WEBVTT 00:00:00.000 --> 00:00:04.759 Thank you, counsel. Thank you. Number 13, Christopher 00:00:04.759 --> 00:00:08.640 Bates. Motion dismissed is carried to 925 at 00:00:08.640 --> 00:00:14.179 10. Number 14, Laura Polson. Is a motion to attend 00:00:14.179 --> 00:00:17.379 the time to object to discharge is unopposed 00:00:17.379 --> 00:00:22.120 and it will be granted. And number 15, Milagros 00:00:22.120 --> 00:00:25.920 Caprio. Motion to dismiss has been withdrawn 00:00:25.920 --> 00:00:30.600 by the trustee. All right. that takes us back, 00:00:30.859 --> 00:00:35.359 I believe, just to block five. Unless there's 00:00:35.359 --> 00:00:42.939 anyone else on the call on another matter. All 00:00:42.939 --> 00:00:47.899 right, silence is good. Let me have appearances, 00:00:48.020 --> 00:00:53.179 please, for the wind down debtor. Good morning, 00:00:53.320 --> 00:00:55.439 Your Honor. Daniel Stoltz, Genova Burns, local 00:00:55.439 --> 00:00:58.479 counsel to the wind down debtor. Good morning, 00:00:58.539 --> 00:01:00.579 Your Honor. Kenneth Ouellette, Brown -Rutnick 00:01:00.579 --> 00:01:02.939 Council to wind down debtor. I'm joined by my 00:01:02.939 --> 00:01:06.980 partner, Tristan Axelrod. Welcome. Good morning. 00:01:07.939 --> 00:01:11.319 And I would also note we have Matt Manning, who 00:01:11.319 --> 00:01:15.060 is our replacement declarant for the motion as 00:01:15.060 --> 00:01:18.599 Mr. Meshe was unavailable. We submitted a replacement 00:01:18.599 --> 00:01:21.879 declaration last night that mirrored Mr. Meshe's 00:01:21.879 --> 00:01:26.500 declaration. I did see that. Thank you. Good 00:01:26.500 --> 00:01:29.120 morning, Mr. Manning. On behalf of the U .S. 00:01:29.319 --> 00:01:31.739 Trustee. Thank you, Your Honor. Lauren Bielski 00:01:31.739 --> 00:01:33.299 with the Office of the United States Trustee. 00:01:33.439 --> 00:01:36.359 I'm really just observing today's hearing. All 00:01:36.359 --> 00:01:41.319 right. I see the credit of counsel and his client. 00:01:41.900 --> 00:01:44.560 Good morning. Mr. Malgley, do you want to enter 00:01:44.560 --> 00:01:46.680 or appearance? Yes, Your Honor. Thank you very 00:01:46.680 --> 00:01:49.780 much. Joe Magelhase on behalf of John Ventuberjian, 00:01:49.819 --> 00:01:52.579 Jr. and the Eckerd Stevens. Thank you, Judge. 00:01:53.099 --> 00:01:58.560 All right. Welcome, Mr. Ventuberjian. All right. 00:02:00.560 --> 00:02:05.239 I have read the submissions and the objections. 00:02:06.099 --> 00:02:11.580 It is clear that two of the objectors have fallen 00:02:11.580 --> 00:02:15.379 by the wayside as a result of Third Circuit activity. 00:02:16.080 --> 00:02:20.699 Mr. Wynn's case was dismissed on appeal to the 00:02:20.699 --> 00:02:24.789 Circuit, by the Circuit, and Mr. Gero's... Mr. 00:02:24.810 --> 00:02:27.750 Jarrell was withdrawn as objection and the circuit 00:02:27.750 --> 00:02:30.169 also affirmed the district court with respect 00:02:30.169 --> 00:02:35.949 to his pending appeal and we still have activity 00:02:35.949 --> 00:02:42.469 obviously on Mr. Van Tubergen's matter just to 00:02:42.469 --> 00:02:44.949 advise the parties I'm about probably when then 00:02:44.949 --> 00:02:49.849 either today or tomorrow to docket an opinion 00:02:49.849 --> 00:02:55.729 on the each issue but I will wait for that. leave 00:02:55.729 --> 00:03:01.750 you all in anxious anticipation. But with respect 00:03:01.750 --> 00:03:07.050 to the motion today, I have just a couple of 00:03:07.050 --> 00:03:11.750 questions at the outset and then I'll let counsel 00:03:11.750 --> 00:03:17.310 proceed. First, I guess, Mr. Arlette, do you 00:03:17.310 --> 00:03:20.189 want to try to direct it to you or is Mr. Axelrod? 00:03:21.210 --> 00:03:23.800 Yes, Your Honor. Uh, for the record, Kenneth 00:03:23.800 --> 00:03:26.900 Olat of Brown Rutnick. Uh, yes, your honor. There 00:03:26.900 --> 00:03:31.360 were a couple of customer objectors as in addition 00:03:31.360 --> 00:03:34.539 to Mr. Van Tuberkin. Correct. I believe that 00:03:34.539 --> 00:03:37.300 we have, I don't know that we got any of them 00:03:37.300 --> 00:03:40.680 to resolve it, but to be clear, as we said in 00:03:40.680 --> 00:03:44.300 our reply, Nothing about the allocation motion 00:03:44.300 --> 00:03:47.280 affects the right of any customer to receive 00:03:47.280 --> 00:03:50.340 their distribution. Anybody whose distribution 00:03:50.340 --> 00:03:54.479 is in flight, it is imminently going to be sent 00:03:54.479 --> 00:03:57.979 or they're still doing the required KYC process. 00:03:58.539 --> 00:04:02.219 Nothing about this affects that and the distribution 00:04:02.219 --> 00:04:05.379 methodology lists all of the reserves that are 00:04:05.379 --> 00:04:08.560 being held for those customer claims. Really, 00:04:08.639 --> 00:04:11.120 the only thing in there about those is just a 00:04:11.120 --> 00:04:14.080 warning that the plan administrator has been 00:04:14.080 --> 00:04:18.620 waiving certain timelines in the plan. Under 00:04:18.620 --> 00:04:20.720 the plan, if you don't collect your distribution 00:04:20.720 --> 00:04:24.500 within six months, you forfeit the distribution. 00:04:24.759 --> 00:04:27.860 However, we have been willing to reissue a distribution 00:04:27.860 --> 00:04:33.279 up until shortly before we close the estates. 00:04:33.360 --> 00:04:36.480 And we wanted to warn people that that window 00:04:36.480 --> 00:04:42.790 is closing. But the principal issue was the allocation 00:04:42.790 --> 00:04:46.850 of the remaining value because when the plan 00:04:46.850 --> 00:04:49.470 was drafted, I don't think anybody seriously 00:04:49.470 --> 00:04:53.009 considered that we would be here today having 00:04:53.009 --> 00:04:56.569 been able to pay all customer claims in full. 00:04:57.069 --> 00:05:00.889 and so the plan was a little bit ambiguous on 00:05:00.889 --> 00:05:05.930 exactly how do you implement the voluntary subordination 00:05:05.930 --> 00:05:10.370 of FTX and certain regulators to all customer 00:05:10.370 --> 00:05:15.779 claims in a case like this where they're subordinated 00:05:15.779 --> 00:05:18.839 to creditors of another entity that has not been 00:05:18.839 --> 00:05:22.620 substantively consolidated. And so we wanted, 00:05:22.899 --> 00:05:25.259 because this is a significant amount of money, 00:05:25.399 --> 00:05:28.579 we wanted to do this openly on notice to make 00:05:28.579 --> 00:05:33.540 it very clear how and why we are allocating the 00:05:33.540 --> 00:05:36.560 remaining value to BlockFi Lending and not BlockFi 00:05:36.560 --> 00:05:39.339 Inc. because there are slight differences in 00:05:39.339 --> 00:05:42.790 the subordinated claims of both entities. Happily, 00:05:42.790 --> 00:05:45.870 there have been no objections on that point. 