,960
the facts and circumstances of this case, we believe would vitiate the utility for these

890
01:25:37,960 --> 01:25:39,880
procedures.

891
01:25:39,880 --> 01:25:46,200
So absent any questions from the Court, I'm happy to see the podium for Mr. Case.

892
01:25:46,200 --> 01:25:47,200
No questions.

893
01:25:47,200 --> 01:25:48,200
Thank you.

894
01:25:48,200 --> 01:25:49,200
Good afternoon, Your Honor.

895
01:25:49,200 --> 01:25:58,800
Gabriel Sassen from Paul Hastings on behalf of the Committee.

896
01:25:58,800 --> 01:26:02,000
I just rise to support the motion, as Mr. Gluckstein pointed out.

897
01:26:02,000 --> 01:26:06,320
We did negotiate and review the motion and the procedures before they were filed.

898
01:26:06,320 --> 01:26:11,400
We're happy with the terms of the motion and the procedures as they were filed, and even

899
01:26:11,400 --> 01:26:14,920
happier with the revised version that they were filed with the reply.

900
01:26:14,920 --> 01:26:19,520
We think that the procedures will promote efficiency, transparency, and minimize the

901
01:26:19,520 --> 01:26:22,880
costs in connection with settling these matters.

902
01:26:22,880 --> 01:26:27,640
And with that, again, just any questions or any further questions from Your Honor, we

903
01:26:27,640 --> 01:26:28,640
would support the motion.

904
01:26:28,640 --> 01:26:29,640
Okay.

905
01:26:29,640 --> 01:26:30,640
Thank you.

906
01:26:30,640 --> 01:26:31,640
No questions.

907
01:26:31,640 --> 01:26:32,640
Anyone else before I go to the Trustee?

908
01:26:32,640 --> 01:26:33,640
Ms. Sarkisian.

909
01:26:33,640 --> 01:26:34,640
Good afternoon, Your Honor.

910
01:26:34,640 --> 01:26:35,640
Juliet Sarkisian on behalf of the U.S. Trustee.

911
01:26:35,640 --> 01:26:38,640
Your Honor, the debtor's motion seeks to settle procedures to settle claims held by

912
01:26:38,640 --> 01:26:39,640
the debtor's estates.

913
01:26:39,640 --> 01:26:42,640
This does not apply to claims against the debtors.

914
01:26:42,640 --> 01:26:51,640
So these are estate claims, but they're seeking to settle with no notice to any parties, and

915
01:26:51,640 --> 01:27:10,120
now they, at my request, have added the U.S. Trustee.

916
01:27:10,120 --> 01:27:17,200
The proposed revisions have made some minor improvements, but they have not addressed

917
01:27:17,200 --> 01:27:21,200
the main points of the U.S. Trustee's objection.

918
01:27:21,200 --> 01:27:27,720
The debtors do not cite to one reported decision or even an unreported written opinion that

919
01:27:27,720 --> 01:27:29,960
approved this type of procedure.

920
01:27:29,960 --> 01:27:35,660
They have cited a number of orders in this court as well as other courts where they say

921
01:27:35,660 --> 01:27:41,680
the settlement procedures are like those proposed by the debtor here, but looking at the ones

922
01:27:41,680 --> 01:27:46,600
from Delaware, the procedures are not remotely similar to the ones the debtors are proposing

923
01:27:46,600 --> 01:27:53,000
here and in fact support the notice and objection procedures that the U.S. Trustee is requesting

924
01:27:53,000 --> 01:28:00,000
if in fact Your Honor does entertain allowing some type of settlement procedures to go forward.

925
01:28:00,000 --> 01:28:07,040
I will provide more detail on those cases shortly.

926
01:28:07,040 --> 01:28:12,400
A big part of the U.S. Trustee's objection is the definition of what kind of claims are

927
01:28:12,400 --> 01:28:14,400
going to be subject to this process.

928
01:28:14,400 --> 01:28:19,240
There is a definition, small estate claims.

929
01:28:19,240 --> 01:28:23,440
Those are the kinds of claims that they say will be subject.

930
01:28:23,440 --> 01:28:27,840
The definition of that in the motion, and that has not been changed as far as I can

931
01:28:27,840 --> 01:28:35,360
see in any of the revised papers, is, quote, certain existing and future affirmative litigation

932
01:28:35,360 --> 01:28:40,440
claims and causes of action of the debtor and their estates that are relatively small

933
01:28:40,440 --> 01:28:45,480
value compared to the debtor's total asset base, close quote.

934
01:28:45,480 --> 01:28:51,200
So what was not explained is what relatively small value compared to the debtor's total

935
01:28:51,200 --> 01:28:53,440
asset base means.

936
01:28:53,440 --> 01:28:54,960
What is the debtor's total asset base?

937
01:28:54,960 --> 01:28:56,880
What's the number the debtors are using for that?

938
01:28:56,880 --> 01:28:59,220
That was not disclosed.

939
01:28:59,220 --> 01:29:03,040
What relatively small means was not disclosed.

940
01:29:03,040 --> 01:29:08,680
Mr. Mosley's declaration describes the claims that will be subject to this procedure as,

941
01:29:08,680 --> 01:29:14,720
quote, smaller in size, close quote, without saying as compared to what.

942
01:29:14,720 --> 01:29:20,360
The motion also does not disclose how the value of a claim will be calculated in order

943
01:29:20,360 --> 01:29:24,720
to determine if it's of small value and who will be doing such calculation.

944
01:29:24,720 --> 01:29:29,520
It says claims seven million or less, right?

945
01:29:29,520 --> 01:29:30,520
I'll see, Your Honor.

946
01:29:30,520 --> 01:29:32,320
That's the thing.

947
01:29:32,320 --> 01:29:35,640
It's not claims that are valued at seven million or less.

948
01:29:35,640 --> 01:29:39,880
The seven million is how much is being paid in settlement.

949
01:29:39,880 --> 01:29:44,360
So regardless of what the claim could be, a hundred million dollar claim, if it's being

950
01:29:44,360 --> 01:29:52,880
settled for seven million dollars or less, then these procedures would apply to it.

951
01:29:52,880 --> 01:29:58,480
But the motion says the claim also has to qualify as a, quote, small estate claim.

952
01:29:58,480 --> 01:30:04,520
But there's no information to figure out what that definition means.

953
01:30:04,520 --> 01:30:09,560
So really what we're left with, Your Honor, is saying some claim that the estate has,

954
01:30:09,560 --> 01:30:16,120
as long as it's settled for seven million or less, which is highly problematic.

955
01:30:16,120 --> 01:30:20,640
Because again, it doesn't say what the claim is valued at.

956
01:30:20,640 --> 01:30:21,640
That's one problem.

957
01:30:21,640 --> 01:30:23,040
We need to know what the claim is valued at.

958
01:30:23,040 --> 01:30:25,420
That's extremely important.

959
01:30:25,420 --> 01:30:28,440
It's more important, frankly, than how much is being paid to settle it.

960
01:30:28,440 --> 01:30:29,780
I shouldn't say more important.

961
01:30:29,780 --> 01:30:33,080
Those are two pieces that are very, very important.

962
01:30:33,080 --> 01:30:36,760
And then what that leads into is you need to know the ratio.

963
01:30:36,760 --> 01:30:41,320
What is the ratio of the amount being paid in settlement to what the claim is valued

964
01:30:41,320 --> 01:30:42,320
at?

965
01:30:42,320 --> 01:30:45,400
And of course, if you have those two numbers, you can figure out the ratio yourself.

966
01:30:45,400 --> 01:30:46,400
But who values the claim?

967
01:30:46,400 --> 01:30:47,400
How are you going to do that?

968
01:30:47,400 --> 01:30:54,080
I mean, litigation claim, you can have, you know, pro se claimant who says the debtors

969
01:30:54,080 --> 01:30:57,200
owe me a hundred billion dollars and they settled it for a hundred dollars.

970
01:30:57,200 --> 01:31:00,320
No, Your Honor, these are not claims against the estate.

971
01:31:00,320 --> 01:31:03,120
These are claims the estate holds.

972
01:31:03,120 --> 01:31:07,720
This process procedure is only for estate claims against third parties.

973
01:31:07,720 --> 01:31:08,720
You're right.

974
01:31:08,720 --> 01:31:09,720
You're right.

975
01:31:09,720 --> 01:31:10,720
Correct.

976
01:31:10,720 --> 01:31:14,080
So the debtors should, I mean, if they're going to settle the claim, one would hope

977
01:31:14,080 --> 01:31:17,600
they have some idea what the value of the claim is that they're settling.

978
01:31:17,600 --> 01:31:22,480
So either they will have filed an adversary proceeding, in which case, again, one would

979
01:31:22,480 --> 01:31:25,400
expect they would have some dollar amount that they're seeking.

980
01:31:25,400 --> 01:31:30,240
Certainly, if it's an avoidance claim, they would say, how much are they seeking to avoid?

981
01:31:30,240 --> 01:31:35,480
But if it's not that kind of a claim, again, one would hope with all of the professionals

982
01:31:35,480 --> 01:31:40,760
that the debtor has that before they're settling a claim, they have some estimate of what the

983
01:31:40,760 --> 01:31:41,760
value of the claim is.

984
01:31:41,760 --> 01:31:46,760
Otherwise, how can you settle the claim if you don't know what the value is?

985
01:31:46,760 --> 01:31:53,680
So and in fact, I mean, the motion doesn't even indicate that they're going to disclose

986
01:31:53,680 --> 01:31:58,080
to the committees what the value of the claim is, only what they're getting in settlement

987
01:31:58,080 --> 01:31:59,080
for it.

988
01:31:59,080 --> 01:32:03,160
So maybe the committee would come back and say, well, in order to evaluate the settlement

989
01:32:03,160 --> 01:32:05,200
value, we need to know how much the claim is.

990
01:32:05,200 --> 01:32:11,360
But that's something that's going on behind closed doors, effectively.

991
01:32:11,360 --> 01:32:17,360
It is very clear that nothing will be filed on the record as to the value of the claims

992
01:32:17,360 --> 01:32:19,800
that are being settled.

993
01:32:19,800 --> 01:32:26,480
What the debtors have proposed now in response to US trustee's objection is that they would

994
01:32:26,480 --> 01:32:32,160
file something once a month on the record saying, you know, we settle claims against

995
01:32:32,160 --> 01:32:36,160
these parties and for each one how much they received in settlement.

996
01:32:36,160 --> 01:32:40,120
This will be done after the fact, after the settlement is effectively done and over with.

997
01:32:40,120 --> 01:32:43,920
That doesn't give anybody an opportunity to object if they have a problem with it.

998
01:32:43,920 --> 01:32:47,840
It also doesn't tell them what is the nature of the claim being settled and what's the

999
01:32:47,840 --> 01:32:49,440
value of the claim being settled.

