WEBVTT 00:00:05.410 --> 00:00:08.490 Mr. Hurst, great to see you. Good to see you 00:00:08.490 --> 00:00:10.449 as well, Your Honor. Thank you. For the record, 00:00:10.609 --> 00:00:12.570 David Hurst from McDermott, Will, and Schulte 00:00:12.570 --> 00:00:14.669 on behalf of the debtors and debtors in possession 00:00:14.669 --> 00:00:18.070 in these cases. Your Honor, thank you very much 00:00:18.070 --> 00:00:20.329 for accommodating us and giving us this first 00:00:20.329 --> 00:00:22.230 day here in this afternoon. Very much appreciate 00:00:22.230 --> 00:00:27.030 that. With me today on Zoom, I'll start, is Mr. 00:00:27.109 --> 00:00:29.890 Mark Renzi. He's the Debtors Chief Restructuring 00:00:29.890 --> 00:00:33.009 Officer, also our First Aid Declaring and our 00:00:33.009 --> 00:00:36.399 Cash Collateral Declaring. And thank you very 00:00:36.399 --> 00:00:38.719 much for letting him appear remotely. Oh, certainly. 00:00:39.439 --> 00:00:41.420 In the courtroom with me are my colleagues, Darren 00:00:41.420 --> 00:00:46.100 Asman, Andrew Mark. Welcome. Ethan Dover. And 00:00:46.100 --> 00:00:49.460 then on Zoom, I have some other colleagues, including 00:00:49.460 --> 00:00:53.079 the head of our litigation team here in this 00:00:53.079 --> 00:00:58.159 case, Mr. Joe Evans. Earlier this morning, Your 00:00:58.159 --> 00:01:01.140 Honor, well, it's afternoon now, but late this 00:01:01.140 --> 00:01:03.899 morning, I sent over to chambers six red lines. 00:01:04.200 --> 00:01:06.760 Yes. Representing the orders that we have negotiated 00:01:06.760 --> 00:01:08.540 with the U .S. Trustee and reached resolution. 00:01:09.260 --> 00:01:11.500 I wanted to thank Mr. Hackman for his work over 00:01:11.500 --> 00:01:14.400 a very short period of time, working with us 00:01:14.400 --> 00:01:17.599 to refine those orders and get them in shape. 00:01:19.579 --> 00:01:22.799 We had total eight first day motions, so we had 00:01:22.799 --> 00:01:25.500 six resolved. The two that we didn't send over 00:01:25.500 --> 00:01:28.980 were the matrix order and the cash collateral 00:01:28.980 --> 00:01:31.680 order. The good news, Your Honor, is that we 00:01:31.680 --> 00:01:34.299 have reached resolution on cash collateral. We 00:01:34.299 --> 00:01:36.859 had already incorporated the U .S. Trustee's 00:01:36.859 --> 00:01:39.459 comments in the filed version of that motion. 00:01:39.640 --> 00:01:41.400 It was the last one filed, so by the time we 00:01:41.400 --> 00:01:43.840 got it on file, we had time to get it fixed up. 00:01:44.379 --> 00:01:46.200 But we've been working with our secured lender 00:01:46.200 --> 00:01:48.739 to try to reach resolution, and shortly before 00:01:48.739 --> 00:01:51.599 the hearing, we did. My colleague, Andrew Mark, 00:01:51.599 --> 00:01:55.159 will be making that presentation, and he'll be 00:01:55.159 --> 00:01:58.620 discussing the resolution with you. The only 00:01:58.620 --> 00:02:00.620 matter which we did not reach resolution with 00:02:00.620 --> 00:02:04.780 the U .S. Trustee is on the matrix. often a tough 00:02:04.780 --> 00:02:08.400 one to get a resolution on. We think we've narrowed 00:02:08.400 --> 00:02:10.000 the issues a little bit. We've been able to accept 00:02:10.000 --> 00:02:12.259 some of the trustees' comments, but there are 00:02:12.259 --> 00:02:15.259 some outstanding issues. And again, my colleague 00:02:15.259 --> 00:02:18.419 Andrew Mark will be discussing that in due course 00:02:18.419 --> 00:02:21.020 when he gets to that in his presentation. Well, 00:02:21.020 --> 00:02:22.520 that's where we stand right now, Your Honor. 00:02:23.759 --> 00:02:25.379 Unless you have any questions for me, I'd like 00:02:25.379 --> 00:02:27.300 to turn the podium over to Mr. Asman, who will 00:02:27.300 --> 00:02:29.300 take you through an overview of the case, and 00:02:29.300 --> 00:02:31.039 then we'll move into the first day paper. That 00:02:31.039 --> 00:02:32.979 sounds great. All right. Thank you, Mr. Hirsch. 00:02:33.419 --> 00:02:36.759 Thank you, Your Honor. Mr. Asman, good afternoon. 00:02:36.939 --> 00:02:39.360 Hi. Good afternoon, Your Honor. Welcome. Darren 00:02:39.360 --> 00:02:41.719 Asman from McDermidville and Schulte, proposed 00:02:41.719 --> 00:02:44.080 counsel to the debtors. Your Honor, in addition 00:02:44.080 --> 00:02:46.240 to all the individuals that Mr. Hirsch named, 00:02:46.759 --> 00:02:48.780 we also have certain members of the debtor's 00:02:48.780 --> 00:02:51.620 senior management team with us today. And then 00:02:51.620 --> 00:02:54.460 additionally, before the filing, the board formed 00:02:54.460 --> 00:02:57.199 a special committee and appointed independent 00:02:57.199 --> 00:03:00.020 director Matthew Kahn of the committee. Mr. Kahn 00:03:00.020 --> 00:03:02.379 is tasked with the authority to handle all conflict 00:03:02.379 --> 00:03:05.039 matters, and he is represented by Cole Schatz. 00:03:05.219 --> 00:03:07.379 That's being led by Justin Alberto and Seth Ann 00:03:07.379 --> 00:03:09.900 Alton. And you can see Mr. Alberto standing up 00:03:09.900 --> 00:03:14.300 over there in his Easter suit over there. Your 00:03:14.300 --> 00:03:16.340 Honor, at the outset, I'd like to move Mr. Renzi's 00:03:16.340 --> 00:03:19.180 declaration and evidence as it provides the evidentiary 00:03:19.180 --> 00:03:21.280 basis for the motions that are up for today's 00:03:21.280 --> 00:03:23.960 hearing, as well as provide some background for 00:03:23.960 --> 00:03:26.400 the debtors. Again, thank you for allowing Mr. 00:03:26.520 --> 00:03:28.979 Renzi to appear by video. He greatly appreciates 00:03:28.979 --> 00:03:31.259 that, and we do as well. He's on the line, as 00:03:31.259 --> 00:03:33.860 you can see. He's available to testify and for 00:03:33.860 --> 00:03:36.699 cross if it's necessary. And so I'd like to move 00:03:36.699 --> 00:03:39.680 that declaration and evidence. Okay, does anybody 00:03:39.680 --> 00:03:42.120 object to the addition of Mr. Renzi's declaration 00:03:42.120 --> 00:03:46.139 purely for the purposes of today's hearing? Okay, 00:03:46.280 --> 00:03:48.520 I hear no response. It is admitted. Will anybody 00:03:48.520 --> 00:03:52.259 wish to cross examine Mr. Renzi today? Okay, 00:03:52.259 --> 00:03:54.620 I hear no response. I do have one question about 00:03:54.620 --> 00:03:59.080 Mr. Renzi's declaration. He's identified throughout 00:03:59.080 --> 00:04:02.139 as the Chief Restructuring Officer, but his signature 00:04:02.139 --> 00:04:04.780 block says that he is the Chief Transformation 00:04:04.780 --> 00:04:07.629 Officer. What is his current title? I believe 00:04:07.629 --> 00:04:09.830 it's Chief Restructuring Officer, Mr. Renzi. 00:04:09.889 --> 00:04:12.110 Could you confirm that? It may have been a typo, 00:04:12.110 --> 00:04:14.610 or maybe there was a prior role that you had 00:04:14.610 --> 00:04:19.490 as Chief Transformation Officer? Good afternoon, 00:04:19.610 --> 00:04:22.990 Your Honor, Mark Renzi. I think the titles are 00:04:22.990 --> 00:04:26.490 used synonymously for this case. Either one is 00:04:26.490 --> 00:04:29.569 sufficient. Okay, I'll take a pick. We're going 00:04:29.569 --> 00:04:31.949 to go with CRO, if that's okay with Your Honor. 00:04:32.410 --> 00:04:35.029 Okay. Thank you. I appreciate that. all right 00:04:35.029 --> 00:04:37.629 sorry about that your honor just just for clarity 00:04:37.629 --> 00:04:40.810 the reason the reason being is that there was 00:04:40.810 --> 00:04:45.310 a title um at the company for chief risk officer 00:04:45.310 --> 00:04:48.269 and at that point in time we were just trying 00:04:48.269 --> 00:04:52.970 to make it a little easier so we chief transformation 00:04:52.970 --> 00:04:55.910 officer is sometimes used so i'm fine i'm fine 00:04:55.910 --> 00:04:57.850 with cro i just wanted to give you a little bit 00:04:57.850 --> 00:05:00.449 more color thank you so much mr renzi i appreciate 00:05:00.449 --> 00:05:03.819 that yeah And the last comment I'll say is that 00:05:03.819 --> 00:05:07.339 I appreciate being remote. I was teaching at 00:05:07.339 --> 00:05:10.959 Boston College Law this morning for some fine 00:05:10.959 --> 00:05:14.500 young new candidates for the legal field. So 00:05:14.500 --> 00:05:16.899 really appreciate it. It meant a lot to me to 00:05:16.899 --> 00:05:19.079 be able to participate in that. Well, I'm glad 00:05:19.079 --> 00:05:21.180 you're here and I'm glad you had a chance. Teaching 00:05:21.180 --> 00:05:24.540 is wonderful. Law students are the best. Yeah. 00:05:24.759 --> 00:05:26.870 Well, I'm glad you're here. Thank you. All right, 00:05:27.029 --> 00:05:28.589 so Your Honor, I thought it would be helpful 00:05:28.589 --> 00:05:31.129 to begin with some background on the company, 00:05:31.589 --> 00:05:34.550 how we got here, and where we hope to go in these 00:05:34.550 --> 00:05:38.589 cases. So Your Honor, Blockfill is a cryptocurrency 00:05:38.589 --> 00:05:40.990 brokerage and trading platform. It was founded 00:05:40.990 --> 00:05:45.149 in 2017. It was created to serve institutional... 00:05:45.680 --> 00:05:49.079 high net worth and professional traders, as opposed 00:05:49.079 --> 00:05:51.939 to retail customers, which a lot of the other 00:05:51.939 --> 00:05:54.000 competitors, some of which have ended up in bankruptcy, 00:05:54.199 --> 00:05:57.839 cater to. And the company provided services such 00:05:57.839 --> 00:06:00.699 as crypto spot trading, derivatives trading, 00:06:01.139 --> 00:06:03.660 collateralized lending, and a limited amount 00:06:03.660 --> 00:06:06.199 of mining, crypto mining related activities. 00:06:06.860 --> 00:06:09.540 The business grew rapidly during the expansion 00:06:09.540 --> 00:06:14.480 of the digital asset industry. And by 2018, Blockfields 00:06:14.480 --> 00:06:16.779 had developed a reputation in the industry as 00:06:16.779 --> 00:06:20.180 a reliable counterparty for institutional crypto 00:06:20.180 --> 00:06:23.180 market participants. That includes hedge funds, 00:06:23.720 --> 00:06:27.060 brokers, exchanges, miners, and investment managers. 00:06:27.759 --> 00:06:31.399 The company operated around the clock and aggregated 00:06:31.399 --> 00:06:33.660 liquidity from multiple exchanges and market 00:06:33.660 --> 00:06:36.660 makers to offer competitive pricing and execution. 00:06:37.959 --> 00:06:41.680 There are several interrelated factors that ultimately 00:06:41.680 --> 00:06:44.279 undermine Blockfield's liquidity and their balance 00:06:44.279 --> 00:06:46.120 sheet and really why we're here today and I want 00:06:46.120 --> 00:06:49.620 to walk through those one by one. First, beginning 00:06:49.620 --> 00:06:53.439 in 2022, the broader crypto market experienced 00:06:53.439 --> 00:06:56.540 severe disruption, including the collapse of 00:06:56.540 --> 00:06:58.819 major industry participants and counterparty 00:06:58.819 --> 00:07:03.339 bankruptcies. Block fills in particular was exposed 00:07:03.339 --> 00:07:06.839 to losses from failed lending counterparties 00:07:06.839 --> 00:07:09.779 who defaulted on crypto loans and left block 00:07:09.779 --> 00:07:12.339 fills unable to recover assets that were worth 00:07:12.339 --> 00:07:16.279 millions of dollars. Second, Blockville suffered 00:07:16.279 --> 00:07:19.459 significant losses from a mining hardware investment 00:07:19.459 --> 00:07:22.959 that they made due to declining mining profitability 00:07:22.959 --> 00:07:26.579 and delays at third -party data sites. The mining 00:07:26.579 --> 00:07:29.579 equipment couldn't be deployed as planned, which 00:07:29.579 --> 00:07:32.439 tied up capital and really prevented Blockville's 00:07:32.439 --> 00:07:34.399 from recouping on its investment in the mining 00:07:34.399 --> 00:07:39.829 space. Third, Blockfills became embroiled in 00:07:39.829 --> 00:07:42.230 a major dispute with Celsius Network, which, 00:07:42.269 --> 00:07:43.870 as I'm sure your honor knows, went through its 00:07:43.870 --> 00:07:47.490 own bankruptcy. And this dispute arose from a 00:07:47.490 --> 00:07:51.810 2019 digital asset lending transaction, so pre 00:07:51.810 --> 00:07:55.470 -Celcius bankruptcy. As a result of that dispute, 00:07:55.990 --> 00:07:58.870 the parties participated in an arbitration in 00:07:58.870 --> 00:08:01.569 the United Kingdom, and the UK arbitrator entered 00:08:01.569 --> 00:08:04.089 an award in favor of Celsius against the company. 