Bittrex, Inc. September 13, 2023 U.S. bankruptcy court hearing (Delaware bankruptcy case number 23-10597 styled In re Desolation Holdings LLC, et al.)
Description
Per a recent Coindesk article https://www.coindesk.com/policy/2023/09/13/surprisingly-few-us-customers-want-their-bittrex-money-back/:Surprisingly Few U.S. Customers Want Their Bittrex Money BackThe U.S. Secret Service kept millions on the exchange, company lawyers told a bankruptcy court – but other creditors have been strangely reluctant to ask for their funds back....
- Unofficial Computer-Autogenerated Transcript, to Assist the Hearing Impaired etc.
Mr. Mosco, welcome. It's good to see you.
Good to see you too, Your Honor.
Mr. Shepard Carter, I like the tie. Is that black and orange?
This is black. No, it's not black and orange. It's dark, dark blue and orange, which are the colors of your alma mater.
The colors of my alma mater are black and orange. Oh, then it's black and orange.
Your instincts are excellent. You may proceed. Mr. Mosco, good morning again. Good to see you.
I should have known that since they were the Tigers. They are the Tigers.
We are the Tigers.
Good morning, Your Honor. We sent over to chambers a PowerPoint presentation. I can hand up an extra copy if you'd like.
I have it. Thank you.
And thanks for the Court's time today. It may seem like a bit of navel gazing going on here because there's not a controversy,
but we did want to update the Court from our last presentation, from where we are. All the work is being done behind the scenes that you haven't seen.
I appreciate that, and certainly no apology is necessary. I'm always happy to take a status report.
As you just mentioned, I really have limited visibility into most of the cases that I have, and often then it just turns into a very ugly surprise when everything blows up all at once.
So I'm hoping that's not going to happen here, but I certainly do appreciate the guidance that you're offering.
Correct, Your Honor. Just to level set and for the record, Patty Tomasko, Quinn Emanuel on behalf of the Dutters, and I'm joined by my colleague, Ken Ennis from the Young Conaway Firm.
We just wanted to go through where we were. The last presentation that we gave you, we had very low engagement from the customers that we had asked to withdraw their crypto.
As you know, the Court entered an order allowing the customers to begin withdrawing cryptocurrency and fiat currency as of June 15th is when we reopened the platform after the May 8th petition date.
So we wanted to go through that. I also want to introduce the Court to, we have a couple of the legal staff from Bittrex, Caleb Barker and David Maria.
David Maria is the General Counsel of Bittrex and Caleb Barker is the Assistant General Counsel of Bittrex.
Very good. Welcome, gentlemen.
Morning, Your Honor. If I get something wrong, which I frequently do, they will correct me and I've invited them to be live so that as we go through this, if I get something wrong, they can say, or if the Court has any questions about what we've done and all of the efforts that have gone into this and where we are with the status of the withdrawals.
I'm not going to bore the Court with the history, but as you know, we filed the bankruptcy petition on May 8th. The Court entered the customer withdrawal order on June 13th. We reopened the platform on June 15th.
This is consistent with the main goal of the case, which was to set up a process by which Bittrex USA operations could be wound down, along with the sister company Bittrex Malta, which is a Maltese organization that has been roughly out of operation since late 2018.
So to that end, if you turn to slide six, you can see our Chapter 11 timeline to where we are today.
Of course, we have a disclosure statement hearing coming up on the 27th.
Right.
And this is sort of to get everybody, you know, oriented correctly as we face that.
So far, I will say we have gotten only informal comments and nothing momentous with respect to the disclosure statement or the plan. We're getting language, incorporating it. All of that's going to plan.
Turning to slide eight, as I mentioned, we still have to comply as we're doing customer withdrawals with the various regulatory requirements for the payment.
KYC and KML stuff.
The main that I call them, Finson and OFAC.
Finson is concerned with financial crimes.
They want to have all the KYC information from the customer.
So are you really who you say you are?
And they also want to know that, you know, you're not engaging in some kind of money laundering.
So that's that's really what they're about.
OFAC is concerned with persons in foreign countries engaging in financial transactions in the U.S.
So those two regulatory requirements are built into the algorithms of the platform.
OK.
So we also wanted them to update, accept the updated terms of service, which also incorporate these regulatory requirements. And so that process has been underway.
So in conjunction with that, there was, of course, an increase in activity with the help desk.
The company engaged overtime help desk assistance.
And that has continued all the way through August 31st when the help desk was shut down, consistent with the August 31st, 2023, part eight.
So that help desk activity kind of demonstrates how much the company has been working with the customers.
There's been forty seven thousand plus customer help desk tickets and a lot.
And then the other the other interesting thing is there's two factor authentication.
Obviously, this is dealing with financial assets.
And so that process of, you know, I know in my law firm to get logged on in the morning, sometimes it takes me 15 minutes as I'm going through all of the steps.
The same thing happens on this platform. So you have two factor authentication.
You're going to get a text to your phone and an email.
And those two things combined give you, you know, the best security, high level confidence that you're dealing with the right person.
Thirty five thousand nine hundred seventy two customers have withdrawn their like kind assets for a total value of one hundred and forty three point seven six million dollars worth of crypto.
This is in addition to approximately twenty three million that was withdrawn during the April wind down period immediately before the petition was filed.
So on slide eleven. We've broken these numbers down.
By the number of customers remaining and the number of customers that have withdrawn.
So the value of crypto withdrawn is one hundred and forty three point six point seven six million broken down between Bittrex US of ninety five million and Bittrex Malta of forty eight million.
OK. So one of the things we wanted to explore was why were we getting such low levels of engagement.
And so in the beginning and so we broke it down between customers with balances over one hundred dollars and customers with balances under one hundred dollars and of the remaining customers.
Their balances are under one hundred dollars. That's the number of those is seventy seven percent of the remaining customers have balances under one hundred dollars.
So we have a combination that you've talked about earlier. We have what may be stale accounts with dated or old or ineffective contact information and then basically relatively modest amounts that nobody's necessarily wondering where my money go.
Correct your honor. OK. And I will tell you anecdotally I've been monitoring things like the Bittrex Twitter Bittrex Reddit.
You know the various sites where customers are engaging more frankly and the sentiment is you know I don't want to give you all that information to get to get thirty five dollars correct.
OK. They really are making a calculated decision. They know about it and we're going to go through the notice process in a bit. But we have also prioritized we took a list of the crypto customers that remained and we put them in in rank order of highest to lowest and we engage with them directly.
Send them an email not just a group email sent them an email and said hey you've got this much you need to get it off. And so that's where we've seen a lot of success. You know understandably.
OK. So 11 of the top 50 customers by balance have withdrawn substantially all their assets for a total of eight point seven million of withdrawn balances. Five hundred and seventeen of the seven hundred and one users with a balance over one hundred thousand have withdrawn substantially all of their assets.
And so that you know prioritizing th
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