Good afternoon, this is Judge Dorsey.
We're on the record in FTX trading limited, case number 22-11068 and FTX digital markets
limited, case number 22-11217.
This was a scheduling conference that I requested.
I'll give the same admonishment I've been giving at the beginning of the Zoom hearings
in these cases.
This is a formal court proceeding.
I expect the parties to conduct themselves accordingly and anyone on the call to conduct
themselves accordingly.
Any disruptions will not be tolerated.
If there is a disruption, you will be removed and not be allowed back into the Zoom hearing.
Unless you are going to be presenting, please keep your camera turned off.
As I mentioned at the beginning, this is a scheduling conference.
So unless you, I'm not going to hear any arguments on any motions or hear complaints from anybody
who has something they might want to say in some future hearing, we'll reserve those for
a later time.
So with that, I'll go ahead and turn it over to debtors council, I guess the U.S. debtors
council, I should say.
Let's see, I have a double hearing here.
Good afternoon, Your Honor.
James Bromley of Sullivan and Cromwell on behalf of the debtors.
Would you like to take appearances for those who are speaking or would you like me to just
begin?
No, you can go ahead and begin.
I've got the list of everybody who's appearing here, so I can – and I assume that those
who are – have their cameras on are expecting to make comments, so go ahead.
Thank you, Your Honor.
The – I'm here with my colleagues, Brian Gluckstein, whose name is appearing under
my face, so I'm averaging up today, and Alexa Cranseley.
We have a number of matters with respect to scheduling we'd like to discuss.
The first I will deal with, which has to do with the joint provisional liquidators, and
there are a number of matters that have been – that are on for consideration.
I see that Mr. Zaki is here from White and Case.
We have been in conversations over the past several days, notwithstanding the volume of
papers that have been filed.
We have also been trying to have conversations about moving forward on a constructive basis.
And based on communications that we've been having between our offices over the past several
hours, I think that we have come to a point where we believe that it's appropriate to
inform the court that we would like additional time to try to reach an agreement, and that
we would not need to go forward on Friday with respect to the hearing on the motion
to compel.
We would be at the court's convenience, we would look for a hearing sometime in the
next week, near the end of next week, that would give us time to allow us to meet in
person and see if we can come across the finish line with an agreement that will resolve most,
if not all, of the issues that exist between the JPLs and the debtors.
Okay.
Mr. Zaki, go ahead.
Sorry, Jason Zaki, from White and Case.
On behalf of the JPLs and the Bahamian debtors, I agree with what Mr. Bromley said.
We've been working in parallel paths, so while there's been a fair bit of litigating, we've
also been negotiating.
And I think that if we could have, obviously, Your Honor, schedule is what it is.
But if you had a date at the end of next week to give us, I think we could use that extra
time constructively.
Okay.
End of next week, that puts us to the 13th, 12th or 13th.
I can do the 13th anytime after 11, 11 or later, whatever time works for the parties.
Sure, Your Honor, I would suggest if it works for Mr. Bromley and his clients that we take
the earliest start time we have, so I'd suggest 11.
That works for the debtors, Your Honor.
Okay.
We'll go ahead and move the January 6th hearing to the 11th, or excuse me, to the 13th at
11 a.m. Eastern time.
Friday the 13th.
Yes.
I'm not superstitious, so.
And, Your Honor, that – we would move all of the pending matters with respect to the
JPLs out to that date, and hopefully we would have an agreement.
If we don't, we can then talk about scheduling at that time.
Okay.
When you say all of the matters, other than the motion to lift stay and turnover, what
else are we talking about?
Well, we have – there's the petition for recognition.
There is a motion to dismiss the case with respect to one of the U.S. debtors.
There's a motion for provisional relief, which I believe may be mooted by certain events
that occurred, as well as the motion to compel.
So the motion to compel was scheduled for hearing on Friday this week, and we would
just suggest that everything be moved off until the 13th.
If we are unable to reach agreement, we would go forward on a contested basis on the motion
to compel on the 13th, but we would also be able to discuss scheduling for all of the
other matters that remain open.