00:08:04.779 --> 00:08:09.079 After that arbitration concluded, and after unsuccessful 00:08:09.079 --> 00:08:11.879 appeals were pursued by the company, in July 00:08:11.879 --> 00:08:15.740 2024, Celsius and Block Fills entered into two 00:08:15.740 --> 00:08:18.600 secure notes with Celsius that totaled around 00:08:18.600 --> 00:08:22.600 $16 million in principal, and had a 12 % interest 00:08:22.600 --> 00:08:26.480 rate. The parties ultimately agreed that Block 00:08:26.480 --> 00:08:29.060 Fills would make a lump sum payment at the outset 00:08:29.060 --> 00:08:32.070 of that agreement. And then the company would 00:08:32.070 --> 00:08:34.389 pay off the notes over time through monthly payments. 00:08:34.769 --> 00:08:37.070 And those monthly payments were made through 00:08:37.070 --> 00:08:40.049 August 2025, but no additional payments have 00:08:40.049 --> 00:08:43.220 been made since that point. As we sit here today, 00:08:43.600 --> 00:08:45.679 the principal amount outstanding on the notes 00:08:45.679 --> 00:08:49.460 is approximately 4 .8 million, but we understand 00:08:49.460 --> 00:08:51.700 that Celsius is asserting default interest at 00:08:51.700 --> 00:08:55.759 the rate of 37%. If we apply that interest rate, 00:08:56.159 --> 00:08:58.279 again, that's what they're alleging, then the 00:08:58.279 --> 00:08:59.620 amount outstanding on the notes is somewhere 00:08:59.620 --> 00:09:02.779 around $5 .5 million and continuing to accrue. 00:09:04.299 --> 00:09:07.100 Your honor, the fourth reason why we're here 00:09:07.100 --> 00:09:10.059 is that despite strong operating performance 00:09:10.059 --> 00:09:13.620 in 2024, as well as attempts to raise new capital 00:09:13.620 --> 00:09:16.919 or pursue a sale or recapitalization in 2025, 00:09:17.679 --> 00:09:20.559 BlockFills was just unable to secure sufficient 00:09:20.559 --> 00:09:23.879 financing. Matters deteriorated even further 00:09:23.879 --> 00:09:26.980 after a major crypto market crash in February, 00:09:27.019 --> 00:09:30.940 2026, so just last month, which triggered a number 00:09:30.940 --> 00:09:33.320 of heavy withdrawal requests from customers. 00:09:33.840 --> 00:09:36.940 Ultimately, Blockfill's suspended all customer 00:09:36.940 --> 00:09:39.700 deposits and withdrawals, and those actions all 00:09:39.700 --> 00:09:42.960 but derailed any potential recapitalization transaction 00:09:42.960 --> 00:09:46.899 that the company was otherwise pursuing. Finally, 00:09:46.940 --> 00:09:50.360 Your Honor, in the weeks before the filing, customers 00:09:50.360 --> 00:09:53.360 filed lawsuits alleging misappropriation of assets 00:09:53.360 --> 00:09:56.759 and seeking injunctive relief. Courts entered 00:09:56.759 --> 00:09:59.320 temporary restraining orders that could have 00:09:59.320 --> 00:10:01.779 restricted Blockville's operations and their 00:10:01.779 --> 00:10:04.460 control over certain assets, which really created 00:10:04.460 --> 00:10:06.600 acute liquidity and operational stress on the 00:10:06.600 --> 00:10:09.870 company. And at the same time, the debtors had 00:10:09.870 --> 00:10:12.409 all but exhausted viable out -of -court alternatives, 00:10:13.070 --> 00:10:16.070 including capital raises, recapitalization efforts, 00:10:16.529 --> 00:10:19.190 and a potential sale transaction, none of which 00:10:19.190 --> 00:10:21.450 could really be consummated due to the market 00:10:21.450 --> 00:10:24.029 conditions and the liquidity constraints, as 00:10:24.029 --> 00:10:26.789 well as the outstanding lawsuits. So, in light 00:10:26.789 --> 00:10:29.190 of mounting litigation, which we expected more 00:10:29.190 --> 00:10:32.289 of, fragmented creditor enforcement risk, different 00:10:32.289 --> 00:10:34.450 parties going to different courts, and really 00:10:34.450 --> 00:10:37.110 the absence of a feasible standalone solution, 00:10:37.629 --> 00:10:39.809 the poor determined that Chapter 11 was really 00:10:39.809 --> 00:10:42.429 the only path, and it was necessary to stabilize 00:10:42.429 --> 00:10:46.370 operations, invoke the automatic stay, centralize 00:10:46.370 --> 00:10:48.789 claims in a single forum, and really to pursue 00:10:48.789 --> 00:10:51.929 an orderly value -maximizing restructuring for 00:10:51.929 --> 00:10:54.330 the benefit of all customers, as well as other 00:10:54.330 --> 00:10:57.620 creditors of the estate. you So I want to talk 00:10:57.620 --> 00:10:59.980 about the plan for what we hope to accomplish 00:10:59.980 --> 00:11:03.519 in this case. We really filed a Chapter 11 here 00:11:03.519 --> 00:11:06.639 to pursue a customer -led restructuring rather 00:11:06.639 --> 00:11:09.120 than a liquidation, which is the fate that the 00:11:09.120 --> 00:11:11.899 majority of crypto companies ended up in in Chapter 00:11:11.899 --> 00:11:15.720 11. As set forth in Mr. Renzi's declaration, 00:11:16.200 --> 00:11:18.980 BlockFills has negotiated a non -binding term 00:11:18.980 --> 00:11:22.399 sheet. It's not executed. It's a framework with 00:11:22.399 --> 00:11:25.320 an ad hoc group of the company's largest customers. 00:11:25.799 --> 00:11:28.100 And that essentially, again, provides the framework 00:11:28.100 --> 00:11:30.879 for a transaction that we believe will maximize 00:11:30.879 --> 00:11:35.240 value for all creditors. Under the proposed structure, 00:11:35.840 --> 00:11:38.820 block fills would reorganize into a newly formed 00:11:38.820 --> 00:11:42.779 entity, NUCO, while assets that are not transferred 00:11:42.779 --> 00:11:45.580 to NUCO, which presumably would include litigation 00:11:45.580 --> 00:11:47.820 assets and other things that NUCO does not need, 00:11:48.220 --> 00:11:50.299 would be placed into a post -confirmation trust 00:11:50.299 --> 00:11:53.909 for the benefit of customers. customers would 00:11:53.909 --> 00:11:57.210 receive recoveries consisting of a combination 00:11:57.210 --> 00:12:01.029 of first, a pro rata portion of the liquidating 00:12:01.029 --> 00:12:03.909 trust interest. And then two, the more unique 00:12:03.909 --> 00:12:07.230 aspect is a pro rata share of the liquid assets 00:12:07.230 --> 00:12:09.389 available in the company at the end of the case, 00:12:10.470 --> 00:12:13.450 which creditors and customers, excuse me, customers, 00:12:13.990 --> 00:12:17.110 could elect to receive in either cash or digital 00:12:17.110 --> 00:12:21.340 assets. or convert into equity of NewCo at their 00:12:21.340 --> 00:12:23.580 election, and they can also do a mix of the two. 00:12:25.080 --> 00:12:27.399 The term sheet also contemplates a convenience 00:12:27.399 --> 00:12:31.019 class for smaller customer claims. Those creditors 00:12:31.019 --> 00:12:34.159 would receive a payment in full, up to a capped 00:12:34.159 --> 00:12:36.639 aggregate amount, thereby reducing administrative 00:12:36.639 --> 00:12:40.590 burdens on the estate. In terms of vendors, Any 00:12:40.590 --> 00:12:42.909 vendors who are deemed essential to the go -forward 00:12:42.909 --> 00:12:46.210 business of NewCo, they may receive distributions 00:12:46.210 --> 00:12:48.809 that are tied to the liquid asset component that 00:12:48.809 --> 00:12:51.610 I mentioned, while other trade claims, meaning 00:12:51.610 --> 00:12:53.570 non -go -forward trade claims, would be addressed 00:12:53.570 --> 00:12:57.049 through the post -confirmation trust. The term 00:12:57.049 --> 00:12:59.470 sheet also provides for new money investments 00:12:59.470 --> 00:13:02.370 to be made. So essentially customers would be 00:13:02.370 --> 00:13:05.509 allowed to invest cash as additional capital 00:13:05.509 --> 00:13:09.629 into NewCo at different defined valuation thresholds 00:13:09.629 --> 00:13:13.429 subject to accredited investor requirements as 00:13:13.429 --> 00:13:16.259 well as ownership caps. And this whole structure 00:13:16.259 --> 00:13:18.559 is really intended to preserve the core business, 00:13:19.139 --> 00:13:21.679 again, maximize recoveries for customers and 00:13:21.679 --> 00:13:24.139 creditors, and avoid what would have otherwise 00:13:24.139 --> 00:13:26.200 been value destructive, piecemeal litigation 00:13:26.200 --> 00:13:29.879 in different jurisdictions. Your Honor, that's 00:13:29.879 --> 00:13:31.740 everything I have for you right now. I'm happy 00:13:31.740 --> 00:13:34.580 to answer any questions if you have them. If 00:13:34.580 --> 00:13:37.220 not, I'll briefly turn over the podium to Ms. 00:13:37.399 --> 00:13:39.700 Van Leer from Cleary .Lead. Cleary is representing 00:13:39.700 --> 00:13:42.240 the ad hoc group. I know she wants to make some 00:13:42.240 --> 00:13:44.539 brief remarks, and then we can move into first 00:13:44.539 --> 00:13:46.460 days, but I'm happy to answer any questions if 00:13:46.460 --> 00:13:48.740 you have them. Yeah, like the first day declaration 00:13:48.740 --> 00:13:50.879 and your presentation were very thorough and 00:13:50.879 --> 00:13:53.100 very helpful to me, so I don't have any questions 00:13:53.100 --> 00:13:54.799 at this point. Okay, thank you, Your Honor. Thank 00:13:54.799 --> 00:14:03.159 you, Mr. Esmeralda. Good afternoon, Jane Van 00:14:03.159 --> 00:14:06.320 Lair, Cleary Gottlieb, Dean and Hamilton on behalf 00:14:06.320 --> 00:14:08.919 of the ad hoc group of Blockfield's clients. 00:14:09.759 --> 00:14:14.580 Your Honor, we represent roughly 75 million of 00:14:14.580 --> 00:14:18.419 exposure of the customers and our group is growing. 00:14:19.539 --> 00:14:22.480 The overwhelming majority of the liabilities 00:14:22.480 --> 00:14:25.779 of this company are to the customers. So I think 00:14:25.779 --> 00:14:32.389 that really the key constituency in this case 00:14:32.389 --> 00:14:37.289 are the customers. Your honor, our clients are 00:14:37.289 --> 00:14:40.389 both individuals and businesses, and I cannot 00:14:40.389 --> 00:14:45.490 understate the devastating impact that this bankruptcy 00:14:45.490 --> 00:14:49.330 has had on them. They put their trust into the 00:14:49.330 --> 00:14:51.870 Block Fills platform, and the impact has been 00:14:51.870 --> 00:14:56.419 profound. The customers have worked to put together 00:14:56.419 --> 00:14:59.580 a customer -led solution that's embodied in the 00:14:59.580 --> 00:15:01.980 term sheet that was just described and attached 00:15:01.980 --> 00:15:06.120 to Mr. Renzi's declaration. It's a roadmap to 00:15:06.120 --> 00:15:10.000 a customer -led resolution, and we think there 00:15:10.000 --> 00:15:13.000 are two goals of this term sheet. One is to maximize 00:15:13.000 --> 00:15:17.259 value for customers, and two is to enable the 00:15:17.259 --> 00:15:19.480 business to continue so that it may continue 00:15:19.480 --> 00:15:23.600 generating value. We believe that the framework 00:15:23.600 --> 00:15:27.559 does represent a viable path. There are some 00:15:27.559 --> 00:15:29.879 issues that are still unresolved, but we think 00:15:29.879 --> 00:15:33.240 that we can resolve them and look forward to 00:15:33.240 --> 00:15:39.320 working constructively to do that. What is critical 00:15:39.320 --> 00:15:43.500 from our perspective, Your Honor, is time. Each 00:15:43.500 --> 00:15:48.620 day that passes in these proceedings represents 00:15:48.620 --> 00:15:52.340 a significant burden on recoveries. for our clients, 00:15:52.480 --> 00:15:56.720 for the customers. Given that these are the folks 00:15:56.720 --> 00:15:59.419 that have been severely impacted, as I described, 00:15:59.759 --> 00:16:01.919 it's really critical from our perspective that 00:16:01.919 --> 00:16:04.759 the case proceeds as expeditiously and efficiently 00:16:04.759 --> 00:16:11.659 as possible. So with that, Your Honor, we thank 00:16:11.659 --> 00:16:14.659 you for your time and we look forward to, again, 00:16:14.879 --> 00:16:17.259 working with you, working with other stakeholders 00:16:17.259 --> 00:16:20.519 in efficiently leading this case to a resolution. 00:16:20.799 --> 00:16:25.700 Thank you. Mr. Osment. Your Honor, consistent 00:16:25.700 --> 00:16:27.980 with your chamber's procedures that encourages 00:16:27.980 --> 00:16:30.279 younger attorneys to present first -day motions, 00:16:30.980 --> 00:16:33.279 we are going to have two of our colleagues, Ethan 00:16:33.279 --> 00:16:35.940 Dover and Andrew Mark, present all the first 00:16:35.940 --> 00:16:37.700 -day motions. Great. And so I'll turn things 00:16:37.700 --> 00:16:44.879 over to Mr. Dover. Okay. Thank you. Thank you. 00:16:45.399 --> 00:16:47.320 Mr. Dover, good afternoon. Welcome. Good afternoon, 00:16:47.320 --> 00:16:50.639 Your Honor. For the record, Ethan Dover of McDermott, 00:16:50.740 --> 00:16:53.600 Will, and Schulte proposed counsel to the debtors. 