00:05:46.189 --> 00:05:51.810 I believe Mr. Van Tubergen's objection made some 00:05:51.810 --> 00:05:55.310 references to it, but I didn't understand that 00:05:55.310 --> 00:05:59.709 to be objecting to the overall principle of the 00:05:59.709 --> 00:06:02.769 surplus value being distributed to subordinate 00:06:02.769 --> 00:06:05.689 creditors goes to the creditors of lending, not 00:06:05.689 --> 00:06:10.800 ICC. And on that I would ask the court to enter 00:06:10.800 --> 00:06:14.720 the declaration of Matthew Manning as the evidentiary 00:06:14.720 --> 00:06:23.319 basis for that allocation. All right. We keep 00:06:23.319 --> 00:06:28.019 getting on the chat and I'll ask Mr. Humphrey 00:06:28.019 --> 00:06:32.620 to cease doing that. Mr. Humphrey's concerned 00:06:32.620 --> 00:06:35.680 that he has not been paid on his crypto. I don't 00:06:35.680 --> 00:06:37.759 know if Mr. Humphrey was on the line when he 00:06:37.759 --> 00:06:42.220 indicated that this motion will not prevent anybody 00:06:42.220 --> 00:06:47.519 who's waiting on a claim based on continued processing 00:06:47.519 --> 00:06:50.680 issues. It will not prevent them from getting 00:06:50.680 --> 00:06:54.600 paid, but it was your intent and you can reiterate 00:06:54.600 --> 00:06:57.240 it that parties understand they have to complete 00:06:57.240 --> 00:07:00.699 all the paperwork and the extensions and the 00:07:00.699 --> 00:07:03.839 waivers of the time to do so will soon come to 00:07:03.839 --> 00:07:07.910 an end at some point. so that it's not being 00:07:07.910 --> 00:07:15.629 ended by this motion, but customers who are still 00:07:15.629 --> 00:07:18.449 waiting for their distributions, who are entitled 00:07:18.449 --> 00:07:20.529 to distributions, and that's the key, if they're 00:07:20.529 --> 00:07:23.689 entitled to distributions, they have to do so 00:07:23.689 --> 00:07:25.769 in compliance with the requirements to complete 00:07:25.769 --> 00:07:29.629 all the necessary paperwork. Yes, Your Honor, 00:07:29.689 --> 00:07:33.850 and for Mr. Humphrey, I will confirm again that 00:07:33.899 --> 00:07:37.779 Nothing in this motion affects the right of customers 00:07:37.779 --> 00:07:40.819 to receive their distribution. That said, Mr. 00:07:41.000 --> 00:07:44.959 Humphrey had asked you to email me at k -a -u 00:07:44.959 --> 00:07:48.740 -l -e -t at bravrednik .com. A number of the 00:07:48.740 --> 00:07:50.959 people who've said they never got their distribution. 00:07:51.019 --> 00:07:53.800 We've made several attempts to get them their 00:07:53.800 --> 00:07:57.100 distribution that have failed. So I searched 00:07:57.100 --> 00:08:00.500 my email. I don't believe I have an email from 00:08:00.500 --> 00:08:05.250 Mr. and Mrs. Humphrey. so that I can't pull up 00:08:05.250 --> 00:08:08.269 the details, but to the extent that they have 00:08:08.269 --> 00:08:10.310 an entitlement to a distribution, we'll get that 00:08:10.310 --> 00:08:12.329 done. Maybe you can have somebody put in the 00:08:12.329 --> 00:08:19.050 chat your email address for Mr. Humphrey. And 00:08:19.050 --> 00:08:22.310 as far as Mr. Manning's declaration, is there 00:08:22.310 --> 00:08:28.790 any objection to it coming in as evidence? All 00:08:28.790 --> 00:08:31.370 right, the court accepts Mr. Manning's declaration. 00:08:32.549 --> 00:08:35.990 uh... has direct testimony in support of the 00:08:35.990 --> 00:08:41.029 pending motion uh... withdrawal and question 00:08:41.029 --> 00:08:43.490 uh... then we'll get to the heart of the issue 00:08:43.490 --> 00:08:46.789 uh... my understanding and i'm from brown numbers 00:08:46.789 --> 00:08:50.809 the dinner has the one and i have roughly a hundred 00:08:50.809 --> 00:08:53.889 and seventy seven million dollars uh... it's 00:08:53.889 --> 00:08:56.070 putting in reserve roughly thirty eight million 00:08:56.070 --> 00:09:00.610 dollars for administration uh... so i have two 00:09:00.610 --> 00:09:04.009 questions What happens under the plan with respect 00:09:04.009 --> 00:09:07.769 to unclaimed funds? Where do they go? Are they 00:09:07.769 --> 00:09:10.690 going to the subordinated creditors or are they 00:09:10.690 --> 00:09:13.570 being reissued to... Well, everybody else has 00:09:13.570 --> 00:09:15.889 gotten 100 cents, so I would assume subordinated 00:09:15.889 --> 00:09:19.590 creditors. And also, to the extent the funds 00:09:19.590 --> 00:09:21.929 that are being reserved, the 38 million, are 00:09:21.929 --> 00:09:25.830 not used up. Where do the leftover funds go? 00:09:26.750 --> 00:09:30.250 And how does this process work if this case is 00:09:30.250 --> 00:09:34.659 closed? Thank you, Your Honor. So you are correct. 00:09:34.820 --> 00:09:38.019 Unclaimed funds at this point would go to subordinated 00:09:38.019 --> 00:09:41.139 creditors. Our view is that the same principles 00:09:41.139 --> 00:09:46.580 of allocating surplus funds to lending mean that 00:09:46.580 --> 00:09:50.620 any surplus, any unclaimed funds should be returned 00:09:50.620 --> 00:09:54.139 to lending for distribution to subordinated creditors. 00:09:54.970 --> 00:09:59.549 As to how any leftover funds in reserve would 00:09:59.549 --> 00:10:04.190 be allocated, we're going to propose a solution 00:10:04.190 --> 00:10:07.590 to still let funds be transferred to subordinated 00:10:07.590 --> 00:10:12.769 creditors when we move for a final motion closing 00:10:12.769 --> 00:10:16.029 the cases. But we haven't done that yet, and 00:10:16.029 --> 00:10:19.669 we're going to finish putting all customer distributions 00:10:19.669 --> 00:10:23.529 in flight before we move to close the estates. 00:10:24.139 --> 00:10:28.220 All right, thank you. So I have a question actually 00:10:28.220 --> 00:10:35.120 for Mr. Malgay's. I understand your client is 00:10:35.120 --> 00:10:38.440 concerned about there being no set aside, no 00:10:38.440 --> 00:10:41.659 reserve in the event you're successful on appeals. 00:10:43.500 --> 00:10:48.379 The question I have is what amount should be 00:10:48.379 --> 00:10:51.600 reserved? I know there's the issue and it was 00:10:51.600 --> 00:10:56.629 brought up in the litigation over the The principle 00:10:56.629 --> 00:10:59.370 upon which distributions have been made to date 00:10:59.370 --> 00:11:07.570 is that the parties are limited to what's required 00:11:07.570 --> 00:11:13.710 under 502, which is to fix the claim as of the 00:11:13.710 --> 00:11:16.549 petition date and therefore the dollarization 00:11:16.549 --> 00:11:19.690 of all claims has been fixed based on the values 00:11:19.690 --> 00:11:25.299 as of the petition date. If I were, and I'm going 00:11:25.299 --> 00:11:28.159 to listen to arguments or additional arguments, 00:11:29.000 --> 00:11:33.940 but if I were to mandate a reserve for your client 00:11:33.940 --> 00:11:38.580 in the event there's a successful appeal, what 00:11:38.580 --> 00:11:42.279 about should there be? Judge, first I know as 00:11:42.279 --> 00:11:45.019 a technical matter, everyone's frozen on my screen. 