1000
01:32:49,440 --> 01:32:55,640
I thought the procedures did provide for an opportunity for the notice parties to object

1001
01:32:55,640 --> 01:32:57,520
to the settlement before it's actually consummated.

1002
01:32:57,520 --> 01:33:01,480
Your Honor, that is only the committee, the official committee and the ad hoc committee,

1003
01:33:01,480 --> 01:33:02,480
nobody else.

1004
01:33:02,480 --> 01:33:03,480
But they added you to it as well.

1005
01:33:03,480 --> 01:33:04,480
And they've added the US trustee.

1006
01:33:04,480 --> 01:33:05,480
Now you're added to it.

1007
01:33:05,480 --> 01:33:06,480
There are many other parties in interest in these cases.

1008
01:33:06,480 --> 01:33:07,480
Well, there's nine million.

1009
01:33:07,480 --> 01:33:08,480
Are they going to give notice to nine million people every time they want to settle a claim?

1010
01:33:08,480 --> 01:33:09,480
No, Your Honor, but if it was filed on ECF, if it was filed in the court docket, then

1011
01:33:09,480 --> 01:33:10,480
that gives parties notice.

1012
01:33:10,480 --> 01:33:11,480
Anybody who's getting ECF notice will receive notice.

1013
01:33:11,480 --> 01:33:12,480
Claimant, individual claimants aren't going to get ECF notice.

1014
01:33:12,480 --> 01:33:13,480
If they file 2002 requests, they're going to get ECF notice.

1015
01:33:13,480 --> 01:33:14,480
So that's the case.

1016
01:33:14,480 --> 01:33:15,480
So that's the case.

1017
01:33:15,480 --> 01:33:16,480
So that's the case.

1018
01:33:16,480 --> 01:33:25,480
So that's the case.

1019
01:33:25,480 --> 01:33:47,480
So that's the case.

1020
01:33:47,480 --> 01:33:56,480
So that's the case.

1021
01:33:56,480 --> 01:34:25,480
So that's the case.

1022
01:34:25,480 --> 01:34:48,480
So that's the case.

1023
01:34:48,480 --> 01:34:54,680
I went to the Delaware cases and I had someone pull the orders.

1024
01:34:54,680 --> 01:34:59,960
One of them, Building Materials case, we couldn't find because the date that was listed for

1025
01:34:59,960 --> 01:35:03,280
the order was actually a date that was prior to the case being filed.

1026
01:35:03,280 --> 01:35:07,520
But the other four from Delaware I will address.

1027
01:35:07,520 --> 01:35:11,880
One of them is one of your honors cases, J&J Sales.

1028
01:35:11,880 --> 01:35:19,920
This is an order relating to a motion by Chapter 7 Trustee Miller to settle avoidance actions.

1029
01:35:19,920 --> 01:35:24,320
I'm not completely clear from the order but it appears it uses the term avoidance actions.

1030
01:35:24,320 --> 01:35:27,960
Presumably these are actions that have been filed so there would at least be some notice

1031
01:35:27,960 --> 01:35:30,560
as to what the nature of the claims are.

1032
01:35:30,560 --> 01:35:36,980
The first category which would not require any notice to anybody for the Trustee to settle

1033
01:35:36,980 --> 01:35:40,240
are claims with a value, gross transfers.

1034
01:35:40,240 --> 01:35:46,280
So that would be the equivalent of the maximum value of the claims of less than $250,000.

1035
01:35:46,280 --> 01:35:51,760
That's not the amount being paid in settlement, that's the value of the claim.

1036
01:35:51,760 --> 01:35:58,720
Then once the value of the avoidance action goes between $250,000 and $500,000, your honors

1037
01:35:58,720 --> 01:36:04,680
order required the Trustee to file a notice of settlement with the court giving parties

1038
01:36:04,680 --> 01:36:09,040
an interest 10 days to object and if somebody objected it would come before your honor and

1039
01:36:09,040 --> 01:36:17,200
then if the gross transfer, any gross transfer in excess of $500,000 would require a 90-19

1040
01:36:17,200 --> 01:36:18,200
motion.

1041
01:36:18,200 --> 01:36:26,840
Similarly, in CR Holdings also cited by the debtors, an order from August 2019 by Judge

1042
01:36:26,840 --> 01:36:33,000
Silverstein, this was a motion by the debtor for settlement procedures.

1043
01:36:33,000 --> 01:36:37,720
It allows settlements of avoidance actions with gross transfers again so that would be

1044
01:36:37,720 --> 01:36:43,760
the maximum value of $75,000 or less could be done without any further notice or approval

1045
01:36:43,760 --> 01:36:44,760
of the court.

1046
01:36:44,760 --> 01:36:50,760
If it was between $75,000 and $250,000 of gross transfers, they had to require, they

1047
01:36:50,760 --> 01:36:54,880
had to file a notice and give parties an interest 10 days opportunity to object.

1048
01:36:54,880 --> 01:36:58,400
If nobody objected, then it would automatically be approved.

1049
01:36:58,400 --> 01:37:04,880
And then if it's over $250,000, they had to file a 90-19 motion.

1050
01:37:04,880 --> 01:37:09,160
Then we have Fresh and Easy.

1051
01:37:09,160 --> 01:37:13,920
With Fresh and Easy, it was the committee that was seeking to settle avoidance actions.

1052
01:37:13,920 --> 01:37:20,520
This is an order of Judge Shannon and there, if the gross amount of the avoidance action

1053
01:37:20,520 --> 01:37:27,080
was less than $35,000, that's what a small claim is, $35,000, no further court approval

1054
01:37:27,080 --> 01:37:28,080
was needed.

1055
01:37:28,080 --> 01:37:33,560
If it was between $35,000 and $200,000, again, not the settlement payment but the value of

1056
01:37:33,560 --> 01:37:38,240
the claim, in that case, they had to file the notice of settlement procedures from the

1057
01:37:38,240 --> 01:37:39,240
motion.

1058
01:37:39,240 --> 01:37:40,240
I pulled it.

1059
01:37:40,240 --> 01:37:41,240
It was similar to these other cases.

1060
01:37:41,240 --> 01:37:46,440
They had to file a notice on the docket and give parties an interest 10 days to object.

1061
01:37:46,440 --> 01:37:51,120
If it went over $200,000, they had to file a 90-19 motion.

1062
01:37:51,120 --> 01:37:59,200
The last one from Delaware that they cited was FTD Companies from 2019 by Judge Silverstein.

1063
01:37:59,200 --> 01:38:07,080
It stated to apply to both causes of action, claims against the debtor as well as causes

1064
01:38:07,080 --> 01:38:11,920
of action brought by the debtor, but all the wording of the order talks about allowed and

1065
01:38:11,920 --> 01:38:12,920
disallowed claims.

1066
01:38:12,920 --> 01:38:17,000
It talks about a claimant, clearly somebody other than the debtor.

1067
01:38:17,000 --> 01:38:22,760
I think that it really was meant to deal with claims against the debtor being settled.

1068
01:38:22,760 --> 01:38:35,280
Even if it applies both ways, again, the numbers, if a claim was $500,000 or less but the claim

1069
01:38:35,280 --> 01:38:41,160
was being allowed at only 15%, then there was no further requirement.

1070
01:38:41,160 --> 01:38:46,920
When you started to get into larger numbers, then they had to serve the 2002 list with

1071
01:38:46,920 --> 01:38:48,760
a settlement notice.

1072
01:38:48,760 --> 01:38:53,720
All parties and interests, not just the committee, not just somebody, all parties and interests

1073
01:38:53,720 --> 01:38:55,920
had a right to object.

1074
01:38:55,920 --> 01:39:00,320
They also specified on the settlement notice what had to go in there.

1075
01:39:00,320 --> 01:39:03,960
It included, again, they talk about proof of claim because this seemed to apply mostly

1076
01:39:03,960 --> 01:39:07,840
to claims against the estate, but what was the original asserted amount of the proof

1077
01:39:07,840 --> 01:39:09,000
of claim?

1078
01:39:09,000 --> 01:39:13,080
What's the proposed amount and priority of the settlement?

1079
01:39:13,080 --> 01:39:20,160
Having more information than what's being proposed here.

1080
01:39:20,160 --> 01:39:24,000
Then again, if it went above a certain amount, they would have to file 90-19 motions.

1081
01:39:24,000 --> 01:39:28,240
By the way, a debtor can file 90-19 motions.

1082
01:39:28,240 --> 01:39:30,800
They don't have to do a separate one for every single settlement.

1083
01:39:30,800 --> 01:39:37,160
If you had multiple settlements within a period of time, one could file a 90-19 motion covering

1084
01:39:37,160 --> 01:39:41,560
multiple settlements as long as they gave the relevant information.

1085
01:39:41,560 --> 01:39:46,240
That is certainly something the debtors could do here.

1086
01:39:46,240 --> 01:39:54,520
However, again, because of the nature of this case, and of course we remember that this

1087
01:39:54,520 --> 01:40:00,120
is a case that Mr. Ray said came in as a dumpster fire.

1088
01:40:00,120 --> 01:40:01,120
There are certainly issues.

1089
01:40:01,120 --> 01:40:07,560
I mean, the claims that the estate holds, not just against the top insiders, but anyone,

1090
01:40:07,560 --> 01:40:12,400
professionals, other employees that might have done something or not done something

1091
01:40:12,400 --> 01:40:21,400
they should have done that caused in any way the dumpster fire that this case was.

1092
01:40:21,400 --> 01:40:28,680
If the debtor is settling those claims, that should not be behind a firewall.

1093
01:40:28,680 --> 01:40:32,840
That should be public and not after the fact, after it's settled and done and nobody can

1094
01:40:32,840 --> 01:40:37,200
object to it other than the committee and the ad hoc committee.

1095
01:40:37,200 --> 01:40:41,440
As the debtors said when they were talking about negotiating the plan, there's a lot

1096
01:40:41,440 --> 01:40:43,000
of stakeholders in this case.

1097
01:40:43,000 --> 01:40:46,880
It's not just the committee and the ad hoc committee.

1098
01:40:46,880 --> 01:40:50,760
Especially when you're talking about numbers as big as a settlement of 7 million and who

1099
01:40:50,760 --> 01:40:57,760
knows how high the value of the claim is because that hasn't been disclosed in this motion.

1100
01:40:57,760 --> 01:41:01,560
We don't know what that top number is, if there is any top number.

1101
01:41:01,560 --> 01:41:07,680
All we know is as long as the settlement amount is 7 million or less, nobody other than the

1102
01:41:07,680 --> 01:41:16,840
two committees is going to know about it until after it's over and done and nobody can object.

1103
01:41:16,840 --> 01:41:22,360
In this case, given the type of claims that the debtors have, the US trustee does not

1104
01:41:22,360 --> 01:41:24,120
believe that that is appropriate.