00:16:54.200 --> 00:16:56.399 Your Honor, the next item on today's agenda is 00:16:56.399 --> 00:16:58.679 agenda item number three, the debtor's motion 00:16:58.679 --> 00:17:01.279 for entry of an order directing joint administration 00:17:01.279 --> 00:17:04.480 of these chapter 11 cases filed at docket number 00:17:04.480 --> 00:17:08.359 eight. This is a procedural motion for administrative 00:17:08.359 --> 00:17:10.920 efficiency, and we are asking that the cases 00:17:10.920 --> 00:17:13.859 be administered under the caption, release technology 00:17:13.859 --> 00:17:21.599 group holdings, Inc. case number 26 -10371. The 00:17:21.599 --> 00:17:23.720 U .S. Trustee's Office had a few comments to 00:17:23.720 --> 00:17:27.079 the order, which we have incorporated. It's my 00:17:27.079 --> 00:17:28.680 understanding that you have the latest version 00:17:28.680 --> 00:17:30.539 of that order, but I do have a red line prepared 00:17:30.539 --> 00:17:32.500 for you if you would like to see changes that 00:17:32.500 --> 00:17:35.539 were incorporated. And unless Your Honor has 00:17:35.539 --> 00:17:37.500 any questions, we respectfully request that this 00:17:37.500 --> 00:17:46.250 motion be granted. I hear no response. This is 00:17:46.250 --> 00:17:49.990 typical relief, of course, in multi -debtor cases, 00:17:50.690 --> 00:17:55.990 and I have authority to grant this relief under 00:17:55.990 --> 00:18:00.190 Bankruptcy Rule 1015 and Local Rule 1015 -1. 00:18:00.589 --> 00:18:02.789 And I can do it without noticing any hearing 00:18:02.789 --> 00:18:05.589 where there is an evidentiary basis, such as 00:18:05.589 --> 00:18:08.789 the declaration of Mr. Renzi that I do. rely 00:18:08.789 --> 00:18:11.269 on in support of the relief being sought in this 00:18:11.269 --> 00:18:13.069 and some of the other motions today. So I'm happy 00:18:13.069 --> 00:18:16.609 to grant the motion. Thank you, your honor. The 00:18:16.609 --> 00:18:19.369 next motion is the insurance motion. This is 00:18:19.369 --> 00:18:21.529 item number four on the agenda and was filed 00:18:21.529 --> 00:18:24.950 at docket number nine. Under the insurance motion, 00:18:25.089 --> 00:18:26.970 the debtors are seeking authority to maintain, 00:18:27.349 --> 00:18:31.190 extend, renew, replace, supplement, or modify 00:18:31.190 --> 00:18:34.009 their existing insurance policies and pay all 00:18:34.009 --> 00:18:36.769 insurance obligations arising under such policies. 00:18:37.590 --> 00:18:40.250 Your Honor, the debtors do not maintain any surety 00:18:40.250 --> 00:18:42.849 bond program, nor do they have any insurance 00:18:42.849 --> 00:18:46.069 premium financing. The debtors only have three 00:18:46.069 --> 00:18:49.849 insurance policies, two D &O policies, and one 00:18:49.849 --> 00:18:53.309 property and casualty policy. The list of insurance 00:18:53.309 --> 00:18:56.950 policies, policy numbers, the term of each policy, 00:18:57.369 --> 00:18:59.630 and the premiums associated with each policy 00:18:59.630 --> 00:19:04.960 are attached to the motion as exhibit C. After 00:19:04.960 --> 00:19:07.299 discussing with the company and its advisors, 00:19:07.779 --> 00:19:09.720 we believe there are no outstanding pre -petition 00:19:09.720 --> 00:19:11.859 amounts owed on account of the insurance policies. 00:19:13.519 --> 00:19:16.420 The insurance policies are paid via annual premiums, 00:19:16.480 --> 00:19:22.000 not monthly. And on account of that, we have 00:19:22.000 --> 00:19:24.960 requested authority to pay up to $200 ,000 with 00:19:24.960 --> 00:19:26.900 respect to any amounts that become due in the 00:19:26.900 --> 00:19:29.240 ordinary course of business, because any amounts 00:19:29.240 --> 00:19:33.799 due would be on account of the entire year. Again, 00:19:33.839 --> 00:19:36.079 we have received helpful comments from Mr. Hackman, 00:19:36.420 --> 00:19:38.059 which are reflected in the current draft of the 00:19:38.059 --> 00:19:40.000 interim order. If you would like to see a red 00:19:40.000 --> 00:19:42.539 line, I have these comments available for you. 00:19:43.279 --> 00:19:45.240 Otherwise, unless Your Honor has any questions, 00:19:45.440 --> 00:20:03.500 we request that the motion be granted. Also, 00:20:04.039 --> 00:20:08.920 the UST is operating guidelines. I find based 00:20:08.920 --> 00:20:11.059 on the evidence before me that immediate and 00:20:11.059 --> 00:20:13.059 reputable harm would come to the debtor if I 00:20:13.059 --> 00:20:15.720 did not grant this relief. So I'm happy to grant 00:20:15.720 --> 00:20:18.279 the motion on an interim basis. Thank you very 00:20:18.279 --> 00:20:21.599 much, Your Honor. That brings us to agenda item 00:20:21.599 --> 00:20:24.299 number five, the debtor's cash management motion, 00:20:24.779 --> 00:20:27.930 which was filed at docket number 10. The debtors 00:20:27.930 --> 00:20:30.069 cash management motion seeks to authorize the 00:20:30.069 --> 00:20:32.309 debtors to continue to operate their existing 00:20:32.309 --> 00:20:35.269 cash management system, maintain existing bank 00:20:35.269 --> 00:20:37.509 accounts and business forms, as well as honor 00:20:37.509 --> 00:20:39.569 certain pre -petition obligations related to 00:20:39.569 --> 00:20:42.710 such maintenance, continue to perform inter -company 00:20:42.710 --> 00:20:45.630 transactions, and grant administrative expense 00:20:45.630 --> 00:20:47.769 status for post -petition inter -company claims, 00:20:48.609 --> 00:20:52.380 and to the extent necessary, Extend the time 00:20:52.380 --> 00:20:54.720 for the debtors to comply with requirements set 00:20:54.720 --> 00:20:58.400 forth in Bankruptcy Code Section 345b. Now that's 00:20:58.400 --> 00:21:00.279 a lot of relief, so I'll just walk you through 00:21:00.279 --> 00:21:03.480 it one by one here. The debtor's cash management 00:21:03.480 --> 00:21:06.279 system is comprised of 12 functioning bank accounts 00:21:06.279 --> 00:21:09.619 held across three debtor entities. Those entities 00:21:09.619 --> 00:21:13.119 are Release Technology Group Holdings Inc., Release 00:21:13.119 --> 00:21:17.519 Technology LLC, and Release Limited. The debtors 00:21:17.519 --> 00:21:20.039 also still maintain eight dormant bank accounts, 00:21:20.400 --> 00:21:23.240 which are empty, no longer in use, and will soon 00:21:23.240 --> 00:21:26.480 be closed by the debtors. The 12 functioning 00:21:26.480 --> 00:21:29.160 bank accounts can be categorized into four account 00:21:29.160 --> 00:21:33.460 types. Operating accounts, client accounts, a 00:21:33.460 --> 00:21:37.519 payroll account, and a wire account. A schematic 00:21:37.519 --> 00:21:39.880 illustrating how these accounts interact is attached 00:21:39.880 --> 00:21:43.140 to the motion as exhibit C. and a schedule of 00:21:43.140 --> 00:21:45.359 the bank accounts, including the debtor entity 00:21:45.359 --> 00:21:48.059 at which each account sits, the name of the financial 00:21:48.059 --> 00:21:50.519 institution at which the account is held, the 00:21:50.519 --> 00:21:52.920 type of the account, the last four digits of 00:21:52.920 --> 00:21:55.380 the account numbers, and the balance of each 00:21:55.380 --> 00:21:58.559 account as of the petition date in U .S. dollars 00:21:58.559 --> 00:22:03.079 is attached to the motion as Exhibit D. In the 00:22:03.079 --> 00:22:05.039 ordinary course of business, the debtors pay 00:22:05.039 --> 00:22:07.339 service charges associated with maintaining these 00:22:07.339 --> 00:22:09.400 bank accounts and their cash management system. 00:22:10.019 --> 00:22:13.279 including bank fees, processing charges, and 00:22:13.279 --> 00:22:15.680 other payment obligations arising under agreements 00:22:15.680 --> 00:22:19.000 governing the bank accounts. Historically, the 00:22:19.000 --> 00:22:21.299 debtors have incurred approximately $20 ,000 00:22:21.299 --> 00:22:24.440 in bank fees each month under the cash management 00:22:24.440 --> 00:22:27.680 system. The debtors do not believe they owe any 00:22:27.680 --> 00:22:29.380 pre -petition amounts on account of the bank 00:22:29.380 --> 00:22:32.220 fees, but out of abundance of caution, the debtors 00:22:32.220 --> 00:22:34.779 request authority both to pay all pre -petition 00:22:34.779 --> 00:22:37.779 bank fees to the extent there are any outstanding... 00:22:38.299 --> 00:22:40.900 and to continue to pay the bank fees and related 00:22:40.900 --> 00:22:43.960 claims in the ordinary course of business post 00:22:43.960 --> 00:22:47.599 -petition. Your Honor, the debtors are also seeking 00:22:47.599 --> 00:22:49.819 authority to continue using their existing business 00:22:49.819 --> 00:22:55.619 forms as opposed to being required to incur the 00:22:55.619 --> 00:22:58.019 expense and delay of ordering new business forms 00:22:58.019 --> 00:23:01.559 or modifying their existing business forms. For 00:23:01.559 --> 00:23:03.559 the avoidance of doubt, Your Honor, we have included 00:23:03.559 --> 00:23:05.519 language in the interim order at the request 00:23:05.519 --> 00:23:08.180 of the U .S. trustee that requires the debtors, 00:23:08.380 --> 00:23:10.619 to the extent they order or create any new checks, 00:23:11.119 --> 00:23:13.619 to include the designation debtors in possession, 00:23:14.059 --> 00:23:15.960 as well as the jointly administered bankruptcy 00:23:15.960 --> 00:23:20.880 case number on such checks. Your Honor, we are 00:23:20.880 --> 00:23:22.859 also seeking authorization for the debtors to 00:23:22.859 --> 00:23:25.619 continue their intercompany transactions. The 00:23:25.619 --> 00:23:27.980 debtors engage in intercompany transactions in 00:23:27.980 --> 00:23:30.799 the ordinary course of business, primarily for 00:23:30.799 --> 00:23:34.579 operational reasons. Specifically, Debtor Release 00:23:34.579 --> 00:23:37.819 Limited receives cash and uses cash to pay certain 00:23:37.819 --> 00:23:41.980 expenses of the other debtor entities. The intercompany 00:23:41.980 --> 00:23:45.140 transfers occur regularly on an as -needed basis 00:23:45.140 --> 00:23:47.779 and are necessary to fund the debtor's expenses, 00:23:48.099 --> 00:23:50.319 including funding payroll for the debtor's employees. 00:23:51.660 --> 00:23:55.099 The debtors actively track, monitor, and record 00:23:55.099 --> 00:23:57.759 all fund transfers in their accounting and cash 00:23:57.759 --> 00:24:01.160 management system, and can ascertain, trace, 00:24:01.440 --> 00:24:03.519 and account for all intercompany transactions. 00:24:04.880 --> 00:24:07.079 The debtors expect these transactions to continue 00:24:07.079 --> 00:24:09.160 post -petition in the ordinary course of business. 00:24:09.940 --> 00:24:12.420 If the intercompany transactions were discontinued, 00:24:12.779 --> 00:24:14.640 the debtor's operations would be unnecessarily 00:24:14.640 --> 00:24:17.180 disrupted, causing harm to the debtor's estates 00:24:17.180 --> 00:24:20.640 and the debtor's creditors. Specifically, certain 00:24:20.640 --> 00:24:22.599 operational expenses would simply fail to be 00:24:22.599 --> 00:24:26.500 paid, including payroll. Finally, Your Honor, 00:24:26.759 --> 00:24:28.559 we request that to the extent the debtors are 00:24:28.559 --> 00:24:30.519 not in compliance with Bankruptcy Code Section 00:24:30.519 --> 00:24:33.539 345, the debtors be given a 30 -day extension 00:24:33.539 --> 00:24:36.819 to come into compliance. Your Honor, the debtors 00:24:36.819 --> 00:24:38.619 received a number of comments to the interim 00:24:38.619 --> 00:24:41.079 cash management order from the U .S. Trustee's 00:24:41.079 --> 00:24:43.099 office, and the debtors have incorporated those 00:24:43.099 --> 00:24:46.380 comments. Unless you have any questions, we'd 00:24:46.380 --> 00:24:48.680 ask that this motion be granted. Okay, I don't 00:24:48.680 --> 00:24:50.619 have any questions. Is there anyone who'd like 00:24:50.619 --> 00:24:52.339 to be heard regarding the cash management motion? 00:24:54.220 --> 00:24:57.140 Okay, I hear no response. Based upon the evidence 00:24:57.140 --> 00:24:59.299 before me, which comes in the form of Mr. Renzi's 00:24:59.299 --> 00:25:02.480 declaration, we find that immediate and irreparable 00:25:02.480 --> 00:25:04.579 harm will come to the debtors if I do not grant 00:25:04.579 --> 00:25:07.319 the relief requested. And so, therefore, I'm 00:25:07.319 --> 00:25:09.440 going to grant the motion on an interim basis. 