00:11:45.279 --> 00:11:47.840 but I'm hearing audio so I take it you folks 00:11:47.840 --> 00:11:50.179 can hear me speak right now. We can hear you 00:11:50.179 --> 00:11:53.340 and nobody seems frozen on our end. Great that's 00:11:53.340 --> 00:11:57.059 great. So Judge I mean the most direct answer 00:11:57.059 --> 00:12:00.320 I could give you would be the delta of whatever 00:12:00.320 --> 00:12:03.700 if anything and we pray you award something in 00:12:03.700 --> 00:12:06.580 connection with the remanded ETH issue so it 00:12:06.580 --> 00:12:08.820 would be the delta of the face facial amount 00:12:08.820 --> 00:12:12.440 of the claim 10 million minus that. In our papers 00:12:12.440 --> 00:12:17.500 Judge both in response to the estimation motion 00:12:17.500 --> 00:12:21.679 and the most recent papers we filed, we asked 00:12:21.679 --> 00:12:24.000 for whatever reserve the court would deem appropriate. 00:12:24.419 --> 00:12:28.519 And we weren't trying to be cute with that. We 00:12:28.519 --> 00:12:30.659 just know that the court never reached the issue 00:12:30.659 --> 00:12:34.000 of damages during our first go around before 00:12:34.000 --> 00:12:38.179 your honor. We argued for liability and then 00:12:38.179 --> 00:12:42.659 we had some damages calculations as to the overall 00:12:42.659 --> 00:12:45.269 claim. feature in our arguments, but the court 00:12:45.269 --> 00:12:49.809 never reached that. And I understand the position 00:12:49.809 --> 00:12:53.809 asked that the crypto should be valued as of 00:12:53.809 --> 00:12:58.549 the petition date. We analyzing the proof of 00:12:58.549 --> 00:13:03.090 claim, we attempted to argue that Mr. Brantubergen's 00:13:03.090 --> 00:13:05.970 claim since those funds weren't kept in those 00:13:05.970 --> 00:13:07.769 specific accounts, that it should not be subject 00:13:07.769 --> 00:13:11.769 to that. But the court has not ruled on that 00:13:11.769 --> 00:13:15.169 specific issue. I know it's ruled on the issue 00:13:15.169 --> 00:13:18.269 at large as to other creditors. I don't know 00:13:18.269 --> 00:13:21.009 if that binds my client on that issue in terms 00:13:21.009 --> 00:13:22.929 of the date evaluation. I know my client feels 00:13:22.929 --> 00:13:25.389 incredibly strongly that it should be present 00:13:25.389 --> 00:13:30.730 day evaluation. But as I said, Judge, to me the 00:13:30.730 --> 00:13:34.629 cleanest way... And it can easily be done given 00:13:34.629 --> 00:13:37.490 the ample funds held by the BlockFi lending estate 00:13:37.490 --> 00:13:39.909 would be to simply take the facial amount of 00:13:39.909 --> 00:13:42.850 the claim on appeal, 10 million, to debit whatever, 00:13:43.009 --> 00:13:45.289 if anything, the court awards in connection with 00:13:45.289 --> 00:13:49.090 the missing ETH issue, and then have the reserve 00:13:49.090 --> 00:13:53.429 be for that delta. All right. Let me turn back 00:13:53.429 --> 00:13:55.730 and we can get to the heart of the objection, 00:13:55.850 --> 00:14:01.029 I guess, because the court doesn't have an objection. 00:14:02.209 --> 00:14:07.629 To the relief being sought under the motion in 00:14:07.629 --> 00:14:14.009 any respect And as to all of the creditors I 00:14:14.009 --> 00:14:16.049 want to focus in we're going to put aside mr. 00:14:16.169 --> 00:14:21.230 Van Tubergen but given that the other appeals 00:14:21.230 --> 00:14:25.610 seem to Absent the searcher area to the by the 00:14:25.610 --> 00:14:31.990 Supreme Court seemed to be going nowhere And 00:14:31.990 --> 00:14:36.909 I've expressed my concerns with the relative 00:14:36.909 --> 00:14:40.429 positions during our mediations on Mr. Van Tubergen's 00:14:40.429 --> 00:14:43.769 claims. And I indicate that I will be issuing 00:14:43.769 --> 00:14:46.490 an opinion probably later today or tomorrow. 00:14:47.370 --> 00:14:52.370 But Mr. Ouellette, let me go back to you. And 00:14:52.370 --> 00:14:55.769 I ask you to address a concern that I have in 00:14:55.769 --> 00:15:00.429 that I'm uncomfortable under the divestiture 00:15:00.429 --> 00:15:06.309 rule. with a pending appeal. I certainly, and 00:15:06.309 --> 00:15:11.230 that rule has allowed for additional bankruptcy 00:15:11.230 --> 00:15:13.149 court when there's an appeal taken from a bankruptcy 00:15:13.149 --> 00:15:20.850 court decision. It's a judge rule, a prudential 00:15:20.850 --> 00:15:27.350 rule that says this court doesn't have jurisdiction, 00:15:27.610 --> 00:15:31.440 shouldn't interfere and pair. a pending appeal 00:15:31.440 --> 00:15:34.399 with further court orders but in a bankruptcy 00:15:34.399 --> 00:15:38.720 context certainly further administration of the 00:15:38.720 --> 00:15:41.879 case has been allowed to continue and other orders 00:15:41.879 --> 00:15:44.220 have been entered that are collateral to the 00:15:44.220 --> 00:15:48.120 issue that's subject to the appeal but it seems 00:15:48.120 --> 00:15:51.620 to me in this case that if I were to estimated 00:15:51.620 --> 00:15:54.639 zero and allow for the distributions to all other 00:15:54.639 --> 00:15:58.600 creditors and basically move out the pending 00:15:58.600 --> 00:16:01.710 appeal i'd be doing exactly what i shouldn't 00:16:01.710 --> 00:16:07.370 be doing uh... uh... final resolution of the 00:16:07.370 --> 00:16:12.029 appeal uh... uh... how can the relief comports 00:16:12.029 --> 00:16:16.070 with those restrictions of course your honor 00:16:16.070 --> 00:16:19.750 so let me just take a step back there is one 00:16:19.750 --> 00:16:23.049 point that i agree with this man is on that there 00:16:23.049 --> 00:16:26.149 is a component of his claim that has not been 00:16:26.149 --> 00:16:29.399 resolved by your honor and we had hoped that 00:16:29.399 --> 00:16:32.340 that would be resolved by now it isn't and so 00:16:32.340 --> 00:16:36.440 we clearly need to keep a reserve for that and 00:16:36.440 --> 00:16:40.139 so the issue is really what kind and I think 00:16:40.139 --> 00:16:43.019 we say in our papers if your honor awards him 00:16:43.019 --> 00:16:45.600 some amount of money on that we're going to pay 00:16:45.600 --> 00:16:48.480 it and be done with that portion of his claim 00:16:48.480 --> 00:16:53.200 the issue is what do we do about things on appeal 00:16:53.200 --> 00:16:57.159 and there your honor I would be very specific 00:16:57.159 --> 00:17:00.440 that we are not asking your honor to estimate 00:17:00.440 --> 00:17:04.160 anything at zero. The plan does so automatically 00:17:04.160 --> 00:17:08.819 and I would know Mr. Van Tubergen did not object 00:17:08.819 --> 00:17:11.759 to the plan and that this has already been upheld 00:17:11.759 --> 00:17:16.910 on appeal because Mr. Gero as you'll recall appealed 00:17:16.910 --> 00:17:20.789 your order, your order overruling his and Mr. 00:17:20.910 --> 00:17:24.009 Van Tubergen's objections to the distribution 00:17:24.009 --> 00:17:28.230 notice about a year ago. Where, and you know, 00:17:28.230 --> 00:17:30.910 I was surprised to realize this was a year ago, 00:17:31.049 --> 00:17:34.589 your honor said, there's not a motion to stay 00:17:34.589 --> 00:17:38.890 pending appeal before me. And there has, you 00:17:38.890 --> 00:17:42.109 know, a year has passed and there is still not 00:17:42.109 --> 00:17:44.309 a motion to stay pending appeal in front of your 00:17:44.309 --> 00:17:47.609 honor. on the portion of Mr. Van der Breen's 00:17:47.609 --> 00:17:51.890 claim that is estimated at zero by virtue of 00:17:51.890 --> 00:17:54.910 the plan. And I think it's important to go back 00:17:54.910 --> 00:17:59.130 and look at the plan because it's very clear 00:17:59.130 --> 00:18:04.410 that any disputed claim that is subject to appeal 00:18:04.410 --> 00:18:07.789 shall be deemed to be estimated at zero dollars. 