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you

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you

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you

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good morning again this is judge Kaplan and I am hearing the committees

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emergent motion in the BlockFi Inc. matter I have limited counsel in front of

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me so let me take appearances on behalf of the debtor thank you on behalf of

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the committee thank you counsel but behalf of the US trustee

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morning your honor Jeff Sponder and Lauren Bielski on behalf of the United States trustee

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this court engaged with all counsel in chambers in a conference outside of the

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record in an effort to address the issues that were raised in the emergent

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motion brought before the court specifically the committees the

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committee filed an emergent motion requesting an order remedying the

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debtors improper plant solicitations in violation of the Bank of Secodes section

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1125 B the purpose in speaking with counsel off record were to examine the

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various issues and statements under scrutiny in a matter which didn't

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further exacerbate any issues with respect to whether creditors parties in

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interest or the public received unauthorized improper communications

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your honor maybe muted what that come I'm rooted shows that you're muted on

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there so it is forgive me for interrupting all right I don't think I'm

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muted that's it says it there but we run through the communications through

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our court recording not a problem better safe than sorry so let me first address

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because the man on which the court addresses the motion to be a bit

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unusual let me say at the outset the issue that's been raised by the

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committee are the statements that have been made in tweets and letters emailed

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to by the debtor to its customers as well as statements reference them in the

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filed disclosure statement and plan with links to certain statements contained in

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the various communications and the issue is whether or not these communications

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are fall outside the scope of permissible activity under section 1125

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the court has reviewed for instance the letter to creditors that was emailed to

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block by customers that was referenced in their tweets the court is reviewed

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the various identified provisions of the disclosure statement to which the

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committee has raised concerns given that there were links to such provisions in

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the various communications to the public to the customers and to the creditors

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and the court and all candors takes issue with the manner in which these

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communications were made indeed many of the communications fall outside the

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scope of permissible solicitation under the Banker T code I applaud the

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committee for acting in this emergent fashion to bring the matter before the

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court professionally quickly and efficiently the manner in which the

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committee raised these issues of course are consistent with the manner in which

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they've prosecuted the case on behalf of the committee council the manner in

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which they have protected the both the committee and the council have protected

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the interest of creditors the court is cognizant that you don't see often what

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goes on outside of court that the public unfortunately is limited to what they see

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inside the court and there's usually a tremendous amount of activity this case

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is no different indeed I think I've referred to this case as being a stealth

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case in that so much of the work that is being done to protect the interest of

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both the creditors the debtor and parties and interest is being done

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outside the courtroom without without a show so to speak that it usually just

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adds and feeds into the cost of the case so the court is appreciative of the

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manner in which the committee and council have worked to protect their

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interests in doing so and now having said that over the committee council

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strenuous objections and chambers I have decided to limit the manner in which

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the motion today is going to be presented to the court in that I'm directing the

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parties to rely on their papers without adding additional argument I'm doing so

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because in this court's view continued argument over the merits or lack of

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merits or the truthfulness of statements and positions that appear in the

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communications that are on file would simply exacerbate the problem the court

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does not want oral argument in which certain statements that have not been

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vetted by the court that have not been authorized by the court that have not

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been supported by outside evidence to be communicated to the public for reliance

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outside of the process that is improved by the code in section 1125 B for

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parties to argue and contest the merits and truthfulness and accuracy of the of

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their competing positions simply provides the public with information

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that has not yet been vetted and approved and only makes this situation

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even worse the court is prepared to enter an order and I'm going to read

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portions of the order into the record that addresses the fact that in the

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court's view the debtors statements outside of their filing invade the

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process and the court wants certain steps taken to ensure at the committee's

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assistance and the court agrees that all creditors understand that what's

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reflected in the disclosure statement and the plan that's on file has not been

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authorized by the court has not been vetted by the court has not been

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approved by the court and that solicitations based on what's been filed

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are improper the committee has filed a statement in which they outline the

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issues they have generally with the plan by category and by substance and

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since that information is on file along with the information that's included in