00:25:09.980 --> 00:25:12.799 Thank you, Your Honor. And finally, Your Honor, 00:25:12.880 --> 00:25:14.500 that brings us to the last item I'm going to 00:25:14.500 --> 00:25:17.160 have the privilege of presenting today. which 00:25:17.160 --> 00:25:19.839 is agenda item number six, the application of 00:25:19.839 --> 00:25:22.440 the debtors to appoint Kurtzman Carson Consultants, 00:25:22.640 --> 00:25:25.380 doing business as Verita Global, as claims and 00:25:25.380 --> 00:25:28.319 noticing agent for the debtors. A sealed version 00:25:28.319 --> 00:25:30.299 of the application is filed at docket number 00:25:30.299 --> 00:25:33.480 11, and a redacted, publicly available version 00:25:33.480 --> 00:25:37.119 is available at docket number 12. Prior to engaging 00:25:37.119 --> 00:25:39.640 Verita, the debtors solicited proposal from two 00:25:39.640 --> 00:25:41.920 other claims agents, consistent with the claims 00:25:41.920 --> 00:25:45.329 agent protocol. The debtors ultimately selected 00:25:45.329 --> 00:25:47.670 Baratah based on its experience, competitive 00:25:47.670 --> 00:25:51.609 rates, and qualifications. As the debtors have 00:25:51.609 --> 00:25:54.369 over 200 creditors, the appointment of a claims 00:25:54.369 --> 00:25:56.769 and noticing agent is required by the local rules. 00:25:57.769 --> 00:25:59.789 The U .S. Trustee's office provided the debtors 00:25:59.789 --> 00:26:01.829 comments to the proposed order, which have all 00:26:01.829 --> 00:26:04.869 been accepted and incorporated. Unless your honor 00:26:04.869 --> 00:26:06.910 has any questions at this time, we would ask 00:26:06.910 --> 00:26:08.809 that you enter the order approving the application. 00:26:10.210 --> 00:26:12.789 What's your evidentiary support for this motion? 00:26:12.970 --> 00:26:14.690 for this application. Thank you, Your Honor. 00:26:14.769 --> 00:26:19.390 We attach a declaration in support of the application 00:26:19.390 --> 00:26:23.049 as evidentiary support for the application. By 00:26:23.049 --> 00:26:26.410 Mr. Gershwine? Yes, Your Honor. And are you moving 00:26:26.410 --> 00:26:28.829 the admission of Mr. Gershwine's declaration 00:26:28.829 --> 00:26:31.609 in support of the application? Yes, Your Honor. 00:26:32.089 --> 00:26:35.450 Okay, very good. Is there anyone who objects 00:26:35.450 --> 00:26:37.890 to the admission of Mr. Gershwine's declaration 00:26:37.890 --> 00:26:43.210 in support of Veritas retention? Okay. I hear 00:26:43.210 --> 00:26:45.670 no response, and I'll just ask, is there anybody 00:26:45.670 --> 00:26:49.289 who wishes to cross -examine Mr. Gershwin? Okay, 00:26:49.410 --> 00:26:52.750 I hear no response to that either. I've reviewed 00:26:52.750 --> 00:26:58.109 the revised order, and again, I'm happy to grant 00:26:58.109 --> 00:27:00.710 the relief request if it is required under all 00:27:00.710 --> 00:27:03.470 the rules, and certainly, Baratet is very well 00:27:03.470 --> 00:27:06.930 known to this court. So I'll be happy to enter 00:27:06.930 --> 00:27:09.660 that order. Thank you, Your Honor. That's all 00:27:09.660 --> 00:27:12.000 I have for you today, and I will be introducing 00:27:12.000 --> 00:27:13.940 my colleague, Andrew Mark, to take the podium 00:27:13.940 --> 00:27:15.799 from here. Thank you very much, Mr. Dover. Great 00:27:15.799 --> 00:27:22.599 work. Good afternoon, Mr. Mark. Good afternoon, 00:27:22.599 --> 00:27:25.619 Your Honor. For the record, Andrew Mark of McDermott, 00:27:25.740 --> 00:27:28.180 Will and Schulte, proposed counsel to the debtors. 00:27:29.039 --> 00:27:31.000 Your Honor, the next item on this afternoon's 00:27:31.000 --> 00:27:36.299 agenda is the debtor's motion for payment of 00:27:36.299 --> 00:27:39.650 taxes and... fees, Your Honor. It's filed at 00:27:39.650 --> 00:27:42.670 Dock at number 13. Your Honor, in the ordinary 00:27:42.670 --> 00:27:44.609 course of the debtor's business, the debtors 00:27:44.609 --> 00:27:47.609 incur various taxes and fees, including, for 00:27:47.609 --> 00:27:50.750 example, income taxes and franchise taxes, which 00:27:50.750 --> 00:27:53.490 the debtors remit to various federal, state, 00:27:53.609 --> 00:27:56.789 local, and foreign governments. Primarily, the 00:27:56.789 --> 00:27:59.210 debtor's tax liabilities are incurred in Delaware, 00:27:59.670 --> 00:28:02.900 Illinois, and the Cayman Islands. As of the petition 00:28:02.900 --> 00:28:04.779 date, Your Honor, the debtors estimate they owe 00:28:04.779 --> 00:28:08.299 approximately $38 ,000 in taxes and fees, which 00:28:08.299 --> 00:28:09.859 will become due and owing during the Chapter 00:28:09.859 --> 00:28:14.799 11 cases. Specifically, as to U .S.-based debtors, 00:28:15.140 --> 00:28:17.460 they have incurred approximately $30 ,000 of 00:28:17.460 --> 00:28:21.519 franchise taxes in 2025, $8 ,000 of which remain 00:28:21.519 --> 00:28:24.599 due and owing. Similarly, the Cayman Islands 00:28:24.599 --> 00:28:27.599 -based debtors also pay registration fees under 00:28:27.599 --> 00:28:30.750 Cayman Islands law. which are substantially analogous 00:28:30.750 --> 00:28:33.109 to franchise taxes owed under state law in the 00:28:33.109 --> 00:28:36.250 U .S. As of the petition date, approximately 00:28:36.250 --> 00:28:39.269 $30 ,000 is owed in registration fees to the 00:28:39.269 --> 00:28:41.130 relevant taxing authorities in the Cayman Islands. 00:28:42.049 --> 00:28:44.569 The relief requested in the tax motion is necessary 00:28:44.569 --> 00:28:46.430 for the debtors to avoid immediate and irreparable 00:28:46.430 --> 00:28:49.319 harm. Failure of the debtors to pay franchise 00:28:49.319 --> 00:28:51.940 taxes and fees could result in the relevant government 00:28:51.940 --> 00:28:56.019 authorities imposing fines, penalties, and potentially 00:28:56.019 --> 00:28:57.960 restricting the debtors' right to conduct business 00:28:57.960 --> 00:29:01.519 in those jurisdictions. Accordingly, the debtors 00:29:01.519 --> 00:29:03.900 submit they meet the criteria contemplated under 00:29:03.900 --> 00:29:07.339 Bankruptcy Rule 6003. Additionally, Your Honor, 00:29:07.539 --> 00:29:09.220 while the debtors believe they are current on 00:29:09.220 --> 00:29:11.940 their other tax obligations, the debtors request 00:29:11.940 --> 00:29:14.500 authority to the extent there is anything else 00:29:14.500 --> 00:29:18.400 outstanding. such as certain prepetition taxes 00:29:18.400 --> 00:29:22.099 and fees which are withheld by the debtors and 00:29:22.099 --> 00:29:25.539 held in trust for the particular taxing authority 00:29:25.539 --> 00:29:27.980 and therefore do not constitute property of the 00:29:27.980 --> 00:29:31.099 debtors of state for those amounts to also be 00:29:31.099 --> 00:29:34.259 paid. Failure of the debtors to pay such prepetition 00:29:34.259 --> 00:29:36.759 taxes may also impact the debtor's ability to 00:29:36.759 --> 00:29:39.740 conduct business in certain jurisdictions. And 00:29:39.740 --> 00:29:42.000 it may also create a risk of personal liability 00:29:42.000 --> 00:29:45.890 on behalf of the debtor's management. And further, 00:29:45.990 --> 00:29:48.250 Your Honor, it may also open up the debtors to 00:29:48.250 --> 00:29:50.470 the risk of the taxing authorities initiating 00:29:50.470 --> 00:29:53.130 audits, which would unnecessarily divert the 00:29:53.130 --> 00:29:55.289 debtors' attention from the Chapter 11 cases. 00:29:57.750 --> 00:30:00.809 I would also note, Your Honor, that nothing in 00:30:00.809 --> 00:30:03.170 the proposed order seeks authority for the debtors 00:30:03.170 --> 00:30:07.089 to pay past due taxes. After the filing of the 00:30:07.089 --> 00:30:11.069 taxes motion, the debtors worked collaboratively. 00:30:11.420 --> 00:30:13.579 with the opposite of the United States trustee 00:30:13.579 --> 00:30:16.460 to resolve Mr. Hackman's comments to the proposed 00:30:16.460 --> 00:30:19.019 interim order, which with respect to this motion 00:30:19.019 --> 00:30:22.039 were fairly light, Your Honor. I'm happy to walk, 00:30:22.099 --> 00:30:24.660 Your Honor, through the one, what I would characterize 00:30:24.660 --> 00:30:27.180 as a substantive change to that proposed order. 00:30:28.160 --> 00:30:30.200 But otherwise, unless Your Honor has any questions, 00:30:30.500 --> 00:30:33.140 the debtors would request that the court enter 00:30:33.140 --> 00:30:35.880 the relief requested on the taxes motion. Thank 00:30:35.880 --> 00:30:38.299 you. Yeah, I've reviewed the revisions and I 00:30:38.299 --> 00:30:41.119 understand them. Let me ask if there is anyone 00:30:41.119 --> 00:30:42.960 who would like to be heard regarding the tax 00:30:42.960 --> 00:30:48.619 motion. Okay. I hear no response. Once again, 00:30:48.640 --> 00:30:52.480 I have the declaration of Mr. Renzi to rely upon 00:30:52.480 --> 00:30:55.259 in support of the relief that the debtors are 00:30:55.259 --> 00:30:58.819 requesting by the tax motion. I've reviewed it 00:30:58.819 --> 00:31:00.819 and I do find that immediate and irreparable 00:31:00.819 --> 00:31:02.900 harm would come to the debtors if I did not grant 00:31:02.900 --> 00:31:05.940 the relief on an interim basis. So I will enter 00:31:05.940 --> 00:31:09.759 the interim order. Thank you, Your Honor. That 00:31:09.759 --> 00:31:12.200 takes us to the next item on today's agenda, 00:31:12.619 --> 00:31:14.619 which is the debtor's motion to pay employee 00:31:14.619 --> 00:31:17.519 wages and continue certain employee benefits 00:31:17.519 --> 00:31:21.480 programs filed at docket number 14. Your Honor, 00:31:21.500 --> 00:31:23.440 through the wages motion, the debtors request 00:31:23.440 --> 00:31:26.039 authority but not direction to pay certain pre 00:31:26.039 --> 00:31:28.480 -petition obligations with respect to their employees. 00:31:29.339 --> 00:31:31.700 As of the petition date, the debtors employ 14 00:31:31.700 --> 00:31:33.940 employees. Although the debtors are generally 00:31:33.940 --> 00:31:35.920 current on the majority of their wage -related 00:31:35.920 --> 00:31:38.640 obligations, there are generally three discrete 00:31:38.640 --> 00:31:41.319 buckets of employee obligations the debtors believe 00:31:41.319 --> 00:31:43.599 pre -petition amounts remain due and payable 00:31:43.599 --> 00:31:46.039 on. The first of which, Your Honor, would be 00:31:46.039 --> 00:31:48.400 that the debtors estimate, as of the petition 00:31:48.400 --> 00:31:52.460 date, approximately $25 ,000 remained outstanding 00:31:52.460 --> 00:31:55.339 on account of employee expense reimbursements 00:31:55.339 --> 00:31:59.079 for work related to reimbursable expenses. In 00:31:59.079 --> 00:32:00.980 the ordinary course of the debtor's business, 00:32:01.279 --> 00:32:03.480 the employees incur work -related expenses and 00:32:03.480 --> 00:32:06.519 pay for such expenses using personal credit cards 00:32:06.519 --> 00:32:09.839 or other personal funds, and subsequently seek 00:32:09.839 --> 00:32:12.799 reimbursement from the debtors. Absent authority 00:32:12.799 --> 00:32:15.740 to pay the employee expenses, including amounts 00:32:15.740 --> 00:32:18.700 incurred pre -petition, the employees would be 00:32:18.700 --> 00:32:20.819 obligated to pay for such amounts out of their 00:32:20.819 --> 00:32:23.720 own personal funds. which could adversely affect 00:32:23.720 --> 00:32:26.259 employee morale and the willingness of the debtor's 00:32:26.259 --> 00:32:28.640 employees to continue employment with the debtors. 00:32:29.240 --> 00:32:31.859 The second bucket, Your Honor, implicates the 00:32:31.859 --> 00:32:35.339 debtor's paid time off programs or PTO. Like 00:32:35.339 --> 00:32:37.299 most companies, Your Honor, the debtors also 00:32:37.299 --> 00:32:40.539 offer their employees paid time off. The amount 00:32:40.539 --> 00:32:43.839 of PTO of any given employee that accrues is 00:32:43.839 --> 00:32:46.200 largely dependent on that employee's specific 00:32:46.200 --> 00:32:48.700 offer letter. But in general, Your Honor, the 00:32:48.700 --> 00:32:50.779 employees will receive on average 16 days of 00:32:50.779 --> 00:32:53.920 PTO per year. Under relevant state and local 00:32:53.920 --> 00:32:56.799 law in the jurisdictions the debtors operate 00:32:56.799 --> 00:33:00.160 in, the debtors may be required to cash out employees 00:33:00.160 --> 00:33:03.980 accrued PTO upon termination. As of the petition 00:33:03.980 --> 00:33:05.880 date, the debtors estimate that approximately 00:33:05.880 --> 00:33:09.960 $80 ,000 of accrued but unpaid PTO remains outstanding. 