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Good morning, everyone.

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Thank you.

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Please be seated.

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All right.

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Before we begin, I wanted to make some announcements about conduct and decorum.

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I know this case has generated a great deal of public interest and publicity, and understandably

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a lot of people are anxious and upset about what happened with this company.

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But it's important to remain to maintain proper courtroom decorum, both in the court, for

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those who are here, and for those participating remotely.

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At this point, we have 535 people on the Zoom call.

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So if you're participating in the courtroom, please keep in mind that the proceeding is

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being recorded.

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If you want to speak, you'll need to approach the podium or speak from one of the microphones

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at the council table so that we can pick up the recording and make sure we have a good

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record.

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Everyone should have their cell phones on silent.

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If you haven't done that already, please do so.

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If you're on the Zoom call, please keep the line muted and your video off, unless you

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are asking to speak.

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If you do want to speak, you need to use the raise your hand function on the Zoom call.

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I will recognize you and give you an opportunity.

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But keep in mind that everyone has a right to be heard, but today might not be the day

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for everyone to be heard, because we have a lot of people involved in this case.

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Any interruptions, of course, will not be tolerated.

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If you make noise on the Zoom call, I will have you removed from the call and you will

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not be allowed to reenter.

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If you turn your video on before recognized, I will have you removed from the call as well.

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And for the future, there is on the court's website, we have set up a YouTube channel

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for this case so that parties who are wanting to participate, want to listen to what's happening.

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It's only audio, it's not video.

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So you can listen to proceedings on YouTube channel going forward from here.

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One other thing is prior to the hearing, I did conduct a chambers conference with debtors

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council and council for the government and our CRDF people coming on with their videos

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on.

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I met with the government council and the U.S. trustee's office regarding the motion

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to seal and the accompanying motion that was filed yesterday.

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I heard the discussion and I will be granting the relief both on the motion to seal and

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the underlying request for relief that was requested under seal, but it's on an interim

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basis only, both of those, the seal motion and the motion for relief is on an interim

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basis only.

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And it will probably be lifted relatively quickly and we'll put this on for the final

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hearing when we come back in a few weeks.

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All right, with that, I will turn it over to debtors council to run the agenda.

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Good morning, your honor, and may it please the court.

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Adam Landis from Landis, Rath and Cobb proposed co-council to the debtors in the FTX trading

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limited group of debtors that we have filed.

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Let me thank your honor for not only hearing us today with respect to the requests for

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relief filed on the agenda, but also in connection with the section 105 chambers conference that

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you conducted this morning.

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With me this morning is a team from Sullivan and Cromwell proposed council to the debtors

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at council table, Andrew Dederick, James Bromley, Brian Gluckstein, Alexa Cransey, Julie Pettiford.

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Our declarants are in the courtroom, Mr. John Ray, Edgar Mosley from A&M.

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And I would be remiss if I didn't also recognize the Office of the United States Trustee who's

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been here and been working with us tirelessly, really, over the last several days, hours,

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into the wee hours of the night.

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They've gone above and beyond to work through a number of issues with us, and I'm pleased

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to report that almost everything that has been raised by the United States Trustee has

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been consensually resolved in connection with the first day motions.

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Almost everything.

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I was going to say almost everything.

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Almost everything.

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That word almost is doing a lot of work in that sentence.

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But with that, your honor, what I'd seek to do is see the podium to Mr. Bromley who will

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present and we'll work our way through the agenda and decourse.

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Thank you.

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Mr. Bromley?

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Good morning, your honor.

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May it please the Court, James Bromley of Sullivan and Cromwell, proposed co-counsel

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to the debtors in these cases.

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I'd like to echo Mr. Landis' comments and thank the Court for the accommodation of hearing

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us today and for also hearing us earlier in chambers with respect to the motion under

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seal.

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Your honor, we are here on an unprecedented matter, and I don't say those words lightly.

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We are dealing with a first day hearing that has taken place well over a week after these

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cases were filed.

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That in and of itself is uncommon.

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But what we had here with respect to the FTX debtors is a different sort of animal.

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Before I get into it, your honor, and I have a presentation to go through, I do want to

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go through in some detail just to talk a little bit about the folks who are in the courtroom

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and who Mr. Landis has already introduced.

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First of all, we do have in the courtroom Mr. John Ray, who is the chief executive officer

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and chief restructuring officer of the FTX debtors before you.

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Mr. Ray has over 40 years of experience in the law and restructuring, including leading

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the Enron estate, Fruit of the Bloom, Nortel, residential capital.

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Mr. Ray is uniquely qualified to be guiding this very complex and developing exercise.

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In addition, Mr. Ray has assembled a team of advisors, and we have Mr. Landis and his

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terrific crew here in Wilmington.

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We have the Alvarez and Marcell team led by Ed Mosley and Steve Kovarik.

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The A&M team are critical to this exercise because I think as many people have read Mr.

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Ray's first aid declaration, unfortunately the FTX debtors were not particularly well

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run, and that is an understatement.

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One of the things that Mr. Ray says in his first aid declaration is we are now writing

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things down.

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It is with the incredible efforts of the A&M team that we are working to organize and secure

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all of the assets of these very complex estates.

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In addition, Your Honor, we have the team from Sullivan and Cromwell, who Mr. Landis

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has already introduced, but there are three other individuals I'd like to mention.

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Because of the issues that we're facing here, we have assembled a team of investigators

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who are at the top of their fields.

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In the courtroom today is Mr. Steve Pekin, who is the former Director of Enforcement

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at the SEC and a former U.S. Attorney, Assistant U.S. Attorney for the Southern District of

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New York.

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With him is Jamie McDonald, former Head of Enforcement at the CFTC and also a former

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AUSA and the Southern District of New York.

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Not here in the courtroom, but an equally important member of the team is Nikki Friedlander,

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the former Chief of Complex Frauds and the Cybercrime Unit in the Southern District of

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New York.

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These individuals are working tirelessly to help us identify all of the issues that we

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need to deal with in terms of what has happened.

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In particular, they are interfacing, as I will indicate later in the presentation, with

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the U.S. government and the various regulators around the world who have taken a very keen

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interest in this situation.

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They will be reporting to Mr. Ray as the CEO and CRO.

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In addition, we have engaged Nardello and Company, which is a leading investigative firm.

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That was one of the first things that Mr. Ray instructed us to do, and we brought Nardello

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on, and they are working with us both here in the United States and around the world.

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We've engaged a firm named Chainalysis, which is the leading consultant with respect to

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blockchain analysis, because all of the issues that we're dealing with in the cyberspace

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relate to blockchain transactions, and Chainalysis has been working around the clock with us

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to secure the assets and identify them.

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In addition, we've retained a cybersecurity firm, the identity of which we have not disclosed

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because of concerns that those who are undertaking cyberattacks on the company and its assets

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will use that information to their benefit.

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We've also engaged Kroll, formerly known as the prime clerk, to be our noticing and claims

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agent, Joelle Frank to be our communications consultant, and in addition, the law firm

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of Quinn Emmanuel has been retained to provide advice to the board of directors, the independent

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board that we have appointed, and I will describe them in a few moments.

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With that, Your Honor, that's the team that's been assembled, and we have been working literally

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around the clock to get to this day.

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As I mentioned earlier, unprecedented is the word of the day.

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The crypto crisis that we're facing in the United States and around the world is well

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documented, but the FTX situation is both the latest and the largest failure in this

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space.

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Beginning in the first week of November, there was effectively a run on the bank with respect

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to FTX, both with respect to the international exchange, which was operated under the brand

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name FTX.com, as well as the U.S. exchange, which was operated under the brand name FTXUS.

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At the same time that the run on the bank was occurring, there was a leadership crisis.

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As I will describe in a moment, the FTX companies were controlled by a very small group of people

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led by Mr. Sam Bank and Freed.

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During the run on the bank, Mr. Freed's leadership frayed, and that led to resignations throughout

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the ranks.

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This is a developing situation, Your Honor.

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We recognize that there are millions of customers around the world and in the United States.

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We recognize that the debtors have unreliable books and records.

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We recognize that the debtors have compromised systems and have been subject to cyber attacks.

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We recognize that press and Internet attention is at an all-time high with respect to these

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debtors.

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It is for that reason, Your Honor, that we have decided that we are going to – that

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Mr. Ray has set out five core objectives, and I'm going to go through those objectives.

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I think it's fair to say that those who are involved right now, today, in running FTX

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understand the concern and the outrage as to what has happened, and we are working day

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and night to bring order to disorder.

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Your Honor, as Mr. Ray has set forth in his first-day declaration, there are five core

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objectives that we are pursuing at the moment.

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The first is the implementation of controls.

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As I described, Mr. Ray has been installed as the CEO and CRO of the debtors.

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He has assembled an impeccable team of advisors and put in place an independent board.

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This independent board provides, for the first time in the history of FTX, a traditional

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and dependable governance structure.

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Prior to the commencement of these cases, FTX was in the control of a small group of

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inexperienced and unsophisticated individuals, and unfortunately, the evidence seems to indicate

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that some, or all of them, were also compromised individuals.

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Now the types of controls that we're putting in place right now, with the assistance in

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particular of Alvarez and Marcell, are traditional and market standard accounting, audit, cash

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management, human resource, risk management, and data management standards.

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In doing this, it's important to note that there are a core group of employees who have

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remained at the FTX companies, who have stepped up in the face of incredible uncertainty and

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have been assisting all of the advisors in making sure that the assets are secured and

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the records are now being kept in a manner that is appropriate.

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I'd like to focus for a moment, Your Honor, on board governance.

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We have identified several silos of the business, and this is for organizational purposes.

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We'll talk in a moment about the organizational chart.

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But with respect to these silos, the first is what we call the WRS silo, which is the

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U.S. currency exchange silo.

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An independent director, Mitchell Sanken, has been appointed to the board of WRS.

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He is a lawyer.

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He is the former chief executive of the MBIA, who led the MBIA's exposure in the Puerto

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Rico situation for almost 10 years.

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He's a member of the board of residential capital.

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He's also a former partner of King & Spalding, with over 40 years of experience.

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The next silo is the Alameda silo.

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Alameda Research is a substantial debtor here, and it operated effectively as a hedge fund

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within the FTX group of families, a group of companies.

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Installed as a director at Alameda is Matthew Rosenberg, with an expertise in finance.

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He's an investment banker and investor with Lincoln Park Advisors from Chicago.

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Before starting Lincoln Park Advisors, he was a partner at Chillmark Partners and advised

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on matters including supermedia, Covanta, USG, Nortel, Overseas Shipping Group, and

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Conti Group.

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He has over 30 years of experience.

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There's a silo that we have identified as the Ventures silo.

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The director at that silo, independent director, is Rishi Jain.

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Rishi has a background in finance.

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He is a managing director at the Accordion Group, which specializes in financial and

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technology consulting.

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He also worked for Alvarez and Marcel for over 10 years, and was instrumental in the

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Washington Mutual exercise.

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At the dot com silo, which is the international business, we have two directors, your honor,

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independent directors.

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First is Joseph Farnan, a lawyer from Delaware, former judge and US attorney, with experience

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in complex financial disputes and investigations.

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Joining Mr. Farnan at the dot com board is Matthew Doheny.

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Matthew Doheny is a financial expert.

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He's the chief executive of North Country Capital.

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He has been either on the board of directors or chief restructuring officer of Yellow

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Corp., the trucking company, Residential Capital, Kodak, and Matlin Patterson.

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Prior to that, he worked at HSBC and Deutsche Bank.

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Our second core objective, your honor, is asset protection and recovery.

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It's important to note that we're not just talking about crypto assets or cash assets

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or physical assets.

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We're also talking about information, and information here is an asset.

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Unfortunately, as the debtors have, new advisors have, and Mr. A have been exercising their

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investigations so far, a substantial amount of assets have either been stolen or are missing.

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We are suffering from cyber attacks, both on the petition date and the days following,

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and we have, as I mentioned earlier, engaged sophisticated expertise to protect against

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the hacks, but they continue.

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The third objective, your honor, is transparency and investigation.

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As I noted, there is a team of investigators who are working tirelessly with the debtors

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to collect and coordinate information.

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The debtors will conduct the investigation.

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We recognize this is not a normal situation and that there are others who will have to

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review the facts and the history.

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We are going to serve as a central repository.

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Unlike many debtor cases where the debtor already knows what information it has, this

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debtor is accumulating the information in real time.

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We are also in constant communication with the U.S. Department of Justice and the Southern

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District of New York Cyber Crimes Unit, which is open to criminal investigation with respect

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to these debtors.

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We are in communication constantly with the Securities and Exchange Commission, the Commodities

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Futures Trading Commission.

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We have received requests, I would say, some might say demands, from the U.S. Congress,

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both from the Senate and the House, to have Mr. Wray appear during the month of December.

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We are coordinating with regulators in multiple states around the United States, as well as

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foreign regulators around the world.

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I think, Your Honor, it's fair to say we typically would not quote things that happened

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on Twitter, but there was a quote that I think summarizes this quite well, which is, what

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00:19:18,040 --> 00:19:22,520
appears to be taking place is a serious investigation by serious adults.

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And we would respectfully agree with that characterization.

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There might be other things on Twitter you wouldn't agree with.

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That's for sure.

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The fourth core objective, Your Honor, is efficiency and coordination.

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As you will see, Your Honor, this was an enterprise that operated around the world, not only at

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the time of the petitions, but also during the brief history that it had leading up to

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the filing of the petitions.

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There has been a joint administration proceeding commenced in Australia.

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We have already made arrangements to meet with the joint administrators from Australia

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00:20:00,800 --> 00:20:04,720
who are coming to New York in the next couple of weeks, and it is our hope to be able to

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approach, Your Honor, with a consensual protocol with respect to the Australian proceedings.