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the debtor's disclosure statement and the debtor's position further argument

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should await proper process which is a contested disclosure statement hearing

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where both the debtor and the committee can supplement their arguments and the

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court will decide what information should go out to the public to the

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parties in interest and creditors before that process is completed the court

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urges all parties in interest to avoid reliance on any of the statements that

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they are reading because they were they reflect only the position of complete

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parties and advocacy the court is prepared to enter today on the

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emergent motion the following order enforcing section 1125 of the Bankruptcy

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Code the sum and substance of the court's order we will read as follows

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apart from the pleadings consistent with the Bankruptcy Code and rules or as

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permitted by today's ruling neither the debtor nor the official committee of

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unsecured creditors shall publish any advocacy communication to a website

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Twitter feed on the docket or otherwise concerning the debtors plan and

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disclosure tape statement until such time as the disclosure statement is

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solicitation materials have been approved within 24 hours of the entry of

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this order the debtors shall post a corrective letter on the case docket

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their website and their Twitter feed will also email to all creditors that

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receive communications described in the emergency motion the corrective letter

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shall state as follows to all concerned parties and creditors please submit a

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message as follows to all concerned block by prematurely posted certain

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statements to the court docket its website and its Twitter feed on May 13th

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2023 regarding a proposed plan of reorganization we urge each of you to

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disregard those communications until such a time as the publication and

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dissemination of such statements are authorized block by publication of those

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communications is inconsistent with the requirements of the Bankruptcy Code and

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undertaken without court authorization the court is directed block by to

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circulate this communication on behalf of the committee to clarify that the

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court has not yet approved block by disclosure statement or block by

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ability to solicit acceptances of its plan at this juncture the committee

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also among other parties does not support the plan of reorganization in

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question among other issues the committee the committee believe that the

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plan provides releases of litigation claims against among others current and

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former directors and officers of block by that committed significant misconduct

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that harmed block by and its customers these are the positions taken by the

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committee as of this date the committee also believe that it is not appropriate

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for block by via its current management and professionals to control the

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validation of block by and district distributions creditors the committee

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has requested changes to the plan the committee has not however proposed its

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own plan as and in fact is barred from doing so by the debtors exclusivity

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entitlements under the Bankruptcy Code nor has the committee taken any formal

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position on certain issues ascribed to the committee in the prior

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communications a disclosure statement must be approved by the court before

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the committee party may lawfully encourage you to accept or reject any

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plan of reorganization accordingly block by withdraws any prior statements

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concerning your vote on the plan the committee's positions regarding the

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plan and any alternatives that might be proposed by the committee at the

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appropriate time after the court has authorized the dissemination of one or

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more disclosure statements the parties may communicate to all creditors their

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respective positions as part of the solicitation process that's this court's

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ruling today I am authorizing the committee in conjunction with the

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efforts of the debtor to communicate the court's ruling to provide its

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statement which is already on the docket to those parties that have received the

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communications by Bach fi and to reiterate of course today's court's

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ruling now the court recognizes that both the committee statement as well as

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the debtors disclosure statement and responses will be supplemented

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consistent with the Bankruptcy Court with the Bankruptcy Rules and the code

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and that all parties are reserving their rights going forward with respect to the

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plan process at the same time the court is of the firm belief that parties are

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not served by a hotly contested expensive and time-consuming litigation

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over this plan process if that happens the court will address the contested

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issues in an efficient and expeditious fashion but in order to avoid those

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costs and delays and risks the court is directing the parties to engage in an

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expedited mediation process with respect to the plan proposed plan

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the court will identify a mediator after taking recommendations from both the

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committee and the debtor if the parties can agree on a proposed mediator of

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course the court will pursue the efforts of that mediator the court will also ask

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debtors council to prepare a proposed form of mediation order once the

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mediator has been identified and a protocol

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and of course communications made and documents and information provided

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during the course of the mediation will remain confidential and not be available

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absent consent there are also pending motions to seal much of what we've

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referenced what the court has referenced as far as information that was included