00:33:11.200 --> 00:33:13.539 Finally, the debtors provide workers compensation 00:33:13.539 --> 00:33:16.319 insurance to their full -time employees, and 00:33:16.319 --> 00:33:18.240 in jurisdictions in which the debtors operate, 00:33:18.799 --> 00:33:22.690 are required by law to do so. As of the petition 00:33:22.690 --> 00:33:24.869 date, the debtors estimate that approximately 00:33:24.869 --> 00:33:28.670 $6 ,000 remain due and owing on account of administrative 00:33:28.670 --> 00:33:30.650 fees in connection with the workers' compensation 00:33:30.650 --> 00:33:33.650 program. Taken together, Your Honor, the debtors 00:33:33.650 --> 00:33:37.549 estimate that in total, approximately $111 ,000 00:33:37.549 --> 00:33:39.890 is outstanding as of the petition date with respect 00:33:39.890 --> 00:33:44.329 to those amounts. As mentioned, the debtors are 00:33:44.329 --> 00:33:46.910 current on their other employee -related obligations, 00:33:47.029 --> 00:33:49.890 but out of an abundance of caution, request authority, 00:33:50.299 --> 00:33:53.680 to continue such employee programs in the ordinary 00:33:53.680 --> 00:33:57.299 course and consistent with past practice. Failure 00:33:57.299 --> 00:33:59.420 to pay outstanding employee wage obligations 00:33:59.420 --> 00:34:01.940 could jeopardize the ability of the debtors to 00:34:01.940 --> 00:34:04.200 accomplish their goals in these Chapter 11 cases, 00:34:04.700 --> 00:34:06.759 especially where the debtor's remaining workforce 00:34:06.759 --> 00:34:08.860 represent a core group of the debtor's essential 00:34:08.860 --> 00:34:12.519 employees. Moreover, Your Honor, I want to highlight 00:34:12.519 --> 00:34:15.320 and also stress to the Court that as we stand 00:34:15.320 --> 00:34:17.940 here today, the debtors need to fund payroll 00:34:17.940 --> 00:34:20.079 by Wednesday this week in order to meet their 00:34:20.079 --> 00:34:23.219 next pay period. Accordingly, the debtors submit 00:34:23.219 --> 00:34:25.840 that the relief in the wages motion is necessary 00:34:25.840 --> 00:34:28.099 to avoid immediate and irreparable harm under 00:34:28.099 --> 00:34:31.579 Bankruptcy Rule 6003. Your Honor, after filing 00:34:31.579 --> 00:34:33.780 the wages motion, the debtors received comments 00:34:33.780 --> 00:34:35.780 from the U .S. trustee and worked to resolve 00:34:35.780 --> 00:34:37.860 those comments as reflected in a red line to 00:34:37.860 --> 00:34:40.280 the order that I do believe was provided to chambers 00:34:40.280 --> 00:34:43.070 prior to this afternoon's hearing. Your Honor, 00:34:43.170 --> 00:34:45.989 the biggest thing to highlight is that the debtors 00:34:45.989 --> 00:34:48.010 have added language at Mr. Hackman's request 00:34:48.010 --> 00:34:49.989 stating that the order is not approving any bonus 00:34:49.989 --> 00:34:53.190 plan severance that would otherwise be subject 00:34:53.190 --> 00:34:57.170 to Bankruptcy Code Section 503C. Unless Your 00:34:57.170 --> 00:34:59.309 Honor has any questions, the debtors respectfully 00:34:59.309 --> 00:35:01.809 request that the court enter the order approving 00:35:01.809 --> 00:35:05.909 the wages motion on an interim basis. Okay, I 00:35:05.909 --> 00:35:08.469 do not have any questions. Does anybody wish 00:35:08.469 --> 00:35:12.989 to be heard regarding the wages motion? Okay, 00:35:13.090 --> 00:35:16.769 I hear no response. Based upon the evidence before 00:35:16.769 --> 00:35:19.110 me, which comes in the form of Mr. Renzi's declaration, 00:35:19.730 --> 00:35:21.349 I find that it would be the irreparable harm 00:35:21.349 --> 00:35:24.409 would come to the debtors if I did not grant 00:35:24.409 --> 00:35:26.630 the relief on an interim basis for the reasons 00:35:26.630 --> 00:35:28.329 that you've identified and that were described 00:35:28.329 --> 00:35:31.329 in the declaration. Therefore, I'm very happy 00:35:31.329 --> 00:35:33.989 to be able to grant the motion on an interim 00:35:33.989 --> 00:35:37.349 basis in relation to the interim order. Thank 00:35:37.349 --> 00:35:40.670 you, Your Honor. The next item on this afternoon's 00:35:40.670 --> 00:35:43.090 agenda is the debtor's motion to file a consolidated 00:35:43.090 --> 00:35:45.710 creditor matrix, authorize service on certain 00:35:45.710 --> 00:35:48.809 parties by email, and to redact certain individuals' 00:35:49.389 --> 00:35:51.650 personally identifiable information, which is 00:35:51.650 --> 00:35:54.989 filed at Dock at number 15. Your Honor, through 00:35:54.989 --> 00:35:57.389 the creditor matrix motion, the debtors request 00:35:57.389 --> 00:35:59.570 authority to file a consolidated list of their 00:35:59.570 --> 00:36:02.190 top 30 creditors, in lieu of filing multiple 00:36:02.190 --> 00:36:05.469 lists of their top 20 creditors for each debtor. 00:36:05.760 --> 00:36:08.460 The debtors submit that filing a single consolidated 00:36:08.460 --> 00:36:11.840 list will alleviate the administrative burden 00:36:11.840 --> 00:36:14.219 on the debtors' estates and minimize costs that 00:36:14.219 --> 00:36:16.460 would otherwise be incurred through filing multiple 00:36:16.460 --> 00:36:20.000 lists that would otherwise be duplicative service 00:36:20.000 --> 00:36:24.440 on multiple creditors. Your Honor, the debtors 00:36:24.440 --> 00:36:28.900 also request authority to serve notices in the 00:36:28.900 --> 00:36:32.460 Chapter 11 cases on creditors via email. Prior 00:36:32.460 --> 00:36:34.219 to the petition date, Your Honor, the debtors 00:36:34.219 --> 00:36:37.059 communicated with many of their customers, investors, 00:36:37.199 --> 00:36:40.260 and creditors solely through email. In many instances, 00:36:40.400 --> 00:36:42.599 the debtors do not have physical mailing addresses 00:36:42.599 --> 00:36:47.219 on file for such parties. Accordingly, service 00:36:47.219 --> 00:36:50.000 by email, Your Honor, is the only method that 00:36:50.000 --> 00:36:53.900 the debtors have to serve such parties. Also, 00:36:53.920 --> 00:36:57.420 I would note for Your Honor that service by email, 00:36:57.760 --> 00:36:59.940 will maintain consistency with how the debtors 00:36:59.940 --> 00:37:02.360 communicated with such parties prior to the petition 00:37:02.360 --> 00:37:05.239 date. However, in instances where the debtors 00:37:05.239 --> 00:37:07.559 do have physical addresses, Your Honor, on file, 00:37:08.019 --> 00:37:10.360 the debtors intend to serve such parties both 00:37:10.360 --> 00:37:14.500 by email and by physical mail. The debtors will 00:37:14.500 --> 00:37:16.920 also be posting important notices and documents 00:37:16.920 --> 00:37:19.800 concerning the Chapter 11 cases on their case 00:37:19.800 --> 00:37:21.780 website maintained by their claims and noticing 00:37:21.780 --> 00:37:26.110 agent, Verita. And then the last piece of relief 00:37:26.110 --> 00:37:28.050 in that motion, Your Honor, is that the debtors 00:37:28.050 --> 00:37:31.090 are seeking authority to redact certain personally 00:37:31.090 --> 00:37:33.969 identifiable information of individual customer, 00:37:34.309 --> 00:37:38.329 client, and investor names. That is only as to 00:37:38.329 --> 00:37:41.789 individuals, not as to any legal entities. Section 00:37:41.789 --> 00:37:44.210 107 of the Bankruptcy Code enables this court 00:37:44.210 --> 00:37:46.550 to enter orders to protect parties from harm 00:37:46.550 --> 00:37:49.050 that could result from disclosing confidential 00:37:49.050 --> 00:37:52.559 information. Specifically, your honor, section 00:37:52.559 --> 00:37:55.219 107C1 of the code provides that the court for 00:37:55.219 --> 00:37:58.280 cause may protect an individual if disclosure 00:37:58.280 --> 00:38:00.559 of information creates an undue risk of identity 00:38:00.559 --> 00:38:04.920 theft or injury to such person's individual or 00:38:04.920 --> 00:38:07.940 property. Your honor, the risk in this case is 00:38:07.940 --> 00:38:11.199 not speculative. The cryptocurrency industry 00:38:11.199 --> 00:38:15.059 in which the debtors operate is a frequent target 00:38:15.059 --> 00:38:18.300 for phishing scams, hackers, and sometimes physical 00:38:18.300 --> 00:38:21.239 threats to individuals. This court has previously 00:38:21.239 --> 00:38:23.659 recognized this reality in other similar Chapter 00:38:23.659 --> 00:38:27.500 11 cases in this industry, such as FTX Trading 00:38:27.500 --> 00:38:30.380 Limited, where this court granted similar relief 00:38:30.380 --> 00:38:33.659 to that sought in the Matrix Motion today. The 00:38:33.659 --> 00:38:35.500 debtors respectfully submit that this type of 00:38:35.500 --> 00:38:38.059 relief has become routine and become a matter 00:38:38.059 --> 00:38:40.480 of common sense given the risk of identity theft 00:38:40.480 --> 00:38:43.019 and or physical harm to individuals from public 00:38:43.019 --> 00:38:46.480 disclosure of their personal information. Here, 00:38:46.559 --> 00:38:48.639 Your Honor, the debtors seek only narrow relief 00:38:48.639 --> 00:38:50.699 in requesting authority to redact individuals' 00:38:50.980 --> 00:38:53.619 names and not redacting the names of any legal 00:38:53.619 --> 00:38:57.179 entities. Your Honor, after filing the motion, 00:38:57.340 --> 00:39:00.440 the debtors worked collaboratively with Mr. Hackman 00:39:00.440 --> 00:39:03.840 to address his office's concerns regarding the 00:39:03.840 --> 00:39:07.500 matrix motion and both the email service and 00:39:07.500 --> 00:39:11.170 redaction issues. Like I mentioned, Your Honor, 00:39:11.429 --> 00:39:13.750 the debtors endeavored to narrowly tailor the 00:39:13.750 --> 00:39:15.630 relief sought in the matrix motion to account 00:39:15.630 --> 00:39:18.449 for the U .S. Trustee's issues and to be consistent 00:39:18.449 --> 00:39:22.230 with relief sought in other cases. We received 00:39:22.230 --> 00:39:24.469 comments just this morning from the U .S. Trustee, 00:39:24.730 --> 00:39:26.489 which to be clear, Your Honor, is not the U .S. 00:39:26.510 --> 00:39:28.989 Trustee's fault. It is just the posture we all 00:39:28.989 --> 00:39:32.329 find ourselves here this afternoon given the 00:39:32.329 --> 00:39:36.139 timing and exigencies of the filing. We've endeavored 00:39:36.139 --> 00:39:38.280 to accept many of the U .S. trustees' comments 00:39:38.280 --> 00:39:41.199 to the proposed order, which I will note do not 00:39:41.199 --> 00:39:44.199 tie the U .S. trustees' hands when it comes to 00:39:44.199 --> 00:39:46.800 appointing any statutory committee and disclosing 00:39:46.800 --> 00:39:49.420 names if a given customer, creditor, or individual 00:39:49.420 --> 00:39:52.360 were to serve on such statutory committee if 00:39:52.360 --> 00:39:56.659 one is eventually appointed. I'd also preview 00:39:56.659 --> 00:40:01.820 for the court that the debtors do not anticipate 00:40:01.820 --> 00:40:03.739 that anything that will be occurring between 00:40:03.739 --> 00:40:06.780 now and the second day hearing would implicate 00:40:06.780 --> 00:40:10.340 this relief. For example, Your Honor, the debtors 00:40:10.340 --> 00:40:13.659 anticipate seeking an extension of time to file 00:40:13.659 --> 00:40:17.960 the schedules and statements in this case. And 00:40:17.960 --> 00:40:22.800 I guess I would perhaps pause there and not get 00:40:22.800 --> 00:40:24.460 out ahead of anything that Mr. Hackman might 00:40:24.460 --> 00:40:27.739 have to represent to Your Honor on his positions. 00:40:28.599 --> 00:40:32.099 But Your Honor, I do believe that given the real 00:40:32.099 --> 00:40:35.440 risks, in this type of industry in particular 00:40:35.440 --> 00:40:38.900 that the relief sought here is appropriate under 00:40:38.900 --> 00:40:40.820 the circumstances and that the debtor has met 00:40:40.820 --> 00:40:44.340 its burden to obtain such relief under the bankruptcy 00:40:44.340 --> 00:40:48.800 code. Okay. Thank you, Mr. Mark. Mr. Hackman. 