Well camera isn't on so we'll see when it comes up.
I like to see myself when I'm talking, it's very strange.
Good morning this is Judge Dorsey, we're on the record in FTX Trading Limited case number 22-11068.
Before we begin let me just remind everyone that even though this hearing is remote it is a formal court hearing.
So if you are not speaking or not presenting please keep your camera off and your lines muted.
Interruptions will not be tolerated and you will be removed if you interrupt the proceeding and not be allowed back in.
So with that I requested this hearing on the motion to shorten that was filed by joint liquidators in the Bahamian proceeding.
Ordinarily I wouldn't hold a hearing on a motion to shorten but I wanted to take the opportunity to talk to the parties about where we are in this case and what's going on.
And it seems to me, I understand that there's a lot of heated debate between the parties here over what's happening.
But I do believe that there must be some path forward here to resolve the concerns of everybody involved.
I think everyone would agree, Mr. Praml they'll give you a chance to tell me I'm wrong if I'm wrong, but I think everyone agrees that the joint liquidators are entitled to the data and information that relates to their debtor entity.
That's in liquidation in the Bahamas. Is there any dispute about that issue Mr. Praml?
Yes, there is.
I'm sorry, there is a dispute or no there isn't?
Yes, there is a dispute.
Okay, over whether they're entitled to their own information?
Well, the requests are not just for information, Your Honor. The requests are probably for dynamic access to live systems and we believe that that is inappropriate.
So in terms of static information, we are certainly happy to sit down and talk about that. Dynamic access we believe should not be permitted.
How are they going to run their case in the Bahamas if they don't have access, dynamic access to at least their own information?
And I separate this out. Is there a distinction? Are you telling me there's an issue with regard to that the only way to provide this information is to provide them access to the entire system and there are some concerns about that?
Or is there a way to provide just dynamic access to their own information?
I think there's a way, Your Honor, at this point to provide static information and we're happy to sit down and have a meeting and confer about how that static information might be able to be provided.
The concern we have with respect to dynamic access to live systems is that we believe that any dynamic access will be provided immediately to the government of the Bahamas and in particular the Securities Commission.
And to date, any access that the Securities Commission has had to our systems has led to the relief from the debtors of digital assets and we do not believe that that should be permitted.
We do not believe that there is a separation between the JPLs and the Securities Commission at this point in time. Certainly no separation that provides the debtors with comfort that whatever is provided to the JPLs will not be provided immediately to the Securities Commission.
Mr. Schor, what's the relationship between the JPLs and the Securities Commission in the Bahamas?
You're muted, Mr. Schor.
I'd like to at some point speak to the larger issues Your Honor is referencing and certainly respond to what Mr. Bromley is saying.
But in response to your question, the JPLs are the analog would be a Chapter 11 trustee.
The Commission's analog is the SEC.
So no more than Mr. Bromley can be claimed for or be accused of being an arm of the SEC.
The JPLs are a court created trustee liquidating FTX digital.
Well, is there any?
Let me just get to my point.
Is there any use in my ordering the parties to mediate this issue or at least sit down and talk to each other about this issue?
Or is are we to the point where I'm going to have to have a full evidentiary hearing on these issues and make a decision?
I'd like to think that the parties can work it out.
The one situation we can't be held in into or put into is having that meet and confer, having the debtors raise these sort of issues and essentially set the bar as being the JPLs must prove that there was no collusion between the Commission and SBF before they can get dynamic access to the information and then have everybody disappear for the holidays.
So essentially we get timed out.
So if what is going to happen here, which is what I was going to propose, is that the court set this hearing for Friday, Monday.
I know your honor has travel plans, but at least some control date so that if we don't get to resolution, you can at least come back to your honor with with discrete issues to be resolved.
So, for example, we have made very clear to the Solomon Cromwell team. How about just getting us a clone of the system?
We don't need dynamic information right now. We can get back their access right now.
Can't you just get us a clone?
And Mr. Bromley saying what I want to do is sit down with Mr. Schor, have our respective teams sit down and they can discuss the shape of a clone.
That's not going to work.
He can't appear in court today and say we have no problem giving the clone, but but they just need to sit down and talk to us about what that clone is going to look like.
It's got to be resolved in the next couple of days, not weeks, certainly not months.
Your honor, that that is that's a conclusion, not an argument.
Mr. Schor has given no indication as to why there's anything that needs to be done in the next couple of days.
First of all, and second, Mr. Schor and his colleagues have not simply said we are willing to take a clone of static information.
Their motion asks for live, dynamic access and the information that we provided to the court and we provided yesterday to Congress for Mr. Ray's testimony indicates that the Securities Commission of the Bahamas has already
collaborated with the JPLs to obtain access to digital assets and to mint tokens.