1105
01:41:24,120 --> 01:41:29,120
It's again very different than what we're seeing in the cases that the debtors cited

1106
01:41:29,120 --> 01:41:31,720
from this jurisdiction.

1107
01:41:31,720 --> 01:41:34,200
None of those say, hey, anything goes.

1108
01:41:34,200 --> 01:41:38,560
There's a certain point that they, again, these are small numbers we're talking about,

1109
01:41:38,560 --> 01:41:42,360
35,000, 50,000, 75,000.

1110
01:41:42,360 --> 01:41:45,960
That's the value of the claim, not how much is being paid in the settlement.

1111
01:41:45,960 --> 01:41:48,360
Those are the ones that can be settled without any further notice.

1112
01:41:48,360 --> 01:41:52,560
Once you go above those, you have to file the notice, you have to give 10 days objection

1113
01:41:52,560 --> 01:41:55,280
and if nobody objects, it's automatically approved.

1114
01:41:55,280 --> 01:41:59,320
It doesn't require your honor necessarily to have to sign orders.

1115
01:41:59,320 --> 01:42:05,880
It would be automatic, but if somebody objects, then if it cannot be resolved with the debtors

1116
01:42:05,880 --> 01:42:11,520
and the committee, then it would be before your honor, which is how it should be.

1117
01:42:11,520 --> 01:42:17,400
These are potentially very valuable claims of the estate and parties have a right to

1118
01:42:17,400 --> 01:42:24,200
know what the value of the claim being settled and what the claim is about, especially with

1119
01:42:24,200 --> 01:42:26,240
respect to those that there's no adversary proceeding.

1120
01:42:26,240 --> 01:42:30,200
At least if you have an adversary proceeding filed, one could look at the adversary proceeding

1121
01:42:30,200 --> 01:42:34,880
and say, okay, I can see what's being asked and who it's against and what the nature is.

1122
01:42:34,880 --> 01:42:42,080
But if they're settling claims before an adversary is filed, which I understand is the intention

1123
01:42:42,080 --> 01:42:46,600
that it would include those subsequent as well, then there's no information in the public

1124
01:42:46,600 --> 01:42:53,520
record to tell whether the settlement is a reasonable one or not.

1125
01:42:53,520 --> 01:43:00,480
And your honor, I would also like to briefly, there are some exclusions that the debtors

1126
01:43:00,480 --> 01:43:06,920
put in that would not be covered by the settlement procedures.

1127
01:43:06,920 --> 01:43:10,800
But it does not include every category that the US trustee believes it should.

1128
01:43:10,800 --> 01:43:14,640
They do cover insiders, so that would cover directors and officers.

1129
01:43:14,640 --> 01:43:19,280
One problem with that is sometimes there's not complete agreement on what qualifies as

1130
01:43:19,280 --> 01:43:24,680
an officer, and the most obvious example is vice presidents, despite the Foothill decision

1131
01:43:24,680 --> 01:43:26,480
from this court many years ago.

1132
01:43:26,480 --> 01:43:32,720
It says that if you have an officer title, including VP, you are an insider unless and

1133
01:43:32,720 --> 01:43:37,760
until proven otherwise, most debtors I found take the position that VPs are not officers.

1134
01:43:37,760 --> 01:43:42,920
But in part from that, there are employees potentially, if debtors have claims against

1135
01:43:42,920 --> 01:43:48,160
other employees that do not have officer titles, they may be significant.

1136
01:43:48,160 --> 01:43:50,200
And they are of interest.

1137
01:43:50,200 --> 01:43:56,240
We know that things happened in this, and we know that people not only did things they

1138
01:43:56,240 --> 01:44:01,440
shouldn't have done, but some people did not do things they should have done.

1139
01:44:01,440 --> 01:44:07,440
And so US trustee believes that all employees, all claims against employees should be accepted

1140
01:44:07,440 --> 01:44:13,560
out of the settlement procedure, regardless of what the amount is, as well as of course,

1141
01:44:13,560 --> 01:44:15,080
directors and officers.

1142
01:44:15,080 --> 01:44:16,920
And also consultants should be added.

1143
01:44:16,920 --> 01:44:21,520
They say professionals, that includes consultants.

1144
01:44:21,520 --> 01:44:30,040
That's wonderful, but it's not completely clear.

1145
01:44:30,040 --> 01:44:35,680
By the way, Your Honor, the ratio element, I think, is the most important when it comes

1146
01:44:35,680 --> 01:44:39,040
to determining whether settlement procedures are appropriate.

1147
01:44:39,040 --> 01:44:46,040
All of the cases, again, there hasn't been any decision that they cited that's on point,

1148
01:44:46,040 --> 01:44:52,640
and I looked in the Third Circuit, there's not a lot of written decisions on 19B.

1149
01:44:52,640 --> 01:45:00,360
However, the debtors cite to Collier's paragraph 9019.03 for certain proposition.

1150
01:45:00,360 --> 01:45:05,720
But what they did not cite to is where Collier says that when seeking to settle numerous

1151
01:45:05,720 --> 01:45:10,560
preference actions, quote, the court could enter into an order authorizing the trustee

1152
01:45:10,560 --> 01:45:16,000
to settle or compromise any action without further hearing, as long as the settlement

1153
01:45:16,000 --> 01:45:22,280
or compromise amount is not less than a certain percentage of the recovery sought in the complaint,

1154
01:45:22,280 --> 01:45:23,280
close quote.

1155
01:45:23,280 --> 01:45:25,760
And I think that's the key factor.

1156
01:45:25,760 --> 01:45:33,360
And that factor was also discussed in the case that we cited to New Era Philanthropy,

1157
01:45:33,360 --> 01:45:37,440
which is an Eastern District PA case.

1158
01:45:37,440 --> 01:45:43,600
So in sum, Your Honor, the US trustee believes that the debtors do have options here instead

1159
01:45:43,600 --> 01:45:50,360
of these types of truncated procedures, like I mentioned, doing 9019 motions that cover

1160
01:45:50,360 --> 01:45:51,800
settlements of multiple claims.

1161
01:45:51,800 --> 01:45:58,160
But if Your Honor is entertaining, allowing some type of settlement procedures, the US

1162
01:45:58,160 --> 01:46:04,280
trustee believes that there has to be a limit on the value of the claim being settled, not

1163
01:46:04,280 --> 01:46:09,000
just what's being paid, but the value of what's being settled.

1164
01:46:09,000 --> 01:46:12,720
And I think that it's up to the debtors to provide that.

1165
01:46:12,720 --> 01:46:15,320
But I don't believe it should be more than $10 million.

1166
01:46:15,320 --> 01:46:19,520
$10 million is a lot of money.

1167
01:46:19,520 --> 01:46:25,800
With respect to the amount being paid in settlement, I think that's less critical than the value

1168
01:46:25,800 --> 01:46:32,520
of the claim and the ratio between the value of the claim and the amount being paid.

1169
01:46:32,520 --> 01:46:35,800
But certainly $7 million is a pretty large amount.

1170
01:46:35,800 --> 01:46:38,960
Again, that's for the amount being paid.

1171
01:46:38,960 --> 01:46:41,080
But there has to be that ratio in there.

1172
01:46:41,080 --> 01:46:47,680
And I think at the very least, the ratio of what is being paid to the value of the claim,

1173
01:46:47,680 --> 01:46:53,080
how the debtors value their claim, should not be less than 50% to be subject to these.

1174
01:46:53,080 --> 01:47:00,200
If it's less than 50%, then they need to file a motion to explain why they are accepting

1175
01:47:00,200 --> 01:47:03,400
less than 50%.

1176
01:47:03,400 --> 01:47:10,000
In addition, the notice of the settlements should be filed on the docket, and ECF notice

1177
01:47:10,000 --> 01:47:11,400
will go out in that matter.

1178
01:47:11,400 --> 01:47:13,520
That is official notice.

1179
01:47:13,520 --> 01:47:17,360
Anyone who signed up for ECF notice will get that notice.

1180
01:47:17,360 --> 01:47:21,880
I have no objection to the notice being served on others, but that I think is the minimum.

1181
01:47:21,880 --> 01:47:26,520
And it does not require a lot of work of the debtors to file a notice.

1182
01:47:26,520 --> 01:47:28,200
And there should be an objection done.

1183
01:47:28,200 --> 01:47:31,440
It can be filed at the same time they give the information to the committee and the ad

1184
01:47:31,440 --> 01:47:32,440
hoc committee.

1185
01:47:32,440 --> 01:47:35,760
There should be the same objection deadline.

1186
01:47:35,760 --> 01:47:39,840
And it should also include not just the name of the party that they're settling with and

1187
01:47:39,840 --> 01:47:43,720
the amount being paid in settlement, which is what's being proposed by the debtors, but

1188
01:47:43,720 --> 01:47:47,160
also the value of the claim and the nature of the claim.

1189
01:47:47,160 --> 01:47:48,160
What is it?

1190
01:47:48,160 --> 01:47:49,160
Is it an avoidance claim?

1191
01:47:49,160 --> 01:47:50,160
Is it breach of contract?

1192
01:47:50,160 --> 01:47:51,160
What's the nature?

1193
01:47:51,160 --> 01:47:55,160
And what does the debtor value it at?

1194
01:47:55,160 --> 01:48:01,280
And the exclusions should be, as I just said, extended so that it also includes all employees

1195
01:48:01,280 --> 01:48:05,520
and consultants, whether or not they're insiders.

1196
01:48:05,520 --> 01:48:09,720
Your Honor, unless Your Honor has any further questions, that concludes my argument.

1197
01:48:09,720 --> 01:48:10,720
Okay.

1198
01:48:10,720 --> 01:48:11,720
No questions.

1199
01:48:11,720 --> 01:48:12,720
Thank you.

1200
01:48:12,720 --> 01:48:21,720
Your Honor, Brian Glockstein again for the debtors.

1201
01:48:21,720 --> 01:48:32,640
I just want to give the debtors a few points in rebuttal.

1202
01:48:32,640 --> 01:48:37,280
The debtors made certain changes to the procedures after carefully reviewing the objections from

1203
01:48:37,280 --> 01:48:38,280
the U.S. trustee.

1204
01:48:38,280 --> 01:48:48,060
Ms. Sarkasian would like to further redline the order, but her real statement was telling

1205
01:48:48,060 --> 01:48:50,000
and was reviewed.

1206
01:48:50,000 --> 01:48:57,320
The office of the U.S. trustee's view is that the facts of this case are such that we shouldn't

1207
01:48:57,320 --> 01:49:02,440
have these sorts of procedures because it's FTX, it's high profile, there's a lot of

1208
01:49:02,440 --> 01:49:05,000
parties in interest.

1209
01:49:05,000 --> 01:49:09,240
The fact that there's a lot of parties in interest and there are a lot of claims, that

1210
01:49:09,240 --> 01:49:16,200
the volume of claims is massive in this case, screams out for these procedures.