Okay.
I got you.
You're not asking to schedule the other matters for the 13th?
You're just –
No.
Okay.
All right.
No, I – Your Honor, if I could, I think just to preview, we're hoping to resolve
this if we don't.
I think the parties may have different views as to how to schedule those matters, and I
agree with Mr. Bromley that's something we could take up with the Court next week.
I do want to update the Court with regard to the provisional relief motion.
This concerned a motion that we had filed to take custody of certain bank accounts that
were in the name of the Chapter 15 debtors.
As Mr. Bromley mentioned, since we filed that motion, the United States government has taken
certain actions with regard to those accounts.
We are in contact with DOJ and also with the Chapter 11 debtors and other parties, and
we are trying to see if we can find a consensual path forward with regard to that.
So I don't think there needs to be anything done with regard to that motion at this time,
and we hope to come back to the Court with an agreed path forward.
But I did want to update you about – it may be mooted, it may not, depending on certain
details, but there have certainly been developments, and I just wanted to make sure the Court was
aware of that.
Okay.
Great.
Thank you.
I appreciate it.
All right.
Your Honor, Chris Hanson.
May I be heard for a second?
Go ahead, Mr. Hanson.
Yes, Your Honor.
My name is Chris Hanson with Paul Hastings, proposed counsel to the Official Committee
of Unsecured Creditors.
I just want to introduce myself and my partner, Ken Pasquale, who's on as well, and inform
the Court that we have been involved in the discussions with the debtors and the JPLs,
and we are also hopeful that we can get to a resolution.
Okay.
Great.
Thank you, Mr. Hanson.
All right.
What else do we have?
Your Honor, sorry.
One other detail, given next week's hearing set for the 13th, Your Honor had set a deadline
for our reply of today.
One of the reasons we wanted the extra time is we don't think further pleadings being
filed now will be constructive.
So if we could roll that deadline to next week as well, which I see whatever works for
the Court, I would suggest the 11th, but if Your Honor would like more time to read it,
I would be happy to do so.
Okay.
Any objection, Mr. Bromley?
I'm sorry, Your Honor.
Just as Mr. Zachea was speaking, a fire alarm started in our courtroom here.
So I didn't hear it.
I'm sure I'm okay with it, but if you could just repeat the date, I'd appreciate that.
The 11th.
He's looking to move the date to the 11th.
That is fine.
Okay.
Yeah, one week.
That's fine with me as well.
Thank you, Your Honor.
All right.
I know we have to schedule the trustees motion to appoint an examiner.
That's another one that we need to talk about.
And before we go to that, I just want to make sure I don't forget this because I've forgotten
that the last two times we've talked.
Because of the size of this case, we are going to have to appoint a fee examiner.
So I would ask that the parties meet and confer and come up with someone, including Ms. Sarkisian
in those discussions as well so that we can get a fee examiner on board.
Thank you, Your Honor.
I'm Juliet Sarkisian for the U.S. trustee.
We, our office, would obviously like to schedule the examiner motion as soon as possible.
Have you, have there been any discussions amongst the parties on trying to schedule
a date for that?
No, Your Honor, because I believe Your Honor had stated that on February 11th, there would
be a status conference regarding scheduling that motion.
So we have not actually discussed dates as of yet.
I forgot I had said we would talk about it on the 11th.
Why don't we go ahead and now that we have the committee council on board, why don't
you coordinate with them and see if you can come up with an agreeable date to have that
motion heard.
Thank you, Your Honor.
And if not, if not between now and the 11th, then we'll talk about it on the 11th.
Thank you, Your Honor.
Your Honor, the U.S. trustee has a request regarding scheduling.
I don't know if you want to hear that now, or there are other scheduling matters to be
addressed first?
Well, I don't think we have any particular order, so go ahead as long as you're already
on board here.
Thank you, Your Honor.
Your Honor, for next Wednesday, January the 11th, by my count, there is at least 21 applications
and motions that are scheduled to be heard.