The JPLs have been involved in that.
The JPLs went to court after the fact to get approval to approve violations of the automatic stay that occurred.
Mr. Schor can shake his head all he wants.
That's what the evidence shows.
So we're happy to sit down.
We're happy to have a mediation.
We're happy to talk about providing static information.
But I will tell you, your honor, with respect to dynamic information, we can have a hearing on Friday.
We will go immediately and if the ruling is against us, we will go immediately on appeal and seek a pending appeal.
This is dangerous information.
We do not trust the Bahamian government.
And because of the evidence we have in terms of the actions to date of the JPLs, we simply don't trust that the JPLs will be able to hold this information and not provide it to the Bahamian government.
All right.
Your honor, while I appreciate your desire to shortcut this, can we just maybe get into the hearing because what was just said is exactly what a Chapter 15 is not supposed to be.
And we don't have a Chapter 15 approval yet either.
All right.
Well, here, hold on, hold on.
All right.
I'm not going forward with the hearing today.
It's not going to be Friday either.
Probably not going to be before next year because this is going to be a full evidentiary hearing.
And for an evidentiary hearing, it's live.
I expect witnesses in the courtroom and present it live before me so I can judge credibility.
And that's not something that can happen Friday or Monday or even before the Christmas holiday.
So if we are going to have to go forward with a hearing, it's going to be in January.
And I can give the parties
January 6th beginning at 930 a.m.
As I said, it will be a live hearing.
And these are serious allegations.
Obviously, this is a gating issue that I'm going to have to resolve before we can move forward with how to proceed with the dynamic between the Bahamian proceeding and this proceeding.
And I'm hoping there's still some way to resolve this before we get to January 6th.
I would highly encourage the parties to talk to each other and if you think it would be productive to find a mediator to help mediate that issue as well.
And I don't know if there's a way to fashion an order, Mr. Bromley, that would limit the ability of JPLs similar to what you might have in a 502 motion order that limits the ability of JPLs to share that information.
They can share it with their advisors, obviously, and themselves.
Maybe that's a possibility of a way to move forward.
But I will leave that to the parties to see if you can work something out.
And if not, I'll hear everybody on the 6th.
Your Honor, if I may be heard for a little bit on this because I think there is a other perspective to this and I think Mr. Bromley is wrong when he says this is not a Chapter 15 yet.
We filed, we've come and asked for provisional relief.
And ultimately, what I'm going to ask your Honor, what you were mentioning is I'd like you to keep a control date on Friday to see if your Honor can't resolve not issues about whether the Bahamian government was in cahoots with SBF,
which I agree would be an evidentiary hearing, but rather whether or not we can fashion an order that provides protection for the legitimate concerns that Mr. Bromley has raised.
Well, because I've got to say, in the last 30 years, I've seen a lot of mega cases go off the rails where accusations like this fly and every hearing turns into a charged referendum on the case.
And it becomes overly expensive, burdensome on the court, and value destructive.
And so when the CRO of the debtor appears in and testifies in front of Congress with respect to what the debtor is doing, the investigations that are going on,
and that a foreign government has colluded with somebody who is jailed right now, we're at least tilting on the rails.
And I just on behalf of my client, it may come to that, but it's way too early in our case, in this case, to devolve.
And I agree with your Honor, there has got to be a way the professionals can work this out without getting into the kind of accusations that are flying.
To be clear, we filed a pleading this morning, Your Honor, that attaches a declaration that Mr. Ray could not have seen, nor counsel could have seen,
which belies this notion that what the commission was doing was working with SBF.
In fact, the email they attached where SBF says-
Well, I'm not going to get into the marizote at this point, Mr. Short.
We'll talk about that on the 6th if we get to it.
Let's talk about the-
Okay, but recognize-
Hold on, Mr. Short. I want to move on.
Let's talk about the 16th.
We have the motion objecting to the seal by the U.S. trustee.
Is U.S. trustee on the line?
Someone from the U.S. trustee?
Yes, Your Honor. Juliet Sarkeesian for the U.S. trustee.
Ms. Sarkeesian, I have some concerns about that hearing going forward on Friday from a number of perspectives.
Number one, the motion implicates individual creditors, and there's no creditors committee yet.
I think the creditors committee would want to weigh in on that motion.
Do we know yet when the committee will be formed?
Your Honor, first, I- I apologize. It's not the right word.
We had hoped to have a committee formed by this time.
We had a tremendous response, and people are located all over the world.
Unfortunately, it becomes a little bit difficult when people are in very different time zones,
and there's a lot of complicated information, as I'm sure Your Honor can imagine.
So we are moving as expeditiously as possible, you know, and we hope to be filing a notice of appointment very soon.
I can't say anything more than that, other than very soon.