1211
01:49:16,200 --> 01:49:22,780
We spent significant time this afternoon in context of the earlier colloquy discussing

1212
01:49:22,780 --> 01:49:29,980
the concerns of the creditors about case burn and expenditure in these cases.

1213
01:49:29,980 --> 01:49:37,360
It makes no sense, Your Honor, for us to need to come forward respectfully with a motion

1214
01:49:37,360 --> 01:49:44,520
for every single claim irrespective of value, given that we have thousands upon thousands

1215
01:49:44,520 --> 01:49:50,920
of potential preference claims that need to be resolved in this case.

1216
01:49:50,920 --> 01:49:53,960
We have tried to strike the appropriate balance.

1217
01:49:53,960 --> 01:50:00,360
As I stated earlier, after constructive discussions with the official committee with respect to

1218
01:50:00,360 --> 01:50:06,600
these procedures, we are giving notice to the notice parties of every single settlement,

1219
01:50:06,600 --> 01:50:08,760
irrespective from first dollar.

1220
01:50:08,760 --> 01:50:12,920
If we're settling with somebody for five dollars, they're getting notice of it.

1221
01:50:12,920 --> 01:50:19,760
We've eliminated, which many, if not all of the orders that Mr. Arkesian referred to,

1222
01:50:19,760 --> 01:50:22,920
have a category of claims where the debtors and their business judgement could settle

1223
01:50:22,920 --> 01:50:26,720
claims because it's simply not worth the administrative cost.

1224
01:50:26,720 --> 01:50:28,680
The committee is here, they're seated.

1225
01:50:28,680 --> 01:50:33,360
The ad hoc committee is here and the U.S. trustee is going to get notice.

1226
01:50:33,360 --> 01:50:38,640
If the U.S. trustee is concerned about a particularized settlement, or if the committee is concerned

1227
01:50:38,640 --> 01:50:44,760
about the size of the claim versus the settlement or the ratio, as Mr. Arkesian was talking

1228
01:50:44,760 --> 01:50:48,560
about it, we can have those discussions.

1229
01:50:48,560 --> 01:50:53,440
If there's a bona fide dispute, they can file an objection and all that does is then have

1230
01:50:53,440 --> 01:50:56,600
us come forward with a 90-19 motion if it can't be resolved.

1231
01:50:56,600 --> 01:50:59,120
What's the notice going to include?

1232
01:50:59,120 --> 01:51:09,240
Your Honor, we did not legislate in the procedures specific requirements because these settlements

1233
01:51:09,240 --> 01:51:11,200
are not one size fits all.

1234
01:51:11,200 --> 01:51:14,080
We had this discussion with the committee.

1235
01:51:14,080 --> 01:51:18,320
We obviously are going to have to provide information about the claim.

1236
01:51:18,320 --> 01:51:23,400
But as Your Honor correctly observed, not every claim, this is not simply we have a

1237
01:51:23,400 --> 01:51:27,560
number necessarily, we might have a preference claim, we know the amount, here's the amount

1238
01:51:27,560 --> 01:51:28,760
of the preference.

1239
01:51:28,760 --> 01:51:32,080
But there are avoidance claims, there are fraudulent transfer claims, there are claims

1240
01:51:32,080 --> 01:51:33,680
that are on liquid data claims.

1241
01:51:33,680 --> 01:51:42,280
And certainly we have a view, we'll have a view as the debtor of value of claims.

1242
01:51:42,280 --> 01:51:43,280
But there is-

1243
01:51:43,280 --> 01:51:46,840
Will that be included in the notice?

1244
01:51:46,840 --> 01:51:47,840
I expect it will be.

1245
01:51:47,840 --> 01:51:53,120
I expect the committee is going to ask about what the claim is, what it's worth.

1246
01:51:53,120 --> 01:51:57,600
I'm reluctant to just say it will be in the quote, notice that we give to them every time

1247
01:51:57,600 --> 01:52:00,960
because again, I don't believe this is one size fits all.

1248
01:52:00,960 --> 01:52:06,900
And I don't believe this idea of the ratio as it was being described of what the claim

1249
01:52:06,900 --> 01:52:08,640
upside value would be.

1250
01:52:08,640 --> 01:52:13,880
Because again, in a litigation claim, you have views of claims might be worth, your

1251
01:52:13,880 --> 01:52:19,120
risk discounted, you think about what a claim is worth and then you enter into potentially

1252
01:52:19,120 --> 01:52:20,440
a settlement.

1253
01:52:20,440 --> 01:52:24,400
This idea of the ratio, I respectfully disagree with Ms. Arcadian.

1254
01:52:24,400 --> 01:52:26,480
This is not the defining factor here.

1255
01:52:26,480 --> 01:52:31,560
If we bring forward a 1919 motion, the question is going to be whether it's a reasonable settlement

1256
01:52:31,560 --> 01:52:35,640
within the range of reasonableness within the debtors business judgment.

1257
01:52:35,640 --> 01:52:42,240
And so if the facts of a particularized claim in our judgment are appropriate to settle

1258
01:52:42,240 --> 01:52:45,040
it, that's the size of the claim that's appropriate.

1259
01:52:45,040 --> 01:52:49,840
And again, the fact that we're giving notice to the committees and now to the US trust

1260
01:52:49,840 --> 01:52:55,640
aid of every single settlement is going to allow those questions to be diligent.

1261
01:52:55,640 --> 01:53:00,440
Some of these, a lot of these settlements, we believe are not going to be not only not

1262
01:53:00,440 --> 01:53:03,360
controversial, but are not going to warrant significant time.

1263
01:53:03,360 --> 01:53:08,960
We have people reaching out to us all the time that received political donations, charitable

1264
01:53:08,960 --> 01:53:12,040
contributions, they want to return funds.

1265
01:53:12,040 --> 01:53:17,140
They might not have all of the funds that were donated or conveyed.

1266
01:53:17,140 --> 01:53:19,080
We explore those circumstances.

1267
01:53:19,080 --> 01:53:20,800
We want to talk about a settlement.

1268
01:53:20,800 --> 01:53:26,880
It doesn't, it's just not sensible to have to come forward with a motion or a detailed

1269
01:53:26,880 --> 01:53:29,280
notice at the outset of the process.

1270
01:53:29,280 --> 01:53:30,760
We then have to serve those partners.

1271
01:53:30,760 --> 01:53:33,360
Well, I don't think she's saying you have to do a motion.

1272
01:53:33,360 --> 01:53:40,680
I think what she is saying is in the notice that you send and she wants it sent put on

1273
01:53:40,680 --> 01:53:45,680
the docket so that ECF notice goes out to anybody who signed up for ECF notice, that

1274
01:53:45,680 --> 01:53:52,640
the notice that you send out says the debtors are settling this claim, whatever it is, preference

1275
01:53:52,640 --> 01:53:56,760
claim, adversary proceeding, whatever it might be.

1276
01:53:56,760 --> 01:54:04,680
We valued the claim at X amount and we decided to settle it for Y amount.

1277
01:54:04,680 --> 01:54:10,000
Then if there's no objection to that, then it automatically is approved.

1278
01:54:10,000 --> 01:54:11,000
You don't even need to come to me.

1279
01:54:11,000 --> 01:54:12,000
You don't have to file a motion.

1280
01:54:12,000 --> 01:54:13,600
You're just putting the notice on the docket.

1281
01:54:13,600 --> 01:54:15,360
This goes out.

1282
01:54:15,360 --> 01:54:18,000
The object is going to be entered.

1283
01:54:18,000 --> 01:54:23,680
I think that's what she's asking for, which isn't unreasonable.

1284
01:54:23,680 --> 01:54:26,880
Your honor, if we, well, I mean, you're going to send the notice anyway, you're going to

1285
01:54:26,880 --> 01:54:27,880
prepare the notice.

1286
01:54:27,880 --> 01:54:32,040
So you got to send the notice to the committee, the ad hoc committee, the US trustee.

1287
01:54:32,040 --> 01:54:35,960
You just file the same notice on the docket to give ECF notice.

1288
01:54:35,960 --> 01:54:42,760
Certainly, this costs associated with needing to serve that notice to the 2002 list of everybody

1289
01:54:42,760 --> 01:54:45,680
who's asked for notice to be served.

1290
01:54:45,680 --> 01:54:47,280
So I don't think she's saying that.

1291
01:54:47,280 --> 01:54:52,200
She's saying only those who've asked for ECF notice.

1292
01:54:52,200 --> 01:54:56,640
I mean, I suppose if that's around his preference, we could do that.

1293
01:54:56,640 --> 01:55:02,960
We would need a waiver of the service requirement to just file it on the docket in that regard.

1294
01:55:02,960 --> 01:55:09,240
You know, look, there's circumstances where I could see that leading to, you know, in

1295
01:55:09,240 --> 01:55:12,000
some circumstances, potentially quite more questions than answers.

1296
01:55:12,000 --> 01:55:17,160
Again, the committee is here and is going to have access to the underlying information

1297
01:55:17,160 --> 01:55:18,160
to evaluate these settlements.

1298
01:55:18,160 --> 01:55:23,240
And this question of whether or not this is a quote small claim on the facts of this case,

1299
01:55:23,240 --> 01:55:25,960
Mr. Mosley testified that it was.

1300
01:55:25,960 --> 01:55:29,600
Mr. Mosley has numbers of why this is small compared to the claims.

1301
01:55:29,600 --> 01:55:33,080
Obviously, Ms. Farkeesian chose not to cross examine him.

1302
01:55:33,080 --> 01:55:35,480
So his testimony is unrefuted.

1303
01:55:35,480 --> 01:55:42,360
I don't have any doubt that in the context of this case, you know, a $7 million settlement

1304
01:55:42,360 --> 01:55:45,160
is a small.

1305
01:55:45,160 --> 01:55:51,040
But you have to have you have to have some understanding of what you believe the claim

1306
01:55:51,040 --> 01:55:53,400
is worth before you can settle it.

1307
01:55:53,400 --> 01:55:54,400
Right.

1308
01:55:54,400 --> 01:55:57,440
I mean, you're not going to sell something unless you say, well, we pegged it at this

1309
01:55:57,440 --> 01:56:00,960
amount, so we're going to sell it for something less than that.

1310
01:56:00,960 --> 01:56:03,640
Or we're going to sell it for that amount because we think we got a really strong case.

1311
01:56:03,640 --> 01:56:05,640
So you have that.

1312
01:56:05,640 --> 01:56:11,480
I mean, the idea that you would have to include what the case what the debtor believed the

1313
01:56:11,480 --> 01:56:15,200
value of the claim was.

1314
01:56:15,200 --> 01:56:22,040
And then what the debtors settling the claim for doesn't seem to be much of a stretch

1315
01:56:22,040 --> 01:56:27,720
or much work because you got to do that anyway.

