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Good afternoon, Your Honor, and may it please the Court.

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Adam Landis from Landis, Rath and Cobb, counsel to FTX Trading, Limited, and the Associated

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Debtors.

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Your Honor, we filed an amended agenda in the case today noting that items 1 through

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5 are adjourned.

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Items 6 through 8, 11, 12, and 13 have been resolved with orders entered, for which we

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thank Your Honor for taking care of that.

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We only have three matters going forward.

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Number 9, with respect to the debtors' request for extension of their exclusive periods to

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file and solicit plan of realization.

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Number 10, the stable-leak motion, and number 14 is the status conference with respect to

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emergent.

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Before we head into the agenda proper, Mr. Diederich would like to address the Court

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with an update as to matters since we last appeared at an omnibus hearing.

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Okay, thank you.

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Mr. Diederich.

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Thank you.

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Good afternoon, Your Honor.

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Andy Diederich with the Debtors, with me as my partner, Brian Gluckstein.

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I think we have a presentation.

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Does it?

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Do I press it forward?

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Thank you.

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Can we bring up that for everybody in the courtroom?

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There it is.

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Good.

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So thank you.

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Your Honor, it's been three months since we were before you at an omnibus hearing.

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We'd like to thank Your Honor for the efficient manner in which the cases have been conducted

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so far.

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The Court has issued more than 38 orders on certification of counsel, including 30 orders

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that reflected negotiated solutions with stakeholders.

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As a result, the debtors have been able to focus on the

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business of the case rather than court appearances.

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The first months of the case have been extraordinarily busy and productive.

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There's an overwhelming number of ongoing work streams and novel issues in every discipline.

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Today, the situation has been stabilized and the dumpster fire is out.

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And as I will explain in a moment, we anticipate filing a plan of reorganization in July.

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I would like to spend some time on a case update for the Court.

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First, and perhaps most important, are assets available for stakeholder recovery.

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Our estate consists of many investments, businesses, and causes of action that have not yet been

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monetized.

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Valuing these now is impossible.

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However, we are tracking distributable assets, cash, Class A, or Category A cryptocurrency,

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which we defined in previous submissions, and securities.

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Here's a chart of these assets at petition date value, including cash receivables from

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the settlements and transactions recently approved by the Court.

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We now stand at $6.2 billion, an increase of $800 million from my update to the Court

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in January.

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This increase in value is more significant if we take into account current asset pricing.

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00:04:07,920 --> 00:04:13,560
On this next slide, at current prices, our distributable assets have increased to $7.3

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billion, a $1.9 billion increase from my January briefing.

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What goes up can go down.

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Prices will fluctuate during these cases.

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As we will discuss in a moment, one of the important tasks of the debtors is being a

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good and prudent custodian of $7.3 billion of asset value.

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We will be increasing distributable assets, hopefully dramatically, as the case progresses,

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but it's also important for us not to lose what we have now.

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Next, Your Honor, I'd like to review some significant events by subject matter.

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The first is our investigative work.

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In addition to everything else, the debtors are conducting an extraordinarily complicated

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forensic investigation in coordination with multiple law enforcement agencies in the United

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States and around the world.

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Early on in this case, the Board of Directors decided it was in the interests of the estate

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to expend the resources necessary to create a centralized collection of information under

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the debtors' control and to make this information available to law enforcement agencies in a

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transparent and reliable manner.

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The debtors believe that this cooperation has and will continue to benefit the estates

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economically, especially as we approach the formation of a plan and the coordination of

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the distribution of estate property with the distribution of property subject to criminal

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forfeiture.

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Government cooperation is in our financial interest.

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The investment has been substantial.

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Over 1.3 terabytes of data has been collected and compiled.

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Much of the information has been provided only to government authorities, sometimes

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directly and sometimes in summary presentations.

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The debtor is limited in what it can say publicly and provide to certain parties an interest

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00:06:00,760 --> 00:06:03,200
because of the pending government investigations.

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However, the debtors were able to publish earlier this week the first interim report

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of Mr. Raid of the Independent Directors, a report that focuses on control failures

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at the FTX Group prior to filing.

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The gist of this report is clear.

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Mr. Bankman-Fried repeatedly, pervasively, and often persuasively lied to stakeholders

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and the customers and creditors in order to maintain a digital con game.

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The FTX exchanges appear to the user as legitimate.

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In fact, superficially, they appear to process trades and information more quickly and conveniently

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than competitors.

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The app worked beautifully, but in truth, it was a facade, a digital Potemkin village,

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or perhaps more apt, a video game.

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00:06:58,320 --> 00:07:04,960
Behind the user interface, there was no correspondingly sophisticated reality, no equivalent process

91
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for segregating assets or reconciling trades, no reliable relationship between positions

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reflected in the online game and the underlying positions held in the real world.

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The debtors are working on a second report that will focus on the violation of basic

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principles of asset segregation.

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00:07:24,120 --> 00:07:28,600
The debtors will endeavor to make these reports available on a rolling basis and hope they

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will facilitate the common understanding necessary for productive plan discussions.

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Other developments include the guilty pleas of Mr. Singh joining Mr. Wang and Ms. Ellison.

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Those who have pled guilty also have agreed to provide assistance to the government, and

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Mr. Wang in particular has provided material assistance to the debtors as well, helping

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us locate additional assets.

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And we've seen additional charges against Sam Bankman-Fried.

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We also appreciate the U.S. criminal authorities working in parallel with us to secure assets.

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This includes approximately $100 million of cash in the name of FTX digital markets, as

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well as the often discussed hood stock.

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From the debtors' perspective, Your Honor, we see no tension between the debtors and

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the U.S. attorney as to whether particular assets are recovered by the U.S. attorney

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or by the debtors.

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In this case, we believe victims entitled to restitution and creditors entitled to a distribution

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in Chapter 11 are functionally equivalent.

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We will continue to work with the U.S. attorney on this basis.

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Operationally, we've reconciled customer balances across an incredible 10 million accounts.

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We have a considerable cost and expense fortified the AWS security environment.

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We've retained a core team of continuing employees, and Your Honor has approved a CURP.

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We've rationalized our use of office space and our footprint.

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And importantly, we have returned cryptocurrency to customers in Japan by opening full withdrawals.

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Japan has a cryptocurrency regulatory environment that was responsive to the Mt. Gox insolvency.

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Cryptocurrency generally must be kept in segregated cold storage, and customers have a clear ownership

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right in the cryptocurrency under Japanese law.

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As a result, Japan is the only place in the world where cryptocurrency was actually kept

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segregated by FTX, and the segregation was never broken.

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The debtors also have been working very hard to open withdrawals of segregated cash in

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Cyprus, where there are different but also effective customer protections with respect

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to cash deposits.

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These jurisdictions, however, are notable exceptions.

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Everywhere else, the situation as to customer rights and asset segregation is unclear.

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Paying and tax are things normally taken for granted by lawyers, but the debtors now are

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not reviewing balance sheets because there are no reliable balance sheets.

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Instead, the debtors have been building balance sheets from primary source material.

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That material includes banking records, AWS, the cloud environment, QuickBooks, and a category

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of unstructured data, which is accountantspeak, for emails, text, and even chatroom entries.

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The initial fruits of this effort were the reports the debtors made public on customer

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shortfalls on the exchanges, and the schedules and statements filed only last month.

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Efforts now underway include recreation of inter-silo and inter-debtor transactions,

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led by our financial advisor, Alvarez and Marsal, the development of historical financial

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statements, led by a team of forensic accountants and ALEKS partners, and efforts to put the

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debtors in a position to file accurate tax returns, led by Ernst & Muell.

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As I mentioned previously, one of the important tasks of the debtors is managing $7.3 billion

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in effectively liquid assets.

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Over 75% of our cash is in 345 compliant accounts, which in the current banking environment,

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the protections of 345 seem especially prudent.

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About $500 million of our cash is held outside of 345A compliant accounts pursuant to our

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cash management order.

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We continue to examine whether or not we can move more of that cash into 345A accounts.

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Our cryptocurrency.

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The debtors hold $1.6 billion in cryptocurrency at current market values and cold storage

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controlled by the debtors.

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The remaining category A cryptocurrency is staked or on third-party exchanges, and we

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may migrate that into cold storage over time, but it's impractical to do it at the current

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moment.

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The board is monitoring all of these exposures, taking expert advice on cryptocurrency custody

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and security risks, and discussing the risks involved and potential alternatives with the

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committee and other stakeholders.

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These assets will continue to grow.

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Avoidance actions and other outbound litigation will be an important source of recovery for

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creditors.

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Actions so far include our $460 million settlement with Modulo, a $53 million cash settlement

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with DelTec, avoidance actions against three other Chapter 11 debtors.

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These include a $445 million administrative preference claim into the Voyager bankruptcy,

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and substantial claims against BlockFi and Genesis.

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These early avoidance actions are the tips of the icebergs.

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We have reviewed substantially all the historical off-change transactions by the debtors at

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this point.

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All the transactions that we believe may be avoidable, and the facts of these suggest

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compelling causes of action relating to several billion dollars of lost value.

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We also are advancing our work to review preferential transactions on the exchanges themselves.

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Finally, in addition to the grayscale litigation, which we've commenced, and then finally turnover

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actions.

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One of the most difficult issues that we've faced is that we continue to discover assets

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of the debtors that were held by nominee owners on behalf of Alameda and FTX.

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One example is the court's recent authorization of the turnover of an account at OKCoin, including

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over $150 million of cryptocurrency held in the name of an individual, but belonging to

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Alameda.

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We'd like to thank the dozens of exchanges and other parties that have been cooperating

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with us in these activities.

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We also have many valuable assets to sell.

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The court has approved the $96 million sale of our position in Miston Labs, and the $45

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million sale of a position in certain Sequoia funds.

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00:14:03,520 --> 00:14:09,040
We received, we've continued, we have a, as we've said before, a very substantial set

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of venture book investments.

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00:14:10,800 --> 00:14:14,640
We have now reviewed substantially all of those investments and are trying to decide

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the path forward on a venture investment by venture investment basis.

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The de minimis asset sale procedures that have been approved by the court, we've used

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for $5 million of proceeds so far, although there's dozens of transactions under discussion.

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And then finally, we have ongoing sale processes as announced that have yet to reach their

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conclusion.

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These include the transactions that we've noticed, that we've mentioned before, as well

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as token investments and other stray investments of various sorts.

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So where is all this going?

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We standard a day in the middle of April.

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In the second quarter, the debtors complete the 90-day review period we set for internal

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00:14:55,640 --> 00:15:00,840
discussions concerning the continued operation of the exchanges, discussions which the committee

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has been an active participant.

