Thread by @rexchatterjee

The 341 Meeting in FTX is about to start.

Dial-in: 1-888-790-3561,,7861992#

This hold music slaps.

Curious about what a 341 Meeting is? Want to read our ex post facto summary? Visit titangrey.com/ftx

Note from J. Sarkessian (UST): this will not be the only 341 Meeting in this case.

Makes sense.

D's have not filed schedules of assets & liabilities.

So there'll be this mtg, a mtg once scheds are out, and maybe even one or more between now and then.

Attorneys for Ds on the call are Glueckstein and Kranzley from S&C and Landis and Brown from LRC.

Ds' representatives: Mary Cilia, post-petition CFO of FTX, and Steve Coverick of Alvarez & Marsal (Ds' financial advisor)

Note, we're going to live tweet the highlights, not a blow-by-blow. A lot of the questions are going to be pretty sundry.

The @alvarezmarsal EL was signed by Tim Wilson of FTX. He's still an employee, still working with Ds.

Our research: Wilson is GC of FTX Ventures. He came on in August 2022 (yikes!). Previously, associate at @FenwickWest and @sullcrom

UST wants a list of pre-petition officers. Ds will supply via e-mail through counsel.

UST wants Ray at the next 341 Meeting. She has an issue with the typed sigs (by Ray) on the petitions. Wants wet ink.

There are over 100 petitions. Adam Landis from LRC points out that this hasn't been an issue in cases past.

UST: they'll figure something out.

Our take: this is a little crazy. Does the UST think that some of these petitions were filed by counsel without their clients' consent?

Come on.

Ds estimate they'll be able to file schedules of assets & liabilities by April 15 (!!).

Our take: yikes!

Ds plan to conduct sales of some of their businesses. Per their sale procedures, it is possible for some of these sales to be concluded prior to the April 15 date.

UST: How can the Ds sell assets prior to knowing the full scope of their A&Ls? How could they be valued?

Ds: for 2 entities, they're solvent non-debtors, so the sale is just of the Ds' equity interest. For the other 2, they're debtors. Ds will prepare separate schedules for all debtors as part of the full A&Ls submissions. But valuation is a diff matter entirely.

This makes sense, in our view. The value of a business, or an interest in a business, probably has little to do with the overall Debtors' landscape of A&Ls and is more about that particular business.

We get the line of UST questioning. It's a q of fairness. (More to say here.)

Moving on, apparently the Ds don't have GLs for all D entities. Not surprising.

B&Rs were put together by, inter alia, Prager Metis, and RA Lee. Ds currently in-housing this functioning.

(Side note: people love questioning the use of Prager Metis, it seems)

D hasn't hired new employees to work on B&Rs. Using existing employees, consultants, and newly appointed officers.

Our take: sure? hiring trustworthy people is a long and arduous process?

Ds moving crypto assets to cold wallets at @BitGo

Cash is being secured. Stream of amounts disclosed by Cilia sometime around timestamp 10:52 ET of the Meeting. (We will go back and list out)

@BitGo Ds are working on getting sig authority changed over. (Our take: how is this taking so long?)

Ds state that there's a bunch of cash overseas in Japan. (Our question: is it in USD or JPY-denominated accounts? Because, FX risk.)

@BitGo Questions from UST on restrictions on how / where Ds can place customer cash. Ds don't know at this time, working to obtain.

@BitGo UST: did the pre-petition Ds have a DMS where they stored customer agreements?

Ds: yes and no. (Our take: wtf?!?) Ds apparently stored contracts on google drive and slack. (Our take: WHAT?!)

@BitGo Our take: IN WHAT UNIVERSE DOES A COMPANY THINK SLACK IS AN APPROPRIATE PLACE TO STORE CRITICAL DOCUMENTS?!?!?

Like I don't think even @SlackHQ would think this is a good idea.

@BitGo @SlackHQ Debtors have set up new (pooling) bank accounts at Western Alliance Bank.

Why them and not someone larger? We'll look into this.

@BitGo @SlackHQ UST had a question about whether cash is also in cold storage.

*facepalm*

@BitGo @SlackHQ Long story short re: cash,

There's customer and Debtor cash in various accounts belonging to various Debtor entities held at various banks in various countries around the world.

Legal procedures for taking control of this cash vary by country / jurisdiction. Time-consuming.

E.g. there's ~$130mm in restricted cash of the Debtors in Japan. S&C indicates that the Ds have retained appropriate local counsel to sort through matters in each relevant jurisdiction.

Ds: there's a lot of unknown cash balances in unknown places at unknown banks.

Our take: this is actually not an insane thing to say given the pp Ds' lack of recordkeeping and reckless cash mgmt sys.