I do have concerns. You know, they obviously have to choose counsel,
and so, you know, I think there's certainly a reasonable possibility that they might not have counsel by Friday,
or maybe they have it by Thursday, but there's not, you know, as much time as one would like for them to have.
So, I mean, Your Honor certainly brings up a valid concern.
We had hoped it would be different. We had hoped that we would have a committee formed by this time,
but the reality is, due to circumstances outside of our control, it has not yet happened.
I also, I noticed that the Trustee also objected to consolidate a creditor matrix on similar grounds
on the production of the creditor information, I believe.
Oh, Your Honor, that was the motion I was talking about.
So there was two motions, seal motions.
One of them relates to the indemnification slash exculpation motion,
allow debtor to address that, but my understanding, based on discussions as well as the agenda,
is that they are agreeing for that to be unsealed.
Okay.
With respect to the other motion relates to the creditor matrix, schedules and statements, top 50 list,
pretty much any document in the case that would have names or addresses of creditors or customer slash creditors.
Okay.
So that's the motion I was discussing that we did file an objection to.
Okay.
We have not technically filed an objection to the other motion, but that, because they said effectively,
they're, I don't know if withdraw is the right word, but they're not going to pursue that relief on a final basis.
Okay. I also have the motion to intervene, followed by members of the media.
I don't know if anyone plans on objecting to the motion to intervene,
but I certainly want to give the media the opportunity to participate in that hearing as well.
So, Ms. Sarkeesian, should we, should I set another date now in January,
or do you want to wait to see when the committee is formed and retains counsel
and has an opportunity to talk to you about how to go forward?
So, Your Honor, I just want to be clear, so Your Honor is asking that the hearing on Friday on the motion
to seal the creditor matrix be put off until after the committee is formed?
Yes.
Okay.
I think, Your Honor, okay, so you want a date in January.
I guess my feeling is it would probably be best if we could schedule that now,
and I mean I think a committee is going to be formed in very short order.
We're not going to be in a situation, I pray, that we're in January and don't have a committee.
So I think that scheduling it now would actually be very helpful.
Okay. My first week of January is booked because I have a two-day evidentiary hearing
and another Chapter 15 on recognition for the fourth and the fifth.
I just scheduled the sixth for a hearing on the relief from stay from the liquidators.
So it would have to be pushed into the week of January 9th.
If you do have a hearing covered already scheduled for the 11th, our second day hearing, we put it on that.
I do see that, yes.
All right. Does that work, Ms. Arcee, to add it to the agenda for the second day hearing?
I believe so, Your Honor. I don't see any problem with respect to that.
I don't know what the debtors intend, if they intend to put any witnesses on, but I don't expect.
My hope would be that it would not be, if there is testimony, that it will not be extensive.
So hopefully that would fit into, if I could just ask, Your Honor, how much time you have on the 11th?
Well, I have—
If it was only two hours, that might be a problem.
I have it scheduled beginning at 10 for the second day hearing.
I have three other hearings in the afternoon.
Probably can't. They're not going to come off.
At least two of them are not going to come off, because they're contested hearings.
So we would probably have—I can move it.
We could start at 9 a.m., and you'd have until 1230.
I don't know what other objections might be raised at that time to any of the motions that were presented at the first day hearing.
I assume, Mr. Bromley, you're going to be calling witnesses for the sealed motion.
Well, we will have a declarant, Your Honor, and that's assuming that we're not able to resolve the issues with the Predators Committee once the point is made.
So if there's going to be a cross, the witness will have to be here, even if it's a declarant.
Correct.
All right. So let's move—we're going to move that hearing, then, Ms. Sarkisian and Mr. Bromley, to the second day hearing on January 11th.
And Ms. Bromley, circling back on what Ms. Sarkisian said about the demarcation motion, are we in agreement on that one? That's going to be unsealed?
Yes, we are, Your Honor.
Okay.
Your Honor, if I could just ask a favor.
Could we start time for the hearing?
I'm thinking—and Mr. Bromley can indicate otherwise—I'm thinking that three hours should be enough.
And just based on my schedule, it would be much easier if we started at 930, if that did not inconvenience the court.
Oh, we—
Go ahead, Mr. Bromley.
Do you have other—I'm sorry, Your Honor. We do have—it is our second day hearings. We do have a fair amount on the calendar for that day.
We're obviously going to work to resolve all of the issues. And I do respect Ms. Sarkisian's time concerns, but—
That's okay. That's okay. If there's any issue, we'll start at 9. I'll make the arrangements.
Okay. We'll continue to work to resolve the issues, just like we resolve the issues for the ceiling on Friday.
All right. The other possibility is we can always—I can try to rearrange and move my other hearings in the afternoon to the 12th the next day.