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00:15:03,240 --> 00:15:09,680
We'll be discussing next steps and alternatives for the potential restart or recapitalization

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of the exchange, conventional ideas and novel ideas with the committee and other stakeholders

195
00:15:15,680 --> 00:15:18,520
over the coming weeks.

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00:15:18,520 --> 00:15:23,300
We also are going to start plan discussions later this quarter.

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Our goal is to file with the court a preliminary plan of reorganization in July.

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We would like to set a bar date promptly.

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00:15:31,640 --> 00:15:38,040
Our current expectation is that we will set a non-customer bar date at the end of July.

200
00:15:38,040 --> 00:15:43,380
Our customer bar date requires the creation of a bespoke claims portal and raises a number

201
00:15:43,380 --> 00:15:46,240
of complicated issues.

202
00:15:46,240 --> 00:15:50,480
We're preparing the portal in consultation again with the committee and want to have

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00:15:50,480 --> 00:15:53,800
an operating demo to run through prior to launch.

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00:15:53,800 --> 00:15:58,440
So we anticipate the customer bar date, like the government bar date, will be at the end

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00:15:58,440 --> 00:15:59,440
of September.

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00:15:59,440 --> 00:16:04,360
That's a bifurcated bar date process, but it allows us at least to get the information

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00:16:04,360 --> 00:16:08,300
that we're going to yield, that the non-customer bar date will yield.

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00:16:08,300 --> 00:16:17,000
This is in part because the level of information we have about non-customer claims is, let's

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00:16:17,000 --> 00:16:21,280
just say it will be benefited by the bar date process as we start to decide we have a pretty

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00:16:21,280 --> 00:16:26,320
good idea now of the nature of customer claims against the estate, but the nature of non-customer

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00:16:26,320 --> 00:16:28,280
claims we have a lot less certainty.

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00:16:28,280 --> 00:16:32,320
And so we bifurcated the bar date so we can approach the plan process having a better

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00:16:32,320 --> 00:16:38,680
sense of how significant are non-customer claims, in particular loan counterparting

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00:16:38,680 --> 00:16:42,680
other claims into Alameda.

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00:16:42,680 --> 00:16:47,480
We're aiming to have a disclosure statement filed in the fourth quarter, a disclosure

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00:16:47,480 --> 00:16:54,080
statement hearing in the first quarter of 2024, a planned solicitation that bridges

217
00:16:54,080 --> 00:16:59,960
the quarters, and finally, plan confirmation in the second quarter of 2024.

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00:16:59,960 --> 00:17:06,520
Now these are of course an aspirational calendar, but we believe it's a sensible calendar,

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00:17:06,520 --> 00:17:12,440
and we believe the filing of a plan early is important given the nature of the case.

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So far in the case we've avoided serious litigation with economic parties.

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00:17:17,360 --> 00:17:23,260
As we've considered internally at great length the central legal issues in the cases, such

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00:17:23,260 --> 00:17:28,420
as the nature of customer entitlements, the distinction or lack of distinction between

223
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legal entities, they all raise significant equitable as well as legal questions.

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00:17:34,880 --> 00:17:39,000
The same is true for stakeholder assertions of constructive trust, a phrase that we've

225
00:17:39,000 --> 00:17:43,040
heard, Your Honor, from dozens of different stakeholders all across the capital structure

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00:17:43,040 --> 00:17:45,680
seeking to elevate their own claim.

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00:17:45,680 --> 00:17:51,740
The debtors believe that discussion, settlement, and if necessary, litigation of all of these

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00:17:51,740 --> 00:17:58,160
issues will be easier if we first table a plan of reorganization that shows all stakeholders

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00:17:58,160 --> 00:18:03,040
and potential litigants the big picture of how they and others will be treated.

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We need to show stakeholders that plan first and resolve disputes about the plan second,

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given our facts.

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Throughout this process, asset recovery efforts will continue.

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That's all I have, Your Honor, but we wanted to make sure that we at least were able to

234
00:18:23,400 --> 00:18:28,200
tell Your Honor and stakeholders not just something about the history of what's accomplished,

235
00:18:28,200 --> 00:18:30,920
but a roadmap going forward.

236
00:18:30,920 --> 00:18:31,920
So absent questions from Your Honor.

237
00:18:31,920 --> 00:18:32,920
I'll turn to today's agenda.

238
00:18:32,920 --> 00:18:38,920
Let me just ask a question about the exchange restart.

239
00:18:38,920 --> 00:18:39,920
What does that entail?

240
00:18:39,920 --> 00:18:40,920
How will it work?

241
00:18:40,920 --> 00:18:45,920
Do customers, will they be able to withdraw a fund or their coin?

242
00:18:45,920 --> 00:18:52,120
What's the anticipation of how that's going to play out?

243
00:18:52,120 --> 00:18:54,600
The short answer is we don't know yet.

244
00:18:54,600 --> 00:18:57,840
So there's two exchanges, of course.

245
00:18:57,840 --> 00:18:59,440
There's actually more than two exchanges.

246
00:18:59,440 --> 00:19:03,980
There's two primary exchanges, DOTCOM and the U.S. exchange.

247
00:19:03,980 --> 00:19:14,240
The options being considered include a restart of the exchange from an operational and a

248
00:19:14,240 --> 00:19:16,480
functional perspective.

249
00:19:16,480 --> 00:19:22,040
It is likely that requires the raising of significant capital.

250
00:19:22,040 --> 00:19:26,000
There's a question posed whether the estate's capital should be used for that or whether

251
00:19:26,000 --> 00:19:28,500
it should be third party capital.

252
00:19:28,500 --> 00:19:31,920
There are some people that look at it as an M&A transaction.

253
00:19:31,920 --> 00:19:36,560
Can we dispose of the assets, including the going concern value of the estate, for proceeds

254
00:19:36,560 --> 00:19:39,320
to the estate and distribute those proceeds?

255
00:19:39,320 --> 00:19:45,520
There are possibilities that customers could have an option to take part of their proceeds

256
00:19:45,520 --> 00:19:50,400
in that they would otherwise receive in cash from the estate and receive from some kind

257
00:19:50,400 --> 00:19:54,460
of an interest in the exchange going forward.

258
00:19:54,460 --> 00:19:59,240
There are as many opinions on this, I think, as there are professionals involved in the

259
00:19:59,240 --> 00:20:02,840
case, and that's a lot.

260
00:20:02,840 --> 00:20:06,240
So it's a very, you know, I don't think we have an answer at this time.

261
00:20:06,240 --> 00:20:11,280
What we have committed to do, as we spent the last about 90 days, the 90-day period

262
00:20:11,280 --> 00:20:15,000
we gave to kind of the initial consideration of this is expiring, and we're going to sit

263
00:20:15,000 --> 00:20:19,200
down with the committee and other stakeholders and think about it.

264
00:20:19,200 --> 00:20:21,720
There's also a sequence and a timing question.

265
00:20:21,720 --> 00:20:24,880
So there are some that believe that if there's anything to be done with the exchange, it

266
00:20:24,880 --> 00:20:31,520
should be done quicker, as quickly as possible, which might imply some kind of 363 or other

267
00:20:31,520 --> 00:20:37,480
things, and others that believe perhaps the exchange should be coupled with other assets,

268
00:20:37,480 --> 00:20:41,440
as opposed to just being the exchange itself.

269
00:20:41,440 --> 00:20:45,960
So a long-winded way to say, Your Honor, that all options are on the table, but we don't

270
00:20:45,960 --> 00:20:49,640
have any particular path forward at this time.

271
00:20:49,640 --> 00:20:56,800
Does there need to be a resolution of the—I know there's litigation pending about whether

272
00:20:56,800 --> 00:21:01,800
the point that's being held in the exchange is property of the state or is it customers'

273
00:21:01,800 --> 00:21:02,800
property?

274
00:21:02,800 --> 00:21:06,800
Does that need to be resolved before we can reopen the exchange?

275
00:21:06,800 --> 00:21:08,440
No, I don't think so.

276
00:21:08,440 --> 00:21:12,640
I think that it depends on the nature and the structure of that transaction, right?

277
00:21:12,640 --> 00:21:16,040
And that's again one of the things we're thinking about, is if we want to do something

278
00:21:16,040 --> 00:21:21,360
with the exchange in advance of what I think is already an aggressive timeline for the

279
00:21:21,360 --> 00:21:26,440
plan, as opposed to waiting to resolve when we resolve the plan, then I think we're all

280
00:21:26,440 --> 00:21:32,520
going to have to get together and come up with a way to monetize, if you will, the estate's

281
00:21:32,520 --> 00:21:38,240
investment in the—the value the estate has in the exchange in a way that is without prejudice

282
00:21:38,240 --> 00:21:42,320
to the plan issues.

283
00:21:42,320 --> 00:21:47,320
But there's obviously a relationship.

284
00:21:47,320 --> 00:21:50,640
Thank you.

285
00:21:50,640 --> 00:21:56,360
So on the agenda today, Your Honor, we only have three items, as I think Mr. Landis mentioned.

286
00:21:56,360 --> 00:21:59,720
The first item, Agenda 9, is exclusivity.

287
00:21:59,720 --> 00:22:05,200
Then we have Mr. Bickman-Freed's motion for relief from the automatic stay, and then a

288
00:22:05,200 --> 00:22:10,320
status conference discussion in the emerging case, Agenda 14.

289
00:22:10,320 --> 00:22:15,920
So Your Honor, I'll turn to the exclusivity motion, file the docket 846.

290
00:22:15,920 --> 00:22:22,280
The debtor's request to extend the exclusivity period by six months is unopposed.

291
00:22:22,280 --> 00:22:25,040
The Committee did file a statement to which we responded.

292
00:22:25,040 --> 00:22:27,720
An absent question from the Court, we'd ask the motion be entered.

293
00:22:27,720 --> 00:22:31,080
If we don't have any questions, did the Committee want to be heard on that?

294
00:22:31,080 --> 00:22:32,080
We would like to, Your Honor.

295
00:22:32,080 --> 00:22:33,080
Yes, thank you.

296
00:22:33,080 --> 00:22:42,560
Your Honor, Chris Hanson with Paul Hastings on behalf of the Official Committee.

297
00:22:42,560 --> 00:22:46,040
I'll try to make this brief, Your Honor.

298
00:22:46,040 --> 00:22:50,120
The Committee's statement that was filed in connection with exclusivity was accurate

299
00:22:50,120 --> 00:22:51,120
and not misleading.

300
00:22:51,120 --> 00:22:55,920
It was direct and aimed at helping the Court to try to understand the Committee's frustrations

301
00:22:55,920 --> 00:22:57,280
to date.

