Well, confusion. Indeed, just apologies. Not
required. It happens. I just have a call at ten
thirty, which makes which is why I had to move
forward. I see your client. Good morning. All
right. OK, this is the motion for reconsideration
filed on behalf of. Mr. Van Tubergen, in the
Block Five matter, let me have appearances please.
Good morning, Your Honor. Joe Magolese, of Eckerd
Siemens, on behalf of the creditor, John Van
Tubergen. Good morning, Your Honor. Tristan Axelrod,
Graham Rudnick, LOP, for the Block Five line
down debtors. And it was 50 -50, and my apologies,
I knew I mispronounced it, the hard G versus
the soft G. All right. Needless to say that I
know there was a supplemental filing on behalf
of Mr. Ventubergen yesterday that the court had
the opportunity to review and review the pleadings.
This is not our first go around in this matter
of these issues. So let me turn to Mr. Magaliz.
Good morning. Thank you, Judge. What would you
like to highlight or add? But I take it Your
Honor had an opportunity to review my client's
supplemental certification, Judge? I did. This
court is obviously always on point with that,
so I just wanted to make sure. Thank you, Judge.
Judge, just generally speaking, first of all,
thank you so much for your time, consideration,
and courtesy. I believe this is the second or...
third motion for reconsideration are followed
before you're on this matter. And a lot of judges
will be catancorous by now. So I just want to
say on a human level, your good -natured spirit
is very much appreciated, Judge. We're just getting
better at it. That's the way I look at it. It's
practice. And judge, you know, and by the way,
I'm dealing with, in a moment of levity, if I
may say, the gnarliest shaving cut I've ever
had since I was a teenager. So just bear with
me, gentlemen. It's quite all right, though.
It happens. I'm glad you're not in court leading
over our furniture. Yes. Yes. Judge, consistent
with the directive on remand, we're just trying
to get this issue of missing youth correct. These
issues are... tricky, they're nuanced. We believe
that we spotted a couple things in the court's
reasoning that warrant further review. I do want
to echo something my client said that has really
resonated with me, which is, he said to me, Joe,
I feel like I'm seeing these numbers for the
first time. The court may agree or disagree with
that. Mr. Axelrod will most likely disagree with
that. Point being, the more we drill down, I
think, the closer we get to the truth. Now, legally,
we have stuck with our front line argument that
the correct number is 895e. And I harken back
to one of the original findings this court made
in its first decision, which was that Mr. Van
Tubergen's mathematical framework analysis of
The subject loan that we're talking about it
didn't make sense and judge by the way I'll just
say this very briefly at this point. That's why
I think the 60 % versus 50 % LTV Discrepancy
because the court found that it was consistent
with traditional loans, but it was a unique loan
that's relevant because You know, that's one
of the things that mr. Van Tubergen's mathematical
framework highlighted And so when this court
said that this LTV was consistent, I just want
to bring the court back to when it originally
found that Mr. Van Tubergen's framework made
some sense. And so we stuck with our front line
argument that 895 ETH was owed. The district
court raised the prospect of 245 ETH being owed.
This court came out differently, came to zero.
And on reconsideration, our point is, whatever
the case may be, it can't be zero. And one of
the points that we raised was that there is a
portion of the ETH that they were credited as
posting that seems to be unaccounted for. That
is that 296 .571 amount, because the loan liquidation
summary reflects a rollover amount available.
of 1718 .358. And Mr. Van Tubergen's point is
this is unaccounted for. And for us, this just
raises a specter of a lack of confidence in the
records that Blockfly has presented. And this
gets back to what I led with, which is we just
want to keep drilling down on the truth. And
I go back to the case that's still on appeal,
where One of our main arguments there is what
was the pricing metric that was actually used
because we believe we're the only ones that actually
put it on the record. And so we don't we don't
believe that black bodies should be entitled
to deference on records. We really want them
to be forced to prove every contention that they
make in terms of the price like argument. The
same the same thing, Judge. You know, I know
that they're in their apply. They are trying
to rely on the pricing that Mr. Van Tubergen
set forth in the aforementioned mathematical
framework analysis of the subject moment. I looked
at the response, specifically paragraph 29, and
I'm still not seeing a judge. We really think
that they have not shown that the price went
up in a way that would have trumped the district
court's concern that the full portion of the
ETH, even under their arguments, was not posted.
And that delta would have been 245 ETH, I believe.
And as to the Scrivener's error argument, Judge,
you know, my client set forth a lot of points,
both in our main... papers, and also the supplemental
certification. It is a rather large difference,
Judge, as we know. Your Honor still found that
it was akin to a clerical error. But my point,
Judge, is that, and I want to highlight now,
is the who, what, when, and how the error has
never been shown. Precisely, how did it occur?