Ds keep finding more cash! (This is good!)

But also, SBFs take that "everything would have been fine with a liquidity facility" is an INSANE thing to say given that their cash mgmt sys was basically A WORLDWIDE EASTER EGG HUNT.

OK, we're on a break. Back at 11:25 ET.

Seems like there's a lot more fun to be had today.

And we're back. There's been questions around uses of ledger terms of "unidentified" vs "unknown" cash. Apparently these are the same?

Also, Ds not closing any bank accounts even if zero balances. (Our take: seems right)

Ds are looking into their real property holdings. No further info at this time.

Ds 'continuing to learn more' re: pp loans made to officers & execs. Nothing more to add at this time.

UST: any D-entity 'hedge fund activities' or derivatives activities with third parties?

Ds: No.

UST: was @MazarsGroup performing accounting services for the Ds?

Ds: yes. depending on the jurisdiction, they performed accounting, payroll and tax functions. in some instances, they're still working for Ds.

@MazarsGroup UST: who prepared the Ds' tax returns?

Ds: "we are still investigating." R. A. Lee did some.

Ds will be using @EYnews going fwd.

@MazarsGroup @EYnews Ds working on gathering documentation of loans. (Our take: seems important?)

Ds also working on stopping sig authorities of fmr officers and replacing w current at banks worldwide.

@MazarsGroup @EYnews UST: any pension or 401k?

Ds: 401k yes but not familiar with any pension plan as of yet in diligence.

@MazarsGroup @EYnews UST: Ds books on cash or accrual basis?

Ds: it's a mix, some entities cash, some accrual.

@MazarsGroup @EYnews UST: D's currently aware of any secured creditors?

Ds: not currently.

@MazarsGroup @EYnews UST: do the Ds currently have gen liab ins?

Ds: "at some entities"

UST: D&O?

Ds: "the same answer"

UST: WC?

Ds: "we're required, I believe"

UST: can you confirm?

Ds: we're working on it.

@MazarsGroup @EYnews UST: are Ds current on their taxes?

Ds: "that's under...continued review."

@MazarsGroup @EYnews There's a question from the UST re: authority transfer to Ray. PP Ds' BoD wasn't involved. It was from SBF, as maj. owner.

@MazarsGroup @EYnews UST: y'all paying bonuses?

Ds: not at this time, and would file motion to do so with the court at the appropriate time.

Obviously?

@MazarsGroup @EYnews UST: prior bankruptcies?
Ds: no

UST: enviro problems?
Ds: no

UST: prior names?
Ds: yes, but listed in petitions.

@MazarsGroup @EYnews Ds: no post-petition sales of assets, and no post-petition interest payments on debts.

@MazarsGroup @EYnews UST: do the Ds have records of withdrawals during the 90-day pre-petition period?

Ds: we are looking into it

(Disclaimer: I was a preferences litigator. This is going to be intense.)

@MazarsGroup @EYnews UST: how many employees do the Ds have?

Ds: around 220, but we are still reviewing records.

Our take: LOL this is bad, pp Ds didn't even know who worked for them.

@MazarsGroup @EYnews Ds still don't have a full figure on total global debt.

@MazarsGroup @EYnews Ds still working on prof fees budgets and allocations amongst D entities.

@MazarsGroup @EYnews UST: are there inter-company cash transactions among D and non-D entities?

Ds: no.

UST: how about with crypto?

Ds: no.

@MazarsGroup @EYnews OK, HA LLEGADO LA HORA, IT'S TIIIME FOR CREDITOR Q&A!

There are 223 people on the line.

@MazarsGroup @EYnews First question from a Mr. Jack Huang, non-US based creditor of FTX.com (intl). Has not received notifications of things, e.g., this meeting.

How will Cs rec. notices? E-mails?

S&C: service by e-mail. can also be added to e-mail list by kroll. monitor kroll site

@MazarsGroup @EYnews Next w. from a Ms. Debbie Fery: pre-petition customer withdrawals being honored? are these custodial funds?

S&C: still locating all assets, distributions will be part of the plan of reorg

Our take: creditors should consider hiring counsel.

@MazarsGroup @EYnews Next q from a Mr. John Mallon: FTX Europe offered products that could be redeemed directly vs FTX Europe. are claims re: these considered secured? if FTXE sold, what happens to claims?

S&C: not appropriate time to discuss

UST: direct q to OCUC counsel or own counsel

@MazarsGroup @EYnews Sidenote, UST notes that OCUC to appoint counsel today or tomorrow. Will note appearance on docket.

@MazarsGroup @EYnews Question from a Mr. Tim Hao: are there f/b/o accounts like in voyager?

Ds: we're still looking into it.