302
00:22:57,280 --> 00:23:01,240
It was also aimed at holding the debtors to their newly minted timeline and their commitment

303
00:23:01,240 --> 00:23:05,360
to be more transparent with Committee members than they have been to date.

304
00:23:05,360 --> 00:23:10,360
Unfortunately, the debtors filed a surprisingly insecure response that the Committee believes

305
00:23:10,360 --> 00:23:15,200
is disingenuous in some ways, and we have no choice but to correct the record.

306
00:23:15,200 --> 00:23:18,600
As we noted in our statement, the primary issue the Committee has had with the debtors

307
00:23:18,600 --> 00:23:22,320
is their lack of trust and engagement at the Committee member level.

308
00:23:22,320 --> 00:23:25,520
The debtor's own exhibit highlights their concern.

309
00:23:25,520 --> 00:23:32,200
Of the 1,636 documents provided to the Committee as listed on the exhibit, only 21 of them,

310
00:23:32,200 --> 00:23:38,120
1.3% of the total, were seen by the members of the Committee as designated as non-professionalized

311
00:23:38,120 --> 00:23:39,120
only.

312
00:23:39,120 --> 00:23:46,520
Of those 21, two were the so-called UCC reports that the debtors referred to a few times in

313
00:23:46,520 --> 00:23:48,120
their response.

314
00:23:48,120 --> 00:23:51,040
To be clear, those are not really UCC reports.

315
00:23:51,040 --> 00:23:54,120
They were debtor documents that were shared with the members of the Committee on the same

316
00:23:54,120 --> 00:23:59,080
day that they were released to the public and accompanied by two of the three meetings

317
00:23:59,080 --> 00:24:03,120
that were listed on the debtor's exhibit, which were walk-throughs of the documents

318
00:24:03,120 --> 00:24:07,360
hours before they were publicly released on January 17th and March 2nd.

319
00:24:07,360 --> 00:24:11,560
Obviously, if the Committee members have been given advanced access to the decks, they could

320
00:24:11,560 --> 00:24:17,280
have asked more intelligent questions, made the calls more productive, and provided valuable

321
00:24:17,280 --> 00:24:21,800
input on those presentations, but they were not provided with that opportunity despite

322
00:24:21,800 --> 00:24:25,400
the requests of the Committee professionals to do so.

323
00:24:25,400 --> 00:24:29,080
The only other meeting of the three that are referenced in the deck happened on March 30th,

324
00:24:29,080 --> 00:24:33,320
after the Committee delivered the debtors a draft reservation of rights on exclusivity

325
00:24:33,320 --> 00:24:36,840
that was far more strident than the one that it ultimately filed.

326
00:24:36,840 --> 00:24:41,080
At the time of the delivery of the draft document, the Committee requested a case timeline and

327
00:24:41,080 --> 00:24:43,040
a meeting with Mr. Wray.

328
00:24:43,040 --> 00:24:49,640
The debtors did not disclose a case timeline to the Committee professionals at that point,

329
00:24:49,640 --> 00:24:53,040
but they did, however, provide a high-level timeline when the call with Mr. Wray took

330
00:24:53,040 --> 00:24:54,880
place a week later.

331
00:24:54,880 --> 00:24:58,600
The debtor's reply would have the Court believe that both its detailed timeline and the call

332
00:24:58,600 --> 00:25:03,280
with Mr. Wray were products of the debtor's own volition, but they simply were not.

333
00:25:03,280 --> 00:25:06,840
They were prompted by the Committee, and we are pleased with Mr. Dietrich's disclosure

334
00:25:06,840 --> 00:25:08,800
of the timeline today.

335
00:25:08,800 --> 00:25:12,080
That's the kind of information that we believe the Court deserves and that we believe the

336
00:25:12,080 --> 00:25:17,280
public deserves, and that we believe all the creditors and the customers deserve as well.

337
00:25:17,280 --> 00:25:21,080
However, as an example of how the Committee members have been helpful to the debtors,

338
00:25:21,080 --> 00:25:25,320
which is not referenced in any of the briefings, is the situation that unfolded over the weekend

339
00:25:25,320 --> 00:25:27,840
after the Silicon Valley bank failure.

340
00:25:27,840 --> 00:25:31,120
That weekend, Mr. Wray reached out to the Committee professionals and the Committee

341
00:25:31,120 --> 00:25:35,360
members, and a productive dialogue occurred where the expertise of the Committee members

342
00:25:35,360 --> 00:25:39,800
was helpful to the debtors in navigating a unique situation that confronted them with

343
00:25:39,800 --> 00:25:42,040
respect to certain stablecoins.

344
00:25:42,040 --> 00:25:46,040
It was and remains the Committee's hope that similar, interactive, roll-up-of-sleeves

345
00:25:46,040 --> 00:25:49,600
and get-to-work meetings like those will continue.

346
00:25:49,600 --> 00:25:53,680
The Committee also takes issue with what the debtors seem to be trying to convey in their

347
00:25:53,680 --> 00:25:59,000
reply as to the Committee's role, which is simply one of administrative oversight.

348
00:25:59,000 --> 00:26:03,600
As the Court knows, that is definitively not what a creditors' committee is limited to.

349
00:26:03,600 --> 00:26:07,440
Section 1103 of the Code provides for the non-exclusive and expansive list of topics

350
00:26:07,440 --> 00:26:12,200
that are appropriate for a Committee, including the investigation of the acts, conduct, assets,

351
00:26:12,200 --> 00:26:17,120
liabilities, and financial condition of the debtors, the operation of the debtor's business,

352
00:26:17,120 --> 00:26:21,400
and any other matter relevant to the case or the formulation of a plan in order to carry

353
00:26:21,400 --> 00:26:25,680
out its role as a fiduciary for all creditors in a Chapter 11 case.

354
00:26:25,680 --> 00:26:30,160
Similarly, Section 1109 of the Code permits committees to be heard on any issue in the

355
00:26:30,160 --> 00:26:31,160
case.

356
00:26:31,160 --> 00:26:34,120
In the end, Your Honor, the Committee believes that its members have real-world, digital

357
00:26:34,120 --> 00:26:38,400
asset and cryptocurrency trading knowledge and expertise that can prove helpful to the

358
00:26:38,400 --> 00:26:43,920
debtors in addressing the many issues in these cases and to expedite their conclusion.

359
00:26:43,920 --> 00:26:47,680
The Committee looks forward to the forthcoming plan negotiations and the hard work to be

360
00:26:47,680 --> 00:26:51,520
done and the many other tasks that are necessary to achieve its goal.

361
00:26:51,520 --> 00:26:57,080
One note on the restart of the Exchange, Your Honor, the Committee does have a subcommittee

362
00:26:57,080 --> 00:27:00,160
that is focused exclusively on the restart.

363
00:27:00,160 --> 00:27:05,040
It incorporates many of the concepts that Mr. Dietrich discussed, and yesterday we were

364
00:27:05,040 --> 00:27:08,560
happy to deliver to the debtors a term sheet on that basis, and we look forward to working

365
00:27:08,560 --> 00:27:09,560
with them going forward.

366
00:27:09,560 --> 00:27:10,560
Thank you.

367
00:27:10,560 --> 00:27:11,560
Thank you, Your Honor.

368
00:27:11,560 --> 00:27:12,560
Mr. Dietrich, any response?

369
00:27:12,560 --> 00:27:21,560
Obviously, I expect the debtors and the Committee to cooperate fully, and there'd be a free

370
00:27:21,560 --> 00:27:27,560
flow of information between the two.

371
00:27:27,560 --> 00:27:35,560
I did not appoint an examiner because we have an independent board of directors and independent

372
00:27:35,560 --> 00:27:42,560
CEO running the debtors, so I expect that there will be an open and free flow of information.

373
00:27:42,560 --> 00:27:47,560
And we believe we have, and we will continue to try our best on that front.

374
00:27:47,560 --> 00:27:51,560
The U.S. Trustee, Your Honor, made, I think, a wise choice, appointed a single committee

375
00:27:51,560 --> 00:27:56,560
in this case, and we are, despite our growing asset value, far away from an equity district,

376
00:27:56,560 --> 00:28:01,560
meaning that there should be alignment at a fundamental level between the debtors and

377
00:28:01,560 --> 00:28:06,560
the Committee, and certainly in our relationship with the professionals.

378
00:28:06,560 --> 00:28:15,560
We have had what I think is really an open, transparent, from our end, very productive

379
00:28:15,560 --> 00:28:20,560
working relationship, but we take the feedback into account that we should do a better job

380
00:28:20,560 --> 00:28:28,560
of, maybe, perhaps now that the case is established and some of the security and other informational

381
00:28:28,560 --> 00:28:38,560
worries are fading in importance, we can continue to push in involving Committee members directly,

382
00:28:38,560 --> 00:28:42,560
not just the professionals, in some of the decisions that we're making.

383
00:28:42,560 --> 00:28:44,560
Thank you.

384
00:28:44,560 --> 00:28:50,560
Anyone else wish to be heard on the exclusivity motion?

385
00:28:50,560 --> 00:28:53,560
I'm satisfied that the requested relief is appropriate.

386
00:28:53,560 --> 00:28:55,560
I will enter the order.

387
00:28:55,560 --> 00:28:57,560
Has an informed order been uploaded?

388
00:28:57,560 --> 00:29:01,560
Your Honor, I believe it has to the extent it has not.

389
00:29:01,560 --> 00:29:02,560
I will get it uploaded.

390
00:29:02,560 --> 00:29:03,560
Okay, thank you.

391
00:29:03,560 --> 00:29:10,560
Thank you, Your Honor.

392
00:29:10,560 --> 00:29:13,560
So I believe the next motion, Your Honor, is from Mr. Bainman Freed's counsel.

393
00:29:13,560 --> 00:29:14,560
Yes.

394
00:29:43,560 --> 00:29:45,560
Good afternoon, Your Honor.

395
00:29:45,560 --> 00:29:49,560
Gregory Donnelly, Montgomery McCracken, on behalf of Samuel Bainman Freed.

396
00:29:49,560 --> 00:29:54,560
I'm joined by my colleague, Edward Schnitzer, who has been admitted per OPJ.

397
00:29:54,560 --> 00:29:58,560
In this case, he will be handling item number 10 on the agenda.

398
00:29:58,560 --> 00:29:59,560
Thank you.

399
00:29:59,560 --> 00:30:00,560
Thank you, Your Honor.

400
00:30:00,560 --> 00:30:03,560
Next up.

401
00:30:03,560 --> 00:30:04,560
Good afternoon, Your Honor.

402
00:30:04,560 --> 00:30:08,560
For the record, Edward Schnitzer from Montgomery McCracken, Walker and Rhodes, on behalf of

403
00:30:08,560 --> 00:30:09,560
Samuel Bainman Freed.