1316
01:56:27,720 --> 01:56:30,280
That's correct, Your Honor, although I can certainly see circumstances where there are

1317
01:56:30,280 --> 01:56:33,720
some claims where the debtors saying we think this claim is worth X.

1318
01:56:33,720 --> 01:56:37,600
In a lot of these cases, it's not going to be potentially with unliquidated litigation

1319
01:56:37,600 --> 01:56:38,600
claims.

1320
01:56:38,600 --> 01:56:40,160
It's going to be a range of outcomes.

1321
01:56:40,160 --> 01:56:41,160
Right.

1322
01:56:41,160 --> 01:56:42,560
If you pursue litigation, as your honor knows.

1323
01:56:42,560 --> 01:56:43,560
Right.

1324
01:56:43,560 --> 01:56:44,560
Of course, we have a claim.

1325
01:56:44,560 --> 01:56:46,280
We believe it's a bona fide claim.

1326
01:56:46,280 --> 01:56:48,800
If we win on these five arguments, it might be worth X.

1327
01:56:48,800 --> 01:56:51,720
It could be worth a lot less than X.

1328
01:56:51,720 --> 01:56:55,560
And we have to make a judgment as to what an appropriate settlement is.

1329
01:56:55,560 --> 01:57:00,800
I mean, the debtor can all you got to do is say we don't the debtor believes the claim

1330
01:57:00,800 --> 01:57:03,120
was worth no more than X.

1331
01:57:03,120 --> 01:57:04,120
And we're selling it for Y.

1332
01:57:04,120 --> 01:57:10,960
Certainly, Your Honor, if your honor's preference is to proceed that way, we can we can certainly

1333
01:57:10,960 --> 01:57:12,880
include that that part of the process.

1334
01:57:12,880 --> 01:57:15,880
We do think I think that makes sense.

1335
01:57:15,880 --> 01:57:18,680
That's what I think.

1336
01:57:18,680 --> 01:57:23,120
And Miss Sarkeesian, let me just make sure I understand your position.

1337
01:57:23,120 --> 01:57:27,800
Am I correct that you're not asking that the 2002 list be received notice?

1338
01:57:27,800 --> 01:57:31,480
You're saying just put it on the docket so that those who receive ECF notice receive

1339
01:57:31,480 --> 01:57:32,480
the ECF notice.

1340
01:57:32,480 --> 01:57:39,160
Well, Your Honor, it's my understanding that as for anybody who is getting ECF notice is

1341
01:57:39,160 --> 01:57:44,040
signed up for that, I think it's that is official service under the local rules.

1342
01:57:44,040 --> 01:57:45,040
Right.

1343
01:57:45,040 --> 01:57:48,520
So I don't object to that being a service.

1344
01:57:48,520 --> 01:57:53,680
I understand there might, I guess, potentially be people in the 2002 list that are not signed

1345
01:57:53,680 --> 01:57:56,040
up to get ECF notice.

1346
01:57:56,040 --> 01:57:57,520
I don't know if that's the case.

1347
01:57:57,520 --> 01:58:00,800
I would imagine if that is the case, it's pretty minimal.

1348
01:58:00,800 --> 01:58:02,560
Would I prefer them to be served as well?

1349
01:58:02,560 --> 01:58:03,560
Yes, of course I would.

1350
01:58:03,560 --> 01:58:08,560
But if we're trying to compromise, then I think that's a fair compromise.

1351
01:58:08,560 --> 01:58:14,480
Yeah, I think we're trying to to give fair notice, but also limit the expense here.

1352
01:58:14,480 --> 01:58:19,120
So I don't want the debtors to have to send out tens of thousands of notices every time

1353
01:58:19,120 --> 01:58:23,280
they settle the claim for $100.

1354
01:58:23,280 --> 01:58:32,360
So I think I think the order should include that ECF notice is sufficient and waive any

1355
01:58:32,360 --> 01:58:41,360
notice to parties who have not signed up for ECF notice.

1356
01:58:41,360 --> 01:58:52,240
Your Honor, just to address briefly a couple of other points with respect to the scope

1357
01:58:52,240 --> 01:58:57,560
of the order, we do have language in paragraph three that was further clarified that make

1358
01:58:57,560 --> 01:59:05,320
clear the types of claims that are excluded from this and that would not be eligible to

1359
01:59:05,320 --> 01:59:10,560
be settled in these procedures, which certainly include claims against insiders, claims against

1360
01:59:10,560 --> 01:59:16,600
professionals or any post petition claim of any kind.

1361
01:59:16,600 --> 01:59:21,560
You know, Mr. Kazian is continuing to ask for all employees.

1362
01:59:21,560 --> 01:59:26,400
We do think that hampers the process, particularly now if we're going to be filing this notice.

1363
01:59:26,400 --> 01:59:32,840
If there are employees, for example, who have smaller preference claims or the like, I don't

1364
01:59:32,840 --> 01:59:39,360
see why a general non-officer, non-insider should, you know, should be uneligible to

1365
01:59:39,360 --> 01:59:42,760
be part of this process through the procedures that have been outlined.

1366
01:59:42,760 --> 01:59:48,880
So we think the scope of the order as revised is appropriate.

1367
01:59:48,880 --> 01:59:52,160
Dentists didn't have that many employees, did they?

1368
01:59:52,160 --> 01:59:54,160
This is certainly not a company where we have thousands of employees.

1369
01:59:54,160 --> 01:59:59,800
I mean, there were, you know, there are a few hundred employees at the time, petition

1370
01:59:59,800 --> 02:00:00,800
date.

1371
02:00:00,800 --> 02:00:06,080
And so there are, you know, there are some employees and it, but this is a situation

1372
02:00:06,080 --> 02:00:17,600
where much of the compensation that was provided to even employees was in the form of cryptocurrency

1373
02:00:17,600 --> 02:00:20,160
and was held on exchange.

1374
02:00:20,160 --> 02:00:25,160
So the fact that employees have claims against the debtor, the fact that employee might have

1375
02:00:25,160 --> 02:00:28,600
withdrawn cryptocurrency within a preference period, for example.

1376
02:00:28,600 --> 02:00:35,760
And so there are claims that, you know, are not Mr. Bankman Fried and officers and claims

1377
02:00:35,760 --> 02:00:40,640
that we don't feel need to be treated any differently just because somebody was an employee

1378
02:00:40,640 --> 02:00:47,240
of the company if they don't meet the standard of being an insider or an officer.

1379
02:00:47,240 --> 02:00:52,960
And certainly if, you know, these are the types of discussions I'm sure we will have

1380
02:00:52,960 --> 02:00:56,800
with the committee, the ad hoc committee, to the extent there are any questions about

1381
02:00:56,800 --> 02:00:57,800
an individual.

1382
02:00:57,800 --> 02:00:58,800
All right.

1383
02:00:58,800 --> 02:00:59,800
Well, let me ask this question.

1384
02:00:59,800 --> 02:01:06,800
I'm trying to figure out how to phrase this.

1385
02:01:06,800 --> 02:01:09,800
Never mind.

1386
02:01:09,800 --> 02:01:12,800
Never mind.

1387
02:01:12,800 --> 02:01:23,680
I mean, given the small number of employees, oh, here's what I was going to ask.

1388
02:01:23,680 --> 02:01:33,800
Ms. Sarkisian, is it the U.S. trustee's position that there is some number below which no notice

1389
02:01:33,800 --> 02:01:37,880
would be necessary to settle the claim, as some of the ones you pointed out in the cases

1390
02:01:37,880 --> 02:01:40,880
that you cited today?

1391
02:01:40,880 --> 02:01:41,880
Yes, Your Honor.

1392
02:01:41,880 --> 02:01:48,200
I mean, if we're talking about, again, a number that's the value of the claim, not how much

1393
02:01:48,200 --> 02:01:54,880
is being paid in settlement, but the value of the claim, you know, in the other cases

1394
02:01:54,880 --> 02:02:03,200
I was looking at, the numbers were, you know, 35,000, 50,000, you know, so maybe 50,000

1395
02:02:03,200 --> 02:02:04,200
and below.

1396
02:02:04,200 --> 02:02:07,160
The value of the claim, not how much is being paid in settlement, because that's a totally

1397
02:02:07,160 --> 02:02:08,160
different issue.

1398
02:02:08,160 --> 02:02:16,000
But right now, there is no number as far as, for these procedures, there is no figure that

1399
02:02:16,000 --> 02:02:18,200
is the figure of the value of the claim.

1400
02:02:18,200 --> 02:02:21,960
Right now, the value of the claim could be anything and be subject to these procedures.

1401
02:02:21,960 --> 02:02:26,040
Well, I don't necessarily have a problem with that, because if the debtors are going to

1402
02:02:26,040 --> 02:02:30,120
give notice that says, we valued the claim at $100 million and we're settling it for

1403
02:02:30,120 --> 02:02:33,720
$7 million, that's going to raise a lot of red flags, and people are going to start asking

1404
02:02:33,720 --> 02:02:36,720
questions, and there will probably be objections.

1405
02:02:36,720 --> 02:02:37,720
Yes, Your Honor.

1406
02:02:37,720 --> 02:02:40,720
I mean, that would be helpful.

1407
02:02:40,720 --> 02:02:46,260
But in terms of, I guess, well, one thing I would say in terms of there being a settlement

1408
02:02:46,260 --> 02:02:52,320
at a dollar amount below which nobody would be noticed, like even the two committees,

1409
02:02:52,320 --> 02:02:53,320
I mean...

1410
02:02:53,320 --> 02:02:55,320
No, I think the committees would still be noticed.

1411
02:02:55,320 --> 02:02:56,320
Okay.

1412
02:02:56,320 --> 02:02:57,320
And the U.S. trustees.

1413
02:02:57,320 --> 02:03:00,320
Just not going out to the ECF notice.

1414
02:03:00,320 --> 02:03:01,320
Yeah.

1415
02:03:01,320 --> 02:03:08,520
Because I don't want, you know, these small claims, and there might be one creditor out

1416
02:03:08,520 --> 02:03:12,160
there who wants to object to everything, you know, and then it becomes a problem.

1417
02:03:12,160 --> 02:03:13,160
I understand, Your Honor.

1418
02:03:13,160 --> 02:03:15,280
I mean, again, but to me, that would be...

1419
02:03:15,280 --> 02:03:19,920
To tie it to the amount that's being paid in settlement, I don't think is useful.

1420
02:03:19,920 --> 02:03:23,160
So I think I would say, you know, if there are claims that are 70...

1421
02:03:23,160 --> 02:03:28,960
If the value of the claim that's held by the estate is $75,000 or less, and maybe that

1422
02:03:28,960 --> 02:03:34,040
would just go to the two committees and the U.S. trustee, I don't think I'd have a problem

1423
02:03:34,040 --> 02:03:35,040
with that.