00:18:08.319 --> 00:18:11.660 And so nothing in the allocation motion asks 00:18:11.660 --> 00:18:14.940 Your Honor to estimate Mr. Van Dubern's claim 00:18:14.940 --> 00:18:18.339 at zero, because that's already happened. What 00:18:18.339 --> 00:18:22.779 it asks is at the end, it says, unless ordered 00:18:22.779 --> 00:18:25.859 otherwise by the bankruptcy court. And what our 00:18:25.859 --> 00:18:28.700 motion submitted, Your Honor, was we've been 00:18:28.700 --> 00:18:32.059 at this for a very long time. Your Honor reminded 00:18:32.059 --> 00:18:35.369 everybody a year ago that You've got to do something 00:18:35.369 --> 00:18:38.569 if you believe that assets should be held up 00:18:38.569 --> 00:18:42.730 based on your appeal. And to go back to what 00:18:42.730 --> 00:18:46.650 we argued a year ago, the plan does not give 00:18:46.650 --> 00:18:50.230 a standard by which your honor should rule on 00:18:50.230 --> 00:18:55.410 what that alternative estimation should be, but 00:18:55.410 --> 00:18:57.549 that we submit that it should be essentially 00:18:57.549 --> 00:19:00.730 a state pending appeal standard, because that 00:19:00.730 --> 00:19:04.509 is what is being in effect sought. that the order 00:19:04.509 --> 00:19:07.490 disallowing Mr. Van Tubergen's claim should be 00:19:07.490 --> 00:19:14.769 stayed such that you know on appeal. So that 00:19:14.769 --> 00:19:21.230 and you know the fact that Mr. Van Tubergen didn't 00:19:21.230 --> 00:19:26.309 object as a result I think to the plan determines 00:19:26.309 --> 00:19:29.430 this issue because it's a very reasonable provision 00:19:29.430 --> 00:19:31.849 to put into a plan. It's for the benefit of all 00:19:31.849 --> 00:19:35.500 creditors. to be able to proceed as quickly as 00:19:35.500 --> 00:19:40.220 possible to getting funds put out. Somebody might 00:19:40.220 --> 00:19:43.339 lose out because they are in Mr. Van Dooper's 00:19:43.339 --> 00:19:46.460 shoes, but at the point of the plan, you don't 00:19:46.460 --> 00:19:49.140 know who's going to be losing out on appeal rights. 00:19:49.200 --> 00:19:52.859 It's very similar to arbitration. People agree 00:19:52.859 --> 00:19:55.079 on arbitration all the time because you don't 00:19:55.079 --> 00:19:57.299 know who's going to win, but you know you'd like 00:19:57.299 --> 00:20:00.359 to spend less on lawyers, so why not do it in 00:20:00.359 --> 00:20:03.609 a quick process? And this also comports with 00:20:03.609 --> 00:20:06.529 the bankruptcy code because the bankruptcy code 00:20:06.529 --> 00:20:12.509 is specific that estimation is mandatory. It's 00:20:12.509 --> 00:20:15.910 not even option. It's mandatory. The court shall 00:20:15.910 --> 00:20:18.970 estimate a claim where failure to do so would 00:20:18.970 --> 00:20:22.710 unduly delay the reorganization. And so even 00:20:22.710 --> 00:20:25.470 if the plan hadn't provided for this automatic 00:20:25.470 --> 00:20:28.970 estimation, we submit that estimation here would 00:20:28.970 --> 00:20:34.259 be not only appropriate but mandatory because 00:20:34.259 --> 00:20:38.900 it will unduly delay the reorganization by holding 00:20:38.900 --> 00:20:44.900 up the completion of these cases by what we're 00:20:44.900 --> 00:20:47.339 probably looking at maybe two years at this point 00:20:47.339 --> 00:20:51.279 of appeals. Mr. Van Tubergen filed for reconsideration 00:20:51.279 --> 00:20:54.369 of your order. That was denied, so appeal on 00:20:54.369 --> 00:20:56.430 the district court is filed for reconsideration 00:20:56.430 --> 00:20:59.309 of the district court appeal. Then we go up to 00:20:59.309 --> 00:21:03.130 the third circuit. We don't even have an appeal 00:21:03.130 --> 00:21:05.789 in the third circuit yet. This is going to take 00:21:05.789 --> 00:21:10.950 a very long time. And that's exactly what Congress 00:21:10.950 --> 00:21:14.890 sought to prevent by passing 502C and making 00:21:14.890 --> 00:21:17.609 it not merely optional, but mandatory to destination 00:21:17.609 --> 00:21:22.440 in these circumstances. What I would submit is 00:21:22.440 --> 00:21:29.700 appropriate, Your Honor, is that we will not 00:21:29.700 --> 00:21:33.960 distribute the money on Mr. Van Tubergen's claim. 00:21:34.299 --> 00:21:37.519 We will reserve money for Mr. Van Tubergen's 00:21:37.519 --> 00:21:41.579 claim that is under submission, Your Honor. But 00:21:41.579 --> 00:21:47.000 we submit that the plan is mandatory. Not only 00:21:47.000 --> 00:21:49.920 are we entitled to hold no reserve for his claim 00:21:49.920 --> 00:21:52.559 pending appeal But we're not supposed to and 00:21:52.559 --> 00:21:55.440 that he needs to file a motion and I'd submit 00:21:55.440 --> 00:21:58.680 that it would be the same standard for a stay 00:21:58.680 --> 00:22:02.240 pending appeal To change that he's had a year 00:22:02.240 --> 00:22:05.960 to do that. He hasn't done it when it comes if 00:22:05.960 --> 00:22:11.059 you know, mr. Van Tubergen Doesn't get what he'd 00:22:11.059 --> 00:22:17.569 like in your order that will come out Then we 00:22:17.569 --> 00:22:22.390 can give him a Three to seven business days or 00:22:22.390 --> 00:22:26.089 three to seven days To seek a stay pending appeal 00:22:26.089 --> 00:22:29.809 before we distribute out those funds but at the 00:22:29.809 --> 00:22:34.710 end of the day It's been a year and not only 00:22:34.710 --> 00:22:39.480 did your honor say There's not a state pending 00:22:39.480 --> 00:22:41.920 appeal in front of me, but that was reiterated 00:22:41.920 --> 00:22:44.220 by the district court when the district court 00:22:44.220 --> 00:22:48.480 specifically upheld keeping no reserve against 00:22:48.480 --> 00:22:51.799 Mr. Jarrow's claim. Mr. Jarrow's claim that was 00:22:51.799 --> 00:22:55.599 disallowed is basically the exact same kind of 00:22:55.599 --> 00:22:58.779 claim as Mr. Van Toop's. There's no meaningful 00:22:58.779 --> 00:23:02.259 difference why... it would be acceptable to reserve 00:23:02.259 --> 00:23:05.859 zero on Mr. Gero's claim that's pending appeal 00:23:05.859 --> 00:23:11.319 while not for Mr. Van Tubergen. Given that Your 00:23:11.319 --> 00:23:14.839 Honor has said you hope to have an opinion by 00:23:14.839 --> 00:23:18.579 Friday, it may be a moot point how much we should 00:23:18.579 --> 00:23:21.380 be reserving if it's the one million, little 00:23:21.380 --> 00:23:24.220 over a million dollars that we submit as the 00:23:24.220 --> 00:23:28.190 only amount of his claim before you. versus the 00:23:28.190 --> 00:23:30.849 eight million dollars that I believe he's put 00:23:30.849 --> 00:23:34.109 in his papers. But that's how I would suggest 00:23:34.109 --> 00:23:38.109 that we proceed on that particular issue. But 00:23:38.109 --> 00:23:41.589 I submit