404
00:30:09,560 --> 00:30:13,560
We're here today on Mr. Bainman Freed's motion for relief from the automatic stay to the

405
00:30:13,560 --> 00:30:19,560
extent applicable to permit insurers to advance and to reimburse defense costs and fees under

406
00:30:19,560 --> 00:30:21,560
Director and Officer's insurance policies.

407
00:30:21,560 --> 00:30:26,560
The relief saw it as quite customary, as we highlight in paragraph 30 of our motion, including

408
00:30:26,560 --> 00:30:29,560
orders entered by this Court in other cases.

409
00:30:29,560 --> 00:30:34,560
To be clear, Your Honor, Mr. Bainman Freed is only seeking an order permitting the insurers

410
00:30:34,560 --> 00:30:36,560
to advance or reimburse costs.

411
00:30:36,560 --> 00:30:41,560
He's not seeking an order determining coverage or an order awarding him $10 million.

412
00:30:41,560 --> 00:30:46,560
Specifically, Your Honor, paragraph two of our proposed order states, the automatic stay

413
00:30:46,560 --> 00:30:52,560
imposed under section 362A of the Bankruptcy Code does not apply or to the extent it does

414
00:30:52,560 --> 00:30:57,560
apply, the automatic stay is lifted and modified solely to the extent necessary to permit and

415
00:30:57,560 --> 00:31:03,560
authorize Realm and Beasley to evaluate coverage and to make payments under and in accordance

416
00:31:03,560 --> 00:31:08,560
with the terms of the DNAO policies to or for the benefit of Mr. Bainman Freed for the

417
00:31:08,560 --> 00:31:14,560
reimbursement and payment of any covered defense costs incurred in connection with the pending

418
00:31:14,560 --> 00:31:15,560
claims.

419
00:31:15,560 --> 00:31:19,560
Your Honor, also contrary to what some of the objecting parties have claimed, Mr. Bainman

420
00:31:19,560 --> 00:31:23,560
Freed is also not seeking an order to the exclusion of any other insurers who might

421
00:31:23,560 --> 00:31:24,560
have coverage.

422
00:31:24,560 --> 00:31:25,560
Far from it.

423
00:31:25,560 --> 00:31:30,560
Mr. Bainman Freed simply sought coverage since he had no choice after the debtors refused

424
00:31:30,560 --> 00:31:33,560
to indemnify him and refused to stipulate to stay with him.

425
00:31:33,560 --> 00:31:39,560
It was not his right or place to seek coverage or stay relief on behalf of any other party

426
00:31:39,560 --> 00:31:40,560
other than himself.

427
00:31:40,560 --> 00:31:44,560
They are certainly free to do so as long as they comply with the Bankruptcy Code and the

428
00:31:44,560 --> 00:31:45,560
policies.

429
00:31:45,560 --> 00:31:48,560
Your Honor, why does Mr. Bainman Freed need this coverage?

430
00:31:48,560 --> 00:31:53,560
Because he has been named as a defendant or is otherwise involved in criminal, regulatory,

431
00:31:53,560 --> 00:31:58,560
civil, and other actions and proceedings that have resulted in and can be expected to continue

432
00:31:58,560 --> 00:32:03,560
to result in significant unreversed, unreimbursed legal fees and other expenses.

433
00:32:03,560 --> 00:32:08,560
We identified those actions and proceedings in paragraph 16 of our moving paper and I

434
00:32:08,560 --> 00:32:10,560
will not repeat them here.

435
00:32:10,560 --> 00:32:14,560
Your Honor, Mr. Bainman Freed is covered by insurance policies designed to protect against

436
00:32:14,560 --> 00:32:15,560
exactly this circumstance.

437
00:32:15,560 --> 00:32:20,560
The policies are structured to provide coverage for defense costs in these circumstances so

438
00:32:20,560 --> 00:32:25,560
that individual insurers like Mr. Bainman Freed can mount an effective defense.

439
00:32:25,560 --> 00:32:28,560
There are two policies relative to this motion.

440
00:32:28,560 --> 00:32:33,560
The first is the Realm Insurance Policy, Realm Insurance Private Company Management Liability

441
00:32:33,560 --> 00:32:38,560
Policy, which was attached to the motion's Exhibit B, and the second policy is the Excess

442
00:32:38,560 --> 00:32:43,560
Claims Made Directors and Officers Liability Insurance Policy, which was attached to the

443
00:32:43,560 --> 00:32:48,560
motion's Exhibit C. Your Honor, there are five important parts of those policies that

444
00:32:48,560 --> 00:32:51,560
I would like to highlight for the court, which were highlighted in the opening paragraph

445
00:32:51,560 --> 00:32:53,560
of our reply papers.

446
00:32:53,560 --> 00:32:58,560
First, the policies contractually mandate reimbursement by the debtors of expenses incurred

447
00:32:58,560 --> 00:33:05,560
by individual insured as the debtors agreed to indemnify all individual insured persons.

448
00:33:05,560 --> 00:33:11,560
Second, the policies require the insurers to advance defense costs if the debtors refuse

449
00:33:11,560 --> 00:33:14,560
so that the insurers can mount the defense.

450
00:33:14,560 --> 00:33:19,560
Third, the policies prioritize payment as to the individual insured, not the debtors

451
00:33:19,560 --> 00:33:25,560
if, quote, the loss due and owing by the insurer under a liability coverage part exceeds the

452
00:33:25,560 --> 00:33:30,560
then remaining limit of liability applicable to such loss.

453
00:33:30,560 --> 00:33:34,560
Four, the policies provide that a bankruptcy of the company shall not relieve the insurer

454
00:33:34,560 --> 00:33:37,560
of its obligations under this policy.

455
00:33:37,560 --> 00:33:41,560
And five, the policies require the company, in this case the debtors, to waive and release

456
00:33:41,560 --> 00:33:46,560
the automatic stay with respect to the policy or its proceeds and agree not to oppose or

457
00:33:46,560 --> 00:33:51,560
object to any efforts by any insurer to obtain relief from the stay.

458
00:33:51,560 --> 00:33:53,560
Why are we here, Your Honor?

459
00:33:53,560 --> 00:33:56,560
We're here because Mr. Banker and Freed asked the debtors to indemnify him as they were

460
00:33:56,560 --> 00:34:00,560
required to do under the insurance policies, but the debtors refused to do so.

461
00:34:00,560 --> 00:34:04,560
After being denied this right, Mr. Banker and Freed, through counsel, asked debtors

462
00:34:04,560 --> 00:34:08,560
counsel to stipulate to relief from the stay, which is also customary in this court as well

463
00:34:08,560 --> 00:34:12,560
as other courts, and again the debtors refused to do so.

464
00:34:12,560 --> 00:34:15,560
So it was in light of that that we had no choice but to file this motion.

465
00:34:15,560 --> 00:34:20,560
Whether the court concludes that the proceeds of the policies are property of the state

466
00:34:20,560 --> 00:34:25,560
or not, sorry, Your Honor, whether this court concludes that the proceeds of the policies

467
00:34:25,560 --> 00:34:30,560
are not property of the state because coverage is likely to be exhausted by side A claims,

468
00:34:30,560 --> 00:34:33,560
or if this court concludes that the proceeds of the policies are potentially property of

469
00:34:33,560 --> 00:34:38,560
the state, stay release should be granted so that the policies can be used for the purposes

470
00:34:38,560 --> 00:34:43,560
that they were obtained to provide coverage to individual insured like Mr. Banker and Freed.

471
00:34:43,560 --> 00:34:48,560
Your Honor, as the Eastern District of New York Bankruptcy Court explained in the first

472
00:34:48,560 --> 00:34:53,560
central financial case, quote, DNO policies are obtained for the protection of individual

473
00:34:53,560 --> 00:34:58,560
directors and officers. In essence and at its core, a DNO policy remains a safeguard

474
00:34:58,560 --> 00:35:04,560
of officer and director's interests. Your Honor, let me address the elephant in the room.

475
00:35:04,560 --> 00:35:09,560
Yes, Mr. Banker and Freed has been indicted and is a defendant in multiple lawsuits, but

476
00:35:09,560 --> 00:35:14,560
Mr. Banker and Freed has not been convicted of a crime or found civilly liable, contrary

477
00:35:14,560 --> 00:35:18,560
to what the objecting parties may have stated in their papers. He is subject to an indictment

478
00:35:18,560 --> 00:35:23,560
and only that. As this court isn't aware, an indictment is not a conviction. It's merely

479
00:35:23,560 --> 00:35:28,560
an accusation, no different than a complaint. Mr. Banker and Freed, like any other person,

480
00:35:28,560 --> 00:35:33,560
is and must be presumed innocent unless and until found guilty of any criminal wrong.

481
00:35:33,560 --> 00:35:38,560
He is like any other former director or officer of a company that seeks access to a DNO insurance

482
00:35:38,560 --> 00:35:43,560
policy to pay for legal fees. Coverage under those policies for those legal fees does not

483
00:35:43,560 --> 00:35:48,560
change simply because some people hope or believe that Mr. Banker and Freed is guilty.

484
00:35:48,560 --> 00:35:53,560
I'd like to address the three responses that were filed, Your Honor. First, the committee

485
00:35:53,560 --> 00:35:58,560
objection. As we noted in our reply, we submit that the committee's objection should be rejected

486
00:35:58,560 --> 00:36:02,560
as they seek relief on behalf of the debtor, relief that the debtor is contractually barred

487
00:36:02,560 --> 00:36:05,560
from seeking something that the debtor is recognized in their papers.

488
00:36:05,560 --> 00:36:12,560
Well, let me ask you about that first because I question whether or not that provision is

489
00:36:14,560 --> 00:36:19,560
even enforceable in bankruptcy. Isn't a void as a public policy issue? How can a debtor,

490
00:36:19,560 --> 00:36:26,560
how can a company say pre-petition, we're going to agree that if we have property of

491
00:36:27,560 --> 00:36:32,560
the estate, we're going to agree to waive our right to seek a stay, to live, or we're

492
00:36:32,560 --> 00:36:37,560
going to waive our right to object to someone who wants to live the estate, to pursue those

493
00:36:37,560 --> 00:36:42,560
assets? It seems to be counterintuitive to the whole purpose of the bankruptcy code.