1424
02:03:35,040 --> 02:03:36,040
Okay.

1425
02:03:36,040 --> 02:03:40,200
But I think that's the amount being paid in settlement, because I don't think that's the

1426
02:03:40,200 --> 02:03:41,200
most important figure.

1427
02:03:41,200 --> 02:03:42,200
Okay.

1428
02:03:42,200 --> 02:03:43,200
Thank you, Your Honor.

1429
02:03:43,200 --> 02:03:56,200
I don't know if you heard that conversation I had with Ms. Accusion.

1430
02:03:56,200 --> 02:03:57,200
I did.

1431
02:03:57,200 --> 02:03:58,200
I'm trying to...

1432
02:03:58,200 --> 02:03:59,200
Yes, Your Honor.

1433
02:03:59,200 --> 02:04:00,200
But I think...

1434
02:04:00,200 --> 02:04:01,200
Look, and we're trying to come up with...

1435
02:04:01,200 --> 02:04:03,680
Your Honor, there's a couple of issues raised here, right?

1436
02:04:03,680 --> 02:04:07,280
And so Your Honor's asking the question now, whether there's some number by which we don't

1437
02:04:07,280 --> 02:04:11,560
have to give notice.

1438
02:04:11,560 --> 02:04:20,320
The introduction of the schedule that we've now talked about doing, right, raises issues

1439
02:04:20,320 --> 02:04:24,120
for us from the perspective of the bid and the ask.

1440
02:04:24,120 --> 02:04:28,040
When we now say this is the value of the claim, isn't the debt, right?

1441
02:04:28,040 --> 02:04:33,600
We are now telling the world that we settled some particular claim at X percent of what

1442
02:04:33,600 --> 02:04:36,480
we have claimed the value is worth, right?

1443
02:04:36,480 --> 02:04:40,640
Where a lot of times in settlement motions, you try not to...

1444
02:04:40,640 --> 02:04:47,720
Particularly if they're kind of weepy types of claims, we try to make clear it's not quite

1445
02:04:47,720 --> 02:04:48,920
as black and white, right?

1446
02:04:48,920 --> 02:04:53,320
So we're now putting a schedule out there that says we're settling this type of claim

1447
02:04:53,320 --> 02:04:57,920
in the litigation with particularly defendants at X percentage that's exactly what Ms. Accusion

1448
02:04:57,920 --> 02:04:59,920
wants the world to see.

1449
02:04:59,920 --> 02:05:03,840
So that's the litigation perspective that's challenging, and so that does in my mind at

1450
02:05:03,840 --> 02:05:09,840
least to the question you were just asking, re-raises the question, does there at least

1451
02:05:09,840 --> 02:05:14,560
need to be some level we can either settle at or at least not have to put this notice

1452
02:05:14,560 --> 02:05:23,600
out to the world under some particular amount of money so that we're not compounding the

1453
02:05:23,600 --> 02:05:26,280
problem on these settlements.

1454
02:05:26,280 --> 02:05:32,840
So I understand the desire and I agree with your honor that from an informational standpoint

1455
02:05:32,840 --> 02:05:37,200
and our ability to provide the information, we're gonna have to have the discussions with

1456
02:05:37,200 --> 02:05:42,800
the committee, we're gonna have to have the discussion with the ad hocs and with the US

1457
02:05:42,800 --> 02:05:47,200
trustee, but noticing everybody of all of these settlements now at first dollar, which

1458
02:05:47,200 --> 02:05:50,880
is what we had agreed to do when this process was not gonna be playing out on the court

1459
02:05:50,880 --> 02:06:00,560
docket, does raise this additional issue of potentially hindering the ability of us to

1460
02:06:00,560 --> 02:06:03,760
maximize the value of one claim versus another in similarly situated claims.

1461
02:06:03,760 --> 02:06:09,680
Well, there's a good point that if you have similar claims and you're settling one, then

1462
02:06:09,680 --> 02:06:14,160
other claimants will say, well, you settled that one for X amount, why are you settling

1463
02:06:14,160 --> 02:06:15,160
mine for more?

1464
02:06:15,160 --> 02:06:17,160
Or why do you want more from me?

1465
02:06:17,160 --> 02:06:20,160
It does raise a problem, Ms. Accusion.

1466
02:06:20,160 --> 02:06:23,160
Your honor, could I, would you like me to go to the podium?

1467
02:06:23,160 --> 02:06:25,160
Either way, whatever you're comfortable with.

1468
02:06:25,160 --> 02:06:30,600
Well, your honor, I know that issue comes up, I think in a lot of chapter seven cases

1469
02:06:30,600 --> 02:06:37,680
with trustees filing motions to settle and I've had situations in which they're disclosing

1470
02:06:37,680 --> 02:06:42,040
how much they're getting in settlement, but not how much the claim was.

1471
02:06:42,040 --> 02:06:46,640
Now, you can pull the, in those situations, you can pull the avoidance actions and actually

1472
02:06:46,640 --> 02:06:47,640
look and see yourself.

1473
02:06:47,640 --> 02:06:52,360
And I've heard that, it's like, well, you know, you, in order to determine whether something

1474
02:06:52,360 --> 02:06:54,960
is reasonable, you have to have both numbers.

1475
02:06:54,960 --> 02:06:58,160
Otherwise, all you know is how much somebody's paying in settlement and you don't know what

1476
02:06:58,160 --> 02:06:59,760
the claim was valued at.

1477
02:06:59,760 --> 02:07:03,440
You have no information and creditors don't have the information.

1478
02:07:03,440 --> 02:07:09,040
So, and you also have the fact that there are many defenses to even just say preference

1479
02:07:09,040 --> 02:07:10,040
actions, right?

1480
02:07:10,040 --> 02:07:14,760
You know, we settled this one for less money because there was new value or whatever.

1481
02:07:14,760 --> 02:07:16,280
There's various defenses.

1482
02:07:16,280 --> 02:07:21,560
So just because they're all avoidance actions doesn't mean that they're all the same.

1483
02:07:21,560 --> 02:07:26,960
And there's going to be, I'm sure there will be some preference actions in these cases,

1484
02:07:26,960 --> 02:07:32,040
but the other types of avoidance actions, fraudulent transfers and the like, I think

1485
02:07:32,040 --> 02:07:39,240
are not cookie cutter types of things like preference actions can sometimes be, you know,

1486
02:07:39,240 --> 02:07:40,600
with trade vendors, for example.

1487
02:07:40,600 --> 02:07:47,320
So, but even in those cases, I mean, you have to balance the right of the creditors and

1488
02:07:47,320 --> 02:07:53,000
the public to know what's going on in the cases with litigation strategy.

1489
02:07:53,000 --> 02:07:56,880
And you know, because these, we don't know what these claims are.

1490
02:07:56,880 --> 02:08:00,080
I mean, honestly, when we're saying it's that there are similar claims, I don't know that

1491
02:08:00,080 --> 02:08:01,080
there's similar claims.

1492
02:08:01,080 --> 02:08:02,360
I don't know what the claims are at all.

1493
02:08:02,360 --> 02:08:06,240
You can't tell from the motion other than there'll be some avoidance, there'll be some

1494
02:08:06,240 --> 02:08:08,380
non-avoidance.

1495
02:08:08,380 --> 02:08:09,380
That's all I know.

1496
02:08:09,380 --> 02:08:10,920
So I don't know if they're similar.

1497
02:08:10,920 --> 02:08:11,920
I don't know if they're the same class.

1498
02:08:11,920 --> 02:08:12,920
I have no idea.

1499
02:08:12,920 --> 02:08:13,920
Maybe the debtors do.

1500
02:08:13,920 --> 02:08:19,880
But even with even similar claims, again, there's different defenses.

1501
02:08:19,880 --> 02:08:20,880
There's different issues.

1502
02:08:20,880 --> 02:08:21,880
There's different facts.

1503
02:08:21,880 --> 02:08:27,800
So the mere fact that the debtors settled one avoidance claim for this amount or this

1504
02:08:27,800 --> 02:08:33,720
percentage and another for different is meaningless.

1505
02:08:33,720 --> 02:08:37,800
And again, does that mean there's no disclosure just because, well, you know, maybe that gives

1506
02:08:37,800 --> 02:08:42,840
somebody an argument, you settle these other claims?

1507
02:08:42,840 --> 02:08:46,920
And honestly, Your Honor, even with what they're proposing, they propose to file after the

1508
02:08:46,920 --> 02:08:52,400
fact a list of the settlements and the amounts received, not the value of the claim, but

1509
02:08:52,400 --> 02:08:53,400
the amounts received.

1510
02:08:53,400 --> 02:08:59,360
Well, if they're settling claims that were actually subject to an avoidance action, if

1511
02:08:59,360 --> 02:09:03,040
you were a defendant in an avoidance action, you could take that, you could go and pull

1512
02:09:03,040 --> 02:09:09,160
the complaint and see the amount sought, and you can make the calculation yourself and

1513
02:09:09,160 --> 02:09:14,000
then argue, well, you took 10 cents on the dollar on this one, so I shouldn't pay more

1514
02:09:14,000 --> 02:09:15,000
than that.

1515
02:09:15,000 --> 02:09:17,760
So that's always going to be a possibility, even with what they propose.

1516
02:09:17,760 --> 02:09:24,720
But what they propose is notice after the fact when creditors can't object.

1517
02:09:24,720 --> 02:09:37,960
So I don't think it's a significant enough element, the possibility that some avoidance

1518
02:09:37,960 --> 02:09:44,200
defendants might have some argument looking at what the debtors accepted in other cases.

1519
02:09:44,200 --> 02:09:50,600
I don't think that's enough to change where I think Your Honor was leaning towards having

1520
02:09:50,600 --> 02:09:56,800
a notice that gives an objection time and that indicates what the claim is valued at

1521
02:09:56,800 --> 02:10:02,520
by the debtors as well as what they're receiving and gives notice at least through ECF.

1522
02:10:02,520 --> 02:10:05,480
I don't think that's a reason to change that.

1523
02:10:05,480 --> 02:10:11,680
Your Honor, if I may, again, Brian Glefstein, the issue, and I don't want to get into every

1524
02:10:11,680 --> 02:10:17,280
possible hypothetical, but Mr. Arcadian is positing that, well, even under our procedure

1525
02:10:17,280 --> 02:10:20,520
proposal, people would be able to reverse the engineering of things.

1526
02:10:20,520 --> 02:10:21,520
But it's a little bit different.

1527
02:10:21,520 --> 02:10:25,200
The extent that there's an avoidance claim on file, there's a complaint, there are pleadings,

1528
02:10:25,200 --> 02:10:28,200
there are documents, there's context to the claim.