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I think, Your Honor, is also aware that there has been a liquidation proceeding commenced

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00:20:14,960 --> 00:20:20,720
in the Bahamas with respect to a single entity, FTX Digital Markets Limited, and representatives

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of the joint provisional liquidators are here in the courtroom today.

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Your Honor may also be aware that the joint provisional liquidators had filed a petition

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00:20:31,240 --> 00:20:35,880
before the Southern District of New York Bankruptcy Court to recognize the proceedings in the

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Bahamas under Chapter 15 of the Bankruptcy Code.

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We had filed with Your Honor a motion to transfer that case from the Southern District of New

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York to the District of Delaware, and we are pleased to report that we have reached an

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agreement with the joint provisional liquidators to do just that, to bring the case from New

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York here to Delaware.

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It is our wish to engage in a constructive dialogue with the joint provisional liquidators.

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However, as we noted in our pleadings to transfer, we do have evidence that there have been movement

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00:21:05,760 --> 00:21:11,720
of assets out of the debtor's estates to the Bahamas, and there have been somewhat cryptic

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00:21:11,720 --> 00:21:16,760
comments that have been issued by the government of the Bahamas as to the actions they have

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taken with respect to certain assets.

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It's sufficient to say at this point, Your Honor, that the debtors reserve all of their

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00:21:22,680 --> 00:21:28,240
rights with respect to both any requests by the joint provisional liquidators to recognize

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00:21:28,240 --> 00:21:33,360
the proceedings here and with respect to any relief they may request.

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I would say, Your Honor, though, it is essential to keep in mind that as we are going forward

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in dealing with any of these foreign entities and with respect to any regulators or liquidators

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that might be appointed, that we are focusing on a single word, which is reciprocity.

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00:21:51,400 --> 00:21:58,280
It is essential that any of the dealings that we have are characterized by reciprocal relationships

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00:21:58,280 --> 00:22:02,840
both with respect to asset recovery and information sharing.

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Finally, Your Honor, maximization of value.

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We realize that there are many people that are looking to get their money back immediately,

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00:22:11,800 --> 00:22:16,600
and we sympathize with that, and we are working towards being able to do that.

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It is essential, though, Your Honor, that we first maximize the value of the assets

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00:22:20,320 --> 00:22:21,320
of the estates.

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00:22:21,320 --> 00:22:25,360
We have to identify those assets, we have to collect them, and we have to maximize them,

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whether that means selling assets, selling businesses, or reorganizing businesses.

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All of those things are on the table, and we believe, Your Honor, that we will be before

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00:22:35,200 --> 00:22:39,880
you quite quickly with an attempt to sell certain of the businesses that we understand,

280
00:22:39,880 --> 00:22:46,800
at least today, are self-sufficient, robust, and have generated interest from others in

281
00:22:46,800 --> 00:22:49,800
the marketplace.

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00:22:49,800 --> 00:23:00,200
So, Your Honor, just I put up on the screen a slide which duplicates this big board that

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00:23:00,200 --> 00:23:09,880
we have here in the courtroom, and just before I go further, this does capture from a summary

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00:23:09,880 --> 00:23:14,760
perspective the four silos that this business operated through.

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00:23:14,760 --> 00:23:20,640
The green silo, WRS, is the U.S. domestic currency exchange.

286
00:23:20,640 --> 00:23:28,160
You will see that that was ultimately controlled by Mr. Sam Bankenfried, and that the control

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00:23:28,160 --> 00:23:33,560
of the WRS silo was also then shared with two other founders of the business, Gary Wang

288
00:23:33,560 --> 00:23:36,120
and Nishad Singh.

289
00:23:36,120 --> 00:23:42,320
There were approximately 23 percent of the business that was also owned by third-party

290
00:23:42,320 --> 00:23:45,720
investors, and I will get to that in a moment.

291
00:23:45,720 --> 00:23:48,800
The Alameda silo, again, relates to Alameda Research.

292
00:23:48,800 --> 00:23:54,240
That is effectively the hedge fund within the FTX world.

293
00:23:54,240 --> 00:24:00,000
The Alameda silo was controlled by Mr. Sam Bankenfried and Gary Wang.

294
00:24:00,000 --> 00:24:04,520
The Venture silo is the most recent addition to the FTX world.

295
00:24:04,520 --> 00:24:09,960
That was controlled effectively 100 percent by Mr. Sam Bankenfried.

296
00:24:09,960 --> 00:24:12,400
The dot-com silo is the international exchange.

297
00:24:12,400 --> 00:24:18,320
As you can see, Your Honor, that was 75 percent controlled by Mr. Sam Bankenfried and 25 percent

298
00:24:18,320 --> 00:24:23,240
by third-party investors.

299
00:24:23,240 --> 00:24:31,600
Your Honor, I would like to go through a bit of the history with respect to FTX.

300
00:24:31,600 --> 00:24:36,840
This does start with Mr. Sam Bankenfried.

301
00:24:36,840 --> 00:24:42,760
Mr. Bankenfried went to MIT, and it was at MIT that he met Gary Wang.

302
00:24:42,760 --> 00:24:47,920
Mr. Bankenfried graduated in 2014, less than 10 years ago.

303
00:24:47,920 --> 00:24:52,680
Mr. Wang graduated in 2015.

304
00:24:52,680 --> 00:24:59,160
The third founder, Nishad Singh, graduates in June of 2017 from the University of California

305
00:24:59,160 --> 00:25:02,080
at Berkeley.

306
00:25:02,080 --> 00:25:09,920
It's in November of 2017 that Mr. Bankenfried and Gary Wang found the Alameda Research Business,

307
00:25:09,920 --> 00:25:19,080
which is effectively a crypto hedge fund that is headquartered in Berkeley, California.

308
00:25:19,080 --> 00:25:24,440
Fast forward two years, let alone less than two years, April of 2019, the dot-com silo

309
00:25:24,440 --> 00:25:30,400
or FTX.com is founded.

310
00:25:30,400 --> 00:25:32,360
It is founded in Hong Kong.

311
00:25:32,360 --> 00:25:36,480
It is founded in Hong Kong because of the regulatory regime that was present in Hong

312
00:25:36,480 --> 00:25:43,280
Kong, and it was founded with the business FTX Trading Limited, an Antiguan company,

313
00:25:43,280 --> 00:25:46,040
which is a U.S. debtor in these cases.

314
00:25:46,040 --> 00:25:50,320
In July of 2019, the FTT token was launched.

315
00:25:50,320 --> 00:25:57,920
The FTT token is effectively a credit that is able to be used on the FTX exchanges, and

316
00:25:57,920 --> 00:26:02,920
also because of that credit that's able to be used, it also carries with it or did carry

317
00:26:02,920 --> 00:26:08,920
with it value in the marketplace and traded separately.

318
00:26:08,920 --> 00:26:15,520
In July of 2020, the Clifton Bay Investments LLC was formed here in Delaware.

319
00:26:15,520 --> 00:26:25,120
In January of 2020, FTX U.S. is founded by Sam Bankenfried, by Gary Wang, and Nishad Singh.

320
00:26:25,120 --> 00:26:30,440
That's founded as well in Berkeley, California.

321
00:26:30,440 --> 00:26:36,680
In November of 2020, the Bahamas passes the DARE Act, a digital assets act, which is intended

322
00:26:36,680 --> 00:26:44,080
to encourage the relocation of crypto businesses to the Bahamas.

323
00:26:44,080 --> 00:26:51,000
In July of 2021, FTX Digital Markets, the Bahamian single debtor, is formed.

324
00:26:51,000 --> 00:26:58,440
And in September of 2021, Mr. Bankenfried announces that FTX Digital Markets is going

325
00:26:58,440 --> 00:27:03,320
to be registered with the Securities Commission of the Bahamas.

326
00:27:03,320 --> 00:27:10,480
In May of 2020, the U.S. silo, WRS, moves its headquarters from Berkeley, California,

327
00:27:10,480 --> 00:27:13,200
to Chicago, Illinois.

328
00:27:13,200 --> 00:27:20,040
Then in September of 2022, the U.S. silo announces that it's in the process of moving its headquarters

329
00:27:20,040 --> 00:27:27,440
from Chicago to Miami.

330
00:27:27,440 --> 00:27:32,560
There were a series of investments that were made in FTX.

331
00:27:32,560 --> 00:27:39,840
November of 2019, Binance, a cryptocurrency exchange that operates offshore, enters into

332
00:27:39,840 --> 00:27:43,200
a strategic partnership and invests in FTX.

333
00:27:43,200 --> 00:27:48,800
Binance will appear later in the script, so to speak.

334
00:27:48,800 --> 00:27:53,920
In July of 2021, Binance divests the entirety of its equity state.

335
00:27:53,920 --> 00:28:01,560
This is a substantial outbound payment that is made by FTX, and it also includes a substantial

336
00:28:01,560 --> 00:28:04,480
amount of the FTT token.

337
00:28:04,480 --> 00:28:08,720
An investigation will have to take place with respect to the Binance divestment and the

338
00:28:08,720 --> 00:28:14,200
amounts of money and tokens that were paid to Binance.

339
00:28:14,200 --> 00:28:19,840
Also at the same time in July of 2021, there was an investment of a billion dollars by

340
00:28:19,840 --> 00:28:27,080
a series of third-party investors, including Sequoia, Paradigm, and Toma Bravo.

341
00:28:27,080 --> 00:28:32,960
Just a few months later, in October of 2021, there was an additional investment, series

342
00:28:32,960 --> 00:28:36,320
B1 of another $420 million.

343
00:28:36,320 --> 00:28:41,440
This included at the time the Ontario Teachers Pension Fund, Tiger Global, and BlackRock.

344
00:28:41,440 --> 00:28:49,600
At the time, in October of 2021, this is again just FTX.com, the international exchange.

345
00:28:49,600 --> 00:28:55,240
The market valued the company at $25 billion.

346
00:28:55,240 --> 00:28:57,960
In January of 2022, two things happened.

347
00:28:57,960 --> 00:29:08,480
First there was an investment into the U.S. silo, a series A $400 million investment by

348
00:29:08,480 --> 00:29:12,720
investors including MultiCoin, Paradigm, and Sequoia.

349
00:29:12,720 --> 00:29:20,360
That valued the U.S. silo, the U.S. currency exchange, at $8 billion.

350
00:29:20,360 --> 00:29:26,520
At the same time in January of 2022, there was an investment of another $500 million

351
00:29:26,520 --> 00:29:32,320
in the international business, the Dotcom silo, with investors including Paradigm, Softbank,

352
00:29:32,320 --> 00:29:36,760
and Tomasic, the sovereign wealth funds of Singapore.

353
00:29:36,760 --> 00:29:39,680
That valued the business at the time at $32 billion.

354
00:29:39,680 --> 00:29:46,960
When you combine the U.S. silo and the international silo in January of 2022, just 10 months ago,

355
00:29:46,960 --> 00:29:58,720
the overall value of those two businesses was $40 billion from a market cap perspective.

356
00:29:58,720 --> 00:30:05,560
Your Honor, I want to talk a little bit about the employee base with respect to the debtors.

357
00:30:05,560 --> 00:30:07,960
This is as of October 31, 2022.

358
00:30:07,960 --> 00:30:14,480
We picked that date because it was a date that seemed to correspond with the last clear

359
00:30:14,480 --> 00:30:19,960
information date that was also a point in time when the business seemed to be stable.

360
00:30:19,960 --> 00:30:27,400
As of October 31, 2022, the debtors, the U.S. debtors, employed 330 employees around the

361
00:30:27,400 --> 00:30:28,400
world.

362
00:30:28,400 --> 00:30:30,400
This pie chart gives you a sense of where they were located.

363
00:30:30,400 --> 00:30:35,480
They were located in many different jurisdictions, but the largest number were located here in

364
00:30:35,480 --> 00:30:40,240
the United States.

365
00:30:40,240 --> 00:30:44,240
When you take into account the non-debtor employees, and that would include those who

366
00:30:44,240 --> 00:30:50,880
were employed by the Australian business as well as FTX digital markets in the Bahamas,

367
00:30:50,880 --> 00:30:54,160
the number increases by 190 to 520 employees.

368
00:30:54,160 --> 00:31:00,400
When you look at the worldwide number of employees as of October 31, 2022, including non-debtors,

369
00:31:00,400 --> 00:31:07,920
again, the United States has the largest number of employees, the Bahamas second, and well,

370
00:31:07,920 --> 00:31:15,000
other is second, and these are people who are working remotely, and the Bahamas is third.

371
00:31:15,000 --> 00:31:20,040
This chart, Your Honor, focuses on the distribution of customers on a global basis between both

372
00:31:20,040 --> 00:31:23,960
the USWRS and the dot-com international silos.

373
00:31:23,960 --> 00:31:29,200
This is as of the petition date based on the best information that we have.

374
00:31:29,200 --> 00:31:37,360
You will see, Your Honor, that the largest jurisdictions are the Cayman Islands and the

375
00:31:37,360 --> 00:31:45,240
Virgin Islands, with China, Great Britain, and Singapore following.

376
00:31:45,240 --> 00:31:52,040
With respect to the dot-com silo, and this is the international silo, 94% of the customers

377
00:31:52,040 --> 00:31:54,400
were customers of FTX Trading Limited.

378
00:31:54,400 --> 00:32:01,600
That is a US debtor, and approximately 6% were customers of FTX Digital Markets Limited,

379
00:32:01,600 --> 00:32:10,040
the Bahamian entity that is under jurisdiction of the Joint Provisional Liquidators.

380
00:32:10,040 --> 00:32:19,440
The reason for this disparity is that in May of 2022, when FTX Trading Limited was considering

381
00:32:19,440 --> 00:32:24,560
transferring its customers over to digital markets, it did not do so.

