great vess flux sllog about
what kind of in.
improve.
So we've got to go. Facebook
at you. I'm fine.
Back.
display.
the district court's decision
to stay improper. And before
you today, I would like to
make 3 key points. First, the
district court's state
decision was premised on
multiple legal errors that the
government barely addresses
much less defense. The
government's refusal to
endorse the district court's
analysis is a clear sign that
the state was improper. Second,
the government has not
demonstrated a strong showing
to the district court's
Senate. This write in motion
here allows the government to
seek to enjoy any transaction
at any time under any law if
tomorrow. The government wants
to file an action seeking to
enjoy. And dollar.
jurisdiction jurisdiction.
Yes, You're��
that there's a 1.
that's the only thing that
says that.
That's the practical effect of
an injunction that that
qualifies under told 92 a one
and that includes post the
Ken cases. The government
concedes that standard and that
test exists. The only thing it
says is that we haven't shown
that. the order enjoys plan
confirmation much like a
preliminary injunction. That's
exactly what the government
is doing. It's not a
preliminary injunction. It's
not a preliminary injunction.
It doesn't join anything.
Well, your honor, it's
certainly orders the parties
not to go forward with
confirmation of consummation,
which is exactly what the
government saw in its
subject. There's an appeal of
the court's.
There is, your honor. There's
that's going to get that. That
is what the district court is
working on.
That's logical.
That fact is reflected
immediately under structure.
And when you say that, we
briefed by next week.
Your honor,
it will be, I believe the
briefing is bound to be
complete by ourx theDistrict
court.
the
state order.
You're on the briefing
schedule was already
extraordinarily expedited,
but didn't even get to the
April 18th closing date. And
in our view, the district
court's stay order, which I
think was premised on that
erroneous day along with a
number of other errors. Is
there anything in the record
to suggest that will walk. If
the district court's decision
to close the deal.
That's not consented to an
extension by April 18th. We
did this as recently as 2
days ago. It during our
reply briefing on very
careful in your they didn't
consent, but they have they
given any indication that
they will walk the deal will
fall through. If it's delayed
by. Your honor, I believe in
every turn they have not
been able to do that. And I
think that's the only thing
that's there's, you know,
that there's not much more we
can do other than continue to
ask them and they continue to
withhold that consent. And
and all of this was raised
after the evidence on
confirmation was complete. So
I don't think it's I think
that we have fulfilled our
burden of showing that finance
would not extend this date.
And I think that's important
to note that the court has
said that the order quote
might have a serious, perhaps
irreparable consequence and
2 can be effectually
challenged only by immediate
appeal. The government's
words that one of the court's
words that you say have the
effect of the the district
court's words. The district
court has stayed
consummation characterized
by the state's
irreversible loss.
And I think that's the
question.
Well, your honor, I don't
believe the practical effect
test requires that would
actually be an injunction.
Sure. It's I don't have the
exact order in front of me,
but it enters a state that
prevents that prevents the
plan from being confirmed from
being consummated in
particular by the April 18th
date, which is the entire
date of the decision.
So I think that's the
question. Right?
Yes, a court decision is an
adjunction because it
precludes the parties from
proceeding with.
Your honor, I don't think
your cases would support that.
I think the C F T C case, the
Sahu case, the SEC case, all
the cases that we cite in
footnote one of our motion
all recognize that there are
circumstances where it's not
the district court. It's the
district court. It's the
district court where you have
a district court or an order
that is actually directing
the parties not to proceed
with something that is
exactly what we have here.
Well, but again, the
district court is not did the
right. Are you suggesting
that this court is dragging
its feet?
Well, your honor, with all
respect to the district court,
it entered its state order on
Friday.
It was a state order. It was
a state order. It was taken
before midnight on Friday.
The clock was ticking. And
then that opinion contained
numerous legal errors, but
also got the date wrong of the
closing of the finance
transaction by several weeks.
And that's that was a material
error. And by that point, the
clock was ticking and we had
to go to this court to
investigate the case.
And I think that's the
reason why you're not doing
things in the district court.
I'm not sure why you I mean, I
think wanted to skip over the
district court. But it's not
going to be that you did
anything to try to get the
district court to correct
these issues on its own.
Your honor, the case was
already very expedited and the
district courts. Order was, I
think we think replete with
council information just to
participate with the
jurisdiction in this court to
vacate back a run out.
Stay particularly given that
that right is running and is
running and that the
government has never really
disputed is running on
irreversible 100 million
dollars. That is going to
en lure to the detriment
questions. We do have a
question and a
comment gotima Study
May, please. Court. My name is
will enamory represent the
official Committee of
unsecured credit is both a
digital holdings.
which may be through no
assessment adultery,
respectively.
are they they're not
potentially forkreman
Exactly the course of these
transactions.
no, that is not that it's not
that. What does.
