Good morning everyone, this is Judge Dorsey.
We're on the record in FTX Trading Limited, case number 22-11068.
Before we start, let me just remind everyone this is a formal court proceeding even though
we are pursuing it virtually, so disruptions will not be tolerated.
So please keep your lines on mute unless you're speaking and your camera's off unless you're
one of the parties participating in the discussion.
And with that, I will turn it over to Debtors' Council.
Good morning, Your Honor.
This is Brian Gluckstein of Sullivan and Cromwell for the Debtors.
Can you hear me okay?
Yes, thank you.
Thank you, Your Honor, good morning.
As reflected on the amended agenda that we filed at Docket 232, we have only a short
remaining agenda of three matters for today with the remaining items scheduled either
being resolved or adjourned to the January 11th hearing.
Your Honor, I propose to just proceed in order of what we have remaining on the agenda if
that's okay with the Court.
With respect to the first item up today, agenda item four, is the Debtors' Motion to Seal
Indemnification and Exculpation Motion.
The motion to seal was filed at Docket 95.
Your Honor, we recall that at the November 22nd hearing, the Court entered an interim
order at Docket number 141 at the Debtors' request, sealing the Debtors' Motion, authorizing
certain indemnification and exculpation in connection with the Debtors' asset recovery
efforts and the interim order granting that motion, which was, which were filed at Docket
numbers 94 and 140 respectively.
The Debtors have made significant progress locating and securing digital assets, and
that work remains ongoing.
Nonetheless, the Debtors are comfortable that at this point in their work, when also considering
the need for transparency in these Chapter 11 cases, that the motion and interim order
can be unsealed at this time.
As a result, the Debtors are not requesting further sealing of the motion and interim
order on a final basis, and therefore request that the Court unseal those documents at this
time.
The Debtors' request for entry of a final order with respect to the Indemnification
Motion itself is scheduled to be heard at our second day hearing on January 11th.
All right.
Does anyone wish to be heard?
All right.
I will enter the order to unseal those pleadings.
Thank you, Your Honor.
The next item up this morning is agenda item number 6, which is the amended motion of certain
media outlets to intervene in these proceedings for a limited purpose, and I'll cede the
podium to the movements.
Mr. Finger?
Good morning, Your Honor.
David Finger on behalf of the opposed intervenors.
May it please the Court?
I believe Your Honor has some historical familiarity with access motions.
I don't know how much your auntie tell you I want to go into a motion to intervene aspect
of it.
Certainly the courts of this district and the appellate to the Third Circuit all recognize
intervention as an appropriate means to deal with access cases.
They find it uncommon.
We share an interest with the public as the eyes and the ears of the public, and there's
no need for an independent basis for jurisdiction.
The claim is under constitutional rights as well as federal common law, and therefore
we satisfy the requirements for intervention.
Moving to the motion to unseal, I note yesterday, Your Honor, that the trustee identified the
members of the creditors committee, and those names were not under seal, so we're already
starting a process of names dribbling out, and the point I made in the motion is that
names are going to come out eventually, and there's no basis for distinguishing between
names that voluntarily come out with those who are on the list.
That's not the standard for sealing or unsealing the actions they have taken.
Well, Mr. Finger, let me stop you for a second.
I think the only thing on the agenda for today was the motion to intervene, and I will be
scheduling a hearing on the motion to unseal, and I also saw that the committee was appointed
yesterday, so we can now—that was what I was waiting for, for a committee to be appointed.
Obviously, they're going to have to retain counsel and get up to speed before we have
a hearing on this, because this is something they're going to want to weigh in on, but
let me just stick with the amended motion to intervene, and I've read those papers.
Is there any objection?
I made the objection deadline today at the hearing.
Is anyone objecting to the motion to intervene?
Your Honor, Brian Gluckstein, Sullivan-Crohn, for the debtors, just very briefly.
The debtors do not object to the media outlets intervening for the sole purpose of permitting
the court to hear their objection to the debtor's motion for an order authorizing the action
of individual information.
As Your Honor notes, that motion is not being heard on the merits today.
It will be heard at a future hearing.
The debtors do reserve all rights with respect to standing, and otherwise, in the event that
the media interveners seek to intervene more broadly in the case, but with respect to being
heard on this motion, we don't have any objection.
Anyone else wish to be heard?
And Mr. Finger, I assume the media outlets are only seeking to intervene for purposes
of this ceiling motion.
Is that correct?
That's correct, Your Honor.
Okay.
They reserve a right to seek to intervene in case there are other ceiling issues that
come up or other matters for media of interest, but for now, this is limited to objecting
to the proposed order of ceiling names and addresses of creditors.
Okay.
I will approve that order.