382
00:32:24,560 --> 00:32:29,800
So none of the customers that were pre-existing FTX Trading customers as of the middle of

383
00:32:29,800 --> 00:32:35,120
May of 2022 transitioned over to being official customers of FTX Digital Markets.

384
00:32:35,120 --> 00:32:41,080
They remained customers of FTX Trading Limited, a US debtor.

385
00:32:41,080 --> 00:32:47,880
Which again, Your Honor, brings us back to the recovery silos.

386
00:32:47,880 --> 00:32:52,080
The exercise here, Your Honor, is to identify the assets in each of these silos, and you

387
00:32:52,080 --> 00:32:56,160
can see that each of these silos has different types of assets.

388
00:32:56,160 --> 00:33:03,760
In the, if you look at the dot-com silo and the WRS silo, the assets are relatively similar.

389
00:33:03,760 --> 00:33:11,440
Cash and cash equivalents, cryptocurrency, subsidiaries, and that's about it.

390
00:33:11,440 --> 00:33:13,920
Cash, cash equivalents, cryptocurrency.

391
00:33:13,920 --> 00:33:17,680
They were operating as crypto-exchanges.

392
00:33:17,680 --> 00:33:20,360
The Alameda silo, Your Honor, is somewhat different.

393
00:33:20,360 --> 00:33:22,200
That is the hedge fund.

394
00:33:22,200 --> 00:33:28,000
Substantial funds appear to have been transferred from other silos to Alameda, and it appears

395
00:33:28,000 --> 00:33:32,560
that assets were used for a number of purposes.

396
00:33:32,560 --> 00:33:38,600
Substantial investments were made in ventures that were primarily focused on the crypto

397
00:33:38,600 --> 00:33:44,520
and technology sphere, but there were also substantial amounts of money that were spent

398
00:33:44,520 --> 00:33:47,240
on things that were not related to the business.

399
00:33:47,240 --> 00:33:56,000
For instance, one of the U.S. debtors is an entity that is, that purchased almost $300

400
00:33:56,000 --> 00:34:00,480
million worth of real estate in the Bahamas.

401
00:34:00,480 --> 00:34:06,160
Based on preliminary investigations, most of those real estate purchases related to

402
00:34:06,160 --> 00:34:14,400
homes and vacation properties that were used by senior executives of the company.

403
00:34:14,400 --> 00:34:19,480
Substantial funds were also spent in the venture silo to make venture investments in a number

404
00:34:19,480 --> 00:34:21,360
of different businesses.

405
00:34:21,360 --> 00:34:25,920
One of the things that the debtors are doing right now is to identify whether or not any

406
00:34:25,920 --> 00:34:36,840
of these venture investments are able to be sold and how much they're able to be sold

407
00:34:36,840 --> 00:34:38,800
for.

408
00:34:38,800 --> 00:34:43,720
So Your Honor, what we have is a worldwide organization.

409
00:34:43,720 --> 00:34:52,960
But an organization that was run effectively as a personal fiefdom of Sam Bank and Freed.

410
00:34:52,960 --> 00:34:55,520
The business only had a short life.

411
00:34:55,520 --> 00:34:59,800
It was founded in 2017 at Alameda.

412
00:34:59,800 --> 00:35:05,760
The currency exchanges were founded in 2019 and 2020, and here we are less than two years

413
00:35:05,760 --> 00:35:12,540
later in bankruptcy having collapsed.

414
00:35:12,540 --> 00:35:17,400
In effect, the company during that period of time wandered the world.

415
00:35:17,400 --> 00:35:23,600
It started in Berkeley, it went to Hong Kong, it went to Chicago, it went to Miami, it went

416
00:35:23,600 --> 00:35:24,600
to the Bahamas.

417
00:35:24,600 --> 00:35:30,240
But at all times it was effectively under the control of Mr. Bank and Freed, and effectively

418
00:35:30,240 --> 00:35:38,520
what we had was a lack of corporate controls at a level that none of us in the profession

419
00:35:38,520 --> 00:35:46,080
that have looked at it so far have ever seen.

420
00:35:46,080 --> 00:35:49,880
Your Honor, this is a slide that gives you a sense of the different investments that

421
00:35:49,880 --> 00:35:52,920
exist in the silos.

422
00:35:52,920 --> 00:35:59,680
So no need to focus too much on it, but what we have is a number of different investments

423
00:35:59,680 --> 00:36:07,400
that were made in the venture silo, a number that were made in the Alameda silo, a number

424
00:36:07,400 --> 00:36:14,840
that were made at the WRS silo, including Ledger X, which is a licensed derivatives

425
00:36:14,840 --> 00:36:27,280
brokerage business and still operating as a non-debtor, and others at the dot com silo.

426
00:36:27,280 --> 00:36:30,440
I'd like now, Your Honor, to take you through the collapse.

427
00:36:30,440 --> 00:36:31,440
It happened very quickly.

428
00:36:31,440 --> 00:36:36,440
It was quite shocking, but I think it's worthwhile to walk through the past couple of weeks.

429
00:36:36,440 --> 00:36:45,440
On November 2nd, documents leaked online showing that the FTT token position in the Alameda

430
00:36:45,440 --> 00:36:50,440
balance sheet was substantially larger than most anticipated.

431
00:36:50,440 --> 00:36:51,440
So what does that mean?

432
00:36:51,440 --> 00:36:56,800
It means the FTT token is a token that is created by FTS.

433
00:36:56,800 --> 00:37:02,360
It's an asset that it creates, and it had a substantially larger amount on its balance

434
00:37:02,360 --> 00:37:06,920
sheet than anyone had anticipated.

435
00:37:06,920 --> 00:37:13,560
A few days later, on November 6th, Caroline Ellison, who was then the CEO of Alameda Research

436
00:37:13,560 --> 00:37:20,480
and is no longer the CEO and no longer employed, tweets out information with respect to the

437
00:37:20,480 --> 00:37:25,440
balance sheet of Alameda.

438
00:37:25,440 --> 00:37:30,360
In this tweet, she indicates that there are less than 10, that there are greater than

439
00:37:30,360 --> 00:37:37,400
$10 billion of assets that are not reflected on the balance sheet.

440
00:37:37,400 --> 00:37:43,400
That same day, Your Honor, is when Changpeng Zhao, known in the business as CZ, who is

441
00:37:43,400 --> 00:37:47,920
the Chief Executive Officer of Binance, a member of Binance, has been an initial investor

442
00:37:47,920 --> 00:37:54,840
in FTX and also had been taken out entirely from its equity investment.

443
00:37:54,840 --> 00:37:59,880
He tweets that as part of Binance's exit from FTX equity last year, Binance received roughly

444
00:37:59,880 --> 00:38:04,640
$2.1 billion equivalent in cash and FTT.

445
00:38:04,640 --> 00:38:09,520
Due to recent revelations that have come to light, we've decided to liquidate any remaining

446
00:38:09,520 --> 00:38:12,560
FTT on our books.

447
00:38:12,560 --> 00:38:21,760
This in effect tells the market that CZ believes that FTT is worth substantially less than

448
00:38:21,760 --> 00:38:28,880
previously anticipated and the value of FTT plummets in the marketplace.

449
00:38:28,880 --> 00:38:36,160
Two days later, on November 8th, in the face of a run on the bank, FTX pauses all customer

450
00:38:36,160 --> 00:38:43,440
withdrawals and the FTT price continues to fall by approximately 80% just over a period

451
00:38:43,440 --> 00:38:45,680
of two days.

452
00:38:45,680 --> 00:38:55,640
On the afternoon of November 8th, CZ tweeted that FTX and Mr. Bankman-Free had asked for

453
00:38:55,640 --> 00:39:02,400
help, that there was a significant liquidity crunch at FTX generally and to protect users

454
00:39:02,400 --> 00:39:08,640
that a non-binding LOI had been signed intending to fully acquire FTX.com and help cover the

455
00:39:08,640 --> 00:39:10,800
liquidity crunch.

456
00:39:10,800 --> 00:39:17,000
He concludes by saying that we will be conducting a full DD, meaning due diligence, in the coming

457
00:39:17,000 --> 00:39:18,000
days.

458
00:39:18,000 --> 00:39:24,760
Just one day later, Binance tweets, as a result of corporate due diligence as well as the

459
00:39:24,760 --> 00:39:29,880
latest news reports regarding mishandled customer funds and alleged US agency investigations,

460
00:39:29,880 --> 00:39:39,480
we decided we will not pursue the potential acquisition of FTX.com.

461
00:39:39,480 --> 00:39:44,600
Mr. Bankman-Free is an active tweeter throughout this period and indicates online that he is

462
00:39:44,600 --> 00:39:54,240
requesting emergency funding from investors to cover up a shortfall of up to $8 billion.

463
00:39:54,240 --> 00:40:01,200
The next day, on the 10th, the Bahamas Securities Commission freezes assets of FTX digital markets

464
00:40:01,200 --> 00:40:05,840
and appoints a provisional liquidator.

465
00:40:05,840 --> 00:40:14,580
Also on November 10th, Alameda Research announces via tweet that it is winding down trading.

466
00:40:14,580 --> 00:40:19,520
During the course of the day of November 10th and into the early morning hours of November

467
00:40:19,520 --> 00:40:28,240
11th, near constant communication is going on with Mr. Bankman-Free.

468
00:40:28,240 --> 00:40:31,040
He is being interviewed by regulators in the Bahamas.

469
00:40:31,040 --> 00:40:35,280
He has hired lawyers in the United States at the Paul Weiss Law Firm.

470
00:40:35,280 --> 00:40:41,960
He's also engaged a professor at Stanford Law School, Mr. David Mills, and is consulting

471
00:40:41,960 --> 00:40:47,280
with his father, who's also a professor at Stanford Law School.

472
00:40:47,280 --> 00:40:51,080
Throughout the day, consideration is being given by Mr. Bankman-Free as to whether or

473
00:40:51,080 --> 00:40:53,960
not he should relinquish control over the entities.

474
00:40:53,960 --> 00:41:00,560
It is during that time that Sullivan and Cromwell and Alvarez and Marcell had been engaged on

475
00:41:00,560 --> 00:41:04,400
an emergency basis to consult on contingency planning.

476
00:41:04,400 --> 00:41:11,120
The first reach out to Mr. Ray and other potential candidates to come in as CRO were made.

477
00:41:11,120 --> 00:41:15,920
At 4.30 a.m. on November 11th, Mr. Bankman-Free resigned.

478
00:41:15,920 --> 00:41:22,960
He signed documentation authorizing Mr. Ray to take control of the businesses and having

479
00:41:22,960 --> 00:41:28,880
full power of any officer at any of the entities, including, among other things, to commence

480
00:41:28,880 --> 00:41:31,880
these Chapter 11 cases.

481
00:41:31,880 --> 00:41:36,080
Then starting on the morning, the traditional morning, rather than the 4.30 a.m. morning

482
00:41:36,080 --> 00:41:45,640
of November 11th, these Chapter 11 cases began to be filed after Mr. Ray had authorized it.

483
00:41:45,640 --> 00:41:54,480
This graph, Your Honor, gives you a sense of what the market was doing with respect

484
00:41:54,480 --> 00:41:55,480
to the FTT token.

485
00:41:55,480 --> 00:42:01,440
This gives you a sense of market cap over time, and it shows the complete collapse of

486
00:42:01,440 --> 00:42:08,440
the value of the FTT token at the time of the bankruptcy filing.

487
00:42:08,440 --> 00:42:15,160
At the peak, the market cap was $9.6 billion.

488
00:42:15,160 --> 00:42:22,600
Right now, the market cap is approximately $422 million.

489
00:42:22,600 --> 00:42:26,360
So Your Honor, that's where we are.

490
00:42:26,360 --> 00:42:34,120
We have witnessed probably one of the most abrupt and difficult collapses in the history

491
00:42:34,120 --> 00:42:39,760
of corporate America, the history of the corporate entities around the world.

492
00:42:39,760 --> 00:42:44,080
When Mr. Bankman-Free signed over control of these businesses, he signed over control

493
00:42:44,080 --> 00:42:49,360
in a way that allowed everyone for the first time to really see under the covers and recognize

494
00:42:49,360 --> 00:42:51,400
that the Emperor had no clothes.

495
00:42:51,400 --> 00:42:58,440
These businesses were not operated in a manner that was consistent with any sort of traditional

496
00:42:58,440 --> 00:43:00,320
best practices.

497
00:43:00,320 --> 00:43:07,240
Since that time, under Mr. Ray's direction, the advisors and the remaining loyal employees

498
00:43:07,240 --> 00:43:13,760
at FTX have worked day and night to identify the assets, to secure those assets wherever

499
00:43:13,760 --> 00:43:20,160
they are located, to start applying the controls that are necessary.

500
00:43:20,160 --> 00:43:23,000
And substantial progress has been made.

501
00:43:23,000 --> 00:43:27,240
But we stand here today, Your Honor, with an absence of information.

502
00:43:27,240 --> 00:43:31,440
We do not have the traditional amount of information that a debtor would traditionally have, but

503
00:43:31,440 --> 00:43:35,480
every day we generate more and more.

504
00:43:35,480 --> 00:43:41,160
So we do have, finally, before Your Honor, a series of traditional first day motions.

505
00:43:41,160 --> 00:43:44,760
We're ready to request that relief.

506
00:43:44,760 --> 00:43:49,160
And I will now hand over the dais to my colleagues.

507
00:43:49,160 --> 00:43:53,600
I would ask, Your Honor, though, before doing that, if we could move the declarations that

508
00:43:53,600 --> 00:43:58,120
have been submitted in support of the relief into evidence.

509
00:43:58,120 --> 00:44:04,600
There are two declarations by Mr. Ray and two declarations by Mr. Mosby of Alvarez and

510
00:44:04,600 --> 00:44:05,600
Marcell.

511
00:44:05,600 --> 00:44:06,600
Is there any objection?

512
00:44:06,600 --> 00:44:07,600
They're admitted without objection.