@MazarsGroup @EYnews Sean Gordon of Thompson Hine for creditor Ledn, Inc.: FTX Trading Ltd. ToS said fiat deposits would result in "e-money" credits in FTX accounts. how did this work?

Ds: "we are not in a position to answer that today"

SG: do you know who at FTX oversaw that?

Ds: "we do not."

@MazarsGroup @EYnews Q from a Mr. Dimitri Augustidis: have the unauthorized pre-petition transfers been recovered?

Ds: working on it, in progress but can't comment further.

DA: preferential treatment of Bahamian customers?

Ds: we are looking into it. look at Bromley dec.

@MazarsGroup @EYnews Follow up: will intl creds be treated differently than us creds?

S&C: we are not in a position today to get into specific issues around customer recoveries.

@MazarsGroup @EYnews Next Michael Troiano from Vedder Price for cred Delta Ivory UK Ltd. etc.: treatment of post-petition deposits into FTX?

S&C: not aware of any such activity.

@MazarsGroup @EYnews Next from Dylan Yamamoto of Arent Fox rep cred. BH Trading: foreign vendor payments?

Ds: that is an ongoing process.

@MazarsGroup @EYnews Next from a Ms. Silberman (sp?): what's going to happen to NFTs?

S&C: have been secured, will be per bkr. process.

Our Take: this is going to be super interesting. noting this for future analysis.

@MazarsGroup @EYnews Next from a Mr. Paul Chambers: systems are down so users can't access their transaction data. how will they access for the purpose of making their tax filings?

Ds: good question and we are working on a plan to provide this info in the very near future.

@MazarsGroup @EYnews Next from a Ms. Jessica Furr: what have the Bahamian authorities seized? is there a claw-back plan?

Ds: under review.

@MazarsGroup @EYnews Next from a Mr. Brian Petrozak: can you disclose brokers holding FTX funds?

Ds: no.

@MazarsGroup @EYnews Next from a Mr. Charles Kaminski: questions re: WRS entity, was FTX US solvent as of the petition date?

Ds: legal question we're not in a position to answer.

CK: maintaining customer ownership lists for cash in banks re: FDIC coverage?

Ds: no information on that today.

@MazarsGroup @EYnews Follow up:

CK: UST, can you incorporate this into future UST questions? Q. is "are Ds maintaining / updating customer ownership lists kept at the bank for omnibus accounts for pass-through FDIC insurance coverage for customers?" ref'd in ToS for FTX US, §6.

UST: will review.

@MazarsGroup @EYnews Follow up:

CK: will FTX ToS terms be respected in customer assets / claims disposition?

S&C: legal question. US bkr process will govern.

@MazarsGroup @EYnews Follow up:

CK: there may be assets that Ds docs, & even creds, do not know cover / about, i.e. undocumented assets, are Ds working with SBF & other fmr execs to diligence & locate?

Ds: we are looking into it. cannot comment on who working with.

@MazarsGroup @EYnews From a Mr. James Murphy: has S&C performed work for FTX pre-petition? who made decision to hire S&C? did they know about S&C's past work?

Ds: will be disclosed in retention app.

Our take: at issue here is likely S&C's past work for FTX in bidding on voyager assets.

@MazarsGroup @EYnews Next from a Mr. Alexander Gruener (sp?): lots of opacity re: "ongoing investigations." when will the mentioned "ongoing investigations" be complete?

Ds: "soon as possible"

Our take: lol.

@MazarsGroup @EYnews Next from a Mr. Hoda repping plaintiffs in CA suit: are there more auditors than have been disclosed?

Ds: not at this time but investigation ongoing.

@MazarsGroup @EYnews Next from a Mr. Victor Simionato (sp?): what steps should creds take in order to secure representation in this case?

UST: contact a lawyer familiar with US bkr. law, and in a few days, OCUC will be retaining counsel, who cred. can contact.

@MazarsGroup @EYnews Next from a Ms. Renate Liechtenegger (sp?), counsel for cred Rich Fox Capital: what're the case numbers for the Ch 15 and the Bahamas case?

UST: Don't have Bahamas case no. Ch. 15 case no. is 22-11217 (thx K. Brown from LRC for the assist.)

@MazarsGroup @EYnews Follow up:

RL: no claims bar date yet. soon?

S&C: not soon. will be filed on the docket.

UST: but claims against FTX DM will need to be filed in the Bahamas. recommend US / Bahamian counsel.

@MazarsGroup @EYnews OK. that was the last. 341 Meeting will continue, as there are no schedules yet.

Final note: we did our best to capture things accurately. if you find that there's an issue or anything that needs correction, please reach out. DMs open.

.@threadreaderapp unroll please and thank you.