Your Honor that the plan and the bankruptcy 00:23:41.589 --> 00:23:44.289 code not only make it appropriate but mandatory 00:23:44.289 --> 00:23:48.210 for Your Honor to permit the estate to finish 00:23:48.210 --> 00:23:51.390 the liquidation. All right. Thank you, Mr. O 00:23:51.390 --> 00:23:53.569 'Loughlin. Mr. Magulis. All right. Thank you, 00:23:53.609 --> 00:23:57.579 Judge. So I believe that the unless otherwise 00:23:57.579 --> 00:24:00.480 ordered language in the plan is the only way 00:24:00.480 --> 00:24:03.380 that plan would have been confirmed because to 00:24:03.380 --> 00:24:06.460 have estimated those claims finally at zero is 00:24:06.460 --> 00:24:10.980 absurd given where the case was and given that 00:24:10.980 --> 00:24:14.779 claims litigation was ongoing. I think that, 00:24:14.779 --> 00:24:17.039 again, unless otherwise ordered by the court, 00:24:17.599 --> 00:24:19.859 leaves all issues on the table and gives us a 00:24:19.859 --> 00:24:23.559 freeway to do what we need to do. And as to other 00:24:23.559 --> 00:24:26.000 potential law of the case, you know, I've looked 00:24:26.000 --> 00:24:29.680 over the order overruling objections of George 00:24:29.680 --> 00:24:32.319 Garrow and Mr. Van Tubergen in approving notice 00:24:32.319 --> 00:24:34.720 of disputed claims reserve. I've read it over 00:24:34.720 --> 00:24:38.720 several times. It's docket number 2389. Yes, 00:24:38.839 --> 00:24:40.920 the objections were overruled. But essentially, 00:24:40.980 --> 00:24:45.450 as I read it, It was to, um, it did not grant 00:24:45.450 --> 00:24:47.930 us what we wanted at the time, but still allowed 00:24:47.930 --> 00:24:50.250 us to live the fight of another day. I don't 00:24:50.250 --> 00:24:52.309 believe it foreclosed anything and it's permitted 00:24:52.309 --> 00:24:55.289 the proceedings we have today. Uh, and I think 00:24:55.289 --> 00:24:57.650 the proceedings we have today and also the estimation 00:24:57.650 --> 00:25:00.869 motion, they are proper avenues, the proper freeway 00:25:00.869 --> 00:25:03.430 to address some of the relief that Mr. Van Trueber 00:25:03.430 --> 00:25:06.859 gin. seeking. The argument regarding a stay, 00:25:07.200 --> 00:25:10.440 I believe, is respectfully inaccurate and also 00:25:10.440 --> 00:25:12.859 a red herring, because first of all, we did seek 00:25:12.859 --> 00:25:15.819 a stay. We sought it by way of docket number 00:25:15.819 --> 00:25:21.160 2142, which was our... We didn't call it a motion 00:25:21.160 --> 00:25:22.819 for reconsideration because we didn't get into 00:25:22.819 --> 00:25:26.339 the language just to judge, but that's what it 00:25:26.339 --> 00:25:28.420 was. It was a motion for post -order relief. 00:25:28.960 --> 00:25:32.839 And I'm looking at a table of contents on... 00:25:34.640 --> 00:25:38.740 On page 22, we began our argument seeking a stay. 00:25:39.599 --> 00:25:42.660 And so we did package that request within that 00:25:42.660 --> 00:25:45.980 motion. Now in your orders, in your judges, in 00:25:45.980 --> 00:25:49.240 the court's order sustaining the objection, the 00:25:49.240 --> 00:25:51.559 court noted that it wasn't reaching the issue 00:25:51.559 --> 00:25:54.640 because no notice of appeal had been filed. So 00:25:54.640 --> 00:25:57.859 that's why the court didn't touch upon, I suppose, 00:25:58.720 --> 00:26:00.740 the stay relief request. But that stay relief 00:26:00.740 --> 00:26:03.539 request was then made to the District of New 00:26:03.539 --> 00:26:07.940 Jersey. We filed a motion there, an individual 00:26:07.940 --> 00:26:10.799 motion for a stay of relief. But then there, 00:26:10.980 --> 00:26:14.160 the court didn't rule upon that before coming 00:26:14.160 --> 00:26:17.019 down with its in -part affirmance, in -part remand, 00:26:17.500 --> 00:26:20.059 and therefore it was muted there. So I think 00:26:20.059 --> 00:26:24.480 Mr. Van Tubergen soundly twice requested a stay. 00:26:24.960 --> 00:26:27.940 But to me, that's a red herring because upon 00:26:27.940 --> 00:26:31.740 the remand... We all had a discussion about how 00:26:31.740 --> 00:26:34.279 we could see the procedure unfolding. We discussed 00:26:34.279 --> 00:26:37.859 the estimation motion, and now we have these 00:26:37.859 --> 00:26:41.279 proceedings, which I believe flow from that prior 00:26:41.279 --> 00:26:44.180 notice of disputed claims reserve. So I think 00:26:44.180 --> 00:26:46.779 procedurally, Mr. Van Terbergen is on all fours 00:26:46.779 --> 00:26:49.539 to request what's being requested. And I think 00:26:49.539 --> 00:26:52.299 it's a common sense request, Your Honor. If I 00:26:52.299 --> 00:26:55.039 may briefly, because our overall theme judge 00:26:55.039 --> 00:26:59.599 is very much, as Mr. Ouellette said, we do believe 00:26:59.599 --> 00:27:02.720 that they can perceive 99 % in the fashion that 00:27:02.720 --> 00:27:05.559 they want. We're just saying that 1%, that's 00:27:05.559 --> 00:27:08.740 Mr. Van Tubergen, the last man standing. As Your 00:27:08.740 --> 00:27:12.279 Honor noted, he has appeal rights that we believe 00:27:12.279 --> 00:27:17.859 would be, it would be unfair. among other things, 00:27:18.039 --> 00:27:19.799 to cut off those appeal rights, they can easily 00:27:19.799 --> 00:27:23.019 be accounted for given the assets held by blackfile 00:27:23.019 --> 00:27:26.599 lending. I don't see why we're in such a rush 00:27:26.599 --> 00:27:32.000 to give the money to the FTX estate. I understand. 00:27:32.190 --> 00:27:34.250 Because I'm not trying to be outrageous. That's 00:27:34.250 --> 00:27:35.430 one thing I want to be very careful about. I 00:27:35.430 --> 00:27:36.970 want to make sound legal arguments and common 00:27:36.970 --> 00:27:40.529 sense arguments that I think resonate well before 00:27:40.529 --> 00:27:44.210 this court. And so we all know what FTS is in 00:27:44.210 --> 00:27:46.710 the headlines for. We all know that it led to 00:27:46.710 --> 00:27:50.630 a lot of cascading effects that we believe did 00:27:50.630 --> 00:27:52.630 wind up hurting people like Mr. Van Tubergen. 00:27:52.950 --> 00:27:57.460 We don't get into that here. To say that we have 00:27:57.460 --> 00:28:01.160 to be in such a rush to fork over $177 million 00:28:01.160 --> 00:28:06.019 to FTX while Mr. Van Tubergen is fighting for 00:28:06.019 --> 00:28:09.019 his life effectively in the appellate process, 00:28:09.039 --> 00:28:11.619 to me is absurd. And it's further absurd when 00:28:11.619 --> 00:28:14.319 you have $37 million being held in reserve for 00:28:14.319 --> 00:28:17.500 continued administration. With all respect to 00:28:17.500 --> 00:28:19.759 Mr. Ouellette, he's done a great job for his 00:28:19.759 --> 00:28:22.940 client in this case, obviously. How quickly do 00:28:22.940 --> 00:28:26.240 we intend to burn through, not he, whomever, 00:28:26.240 --> 00:28:29.079 you know, takes the reins here, how quickly do 00:28:29.079 --> 00:28:32.980 we intend to burn through $37 million in admin? 