513
00:44:07,600 --> 00:44:12,600
Thank you very much, Your Honor.

514
00:44:12,600 --> 00:44:21,120
Before you sit down, Mr. Bromley, how many employees remain at the company?

515
00:44:21,120 --> 00:44:27,080
That's a good question.

516
00:44:27,080 --> 00:44:33,600
I can check, Your Honor.

517
00:44:33,600 --> 00:44:34,600
Okay.

518
00:44:34,600 --> 00:44:35,600
Roughly 260.

519
00:44:35,600 --> 00:44:36,600
Roughly 260, Your Honor.

520
00:44:36,600 --> 00:44:37,600
Okay.

521
00:44:37,600 --> 00:44:38,600
Thank you.

522
00:44:38,600 --> 00:44:39,600
Okay.

523
00:44:39,600 --> 00:44:40,600
Thank you very much, Your Honor.

524
00:44:40,600 --> 00:44:41,600
I'm going to hand it over to my partner, Brian Gluckstein.

525
00:44:41,600 --> 00:44:42,600
Thank you very much.

526
00:44:42,600 --> 00:44:43,600
Good morning, Your Honor.

527
00:44:43,600 --> 00:44:44,600
Brian Gluckstein.

528
00:44:44,600 --> 00:44:45,600
Good morning.

529
00:44:45,600 --> 00:44:46,600
I'm Sullivan Cromwell on behalf of the debtors.

530
00:44:46,600 --> 00:44:47,600
Your Honor, with the Court's indulgence, we will largely take today's agenda as it appears,

531
00:44:47,600 --> 00:44:56,600
today's matters as they appear on the agenda, with a couple of exceptions.

532
00:44:56,600 --> 00:45:03,600
But starting at the top, Your Honor, we will take the agenda as it appears, as it appears

533
00:45:03,600 --> 00:45:06,600
on the agenda, with a couple of exceptions.

534
00:45:06,600 --> 00:45:11,600
But starting at the top, Your Honor, the first motion that we have is agenda item two, which

535
00:45:11,600 --> 00:45:14,600
was filed at docket number three, and is our motion for joint administration.

536
00:45:14,600 --> 00:45:21,600
By this motion, the debtors requested 102 debtors that have been filed cases be joined

537
00:45:21,600 --> 00:45:25,600
by the administrator under the caption of the XTX Trading Limited to allow for efficient

538
00:45:25,600 --> 00:45:28,600
administration pursuant to rule 1015B.

539
00:45:28,600 --> 00:45:30,600
The debtors are affiliates here.

540
00:45:30,600 --> 00:45:36,600
102 entities fall into the four silos that Mr. Bromley just walked through, all of which

541
00:45:36,600 --> 00:45:41,600
have common ownership and prior to the filing of these cases were under common control of

542
00:45:41,600 --> 00:45:42,600
Mr. Bankman.

543
00:45:42,600 --> 00:45:46,600
The debtors believe joint administration of these cases, of course, will permit the efficient

544
00:45:46,600 --> 00:45:50,600
and convenient administration of these matters.

545
00:45:50,600 --> 00:45:55,600
Most, if not all, of the notices, applications, hearings in these cases will affect each and

546
00:45:55,600 --> 00:45:57,600
every one of the debtors.

547
00:45:57,600 --> 00:46:02,600
If the debtor is absent in joint administration, it would result in numerous duplicative filings.

548
00:46:02,600 --> 00:46:08,600
The motion, Your Honor, of course, only requests administrative and not substantive consolidation

549
00:46:08,600 --> 00:46:10,600
of the debtor's estates.

550
00:46:10,600 --> 00:46:15,600
Thus, joint administration will not adversely affect the debtor's creditors or other stakeholders,

551
00:46:15,600 --> 00:46:20,600
rather constituents stand only to benefit from joint administration through cost reductions

552
00:46:20,600 --> 00:46:22,600
and efficiency gains.

553
00:46:22,600 --> 00:46:26,600
Your Honor, the U.S. Trustee did provide, reviewed the motion, provided minor comments

554
00:46:26,600 --> 00:46:32,600
and reflected in the revised form of order that was filed overnight at Dock number 98

555
00:46:32,600 --> 00:46:38,600
at Exhibit A. And unless, Your Honor, has any questions, we request entry of the joint

556
00:46:38,600 --> 00:46:39,600
administration.

557
00:46:39,600 --> 00:46:40,600
I have no questions.

558
00:46:40,600 --> 00:46:42,600
Anyone else wish to be heard?

559
00:46:42,600 --> 00:46:46,600
I'm satisfied the request of relief is appropriate and I'll grant the relief.

560
00:46:46,600 --> 00:46:48,600
Thank you, Your Honor.

561
00:46:48,600 --> 00:46:56,600
The next item on the agenda, which is item number three, is the debtor's motion for

562
00:46:56,600 --> 00:47:01,600
entry of an order of modifying certain credit list requirements and authorizing the service

563
00:47:01,600 --> 00:47:03,600
of creditors by email.

564
00:47:03,600 --> 00:47:09,600
And I would suggest, Your Honor, if it pleases the Court, that we consider agenda item seven

565
00:47:09,600 --> 00:47:11,600
in connection with agenda item three.

566
00:47:11,600 --> 00:47:16,600
That is the debtor's motion authorizing consolidated creditor matrix and to redact certain

567
00:47:16,600 --> 00:47:21,600
customer information as that relief is quite delayed.

568
00:47:21,600 --> 00:47:22,600
That's fine.

569
00:47:22,600 --> 00:47:24,600
Thank you.

570
00:47:24,600 --> 00:47:29,600
With respect to agenda item three, Your Honor, in that motion, the debtors are requesting

571
00:47:29,600 --> 00:47:35,600
that we be permitted to file a consolidated list of top 50 creditors and to serve the

572
00:47:35,600 --> 00:47:38,600
debtors' customers by email.

573
00:47:38,600 --> 00:47:42,600
With respect to the creditor list, Your Honor, there have been 102 debtors filed in these

574
00:47:42,600 --> 00:47:47,600
cases, many of which are expected to have very few creditors and many others expected

575
00:47:47,600 --> 00:47:49,600
to have overlapping creditors.

576
00:47:49,600 --> 00:47:55,600
In addition, as detailed in Mr. Wray's declaration, the state of the debtor's historical books

577
00:47:55,600 --> 00:47:57,600
and records has been substandard.

578
00:47:57,600 --> 00:48:02,600
Thus, the exercise of compiling separate creditor lists for each debtor would be particularly

579
00:48:02,600 --> 00:48:05,600
time-consuming and resource-intensive.

580
00:48:05,600 --> 00:48:13,600
This is as the debtor's team works to protect assets and maximize value.

581
00:48:13,600 --> 00:48:19,600
We submit the consolidated top 50 creditors list is appropriate under the circumstances.

582
00:48:19,600 --> 00:48:24,600
Furthermore, Your Honor, as reflected in the revised form of order that was filed at Docket

583
00:48:24,600 --> 00:48:30,600
98, Exhibit B, the debtors have now agreed at the request of the United States' trustee

584
00:48:30,600 --> 00:48:36,600
to file a consolidated top 50 creditors list for each of the four main debtors and their

585
00:48:36,600 --> 00:48:46,600
subsidiaries, the so-called silos, for WRSAlamita Ventures and.com separately as applicable.

586
00:48:46,600 --> 00:48:51,600
So to the extent that each of those silos have individual creditors, we will file a consolidated

587
00:48:51,600 --> 00:48:54,600
list effectively for each site.

588
00:48:54,600 --> 00:48:59,600
And that's reflected in the amended order that was filed last night.

589
00:48:59,600 --> 00:49:00,600
I did say it.

590
00:49:00,600 --> 00:49:01,600
Thank you.

591
00:49:01,600 --> 00:49:07,600
As noted in Paragraph 75 of Mr. Ray's declaration, the debtors have struggled to gain access

592
00:49:07,600 --> 00:49:13,600
to their customer data due to ongoing security risks in accessing that information.

593
00:49:13,600 --> 00:49:18,600
The debtors have now succeeded in finding a way to safely view the necessary customer

594
00:49:18,600 --> 00:49:24,600
information to prepare and file the consolidated top 50 list that was filed in redacted form

595
00:49:24,600 --> 00:49:32,600
at Docket number 51, despite the debtors still not having full access to their customer data.

596
00:49:32,600 --> 00:49:38,600
We will now work to promptly file those four creditor lists for each of the main debtors,

597
00:49:38,600 --> 00:49:42,600
assuming the relief in this motion is granted today.

598
00:49:42,600 --> 00:49:47,600
Presenting the information on a consolidated basis will ensure the most relevant and reliable

599
00:49:47,600 --> 00:49:50,600
information can be promptly disclosed.

600
00:49:50,600 --> 00:49:58,600
With respect to the second part of Agenda 3, Your Honor, the email service request,

601
00:49:58,600 --> 00:50:04,600
the motion seeks to modify the service requirements under Bankruptcy Rule 2002-G to permit email

602
00:50:04,600 --> 00:50:10,600
service to customers unless they have designated a mailing address or come forward and request

603
00:50:10,600 --> 00:50:13,600
hard copy service.

604
00:50:13,600 --> 00:50:18,600
The Court has significant discretion to modify the general rule pursuant to Bankruptcy Rule

605
00:50:18,600 --> 00:50:24,600
2002-M and has permitted email service in similar situations, including in the cred

606
00:50:24,600 --> 00:50:28,600
case involving customers of a cryptocurrency platform.

607
00:50:28,600 --> 00:50:33,600
The number of customers and former customers to be noticed in these cases could certainly

608
00:50:33,600 --> 00:50:35,600
number in the millions.

609
00:50:35,600 --> 00:50:41,600
The debtors operate cryptocurrency platforms, and all of the debtors' customers interact

610
00:50:41,600 --> 00:50:45,600
online and through email in the ordinary course.

611
00:50:45,600 --> 00:50:53,600
In fact, with respect to the exchanged customers, both FTX US and FTX.com user agreements,

612
00:50:53,600 --> 00:51:00,600
expressly provided notice or other communications will be by email or through online applications.

613
00:51:00,600 --> 00:51:04,600
Following discussions with the United States Trustee, we have revised a form of order to

614
00:51:04,600 --> 00:51:09,600
make clear that email service is permitted for customers unless hard copy service by

615
00:51:09,600 --> 00:51:13,600
mail is requested.

616
00:51:13,600 --> 00:51:19,600
As we understand it, there is no continuing concerns with respect to the relief from the

617
00:51:19,600 --> 00:51:22,600
United States Trustee with respect to that motion.

618
00:51:22,600 --> 00:51:28,600
The other piece of the relief, Your Honor, is set forth in the motion docketed at agenda

619
00:51:28,600 --> 00:51:31,600
item number seven.

620
00:51:31,600 --> 00:51:38,600
Pursuant to that motion, the debtors are seeking authority to file a single consolidated creditor

621
00:51:38,600 --> 00:51:43,600
matrix in lieu of separate lists for each debtor to establish procedures for providing

622
00:51:43,600 --> 00:51:50,600
notice of commencement and only on an interim basis, Your Honor, at this time, redact confidential

623
00:51:50,600 --> 00:51:57,600
customer creditor information from public viewing of court filings.

624
00:51:57,600 --> 00:52:02,600
Your Honor, FTX's customers were the lifeblood of the company.

625
00:52:02,600 --> 00:52:09,600
The debtors are very cognizant of customers' concerns, particularly with respect to privacy,

626
00:52:09,600 --> 00:52:15,600
and intend to try to protect customers and their interests as these cases progress.

627
00:52:15,600 --> 00:52:21,600
The revised form of order, filed at docket number 98 at exhibit E, incorporates a number

628
00:52:21,600 --> 00:52:24,600
of comments from the United States Trustee.

629
00:52:24,600 --> 00:52:31,600
As we understand it, the only open issue is whether to redact on an interim basis the

630
00:52:31,600 --> 00:52:36,600
confidential customer information in the scope that is requested.

631
00:52:36,600 --> 00:52:42,600
And Your Honor, the requested redactions include that we would be permitted to redact, again,

632
00:52:42,600 --> 00:52:48,600
only on an interim basis at this time, confidential names and addresses of customers from all

633
00:52:48,600 --> 00:52:56,600
court filings, addresses and email addresses of individual non-customer creditors and shareholders,

634
00:52:56,600 --> 00:53:01,600
and the names and addresses of all creditors who are citizens of the United Kingdom or

635
00:53:01,600 --> 00:53:08,600
a European Union member country subject to local data privacy protections.

636
00:53:08,600 --> 00:53:16,600
It's my understanding that the United States Trustee has agreed, for purposes of this motion

637
00:53:16,600 --> 00:53:22,600
today, that the redaction of information for customers residing in the European Union,

638
00:53:22,600 --> 00:53:29,600
covered by the GDPR, is appropriate and is willing to permit the redaction of individual

639
00:53:29,600 --> 00:53:35,600
customer addresses, but not names.

640
00:53:35,600 --> 00:53:41,600
We submit, Your Honor, that there is no basis at this point in the case to treat some customers

641
00:53:41,600 --> 00:53:48,600
worse and to immediately reveal their customers' sensitive personal information.

642
00:53:48,600 --> 00:53:55,600
These cases present very unusual circumstances, as Mr. Bromley just walked through this morning.

643
00:53:55,600 --> 00:54:02,600
And thus, the complete redaction relief on an interim basis, we submit, is appropriate here.

644
00:54:02,600 --> 00:54:08,600
The debtor's customer records include the names and email addresses of millions of individuals

645
00:54:08,600 --> 00:54:11,600
and entities.

646
00:54:11,600 --> 00:54:16,600
There are two independent reasons, Your Honor, why redaction, at least on an interim basis,

647
00:54:16,600 --> 00:54:21,600
is in the best interest of the estates and their stakeholders.