Do we have a form of order uploaded that the parties agree on?
I'm not sure that I'm on, but I will certainly contact Mr. Gluckstein when this is over and
make sure that we have something that is agreeable to everyone.
Okay.
Go ahead and confer and upload the order.
No need to do it under COC.
I'll enter the order once it gets uploaded.
Thank you, Your Honor.
Okay.
Okay, Mr. Gluckstein, and I will come back to the, we'll talk about the scheduling of
that motion in a moment, but let me go back to Mr. Gluckstein.
Gluckstein?
Yes.
Thank you, Your Honor.
The only other item on the agenda for this morning is the status conference with respect
to the motion of the JPLs of FTX digital markets.
Did you want to address scheduling before we handle that or at the end?
Well, why don't we do that?
I mean, the only thing I was going to say about scheduling is, I was wondering if you
were on, Ms. Sarkeesian, is to have the parties meet and confer with the committee once committee
council is appointed so that we can get something on the books.
I don't want this to linger out there too long.
I think it's something that does need to be addressed in a fairly timely manner.
Obviously, we're going to be into January before that happens, but I also want to make
sure the committee's council is comfortable with its ability to properly address that
motion.
So I just ask Mr. Gluckstein and Ms. Sarkeesian if you could meet and confer with the committee's
council once we know who they are and then contact chambers for a hearing date.
Your Honor, if I could address the court briefly.
Sure, go ahead.
I'm Julia Sarkeesian for the U.S. Trustee.
At the hearing earlier this week, I believe your honor suggested scheduling that hearing
for starting at 9 a.m. on January the 11th.
Initially, I think there's an omnibus hearing for 10 a.m. and you suggested 9 a.m. because
potentially this hearing could have, there's some aspect of it that will be evidentiary.
Is that something that we could sort of put a pin on and have that reserved so that assuming
that date is okay for the committee that we can move forward then?
Yeah, I do have, I have it blocked in my calendar beginning at 9 30 on the 11th, but we can
start at 9.
I think we, you had indicated, Ms. Sarkeesian, at the last hearing that 9 30 would work better
for you, so I set it for 9 30, but we can make it 9 if we think this is going to run
over with all the other motions that are going to be on for that day.
I leave that to debtor's counsel to address.
I can get, I can, 9 o'clock is manageable for me.
I can make it work.
Okay.
Mr. Landis?
You're muted.
You're muted, Mr. Landis.
Sorry, no longer, no matter how long we do this, Your Honor, I need to be reminded to
click unmute.
Adam Lantz from Landis, Rath and Cobb and we have the debtors.
We were anticipating, Your Honor, starting at 9.
Ms. Sarkeesian had indicated that she could make it work and based on the length of the
agenda and the nature of the matters going forward, we thought we were going to need
the time, so we would appreciate the court's indulgence to start at 9.
Okay.
We'll start at 9 and we'll at least block out including the seal motion on for that
day subject to the committee's counsel coming in and saying they need more time.
Thank you, Your Honor.
Okay.
Mr. Brown, did you hear me?
I see you turned your camera.
You're muted, Mr. Brown.
I wish I had a dollar for every time I said that in the last three years.
You could read as higher.
Can your honor hear me now?
You're muted still.
It sounded like you had two microphones open at the same time there.
You were getting feedback.
Can your honor hear me now?
Yes.
Okay.
I'm sorry, Your Honor.
My Zoom requires me to dial in as well.
That's the technical issue on my end.
You're going to have to speak up.
I'm sorry.
I apologize.
You're going to have to speak up.
Your Honor, I represent.
You're going to have to speak up a little, Mr. Browning.
Get the microphone closer.
I represent one of the members of the committee and not on behalf of the committee, but just
reporting to the Court that the committee is meeting and going through its processes
and expects to select council a given Monday or Tuesday or next week.
I just wanted the Court and parties to be aware of that.
Okay.
All right. Are there any other scheduling issues we need to discuss at this point? I
don't have anything on my list that needs to be scheduled.
Not from the debtor's perspective, Your Honor.
Okay. All right. Let's go ahead with the status conference then.
Thank you, Your Honor. For that I'll turn it over to my partner, Mr. Bromley.
Okay.
Good morning, Your Honor. James Bromley of Sullivan and Cromwell on behalf of the debtors.
We gave room before Your Honor a couple of days ago with respect to the request by the
joint – I'm sorry – the joint provisional liquidators from the Bahamas. We had a meeting
yesterday in New York which included representatives of the debtors, the joint provisional liquidators,
and the Securities Commission of Bahamas, both principals and counsel. And while we
haven't come to any conclusions, we did have a productive exchange of views. We have
a proposal from the joint provisional liquidators. The debtors will be responding to that proposal.