494
00:36:42,560 --> 00:36:47,560
I understand, Your Honor, it's like how I believe agreements to make a debt non-dechargeable

495
00:36:47,560 --> 00:36:51,560
are not necessarily enforceable in a bankruptcy. Your Honor, it's possible, I will admit we

496
00:36:51,560 --> 00:36:56,560
did not look into it. The debtors in their papers agreed. It was the only thing that

497
00:36:56,560 --> 00:37:02,560
they agreed with us on in their papers. Your Honor, it may not be enforceable. We do not

498
00:37:02,560 --> 00:37:07,560
rely upon that. We rely upon reasons for why stay relief should be granted here. But I

499
00:37:07,560 --> 00:37:12,560
did want to note that the debtors, like I said, did apparently agree with it. So they

500
00:37:12,560 --> 00:37:17,560
apparently were comfortable with it. And maybe it's because the policy is going forward post-petition.

501
00:37:17,560 --> 00:37:21,560
And so you could get into questions there. But honestly, Your Honor, I don't know, we're

502
00:37:21,560 --> 00:37:28,560
not relying upon that. We're not asking you to strike all the opposition because of that

503
00:37:28,560 --> 00:37:31,560
and grant our relief as effectively unimposed.

504
00:37:31,560 --> 00:37:39,560
Okay. Well, let me ask you another fundamental question. It has been the rule in this court,

505
00:37:39,560 --> 00:37:45,560
at least, and I've ruled the same way, that where a debtor is a co-insured under a policy,

506
00:37:45,560 --> 00:37:51,560
it is property of the debtors of state. And the debtor here is a co-insured under these

507
00:37:51,560 --> 00:37:52,560
policies, correct?

508
00:37:52,560 --> 00:37:53,560
Yes, correct, Your Honor.

509
00:37:53,560 --> 00:37:59,560
So they would be under precedent in this court. It is property of the debtors of state, right?

510
00:37:59,560 --> 00:38:04,560
Your Honor, as we set forth in our paper, we believe because of the priority of payments

511
00:38:04,560 --> 00:38:12,560
that side A will come first, that there will not be anything left likely for the debtors.

512
00:38:12,560 --> 00:38:15,560
And we believe because of that, and there's ample case law to support it, that it's not

513
00:38:15,560 --> 00:38:20,560
property of the state. But as we put in our papers, should this court conclude otherwise,

514
00:38:20,560 --> 00:38:24,560
that is why we also sought relief from the state to the extent that proceeds of the policies

515
00:38:24,560 --> 00:38:29,560
are fine to be property of the state. They do have a potential interest. We believe it

516
00:38:29,560 --> 00:38:34,560
is contingent and it is less than individual insurers, which includes Mr. Bank entry, but

517
00:38:34,560 --> 00:38:39,560
does include other members. But Your Honor, to the extent you conclude that because of

518
00:38:39,560 --> 00:38:44,560
that contingent interest, it is property of the state, that is why we also seek state

519
00:38:44,560 --> 00:38:45,560
relief, Your Honor, as our alternative ground.

520
00:38:45,560 --> 00:38:52,560
Well, doesn't that also contradict your position that you're taking that the priority of payments,

521
00:38:52,560 --> 00:38:57,560
you're saying, you're saying that Mr. Fried, Banker Fried is not seeking to deplete the

522
00:38:57,560 --> 00:39:04,560
$10 million. He doesn't think he, apparently he's going to deplete the $10 million. So

523
00:39:04,560 --> 00:39:08,560
the priority of payment provision hasn't kicked in yet.

524
00:39:08,560 --> 00:39:09,560
Correct. It has not.

525
00:39:09,560 --> 00:39:13,560
Which means anybody can file a claim, including the debtors.

526
00:39:13,560 --> 00:39:18,560
Correct. Anybody who is permitted to under the policies and under any bankruptcy code

527
00:39:18,560 --> 00:39:22,560
provisions that are applicable is permitted to submit a claim. And I would expect that

528
00:39:22,560 --> 00:39:27,560
the insurance companies will abide by the policy and review the claims, determine which

529
00:39:27,560 --> 00:39:33,560
are appropriate or not, and pay them out as they would do as if there was no bankruptcy

530
00:39:33,560 --> 00:39:38,560
proceeding. If that means Mr. Bankman Fried receives reimbursement, obviously that would

531
00:39:38,560 --> 00:39:42,560
be great from my client's perspective. If it means others also receive reimbursement,

532
00:39:42,560 --> 00:39:46,560
I'm sure that is great from their perspective. If it means the debtors receive some type

533
00:39:46,560 --> 00:39:53,560
of reimbursement for some type of cost that they incur, that is also possible. The insurer

534
00:39:53,560 --> 00:39:58,560
will follow the policies, which is all that we're asking. We're asking for the right to

535
00:39:58,560 --> 00:40:01,560
submit the claim and allow them to go forward because the insurers have specifically told

536
00:40:01,560 --> 00:40:08,560
us, and we understand why as sure as court, they have told us they will not look at our

537
00:40:08,560 --> 00:40:13,560
claims until stay relief is obtained.

538
00:40:13,560 --> 00:40:26,560
Okay, go ahead.

539
00:40:26,560 --> 00:40:31,560
Your Honor, you touched on the fact that there are potential other parties that was a point

540
00:40:31,560 --> 00:40:35,560
that the committee made in their objection. Once again, we don't believe that's a basis

541
00:40:35,560 --> 00:40:39,560
to deny the motion. If there are other parties that would like access to the policy, they

542
00:40:39,560 --> 00:40:44,560
merely need to comply with the policy and comply with any applicable code provision.

543
00:40:44,560 --> 00:40:49,560
What I mean by that is if they are individuals and they are not being somehow covered by

544
00:40:49,560 --> 00:40:53,560
an ordinary course professional, I suppose they would need to file a motion for relief

545
00:40:53,560 --> 00:40:58,560
and say, be before this court and if it's granted, then they can do, assuming this court

546
00:40:58,560 --> 00:41:03,560
grants the motion we filed, they would have a right to do it. But our point, Your Honor,

547
00:41:03,560 --> 00:41:07,560
is nothing in relief that we've sought prevents those other parties from doing so and Mr.

548
00:41:07,560 --> 00:41:11,560
Bankman Fried shouldn't be penalized simply because he filed a motion and others have

549
00:41:11,560 --> 00:41:15,560
chosen not to. It honestly surprises us, Your Honor, we filed this motion a while ago. If

550
00:41:15,560 --> 00:41:22,560
there were these other parties, I don't understand why they haven't filed something, but that

551
00:41:22,560 --> 00:41:27,560
is their choice. What you heard, Your Honor, or what you read, Your Honor, I should say,

552
00:41:27,560 --> 00:41:31,560
in the debtors and the committee's papers is there are these other employees who the

553
00:41:31,560 --> 00:41:38,560
debtors have chosen to, it looks like, effectively indemnify and they're going to indemnify them

554
00:41:38,560 --> 00:41:43,560
by providing them counsel from Covington and Berlin as an ordinary course professional.

555
00:41:43,560 --> 00:41:48,560
And they've chosen to do that. They've chosen not to indemnify Mr. Bankman Fried and to

556
00:41:48,560 --> 00:41:52,560
challenge his right to get reimbursement, but they've now told you that they're going

557
00:41:52,560 --> 00:41:57,560
to seek reimbursement under the policies for at least perhaps some of Covington-Berlin

558
00:41:57,560 --> 00:42:02,560
expenses. Why do I point this out, Your Honor? Because it shows the reason why this instant

559
00:42:02,560 --> 00:42:06,560
motion should be granted. I don't think it would be appropriate to have one set of former

560
00:42:06,560 --> 00:42:12,560
employees getting legal counsel effectively for free from their perspective, whereas another

561
00:42:12,560 --> 00:42:17,560
set of employees, or in this case, another set of one employee receiving, having to pay

562
00:42:17,560 --> 00:42:22,560
for his own legal counsel and having no right to seek reimbursement. Given this unequal

563
00:42:22,560 --> 00:42:27,560
treatment, Your Honor, we believe stay release should be granted so that Mr. Bankman Fried

564
00:42:27,560 --> 00:42:31,560
is certainly not worse off than these other employees who are getting this benefit of

565
00:42:31,560 --> 00:42:32,560
the legal fee.

566
00:42:32,560 --> 00:42:38,560
Well, can I just list a stay for everybody? Say, go follow your claim against the insurance

567
00:42:38,560 --> 00:42:39,560
policy.

568
00:42:39,560 --> 00:42:45,560
Your Honor, I suppose you could. I would submit that I believe generally speaking a

569
00:42:45,560 --> 00:42:49,560
motion needs to be filed to seek relief. A motion was not filed for that. I believe it's

570
00:42:49,560 --> 00:42:54,560
up to those individuals or entities to file that relief. We did go to the trouble. Again,

571
00:42:54,560 --> 00:42:58,560
we went to the trouble because the debtors refused to stipulate to it. Had they told

572
00:42:58,560 --> 00:43:03,560
us in response to a request for a stipulation, yes, Mr. Spencer, we think stay relief makes

573
00:43:03,560 --> 00:43:08,560
sense. How about we make it for all individual insurers? I would have said yes. I unquestionably

574
00:43:08,560 --> 00:43:12,560
would have said yes. I tell you today, I know I would have said yes. They didn't say that.

575
00:43:12,560 --> 00:43:16,560
They just said no. Go ahead and file your motion. So I did. If this somehow wants to

576
00:43:16,560 --> 00:43:20,560
be converted, and I would be more than happy for this to be one of the, I believe you said

577
00:43:20,560 --> 00:43:24,560
there were 30 things maybe that they resolved contentially, I'd be more than happy for this

578
00:43:24,560 --> 00:43:32,560
to be 31 if I'm counting right. It wasn't yet. If we can make it number 31 today, tell

579
00:43:32,560 --> 00:43:34,560
me where to sign, Your Honor. I would do so.