648
00:54:21,600 --> 00:54:27,600
First, Your Honor, the debtor's customer list, numbering in the millions, is an asset of the estate

649
00:54:27,600 --> 00:54:35,600
that is important to any potential reorganization or sale to maximize value for all stakeholders.

650
00:54:35,600 --> 00:54:38,600
These cases are in their infancy.

651
00:54:38,600 --> 00:54:44,600
Mr. Wray states in his declaration in paragraph 6, as Mr. Bromley walked through this morning,

652
00:54:44,600 --> 00:54:51,600
that one of the core objectives of these cases is asset protection and recovery.

653
00:54:51,600 --> 00:54:58,600
Public release of the debtor's customer list and identifying information would give the debtor's

654
00:54:58,600 --> 00:55:05,600
competitors a free opportunity to poach the debtor's customers and would interfere with the ability

655
00:55:05,600 --> 00:55:10,600
to sell assets and maximize value as these cases progress.

656
00:55:10,600 --> 00:55:15,600
There is no counter reason to eliminate a potentially significant source of value

657
00:55:15,600 --> 00:55:21,600
in the very first hearing before Your Honor in the very first week of these cases.

658
00:55:21,600 --> 00:55:28,600
Mr. Mosley states in his declaration, paragraph 18, that the debtor's customer list and related data

659
00:55:28,600 --> 00:55:31,600
is a valuable asset.

660
00:55:31,600 --> 00:55:36,600
How valuable, Your Honor, is to be determined that the debtors and all of their stakeholders

661
00:55:36,600 --> 00:55:41,600
have an interest in preserving that asset today.

662
00:55:41,600 --> 00:55:46,600
The circumstances are similar to those considered by the court in cred,

663
00:55:46,600 --> 00:55:51,600
but we would submit respectfully on a much larger scale.

664
00:55:51,600 --> 00:55:57,600
We submit that under the circumstances, section 107b1 provides a basis consistent with the court's prior

665
00:55:57,600 --> 00:56:05,600
decision in the cred case to permit the redaction of the customer's personal information on an interim basis.

666
00:56:05,600 --> 00:56:10,600
And, Your Honor, there are significant privacy concerns raised by the disclosure of this customer

667
00:56:10,600 --> 00:56:14,600
and protected creditor information.

668
00:56:14,600 --> 00:56:17,600
The debtor's customer base is global.

669
00:56:17,600 --> 00:56:23,600
Those customers who reside in the United Kingdom and the European Union member countries have additional

670
00:56:23,600 --> 00:56:26,600
data privacy protections under local law.

671
00:56:26,600 --> 00:56:32,600
But privacy concerns are not limited to the customers in those jurisdictions.

672
00:56:32,600 --> 00:56:37,600
Customers in the cryptocurrency space are not the typical creditors.

673
00:56:37,600 --> 00:56:43,600
Many customers invest in cryptocurrency in part to not be publicly identified.

674
00:56:43,600 --> 00:56:49,600
This is a highly sensitive issue for the customer community, and we've heard from numerous customers

675
00:56:49,600 --> 00:56:53,600
in that community, both individuals and entities, already in these cases,

676
00:56:53,600 --> 00:56:57,600
requesting that personal information be protected.

677
00:56:57,600 --> 00:57:05,600
Many of the debtor's creditors are high net worth individuals and entities with significant positions in digital assets.

678
00:57:05,600 --> 00:57:15,600
As explained in Mr. Ray's declaration, the debtors have been the targets of ongoing hacking and unauthorized access to their systems.

679
00:57:15,600 --> 00:57:21,600
Identifying the personal contact information of the debtor's customers, particularly at this time,

680
00:57:21,600 --> 00:57:27,600
while emotions are running hot, could put them in the crosshairs of bad actors.

681
00:57:27,600 --> 00:57:34,600
In addition, the immediate identification of the debtor's customers with exposure to FDX could have the effect

682
00:57:34,600 --> 00:57:38,600
of further destabilizing the broader crypto markets.

683
00:57:38,600 --> 00:57:46,600
Section 107C of the Bankruptcy Code provides that the court may, for cause, protect personal information from disclosure,

684
00:57:46,600 --> 00:57:50,600
which would create a risk of injury to the individual's property.

685
00:57:50,600 --> 00:58:00,600
Courts in this district have taken a strong stance with respect to the protection of customer and personally identifiable information.

686
00:58:00,600 --> 00:58:07,600
In contrast, Your Honor, there is minimal benefit, in our opinion, to requiring the immediate mass disclosure

687
00:58:07,600 --> 00:58:14,600
of the debtor's customer and individual creditor personal information.

688
00:58:14,600 --> 00:58:21,600
The Court and the U.S. Trustee have been and will continue to be provided the unredacted information,

689
00:58:21,600 --> 00:58:26,600
as will any statutory committee appointed in these cases.

690
00:58:26,600 --> 00:58:33,600
Thus, we submit there is no prejudice to any party in interest by granting this relief on an interim basis.

691
00:58:33,600 --> 00:58:45,600
Creditors will be noticed through our claims agent and receive all notices that they are entitled to under the Bankruptcy Code and rules.

692
00:58:45,600 --> 00:58:51,600
Finally, Your Honor, on this issue, the debtors have included language in the proposed order before Your Honor today,

693
00:58:51,600 --> 00:59:01,600
consistent with the language the Court suggested in the Craig case, reserving rights and providing that upon the request of any party in interest.

694
00:59:01,600 --> 00:59:08,600
The Court may revisit this issue upon a showing of good cause and release some or all of the redacted information.

695
00:59:08,600 --> 00:59:18,600
Under the circumstances, Your Honor, we respectfully request that the entirety of the relief requested in this motion be granted in its entirety.

696
00:59:18,600 --> 00:59:32,600
Thank you. We hear from the U.S. Trustee.

697
00:59:32,600 --> 00:59:38,600
Good morning, Your Honor. May it please the Court. Ben Hackman for the U.S. Trustee.

698
00:59:38,600 --> 00:59:45,600
We object to two aspects of the creditor matrix motion.

699
00:59:45,600 --> 01:00:02,600
First, in Order Paragraph 4, we oppose the redaction of the names and addresses of creditors and customers who are not individuals.

700
01:00:02,600 --> 01:00:09,600
We see no basis to redact that information for legal or business entities.

701
01:00:09,600 --> 01:00:19,600
There should be transparency about who those entities are, including on the top 50 lists that are to be filed.

702
01:00:19,600 --> 01:00:31,600
Second, we object to Order Paragraph 7, in particular, Order Paragraph Subpart C,

703
01:00:31,600 --> 01:00:42,600
which would authorize the claim's noticing agent to withhold publication of proofs of claim filed by the debtor's customers.

704
01:00:42,600 --> 01:00:46,600
We're not entirely sure what that means.

705
01:00:46,600 --> 01:00:55,600
We submit respectfully that proofs of claim should not be withheld from being published on the claims register wholesale.

706
01:00:55,600 --> 01:01:03,600
If Your Honor authorizes certain types of other information to be redacted in other papers that are filed to the Court,

707
01:01:03,600 --> 01:01:15,600
such as individual customer addresses, we take no position on that same information being redacted in filed proofs of claim.

708
01:01:15,600 --> 01:01:20,600
But there should not be redactions beyond that in proofs of claim.

709
01:01:20,600 --> 01:01:31,600
A claims register paints a picture, and in a case with over 100,000, potentially over a million creditors, that picture may be substantial.

710
01:01:31,600 --> 01:01:42,600
Proofs of claim allow creditors to tell their story, and we submit that those proofs of claim should not be withheld or sealed wholesale.

711
01:01:42,600 --> 01:01:51,600
In the Altera Healthcare decision, Judge Walrath wrote that there is a strong presumption in favor of public access to bankruptcy proceedings and records.

712
01:01:51,600 --> 01:02:00,600
During a Chapter 11 reorganization, a debtor's affairs are an open book, and the debtor operates in a fishbowl.

713
01:02:00,600 --> 01:02:07,600
The Supreme Court has written that it is clear that the courts of this country recognize a general right to inspect and copy public records and documents,

714
01:02:07,600 --> 01:02:15,600
including judicial records and documents, in the Nixon v. Warner Communications case.

715
01:02:15,600 --> 01:02:24,600
The Third Circuit has likewise recognized that there is a strong presumption, I apologize, the District of Delaware has recognized there is a strong presumption,

716
01:02:24,600 --> 01:02:32,600
in favor of public access to judicial records and papers, which has statutory, common law, and First Amendment underpinnings.

717
01:02:32,600 --> 01:02:38,600
In the Continental Airlines decision, 150 BR at 334, Pinsite 341.

718
01:03:02,600 --> 01:03:12,600
I believe Mr. Bromley described this case as one of the most abrupt collapses in the history of corporate America.

719
01:03:12,600 --> 01:03:26,600
And in counsel's presentation earlier, they indicated that one of Mr. Ray's five core objectives in this case is transparency and investigation.

720
01:03:26,600 --> 01:03:36,600
We submit that over-broad redactions do not serve transparency in these cases.

721
01:03:36,600 --> 01:03:46,600
We're also concerned that presently the Top 50 list contains no information identifying who the creditors are.

722
01:03:46,600 --> 01:03:54,600
And if our office appoints a creditors committee, we'll need to identify who we're appointing to that committee or those committees.

723
01:03:54,600 --> 01:03:59,600
And we need to be able to do that with transparency.

724
01:03:59,600 --> 01:04:12,600
Any redaction or ceiling relief should not prevent us from filing those notices of appointment.

725
01:04:12,600 --> 01:04:20,600
I would also point out, Your Honor, that we do object to the names of individuals being redacted.

726
01:04:20,600 --> 01:04:24,600
We take no position about the individuals' addresses being redacted.

727
01:04:24,600 --> 01:04:41,600
But as to their names, we respectfully submit they should not be redacted unless they are citizens of members of the European Union and are covered by the GDPR.

728
01:04:41,600 --> 01:04:44,600
Unless Your Honor has any questions, that's all I have.

729
01:04:44,600 --> 01:04:46,600
Thank you, Mr. Schaffer.

730
01:04:46,600 --> 01:04:52,600
You addressed the issue about the fruits of the claim.

731
01:04:52,600 --> 01:04:55,600
I can, Your Honor.

732
01:04:55,600 --> 01:05:14,600
We have requested in the motion at this point that the idea of all of this is to ensure that credit customers are not having their information involuntarily disclosed.

733
01:05:14,600 --> 01:05:17,600
No bar date has been set yet in this case.

734
01:05:17,600 --> 01:05:20,600
It will be at some point.

735
01:05:20,600 --> 01:05:25,600
Creditors will need to file claims in order to preserve those claims.

736
01:05:25,600 --> 01:05:38,600
So with the disclosure issue at this point, there are some folks, I think there have been a couple of people, who have voluntarily come forward and have started to put claims on the docket.

737
01:05:38,600 --> 01:05:41,600
That is their prerogative.

738
01:05:41,600 --> 01:05:44,600
But that's self-identification.

739
01:05:44,600 --> 01:05:55,600
But what we're trying to protect, again, Your Honor, just for this interim period, is to ensure that nobody's personal information is being involuntarily disclosed.

740
01:05:55,600 --> 01:06:07,600
And to, Your Honor, that the debtor's customer list is not being compromised in a significant way before we're able to marshal that asset.

741
01:06:07,600 --> 01:06:10,600
Both of those issues are in play.

742
01:06:10,600 --> 01:06:19,600
I think the proof of claim issue can be avoided for the interim period because we haven't set a bar date.

743
01:06:19,600 --> 01:06:24,600
And so I think at this point we could table that portion of the relief.

744
01:06:24,600 --> 01:06:31,600
If somebody has voluntarily filed a proof of claim on the docket, we haven't yet sought to take any action with respect to that claim.

745
01:06:31,600 --> 01:06:34,600
It's very few.

746
01:06:34,600 --> 01:06:43,600
The issue that's raised by counsel with respect to the creditors committee, I think, is a good example of how we see this playing out, Your Honor.

747
01:06:43,600 --> 01:06:49,600
We don't believe the top 50 lists should be unredacted, including names.

748
01:06:49,600 --> 01:07:03,600
The names of customers, once you have customer names, it's not very difficult to solicit those customers, find information about them, and know that they are customers of FTX.

749
01:07:03,600 --> 01:07:14,600
The United States trustee's office, of course, is presumably going to form a creditors committee, and those members of that committee will have come forward voluntarily to serve on that committee,

750
01:07:14,600 --> 01:07:26,600
and presumably are comfortable with the requirements of service that are necessary, including the disclosure of their names and their participation in this process.

751
01:07:26,600 --> 01:07:33,600
That will be a handful of customers who agree to serve on a creditors committee.

752
01:07:33,600 --> 01:07:45,600
That's very different, and again, that's voluntary, very different, than the millions of customers that are sitting in a database that need to be noticed in this case and will appear on the debtors-creditor matrix.

753
01:07:45,600 --> 01:07:48,600
That is a very different situation.

754
01:07:48,600 --> 01:07:58,600
Again, Your Honor, there's no need, certainly at this time, in the first month of the case, for the world to have all of those names and addresses.

755
01:07:58,600 --> 01:08:03,600
Understanding, Your Honor, for most of our customers, we don't have physical addresses.

756
01:08:03,600 --> 01:08:12,600
These are folks who conduct business with the debtors entirely online through applications.

757
01:08:12,600 --> 01:08:24,600
For many of these customers, we have email addresses or other contact information, identifiable information, but not necessarily brick-and-mortar mailing addresses.

758
01:08:24,600 --> 01:08:35,600
I think many people would view email addresses and the ability to contact people as some of the most valuable customer information.