This includes bid procedures, the debtor's request for final approval to redact customer
names and other information from various filings to which the U.S. trustee has filed an objection,
as well as many, many retention applications.
Of the 21 items, 16 were filed just a few days prior to Christmas and had objection
deadlines of today, just a few days after New Year's, although the debtors have agreed
to extend our objection deadline to this Friday, and I believe the same for the committee.
From our office's standpoint, to address such a large number of items over the holidays,
vacations had to be canceled, but it was still a large number of items, a large number of
matters to deal with in a very short period of time over the holidays.
So we have sent a lot of questions and comments to debtors' council about these many motions
and applications.
We have received responses to some of those, but not to others.
We are, with respect to the information we have received, and we do certainly appreciate
the debtors providing this information.
Some of it was quite extensive, but we are still digesting it, and we may have follow-up
questions, and we will be asking for supplemental disclosures to be filed with respect to certain
of the professionals, and we may also be filing objections regarding some of the retentions.
In light of this situation, the U.S.
Trustee is asking for a continuance of five of the retention applications and an
adjournment of the hearing.
Those five are Sullivan and Cromwell, Wayne Emanuel, Alex Partners, Alvarez and Marcel,
and Pirella, the investment banker.
There would be no prejudice to these professionals, since all retention applications seek
non-proton relief, and the U.S.
Trustee will not be objecting to non-proton relief.
The additional time would also allow us to hopefully resolve a number of open issues
and therefore limit what we have to bring before the court.
And in this case, Your Honor may be aware, the debtors have sought to have a four-month
extension of the time to file their schedules and statements and rule 2015.3A reports.
They have also yet to file any monthly operating reports.
The first one is already past due, and they've indicated they're seeking to file those
reports at the end of March.
And we certainly understand that the debtors have a lot of pressures on them with respect
to these very important disclosure documents, but at the same time they want to move quickly
on a large number of retentions and motions and starting bid procedures.
So in light of all of that, we would ask to have that additional time with respect to
the five particular retention applications I mentioned, and we certainly appreciate the
efforts and consideration of our request.
Thank you, Your Honor.
MR.
HOOKS.
Anyone object to pushing those off?
MR.
KING.
Your Honor, from the debtors, I'd like to see the podium to my colleague, Alexa Cransey.
I think the debtors do have an objection to moving it off.
Thank you.
MS.
CRANSLEY.
Good afternoon, Your Honor.
For the record, Alexa Cransey from Sullivan Crown Wall proposed counsel for the debtors.
And Your Honor, we echo Ms. Sarkeesian's comments.
We have been working very closely with her and responding, written and orally, to questions
and comments that she has received.
With respect to Sullivan and Crown Wall, we have now gone through two rounds of comments,
and we submit that with another week remaining between now and next week's hearing, that
the debtors are ready to proceed, and we are willing to work with Ms. Sarkeesian on any
additional questions that she has and on a supplemental declaration to include additional
disclosures as necessary.
This is likewise true for the other professionals that were named.
We have been responsive to the various questions and comments on the proposed forms of order.
We are amenable to working with Ms. Sarkeesian on extending objection deadlines and working
with her with respect to those.
But given the size of this case and the importance of the work that has been done by the professionals,
the debtors respect that we continue and proceed with these retention applications next Wednesday.
Well, Ms. Sarkeesian, are there any of the five you are requesting that you are anticipating
you might object to the retention?
Well, Your Honor, we do have one sort of overarching objection which relates to certain professionals
that are being retained to conduct investigations of the kind that we believe would be appropriate
and can only be performed, frankly, by an examiner.
So we would have that objection.
With respect to other more, I would say granular details, again, we are still digesting.
We haven't gotten back responses to all of our requests.
I don't believe we have gotten anything on Pirella.
We have gotten responses on the others, but we have to digest the information.
And so I can't say at this point in time whether we would have other objections.
Again, we are trying to work through this material, but it's a lot.
And in addition to this five, there's a lot of other things we think we can work out.
And with respect to extending the objection deadline, I certainly appreciate a further
extension.