Who committed it? And what was the fallout of
it? You know, was there anything contemporaneous
at the time? The case law that Your Honor cited
did feature specifics as to who, what, when,
and how. Whereas here, we have something that
wasn't even raised pre -bankruptcy. And to me,
that suggests that it was a legal argument invoked
by highly competent and skilled counsel rather
than what actually happened as a matter of fact.
And so, Judge, I'll end my opening here with
this. As part of the supplemental proceedings
that we're requesting, we do think it makes sense
to force BlockFi to document the factual nature
of the Scrivener's error, not just that, oh,
whoopsie, right? But to tell us how, because
as Mr. Van Tubergen went chapter and verse, there
would be a lot of errors that, there have been
many, a multitude of Scrivener's errors littered
throughout. the document, including the truth
and money statement. All right, fair enough.
Thank you, Mr. Magulies. Mr. Axelrod. I'm going
to get another paper towel. Thank you. Mr. Magulies
has left the picture. Should I wait for him to
return? I'm sure he can hear. He's just grabbing
it. Thank you for your courtesy, sir. Yeah. All
right. Thank you, Your Honor. We've now, as counsel
referenced, been through the reconsideration
drill a few times. Unfortunately, for reasons
that I'll try not to beat on too much, we have
to create a record today. So I just want to set
forth, as we all know, the bankruptcy rules don't
create a standard for reconsideration. It is
understood that incorporated are rules 59E and
60B of the Federal Rules of Civil Procedure.
That's what we are here today to discuss. They
set forth standards for reconsideration or relief
from a judgment. And the standard is set forth
in certain Your Honor's rulings. It's set forth
in the papers. But basically there's four things
that we might be looking for. There's clear legal
error. There's manifest injustice. A change of
controlling law or newly available evidence.
There's been no change of controlling law. I
don't think that's being argued. Notwithstanding
that Mr. Van Tubergen may be seeing numbers for
the first time, we're not talking today about
newly available evidence. There actually was
an argument about that earlier, which had to
do with a document that was emailed to Mr. Van
Tubergen six years ago, but we're not here today
talking about that. So the standard that this
court needs to address, I believe, is either
clear legal error or manifest injustice. not
merely re -arguing what has been argued about
now for at least months, if not two and a half
years, if not four years. This motion for reconsideration
is re -argument of a lot of different points.
It does not address the standard much as needed
for reconsideration. And most of the arguments
that we've heard are just not correct. And so
we're going to walk through them. The first reconsideration
argument has to do with what's been referred
to as the rollover from the prior loan into the
E -43 loan, the E -43 LSA, which is the operative
contract concerning what we call the missing
ETH. Mr. Van Tubergen says he's now looking at
these numbers and the rollover should have been
1 ,718 ETH instead of 2 ,014. Once you start
out before we go to too deep into the woods on
this By quoting from the holding that is seeking
to be reconciled to be reconsidered here Nothing
is from page 5 to your honor's pain Nothing in
the agreement referring to the e43 LSA Suggests
that BlockFi as lender was obligated to supply
cryptocurrency collateral for the benefit of
the borrower and Mr. Van Tubergen's position
that Block 5 was required to post -collateral
is not supported by the Operative Contract. Accordingly,
regardless of the collateral amount referenced
in the E -43 LSA, the obligation to post sufficient
collateral rested at all times with Mr. Van Tubergen.
So as we talk through these issues that surround
how much collateral there was supposed to be,
I think it's important to keep in mind that that
is all about a secondary holding in Your Honor's
opinion. that there is no part of the motion
for reconsideration that seeks reconsideration
of the holding, that if you look at the contract
that Mr. Ventuberjian negotiated and executed,
he was required to post collateral. He did not
do that. There was an integration clause. And
so if you read the contract in the most textualist
manner possible, which is what Mr. Ventuberjian
has asked for expressly. If you read the contract
in the most textualist manner possible, then
any award where he gets back some bit of collateral
is a windfall. And in fact, he borrowed $5 .9
million under this contract and collateral was
liquidated on his behalf to satisfy, repay that
obligation. And so if you interpret the operative
contract, he's already gotten a windfall because
he never posted collateral. But collateral was
essentially sold and given to him on his behalf.
So now let's come back to the proposed difference
between 1700 and 2000 ETH that was part of the
rollover. Docket number 1963, exhibit C. This
is part of the emails that preceded the E -43
LSA. And we've talked about if you have to look
outside the contract, then you look at these
emails. I'm looking at, it's the 45th page of
the PDF in docket number 1963. It says, in an
email from BlockFi to Mr. Van Tubergen on June
29th, 2021, it refers to the existing 2014 .928
ETH on the loan. That is the rollover amount.
And Mr. Van Tubergen responds, below is confirmed.