580
00:43:34,560 --> 00:43:38,560
Well, maybe I need to send everybody out in the hallway for a little bit so you're going

581
00:43:38,560 --> 00:43:44,560
to resolve this motion. Go ahead. Finish your argument. Go ahead. Your Honor, bizarrely

582
00:43:44,560 --> 00:43:49,560
the committee suggests that Mr. Bankman Fried will suffer, the quote is, will suffer no real

583
00:43:49,560 --> 00:43:53,560
prejudice if the stay is not lifted. It's hard to respond to that claim because I don't

584
00:43:53,560 --> 00:43:57,560
even understand how it could be made given that Mr. Bankman Fried is a defendant in multiple

585
00:43:57,560 --> 00:44:03,560
civil actions, a defendant in various governmental action, and he has to pay for all that legal

586
00:44:03,560 --> 00:44:08,560
litigation out of his own pocket and have no access to insurance proceeds of a policy

587
00:44:08,560 --> 00:44:12,560
that's specifically applied to his current predicament. The hardship is clear, and multiple

588
00:44:12,560 --> 00:44:16,560
courts have recognized that. By way of example, Your Honor, in Downey Financial Court, Judge

589
00:44:16,560 --> 00:44:21,560
Shanxi stated, quote, the insureds would suffer a very real and easily identifiable hardship

590
00:44:21,560 --> 00:44:26,560
if the stay is not lifted. Specifically, the insureds would have to pay 880,000 defense

591
00:44:26,560 --> 00:44:31,560
costs as well as any defense costs incurred subsequent to the filing of this motion out

592
00:44:31,560 --> 00:44:36,560
of their own pockets. Your Honor, if I can next move on to the objection filed by the

593
00:44:36,560 --> 00:44:41,560
class action plaintiff, the onus objection. As we state in our reply, Your Honor, we submit

594
00:44:41,560 --> 00:44:45,560
that objections should be overruled because A, they have no standing to seek the funds

595
00:44:45,560 --> 00:44:51,560
under the DNO policies. B, they wrongly place their interest in potential recoveries in

596
00:44:51,560 --> 00:44:55,560
their adversary proceedings ahead of everybody else, including Mr. Bankman Fried's rights

597
00:44:55,560 --> 00:45:00,560
under the DNO policy. And lastly, they falsely claim that Mr. Bankman Fried has been found

598
00:45:00,560 --> 00:45:04,560
liable for, quote, both civil and criminal unlawful conduct. The simple fact is that

599
00:45:04,560 --> 00:45:09,560
it would be patently unfair to allow the class actions to proceed against Mr. Bankman Fried,

600
00:45:09,560 --> 00:45:14,560
but at the same time deprive him of the right to access the proceeds to defend against these

601
00:45:14,560 --> 00:45:18,560
claims. This right to defense was recognized by the Southern District of New York in the

602
00:45:18,560 --> 00:45:22,560
MF Global case and also by this bankruptcy court and ally, Digital, both of which we

603
00:45:22,560 --> 00:45:27,560
cited in paragraph 20 of our reply. Lastly, Your Honor, I want to touch upon the debtor's

604
00:45:27,560 --> 00:45:32,560
objection. I already mentioned the state relief, so I won't repeat that again. I've already

605
00:45:32,560 --> 00:45:37,560
also mentioned the Covington-Berlin issue. I think if there is another basis for access

606
00:45:37,560 --> 00:45:43,560
to the DNO proceeds, claims should be made. I was a little surprised that the debtor said

607
00:45:43,560 --> 00:45:47,560
it would be both unfair and inequitable for you to grant this relief. Again, as we said

608
00:45:47,560 --> 00:45:52,560
before, what we think is unfair and inequitable is that Mr. Bankman Fried was denied a

609
00:45:52,560 --> 00:45:58,560
debtor's right to indemnification. He was then denied the debtor's agreeing to his stipulation

610
00:45:58,560 --> 00:46:05,560
and instead the debtors have chosen to indemnify certain employees for whatever reason and

611
00:46:05,560 --> 00:46:09,560
provide them with counsel free of charge while at the same time trying to stop Mr. Bankman

612
00:46:09,560 --> 00:46:15,560
Fried from having any access to the DNO proceeds. If there's anything that would be unfair and

613
00:46:15,560 --> 00:46:20,560
inequitable, Your Honor, it would be to deny this motion with respect to Mr. Bankman Fried.

614
00:46:20,560 --> 00:46:23,560
Your Honor, in sum, we respectfully request this court grant the motion and enter the

615
00:46:23,560 --> 00:46:26,560
proposed order that was completed with the motion.

616
00:46:26,560 --> 00:46:27,560
Thank you.

617
00:46:27,560 --> 00:46:28,560
Thank you, Your Honor.

618
00:46:28,560 --> 00:46:31,560
Who wants to go first, the Committee or the debtors?

619
00:46:31,560 --> 00:46:32,560
Committee.

620
00:46:40,560 --> 00:46:43,560
Thank you, Your Honor. The tempus quali of Paul Hastings for the Official Committee of

621
00:46:43,560 --> 00:46:48,560
Unsecured Creditors. First, Your Honor, let me just very quickly address the point that

622
00:46:48,560 --> 00:46:52,560
the Committee shouldn't be heard today. The Committee is not a party to the policy. We're

623
00:46:52,560 --> 00:46:57,560
a party in interest to the case. There's no reason offered either in contract or in law

624
00:46:57,560 --> 00:47:01,560
as to why the Committee objection shouldn't be heard. And I know, Your Honor, through

625
00:47:01,560 --> 00:47:06,560
your questions, it seems to be recognized in that, but I did want to mention that.

626
00:47:06,560 --> 00:47:11,560
I think, Your Honor, one of your questions was right on point as well, and that is Mr.

627
00:47:11,560 --> 00:47:18,560
Bankman Fried misinterprets the policy. The policy here does not provide any priority

628
00:47:18,560 --> 00:47:25,560
to the side A claimants in the circumstances in which we stand here at the moment. The

629
00:47:25,560 --> 00:47:31,560
priority, if any, only arises under the terms of the policy if a claim is going to, at that

630
00:47:31,560 --> 00:47:38,560
point, exhaust the policy. So there is a sharing of the 10 million in aggregate proceeds between

631
00:47:38,560 --> 00:47:45,560
the side A directors and officers and the debtors under side B, C, and D of the policy.

632
00:47:45,560 --> 00:47:50,560
And because there is a sharing, Your Honor, as Judge Silverstein explained in the Boy

633
00:47:50,560 --> 00:47:57,560
Scouts case very recently, the debtor's interest in the proceeds requires protection from

634
00:47:57,560 --> 00:48:03,560
depletion and overrides the interests of the directors and officers. That's 642 Bankancy

635
00:48:03,560 --> 00:48:10,560
per quarter, 504 and 573. So as we stand here today, it's actually the estates that have

636
00:48:10,560 --> 00:48:19,560
a priority to the policy, to the proceeds of the policy, not the directors and officers.

637
00:48:19,560 --> 00:48:23,560
Given that, Your Honor, and I think, again, your question to recognize this, there is

638
00:48:23,560 --> 00:48:31,560
no question as a matter of law and contract that the proceeds here are property of the

639
00:48:31,560 --> 00:48:36,560
state, and Mr. Bankman Fried then has the burden of convincing this court that state

640
00:48:36,560 --> 00:48:43,560
relief is appropriate. No evidence has been presented by Mr. Bankman Fried in that regard.

641
00:48:43,560 --> 00:48:53,560
And so let me hit those points in particular. The first, Your Honor, is that, excuse me,

642
00:48:53,560 --> 00:48:59,560
I just lost my voice. There is prejudice to the estates if the state is lifted and Mr.

643
00:48:59,560 --> 00:49:06,560
Bankman Fried is able to access the insurance proceeds for the very simple reason that the

644
00:49:06,560 --> 00:49:13,560
debtors will then have to pay the costs of defending various claims, various investigations

645
00:49:13,560 --> 00:49:19,560
that are pending now, not hypothetical, but that are pending at the moment, including

646
00:49:19,560 --> 00:49:26,560
the class action complaint that the movement mentioned in argument and opposed the motion

647
00:49:26,560 --> 00:49:33,560
as well. So there's nothing speculative or hypothetical about it. That exists today.

648
00:49:33,560 --> 00:49:42,560
And absent being able to access this particular policy of these particular debtors, the assets

649
00:49:42,560 --> 00:49:48,560
of the estate would be diminished in that regard. Second, as to the prejudice that Mr.

650
00:49:48,560 --> 00:49:54,560
Bankman Fried claims that he would sustain, again, no evidence has been presented. And

651
00:49:54,560 --> 00:50:01,560
in that regard more particularly, the motion itself at paragraph 22 references that Mr.

652
00:50:01,560 --> 00:50:07,560
Bankman Fried by and through counsel submitted notice letters to various other insurance

653
00:50:07,560 --> 00:50:14,560
carriers, including Realm here. But no evidence has been presented as to what other coverage

654
00:50:14,560 --> 00:50:20,560
Mr. Bankman Fried has made claim to and may be receiving. In particular, we mention in

655
00:50:20,560 --> 00:50:27,560
our opposition, it's the committee's understanding that there is a $20 million DNO policy of

656
00:50:27,560 --> 00:50:33,560
a different debtor, paper bird, that does not contain side B, C, and D coverage. And

657
00:50:33,560 --> 00:50:38,560
thus the issues that we're discussing today are not raised. But as I said, no evidence

658
00:50:38,560 --> 00:50:43,560
in the record in that regard at all. Now, of course, the court has great discretion

659
00:50:43,560 --> 00:50:48,560
and latitude in determining whether to lift the stay and in considering balancing the

660
00:50:48,560 --> 00:50:56,560
equities. The court can consider in this regard the charges and claims that are very significant

661
00:50:56,560 --> 00:51:02,560
against Mr. Bankman Fried, his alleged complicity in the very actions that led to these bankruptcy

662
00:51:02,560 --> 00:51:09,560
cases, and the fact that three of his closest executives have pleaded guilty to serious

663
00:51:09,560 --> 00:51:16,560
crimes. Those are all relevant facts before the court today. And that's even while we're

664
00:51:16,560 --> 00:51:22,560
recognizing, of course, that Mr. Bankman Fried has the right to contest those charges and

665
00:51:22,560 --> 00:51:28,560
claims. But the facts still remain of what the charges are as we look at the balance

666
00:51:28,560 --> 00:51:36,560
of the equities before your honor. Finally, your honor, just if the court is inclined

667
00:51:36,560 --> 00:51:42,560
to grant the motion, we would request that the movement be required to comply with Banker's

668
00:51:42,560 --> 00:51:48,560
2016 and file applications with the court so that we can, the estates can monitor what

669
00:51:48,560 --> 00:51:53,560
proceeds from these policies are being used and in what manner. So unless the court has

670
00:51:53,560 --> 00:51:55,560
any other questions, those are the points I want to raise.

671
00:51:55,560 --> 00:51:56,560
Thank you. No questions.

672
00:51:56,560 --> 00:51:57,560
Thank you, your honor.