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in the declaration of kristen axelrod as well as information that was included in

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the statement that that's on file

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well the only objection that the court is aware of well I shouldn't say that

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needless to say the committee has expressed an interest in having full

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disclosure but recognizes the mandate to at least pursue sealing efforts but I

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understand that the US trustee has objected to sealing or redactions under

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section 107 mr. Sponder did you as trustee want to place anything on the

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record thank you your honor good afternoon again Jeff Sponder from the

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office the United States trustee your honor the debtor and or the committee

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since the committee is the one that filed the motions to seal bear the burden of

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showing that the information to be sealed falls within the parameters and

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an exception to section 107 a by demonstrating that the interest in

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secrecy outweighs the presumption in favor of access it appears that the

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ceiling motions rely on a protective order and or some type of confidentiality

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agreement your honor a protective order is not sufficient grounds to support

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the ceiling of information nor is an agreement among parties to keep

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information confidential not a not sufficient grounds neither the debtor

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nor the committee have made any showing that the information to be sealed is

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protected under section 107 as a result the United States trustee believes your

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honor that these motions should be denied and the information should be

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disseminated to the public thank you thank you mr. Sponder the court is

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overruling the objections of the US trustee and doing so notes the inherent

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tension between 1125 of the code and 107 with a section 1125 restricting the

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information that can go out to the public as part of the plan and disclosure

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statement process until court court approval to avoid improper solicitation

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activity and and to ensure that the information that the public receives as

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part of this process has been vetted has been reviewed by all parties in

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interest and and has been approved only after the court has had the ability and

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the opportunity to hold a hearing in which the parties can raise issues with

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the language and content that flies in the face of section 107 which mandates

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disclosure of information that is on file in order to ensure the proper

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administration of this case and to better serve the interest of the

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creditors in getting accurate information that has been approved vetted

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and authorized the court is going to employ its authority under section 105

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to overrule the objection noting the tension between the statutory sections

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let me ask at this point do through any council wish to raise any issues or

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concerns that the court may have missed some clarification thrown if I may again

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Robert Stark Brown Rudnick on behalf of the creditors committee first just so

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that we have a clear record we had asked that I do not believe there's an

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objection from my opposition that the documents that were attached to the

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Axelrod declarations would be formally admitted into evidence so that they are

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as part of the record in evidentiary fashion all of them that was my

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understanding that there would be no objection albeit they are under seal no

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objection your honor as long as they're under seal they are under seal and the

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court accepts that those documents into the record thank you second

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clarification your honor when we were chatting earlier your honors ruling

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earlier about clarification that that creditors would receive and I think your

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honor was was clear with respect to what the debtor has to do but I want to be

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make sure that we have clarity on the record about the committee's

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authorization in terms of making its views known my understanding had been

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and I think your honor alluded to it but I want to make sure we have a clear

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record and I have clear instructions is that the committee is authorized to send

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emails to the same people that received the company's emails and we can hyper

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link or otherwise attach our statement with respect to the plan and today's

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ruling from Iran or whether it be in whole or in part from the record and

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that would be the same communication format that individual creditors

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received whether it be email what have you and that the company is required to

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assist us in terms of being able to get that out the door that is my

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understanding is there any objection no your honor we will coordinate we will

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send the order and a statement no no no your honor it's the commit it'll be the

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committee's communication I thought that the debtor has to actually undertake

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that as part of the same platform or share with us how it can be done correct

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it will be ours it's your communication it won't be blockbites communication

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all right thank you any other issues nothing further from us your honor

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Joshua Suspert from Kirkland Alice on behalf of the debtors we appreciate

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your time today and look forward to mediation all right I will ask let's see

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it's Thursday if possible by the close of business tomorrow can I get

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recommendations on mediators yes yes you're happy to please meet and confer

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again I want to thank all the professionals involved I know this is an

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emotional that there's that there are issues here that are troubling that

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they are difficult and I appreciate the courtesies and professionalism engaged

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in by all counsel thank you