There's an exception to some... And so we have,
starting in 2021, an agreement that the rollover
was 2014 ETH, going through an agreement that
then supersedes those emails, and then years
of litigation around this. And this is the first
time that we have heard, oh, it might be 1700
ETH. There are multiple additional reasons that
are stated in our papers why it does not make
sense that this number would be 1718. But I want
to stress here because the motion for reconsideration
is about clear error or manifest injustice. We're
not meeting that standard. He agreed to a number
at the time. He signed a contract. This was never
raised in four years. The second issue, Mr. Antubergen
says that the court inaccurately found that the
LTV ratio under this contract was 60 percent,
which was the usual. And in fact, the usual may
have been 50 percent again. This is not what
the court's holding was about. I don't think
there's any way you could argue that that observation
of the court was important to any part of its
holding. This is just not a missing each type
of question. I do want to observe that those
same emails, docket number 1963, exhibit C, they
agree to an 80 % LTD. The E43 LSA then says 60%.
That was negotiated. Now, read carefully, and
I think counsel was clear about this. I mean,
anything is being obfuscated. Their point is
not that the contract should have said 50 percent
or that it should be interpreted as 50 percent.
What they're saying is that the court should
have looked at all of the different LSAs and
seen that actually the usual was 50 percent and
that was change. I don't understand why that
makes any difference to the court's holding whatsoever.
But even if that's the case they they haven't
cited enough to support that or shown why it
matters except In the context of arguing there
was no Scriveners error and I'm gonna get to
that point in a bit The third argument that they
make on reconsideration is and I will quote here
from their motion at page 9 the court's finding
they dispute the court's finding I'm quoting
that the value of ETH rose during the course
of negotiations. Here's what the court says in
its opinion. Block 5 further explains that because
the value of ETH rose during the course of negotiations,
etc. So that's not a finding of the court. That
is the court observing what was argued by the
parties and supported by evidence of various
parties. And it's employed to reach the finding
that the court makes, so now quoting from the
opinion of pages eight and nine, the documentary
record, ellipsis, demonstrates that the collateral
pledge was precisely that which the parties agreed
would back the loan. So to be clear, there's
no incorrect finding of fact as to what the price
change was in ETH or what happened there. The
court looked at the documentary record. It looked
at explanations offered by the parties of that
record. And being a fact -finder, the court made
a fact -finding. That fact -finding is what the
documentary record demonstrates, which is that
the collateral pledge was precisely that which
the parties agreed would back the loan. Once
again, that is ancillary to the primary holding
and the opinion that if you interpret the contract
as it was negotiated, then what Mr. Van Tuberging
is seeking is a windfall that violates what he
agreed to. Even so, I don't think, and we get
into this somewhat in our papers, I don't think
it's correct that the price of ETH did not rise.
I don't even know that we have a dispute about
the movement of ETH at that time or how it affected
what the parties were doing. If you look at the
June 29th emails, you can actually see that Mr.
Van Tubergen is acknowledging movements of ETH
prices. He says, I... this offer does not expire
today and will continue to be available until
I identify a safe purchase price amount. So obviously
the price was increasing, he was waiting for
it to drop so that he wouldn't be at risk of
an LTV default immediately when it was executed.
Even so, the argument is just wrong about what
the court was finding and even reading the motion
to reconsider most charitably, this is just the
second bite at the apple. It's just saying the
court was maybe wrong about some little thing,
and because of that, it has to reconsider every
portion of what it ordered and why. Finally,
we get to the argument about whether or not there
was a scrivener's error and what that means.
Once again, there's an integration clause. Mr.
Ventuberjian argued the terms of the contract
apply. He's not even seeking reconsideration
of that, and the contract is binding. Under the
terms of the contract, he had to post collateral.
He didn't. So any collateral that was credited
to him violated the contract and he's already
gotten a windfall. Anything more is a greater
windfall at the expense of Block 5's creditors.
So I'm not sure that any of this really matters.
But setting that aside, the court looked at the
entire documentary record and held that Block
5's explanation of how you get to the amount
of ease that was pledged, whether you need to
look at parole evidence and why, what that parole
evidence suggests. The court found that Block
5's explanation was more persuasive, and I would
submit it's the only reasonable explanation.
That only brings us back full circle to what
was argued about and ruled on before. One of
two things has to be true. Either the contract
applies and you interpret the contract as it
was written, in which case Mr. Van Tubergen is
seeking a windfall, or you can look outside the
contract and look at what the party's intended,
and we've had a factual ruling looking at a lot
of evidence about that and it shows that any
additional theory on any additional collateral
credited to Mr. Van Tubergen at this point is
also a windfall to him because it's just not
what they negotiated. It doesn't make any sense.
Your Honor, I want to close again to make a record
here and I'm going to sound like a broken record
because BlockFi has now said this many times.