759
01:08:35,600 --> 01:08:44,600
I don't think there's absolutely a balance. We are very cognizant of the need for transparency in these cases.

760
01:08:44,600 --> 01:08:51,600
The debtors intend to provide that transparency to its stakeholders, including the customer base.

761
01:08:51,600 --> 01:09:03,600
What's being asked here today, Your Honor, is simply to ensure, for now on an interim basis, that the customer information, its entirety, individuals and entities,

762
01:09:03,600 --> 01:09:09,600
many times there are individuals behind those entities in this space, those are all valuable customers,

763
01:09:09,600 --> 01:09:16,600
and the identifiable information of customers, including email addresses, be redacted from all filings.

764
01:09:16,600 --> 01:09:20,600
I think for purposes of the interim order, we could remove the proof of claimage.

765
01:09:20,600 --> 01:09:34,600
Anyone else want to shoot her? I've got some other folks standing up. Come on forward.

766
01:09:34,600 --> 01:09:43,600
Good afternoon, Your Honor. This is Matthew Kelsey of Alstenberg. We represent an ad hoc group of account holders.

767
01:09:43,600 --> 01:09:56,600
The relief requested in the motion, which we support, you know, by implication, affects our group in the sense of 2019 requirements, Your Honor.

768
01:09:56,600 --> 01:10:04,600
I think both confidentiality and privacy are implicated here. Our group was formed yesterday. We have not filed a 2019 yet,

769
01:10:04,600 --> 01:10:12,600
but we are hoping for some guidance from the court in connection with your resolution as to the ability to redact names and addresses,

770
01:10:12,600 --> 01:10:20,600
particularly of individual holders, especially given what we've heard today, the risk of cyber attack,

771
01:10:20,600 --> 01:10:27,600
the risk of cyber attack and the lack of controls, at least, that was handed to the current management now.

772
01:10:27,600 --> 01:10:32,600
I have no doubt that they're working hard to put those controls into place, but at least on an interim basis,

773
01:10:32,600 --> 01:10:37,600
redacting this sort of information on 2019 seems appropriate.

774
01:10:37,600 --> 01:10:48,600
All right. Thank you.

775
01:10:48,600 --> 01:10:55,600
Good afternoon, Your Honor. Mike Reschenthaler from Whiteford, Taylor and Preston. I'm here with my colleague, Rich Riley.

776
01:10:55,600 --> 01:11:08,600
We, too, are here on behalf of a significant number of customers, some of which, based on what's been disclosed so far,

777
01:11:08,600 --> 01:11:19,600
will likely be on that consolidated 50 list of unsecured creditors.

778
01:11:19,600 --> 01:11:28,600
We certainly join in the debtors' motion. This is a case about cryptocurrency.

779
01:11:28,600 --> 01:11:40,600
So obviously, confidentiality is candidly part of the benefit of the bargain for those that participate in this space.

780
01:11:40,600 --> 01:11:53,600
We think the disclosures being sought by the Office of the United States Trustee could actually disincentivize participation in the case.

781
01:11:53,600 --> 01:12:05,600
By extension, it impairs the ability of creditors to recover from this case, which, of course, would be contrary to the best interest of the creditors.

782
01:12:05,600 --> 01:12:11,600
So we join in the debtors' motion. Thank you.

783
01:12:11,600 --> 01:12:32,600
Anyone else? All right. Well, there certainly is a hole and tug here between the right to privacy and the right to everybody involved in this case to have transparency.

784
01:12:32,600 --> 01:12:40,600
As I did in the CredInc case, let's deal first with the modified creditors list of 50.

785
01:12:40,600 --> 01:12:54,600
I think the only issue there from the U.S. Trustee is the disclosure of the names. Is that right, Mr. Hackman?

786
01:12:54,600 --> 01:13:04,600
We would submit, Your Honor, that for institutional entities, names and addresses should not be redacted for any individuals.

787
01:13:04,600 --> 01:13:10,600
Only their addresses should be redacted. All right. Here's what I'm going to do on that.

788
01:13:10,600 --> 01:13:16,600
I'm going to, on an interim basis, I'll enter the order as the debtors have requested.

789
01:13:16,600 --> 01:13:25,600
But it does raise a factual issue, and there may be a factual basis for why those claims need or why those names need to be disclosed.

790
01:13:25,600 --> 01:13:43,600
So we'll reserve that for the final hearing. And if there is still an objection by the U.S. Trustee at that time, once they've seen the list and know who these parties are, if they think there should be disclosure of those entities, we'll revisit it at that time.

791
01:13:43,600 --> 01:13:54,600
And on an interim basis, I'll enter the order allowing the redaction of the names and addresses of the top 50 list.

792
01:13:54,600 --> 01:14:01,600
The same goes for the consolidated creditor list.

793
01:14:01,600 --> 01:14:09,600
Again, I need to make sure I'm protecting the interests of these individuals. This is a space where it's all done over the Internet.

794
01:14:09,600 --> 01:14:19,600
Everyone on this road knows the Internet is wrought with potential dangers. Hacking happens all the time. People's individual accounts get hacked.

795
01:14:19,600 --> 01:14:32,600
And I think it's important that we protect those individuals who are seeking, want to participate in this case, want to file their proof of claim, but also want to protect their assets.

796
01:14:32,600 --> 01:14:41,600
So again, on an interim basis, I will grant the relief requested by the debtor, excluding the proof of claim. We'll take that out of the formal order.

797
01:14:41,600 --> 01:14:53,600
We'll deal with that once we set a bar date, because as Debtors' Council pointed out, if someone wants to voluntarily disclose who they are, that's perfectly okay. They can do that.

798
01:14:53,600 --> 01:15:07,600
Certainly, Mr. Hackman, when you come to the time of appointing a statutory committee, they have to be disclosed.

799
01:15:07,600 --> 01:15:13,600
And I would assume that anybody who's coming forward who wants to serve on the committee is voluntarily agreeing to disclose their names.

800
01:15:13,600 --> 01:15:21,600
I would not, under any circumstances, allow a committee member to withhold their information. They have to disclose.

801
01:15:21,600 --> 01:15:29,600
But again, on an interim basis, we can revisit this on the final, again, if there's some evidentiary basis for why you think.

802
01:15:29,600 --> 01:15:36,600
I should not allow this relief, Mr. Hackman. You can come back and we'll deal with it at the final hearing.

803
01:15:36,600 --> 01:15:39,600
Thank you, Your Honor.

804
01:15:39,600 --> 01:15:51,600
So with that, based on my comments, I will approve both the motion regarding the modification of the creditors' list and the consolidated creditors' list of items 3 and 7.

805
01:15:51,600 --> 01:15:54,600
Thank you very much, Your Honor.

806
01:15:54,600 --> 01:16:08,600
Continuing to move to the agenda, the next item on the agenda is agenda item 4, which was the debtor's emergency motion to transfer the Chapter 15 case of FTX digital markets to this Court.

807
01:16:08,600 --> 01:16:30,600
As filed on the docket yesterday, and as Mr. Bromley touched on in his opening remarks, there is, we have reached an agreed form of order with counsel for the joint provision of liquidators to, in fact, permit and have the Chapter 15 case transferred to this Court with the rights of all parties reserved.

808
01:16:30,600 --> 01:16:34,600
So absent any questions from the Court, we would ask that to be entered.

809
01:16:34,600 --> 01:16:37,600
I have no questions. The liquidators wish to be heard on that.

810
01:16:37,600 --> 01:16:41,600
Yes, Your Honor. Chris Shore from White and Case on behalf of the three JPLs.

811
01:16:41,600 --> 01:16:54,600
We have nothing to address. I will note, because I am going to stand on one motion in a bit, that we're going to need a recognition hearing setting, but we can discuss that in the context of the setting the second day.

812
01:16:54,600 --> 01:16:55,600
We'll get to that.

813
01:16:55,600 --> 01:16:56,600
Okay.

814
01:16:56,600 --> 01:16:58,600
All right. I will answer that one.

815
01:16:58,600 --> 01:17:00,600
Thank you.

816
01:17:00,600 --> 01:17:01,600
Has it been uploaded, by the way?

817
01:17:01,600 --> 01:17:02,600
The final one?

818
01:17:02,600 --> 01:17:04,600
On that one?

819
01:17:04,600 --> 01:17:05,600
Yes, Your Honor, it has.

820
01:17:05,600 --> 01:17:09,600
Okay, we can go ahead and enter that one right away.

821
01:17:09,600 --> 01:17:12,600
Thank you, Your Honor.

822
01:17:12,600 --> 01:17:29,600
That brings us to the next item on the agenda, which is agenda item five, is the motion of the debtors for entry of an order file, motion file document 25, with respect to the automatic stay.

823
01:17:29,600 --> 01:17:39,600
By this motion, Your Honor, the debtors are requesting entry of an order, enforcing and restating the worldwide stay.

824
01:17:39,600 --> 01:17:55,600
As a result of the debtors' international business operations, Your Honor, the debtors have many foreign creditors, contract counterparties, and other parties in interest in countries who are not and may not be as well versed in the protections and restrictions of the bankruptcy code.

825
01:17:55,600 --> 01:18:04,600
These creditors and parties in interest may be unfamiliar with the operation of the stay and the other provisions, operative provisions of the bankruptcy code.

826
01:18:04,600 --> 01:18:16,600
Upon commencement of the cases, non-U.S. parties may in fact try to take action to violate the protections afforded to debtors under the code, and we have started to see some notices in that regard.

827
01:18:16,600 --> 01:18:28,600
We are responding to those, but accordingly, the debtors submit that such circumstances warrant an order apprising all parties in such protections as set forth in the code.

828
01:18:28,600 --> 01:18:51,600
Importantly, Your Honor, the debtors are not seeking to expand the protections provided by the code, rather only seeking an order to be able to notify parties in a stand-alone order of this court who are unfamiliar with the code of the scope and effect of Section 362 and related provisions, including 365-E1 and 541.

829
01:18:51,600 --> 01:19:04,600
Your Honor, the debtors did receive some comments from the United States Trustee and other parties on the proposed form of order that we incorporated in the form filed at Dock at number 98, Exhibit C.

830
01:19:04,600 --> 01:19:11,600
And we would ask that under the circumstances, Your Honor, enter that order unless the court has any questions.

831
01:19:11,600 --> 01:19:15,600
No questions. Mr. Schor.

832
01:19:15,600 --> 01:19:34,600
Thank you again, Your Honor. Chris Schor from Whiten Case on behalf of the three JPLs, Brian Sims, Peter Graves, and Kevin Cambridge, who have all been appointed as joint provisional liquidators of FTX Digital Markets, a Bahamian company, and a Bahamian wind-down proceeding.

833
01:19:34,600 --> 01:19:42,600
I'll note that some of what Mr. Bromley said when he put the charts up is not in the evidentiary record.

834
01:19:42,600 --> 01:19:43,600
I understand.

835
01:19:43,600 --> 01:19:54,600
Yeah, and we have some disagreements which will work out over time as to how we fit in and what portion of customers sat where within the organization.

836
01:19:54,600 --> 01:20:04,600
But for now, as noted, we had started a Chapter 15 in New York. We've consented to have it coming down here.

837
01:20:04,600 --> 01:20:14,600
And we'll need to get a scheduling date, which we can do at the end of the hearing. For now, the 15 isn't being called. It's just the 11. We're only appearing.

838
01:20:14,600 --> 01:20:27,600
We're not seeking any provisional relief. We're just participating to make sure that what's happening today isn't impinging upon any relief that the JPLs might need pending recognition.

839
01:20:27,600 --> 01:20:39,600
We've been working with the debtors to begin the process of coordinating our efforts on information flow, asset containment, and ultimately judicial coordination.

840
01:20:39,600 --> 01:20:50,600
And we've worked out everything except for the automatic stay. We're not objecting to the relief. We're actually asking for a comfort clarification on a comfort order.

841
01:20:50,600 --> 01:21:04,600
There is a tension that's going on right now between the automatic stay. The automatic stay is what the automatic stay is, but also Mr. Ray's guiding principles that went up.

842
01:21:04,600 --> 01:21:23,600
There is a lot that needs to get done, even between now and a recognition hearing and now and second day hearings with respect to information gathering, asset containment, developing information, sharing information, coordinating information.

843
01:21:23,600 --> 01:21:37,600
You heard Mr. Bromley say information is property. It can't be that the JPL seeking to access information of their debtor is a stay violation in a Chapter 11 case.

844
01:21:37,600 --> 01:21:47,600
We're going to try to work this out. We were able to work out everything else. We weren't able to put language in the order with respect to the automatic stay.

845
01:21:47,600 --> 01:22:02,600
We're going to continue to work with them. My caveat on provision relief is we can't get to a place where we can develop an information flow between the dot com silo and the JPLs.

846
01:22:02,600 --> 01:22:16,600
We may have to come back and get provision relief because from the perspective of the JPLs, order number one in this case is to make sure that all assets are protected and all information is protected.

847
01:22:16,600 --> 01:22:32,600
We can figure out later what that information means or where those assets get mapped, but we can't have assets being dissipated nor can we have information sitting there unaccessed because we can't get out of our own ways to come up with a protocol to share information.

848
01:22:32,600 --> 01:22:50,600
So again, we don't object to the order being entered, but we're going to have to work out some arrangement between ourselves. Otherwise, we may have to come back and address it with your honor.

849
01:22:50,600 --> 01:22:56,600
Thank you, honor. I don't think there's we don't have I don't have any agreement with anything. Mr. Schor said disagree.

850
01:22:56,600 --> 01:23:04,600
You said I don't have any agreement with it. I'm sorry, I disagree. We might have disagreements later. You know, sometimes we have disagreements, but I like working with Mr. Schor.

851
01:23:04,600 --> 01:23:14,600
I think that the issue here, everything you say goes both ways, right? They're going to be looking for information from us. We're going to be looking for information from them.