673
00:51:57,560 --> 00:52:08,560
Good afternoon, your honor. For the record, Brian Gluckstein, Sullivan and Palmo for the

674
00:52:08,560 --> 00:52:18,560
record. Your honor, we filed a response to the motion, as your honor knows. We share

675
00:52:18,560 --> 00:52:23,560
the concerns that your honor raised about the enforceability of the provision, prevents

676
00:52:23,560 --> 00:52:29,560
us from objecting. We, of course, understood the committee was going to be objecting to

677
00:52:29,560 --> 00:52:34,560
this motion. We thought it prudent not to necessarily get into a fight with the insurance

678
00:52:34,560 --> 00:52:41,560
carriers at this stage. From our perspective, your honor, there are a number of points that

679
00:52:41,560 --> 00:52:47,560
Mr. Bank and Creed has assorted that are inaccurate. Mr. Vesquale addressed a number of them, particularly

680
00:52:47,560 --> 00:52:53,560
how the policy works. And it is critical here, your honor, that the debtors do have coverage

681
00:52:53,560 --> 00:52:58,560
under this policy. We do believe it's an asset of the estate. And we do believe that the

682
00:52:58,560 --> 00:53:05,560
debtors today have claims under that policy with respect to side B, side C coverage. So

683
00:53:05,560 --> 00:53:10,560
it's not a hypothetical as to whether there is a real interest here of the debtors, as

684
00:53:10,560 --> 00:53:17,560
the court is considering whether or not to grant state relief to Mr. Bank and Creed.

685
00:53:17,560 --> 00:53:24,560
The other point raised and articulated again today with respect to the fact that we are,

686
00:53:24,560 --> 00:53:33,560
as the debtors, choosing certain current and former employees to indemnify and provide

687
00:53:33,560 --> 00:53:40,560
counsel to, to cooperate with investigations is, of course, true. And that's this, Mr.

688
00:53:40,560 --> 00:53:46,560
Bank and Creed's papers make it sound like this was novel and new. That arrangement was

689
00:53:46,560 --> 00:53:53,560
disclosed back in February and in the declaration provided by the Covington firm in connection

690
00:53:53,560 --> 00:53:59,560
with the OCP retention in paragraph five. It was disclosed very clearly that we had

691
00:53:59,560 --> 00:54:06,560
the debtors had requested that that firm provide services to represent quote current and former

692
00:54:06,560 --> 00:54:10,560
employees of the debtors in connection with ongoing investigations by the government,

693
00:54:10,560 --> 00:54:14,560
as well as related inquiries from counsel to the debtors and third parties. And of course,

694
00:54:14,560 --> 00:54:20,560
your honor, that's providing a benefit to the estate. These are individuals that have

695
00:54:20,560 --> 00:54:26,560
information and they're sharing that information with the debtors in connection with the

696
00:54:26,560 --> 00:54:32,560
investigations highlighted and walked through by Mr. Deedorick earlier and with the government.

697
00:54:32,560 --> 00:54:37,560
Mr. Bank and Creed is not in that camp. Mr. Bank and Creed, of course, is not cooperating

698
00:54:37,560 --> 00:54:43,560
with the debtors. There was a suggestion that we forced him to file this motion today. We

699
00:54:43,560 --> 00:54:49,560
did decline to enter into any sort of stipulation as to state relief. We have no obligation

700
00:54:49,560 --> 00:54:56,560
to do so. Even if the provision in the policy is enforceable, despite the concerns your

701
00:54:56,560 --> 00:55:02,560
honor raises, it doesn't require us to cooperate with Mr. Bank and Creed. It simply states,

702
00:55:02,560 --> 00:55:08,560
the language states that we would not oppose state relief, which we have not done. We do

703
00:55:08,560 --> 00:55:14,560
think that certainly the question, the debtors, to be clear, have no intention of cooperating

704
00:55:14,560 --> 00:55:24,560
with Bank and Creed on this or other issues at this time. With respect to the question

705
00:55:24,560 --> 00:55:31,560
of one former officer director versus others accessing the policy, and we did raise this

706
00:55:31,560 --> 00:55:37,560
in our submission, your honor, we do think that if the court is so inclined to access

707
00:55:37,560 --> 00:55:45,560
the policy, that Mr. Bank and Creed should not get a leg up amongst among the other potentially

708
00:55:45,560 --> 00:55:52,560
insured parties here today. And so we certainly understand and agree with the points raised

709
00:55:52,560 --> 00:55:57,560
by the committee, but to the extent state relief is granted, it probably should be granted

710
00:55:57,560 --> 00:55:59,560
for all. Thank you, your honor.

711
00:55:59,560 --> 00:56:05,560
Thank you. Anyone else wish to be heard before I go back to Mr. Schnitzer?

712
00:56:05,560 --> 00:56:16,560
Thank you, your honor. I'll be brief in responding. Your honor, first with respect to what the

713
00:56:16,560 --> 00:56:20,560
committee said, they used the word sharing, and this was a word that they also used in

714
00:56:20,560 --> 00:56:25,560
their motion, which I wanted to highlight. They want to give Mr. Bank and Creed nothing,

715
00:56:25,560 --> 00:56:31,560
and they want to give all the proceeds to somebody else, whether that be Covington,

716
00:56:31,560 --> 00:56:35,560
or the others, or somebody else. I don't believe that's the definition of sharing. I don't

717
00:56:35,560 --> 00:56:39,560
believe that's the definition of anyone sharing, so I think if you truly want to do what the

718
00:56:39,560 --> 00:56:46,560
committee is asking, which is have this policy shared, the relief thought should be granted.

719
00:56:46,560 --> 00:56:51,560
If it's to be in a stipulation where it's granted with respect to an individual insured,

720
00:56:51,560 --> 00:56:56,560
and then people can file their claim, certainly, but sharing does not mean all the money goes

721
00:56:56,560 --> 00:57:00,560
to everybody except for Mr. Bank and Creed. That's not sharing. Your honor, I would also

722
00:57:00,560 --> 00:57:04,560
note this goes to their argument in terms of the prejudice to the estate. They're arguing

723
00:57:04,560 --> 00:57:09,560
basically that they'd be prejudiced because we would have access to money, and they would

724
00:57:09,560 --> 00:57:13,560
have the debtors or the other insured would have access to money at the same time. They're

725
00:57:13,560 --> 00:57:17,560
suggesting that basically the estate should get all the access to the money first, and

726
00:57:17,560 --> 00:57:23,560
only if somehow after that there is leftover, then perhaps someday, years in the future,

727
00:57:23,560 --> 00:57:28,560
you should grant this motion. That is not what the body of law says on this, your honor.

728
00:57:28,560 --> 00:57:33,560
I don't think that's correct. They also made a point with respect to indemnification, and

729
00:57:33,560 --> 00:57:39,560
I would just say, your honor, any payment of defense costs, and this is from the allied

730
00:57:39,560 --> 00:57:44,560
digital case, quote, any payment of defense costs will remove any indemnification claim

731
00:57:44,560 --> 00:57:48,560
individual defendants would have against allied digital. That works for Mr. Bank and Creed

732
00:57:48,560 --> 00:57:52,560
as well. Mr. Bank and Creed does have a potential indemnification plan against the debtors.

733
00:57:52,560 --> 00:57:57,560
If he receives reimbursement from the insurance proceeds, that satisfies the claim. Same as

734
00:57:57,560 --> 00:58:06,560
perhaps any of these other individual insureds have. Your honor, the debtors again made this

735
00:58:06,560 --> 00:58:10,560
point about these other parties, and I just wanted to state something clearly. They state

736
00:58:10,560 --> 00:58:15,560
in their papers that we inappropriately sought the relief only with respect to the payment

737
00:58:15,560 --> 00:58:18,560
of insurance proceeds to Mr. Bank and Creed. Again, your honor, from my perspective as

738
00:58:18,560 --> 00:58:22,560
Mr. Bank and Creed's lawyer, that's all I could do. Your honor, I don't believe it's

739
00:58:22,560 --> 00:58:26,560
appropriate. I believe it would in fact be unethical for me to file a motion for relief

740
00:58:26,560 --> 00:58:31,560
and stay on behalf of people who I don't know. I can't even identify their names and who

741
00:58:31,560 --> 00:58:35,560
actually, I believe, are being represented by another law firm, your honor. I believe

742
00:58:35,560 --> 00:58:40,560
I'd be subject to, we'll say, lots of problems if I did that. So I think they're suggesting

743
00:58:40,560 --> 00:58:45,560
that this was inappropriate, particularly when any party could have filed a motion at

744
00:58:45,560 --> 00:58:49,560
any time, including a few minutes before this hearing, your honor. That's not correct.

745
00:58:49,560 --> 00:58:53,560
Lastly, your honor, the committee suggests that this should be subject to some sort of

746
00:58:53,560 --> 00:58:59,560
FIAP. In support of that, they cite to a 2005 case out of Ohio and a 2008 case from Florida.

747
00:58:59,560 --> 00:59:06,560
Notably, they fail to cite to any case from Delaware. We have seen no case in Delaware

748
00:59:06,560 --> 00:59:09,560
that does that. I'm not suggesting that means they don't exist. As you know, a case is not

749
00:59:09,560 --> 00:59:13,560
the easiest thing to search, so it's possible. I don't believe it's appropriate. I don't

750
00:59:13,560 --> 00:59:18,560
believe it's appropriate, particularly in this case. Mr. Bank and Creed is, as you know,

751
00:59:18,560 --> 00:59:24,560
is a defendant in multiple class actions and is a target of multiple government investigations.

752
00:59:24,560 --> 00:59:30,560
If he had a file of FIAP setting forth what his lawyers are doing for him, you'd either

753
00:59:30,560 --> 00:59:34,560
have one of two situations. Either you'd have to reveal his strategy to the people who are

754
00:59:34,560 --> 00:59:39,560
trying to proceed against him, or we would have to essentially redact almost the entire

755
00:59:39,560 --> 00:59:46,560
invoice such that what you would have before you would look like a bunch of black lines,

756
00:59:46,560 --> 00:59:50,560
is what it would look like. Your Honor, I don't believe it's appropriate. I also believe

757
00:59:50,560 --> 00:59:54,560
it shows really the true intent here, and that's just to frustrate Mr. Bank and Creed's

758
00:59:54,560 --> 00:59:59,560
ability to defend himself. Not only trying to deprive him of the right to proceed, but

759
00:59:59,560 --> 01:00:03,560
then trying to condition it, well, if he can have a right to proceed, he should have to

760
01:00:03,560 --> 01:00:08,560
file a FIAP. Something that they didn't suggest with respect to any other individual, something

761
01:00:08,560 --> 01:00:12,560
that doesn't govern Covington and Burlington right now, as long as their fees are under

762
01:00:12,560 --> 01:00:17,560
$200,000. So it seems like this is once again special achievement for Mr. Bank and Creed.

763
01:00:17,560 --> 01:00:21,560
Well, in general, I would say everyone likes to feel special. This is not one of those

764
01:00:21,560 --> 01:00:26,560
circumstances here where he should be treated differently. I would say this, Your Honor,

765
01:00:26,560 --> 01:00:32,560
if you do believe some type of notice is appropriate so that this court is aware and so that perhaps

766
01:00:32,560 --> 01:00:37,560
other parties are aware, you could do what was done in one of the cases cited by the

767
01:00:37,560 --> 01:00:44,560
committee, and that's the case in Reed Beach First National Bank shares. It's 451 BR 406.