00:28:33.599 --> 00:28:36.240 Because if we're saying that Mr. Van Tubergen's 00:28:36.240 --> 00:28:39.039 appellate claims are going to last two years, 00:28:39.500 --> 00:28:42.160 well then certainly a portion of $37 million 00:28:42.160 --> 00:28:45.019 can be put aside for whatever happens, whether 00:28:45.019 --> 00:28:46.779 before the district court where stuff is still 00:28:46.779 --> 00:28:52.970 pending or the circuit of appeals. So, I don't 00:28:52.970 --> 00:28:55.150 see what the rush is to cut him off at Denise. 00:28:55.670 --> 00:28:59.049 You can still go forward with the overwhelming 00:28:59.049 --> 00:29:01.190 majority of the machinations that are necessary 00:29:01.190 --> 00:29:04.349 to wind down the estates and still look after 00:29:04.349 --> 00:29:07.529 Mr. Vanturigen's due process rights. And look, 00:29:07.829 --> 00:29:10.309 I'd be remiss if I didn't mention the substantive 00:29:10.309 --> 00:29:12.109 consolidation issue. I'm just going to say right 00:29:12.109 --> 00:29:13.529 now, because again, I'm not trying to be outrageous. 00:29:16.329 --> 00:29:18.789 I didn't read it as a distinction without a difference 00:29:18.789 --> 00:29:24.809 in the papers because in paragraph 10 of the, 00:29:24.829 --> 00:29:29.569 it was a little foggy in the motion itself. So 00:29:29.569 --> 00:29:33.950 in docket number 2643, I know that the wind down 00:29:33.950 --> 00:29:36.589 debtor is, the main motion before your honor 00:29:36.589 --> 00:29:38.609 judge, I know that the wind down debtor spent 00:29:38.609 --> 00:29:41.450 some time on this issue, the characterization. 00:29:41.950 --> 00:29:44.670 issue in terms of, I suppose, the distribution 00:29:44.670 --> 00:29:48.950 to BlockFi Inc. We weren't trying to get in the 00:29:48.950 --> 00:29:52.089 weeds with that. We were just saying, Mr. Van 00:29:52.089 --> 00:29:54.569 Tubergen is a proper creditor of BlockFi lending. 00:29:55.089 --> 00:29:57.470 There's $177 million attributed to the estate. 00:29:58.049 --> 00:30:00.809 However we get there, he should be taken care 00:30:00.809 --> 00:30:04.480 of through some reserve. Given supplemental filings, 00:30:04.759 --> 00:30:07.359 I do feel compelled, and we didn't object to 00:30:07.359 --> 00:30:09.380 them being allowed in the record, Judge. We're 00:30:09.380 --> 00:30:11.640 trying to move this along. I get it. But allow 00:30:11.640 --> 00:30:15.640 me at this point to just quote paragraph 10 of 00:30:15.640 --> 00:30:19.460 docket number 2660. It says, to address this 00:30:19.460 --> 00:30:22.940 issue and fund customer distributions, the plan 00:30:22.940 --> 00:30:25.940 administrator, upon the advice of its professionals, 00:30:26.240 --> 00:30:30.190 including M3, directed the transfer of distributable 00:30:30.190 --> 00:30:33.529 assets primarily held at BlockFi Lending, which 00:30:33.529 --> 00:30:36.190 had a surplus followed in its customer distributions, 00:30:36.750 --> 00:30:40.170 to BlockFi Inc., which had a deficit of distributable 00:30:40.170 --> 00:30:43.750 assets available for customers. To me, that can't 00:30:43.750 --> 00:30:46.950 be read as a characterization issue. That has 00:30:46.950 --> 00:30:50.309 to be read as money going from one pot to another 00:30:50.309 --> 00:30:53.410 pot. And therefore, when you look at, you know, 00:30:53.710 --> 00:30:58.339 paragraph 9 of the same... declaration, it says, 00:30:58.619 --> 00:31:01.660 this created a practical problem. In some, the 00:31:01.660 --> 00:31:03.799 debtors were not substantively consolidated, 00:31:04.299 --> 00:31:07.359 and each black fly entity possesses certain assets. 00:31:07.920 --> 00:31:10.640 And it continues. Well, that's not a practical 00:31:10.640 --> 00:31:14.400 problem. That's a legal problem. Because we know 00:31:14.400 --> 00:31:18.039 that subsequent consolidation is a far cry from 00:31:18.039 --> 00:31:20.359 procedural consolidation, i .e. joint administration. 00:31:21.440 --> 00:31:23.619 And again, we're not trying to throw, you know, 00:31:23.880 --> 00:31:26.539 a grenade here on this issue. Again, that just 00:31:26.539 --> 00:31:29.400 supports the notion that the Block 5 lending 00:31:29.400 --> 00:31:32.680 estate is the rich estate. And if we have $37 00:31:32.680 --> 00:31:38.299 million for administration to go on after this, 00:31:38.900 --> 00:31:41.619 then surely money can be put aside for Mr. Van 00:31:41.619 --> 00:31:44.079 Tubergen. Because it's not as if we're saying 00:31:44.079 --> 00:31:46.519 we're closing up shop and everything's done. 00:31:48.319 --> 00:31:51.500 The sum and substance of the motion is that we're 00:31:51.500 --> 00:31:53.559 going to somehow wind down these estates, but 00:31:53.559 --> 00:31:55.440 there's going to be a life after. And for that 00:31:55.440 --> 00:31:58.539 life after, we need to pack our car with $37 00:31:58.539 --> 00:32:03.500 million. So to me, it's crazy to think that you 00:32:03.500 --> 00:32:05.900 could load the car, so to speak, with $37 million, 00:32:06.180 --> 00:32:10.019 drive away, close this estate, and then cut off 00:32:10.019 --> 00:32:13.000 appellate rates. You still have a motion for 00:32:13.000 --> 00:32:16.539 re -hearing pending. So that's my opinion, Judge. 00:32:16.980 --> 00:32:19.099 All right. Thank you, counsel. Mr. Ouellet, anything 00:32:19.099 --> 00:32:24.619 in response? Yes. So first, look, I still... 00:32:24.799 --> 00:32:27.980 don't understand why Mr. Maglis is talking about 00:32:27.980 --> 00:32:32.400 substantive consolidation. This is a issue to 00:32:32.400 --> 00:32:37.319 implement a specific contractual agreement with 00:32:37.319 --> 00:32:40.960 essentially with certain subordinated creditors 00:32:40.960 --> 00:32:44.359 of block by lending who agreed to be subordinated 00:32:44.359 --> 00:32:48.460 to all creditors. There's no dispute that there's 00:32:48.460 --> 00:32:51.440 assets available at block by lending. In fact, 00:32:51.519 --> 00:32:55.319 that's what the plan administrator is seeking 00:32:55.319 --> 00:32:59.619 to confirm here. So, you know, I just frankly 00:32:59.619 --> 00:33:02.200 don't understand why that is coming up. As to 00:33:02.200 --> 00:33:06.700 the 38 million, that's not there for legal fees. 00:33:06.779 --> 00:33:10.759 There's potential tax filings that, you know, 00:33:11.099 --> 00:33:14.519 the estate is still open this year. There is 00:33:14.519 --> 00:33:19.940 all sorts of movement in value of assets that 00:33:19.940 --> 00:33:22.980 potentially makes you know, we have to keep a 00:33:22.980 --> 00:33:30.119 reserve in case we owe the IRS money. There was 00:33:30.119 --> 00:33:35.319 a settlement of the litigation that the state 00:33:35.319 --> 00:33:38.819 had against D &O insurers. It was merged with 00:33:38.819 --> 00:33:42.259 a settlement of a class action against certain 00:33:42.259 --> 00:33:46.019 directors and officers where that proceeding 00:33:46.019 --> 00:33:48.640 where the approval of that settlement was significantly 00:33:48.640 --> 00:33:51.640 delayed in the securities class action and we 00:33:51.640 --> 00:33:54.400 only recently got preliminary approval but it 00:33:54.400 --> 00:33:58.559 leads to a problem that all of the information 00:33:58.559 --> 00:34:01.359 that we will be getting rid of when we close 00:34:01.359 --> 00:34:04.759 is information that the plaintiffs and defendants 00:34:04.759 --> 00:34:07.500 might need should that settlement fall through 00:34:07.500 --> 00:34:09.639 and it doesn't look like the settlement will 00:34:09.639 --> 00:34:12.360 get final approval by the time we would like 00:34:12.360 --> 00:34:15.619 to close. It's things like that that are driving 00:34:15.619 --> 00:34:21.559 the need for reserves. But the point... Absolutely. 