852
01:23:14,600 --> 01:23:27,600
We are actually looking forward to the possibility of coming up with a protocol that makes sense. It's something we suggested to prior counsel for the joint liquidators didn't get traction last week.

853
01:23:27,600 --> 01:23:43,600
We're glad that Mr. Schor and his colleagues are now on the scene and we hope to make some progress in that regard. With respect to this motion, paragraph seven as revised with input from other parties makes very clear that this order is simply declared.

854
01:23:43,600 --> 01:23:57,600
This order is simply declarative and intended to simply state what is in the statute and all parties rights and reserves. So I think with respect to the relief today, your honor, I didn't hear any objection really from Mr. Schor on this order being entered.

855
01:23:57,600 --> 01:24:08,600
We'd ask this order be entered and we look forward to working with them on the issues that's related to the Bahamas and the chapter 15 verse the chapter 11.

856
01:24:08,600 --> 01:24:26,600
I didn't hear Mr. Schor saying he, I actually said he doesn't object to the entry of the order and I will enter the order. It obviously is a comfort order that gives the debtors an opportunity to send something under the signature of a judge to parties outside the United States who might not understand the automatic stay.

857
01:24:26,600 --> 01:24:33,600
What the automatic stay is, what the automatic stay is and if someone violates it, they do so with their own risk.

858
01:24:33,600 --> 01:24:37,600
Thank you very much, your honor.

859
01:24:37,600 --> 01:24:48,600
The next item on the agenda, item number six, is the debtors application, which was filed at docker number 28 to retain the parole for structuring administration LLC.

860
01:24:48,600 --> 01:24:59,600
Debtors by this motion are seeking to employ and retain parole as claims a noticing agent, effective non-protein to the petition date pursuant to 28 U.S.C. 156C.

861
01:24:59,600 --> 01:25:05,600
Appendix of the motion as exhibit B was the declaration of Benjamin J. Steele, managing director at parole.

862
01:25:05,600 --> 01:25:14,600
The debtors also filed a supplemental declaration from Mr. Steele at docker number 96, which includes additional disclosures that were requested by the United States trustee.

863
01:25:14,600 --> 01:25:19,600
Mr. Steele is on the Zoom hearing today.

864
01:25:19,600 --> 01:25:28,600
The debtors, your honor, anticipate, as we've been discussing this morning and now this afternoon, that there will be millions of creditors in these chapter 11 cases.

865
01:25:28,600 --> 01:25:39,600
In light of the number of anticipated claimants and the complexity of the debtors' businesses, the debtors submit that appointment of a claims a noticing agent required by local rule 2002.1.F.

866
01:25:39,600 --> 01:25:44,600
Otherwise, it's in the best interest of both the debtors' estates and their predators.

867
01:25:44,600 --> 01:25:55,600
By appointing parole, the distribution of notices and processing claims will be expedited, and the office of the clerk of the bankruptcy court will be relieved of an administrative burden.

868
01:25:55,600 --> 01:26:02,600
Otherwise, it could be an overwhelming number of claims and contacts.

869
01:26:02,600 --> 01:26:13,600
In selecting parole, your honor, the debtors obtained and reviewed proposals from two other court-approved claims and noticing agents to ensure selection was through a competitive process.

870
01:26:13,600 --> 01:26:22,600
The debtors believe that parole is qualified due to a significant experience in both legal and administrative aspects of large complex chapter 11 cases.

871
01:26:22,600 --> 01:26:34,600
The debtors further submit, your honor, that none-for-autonomous relief is appropriate because parole has provided and continues to provide valuable services to the debtors' estates in this interim period.

872
01:26:34,600 --> 01:26:48,600
The debtors did receive informal comments on parole's retention application from the United States trustee, which the debtors addressed in the revised order that was filed at docket number 98, ZD, and the supplemental declaration of Mr. Steele.

873
01:26:48,600 --> 01:26:52,600
Unless your honor has any questions, we would request respect for the entry of that order.

874
01:26:52,600 --> 01:26:55,600
Any other questions that should be heard?

875
01:26:55,600 --> 01:26:59,600
Satisfied the retention is appropriate. I will enter the order.

876
01:26:59,600 --> 01:27:01,600
Thank you very much, your honor.

877
01:27:01,600 --> 01:27:14,600
I think we're going to go with your honor's indulgence slightly out of order, and we'll take next the cash management, which is item number eight on the agenda, and I will turn it over to Mr. Theodore to present that motion.

878
01:27:14,600 --> 01:27:23,600
Why don't we, we're going about an hour and a half, why don't we take a 10-minute recess to allow people a little break, and then we'll come back and we'll take up that next order.

879
01:27:23,600 --> 01:27:45,600
Sounds great. Thank you, your honor.

880
01:27:53,600 --> 01:28:21,600
We heard we had some entertainment while we were on break, music playing over the system.

881
01:28:21,600 --> 01:28:24,600
All right, you may proceed.

882
01:28:24,600 --> 01:28:27,600
May it please the court, Andy Diederich, Sullivan and Crumwell.

883
01:28:27,600 --> 01:28:31,600
Your honor, I present the cash management motion today.

884
01:28:31,600 --> 01:28:36,600
We have, I think, a consensual motion. We have one objection on the record.

885
01:28:36,600 --> 01:28:40,600
I think it's been rendered moot by language we put into the order last night.

886
01:28:40,600 --> 01:28:43,600
Maybe when I'm through, we can confirm that on the record.

887
01:28:43,600 --> 01:28:58,600
Your honor, the cash management motion takes the debtors' current accounts. There are 216 bank accounts, 36 institutions, 19 countries, and creates on top of those a new set of five pooling accounts that are compliant with the U.S.

888
01:28:58,600 --> 01:29:17,600
Treasury guidelines. I put up on the screen for your honor the snapshot of liquidity that we have in all four silos as of today. Your honor, there was a revised declaration of Ed Mosley we filed overnight, which shows the additional cash the debtors have been able to verify.

889
01:29:17,600 --> 01:29:35,600
This process will continue. It's likely we find additional cash, additional marketable securities and other liquid assets. So we hope our cash situation does improve. What you have in front of you is the cash projections we're using for the five-week period that was our initial estimation for an interim period of relief.

890
01:29:35,600 --> 01:29:41,600
And you'll see, your honor, that at the end of the period, each of the silos has positive cash.

891
01:29:41,600 --> 01:29:58,600
Now, your honor, very important that this is unencumbered or unrestricted cash. So within the debtor system, there's restricted cash, which consists of cash held in custodial accounts, FOB accounts, cash necessary to keep at regulated entities for regulatory capital purposes.

892
01:29:58,600 --> 01:30:05,600
All of that is excluded from these calculations, so this shows only unencumbered cash.

893
01:30:05,600 --> 01:30:18,600
Your honor, we do have a revised form of order we put in last night. I think that's been reviewed by all the applicable parties. And then I have two comments that came in this morning that we resolved.

894
01:30:18,600 --> 01:30:25,600
One is from the SEC, the Securities and Exchange Commission, which has some additional reservation of rights language.

895
01:30:25,600 --> 01:30:41,600
The second is a comment from the U.S. Trustee, who has asked us to reduce the amount we can move from the master pooling account into the silo pooling accounts from the $25 million initially requested in the motion to $5 million.

896
01:30:41,600 --> 01:30:48,600
And, your honor, the debtors are fine with that, given the robust liquidity picture in each of the silos.

897
01:30:48,600 --> 01:30:52,600
So with that, your honor, I'd ask for entry of the order.

898
01:30:52,600 --> 01:30:59,600
And then we'll switch over here.

899
01:30:59,600 --> 01:31:04,600
Good afternoon, your honor. Scott Cousins on behalf of the Evolved Bank. We're close.

900
01:31:04,600 --> 01:31:21,600
We did file an objection this morning. When we first saw the motion, we were concerned about, with respect to the Evolved Bank, these FBO accounts, which according to our agreement with WRS, our property, property of the estate,

901
01:31:21,600 --> 01:31:29,600
the debtors have made some additional language. We're not quite there. We saw the filing last night.

902
01:31:29,600 --> 01:31:36,600
Footnote three says the FBO accounts, these are the accounts that are concerning the Evolved Bank, are frozen.

903
01:31:36,600 --> 01:31:41,600
But paragraph 11 allows existing bank accounts to be closed.

904
01:31:41,600 --> 01:31:47,600
And exhibit C of the motion includes the Evolved FBO accounts.

905
01:31:47,600 --> 01:32:13,600
So we've given the debtors a language that would say the identified FBO accounts 0066, 0078, and 0082 shall remain frozen and should not be closed or accessed until we can determine a final order of the court, presumably the next cash management order, that determines that it's our property.

906
01:32:13,600 --> 01:32:22,600
So we want to avoid a situation where these accounts, which belong to the bank, it's in fiat currency.

907
01:32:22,600 --> 01:32:33,600
It's used for credit cards of our customers. So in other words, when customer uses a credit card, it's fiat currency. It's not in our property as an estate.

908
01:32:33,600 --> 01:32:45,600
So we've asked to punt it, but we still need that reservation of rights so that the bank accounts aren't closed since we believe these are not property of the estate.

909
01:32:45,600 --> 01:32:47,600
Okay.

910
01:32:47,600 --> 01:32:49,600
I think we have somebody else wants to speak as well.

911
01:32:49,600 --> 01:33:06,600
Why don't we get both the, yeah, you are? Yeah, go ahead.

912
01:33:06,600 --> 01:33:19,600
I'm Michael Deutch here on behalf of Philadelphia and the insurance company. I'm joined today by co-counsel to Philadelphia and entity Scott Williams, who is appearing remotely.

913
01:33:19,600 --> 01:33:26,600
He's based in the law firm of Monier Herod based in Nashville, Tennessee.

914
01:33:26,600 --> 01:33:39,600
My client conveyed a limited objection to the debtors about the cash management motion, which I'm glad to announce has been resolved, at least for purposes of this interim order.

915
01:33:39,600 --> 01:33:57,600
As background, Philadelphia is a surety that issued seven million in money transmittal and other surety bonds connected to various state licenses the debtors possessed that allowed to operate custodial fund and other accounts in those states.

916
01:33:57,600 --> 01:34:11,600
Philadelphia had concerns about the motion as it related to funds in those accounts, as well as the debtors management of those accounts compliance with trust fund and other state laws.

917
01:34:11,600 --> 01:34:27,600
Philadelphia reached out to the debtors to address these concerns and again I'm pleased to say the parties have reached an agreement on language to include in the interim order that is addressed in footnote three that council just talked about, your honor.

918
01:34:27,600 --> 01:34:37,600
Again, I wish to thank the debtors for working with my client at this point on this issue, especially given all the other matters we're having to deal with at this time in this case.

919
01:34:37,600 --> 01:34:44,600
Thank you, Mr. Williams. Mr. Nader? You want to address Mr. Cousins proposed additional change, I guess?

920
01:34:44,600 --> 01:34:50,600
Yes, thank you, your honor. We can confirm on the record we will not close any accounts at a wall bank during the interim period.

921
01:34:50,600 --> 01:34:56,600
Okay. Thank you. Does that satisfy you, Mr. Cousins? Or do you need something in the order?

922
01:34:56,600 --> 01:35:02,600
I would like something, I apologize, Scott Cousins on behalf of the wall bank. I'd like something in the order, your honor.

923
01:35:02,600 --> 01:35:12,600
Your honor, we have 36 banks and 216 bank accounts. I think by negative implication that might just concern others. I'm just a little bit loathe to put specific bank names in the order.

924
01:35:12,600 --> 01:35:25,600
We're happy to have Alvarez and Marsal look at the particular account numbers that you've referenced and confirmed you in writing that those accounts are FBO accounts that are specified in the order.

925
01:35:25,600 --> 01:35:32,600
With that, your honor, maybe we'll see you at the final hearing, but I think that representation works.

926
01:35:32,600 --> 01:35:36,600
All right, yeah. I think the representation on the record is sufficient to address the issues.

927
01:35:36,600 --> 01:35:42,600
Thank you, your honor. Thank you, your honor.

928
01:35:42,600 --> 01:35:47,600
So for the record, I will enter the order. I did say that. Thank you.

929
01:35:47,600 --> 01:36:02,600
Good afternoon, your honor. Alexa Cranley from Sullivan and Commonwealth, proposed counsel for the debtors. Your honor, I'll take the remaining items on the agenda, going back to item number eight, which is the vendor motion at docket number 46.

930
01:36:02,600 --> 01:36:13,600
Your honor, the debtors are seeking authority to pay pre-petition claims of certain critical domestic vendors, foreign vendors, 503B9 claimants, and potential lien claimants.

931
01:36:13,600 --> 01:36:23,600
Notwithstanding that the debtors and their advisors do not currently have full books and records, the debtors and their advisors have identified certain vendors who are critical to their business.

932
01:36:23,600 --> 01:36:30,600
Given the nature of the business, most of these vendors relate to data systems, data storage, and security measures.

933
01:36:30,600 --> 01:36:38,600
As such, the debtors' businesses do not require a material amount of physical goods or shipments and primarily rely on these services.

934
01:36:38,600 --> 01:36:47,600
Additionally, as Mr. Bromley discussed earlier, the debtors' businesses are international and involve foreign vendors all over the world.

935
01:36:47,600 --> 01:37:06,600
Your honor, we had requested in the motion authorization to pay critical vendors up to an interim cap of $9.3 million, to pay foreign vendors with no cap, to pay 503B9 claimants with no cap, and to pay potential lien claimants up to a cap of $125,000.

936
01:37:06,600 --> 01:37:14,600
Your honor, further to discussions with the U.S. trustee, the debtors have agreed to make a number of revisions as follows.

937
01:37:14,600 --> 01:37:23,600
First, the debtors will reduce the critical interim cap from $9.3 million to $8.5 million.