768
01:00:44,560 --> 01:00:48,560
In that case, what the court said is the insurer should review fees paid under the defense

769
01:00:48,560 --> 01:00:53,560
cost provisions of the policy to ensure that the costs actually relate only to the defense

770
01:00:53,560 --> 01:00:57,560
of the directors and officers and that the fees and expenses were actually incurred and

771
01:00:57,560 --> 01:01:02,560
necessary and reasonable, and at least five business days prior to dispersing any funds,

772
01:01:02,560 --> 01:01:06,560
they should notify, in that case it was a trustee, notify the trustee of the amount

773
01:01:06,560 --> 01:01:10,560
of defense cost paid. So basically what the court did in that case is said, told the insurers,

774
01:01:10,560 --> 01:01:15,560
do your job, do what your policy requires you to do and what you were presumably doing

775
01:01:15,560 --> 01:01:19,560
before the bankruptcy, and right before, as in five business days, you're going to disburse

776
01:01:19,560 --> 01:01:24,560
funds, notify the bankruptcy estate that you're going to search so that people kind of have

777
01:01:24,560 --> 01:01:30,560
a running total of what's being done. So if you believe that some type of notice is appropriate

778
01:01:30,560 --> 01:01:35,560
so that people kind of know the balance, that I would suggest is a reasonable solution which

779
01:01:35,560 --> 01:01:41,560
would not get into Mr. Bankman-Preet or anyone else's attorney client work product and just

780
01:01:41,560 --> 01:01:45,560
general defense strategy issues. Thank you, Your Honor.

781
01:01:45,560 --> 01:01:55,560
Thank you. I'm going to take a recess here. I don't know if there's any willingness or

782
01:01:55,560 --> 01:02:01,560
desire for the parties to talk to one another about a potential resolution here. I mean

783
01:02:01,560 --> 01:02:09,560
the options are I open this up for, I lift the stay for everybody so people can assert

784
01:02:09,560 --> 01:02:15,560
their claim as it comes in and the insurance company will decide who gets paid and who

785
01:02:15,560 --> 01:02:23,560
doesn't. Another option would be I don't lift the stay, but at the end of the day, at some

786
01:02:23,560 --> 01:02:29,560
point in the future, parties come forward and say, well, this is the cost that we incurred

787
01:02:29,560 --> 01:02:35,560
in this period of time and so we want reimbursement under the policy, something to that effect.

788
01:02:35,560 --> 01:02:41,560
The other third option is I just deny the motion. So I don't know if, I'm going to take

789
01:02:41,560 --> 01:02:45,560
a recess so you can talk if you want to. I don't know if I'm going to come back and give

790
01:02:45,560 --> 01:02:53,560
you a ruling right now. I may. I may not. But let's take a recess for, let's take a

791
01:02:53,560 --> 01:03:03,560
recess until 2 20 and I'll come back on the record. Yes. Your honor, I rise only to correct

792
01:03:03,560 --> 01:03:09,560
something on the record, Jeff Saban from Veneville representing OKCoin and their affiliate OKX.

793
01:03:09,560 --> 01:03:15,560
And I am happy for this court's approval and for all the cooperation that we got from

794
01:03:15,560 --> 01:03:20,560
debtors council that led to the soon turnover and transfer to these estates of more than

795
01:03:20,560 --> 01:03:25,560
$60 million. But the information that was exchanged was all pursuant to a confidentiality.

796
01:03:25,560 --> 01:03:31,560
The motion itself and your order doesn't designate which of the two exchanges otherwise is turning

797
01:03:31,560 --> 01:03:36,560
back what money. The accounts themselves are identifying the motion. The order approves

798
01:03:36,560 --> 01:03:40,560
it. And so I don't want anyone on the press listening or anything else to say that it

799
01:03:40,560 --> 01:03:46,560
was OKCoin as I think in the burden that Mr. Diedrich is referring to that is returning

800
01:03:46,560 --> 01:03:50,560
a particular account that has roughly 150 million. I just wanted to correct the record.

801
01:03:50,560 --> 01:04:17,560
Thank you. All right. Let's take a recess. Thank you.

802
01:04:20,560 --> 01:04:23,560
Thank you.

803
01:04:50,560 --> 01:04:52,560
Thank you.

804
01:05:20,560 --> 01:05:22,560
Thank you.

805
01:05:50,560 --> 01:05:52,560
Thank you.

806
01:06:20,560 --> 01:06:22,560
Thank you.

807
01:06:50,560 --> 01:06:52,560
Thank you.

808
01:07:20,560 --> 01:07:22,560
Thank you.

809
01:07:50,560 --> 01:07:52,560
Thank you.

810
01:08:20,560 --> 01:08:22,560
Thank you.

811
01:08:50,560 --> 01:08:52,560
Thank you.

812
01:09:20,560 --> 01:09:22,560
Thank you.

813
01:09:50,560 --> 01:09:52,560
Thank you.

814
01:10:20,560 --> 01:10:22,560
Thank you.

815
01:10:50,560 --> 01:10:52,560
Thank you.

816
01:11:20,560 --> 01:11:22,560
Thank you.

817
01:11:50,560 --> 01:12:19,560
OK.

818
01:12:19,560 --> 01:12:31,560
Well, in order to lift the state, the burden is on the movement to prove cause.

819
01:12:31,560 --> 01:12:40,560
And frankly, I have zero evidence to establish cause here.

820
01:12:40,560 --> 01:12:48,560
Mr. Bankman Fried did not put on any evidence whatsoever as to what, the balancing of the equities here.

821
01:12:48,560 --> 01:12:54,560
What harm is going to occur to him? I don't know what other insurance policies he has access to.

822
01:12:54,560 --> 01:13:02,560
I don't know what other assets he has access to privately that would allow him to cover these costs and then recover them later under this policy.

823
01:13:02,560 --> 01:13:06,560
I have nothing to show that there was cause here.

824
01:13:06,560 --> 01:13:12,560
It was also the burden on Mr. Bankman Fried to prove that there would be no harm to the bankruptcy.

825
01:13:12,560 --> 01:13:16,560
That has not been done either.

826
01:13:16,560 --> 01:13:21,560
And finally, that he had the probability of success on the merits.

827
01:13:21,560 --> 01:13:25,560
And I have absolutely no evidence whatsoever on that either.

828
01:13:25,560 --> 01:13:31,560
So at this point, I have no choice but to deny the motion for lack of evidence.

829
01:13:31,560 --> 01:13:34,560
I'll do so without prejudice.

830
01:13:34,560 --> 01:13:41,560
If Mr. Bankman Fried wants to come back and put on an evidentiary hearing and will establish the elements necessary for me to lift the automatic state,

831
01:13:41,560 --> 01:13:44,560
he's free to do so, but we'll deal with that another day.

832
01:13:44,560 --> 01:13:46,560
So for now, the motion is denied.

833
01:13:46,560 --> 01:13:54,560
The party should submit a or Mr. Bankman Fried's council should submit a form of order denying the motion without prejudice.

834
01:13:54,560 --> 01:13:58,560
And we'll go from that.

835
01:13:58,560 --> 01:14:03,560
Anything else before we adjourn for the day?

836
01:14:03,560 --> 01:14:04,560
Thank you, Your Honor.

837
01:14:04,560 --> 01:14:06,560
I got Brian boxing for the debtors.

838
01:14:06,560 --> 01:14:13,560
The only other thing on the agenda today, Your Honor, was still was item 14, which was a status comp, the emerging case.

839
01:14:13,560 --> 01:14:27,560
The parties did submit yesterday afternoon and agreed upon stipulation that the parties worked through since the hearing in March to address the issues that your honor raised at that hearing that is now agreed and executed.

840
01:14:27,560 --> 01:14:30,560
Your honor saw.

841
01:14:30,560 --> 01:14:44,560
We will be submitting that certainly in the FDX case and emerging case and block by be doing so in New Jersey in its case to get that formally approved by your honor as expeditiously as possible.

842
01:14:44,560 --> 01:14:47,560
So that those states can go into effect.

843
01:14:47,560 --> 01:14:55,560
But I did see I thought correct me if I'm wrong, but I thought I had read that that that it's contingent on both courts approving it.

844
01:14:55,560 --> 01:14:57,560
It is your honor to be effective.

845
01:14:57,560 --> 01:15:06,560
Both courts, so I probably need to call Judge Kaplan and find out when he's going to approve it before we're going to have to do it simultaneously.

846
01:15:06,560 --> 01:15:10,560
I got I know that.

847
01:15:10,560 --> 01:15:12,560
The Blackfriars Council.

848
01:15:12,560 --> 01:15:20,560
But yeah, I mean, I think from our from our point of view, we don't I think Blackfriars agreement that there isn't any anticipated certainly issues there.

849
01:15:20,560 --> 01:15:21,560
I wouldn't think so.

850
01:15:21,560 --> 01:15:28,560
Yes, but yet we will we will submit an order to your honor with the stipulation asked that that be entered.

851
01:15:28,560 --> 01:15:35,560
Other than that, I don't unless there's any other matters in the emerging case that your honor wanted to address, I don't think there is anything for the parties.

852
01:15:35,560 --> 01:15:41,560
OK, thank you.

853
01:15:41,560 --> 01:15:42,560
So you stand up.

854
01:15:42,560 --> 01:15:43,560
I did, your honor.

855
01:15:43,560 --> 01:15:45,560
Derek Abbott of Morris and Nicholas here for Blackfriar.

856
01:15:45,560 --> 01:15:49,560
We're going to submit it expeditiously.

857
01:15:49,560 --> 01:15:53,560
I think all parties would like to see it approved by both courts as quickly as possible.

858
01:15:53,560 --> 01:15:55,560
So we'll do whatever we can to make that happen.

859
01:15:55,560 --> 01:15:57,560
I'll just submit it under C.O.C.

860
01:15:57,560 --> 01:15:59,560
I'll and I can enter it right away.

861
01:15:59,560 --> 01:16:01,560
I have no problem with I've reviewed it.

862
01:16:01,560 --> 01:16:04,560
I think it's appropriate and I would enter the order.

863
01:16:04,560 --> 01:16:07,560
So once it's submitted to me under C.O.C., I'll do it.

864
01:16:07,560 --> 01:16:08,560
We'll do, your honor.

865
01:16:08,560 --> 01:16:09,560
Thank you very much.

866
01:16:09,560 --> 01:16:10,560
All right.

867
01:16:10,560 --> 01:16:11,560
Thank you very much.

868
01:16:11,560 --> 01:16:12,560
We are adjourned.

869
01:16:12,560 --> 01:16:19,560
Thank you.