00:40:54.019 --> 00:40:55.880 Great to see you. Good afternoon. Good afternoon, 00:40:55.980 --> 00:40:57.460 Your Honor. May it please the Court, Ben Hackman 00:40:57.460 --> 00:40:59.099 for the U .S. Trustees. Good to see you, Your 00:40:59.099 --> 00:41:05.570 Honor. We did send informal comments to Council 00:41:05.570 --> 00:41:08.449 about this form of order. I understand that debtors 00:41:08.449 --> 00:41:10.650 are prepared to make certain changes to it that 00:41:10.650 --> 00:41:14.050 would resolve some of our comments. At this point, 00:41:14.090 --> 00:41:16.150 we have one open issue, and that is the scope 00:41:16.150 --> 00:41:21.090 of paragraph seven of the form of order. As I 00:41:21.090 --> 00:41:26.130 read it, this would authorize the debtors not 00:41:26.130 --> 00:41:30.110 just to redact the names of their individual 00:41:30.110 --> 00:41:32.920 customers, but also the names of their current 00:41:32.920 --> 00:41:35.960 and former directors, managers, officers, employees, 00:41:36.179 --> 00:41:40.719 and individual shareholders. We object to redacting 00:41:40.719 --> 00:41:44.619 the names of management for a few reasons. First, 00:41:45.559 --> 00:41:48.219 if you look at Mr. Renzi's first -day declaration, 00:41:48.420 --> 00:41:54.340 paragraphs 39 through 41 and paragraph 74, identify 00:41:54.340 --> 00:41:59.119 by name, by my count, nine current or former 00:41:59.119 --> 00:42:02.300 members of management. and we would submit respectfully 00:42:02.300 --> 00:42:05.039 that there's no basis to seal those names that 00:42:05.039 --> 00:42:06.780 have already been publicly disclosed in the first 00:42:06.780 --> 00:42:12.159 day declaration. Second, members of management 00:42:12.159 --> 00:42:14.639 should not have their names redacted where the 00:42:14.639 --> 00:42:19.139 context is solely with respect to their status 00:42:19.139 --> 00:42:23.280 as management. So for example, so for item four, 00:42:23.719 --> 00:42:26.300 transfers made to insiders in the year pre -petition. 00:42:28.230 --> 00:42:31.170 Rule 2014 a disclosures and professional retention 00:42:31.170 --> 00:42:36.449 applications Should not be Redacting or omitting 00:42:36.449 --> 00:42:41.210 the names of management? The section 503 motion 00:42:41.210 --> 00:42:45.929 to pay bonuses to insiders We would submit it 00:42:45.929 --> 00:42:48.409 is an issue for today your honor because if you 00:42:48.409 --> 00:42:54.269 look at Veritas application the schedule of parties 00:42:54.269 --> 00:42:59.590 and interests attached to Mr. Gershbein's declaration 00:42:59.590 --> 00:43:04.510 omits every name of current and former D's and 00:43:04.510 --> 00:43:08.190 O's of the debtor. I would assume that retention 00:43:08.190 --> 00:43:09.769 applications when they're filed would follow 00:43:09.769 --> 00:43:14.030 suit. I think the authority to do that, at least 00:43:14.030 --> 00:43:16.969 for Verita, would be in this order. And so we 00:43:16.969 --> 00:43:22.070 would oppose that relief even on an interim basis 00:43:22.070 --> 00:43:26.630 today. And finally, Your Honor, the third point 00:43:26.630 --> 00:43:31.309 I would make is transparency is key. As I read 00:43:31.309 --> 00:43:34.150 the first day declaration, paragraphs 61 and 00:43:34.150 --> 00:43:37.909 62 say temporary restraining orders were granted 00:43:37.909 --> 00:43:41.829 in two recent suits against the debtors and certain 00:43:41.829 --> 00:43:44.590 members of current or former management that 00:43:44.590 --> 00:43:47.710 alleged, as I read it, misappropriation of customer 00:43:47.710 --> 00:43:50.389 funds, conversion, and other fraud -based claims. 00:43:51.369 --> 00:43:53.269 We would respectfully submit there should be 00:43:53.269 --> 00:43:57.190 visibility. into any indemnity claims, insurance 00:43:57.190 --> 00:44:01.150 coverage, derivative actions, et cetera, if those 00:44:01.150 --> 00:44:09.050 become issues in these cases. We would respectfully 00:44:09.050 --> 00:44:11.070 submit, Your Honor, that paragraph seven of the 00:44:11.070 --> 00:44:13.369 form of order should be revised so that it does 00:44:13.369 --> 00:44:17.349 not apply to the names of current or former directors, 00:44:17.630 --> 00:44:22.170 officers, or managers of the debtor. And it should 00:44:22.170 --> 00:44:27.159 limit redaction of any customer names to situations 00:44:27.159 --> 00:44:29.340 where the disclosure would indicate the status 00:44:29.340 --> 00:44:33.300 of such person as a customer of the debtor. Unless 00:44:33.300 --> 00:44:35.139 your honor has any questions, that's all I have. 00:44:36.059 --> 00:44:38.880 Okay. I don't have any questions. Thank you, 00:44:38.880 --> 00:44:47.099 your honor. Okay. Mr. Mark, I don't recall where 00:44:47.099 --> 00:44:52.119 I've ever... Well... I don't recall where debtors 00:44:52.119 --> 00:44:55.360 have requested that I permit the redaction of 00:44:55.360 --> 00:44:58.019 the names of directors, managers and officers. 00:45:00.440 --> 00:45:05.320 Could you address Mr. Hackman's comments on that 00:45:05.320 --> 00:45:12.179 and also point me to where in the evidentiary 00:45:12.179 --> 00:45:17.260 record I can find support for the idea that those 00:45:17.260 --> 00:45:22.650 names need to be redacted? especially given the 00:45:22.650 --> 00:45:25.369 identification of a lot of those parties in the 00:45:25.369 --> 00:45:29.110 declaration itself. Certainly, Your Honor. As 00:45:29.110 --> 00:45:32.210 to current management, Your Honor, the debtors 00:45:32.210 --> 00:45:35.070 would actually be prepared to concede to Mr. 00:45:35.309 --> 00:45:39.289 Hackman and agree to have the names of current 00:45:39.289 --> 00:45:43.349 management not be redacted, Your Honor. To be 00:45:43.349 --> 00:45:45.849 clearer than current directors, managers, and 00:45:45.849 --> 00:45:48.210 officers? That would be correct, Your Honor. 00:45:48.650 --> 00:45:55.429 Okay. I think that that then resolves Mr. Hackman's, 00:45:56.829 --> 00:45:59.329 one of Mr. Hackman's concerns about paragraph 00:45:59.329 --> 00:46:04.469 seven. Is that right, Mr. Hackman? Yes, Your 00:46:04.469 --> 00:46:07.130 Honor, we would maintain the objection to redacting 00:46:07.130 --> 00:46:11.489 the names of former management. I would ask counsel 00:46:11.489 --> 00:46:14.610 to please correct me if I misspeak, but my impression 00:46:14.610 --> 00:46:16.130 from reading the first state declaration, for 00:46:16.130 --> 00:46:19.150 example, is that there's been very recent some... 00:46:19.179 --> 00:46:23.039 some very recent changes in management. Right. 00:46:23.239 --> 00:46:26.679 As I understood Mr. Marks' comments, no longer 00:46:26.679 --> 00:46:30.780 seeking to redact the names of former... I'm 00:46:30.780 --> 00:46:34.480 sorry. Explain to me again. I apologize. Yes, 00:46:34.980 --> 00:46:38.860 certainly, Your Honor. The debtors would be amenable 00:46:38.860 --> 00:46:41.940 to not redacting the names of current management. 00:46:42.960 --> 00:46:45.280 But we would still take the position, your honor, 00:46:45.599 --> 00:46:48.440 that given the nature of the industry, that redacting 00:46:48.440 --> 00:46:52.039 the names of former management is something that 00:46:52.039 --> 00:46:53.760 the debtors would still be seeking. And then 00:46:53.760 --> 00:46:57.679 also as to your rank and file employees, your 00:46:57.679 --> 00:47:08.039 honor. Director, former directors, managers and 00:47:08.039 --> 00:47:13.340 officers, can you explain what the concern is 00:47:13.340 --> 00:47:15.679 and where in the evidentiary record the relief 00:47:15.679 --> 00:47:20.579 that you're requesting is supported? Yes, Your 00:47:20.579 --> 00:47:23.760 Honor. I believe the concerns really boil down 00:47:23.760 --> 00:47:26.480 to the nature of this industry and the heightened 00:47:26.480 --> 00:47:30.079 risk of all the parade of horribles that we've 00:47:30.079 --> 00:47:32.159 seen in some of these other cryptocurrency related 00:47:32.159 --> 00:47:35.769 cases, Your Honor. I do not have the first day 00:47:35.769 --> 00:47:39.610 declaration in front of me. Your honor, I understand 00:47:39.610 --> 00:47:45.110 Mr. Hackman's position with respect to former 00:47:45.110 --> 00:47:48.510 directors and officers, and if I understand it 00:47:48.510 --> 00:47:52.090 correctly, also the employees. Your honor, given 00:47:52.090 --> 00:47:54.269 that we are here on a first day hearing, and 00:47:54.269 --> 00:47:56.909 I do understand Mr. Hackman has his reservations 00:47:56.909 --> 00:48:00.510 about doing so, but we would ask if your honor's 00:48:00.510 --> 00:48:02.750 not inclined to grant the relief here today that 00:48:02.750 --> 00:48:05.500 - Perhaps we can consult with our client on the 00:48:05.500 --> 00:48:10.079 issue further. I expect that the debtors might 00:48:10.079 --> 00:48:13.619 wish to brief this issue further for a final 00:48:13.619 --> 00:48:17.500 hearing, Your Honor. So I would, I guess, pause 00:48:17.500 --> 00:48:20.940 there and perhaps maybe receive comments from 00:48:20.940 --> 00:48:25.480 Mr. Hackman or Your Honor on that proposal. Sure. 00:48:26.739 --> 00:48:28.559 To my knowledge, and you're going to have to 00:48:28.559 --> 00:48:31.599 educate me, but in some of these other crypto 00:48:31.599 --> 00:48:36.250 cases where problems have arisen. It's been in 00:48:36.250 --> 00:48:43.309 the context of bad actors trying to get access 00:48:43.309 --> 00:48:48.449 to the wallets of customers. If they're on a 00:48:48.449 --> 00:48:51.130 matrix, they've got their names, they've got 00:48:51.130 --> 00:48:53.949 other identifying information that they can use 00:48:53.949 --> 00:48:58.710 to try phishing scams and other ways of trying 00:48:58.710 --> 00:49:03.579 to get... information from them to be able to 00:49:03.579 --> 00:49:08.159 take their property. That would seem to be a 00:49:08.159 --> 00:49:10.679 different sort of concern than one would have 00:49:10.679 --> 00:49:15.880 for directors, managers, and officers of a business 00:49:15.880 --> 00:49:25.480 that's involved in crypto. Do you disagree or 00:49:25.480 --> 00:49:27.380 is that something that you would push back on? 00:49:28.269 --> 00:49:30.690 Your Honor, I think the debtors would, at this 00:49:30.690 --> 00:49:35.230 point, push back on that. Again, the nature of 00:49:35.230 --> 00:49:36.949 the industry, and if they're no longer serving 00:49:36.949 --> 00:49:40.289 with the company, Your Honor, we would, I think, 00:49:40.489 --> 00:49:46.429 request the ability to brief that issue. Your 00:49:46.429 --> 00:49:52.969 Honor, would we be able to have, perhaps, a 10 00:49:52.969 --> 00:49:55.190 -minute brief recess to discuss with our client? 00:49:56.069 --> 00:49:58.130 Yeah, certainly. That's just fine. Thank you 00:49:58.130 --> 00:56:27.909 your honor. Okay. Okay. We're in recess All right. 00:56:28.030 --> 00:56:33.929 Please be seated. Mr. Mark. Hello again, Your 00:56:33.929 --> 00:56:36.389 Honor. For the record, Andrew Mark with Dermot 00:56:36.389 --> 00:56:38.630 Rollins -Schulte, proposed counsel of the debtors. 00:56:38.989 --> 00:56:41.690 Your Honor, thank you for affording the parties 00:56:41.690 --> 00:56:46.289 a brief recess. During such recess, the debtors 00:56:46.289 --> 00:56:49.010 did have an opportunity to discuss the relief 00:56:49.010 --> 00:56:51.849 sought in the matrix motion with Mr. Hackman. 00:56:52.139 --> 00:56:55.880 And after such discussions, I'm happy to report 00:56:55.880 --> 00:56:58.139 to Your Honor that I believe we've resolved Mr. 00:56:58.380 --> 00:57:02.039 Hackman's concerns as to the matrix motion and 00:57:02.039 --> 00:57:06.099 the ceiling issue. Specifically, Your Honor, 00:57:06.539 --> 00:57:10.460 the debtors will agree not to redact the names 00:57:10.460 --> 00:57:14.119 of former directors, officers, and managers in 00:57:14.119 --> 00:57:17.840 addition to not redacting the names of current 00:57:17.840 --> 00:57:20.710 directors, officers, and managers. but that the 00:57:20.710 --> 00:57:24.409 debtors will still be permitted to redact, rank 00:57:24.409 --> 00:57:28.969 and file employees. And I believe that's consistent 00:57:28.969 --> 00:57:32.670 with our conversation, but I'll let Mr. Hackman 00:57:32.670 --> 00:57:35.210 weigh in and the debtors would submit a revised 00:57:35.210 --> 00:57:37.590 proposed order under certification of counsel 00:57:37.590 --> 00:57:40.070 following this afternoon's hearing. Okay. Thank 00:57:40.070 --> 00:57:42.349 you, Mr. Mark. Mr. Hackman? Your Honor, confirming 00:57:42.349 --> 00:57:44.610 our office is resolved. Thank you. Okay. Thank 00:57:44.610 --> 00:57:47.889 you. Okay. Is there anyone else who wishes to 00:57:47.889 --> 00:57:56.440 be heard regarding the I hear no response. Then 00:57:56.440 --> 00:57:58.360 based upon the evidence before me, I'm happy 00:57:58.360 --> 00:58:05.420 to grant the motion as modified by the agreement 00:58:05.420 --> 00:58:07.920 with the Office of the United States Trustee. 