Mr. Van Tubergen made risky bets. he lost an
unbelievable amount of money betting on the price
of Ethereum tokens. And this litigation is the
only way that he gets it back. So he's holding
up a massive process. He's denying recoveries
to creditors of Block 5, making purported settlement
demands that we can't even engage with consistent
with our fiduciary duties. The arguments we're
hearing broadly contradict all the evidence.
They're just an appeal of what's been said before.
The fact that Mr. Van Tubergen is seeing numbers
in a new light is not relevant to any legal standard
here. Mr. Van Tubergen could even win on all
of the arguments he makes in the motion to reconsider
and he would still lose because he hasn't even
addressed the primary holding of the opinion
as to whether the text of the contract that he
negotiated should control. Nothing that we were
talking about today supports a finding that this
court made any error, let alone a clear legal
error that that creates manifest injustice. The
court looked at a lot of evidence that made a
fact -finding that's how this works. And Mr.
Van Tubergen will surely appeal that that's what
you need to do here. We will entertain settlement
offers. I can tell you there's been nothing that
that any of our stakeholders, the planning administrator,
the oversight committee, predators are allowing
us to even entertain at all. But there's a standard
for reconsideration. That is what we're here
for today, and he's not even close to meeting
him. All right. Thank you, Mr. Axelrod. Back
to you, Mr. Magelese. Judge, I just want to make
two points in reply. I'll be brief. So we're
not here on a case in chief, we're here on remand,
and the district court made a finding that it
was not my client's obligation to post a collab.
And so that's one of the directives we're working
on, working under. And so the court's original
finding that, you know, when you read the contract,
there was nothing in there saying that Blockfly
had to post a collateral. That's been undone,
I believe, Judge. And so the exercise is to find
how much was Blockfly obligated to post. Also,
Judge, My fellow member of the bar is an excellent
oral presenter, but the price spike argument
is still not fleshed out. I don't know what it
means that parties were acknowledging the movement
of pricing. What I didn't hear is a specific
explanation as to why the 245 ETH Delta, the
discord itself, identified how that goes away.
So I do believe that a further record is required
on that issue. All right. Thank you, counsel.
Let me address this motion. The district court
in remanding the issue back to this court was
unclear as to the proper, we'll call it disposition.
of 245 shares, 245 ETH, and was unclear that
a proper record had been established addressing
the loss of ETH claim. That's what the court
remanded back to this court, and this court addressed
in its opinion. In fact, it was the district
court that raised the integration issue in a
footnote towards the conclusion of its opinion.
When this court issued its opinion on September
11th in addressing the remand issues, the court
essentially addressed two primary issues. Simple
issues. We thought it was simple. Which party
under the loan transaction in which $5 ,928 ,830
.21 was borrowed, which party was required to
post the collateral? And number two, how much
collateral had to be posted? That in essence
is the primary focus. of the September 11th opinion,
and it remains the primary focus in front of
this court. Other issues are before the district
court on appeal, and this court doesn't have
the jurisdiction and authority to address them.
Well, as argued by the wind down debtor, this
court finds that there's been no showing under
rules 59 or 60. taking into consideration 502
J. That the court has made either a clear error
or that there's a manifest injustice. We go back
and look at the initial question as to who was
required to post the collateral. If the court
accepts the suggestion of the district court
that there was an integration clause at play
and of the parties. and end of the movement,
the inquiry stops because it's clear that this
loan transaction is consistent with virtually
every loan transaction. There's an obligation
of the borrower to post a collateral. And that's
clear from the language of LSA E -43. If the
court looks beyond and this was reflected in
my opinion, prior opinion, but the court looks
beyond the four corners of LSA E43 and takes
into account the available parole evidence and
other documentation. There's no change in the
conclusion that the borrower is responsible for
posting the collateral. The court observes that
no documentation pointed to, blocked by responsibility,
to ultimately post the collateral that secured
a loan that it was making to Mr. Van Tubergen.
That's not how lending works. Lenders don't.
Provide the collateral they provide the funding
possibly in here to acquire the collateral But
going beyond that then if we go to the second
question the parole evidence confirmed for this
court as it found That the amount of the collateral
That was agreed to be posted was in an amount
that took into account The rollover collateral
from LSA 785 and required an additional posting
by the borrower of $1 ,320 for a total collateral
base of $3 ,334 .93. That's what the parole evidence
informed the court. And again, the other issues
that have been raised today do not detract from
those findings. So the court is not prepared
to find either clear error or manifest injustice
or any of the other requirements under rules
59 or 60 have been satisfied unless The court
will leave the parties to their appellate rights.
I'll ask Block Finders to submit a form of order.
Thank you counsel. Have a good day everyone.
Take care. Be well.