And at the moment, Your Honor, we don't have a solution, but we're certainly working
in good faith to see if we can get to a solution. For the moment, I think it makes sense to
continue to hold the date of January 6th. It is certainly our hope that we might be
able to have a solution prior to that. And notwithstanding the holidays, we'll be working
towards trying to come to that conclusion. But at the moment, Your Honor, I think we
need to continue to hold that date.
Okay. Thank you. Mr. Zuckeed?
Good morning, Your Honor. Jason Zecke of White and Case on behalf of the joint provisional
liquidators. First matter, Mr. Schor sends his apologies. He is about three doors down
from you, I think, in a different courtroom on a long scheduled hearing, so you're stuck
with me. Mr. Brunley is correct. We did have a meeting. Principals and counsel did attend.
Mr. Ray attended. We very much appreciated that. And we are hopeful that we'll be able
to work this out. But if I just could raise a couple of issues so Your Honor can understand
from our client's perspective in case we do need to move forward. First, we believe that
the proposal we made with respect to the information addresses all of the issues that were raised
by Mr. Brunley earlier this week. And so we are hoping that the debtors consider that
in good faith and that we are able to come to an agreement because this is critically
important from our client, Your Honor. This is a threshold issue for them. They need access
to their debtors' books and records in order to do their job as court appointed fiduciaries.
And so from our perspective, it will be really important that this issue with regard to the
information gets considered on its own merits and isn't tied together with other parts of
the case. There are a lot of issues in the case that will have to be dealt with. And
that will all come in time. But we believe that our request for information, which we
believe is quite unremarkable, should be considered on its own and not tied together with other
issues. On timing, Your Honor, I know that Your Honor has set this for the 6th, and so
we will proceed on that schedule. From our perspective, this really is an urgent matter.
And so while we are happy to work with the debtors, from our perspective, we cannot have
the issue of the information slip past the 6th. And so to the extent we are not able to
come to an agreement, what we really need to avoid from our perspective is having this
kind of drag out so that we can't even really begin to do our job in the Bahamas for any
longer, because this is really interfering with the ability of the liquidators to do
their job. And so that's why the timing, from our perspective, is so important. And I
think it's important to note that in any international case like this, there are a
multitude of jurisdictions that have legitimate and important interests. And that certainly
includes the Bahamas. Remember, these are Bahamian entities. Our clients are the
trustees for a Bahamian entity. And the Bahamian legal system is an independent legal
system that should be respected. And there have been a lot of allegations and aspersions
thrown around directed at the Bahamas, the Bahamian government, the Bahamian legal system.
And we'll deal with that in good time if necessary. If we get to the 6th, we think the
evidence will show that those allegations are wholly without merit. In fact, as Mr.
Schor pointed out, one of the allegations that the debtors raised in connection with
in response to this motion to shorten that the Bahamians were somehow facilitating payments
off the system to Bahamian residents in preference to other creditors. When we look at the
evidence, they have that exactly backwards. And our clients were appointed specifically
as part of an effort to stop such activity. And so we do think that to the extent that
there have been allegations of any improper conduct by our clients or by the Bahamian
system as a whole, at the right time, the evidence will show that's entirely unfounded.
And then the last point I want to make, Your Honor, just so that you can understand this
from my client's perspective. My clients are independent court-appointed fiduciaries
for the Bahamian estate that had no involvement in this matter prior to their appointment
and the commencement of these bankruptcy proceedings. They are charged under Bahamian law
with investigating what happened and the information that is requested by this motion, which again
is the information that belongs to the debtors over which they have been charged and given
responsibility, is fundamental to their ability to do that investigation. And we found ourselves
in a situation which again, from their perspective, is a little bit upside down, where the debtors,
even with regard to the information that belongs to the Bahamian entity, the debtors have set
themselves up as a gatekeeper here. And while I'm certainly-
Mr. Zecchia, I'm going to cut you off because we're getting into the merits of the issues
here. And we have a hearing date on the 6th. I'm going to talk a little bit more about
that date and what's going to happen leading up to it. But let's, you know, this is not
the time to make those arguments. So the evidence will show what the evidence shows if we get
to the 6th. And that's what I will base my decision upon at that time. So with that,
hold on, Mr. Zecchia. So at this point, what I want to know is, have, is the briefing complete
on the motion to lift the stay and turn over Mr. Bromley's shaking his head? I haven't
seen a response from the debtors yet. Is that correct, Mr. Bromley?
That's correct, Your Honor. We did file an objection to the motion to shorten. We have
not filed an objection to the motion to compel. And we would like to have a schedule to do
that.