I think the difficulty comes with the hearings on Wednesday.
The agenda is due on Monday.
Any reply that the debtors would have would actually be due on Sunday, I believe, at 4
p.m.
So there's not a lot of wiggle room for further extensions unless the debtors are willing
to not file a reply or if the court is willing to have items being filed after the agenda.
All right, well, I'm sympathetic to the fact that while debtors have a lot of resources
and a lot of lawyers to produce these motions, the U.S. Trustee's office has more limited
resources available to it.
And given that there are 21 motions on for the 11th, and by the way, I have another hearing,
a contested oral argument on a motion to dismiss at 2 o'clock that day.
So my time is going to be implicated as well.
So I'm going to grant the motion to move those five retention application hearings
to.
It looks like I have a time blocked out at 10 a.m. on the 20th for a motion filed by
BlockFi, a stay motion.
We can hear those retention applications at that time.
That gives Ms. Sarkeesian a little more than another extra week to be able to address those
five retention applications.
Thank you, Your Honor.
That's greatly appreciated.
I think that that will absolutely be enough time for us.
I guess the only thing I would ask is should we set the objection deadline now or is that
something you would like us to work out with debtors' counsel?
Why don't you try and work it out and see if you can come to an agreement on that?
I'm sure we can.
Debtors' counsel has been very cooperative.
I certainly do not want to imply in any way otherwise.
And we do appreciate the additional time.
I think we will be able to use that to really limit the issues that we will be removing
before the court.
Thank you, Your Honor.
All right.
Thank you.
Anything else for Ms. Sarkeesian on the, from your office on scheduling?
No, Your Honor.
That's it.
Okay.
Thank you.
All right.
Do we have any other scheduling issues then?
Did we take care of everything?
Your Honor.
Sorry, Adam Landis here from Landis Rathlin Cobb, Delaware counsel to the debtors, proposed
Delaware counsel to the debtors.
I'm jumping in because I have gotten a message from a Department of Justice attorney, Seth
Shapiro, who's on and has his hand raised and is trying to make a statement or to address
the court and he can't jump in.
So I just wanted to do that.
Yes, I do see it now.
As convenience to him in the court.
Go ahead, Mr. Shapiro.
You can turn your camera on as well.
Thank you, Your Honor.
I'm trying to turn the camera on, but for some reason it says that the host has disabled
it.
Well, I did turn you off because we had a bunch of people had the cameras on at the
beginning of the hearing, but we'll see if we can get you turned back on.
But if not, go ahead in the meantime.
I can hear you.
Okay.
Yes.
Yes, Your Honor.
And thank you for hearing me.
I'm appearing on behalf of the criminal prosecutors for the United States, both in the Southern
District of New York and the criminal division, and we wanted the court to know that connection
with the in the FTX digital case and connection with the JPL's motion for provisional relief
that certain assets have been seized.
We didn't want the court to just read that in the papers that were filed by Silvergate
and Moonstone, so if Your Honor has any questions about the accounts or cryptocurrency that's
been seized, please certainly let us know.
We're trying to work things out with the parties, but if we can't, those matters will be heard
at a later date.
There is another scheduling matter as well in connection with the FTX trading matter
that's on the court's docket for January 20th.
That stay motion relates to an adversary proceeding filed in the Block 5 bankruptcy proceeding
in New Jersey related to Robin Hood shares, which the federal government has also seized
or is in the process of seizing, and we wanted Your Honor to know about that as well.
We need to believe that these assets are not property of the bankruptcy estate or that
they fall within the exceptions under sections 362B1 and or B4 of the bankruptcy code.
So we can address those issues at a later date, but we did want the court to know about
those seizures.
Okay, what, which, I saw, I did see one pleading where one of the banks indicated that the
funds had been seized.
How many banks are there and which ones are they in?
Have they all been seized at this point, the ones that were subject to the motion?
The ones that were subject to the motion that had money in them, Your Honor, we believe
those accounts have all been seized and all the money related to those accounts either
has been seized or is in the process of seizure.