00:34:21.780 --> 00:34:24.199 And I want to be very clear so that there's no 00:34:24.199 --> 00:34:28.619 confusion. The absolute point is that we would 00:34:28.619 --> 00:34:31.260 like to cut off Mr. Van Tubergen's appeal rights 00:34:31.260 --> 00:34:36.480 because waiting two years does not comport with 00:34:36.480 --> 00:34:38.679 the requirements of the plan or the bankruptcy 00:34:38.679 --> 00:34:42.059 code. Mr. Van Tubergen has had his day in court 00:34:42.059 --> 00:34:44.860 in this court. He's had his day in court in the 00:34:44.860 --> 00:34:49.389 district court. And it is a... well understood 00:34:49.389 --> 00:34:52.670 feature of bankruptcy that occasionally appeals 00:34:52.670 --> 00:34:55.530 get mooted. It's the whole equitable mootness 00:34:55.530 --> 00:34:59.969 doctrine where the most significant thing in 00:34:59.969 --> 00:35:05.389 Chapter 11, the confirmation of a plan, can often 00:35:05.389 --> 00:35:09.130 appeals be mooted by the plan going effective. 00:35:09.869 --> 00:35:16.190 And so where appeals courts have upheld repeatedly, 00:35:16.780 --> 00:35:19.519 that you can, in fact, lose your appeal rights 00:35:19.519 --> 00:35:21.880 when the underlying issues get mooted if you 00:35:21.880 --> 00:35:24.980 did not seek and obtain a stay -pending appeal. 00:35:26.280 --> 00:35:29.199 It's how the bankruptcy code is supposed to work. 00:35:29.659 --> 00:35:32.900 As for the stay -pending appeal that Mr. Van 00:35:32.900 --> 00:35:35.059 Tubering requested and Mr. Magelies referred 00:35:35.059 --> 00:35:39.679 to, that's from February of 2024 to a year and 00:35:39.679 --> 00:35:43.489 a half ago. It was denied. It was denied before, 00:35:43.550 --> 00:35:46.230 Your Honor, before we had the whole issue over 00:35:46.230 --> 00:35:52.409 the previous reserve amount, to the extent that 00:35:52.409 --> 00:35:55.710 Mr. Van Tubergen wanted to file a motion saying, 00:35:56.590 --> 00:35:59.730 here's what reserve, you know, I want to overturn 00:35:59.730 --> 00:36:02.389 the estimation of the disputed portions of my 00:36:02.389 --> 00:36:05.530 claim at zero. It should have been filed sometime 00:36:05.530 --> 00:36:07.989 between, I think it was, Your Honor said that 00:36:07.989 --> 00:36:12.000 on September 6th of last year. today September 00:36:12.000 --> 00:36:17.079 11th of this year over a year later and Instead 00:36:17.079 --> 00:36:23.739 what we have is a Request for a reserve in an 00:36:23.739 --> 00:36:26.920 amount to be determined by your honor And I don't 00:36:26.920 --> 00:36:29.179 know what what the plan administrator is supposed 00:36:29.179 --> 00:36:32.599 to do with that the plan says zero There's no 00:36:32.599 --> 00:36:35.400 argument for what would be an appropriate reserve 00:36:35.400 --> 00:36:39.110 because no motion was filed And so, Your Honor, 00:36:39.150 --> 00:36:41.289 I would submit that the only appropriate reserve 00:36:41.289 --> 00:36:45.409 is zero. And the actual relief sought in the 00:36:45.409 --> 00:36:48.670 motion, again, was not to estimate the claim 00:36:48.670 --> 00:36:51.889 at zero because that's already done. But to say 00:36:51.889 --> 00:36:56.170 you've had enough time, the time to file new 00:36:56.170 --> 00:37:01.449 motions seeking a new reserve is over. All right, 00:37:01.550 --> 00:37:05.940 Mr. Magulies. I'll be very brief, Judge. I have 00:37:05.940 --> 00:37:08.699 to take umbrage to that. We discussed the concept 00:37:08.699 --> 00:37:13.059 of the line -down debtor estimation motion being 00:37:13.059 --> 00:37:15.760 a vehicle to try to hash out some of these issues. 00:37:15.820 --> 00:37:17.539 Now, I understand that motion has not been ruled 00:37:17.539 --> 00:37:24.739 upon yet, but we saw let's going along on what 00:37:24.739 --> 00:37:27.239 I view as procedural quibbles after we've shown 00:37:27.239 --> 00:37:29.619 that yes, we did seek a stay, but that's not 00:37:29.619 --> 00:37:32.239 even... I don't want to be discussing that because 00:37:32.239 --> 00:37:34.059 we can get to the heart of issues that the court 00:37:34.059 --> 00:37:37.639 is right now. But to suggest that there was not 00:37:37.639 --> 00:37:40.179 some mechanism envisioned to address this, we 00:37:40.179 --> 00:37:43.480 all hashed out that their estimation motion would 00:37:43.480 --> 00:37:48.320 be that vehicle. And I appreciate them filing 00:37:48.320 --> 00:37:51.519 this additional motion in part pursuant to the 00:37:51.519 --> 00:37:54.320 prior notice of disputed claims reserve. But 00:37:54.320 --> 00:37:57.900 I don't understand the point. These issues are 00:37:57.900 --> 00:38:00.980 properly before the court. and the court has 00:38:00.980 --> 00:38:04.559 sufficient discretion to award the relief requested. 00:38:04.860 --> 00:38:07.519 Now, it might be mercurial in some sense, because 00:38:07.519 --> 00:38:10.380 I understand, Judge, we did say, as the court 00:38:10.380 --> 00:38:13.719 may deem appropriate, we have faith and confidence 00:38:13.719 --> 00:38:16.019 in the court, and we're comfortable with that. 00:38:17.380 --> 00:38:19.320 And on the record, I've said today what it could 00:38:19.320 --> 00:38:20.980 be. But yeah, I don't want to stand up procedural 00:38:20.980 --> 00:38:22.900 arguments. I don't know where we're going with 00:38:22.900 --> 00:38:26.079 those. The support of equity, and we discussed... 00:38:26.139 --> 00:38:29.340 the potential means of resolving these issues 00:38:29.340 --> 00:38:33.000 in good faith. And we're here now. All right. 00:38:33.079 --> 00:38:38.179 Thank you, counsel. Court's facing an issue here 00:38:38.179 --> 00:38:47.260 where it's been asked to approve a pathway which 00:38:47.260 --> 00:38:54.050 will, in effect, mood out future appeals. Now, 00:38:54.190 --> 00:38:56.489 Mr. Magulies, on behalf of his client, Mr. Van 00:38:56.489 --> 00:38:59.429 Tubergen, has argued and asked for this court 00:38:59.429 --> 00:39:03.030 to exercise its equitable powers under Section 00:39:03.030 --> 00:39:11.849 105. It is, in this court's view, not equitable 00:39:11.849 --> 00:39:15.510 to have Mr. Van Tubergen's ability to pursue 00:39:15.510 --> 00:39:19.050 his appellate rights rooted out at this juncture, 00:39:19.510 --> 00:39:23.219 where the relief sought by the wind down debtor 00:39:23.219 --> 00:39:30.199 could be accomplished almost completely and still 00:39:30.199 --> 00:39:34.280 provide some avenue of relief for Mr. Van Tubergen. 