What the clause does?
Is it. Protects the
professionals who were
the
government's
suggestion. It does not
exculpate actual fraud,
willful misconduct or gross
negligence. Contrary to the
government's suggestion, it
does not exculpate tax
violations or other crimes.
Judge Wiles made this very
clear. He said that the
government theorizes, for
example, that my order might
somehow be interpreted as
a fraud. It does not exculpate
tax violations or other
crimes. Well, the clause, the
exculpation clause that was
ultimately issued was drafted
by Judge Wiles. Actually, he
took the pen to the
exculpation clause and issued
that opinion. And in the
confirmation order, it made
clear that the will actual
fraud, willful misconduct or
gross negligence out applies
to the entire exculpation
clause. And the
government is very clear that
the government can stop the
transaction should it decide
if any of them are illegal.
And the government argues that
the exculpation clause,
quote, handcuffs the
government, it will have
widespread effect on its
ability to regulate
cryptocurrency. That's not
true either. The government
maintains the ability to come
to a decision and determine
that any of the 106
cryptocurrencies traded on
Voyager, our securities, are
otherwise illegal to transact.
So they come to that
decision.
And that's not true.
I mean, I think that's
what the government is
fighting over that in light
of what you've just said.
I mean, you can't come up with
some language that both sides
can live with.
We've been we've been trying
your honor to come up with
language that both sides can
live with. Those discussions
are underway, not concluded.
And we just want to be clear
on one point on what the
exculpation clause does and
what it doesn't do. I think
there was some confusion at
the district court. The
government argued that the
exculpation clause acts as an
act of
enforcement of the
transaction. The exculpation
clause states clearly that
excommunicated parties, quote,
So have no liability for
executing the transactions. It
does not state that the
government is enjoying from
doing anything. That for some
reason, the government sought
to personally punish an
individual for executing
transaction on the plan. That
individual raise exculpation
as an affirmative defense and
the district court would have
to determine whether the
conduct was within scope or
without. So there is no
injunctive relief or
anything. The district court
is not going to be
executing its police powers,
which is entitled to do.
But this can all be corrected
in by the district court,
right?
This can all be corrected by
the district court. The
district court can basically
come up with new language that
satisfies both parties. If
the parties can't do it
themselves.
The district court can take
a pen to the language of the
language.
The district court can take a
pen to the language of the
language and excise certain
provisions and not others.
That's not the
request.
The district court would then
send it back to the
bankruptcy court to amend the
language.
Yes, that's right.
We also believe that the
district court.
The district court is not
going to be able to do that.
The district court is short
thrift to the harm that could
be fall.
The creditors and just to be
clear, the creditors are 1.1
million retail customers. 70%
of the accounts are under $100,000.
Our constituents are having a
difficult time being for
mortgages, car notes, everyday
things. They badly need their
crypto back. And so any
extension and any any extension
of the stay harms them every
day.
So that's a question that
the district court would
answer.
If the state would have to
return it with any state would
would violate. And so you
have to overturn it. The
answer is no. And the
difference in this case is the
finance. You finance still
will expire on April 18th.
Bonds is the opportunity to
get those stay with a tight
schedule.
That's a stay.
A state that puts at risk a
state that puts at risk a
state that puts at risk. Meaning
what? April 18th finance has
the ability to walk.
Okay.
So that's a week. And so
there are a lot of things that
could happen. We've been
really to each since.
Yeah. Well, let's kick
around.
Yes, your honor. But let me be
very clear on the timeline
because I think there was
there was some confusion.
April 18th is a date by which
the finance must close. They
must be closed. And then
April 18th is a date by which
all conditions to closing must
be satisfied, which includes
that there are no orders or
temporary restraining orders
are preliminary permanent
junctions in effect,
restraining and joining,
making illegal or otherwise
prohibiting the transaction.
That's 7.1 a that's required
to be complete. 3 business
days prior to the April 18th
closed.
Okay.
The word out of the district
court is we have a pending
briefing schedule. The
government's brief was just
filed. Ours is due on the
14th. And then the reply is
on April 18th. And so the
decision was made after the
what we're viewing is a drop
that date because finance has
refused to accept.
I guess. But the judge
chin's point, they haven't
said they're going to walk
away from the deal. They just
haven't agreed to consent to
the extension.
That's our understanding. Yes.
That was a discussion between
the debtors and by.
So it's hard to know how to
interpret that. That might be
just that they want to keep the
pressure on or they want to
you.
This is you and arguing that
this is really an injunction.
There might be a lot of
reasons why they're not
consenting to an extension,
but not without seeing that
they're actually prepared to
walk away from this deal.
Well, they haven't agreed to
consent to an extension.