1529
02:10:28,200 --> 02:10:36,080
The problem with what is now being discussed at any, at first dollar every level is we're

1530
02:10:36,080 --> 02:10:40,280
putting out a chart that just says here's the claim amount, here's the settlement amount.

1531
02:10:40,280 --> 02:10:41,280
People can just do math.

1532
02:10:41,280 --> 02:10:43,240
There's no context to any of it.

1533
02:10:43,240 --> 02:10:49,880
And so yes, we were intending to put out for disclosure purposes in our proposed procedures

1534
02:10:49,880 --> 02:10:54,800
a settlement amount of all the month settlements after the fact so people could see that the

1535
02:10:54,800 --> 02:10:59,880
estate took in X dollars in the month of August.

1536
02:10:59,880 --> 02:11:00,880
And it is true.

1537
02:11:00,880 --> 02:11:02,280
Mr. Arcadian is correct.

1538
02:11:02,280 --> 02:11:08,800
There is not, under the procedures that we proposed, there is not an opportunity for

1539
02:11:08,800 --> 02:11:15,040
every single creditor in the case to come forward and object to the settlements at these

1540
02:11:15,040 --> 02:11:16,040
values.

1541
02:11:16,040 --> 02:11:19,340
The notice parties have the ability to do that.

1542
02:11:19,340 --> 02:11:25,600
They will have access, they have access to information that's not public and that is

1543
02:11:25,600 --> 02:11:27,760
not on the dock.

1544
02:11:27,760 --> 02:11:33,500
If the committee and the debtors don't see eye to eye on the value of a settlement in

1545
02:11:33,500 --> 02:11:37,680
relation to the amount of the claim as we had proposed it, we would have to come forward

1546
02:11:37,680 --> 02:11:39,560
with a 90-19 motion.

1547
02:11:39,560 --> 02:11:47,600
And so I think this is, I think that Mr. Arcadian is understating the issue here because of

1548
02:11:47,600 --> 02:11:53,600
the fact that, and what your honor asked about as a possible solution here, is going to have

1549
02:11:53,600 --> 02:12:03,320
us filing each time we have a settlement a notice that says, notice against Joe Smith,

1550
02:12:03,320 --> 02:12:08,720
we have a claim for a million dollars and we settled it for $800,000.

1551
02:12:08,720 --> 02:12:11,400
And that's just going to be out there and people are going to know without any context.

1552
02:12:11,400 --> 02:12:16,520
So I do think to the extent that your honor is leaning in that direction, yes, we can

1553
02:12:16,520 --> 02:12:21,360
do it, but I think then there should be some exemption, at least up to some amount at a

1554
02:12:21,360 --> 02:12:27,360
minimum, where we can get these truly smaller claims resolved in consultation with the notice

1555
02:12:27,360 --> 02:12:33,720
parties without having to notice every creditor on the docket who has access to ECF.

1556
02:12:33,720 --> 02:12:40,640
I do think that that, you know, at every single dollar level does propose an issue.

1557
02:12:40,640 --> 02:12:45,360
What level, excuse me, what level would you propose?

1558
02:12:45,360 --> 02:12:46,360
You knew I was going to ask that.

1559
02:12:46,360 --> 02:12:47,360
I did.

1560
02:12:47,360 --> 02:12:51,320
Of course, we're all kind of now, you know, adjusting this a little bit on the fly.

1561
02:12:51,320 --> 02:12:59,120
But I mean, it seems, it certainly seems to me, your honor, if the concern is around the

1562
02:12:59,120 --> 02:13:05,000
claim amount, the concern that's being expressed by the U.S. trustee is claim amount to the

1563
02:13:05,000 --> 02:13:08,960
extent that your honor shares that concern of claim amount versus settlement amount,

1564
02:13:08,960 --> 02:13:13,160
which, you know, I don't want to rehash all this.

1565
02:13:13,160 --> 02:13:18,560
We do cite cases where settlement value as opposed to claim amount is absolutely looked

1566
02:13:18,560 --> 02:13:23,520
at, but to the extent it's claim amount, then we could put a cap on the claim amount that

1567
02:13:23,520 --> 02:13:28,760
we're settling for whatever value we settle it at potentially under these procedures.

1568
02:13:28,760 --> 02:13:37,280
But I think we have to have some ability to take claims that are, you know, in the debtor's

1569
02:13:37,280 --> 02:13:42,760
judgment that we would be disclosing that claim amount up to, you know, some amount.

1570
02:13:42,760 --> 02:13:45,120
I don't know, $5 million.

1571
02:13:45,120 --> 02:13:50,080
And then we're settling it for something less than that that we can do without noticing

1572
02:13:50,080 --> 02:13:51,200
publicly on the docket.

1573
02:13:51,200 --> 02:13:56,000
Because I do think we have cases, and Mr. Acasio is saying, well, she doesn't know,

1574
02:13:56,000 --> 02:13:57,000
you know, all the claims we have.

1575
02:13:57,000 --> 02:14:00,720
We don't know all the claims we have either, but we know a lot of them now.

1576
02:14:00,720 --> 02:14:04,280
And some of the claims that have been filed publicly, we have filed avoidance actions

1577
02:14:04,280 --> 02:14:11,720
that are on the docket of this court that name numerous defendants, some of whom are

1578
02:14:11,720 --> 02:14:16,720
equity holders, received equity distributions, relatively modest amounts compared to some

1579
02:14:16,720 --> 02:14:20,800
of the larger issues in those avoidance actions.

1580
02:14:20,800 --> 02:14:25,680
You know, we have claims like that that have not been filed, right, where we're talking

1581
02:14:25,680 --> 02:14:29,840
to parties, where we have potentially the opportunity to bring money into the estate

1582
02:14:29,840 --> 02:14:34,560
and resolve those claims without the need to file an adversary proceeding.

1583
02:14:34,560 --> 02:14:36,240
That's beneficial to the estate.

1584
02:14:36,240 --> 02:14:37,240
That's reducing costs.

1585
02:14:37,240 --> 02:14:43,440
And again, you know, the committee is going to be at the table to vet any of these settlements

1586
02:14:43,440 --> 02:14:44,440
as will Mr. Acasio.

1587
02:14:44,440 --> 02:14:47,840
He is going to get notice of these settlements and can ask questions.

1588
02:14:47,840 --> 02:14:54,840
So you know, if the concern is claim value versus settlement value, I think we, I would

1589
02:14:54,840 --> 02:15:02,520
submit then we should consider putting a number that kind of is a cap on the claim amount

1590
02:15:02,520 --> 02:15:08,120
at some number that we could do without filing the public notice.

1591
02:15:08,120 --> 02:15:11,840
Because I think that would at least allow us to facilitate some of these settlements

1592
02:15:11,840 --> 02:15:14,520
that frankly we might otherwise have to make a judgment.

1593
02:15:14,520 --> 02:15:19,400
Do we want to enter into the settlement under these procedures and disclose this ratio or

1594
02:15:19,400 --> 02:15:23,400
do we're just going to file a motion because we want to get more context to the claim?

1595
02:15:23,400 --> 02:15:26,360
And we might have to do that.

1596
02:15:26,360 --> 02:15:28,280
I agree with that.

1597
02:15:28,280 --> 02:15:33,000
I think there has to be some, some amount, claim amount where the debtors can settle

1598
02:15:33,000 --> 02:15:37,320
without having to do it publicly on the docket.

1599
02:15:37,320 --> 02:15:40,320
Question is, what's that number?

1600
02:15:40,320 --> 02:15:41,320
That's the difficult part.

1601
02:15:41,320 --> 02:15:44,320
How do you put a number on it?

1602
02:15:44,320 --> 02:15:45,320
Ms. Sarkeesian said 75,000.

1603
02:15:45,320 --> 02:15:55,760
That's way too low in the context of this case.

1604
02:15:55,760 --> 02:15:56,760
I'm open to suggestions.

1605
02:15:56,760 --> 02:16:00,560
Well, Your Honor, I mean, again, we're talking about kind of face, if we're talking about

1606
02:16:00,560 --> 02:16:04,920
face value of claims, I'll call face value debtors perceive value of claims.

1607
02:16:04,920 --> 02:16:10,640
I think to be meaningful here, you know, this is, this is a case that has a lot more zeros

1608
02:16:10,640 --> 02:16:11,640
than other cases.

1609
02:16:11,640 --> 02:16:12,640
Right.

1610
02:16:12,640 --> 02:16:19,480
And so I think at a minimum we need, you know, at least the ability to settle claims that

1611
02:16:19,480 --> 02:16:27,200
we have valued at, you know, I would think at least a few million dollars, $5 million,

1612
02:16:27,200 --> 02:16:33,240
$3 million, something that gives us a meaningful range to take those claims and resolve them

1613
02:16:33,240 --> 02:16:35,040
without having to do the public notice process.

1614
02:16:35,040 --> 02:16:39,840
I would like to have the opportunity to settle claims beyond that amount.

1615
02:16:39,840 --> 02:16:44,360
If we're talking about two tiers here, the larger claims up to the 7 million we proposed

1616
02:16:44,360 --> 02:16:47,720
of settlement value by doing the notice procedure that's been talked about.

1617
02:16:47,720 --> 02:16:52,920
I think it's critical that we have at least some bandwidth that goes, that has, you know,

1618
02:16:52,920 --> 02:16:54,680
it's certainly not $75,000.

1619
02:16:54,680 --> 02:16:58,400
I think it's got to be, it's got to start, you know, with a, with a millions on it to

1620
02:16:58,400 --> 02:16:59,400
really be meaningful.

1621
02:16:59,400 --> 02:17:04,240
We have a lot of those claims in the small one to three, less than $5 million claims

1622
02:17:04,240 --> 02:17:06,240
at range that need to get resolved here.

1623
02:17:06,240 --> 02:17:07,240
Right.

1624
02:17:07,240 --> 02:17:08,600
I, I agree with that.

1625
02:17:08,600 --> 02:17:12,520
I think it does need to be a much bigger number.

1626
02:17:12,520 --> 02:17:18,940
And I do think the idea of a two tier approach is appropriate.

1627
02:17:18,940 --> 02:17:26,840
So you can go, question is, do we put a cap on the claim amount as opposed to the settlement

1628
02:17:26,840 --> 02:17:35,640
amount on the larger claims that can be just noticed to, or they have to be on the docket.

1629
02:17:35,640 --> 02:17:44,800
So let's say I agree with you, 3 million or less can be done without notice on the docket,

1630
02:17:44,800 --> 02:17:50,920
just to the notice parties, the committee, ad hoc committee and the US trustee claims,

1631
02:17:50,920 --> 02:17:53,920
claim value over something.

1632
02:17:53,920 --> 02:18:01,840
And then the question is, what's that number going to be?

1633
02:18:01,840 --> 02:18:06,560
You want to have settlement amounts of 7 million.