00:58:09.199 --> 00:58:11.960 Thank you, Your Honor. Thank you, Mr. Mark. That 00:58:11.960 --> 00:58:14.199 brings us to what I believe to be the final item 00:58:14.199 --> 00:58:17.260 on this afternoon's agenda, which is the debtor's 00:58:17.260 --> 00:58:20.099 motion for use of cash collateral filed at docket 00:58:20.099 --> 00:58:24.199 number 16. Before I proceed with the debtor's 00:58:24.199 --> 00:58:25.719 argument on that motion, Your Honor, I would 00:58:25.719 --> 00:58:29.579 move for the admission of Mr. Renzi's declaration 00:58:29.579 --> 00:58:32.800 in support of cash collateral, which is filed 00:58:32.800 --> 00:58:37.159 at docket number 17 into evidence. Okay does 00:58:37.159 --> 00:58:40.840 anybody object to the admission of Mr. Renzi's 00:58:40.840 --> 00:58:43.480 declaration in support of the dip motion and 00:58:43.480 --> 00:58:46.000 that that submit that admission of evidence would 00:58:46.000 --> 00:58:49.079 be purely for the purposes of today's hearing. 00:58:50.019 --> 00:58:52.900 Okay I hear no response it is admitted. Does 00:58:52.900 --> 00:58:55.360 anybody wish to cross examine Mr. Renzi regarding 00:58:55.360 --> 00:59:01.320 the sorry I said dip couch collateral. Okay I 00:59:01.320 --> 00:59:06.869 hear no response. Thank you your honor. Your 00:59:06.869 --> 00:59:08.730 Honor, through the cash collateral motion, the 00:59:08.730 --> 00:59:10.789 debtors seek authorization to use their cash 00:59:10.789 --> 00:59:13.070 on hand and other assets to fund these Chapter 00:59:13.070 --> 00:59:16.550 11 cases. The use of cash collateral is necessary 00:59:16.550 --> 00:59:18.769 and indeed crucial for the debtors to achieve 00:59:18.769 --> 00:59:21.429 their goals in Chapter 11. Prior to the filing 00:59:21.429 --> 00:59:23.409 of these cases, the debtors entered into two 00:59:23.409 --> 00:59:25.929 promissory notes with Celsius Network Limited. 00:59:27.469 --> 00:59:29.869 Under the notes, Your Honor, Celsius claims that 00:59:29.869 --> 00:59:32.170 it has a lien and alleges a security interest 00:59:32.170 --> 00:59:38.139 over the debtor's assets. First, as a gating 00:59:38.139 --> 00:59:40.719 issue, Your Honor, the debtors continue to evaluate 00:59:40.719 --> 00:59:44.079 whether Celsius is properly perfected on its 00:59:44.079 --> 00:59:46.639 security interest in the debtor's assets. and 00:59:46.639 --> 00:59:49.340 if later it is determined that Celsius was not 00:59:49.340 --> 00:59:52.039 properly perfected, submit that that alone would 00:59:52.039 --> 00:59:54.360 warrant approval of the cash collateral motion. 00:59:55.260 --> 00:59:57.039 However, Your Honor, as we stand here today, 00:59:57.619 --> 01:00:00.320 until the debtors complete their evaluation of 01:00:00.320 --> 01:00:03.239 whether Celsius is properly perfected and the 01:00:03.239 --> 01:00:05.579 court has an opportunity to make a ruling on 01:00:05.579 --> 01:00:08.269 such issue, be debtors propose through the cash 01:00:08.269 --> 01:00:11.130 collateral motion to afford Celsius adequate 01:00:11.130 --> 01:00:13.849 protection until such time that the validity 01:00:13.849 --> 01:00:16.329 of its alleged liens, if any, can be determined. 01:00:17.230 --> 01:00:20.269 Specifically, Your Honor, Celsius is heavily 01:00:20.269 --> 01:00:23.610 over -secured. The principal outstanding amount 01:00:23.610 --> 01:00:26.449 owed under the promissory notes is approximately 01:00:26.449 --> 01:00:29.760 $4 .8 million. Although the debtors understand 01:00:29.760 --> 01:00:32.280 that Celsius asserts it is a default interest, 01:00:32.599 --> 01:00:34.780 which, if enforceable, would bring the alleged 01:00:34.780 --> 01:00:39.699 amount to approximately $5 .5 million. You're 01:00:39.699 --> 01:00:41.659 under the aggregate value of the debtor's cash 01:00:41.659 --> 01:00:45.460 collateral, which consists of both cash and cryptocurrencies, 01:00:46.219 --> 01:00:50.179 is approximately $30 million. This creates circumstances 01:00:50.179 --> 01:00:53.820 where Celsius enjoys an approximate 500 % equity 01:00:53.820 --> 01:00:56.420 cushion, which the debtors submit is more than 01:00:56.420 --> 01:00:58.679 sufficient for purposes of adequate protection 01:00:58.679 --> 01:01:01.760 under these facts and relevant case law, which 01:01:01.760 --> 01:01:05.480 typically requires only 20 % of an equity cushion 01:01:05.480 --> 01:01:08.559 to be sufficient. However, your honor, under 01:01:08.559 --> 01:01:11.880 the proposed cash collateral order, even with 01:01:11.880 --> 01:01:14.300 such equity cushion, the debtors further proposed 01:01:14.300 --> 01:01:16.960 a grant, the pre -petition secured party replacement 01:01:16.960 --> 01:01:19.960 lanes, which... will be valid and enforceable 01:01:19.960 --> 01:01:23.639 even if it is later determined that, excuse me, 01:01:23.699 --> 01:01:26.199 will be valid and enforceable unless it is later 01:01:26.199 --> 01:01:28.300 determined that the pre -petition secured party 01:01:28.300 --> 01:01:32.559 is properly perfected on account of its alleged 01:01:32.559 --> 01:01:36.019 lien. Your Honor, the debtor's further proposed 01:01:36.019 --> 01:01:38.719 to provide Celsius with a super priority administrative 01:01:38.719 --> 01:01:40.900 expense claim to the extent it holds a valid 01:01:40.900 --> 01:01:44.380 secured claim under section 507B of the bankruptcy 01:01:44.380 --> 01:01:48.199 code. And finally, Your Honor, the Preparation 01:01:48.199 --> 01:01:50.940 Secured Party will be further protected from 01:01:50.940 --> 01:01:53.500 any diminution in value because the debtor will 01:01:53.500 --> 01:01:56.119 only be using the cash collateral to preserve 01:01:56.119 --> 01:01:58.519 the ongoing concerned value of the debtor's estates 01:01:58.519 --> 01:02:01.719 by administering these Chapter 11 cases. Your 01:02:01.719 --> 01:02:03.860 Honor, absent authority to use cash collateral, 01:02:04.000 --> 01:02:06.219 the debtors will lack the liquidity to accomplish 01:02:06.219 --> 01:02:08.559 their goals in these Chapter 11 cases, which 01:02:08.559 --> 01:02:10.719 will lead to the detriment of all the debtor's 01:02:10.719 --> 01:02:13.789 creditors and stakeholders. Prior to the filing 01:02:13.789 --> 01:02:15.429 of this motion, Your Honor, the debtors were 01:02:15.429 --> 01:02:18.170 able to consensually resolve comments from the 01:02:18.170 --> 01:02:19.869 United States Trustee's office, as I believe 01:02:19.869 --> 01:02:22.590 Mr. Hurst previewed for Your Honor at the beginning 01:02:22.590 --> 01:02:25.349 of this afternoon's hearing. And I would further 01:02:25.349 --> 01:02:27.769 highlight that after the filing of the motion, 01:02:28.070 --> 01:02:30.590 the debtors entered into discussions about the 01:02:30.590 --> 01:02:34.070 relief sought with Celsius and have reached an 01:02:34.070 --> 01:02:36.590 agreement on consensual use of cash collateral. 01:02:37.050 --> 01:02:39.969 The debtors greatly appreciate Celsius's efforts 01:02:39.969 --> 01:02:43.050 to reach a resolution with us and anticipate 01:02:43.050 --> 01:02:46.449 submitting a revised order with a further interim 01:02:46.449 --> 01:02:50.170 order to be heard in two weeks, subject to this 01:02:50.170 --> 01:02:54.070 court's availability. Your honor, I have a markup 01:02:54.070 --> 01:02:56.750 of that further revised order. If your honor 01:02:56.750 --> 01:02:58.590 would like to see it, I'm not certain that it's 01:02:58.590 --> 01:03:01.590 been provided to chambers. If I may approach 01:03:01.590 --> 01:03:17.539 your honor. Your honor, at a very high level, 01:03:17.739 --> 01:03:20.179 the revisions to the proposed cash collateral 01:03:20.179 --> 01:03:22.820 order contemplate the debtors capping their spending 01:03:22.820 --> 01:03:27.099 under the interim order at $1 million until the 01:03:27.099 --> 01:03:29.619 end of the month, absent consent from Celsius 01:03:29.619 --> 01:03:32.340 to spend additional amounts or otherwise ordered 01:03:32.340 --> 01:03:36.079 by the court. The debtors believe that that rough 01:03:36.079 --> 01:03:38.139 two -week period will afford the debtors and 01:03:38.139 --> 01:03:40.639 Celsius enough time to either reach an agreement 01:03:40.639 --> 01:03:43.940 as to the validity and enforceability of Celsius's 01:03:43.940 --> 01:03:46.300 alleged security interest or otherwise bring 01:03:46.300 --> 01:03:50.840 the issue back before the court. I would pause 01:03:50.840 --> 01:03:52.659 there and if your honor would like, I'm happy 01:03:52.659 --> 01:03:57.780 to walk the court through the revised proposed 01:03:57.780 --> 01:04:00.699 order. Otherwise, the debtors would respectfully 01:04:00.699 --> 01:04:03.670 request entry of the interim order. I'll tell 01:04:03.670 --> 01:04:05.590 you what, I've had a chance to review it quickly, 01:04:05.730 --> 01:04:07.150 but why don't you walk through them for the benefit 01:04:07.150 --> 01:04:09.869 of people in the courtroom who may not have had 01:04:09.869 --> 01:04:12.030 a chance to look at it. Certainly, Your Honor. 01:04:13.489 --> 01:04:17.510 Your Honor, if you turn to page four of the proposed 01:04:17.510 --> 01:04:21.989 order in paragraph three, this paragraph at the 01:04:21.989 --> 01:04:24.869 end contains the language I just alluded to regarding 01:04:24.869 --> 01:04:29.769 the $1 million interim cap in spending, which 01:04:29.769 --> 01:04:31.750 would apply during the first two weeks from entry 01:04:31.750 --> 01:04:34.579 of this interim order. and that the debtors could 01:04:34.579 --> 01:04:37.739 exceed that interim amount with the consent of 01:04:37.739 --> 01:04:43.260 Celsius or a further order from this court. Your 01:04:43.260 --> 01:04:47.559 honor, on page five of the revised proposed order, 01:04:48.619 --> 01:04:52.400 we struck the language regarding the pre -petition 01:04:52.400 --> 01:04:54.679 secured parties' additional adequate protection. 01:04:56.199 --> 01:05:00.099 I believe that was at the request of Celsius's 01:05:00.099 --> 01:05:06.130 counsel. And in paragraph seven, Your Honor, 01:05:06.170 --> 01:05:08.690 which is also on page seven of the revised proposed 01:05:08.690 --> 01:05:11.769 order, that does contain with respect to the 01:05:11.769 --> 01:05:14.630 termination date of interim use of cash collateral, 01:05:15.510 --> 01:05:19.250 the roughly two week period I earlier alluded 01:05:19.250 --> 01:05:24.889 to, which would be March 31st, 2026. And Your 01:05:24.889 --> 01:05:28.789 Honor, I do believe that that is the bulk of 01:05:28.789 --> 01:05:32.860 the substantive changes to the order. We do make 01:05:32.860 --> 01:05:36.340 a conforming change in paragraph 10 on page nine 01:05:36.340 --> 01:05:40.460 to reflect the possibility that we would be back 01:05:40.460 --> 01:05:43.079 before your honor for a second interim hearing 01:05:43.079 --> 01:05:45.780 absent the debtors obtaining consent from Celsius. 01:05:46.679 --> 01:05:52.019 Okay. I do have one question that's sort of a 01:05:52.019 --> 01:06:03.130 little unclear to me from the papers. The issue 01:06:03.130 --> 01:06:07.309 is this, it sounds to me like the the pre -petition 01:06:07.309 --> 01:06:11.389 practice has been that customer funds and company 01:06:11.389 --> 01:06:15.210 funds are co -mingled. That's been the practice 01:06:15.210 --> 01:06:17.969 and under the term sheet that practice would 01:06:17.969 --> 01:06:23.769 cease. So has there been any analysis done of 01:06:23.769 --> 01:06:28.170 to what extent funds might be customer funds 01:06:28.170 --> 01:06:35.300 as opposed to... I'll let my colleague Mr. Asman 01:06:35.300 --> 01:06:38.239 play in on that Your Honor. Your Honor, yes, 01:06:38.280 --> 01:06:41.159 there has been analysis and effectively what 01:06:41.159 --> 01:06:43.780 we have determined is that customer funds, at 01:06:43.780 --> 01:06:46.460 least as we call them, funds that were deposited 01:06:46.460 --> 01:06:50.199 by customers have always been commingled with 01:06:50.199 --> 01:06:53.380 company funds and other customer funds. The company's 01:06:53.380 --> 01:06:55.260 position is that all the funds in the estate 01:06:55.260 --> 01:06:58.119 currently subject potentially to liens that may 01:06:58.119 --> 01:07:01.139 exist, such as the Celsius potentially. All the 01:07:01.139 --> 01:07:03.900 funds are property of the estate. And I think, 01:07:04.099 --> 01:07:05.960 as Your Honor probably knows, in the Third Circuit 01:07:05.960 --> 01:07:08.320 and many others, property in the possession of 01:07:08.320 --> 01:07:11.960 the debtors, by default, are assumed to be property 01:07:11.960 --> 01:07:14.400 of the estate, but other parties are free, certainly, 01:07:14.579 --> 01:07:16.639 to come in and challenge that. But that is the 01:07:16.639 --> 01:07:18.760 company's position right now. Sure. I understand 01:07:18.760 --> 01:07:21.300 precisely that that will be an issue for customers 01:07:21.300 --> 01:07:24.719 to raise if they wish to. Yes. Having said that, 01:07:25.420 --> 01:07:27.820 your friend, Ms. Van Laer, has stood up. I will 01:07:27.820 --> 01:07:30.840 allow her to speak. Okay. Ms. Van Laer. Yes, 01:07:30.940 --> 01:07:32.699 Your Honor. Thank you so much. Just briefly, 01:07:32.900 --> 01:07:35.400 I just wanted to address this issue. I think 01:07:35.400 --> 01:07:38.320 the ad hoc group would like to reserve our rights 01:07:38.320 --> 01:07:40.900 on this issue of customer property. Certainly 01:07:40.900 --> 01:07:42.679 the customers have the expectation and we're 01:07:42.679 --> 01:07:46.639 told that these were customer funds that would 01:07:46.639 --> 01:07:50.519 be segregated. So I don't think we can get into 01:07:50.519 --> 01:07:53.179 that issue fully right now, of course, but we 01:07:53.179 --> 01:07:55.460 do reserve our rights on that issue. Okay. Thank 01:07:55.460 --> 01:08:01.000 you. That's fair enough. Okay, that's really 01:08:01.000 --> 01:08:03.099 the only question that I had. Is there anybody 01:08:03.099 --> 01:08:05.440 who'd like to be heard regarding the interim 01:08:05.440 --> 01:08:10.559 cash collateral motion? Mr. Pasitti. Your Honor. 