00:39:34.800 --> 00:39:38.159 By the same token, it is not equitable in this 00:39:38.159 --> 00:39:43.539 court's view to have creditors, whether they're 00:39:43.539 --> 00:39:49.420 subordinated or not, take on the costs. of having 00:39:49.420 --> 00:39:53.139 Mr. Van Tubergen continue his efforts to tilt 00:39:53.139 --> 00:39:56.599 that windmills, in this court's view, in the 00:39:56.599 --> 00:40:03.880 appeals. Let me be clear and avoid any guessing, 00:40:04.480 --> 00:40:08.880 guesswork by parties. Mr. Van Tubergen is not 00:40:08.880 --> 00:40:13.940 recovering on a heath, in my opinion. All right, 00:40:14.039 --> 00:40:19.420 it'll come out and it will... why and the legal 00:40:19.420 --> 00:40:23.960 and factual basis for my denying the relief that 00:40:23.960 --> 00:40:26.460 he has requested in finding that there is no 00:40:26.460 --> 00:40:30.280 missing needs at all. But that doesn't end the 00:40:30.280 --> 00:40:35.440 inquiry or the problem that we're facing. That 00:40:35.440 --> 00:40:42.800 just makes it a larger number for which Mr. Ventubergen 00:40:42.800 --> 00:40:47.360 will continue to his appellate efforts. to recover 00:40:47.360 --> 00:40:53.099 because you won't have any funds in hand that 00:40:53.099 --> 00:40:58.960 reduce the amount that is still seeking. I am 00:40:58.960 --> 00:41:04.400 concerned that this court would be acting in 00:41:04.400 --> 00:41:11.039 a manner that violates the divestiture rule courts 00:41:11.039 --> 00:41:16.530 operate under in taking actions that impede and 00:41:16.530 --> 00:41:24.909 impair the appellate process. So I am going to 00:41:24.909 --> 00:41:27.150 grant all the relief requested in the motion 00:41:27.150 --> 00:41:30.590 with the exception pursuant to the authority 00:41:30.590 --> 00:41:33.829 I reserve myself in the language of the plan 00:41:33.829 --> 00:41:38.550 provided for unless otherwise ordered to mandate 00:41:38.550 --> 00:41:44.840 that there be a reserve. The wind out there is 00:41:44.840 --> 00:41:46.940 already reserving thirty eight million dollars 00:41:46.940 --> 00:41:51.780 or so. Several more millions of dollars in reserve 00:41:51.780 --> 00:41:55.380 won't have an impact. You could still make the 00:41:55.380 --> 00:41:58.860 wind down administrator can still make substantial 00:41:58.860 --> 00:42:03.019 distributions to SEC and FTX and other authorities. 00:42:04.079 --> 00:42:06.980 What I will require is that the amount set aside 00:42:06.980 --> 00:42:11.519 for Mr. Van Tubergen's claim. It should. act 00:42:11.519 --> 00:42:15.380 almost like a wasting insurance policy in that 00:42:15.380 --> 00:42:20.519 any fees incurred by the wind down debtor in 00:42:20.519 --> 00:42:24.159 contesting the appeals should not come from other 00:42:24.159 --> 00:42:27.579 creditors. That's not equitable either. The rest 00:42:27.579 --> 00:42:30.380 of the creditors shouldn't bear the costs of 00:42:30.380 --> 00:42:33.920 Mr. Van Tubergen continuing to pursue his appellate 00:42:33.920 --> 00:42:38.639 rights when he's had a fair opportunity at initial 00:42:38.639 --> 00:42:42.789 appeals so that the wind down debtor estates 00:42:42.789 --> 00:42:46.110 costs in defending these appeals will come out 00:42:46.110 --> 00:42:53.769 of that set aside amount. The question becomes, 00:42:54.190 --> 00:42:58.929 what is the proper amount that has to be set 00:42:58.929 --> 00:43:03.730 aside? The $10 million request and the proof 00:43:03.730 --> 00:43:07.389 of claim is of no greater validity necessarily 00:43:07.389 --> 00:43:10.789 than the I actually had less validity than the 00:43:10.789 --> 00:43:13.869 zero estimated amount that I've already fixed. 00:43:15.170 --> 00:43:19.369 So to say put aside $10 million has no basis. 00:43:22.250 --> 00:43:29.570 But no one has given me a sufficient factual 00:43:29.570 --> 00:43:33.409 basis to decide how much is fair to set aside. 00:43:33.889 --> 00:43:37.579 Yes. the court did assist in trying to mediate. 00:43:38.019 --> 00:43:40.519 I have a sense of where the parties could have 00:43:40.519 --> 00:43:44.159 gone in mediation, but that's not recovering 00:43:44.159 --> 00:43:49.039 an appellate rights. But absent any true way 00:43:49.039 --> 00:43:59.260 of fixing a claim set aside amount that is not 00:43:59.260 --> 00:44:01.639 simply pulling a number out of thin air. That's 00:44:01.639 --> 00:44:04.289 exactly what I'm going to do. is pull a number 00:44:04.289 --> 00:44:11.070 out of Fiverre and ask that the wind down debtor 00:44:11.070 --> 00:44:19.610 set aside $7 .5 million to cover any reversal 00:44:19.610 --> 00:44:23.789 on appeal and allowance of claim Mr. Van Tubergen 00:44:23.789 --> 00:44:27.550 can achieve through his appellate rights, but 00:44:27.550 --> 00:44:31.190 also to cover any of the wind down debtor's costs. 00:44:31.420 --> 00:44:34.679 in defending those appeals. I would urge the 00:44:34.679 --> 00:44:38.239 parties to try again at reaching a sensible number 00:44:38.239 --> 00:44:46.159 in settlement, but I'm issuing this ruling based 00:44:46.159 --> 00:44:51.019 on the court's concern that there should be some 00:44:51.019 --> 00:44:57.579 equitable treatment of both the wind down debtor 00:44:57.579 --> 00:45:00.239 and Mr. Van Tubergen as he pursues his appellate 00:45:00.239 --> 00:45:04.710 right. uh... without harming the subordinated 00:45:04.710 --> 00:45:07.309 creditors further or anyone else and i think 00:45:07.309 --> 00:45:12.170 this is the best the court can come up with uh... 00:45:12.170 --> 00:45:16.469 so i'll respond to any concerns or inquiries 00:45:16.469 --> 00:45:19.329 and this is that let me make sure this is clear 00:45:19.329 --> 00:45:21.469 this is without prejudice to wind down better 00:45:21.469 --> 00:45:23.949 coming back before me should things that should 00:45:23.949 --> 00:45:27.570 events develop that require the court to reconsider 00:45:27.570 --> 00:45:32.000 uh... maybe certain outcomes on the appeals. 00:45:33.199 --> 00:45:38.639 And the same for Mr. Venturbigin. As long as 00:45:38.639 --> 00:45:41.019 there's additional funds on hand, he can ask 00:45:41.019 --> 00:45:44.159 me to reconsider the fixing of the amount. But 00:45:44.159 --> 00:45:50.679 there has to be a reason. So with that, all the 00:45:50.679 --> 00:45:53.960 other reliefs sought, and as outlined by Mr. 00:45:54.139 --> 00:45:57.860 Manning and his declaration, can be accomplished. 00:45:58.119 --> 00:46:02.320 And Mr. Oled, I'll let you submit a proposed 00:46:02.320 --> 00:46:05.880 form of order. Thank you, Your Honor. All right. 00:46:06.500 --> 00:46:08.159 Mr. Magley, is there anything else on your end? 00:46:08.860 --> 00:46:10.699 Obviously, Judge, we're just on the edge of our 00:46:10.699 --> 00:46:14.019 seat to read the ruling. I don't want to push 00:46:14.019 --> 00:46:16.500 the court. Could you give us a preview, like 00:46:16.500 --> 00:46:21.900 the trailer, Judge? I think I did. Your client 00:46:21.900 --> 00:46:24.800 loses, unfortunately, from your perspective. 00:46:27.119 --> 00:46:30.980 And it'll be out in a day. All right. Thank you. 00:46:30.980 --> 00:46:31.820 Thank you.