1634
02:18:06,560 --> 02:18:11,520
I mean, perhaps, I mean, again, your honor, I think for that, we're going to make the

1635
02:18:11,520 --> 02:18:12,520
disclosure publicly.

1636
02:18:12,520 --> 02:18:13,520
Other people can come forward.

1637
02:18:13,520 --> 02:18:18,600
We're going to at that, at that level, if we're going to say settlements up to 7 million

1638
02:18:18,600 --> 02:18:22,600
in settlement value, I'd propose 20 million in, in claim value.

1639
02:18:22,600 --> 02:18:27,360
I mean, that's some, you know, that's obviously would be a settlement at something less than

1640
02:18:27,360 --> 02:18:28,360
50%.

1641
02:18:28,360 --> 02:18:32,240
I mean, there's a lot of facts and circumstances here, we could probably do something a little

1642
02:18:32,240 --> 02:18:33,640
bit less than that if you want to prefer it.

1643
02:18:33,640 --> 02:18:39,160
But that's the number that jumps into my head when there's going to be disclosure.

1644
02:18:39,160 --> 02:18:40,160
What about 15 million?

1645
02:18:40,160 --> 02:18:43,160
I think we could live with that, your honor.

1646
02:18:43,160 --> 02:18:46,480
So these are for both of the 3 million and the 15 million, you're talking about claim

1647
02:18:46,480 --> 02:18:48,760
amounts, the debtor's assessment of claim amount.

1648
02:18:48,760 --> 02:18:49,760
Correct.

1649
02:18:49,760 --> 02:18:52,400
Under 3 million, we could do it on notice to the notice parties.

1650
02:18:52,400 --> 02:18:53,400
Right.

1651
02:18:53,400 --> 02:18:57,360
Without on the docket, and then claim values up to 15 million that were settling for up

1652
02:18:57,360 --> 02:19:02,040
to 7, we could file the notice without filing an I.D.I.T. motion.

1653
02:19:02,040 --> 02:19:03,040
Correct.

1654
02:19:03,040 --> 02:19:05,480
I think that certainly would work from our perspective.

1655
02:19:05,480 --> 02:19:09,160
It gives us at least a framework to be able to start to resolve these claims, your honor.

1656
02:19:09,160 --> 02:19:13,560
And of course, if for some reason we find that we're in a range that's not working,

1657
02:19:13,560 --> 02:19:14,560
we can always come back.

1658
02:19:14,560 --> 02:19:15,560
Can always come back, yeah.

1659
02:19:15,560 --> 02:19:16,560
Can always come back.

1660
02:19:16,560 --> 02:19:17,560
Yeah, if we run into problems, I have no problem with revisiting the issue.

1661
02:19:17,560 --> 02:19:18,560
So, yes.

1662
02:19:18,560 --> 02:19:19,560
You are Gabe Sassen from Paul Hastings on behalf of the committee.

1663
02:19:19,560 --> 02:19:20,560
That framework that Mr. Gluckstein described is a good one.

1664
02:19:20,560 --> 02:19:27,560
Excellent, good.

1665
02:19:27,560 --> 02:19:35,360
So, the only remaining question is do we expand this, the exemptions to include all employees?

1666
02:19:35,360 --> 02:19:38,360
I don't think that's necessary.

1667
02:19:38,360 --> 02:19:42,360
I think we keep it at the officers and directors.

1668
02:19:42,360 --> 02:19:48,360
In my view, other than banks, I think everybody else would say a vice president is an officer

1669
02:19:48,360 --> 02:19:49,360
of a company.

1670
02:19:49,360 --> 02:19:50,360
Banks say they're not.

1671
02:19:50,360 --> 02:19:51,360
But I think everybody else does.

1672
02:19:51,360 --> 02:19:52,360
So, if it's a vice president, that's an officer of the company.

1673
02:19:52,360 --> 02:19:53,360
I don't know if they even had any vice presidents, but.

1674
02:19:53,360 --> 02:19:54,360
Yeah, this was not the word.

1675
02:19:54,360 --> 02:19:55,360
The word is formalistic in the titles in a way.

1676
02:19:55,360 --> 02:19:56,360
So, we obviously have made these assessments.

1677
02:19:56,360 --> 02:19:57,360
We have filed statements and schedules that include insiders and the like.

1678
02:19:57,360 --> 02:19:58,360
Okay, good.

1679
02:19:58,360 --> 02:19:59,360
All right.

1680
02:19:59,360 --> 02:20:00,360
Then I think that resolves everything, right?

1681
02:20:00,360 --> 02:20:01,360
Any?

1682
02:20:01,360 --> 02:20:02,360
Your honor, can I just ask a clarifying question on that last point?

1683
02:20:02,360 --> 02:20:03,360
Yes.

1684
02:20:03,360 --> 02:20:26,560
To the extent that there is a settlement with an employee that's not a director and officer,

1685
02:20:26,560 --> 02:20:36,400
I would ask that if it falls within the, so I guess it would be the $3 to $15 million value

1686
02:20:36,400 --> 02:20:42,720
range that they actually had to put it on the notice that's being filed, to please specify

1687
02:20:42,720 --> 02:20:46,480
that it is a current or former employee of the company.

1688
02:20:46,480 --> 02:20:51,160
Because what I see a lot in various documents is they'll say, you know, settlement with

1689
02:20:51,160 --> 02:20:52,160
Jim Jones.

1690
02:20:52,160 --> 02:20:54,080
I'm like, who's Jim Jones?

1691
02:20:54,080 --> 02:20:57,720
So if it's somebody who's actually an employee, just to give people more notice, this is a

1692
02:20:57,720 --> 02:20:59,880
former employee or a current employee.

1693
02:20:59,880 --> 02:21:02,960
Again, they would have to be within that range.

1694
02:21:02,960 --> 02:21:07,600
I mean, if it's less than $3 million, it's not going to go on that notice, or it's not

1695
02:21:07,600 --> 02:21:10,080
going to go on a public notice.

1696
02:21:10,080 --> 02:21:16,440
But if they do fall within the $3 to $5 million range that the public notice will be filed,

1697
02:21:16,440 --> 02:21:18,440
I would ask that they be identified.

1698
02:21:18,440 --> 02:21:22,960
And similarly, if there is a settlement with somebody else and it's just an individual,

1699
02:21:22,960 --> 02:21:27,600
to say, especially if there's not an action filed against the person, to say who that

1700
02:21:27,600 --> 02:21:28,600
person is.

1701
02:21:28,600 --> 02:21:29,600
Like, was it a consultant?

1702
02:21:29,600 --> 02:21:32,080
You know, was it a former professional?

1703
02:21:32,080 --> 02:21:37,080
Some type of information of that kind that I hope the debtors would be willing to do.

1704
02:21:37,080 --> 02:21:42,680
Your Honor, my reaction to that, and we'll take the court's guidance on that if the court

1705
02:21:42,680 --> 02:21:48,080
prefers it, my concern about that, I have no problem making that disclosure to Mr. Arcasian.

1706
02:21:48,080 --> 02:21:52,840
A notice on the docket, if we start identifying people as employees, that is, of course, outing

1707
02:21:52,840 --> 02:21:54,600
them as employees of the company.

1708
02:21:54,600 --> 02:22:00,440
And there's, you know, there is pushback against this company and its employees, whether people

1709
02:22:00,440 --> 02:22:02,440
are responsible or not.

1710
02:22:02,440 --> 02:22:07,480
So, you know, if we start characterizing, you know, the settlements, that's just, we're

1711
02:22:07,480 --> 02:22:11,240
adding another layer of disclosure into that notice.

1712
02:22:11,240 --> 02:22:14,240
I don't know that that's necessary.

1713
02:22:14,240 --> 02:22:18,840
And I have some concerns on the employee issue, but we'll take your course, the court's guidance

1714
02:22:18,840 --> 02:22:19,840
on that.

1715
02:22:19,840 --> 02:22:26,720
Yeah, I do have some concerns about identifying people on the docket as employees of this

1716
02:22:26,720 --> 02:22:27,720
company.

1717
02:22:27,720 --> 02:22:35,960
I mean, I have no specific evidence to support this, but I know in these types of cases,

1718
02:22:35,960 --> 02:22:42,200
and I think in this case in particular, there's a risk of a threat if someone is identified

1719
02:22:42,200 --> 02:22:44,000
as an employee.

1720
02:22:44,000 --> 02:22:47,240
So I would say not put that on the docket.

1721
02:22:47,240 --> 02:22:52,120
You can put it on the notice to the notice parties, but not on the docket itself.

1722
02:22:52,120 --> 02:22:53,120
That's fine, Your Honor.

1723
02:22:53,120 --> 02:22:54,120
Thank you.

1724
02:22:54,120 --> 02:22:55,120
Thank you, Your Honor.

1725
02:22:55,120 --> 02:22:56,120
Okay.

1726
02:22:56,120 --> 02:22:57,120
Does that resolve all these?

1727
02:22:57,120 --> 02:22:58,120
This was an interesting session.

1728
02:22:58,120 --> 02:22:59,120
It was probably a mediation session.

1729
02:22:59,120 --> 02:23:00,120
We appreciate the court's guidance on this.

1730
02:23:00,120 --> 02:23:01,120
This is actually, from the debtor's perspective, this type of a process is very important to

1731
02:23:01,120 --> 02:23:02,120
us so that we're able to start to resolve some of these claims that have been starting

1732
02:23:02,120 --> 02:23:03,120
to build up but have not warranted yet written forward motions.

1733
02:23:03,120 --> 02:23:04,120
So I think that's a good point.

1734
02:23:04,120 --> 02:23:05,120
I think that's a good point.

1735
02:23:05,120 --> 02:23:06,120
I think that's a good point.

1736
02:23:06,120 --> 02:23:07,120
I think that's a good point.

1737
02:23:07,120 --> 02:23:08,120
I think that's a good point.

1738
02:23:08,120 --> 02:23:09,120
I think that's a good point.

1739
02:23:09,120 --> 02:23:10,120
I think that's a good point.

1740
02:23:10,120 --> 02:23:17,120
I think that's a good point.

1741
02:23:17,120 --> 02:23:24,120
I think that's a good point.

1742
02:23:24,120 --> 02:23:29,120
I think that's a good point.

1743
02:23:29,120 --> 02:23:41,120
I think that's a good point.

1744
02:23:41,120 --> 02:23:50,120
I think that's a good point.

1745
02:23:50,120 --> 02:24:00,120
I think that's a good point.

1746
02:24:00,120 --> 02:24:07,120
I think that's a good point.

1747
02:24:07,120 --> 02:24:14,120
I think that's a good point.

1748
02:24:14,120 --> 02:24:21,120
I think that's a good point.

1749
02:24:21,120 --> 02:24:42,120
I think that's a good point.

1750
02:24:42,120 --> 02:24:49,120
I think that's a good point.

1751
02:25:12,120 --> 02:25:20,120
I think that's a good point.