01:08:11.579 --> 01:08:13.699 Good afternoon, Your Honor. Good afternoon. For 01:08:13.699 --> 01:08:15.860 the record, Dominic Pasitti of Clare Harris and 01:08:15.860 --> 01:08:20.619 Harvey Bransburg. On behalf of Celsius Network 01:08:20.619 --> 01:08:23.560 Limited buying through the blockchain recovery 01:08:23.560 --> 01:08:27.270 investment consortium LLC. acting in its capacity 01:08:27.270 --> 01:08:30.590 as litigation agreement and complex asset recovery 01:08:30.590 --> 01:08:34.210 manager. Mouthful. Your Honor, we're co -counseled 01:08:34.210 --> 01:08:36.689 with the folks at Whiten Case on this matter. 01:08:37.430 --> 01:08:40.689 Mr. Gregory Pash is on the line on Zoom, and 01:08:40.689 --> 01:08:42.670 I think he might want to address the court. I 01:08:42.670 --> 01:08:45.550 think he has to be acknowledged, but I'm not 01:08:45.550 --> 01:08:49.609 sure if he was able to plug in. Sure. Mr. Pash. 01:08:51.369 --> 01:08:54.470 Hi, Your Honor. Gregory Pash, Whiten Case for 01:08:54.470 --> 01:08:58.539 Celsius here. Can you hear me all right? I can 01:08:58.539 --> 01:09:01.100 hear you. I can't see you, but I'll leave it 01:09:01.100 --> 01:09:03.939 whether you want to turn the camera on. Yeah, 01:09:04.380 --> 01:09:05.939 they're letting me turn my camera on now. So 01:09:05.939 --> 01:09:08.140 thank you. I'm not trying to hide here. All right. 01:09:08.279 --> 01:09:10.880 So thank you. There we go. So thank you very 01:09:10.880 --> 01:09:13.600 much for letting me speak. And we appreciate 01:09:13.600 --> 01:09:16.699 the time with Mr. Renzi and the McDermott firm 01:09:16.699 --> 01:09:22.899 to address our concerns as alluded to by the 01:09:22.899 --> 01:09:27.439 debtors council. Celsius has a significant secured 01:09:27.439 --> 01:09:31.060 claim here. The instrument has been in default 01:09:31.060 --> 01:09:35.359 since around August, 2025. It's accruing default 01:09:35.359 --> 01:09:40.039 interest. Celsius has a lot of questions about 01:09:40.039 --> 01:09:42.680 the case and the circumstances that have led 01:09:42.680 --> 01:09:47.100 to the filing here. In the last 24 hours, we've 01:09:47.100 --> 01:09:49.680 started to get information as we've engaged with 01:09:49.680 --> 01:09:52.020 Mr. Renzi and the McDermott firm about the cash 01:09:52.020 --> 01:09:55.140 collateral situation. We look forward to working 01:09:55.140 --> 01:09:58.380 with them more in the coming two weeks ahead 01:09:58.380 --> 01:10:01.399 of the expiration of this order to get more information 01:10:01.399 --> 01:10:04.159 about what happened at the company and what the 01:10:04.159 --> 01:10:07.180 path forward is. In particular, regarding the 01:10:07.180 --> 01:10:12.510 IP that might be the foundation for the so -called 01:10:12.510 --> 01:10:16.050 customer -led reorganization since it's our assertion 01:10:16.050 --> 01:10:18.430 that that is subject to our security interest. 01:10:19.470 --> 01:10:21.289 For purposes of today, we're pleased that we 01:10:21.289 --> 01:10:24.270 reached an agreement that has some specific guardrails 01:10:24.270 --> 01:10:27.630 on the use of cash collateral. We look forward 01:10:27.630 --> 01:10:29.630 to engaging with the court and the other parties 01:10:29.630 --> 01:10:32.609 here in the coming weeks. And I appreciate you 01:10:32.609 --> 01:10:34.149 making the time. That was all I wanted to share 01:10:34.149 --> 01:10:36.329 with the court today. Thank you. Thank you, Mr. 01:10:36.590 --> 01:10:40.050 Pesch. Mr. Gurevich, appearing by Zoom, would 01:10:40.050 --> 01:10:50.850 you like to be heard, sir? Hi, Your Honor. Can 01:10:50.850 --> 01:10:52.930 you hear me okay over there? I can hear you. 01:10:53.029 --> 01:10:56.189 Thank you, Mr. Gurevich. Yes. So thank you, Your 01:10:56.189 --> 01:10:58.430 Honor, and good afternoon. I represent Dominion 01:10:58.430 --> 01:11:02.430 Capital. I'm a principal at the firm. It's a 01:11:02.430 --> 01:11:06.560 small family office in New York. We are... seventh 01:11:06.560 --> 01:11:09.180 largest depositor on the platform, I believe, 01:11:09.439 --> 01:11:12.960 or six, if you don't include Nexo, that are on 01:11:12.960 --> 01:11:15.979 the convertible note. So I just wanted to highlight 01:11:15.979 --> 01:11:20.579 for your information the fact that when we deposited 01:11:20.579 --> 01:11:23.659 our assets on the platform and signed the onboarding 01:11:23.659 --> 01:11:28.260 agreement as part of Blockfill's document package, 01:11:28.500 --> 01:11:31.380 it specifically said that all customer deposits 01:11:31.380 --> 01:11:33.949 are going to be completely segregated. from the 01:11:33.949 --> 01:11:38.510 general balance sheet of the company. So as you 01:11:38.510 --> 01:11:41.289 contemplate this discussion, I'd just like to 01:11:41.289 --> 01:11:45.890 point out that fact for you. So if there is an 01:11:45.890 --> 01:11:50.510 opportunity for the court to set aside a percentage 01:11:50.510 --> 01:11:53.510 for the customer deposits, I think that would 01:11:53.510 --> 01:11:56.170 be a prudent decision. But again, I just want 01:11:56.170 --> 01:11:59.210 to highlight that fact. Okay. Thank you, Mr. 01:11:59.369 --> 01:12:01.989 Gurvich. Is there anyone else who would like 01:12:01.989 --> 01:12:09.260 to be heard? Okay. Mr. Hackman. Thank you, Your 01:12:09.260 --> 01:12:11.220 Honor. Ben Hackman for the U .S. Trustee. We 01:12:11.220 --> 01:12:13.020 have no objection to entry of the order as revised. 01:12:13.199 --> 01:12:14.739 I thank counsel for working with us to resolve 01:12:14.739 --> 01:12:17.060 our comments. I rise just to apprise the court 01:12:17.060 --> 01:12:19.560 that we have sent out a solicitation for a creditors 01:12:19.560 --> 01:12:22.239 committee. We have a March 23rd return deadline. 01:12:23.180 --> 01:12:26.020 I note that the second interim hearing was contemplated 01:12:26.020 --> 01:12:30.380 as being March 31st. If there's interest in appointing 01:12:30.380 --> 01:12:32.960 a committee, we'll endeavor to process that as... 01:12:32.989 --> 01:12:35.470 promptly as we can next week. Thank you. Thank 01:12:35.470 --> 01:12:40.590 you. Thank you. Okay. Mr. Aspin, would you like 01:12:40.590 --> 01:12:43.609 to respond to Mr. Gurovich's comments? No, Your 01:12:43.609 --> 01:12:46.090 Honor. Other than to say that, as you can imagine, 01:12:46.350 --> 01:12:48.630 this may be coming to a movie near you shortly 01:12:48.630 --> 01:12:50.770 in terms of the issue coming before the court. 01:12:51.189 --> 01:12:57.170 Okay. Okay. I hear Mr. Gurovich's concerns. Certainly 01:12:57.170 --> 01:13:04.800 it's a question that I had. But based upon the 01:13:04.800 --> 01:13:09.680 record before me, I don't have any evidence that 01:13:09.680 --> 01:13:13.300 would show that the funds that the debtors are 01:13:13.300 --> 01:13:19.840 proposing to use are a property of anybody but 01:13:19.840 --> 01:13:25.460 the debtor in possession. But the issue is preserved 01:13:25.460 --> 01:13:29.159 and it can be raised in connection with the final 01:13:29.159 --> 01:13:32.329 hearing. Based upon the evidentiary record that 01:13:32.329 --> 01:13:36.529 I do have, I am satisfied that the debtors have 01:13:36.529 --> 01:13:38.289 sustained their burden of showing why they should 01:13:38.289 --> 01:13:41.909 be permitted to use cash collateral in accordance 01:13:41.909 --> 01:13:45.890 with the revised proposed interim order. And 01:13:45.890 --> 01:13:48.170 I will grant that motion on an interim basis. 01:13:48.210 --> 01:13:53.850 But again, I'm not giving short shrift to Mr. 01:13:54.029 --> 01:13:57.529 Gervitch's concerns. It simply be an issue. that 01:13:57.529 --> 01:14:02.409 is fully preserved for him and anybody else to 01:14:02.409 --> 01:14:05.430 raise in connection with further hearing. Thank 01:14:05.430 --> 01:14:07.270 you, Your Honor. And just as a housekeeping item, 01:14:07.390 --> 01:14:10.409 I would like to request a second interim hearing, 01:14:10.829 --> 01:14:13.670 which is a two -week period. Whatever works for 01:14:13.670 --> 01:14:15.930 Your Honor, I'm sure we can accommodate. Yeah. 01:14:16.609 --> 01:14:19.010 We'll give you March 31st at 3 p .m. if that's 01:14:19.010 --> 01:14:20.890 suitable for parties. That's great. Thank you, 01:14:20.890 --> 01:14:23.350 Your Honor. Okay. And I have something else going 01:14:23.350 --> 01:14:25.289 on before that. If that gets moved, I'll reach 01:14:25.289 --> 01:14:27.989 out to you. If we can move it up in the day, 01:14:28.090 --> 01:14:31.529 I'm sure you'd be happier to get home that soon. 01:14:32.130 --> 01:14:32.390 It may also be resolved by that point, too. What's 01:14:32.390 --> 01:14:34.010 that? It may also be resolved by that point, 01:14:34.149 --> 01:14:37.270 as well. Right, right. Okay. Very good. But we'll 01:14:37.270 --> 01:14:39.569 say March 31st at 3 p .m. Thank you, Your Honor. 01:14:39.989 --> 01:14:43.750 Okay. And as for the other interim orders, well, 01:14:43.810 --> 01:14:46.649 really all of them, I reviewed them, but they 01:14:46.649 --> 01:14:49.670 were not on the docket for others to review. 01:14:50.109 --> 01:14:52.489 So if you could file those under certification 01:14:52.489 --> 01:14:58.079 of counsel... then I will enter the order once 01:14:58.079 --> 01:15:00.100 they've been filed in certification of counsel 01:15:00.100 --> 01:15:02.520 and uploaded. Thanks so much, Your Honor. Appreciate 01:15:02.520 --> 01:15:06.439 it. Thank you. Is there anything else for today? 01:15:07.000 --> 01:15:09.039 No, Your Honor. Not for the debtors. Thank you. 01:15:09.039 --> 01:15:15.100 Okay. Very good. Oh, just one. Yes. On the cash 01:15:15.100 --> 01:15:17.819 management motion, the ad hoc group requested 01:15:17.819 --> 01:15:20.600 a minor change that Mr. Dover would like to just 01:15:20.600 --> 01:15:22.199 read into the record briefly, if that's okay, 01:15:22.279 --> 01:15:23.939 Your Honor. Yeah, please. Just so that you don't 01:15:23.939 --> 01:15:25.960 see the red line and you have some context for 01:15:25.960 --> 01:15:30.439 it. Thank you. Sure. Thank you, Your Honor. Ethan 01:15:30.439 --> 01:15:32.500 Dover, McDermott, Will and Schulte, proposed 01:15:32.500 --> 01:15:34.760 counsel to the debtors. At the conclusion of 01:15:34.760 --> 01:15:38.539 my presentation, the ad hoc group made a request 01:15:38.539 --> 01:15:40.819 that they be given notice of any intercompany 01:15:40.819 --> 01:15:44.840 transaction. We find that request acceptable 01:15:44.840 --> 01:15:47.119 and will work with the ad hoc group and the U 01:15:47.119 --> 01:15:49.380 .S. trustee to fashion language to include in 01:15:49.380 --> 01:15:51.800 the interim cash management order and get your 01:15:51.800 --> 01:15:53.640 revised from the conclusion of the hearing. Very 01:15:53.640 --> 01:15:55.760 good. Okay. Thank you. Thank you, Your Honor. 01:15:56.239 --> 01:16:01.439 Okay. I appreciate the presentations, especially 01:16:01.439 --> 01:16:04.479 those from Mr. Dover and Mr. Mark, and I thank 01:16:04.479 --> 01:16:08.699 you for bringing them and giving them the opportunity 01:16:08.699 --> 01:16:12.930 to contribute to the hearing. all of the relief 01:16:12.930 --> 01:16:14.810 that you were seeking. It's great to see. So 01:16:14.810 --> 01:16:17.390 I'm grateful for that and I look forward to seeing 01:16:17.390 --> 01:16:18.689 you on the 31st.