And, Your Honor, just on that point, if I, and this might help with Mr. Bromley's response,
one of the things that we will do if we proceed on the 6th, Your Honor, I know that the live
access versus static access was a hot issue. And while, again, we don't agree with the
debtors' concerns, in order to simplify this hearing, for purposes of the 6th, what we
will be seeking is static access, not live access. We think that that makes the issues
simpler and cleaner. And so we would be amending the relief we sought in the motion to seek
at this point, without prejudice, to seek live access later, simply static access at
this point. Hopefully that makes the issues simpler.
It sounds like it might, but I'll leave that to Mr. Bromley. That's an issue for him to
address with his clients. So for the briefing schedule, we have a hearing date on the 6th.
Mr. Bromley, when do you want to file your response to the motion to compel?
Your Honor, the 6th is a Friday. We would like to be able to file our response on the
morning of the 4th, which is Wednesday, so 9 a.m. on the 4th.
I won't give much time for Mr. Zacchi to file a reply brief. Why don't we make it...
With my mind, Your Honor.
Why don't we make it... Why don't we make your brief to Mr. Bromley on the 30th, and
then if there's a reply, that will be on the 4th, and that gives me a couple days to review
before I have to go into the hearing.
Certainly we will meet those dates, Your Honor.
Okay. And we have... This will obviously be a live hearing with, well, hybrid, I guess,
people who want to participate, who aren't going to be actively participating in the
hearing on the 6th, can appear virtually, but the main parties to the case, and certainly
the witnesses, must appear live in the courtroom.
I understand, Your Honor.
Same goes for, I think, the second day hearings, just to go off this issue for a while. The
second day hearings, Mr. Bromley, are we anticipating... Well, now that we may have the issue on
sealing, I assume we're going to have witnesses, so that will probably have to be a hybrid
hearing as well, so just so everybody knows ahead of time.
Yes, Your Honor.
Okay. All right. So anything else on the schedule before we adjourn?
Just with respect to the hearing on the 6th, if we do have to go forward, what I would
propose, Your Honor, is on the 30th, when we file our response, that that also be the
date that the parties would exchange names of testifying witnesses for the hearing on
the 6th.
Yes, absolutely. And to the extent you can agree on stipulated facts and exhibits and
the admissibility of exhibits, we should also do that on the 30th as well. So we could have...
Why don't we just go ahead and have kind of a pre-trial order that lays out what the
agreed upon facts are, what the disputed facts are, what the witnesses are in a brief
statement of what they're going to testify about, and exhibits, lists of exhibits, whether
they're agreed to or not. And that way I can address any objections to the exhibits at
the beginning of the hearing on the 6th.
Very good, Your Honor.
Okay.
And Your Honor, just with regard to scheduling, and I don't know if you want to deal with
this now, we spoke I think on Wednesday as to the scheduling of the recognition hearing.
I asked about it.
Yeah, I thought Chambers had given us the 13th of January as a date for that. I didn't
know if that still works for the Court or the Dutters.
It's not on my calendar.
I didn't know if you wanted a second hour if we should work with Chambers offline to
accomplish that.
Work with Chambers and Dutters Council, and obviously you're going to have to have the
committee's counsel as well on that one.
Yeah, Your Honor, with respect to the recognition, certainly it is our hope that we'll be able
to resolve issues that exist between the parties. But if we are not able to, we do not consent
to go forward on the 13th. We will need discovery with respect to the recognition hearing. So
our view is that what we should do at best is have a scheduling hearing with respect
to discovery. We will need to take discovery not only of the Joint Provisional Liquid Orders,
but also other parties in the Bahamas if we do decide to go forward on that basis.
All right, we'll let the parties meet and confer along with the committee council. And
then if you need to have a scheduling conference, come back and we'll do that.
Yeah, and I would just suggest, Mr. Bromley, if there's discovery they need and they want
to get started, they can get started. Again, we're going to want, Your Honor, to be able
to deal with these issues in a timely manner. And I know we don't have to resolve that here,
but it's going to prejudice our clients if these things just get pushed up indefinitely.
Well, it sounds like the parties are talking to each other, and hopefully the cooperation
will continue, including discovery issues. I don't want to have to spend my holiday while
I'm traveling having to have a conference call about the discovery dispute. So hopefully
the parties can agree on discovery issues. All right. Anything else before we adjourn?
Nothing from the debtors, Your Honor.
Okay. All right. Well, thank you all very much. We're adjourned. I guess our next, we
won't get together until the 6th, if that goes forward. Hopefully the parties can resolve
it, but if not, I'm prepared to go forward on the 6th. All right. Well, thank you all
very much. Enjoy the holidays, and I will see everybody next year. We're adjourned.
Thank you, Your Honor.