They're not going to be able to
make a decision. They're going
to be able to make a decision
that are going to go into the
hands of retail creditors. And
so when the question is, it
doesn't have the effect of a
of a preliminary injunction.
There's a deal that our
constituents very much want
that's not going to happen or
could not happen if we don't
get a decision by the time that
we requested.
There's one other issue that
was raised by the government
that was raised by the
government.
And that's the
argument that there's a separate
the separation of powers does
not allow an article one judge
to make those sorts of
determinations. That's not so
because the bankruptcy courts
are required to interpret and
enforce a bankruptcy code. One
important provision is 11 USC
1129, 8, 3, which requires a
bank and support to find the
plan has been proposing good
faith and not by any means
forbidden by law.
That provision that state
government is not going to
be able to do that.
That's why we're asking the
government to come forward and
say, hey, some of these
transactions are legal. Some
of these transactions are
forbidden by law and they
didn't do so.
That's why we're asking the
government to come forward and
yes, thank you.
I think that's as high as it
goes. Good morning. Your
honors. May please. The court.
My name is JD Barnea. I'm an
assistant United States
attorney and I'm here on behalf
of the United States of
Congress. I'm a lawyer and I
work for the United States
Department of Justice. I work
for the United States Department
of Justice. I work for the
Department of Justice. I work
for the Department of Justice
on the implementation of
federal and state criminal and
civil enforcement laws against
entities and individuals will
be undertaking broadly
defined, highly
traditionally unsupervised
actions in a field right with
fraud and abuse. No court of
any kind as that authority.
The district court correctly
state implementation of this
to the effect that if somebody commits fraud in carrying out the plan as directed by the
bankruptcy court, that person cannot be prosecuted successfully for fraud.
Well, I ask that very question to...
The order gives a defense to a prosecution for fraud. First of all, before reaching that,
do you agree with your adversary that there's nothing in the order that prevents the government
from launching a prosecution, they say it's merely... At most, it's a defense against
a fraud charge.
Well, the bankruptcy court said that the parties shall have no liability for any fines, penalties,
or other liabilities. So, to the extent that this is, quote unquote, a defense, it is essentially
a complete defense. It is an ex ante defense as applied to conduct that hasn't yet occurred.
That is not an appropriate...
Is there any other clause that states that it doesn't serve as a defense? It says effectively
that it does not serve as a defense against a fraud charge?
There are two clauses in the exculpation provision. One of which says that with respect to the
negotiation, execution, and implementation of any transactions contemplated by the plan,
there would be a defense, an exception for actual fraud with willful misconduct or gross
negligence.
Then it says, in addition, the exculpated parties shall have no liability for fines,
penalties, damages, or other liabilities for the rebalancing transactions and the distribution
of cryptocurrencies. There is no similar exclusion for fraud or intentional conduct. When I asked
the bankruptcy court whether it was intending to enjoin criminal prosecutions, it said
that it was preposterous for the government to suggest that it could criminally prosecute
people for merely following what it perceived as to be its order.
It may be that the bankruptcy court intended in one place to exclude fraud, but it was
very clear that it intended to bar criminal prosecution specifically of... I would imagine
in this kind of context, types of criminal claims that could arise are generally involved
fraud or intentional conduct. It's pretty clear that the bankruptcy court intended to
preclude that. Moreover, the harm claimed by the appellant...
Why do you say it's pretty clear? I don't understand the pretty clear. It seems to me
that the way you characterize it, the judge didn't answer your question. When you said,
may they be prosecuted, the judge said it's preposterous to think that they would be prosecuted.
No, it's preposterous to think that they would... That he should not... I'm sorry. The bankruptcy
court said it was preposterous for the government to suggest that it could prosecute people
for following the bankruptcy court's order, suggesting that the bankruptcy court fully
intended to bar criminal prosecutions. Moreover, the harms identified by the appellants in
this case is the terrifying harm that they identify in their brief is that they might
be criminally prosecuted for engaging in these transactions. If in fact all that we're talking
about here are non-fraud or non-criminal prosecutions, then the harm identified by the appellants
that would justify this extraordinary application to this court all but vanishes, although the
harm to the government remains essentially the same because the district court may not
bar any causes of action, civil or criminal, by the government, whether they sound in ordinary
negligence, gross negligence, harm or willful misconduct. It's simply outside the power
of the bankruptcy court to decide which federal laws should and should not apply as against
the appellants in particular circumstances. However, again, to the extent that the appellants
believe that they are receiving a substantial protection that might be taken away, they
specifically identified the protection against criminal prosecution as the one that they
are trying to protect against, and that is one that the plain reading of bankruptcy court's
order might grant them, but is plainly illegal and unconstitutional.
I guess it's not clear to me why this all has to be resolved before the plan is approved.
I mean, there are often disputes as to provisions in a plan or closing documents. The parties
might have different views as to what they mean, but until there's actual litigation,
that doesn't have to necessarily be resolved.