I will ask my chambers to do that so that that would free up the entire day for this case, because I do have time.
The other option is if we can't move any of those off from the 11th, I have time on the 12th in the afternoon.
We can always continue the second day hearing on the 12th in the afternoon.
I mean, Your Honor, from my perspective, I—again, even with the other motions that are on for that day,
I don't really expect this would take more than three hours or three and a half hours.
I would not want an inconvenience, again, before it was trying to move the afternoon hearings.
But I also don't know what other motions or applications the debtors might be filing that—you know, retention applications and whatnot that could be scheduled.
So if the debtors feel that it's helpful for the court to try to move those afternoon hearings, I don't object.
I don't want an inconvenience to other people if it's not necessary.
All right. Well, that brings me to the next issue, which is the liquidator's motion to dismiss that was filed on Monday and set for a hearing on the 11th,
which, Mr. Schor, in the future, if you—that was not a nominative state.
That's a second-day hearing. So it was not an open invitation to schedule something.
You need to contact chambers to request a date for—particularly a motion like a motion to dismiss.
I mean, that's going to be an evidence-sharing hearing.
Understood. Understood, Your Honor.
We'll do that in the future, and we'll discuss it with Soloman about when that can go forward.
Okay. Yeah, let's find another date to handle that one. All right.
That brings me to—I wanted to ask about the motion for recognition.
Where are we on that, Mr. Schor? Are we going forward? What's happening?
We're still trying to see if we couldn't resolve that.
I think that's going to be part of a package of discussions that have to occur kind of now to see how we're proceeding.
All right. Well, let's try to get that resolved as well here.
So let me circle back then to the request by Mr. Schor to have the 16th as—I guess it would be kind of a status conference on where the parties are on the issue of the relief from stay.
Mr. Brownlee, do you have a position on that? Everyone was going to be available anyway, so I assume everyone is available.
We are available, Your Honor, and we would like to have the opportunity to meet with the folks from Whiten Case.
We would also like to include in that conversation the Securities Commission of Bahamas, who we think is an essential party to this conversation.
So look, I think our view is that we would be amenable to mediation. We believe that before you go to mediation, you should at least sit down and try to talk about it.
We know that the commission has U.S. counsel because they have contacted us on other matters, and we believe that there hopefully now with Mr. Franklin's freedom of custody in the Bahamas,
there might be a way forward that we can move along with a cooperative relationship.
If this is going to be an attempt to seize control of these debtor's cases and movements of Bahamas, we will fight them with all our strength.
Let me ask, is there anyone on the call from the Bahamian Securities Commission just by chance?
Yes, Your Honor. This is Blair Rennie from Brown-Redneck.
And this is Kenneth Ouellette also from Brown-Redneck, Your Honor.
You can turn your cameras on so I can see you, please.
And just to be clear, Your Honor, while we're attending the hearing, to observe, we are not entering a appearance, and the Bahamas Security Commission is not consenting to personal jurisdiction in this court.
Well, I was only going to ask if you were willing to sit down with the joint liquidators and the debtors here to talk about a path forward.
Your Honor, we will take it back to our client. We are always happy to discuss.
Okay. I think it would be helpful, might help resolve some of the concerns that the debtors here have, if they can talk to the Commission.
So I would highly recommend doing that and encourage the Commission to participate in that discussion.
All right. So I'll leave the 16th on then as a status conference to see where we are on this issue, on the motion to – our motion for release from the automatic stay and the turnover of the records.
And we'll go from there. We'll discuss – I didn't set a date – did I set a date for that one? I didn't set a date.
We'll talk about that on Friday, I guess, when that would – or did I set it for – that's what I set for the 6th, right? January 6th. Yes. Okay.
So that's set for the 6th. And we'll discuss on Friday, see where we are, and see if it's necessary to go forward on the 6th, or if there's something else I can do to help accommodate the party's attempts at mediation.
Good. What time on Friday, Your Honor?
It is currently scheduled at 10 a.m. And we'll just leave it at 10.
Very good. Okay.
All right.
And we'll be busy between now and then.
I'll bet. Anything else? Mr. Landis, you turned your camera on. Do you have anything else?
Yes, I did, Your Honor. I just wanted to note for the record that Adam Landis, Landis Raffin, Co-Counsel to the Debtors, we will file an amended agenda reflecting Your Honor's rulings in the moving of the various hearings.
We'll get that on the file as soon as possible. Okay. Great. Thank you. I appreciate that.
Okay. Anything else before we adjourn?
Well, thank you, everybody. I appreciate everyone getting on the call on short notice, and hopefully we can continue to talk and move these things forward.
Until then, I'll see everybody on Friday morning.
Thank you very much, Your Honor.
We're adjourned.