938
01:37:23,600 --> 01:37:28,600
Second, to include a foreign vendor interim cap of $1 million.

939
01:37:28,600 --> 01:37:34,600
Third, to include an interim cap of $200,000 for 503B9 claimants.

940
01:37:34,600 --> 01:37:41,600
And fourth, to remain and leave the cap for lien claimants at $125,000.

941
01:37:41,600 --> 01:37:48,600
With those changes, your honor, we understand that the U.S. trustee's issues with respect to this motion and order are resolved.

942
01:37:48,600 --> 01:37:53,600
And unless your honor has any questions, we request that the relief be entered.

943
01:37:53,600 --> 01:37:58,600
I don't have any questions. Mr. Hackman?

944
01:37:58,600 --> 01:38:01,600
Yes, your honor. I rise to confirm that our comments on this motion are resolved.

945
01:38:01,600 --> 01:38:02,600
Okay. Thank you.

946
01:38:02,600 --> 01:38:06,600
All right. With that, I'm satisfied the request of relief is appropriate. I will enter the order.

947
01:38:06,600 --> 01:38:10,600
Thank you, your honor. This is one order where we did not file last evening, so we'll submit a new order.

948
01:38:10,600 --> 01:38:13,600
Okay. Thank you.

949
01:38:13,600 --> 01:38:18,600
Item number 10 on the agenda and docket number 49 is the equity NOL motion.

950
01:38:18,600 --> 01:38:23,600
By this motion, the debtors are requesting entry of an interim order to establish two things.

951
01:38:23,600 --> 01:38:39,600
First, notice and objection procedures related to certain transfers and declarations of worthlessness for federal or state tax purposes with respect to common or preferred or equity interests in seven debtors who are U.S. taxpayers.

952
01:38:39,600 --> 01:38:47,600
And second, to direct that any purchase, sale, transfer, or declaration of worthlessness in violation of the procedures to be NOL and VOIP.

953
01:38:47,600 --> 01:38:56,600
Your honor, we did serve this motion on all the shareholders of these seven debtors based on the contact information available to the debtors.

954
01:38:56,600 --> 01:39:08,600
Similar to the other motions we've discussed with the U.S. trustee, there were limited comments made to the revised form of order filed last evening at docket number 98, exhibit 18.

955
01:39:08,600 --> 01:39:13,600
If your honor doesn't have any questions, we request entry of this order.

956
01:39:13,600 --> 01:39:19,600
Mr. Hackman, anything from the U.S. trustee?

957
01:39:19,600 --> 01:39:23,600
This has been Hackman from the U.S. trustee. Our comments are resolved on this motion, your honor.

958
01:39:23,600 --> 01:39:35,600
The change we requested was increasing the number of days from 14 to 30 that current substantial shareholders are required to make their initial disclosures.

959
01:39:35,600 --> 01:39:37,600
Okay. Thank you.

960
01:39:37,600 --> 01:39:38,600
All right.

961
01:39:38,600 --> 01:39:41,600
I don't have any questions. I'm satisfied the request of relief is appropriate. I'll enter the order.

962
01:39:41,600 --> 01:39:43,600
Thank you, your honor.

963
01:39:43,600 --> 01:39:48,600
Last item on the agenda is item number 11 and docket number 50, the employee and wages motion.

964
01:39:48,600 --> 01:39:58,600
Your honor, we're seeking limited relief with respect to the dedicated employees and the newly appointed officers working under the direction of the newly appointed chief executive officer.

965
01:39:58,600 --> 01:40:06,600
The debtors are not seeking approval of any severance, retention, incentive, or bonus payments for any employees or insiders.

966
01:40:06,600 --> 01:40:16,600
The debtors are also not seeking to make any payments to Mr. Sam Bankman Freed, Mr. Gary Wang, Mr. Nishad Singh, or Ms. Caroline Ellison.

967
01:40:16,600 --> 01:40:29,600
The debtor's limited relief includes payment of pre-petition wages, salary, and compensation and benefits, and continuing the compensation and benefit programs in the ordinary course and making any changes as necessary.

968
01:40:29,600 --> 01:40:34,600
Your honor, we've likewise worked with the U.S. trustee and resolved all their objections.

969
01:40:34,600 --> 01:40:39,600
There are a number of changes that were reflected in the revised form of order filed last evening.

970
01:40:39,600 --> 01:40:47,600
First, the debtors have agreed that the relief in this motion will be sought on an interim basis and then on a final basis at the second day hearing.

971
01:40:47,600 --> 01:41:00,600
In paragraph two of the proposed form of order, we have clarified that the debtors are only seeking authority to pay amounts above the 15,000 stash story cap by no more than 40,000 in the aggregate.

972
01:41:00,600 --> 01:41:08,600
We've incorporated a new paragraph three that the new non-employee director compensation is approved on an interim basis.

973
01:41:08,600 --> 01:41:25,600
And finally, we've agreed with the U.S. trustee that with respect to the advisory firm obligations to Al Hill and RLKS executive solutions, that we have agreed to remove the request from this motion and will seek approval of these obligations by separate motion.

974
01:41:25,600 --> 01:41:27,600
Okay. Thank you.

975
01:41:27,600 --> 01:41:31,600
Your honor, with that, we ask you to enter the proposed order.

976
01:41:31,600 --> 01:41:33,600
Mr. Hackney, anything?

977
01:41:33,600 --> 01:41:36,600
I confirm that our informal comments are resolved, your honor.

978
01:41:36,600 --> 01:41:37,600
Thank you.

979
01:41:37,600 --> 01:41:38,600
Thank you.

980
01:41:38,600 --> 01:41:42,600
Again, I'm satisfied the request and relief was appropriate and I will enter the order.

981
01:41:42,600 --> 01:41:44,600
Thank you very much, your honor.

982
01:41:44,600 --> 01:41:46,600
I believe that that concludes the agenda.

983
01:41:46,600 --> 01:41:51,600
So I think the only item is a housekeeping one of scheduling the second day hearing.

984
01:41:51,600 --> 01:41:52,600
Okay.

985
01:41:52,600 --> 01:42:02,600
I've just been in touch with your chambers and understand that your honor is available on January 11th at 10 a.m.

986
01:42:02,600 --> 01:42:03,600
Mr. Cabello says I'm available.

987
01:42:03,600 --> 01:42:05,600
I guess I'm available.

988
01:42:05,600 --> 01:42:07,600
January 11th.

989
01:42:07,600 --> 01:42:14,600
Your honor, Adam Landis, I can confirm that you were.

990
01:42:14,600 --> 01:42:15,600
All right.

991
01:42:15,600 --> 01:42:25,600
I think we have another housekeeping matter.

992
01:42:25,600 --> 01:42:27,600
I have some.

993
01:42:27,600 --> 01:42:28,600
I'm sorry.

994
01:42:28,600 --> 01:42:30,600
Let me take this off.

995
01:42:30,600 --> 01:42:32,600
I'll say that again in case it wasn't picked up.

996
01:42:32,600 --> 01:42:34,600
Juliet Sarkeesian on behalf of the U.S. trustee.

997
01:42:34,600 --> 01:42:42,600
Your honor, I'm worried about waiting until January the 11th, wasn't it, to have the second day hearing.

998
01:42:42,600 --> 01:42:49,600
That means that the ceiling or the items that are sealed will continue to be sealed to that through that date.

999
01:42:49,600 --> 01:43:03,600
So, your honor, I would ask that there be, if possible, a hearing date set, you know, maybe in the week of December the 12th to address at least that.

1000
01:43:03,600 --> 01:43:23,600
And, you know, potentially other final orders on some of the other first day actually I don't really see why we shouldn't have the final order and all the rest of the first day relief in December because the interim order stays in place until we have that final hearing.

1001
01:43:23,600 --> 01:43:34,600
Mr. Bromley.

1002
01:43:34,600 --> 01:43:54,600
With respect to the ceiling, would go forward on an earlier date or are you suggesting all of the second day?

1003
01:43:54,600 --> 01:43:55,600
All right.

1004
01:43:55,600 --> 01:43:56,600
That's fine.

1005
01:43:56,600 --> 01:44:05,600
And in the meantime, Mr. Schor, you wanted to schedule a recognition hearing. Have you conferred with the other side about potential dates on that one?

1006
01:44:05,600 --> 01:44:11,600
No, I thought we were talking about everything in the middle of December, but it just sounded like we're fine in the mid-December.

1007
01:44:11,600 --> 01:44:22,600
I have a conflict 14, 15, 16 in front of Judge Owens and Judge Goldblatt, but other than that, we're kind of available at your honor's convenience.

1008
01:44:22,600 --> 01:44:31,600
I apologize, Mr. Schor. I think we were talking about numbers and not months. I thought we were talking about January.

1009
01:44:31,600 --> 01:44:33,600
You know, for recognition.

1010
01:44:33,600 --> 01:44:34,600
For recognition.

1011
01:44:34,600 --> 01:44:36,600
Well, we're going to have to have a discussion.

1012
01:44:36,600 --> 01:44:51,600
Yeah, why don't you meet and confer on it. It's going to be an evidentiary hearing, obviously. I need to make findings effective, conclusions of law. So make sure you've left yourself enough time for whatever discovery and you coordinate with other witnesses you're going to need to bring and so forth.

1013
01:44:51,600 --> 01:44:55,600
Understood, Your Honor.

1014
01:44:55,600 --> 01:44:59,600
So we'll schedule the recognition hearing. You can contact Chambers once you've conferred.

1015
01:44:59,600 --> 01:45:02,600
Thank you.

1016
01:45:02,600 --> 01:45:30,600
Second.

1017
01:45:32,600 --> 01:45:53,600
So, Your Honor, we can live with having that interim hearing in December for just the ceiling

1018
01:45:53,600 --> 01:46:06,600
Okay. Just so that we're clear, we're talking about ceiling, we're talking about the ceiling

1019
01:46:06,600 --> 01:46:11,600
with respect to the motion that we dealt with at the Chippet before the hearing, right?

1020
01:46:11,600 --> 01:46:26,600
Okay.

1021
01:46:26,600 --> 01:46:53,600
The motion with respect to the other matter, yes, actually, should also be in this separate.

1022
01:46:53,600 --> 01:47:02,600
Well, Your Honor, the issues with respect to the creditor matrix, I believe, are going to require an evidentiary hearing

1023
01:47:02,600 --> 01:47:06,600
assuming that we're not going to be able to get over the hump with the U.S. Trustee's office

1024
01:47:06,600 --> 01:47:11,600
and I do understand that the U.S. Trustee's office has a policy position on this

1025
01:47:11,600 --> 01:47:15,600
so I don't think we're anticipating we're going to get past it.

1026
01:47:15,600 --> 01:47:20,600
So I guess the question is whether we think that that's enough time to have an evidentiary

1027
01:47:20,600 --> 01:47:24,600
to prepare for and to have an evidentiary hearing on those issues.

1028
01:47:24,600 --> 01:47:30,600
What date did you suggest?

1029
01:47:30,600 --> 01:47:35,600
There was some time available the week of December 12th.

1030
01:47:35,600 --> 01:47:46,600
That's a month from today, so it should be enough time, I would think.

1031
01:47:46,600 --> 01:47:52,600
Do you have, I'm sorry, Your Honor, during that week, is it the, this is your calendar, not the judge's?

1032
01:47:52,600 --> 01:47:56,600
I can do it the rest of the time.

1033
01:47:56,600 --> 01:48:00,600
I can do it any time during the week of the 12th.

1034
01:48:00,600 --> 01:48:05,600
I'm fairly jammed up that week other than the 16th.

1035
01:48:05,600 --> 01:48:08,600
Okay, then I guess we'll take the 16th.

1036
01:48:08,600 --> 01:48:11,600
That would be wonderful, Your Honor. Thank you so much.

1037
01:48:11,600 --> 01:48:17,600
We'll take the 16th and we'll start at 10 a.m. Thank you, Your Honor.

1038
01:48:17,600 --> 01:48:21,600
All right, it was going so smoothly until...

1039
01:48:21,600 --> 01:48:29,600
Yes?

1040
01:48:29,600 --> 01:48:33,600
I was just looking for an objection deadline for the hearing on the 16th

1041
01:48:33,600 --> 01:48:37,600
in case others wanted to weigh in on the issues.

1042
01:48:37,600 --> 01:48:48,600
Let's set it for the 9th with replies due on the 14th.

1043
01:48:48,600 --> 01:48:53,600
Thank you.

1044
01:48:53,600 --> 01:48:56,600
Anything else, Mr. Bromley?

1045
01:48:56,600 --> 01:48:58,600
That is it for the debtors, Your Honor.

1046
01:48:58,600 --> 01:49:01,600
We want to thank you very much for your time and attention.

1047
01:49:01,600 --> 01:49:02,600
We appreciate the effort.

1048
01:49:02,600 --> 01:49:07,600
Thank you all for a smooth presentation and a very thorough presentation.

1049
01:49:07,600 --> 01:49:08,600
I appreciate it.

1050
01:49:08,600 --> 01:49:12,600
It brought me up to speed on the case.

1051
01:49:12,600 --> 01:49:16,600
I'm glad to hear the parties are cooperating with the liquidators

1052
01:49:16,600 --> 01:49:18,600
and the debtors here in Chapter 11.

1053
01:49:18,600 --> 01:49:21,600
Hopefully that will continue when you come to a resolution

1054
01:49:21,600 --> 01:49:26,600
about how to proceed forward with the sharing of information and recognition.

1055
01:49:26,600 --> 01:49:30,600
Maybe we can avoid the whole hearing in January

1056
01:49:30,600 --> 01:49:34,600
or whenever it's going to be because we don't have a date yet for recognition.

1057
01:49:34,600 --> 01:49:35,600
Well, thank you all very much.

1058
01:49:35,600 --> 01:50:02,600
I have a question.