Of course, that's not the end of the story.
There of course would be a criminal and or civil asset forfeiture proceeding at some
point down the line in the Southern District of New York to which entities could file claims.
So we're in the process of speaking with the parties about that, about where those matters
should be adjudicated.
We're trying to work out an agreement, but if we can't, ultimately there will be a criminal
and or civil asset forfeiture proceeding in the Southern District of New York.
Thank you.
I appreciate that, Mr. Chair.
Okay.
All right.
Any other, Mr. Davidoff?
Thank you, Your Honor.
Good afternoon.
Brian Davidoff from a law firm Greenberg, Lascaux in Los Angeles.
Your Honor, I do see on the agenda for hearing today is scheduling on the motion that my
client had filed North America League of Legends Championship Series, which is operated by
Riot Games.
That hearing is currently scheduled on the 11th.
I certainly note that Your Honor has a number of matters scheduled for that day.
Your Honor, that motion requests relief from stay or alternatively to compel the debtors
to reject the agreement.
The debtors separately had filed a motion to reject contracts, which they have scheduled
for February 8th.
I've had communications with Ms. Cranesley in an effort to get a stipulation whereby
our motion would be granted since both parties are looking for the same result, that is,
for rejection of the agreement.
We would also agree with the debtors which they have requested in their motion that the
rejection is effective December 30th, which is when they filed their motion.
Ms. Cranesley has indicated that they wanted to wait until after the objection deadline
to their motion, which I believe is January 13th.
The objection deadline to our motion is scheduled for today.
And so what I was hoping that we could discuss with Your Honor is simply a stipulation with
the debtors whereby they stipulate to the relief in our motion and we resolve this matter
entirely both for January 11th and February 8th.
Ms. Cranesley?
Thank you, Your Honor.
We had understood from your chambers that Mr. Davidoff's client's motion is not being
scheduled to be heard on January 11th.
We agree that their objection deadline is in fact today.
Our position, as Mr. Davidoff had articulated, is our – the objection deadline with respect
to our motion is next Friday, January 13th.
So we would work with Mr. Davidoff in the meantime on a mutual stipulation to resolve
the issues.
But we believe we should wait until the passage of the objection deadline for our motion
before we put that stipulation on file in case there are any issues or objections raised
by any parties in interest.
Well, I think that's right.
I mean, the motion was set on a regular notice.
There was no request for a shorter notice on that motion.
And while it's probably unlikely that anyone else is going to object, I do need to leave
it open to see if somebody does.
I mean, we're only talking about a few days here, Mr. Davidoff.
If you wait until the 13th, I think we'll be able to get a little bit of a better understanding
of the motion.
I think that's right.
I mean, we're only talking about a few days here, Mr. Davidoff.
If you wait until the 13th, then there's no objection.
It sounds like the debtors are willing to enter into a stipulation that could be filed.
Well, the 16th is a holiday.
This court will be closed, but it could be entered on the 17th if there's no objection.
Your Honor, I appreciate that, and I do recognize it's merely a matter of a few days.
I did want to mention to the court that every day in January is an important day for my
client because the debtors are willing to enter into a stipulation that could be filed.
I think that's right.
You're the quickie subject?
has given us until January 12th to respond to their stay motion.
And the provisional liquidators have also
extended our deadline to a date to be decided.
So I just wanted to make sure that's clear on the record.
And for the court's benefit, we will file a notice of seizure
so that the court is aware and has something in the docket
that shows what's actually been seized by the US government
so that if we don't end up resolving it,
it'll be clear for purposes of litigation
what is actually in the government's possession.
Thank you.
Thank you, Mr. Shapiro.
All right.
Well, thank you all very much.
I appreciate it.
I think it was productive.
I'm glad we had this call.
I'm glad to hear that the parties are still
working towards a resolution of the issues.
And hopefully, we'll be able to do this in a cooperative way
and avoid having to have a hearing later on.
So with that, we are adjourned.
Thank you all very much.
Thank you, Ryan.