And precisely, and the government proposed this to the parties, to the appellants, in
the bankruptcy court and the district court, the exculpation clause could simply be separately
stayed from the plan itself.
But why does it have to be stayed? What it means, whether it's as broad as you say it
is or whether it's as narrow as they say it is, why is that something that has to be resolved
before the plan is approved?
Because of the doctrine of equitable mootness, Your Honor. Equitable mootness holds that
if a plan, if a bankruptcy plan is substantially consummated while an appeal is pending and
it is not stayed, then any appeal of that plan is rendered equitably.
But it's your appeal, right?
Yes.
So do you not care whether this closing happens? I mean, it doesn't really matter to you?
The government has no objection to this closing to happen.
That's all it is. It's just no objection to it happening. But it doesn't matter whether
it happens or not. Is it no moan to you?
To the extent that the customers are able to access their funds, that's not...
That sounds like a good thing. And so we have no problem with that happening.
Under any stretch, would it be a bad thing?
I'm not aware of any specific bad thing that would happen from customers being able to
access their...
So if your appeal to the district court and the arguments you're making here scuttle the
deal, that's just lying?
It is not our intention to do so.
Well, it seems like it's getting right to the brain, though, doesn't it?
Well, again, first of all, the reason why we're having this fight is because the appellants
insisted on including this and the bankruptcy court ultimately agreed to include this language
in the bankruptcy plan that has no place in the bankruptcy plan. The government is normally
carved out from exculpation clauses in bankruptcy cases. And in that event, as it was earlier
on in this particular bankruptcy plan, in that event, the government wouldn't got involved
at all in this case. So the harm is entirely of the appellant's own making in that they
insisted on receiving this illegal protection that they're not entitled to and that the
bankruptcy court was not entitled to offer them as a condition of proceeding. The harm
to them should this exculpation provision be excised from the plan is simply that they
have to follow the law like everyone else and that ordinary laws that apply to every
single person in the United States would also apply to them in the execution of the plan.
That is not any harm at all. However, if they...
It might subject them to a lot of civil lawsuits, right?
It may subject them to whatever civil lawsuits...
But that's not a harm at all?
It's not a harm at all to be subject to the law as it is. They have defenses as against
lawsuits to the extent that they're sued with respect to a civil lawsuit, with respect to
something that was already decided by the bankruptcy court. They can say that it's rest
judicata.
That the government is entitled to prosecute crimes and the bankruptcy court is not entitled
to tell the government you can't do it.
Precisely, Your Honor. And again, to the extent that they wish to fight over this on appeal,
that is fine. We can stay just to exculpation provision. That provision can be put on hold
pending a review of the merits if ultimately...
But I just don't even understand what you're worried about. If we had jurisdiction, I wouldn't
really understand what you're worried about. You're concerned that someone's gonna cite
this provision in a criminal trial and say, and therefore, I can't be convicted of fraud.
That's what you're worried about.
A criminal case, a civil...
Do you have any case where that's ever happened?
Well, this is the first time as far as we...
The bankruptcy court said we were allowed to commit crimes and now the government's
prosecuting us for it.
The bankruptcy court said that the participants in these transactions shall have no liability
for fines, penalties, or damages or other liabilities with regard to the implementation
of these transactions. The bankruptcy court has no authority to say that and certainly
I hope that even with this language, another court would essentially ignore it and proceed
to apply the law as it is, but this is an unacceptable risk for the government for courts
to be issuing this type of order purporting to exculpate people in this fashion. And it
is for that institutional interest which implicates both the constitutional interests of the United
States and the separations of power that the government felt compelled to appeal in.
I suppose your concern goes beyond this case as well.
Absolutely, Your Honor, because...
A precedent for including the same order as a part of the confirmation of a future bankruptcy.
Yes, Your Honor, the bankruptcy bar is relatively tight-knit and essentially the way this works
is as soon as somebody gets something out of one bankruptcy court, everyone asks for
it in every bankruptcy case. So if this court or the district court on appeal does not remedy
this error, we can expect hundreds and thousands of these types of excultation clauses in cases
around the country and the havoc that that would entail specifically with regard to government
enforcement and perhaps even more broadly would be unimaginable. So we're here to try
to stop it in a relatively unique situation where the district, where the bankruptcy court
explicitly directed its exculpation to the government. And for the most part, these exculpation
clauses, as I said, the government has either explicitly carved out or it is sort of understood
from context that they don't apply to the government at all. But to the extent that
anyone is trying to exculpate someone from criminal or civil enforcement liability of
the government, that is simply unacceptable and cannot stand. And I see my time is up,
but I'm happy to answer any further questions.
Okay, real reserved decision, but thank you. We're mindful of the time restrictions. Thanks.