American court hearing recordings and interviews - BlockFills crypto bankruptcy - 3/26/2026 bankruptcy hearing in Delaware re temporary restraining order (In re Reliz Technology Group Holdings, adversary proceeding)

Episode Date: March 29, 2026

For the rest of the court filings in this adversary proceeding, which is within the BlockFills bankruptcy pending in Delaware, see: https://veritaglobal.net/blockfills/document/list/6505

Mr. Hurts, Tom Rainey. Good morning, Your Honor. For the record, David Hurst, McDermott, Will & Schulte, on behalf of the debtors and debtors in possession in these cases. First, Your Honor, thank you very much for scheduling this hearing so quickly.

We're really appreciated it. With me on Zoom today, Your Honor, is Mr. Mark Renzi. He's the debtor's Chief Restructuring Officer. Yes. He's also the signatory for the complaint that we filed, the verified complaint we filed, initiating this adversary proceeding.

And in the courtroom today, on my right, my colleagues Joe Evans and Dan Coltman. Mr. Evans will be doing the argument today. Your Honor, as you saw from the agenda, there's just one item on the agenda today, and that's the debtor's motion for a temporary restraining order and joining the continuation of certain litigation in Illinois.

Yes. Or in the alternative extending the automatic stay, the debtors, directors, and officers to prevent the litigation against those directors and officers. Your Honor, unless you have any initial questions for me, I'm happy to turn the office. podium over to my colleague, Mr. Evans, too. Yeah, I'm happy to hear from the parties.

All right. Okay, thank you. Thank you, Your Honor. Good morning, welcome. Good morning, Joseph Evans, McDermott, Will, and Schulte. The Honor, first we'd like to move into evidence adversary proceeding document number one,

which is the verified complaint, and adversary proceeding document five, which is the Declaration of David Hearst and Associated Exhibits. Okay, does anybody object to the admission of the verified complaint to Mr. Hertz declaration purely for the purposes of today's hearing. Your Honor, this Ronald Gallard is the other-sized-Gillard.

Mr. Gallard, I'm not sure if my co-counsel, wishes to speak, it looks like they're having some technical issues right there. Yes. So just hold off a second. Let me introduce him. It's Thomas Patterson from the Patterson law firm from Chicago. His pro hoc has been admitted on the DIA. Yeah, I had the pleasure of granting that motion.

Okay, thank you. Yeah. Why don't we give Mr. Patterson just a second to get... My apology. Okay, no worries, Mr. Gallet, no worries. Happy opening day at all celebrate. Okay, Mr. Patterson, can you hear us okay? Looks like the answer is no.

Okay, in the spirit of the day that it is, Mr. Gellert, I may ask you to pinch it. Yes. Well, good one. With respect to the admission of the complaint, and, you know, obviously the fact that we haven't had the opportunity to look at sort of the things, being the surgeon in there.

I mean, they can be admitted for the purpose of, this is what you say they are, but we can't agree that they are all purposeful, you know, all true and all those things without having an opportunity to really kind of debt them. Understood. So for the record in terms of determining a TRO, yeah, sure, but not for the truth of the matter

that they're later said to be, oh, well, they're admitted in the record. Understood, understood. It's purely for the purposes of today's hearing And certainly your clients, I just don't want to. No, your client's rights to contest the complaint and to ultimately test any of the contents of the declaration and supporting documents is reserved. All right, great. Thank you, Your Honor. Okay, thank you, Mr. Gillard.

Okay, Mr. Evan. Thank you, Your Honor. The debtors filed this adversary proceeding in motion for a TRO to enjoin the Illinois litigation against three of Bluffield's directors and officers. The Illinois litigation was brought by two creditors, alleging that, block bills, the debtors violated their terms and conditions by claiming the assets, and that blockbills made misrepresentations concerning the safety of those assets. There are 11 counts, nine against the company, and two against the three directors and officers, and they all seek essentially the same thing, which is the return of crypto that was provided by the plaintiffs in that case, two blockbills.

Yes. On March 20th, the Northern District of Illinois stayed the Illinois litigation as to the debtors. There are two remaining counts, count five. dating and abending fraud, and count 10, which is a breach of fiduciary duty claims. In that order, Judge Pennelly stated that he was seeking further advice from the bankruptcy court regarding the extent of the automatic stay as it relates to the individual defendants. Accordingly, we filed this adversary proceeding in this application. The stay should be extended to the claims gives the D&Os for four primary reasons.

One. Let me ask you one question of. Sure. The relief that you're seeking today is under Section 105 and Rule 65. As I read the proposed order, you're not seeking any relief or any findings under Section 362 today. Am I misunderstanding the proposed form of order? The proposed form of order was in the alternative, I believe, Judge. So yes, but you're right.

The primary relief we are seeking is under 105, which is a TRO until we have a final hearing on the extension of the automatic stay. Some of the things we're going to be arguing today, Judge, are relate to 362, which goes to the likelihood of the success on the merits, and that's why we're arguing about those things. It's relevant, but, yes, I believe we're seeking is under 105-back. Okay, very. The state should be extended to the D's and O's for four reasons. One, the cases against the D's and O's are inextricably interwoven with the conduct of the debtors, blockers. Two, adjudicating the case against the D's and O's will necessarily decide issues that are critical to this bankruptcy proceeding. Three, there will be significant costs in defending the action against the Dies and O's.

And for the fiduciary duty act, claim, and specifically we contend as an estate cause of action that should be state. First, our read of the complaint is that this is really a claim against blockbills and not the directors and officers. In each of the allegations concerning representations that are made prior to plaintiffs deposit to block bills, the plaintiffs actually identify other blockbills employees, not any of the defendants. That's complaint 20, 21, 22, 23, 25, and 30. In certain of those allegations, they identify generally either block those representatives or employees other than the defendants, but never any of the Dees and O's.

And plaintiff's primary allegation is that they were lied to before they made the deposit. Not on January 16th they made this deposit. But none of the statements prior to January 16th relate to any of the defendants. And I raised this because it shows, we think, that this claim is really a claim against Blockvills, and not any one of those directors and officers in their personal capacity.

The second issue, commingling. The plaintiffs allege that Blockville's advised plaintiffs that they wouldn't be commingled. And when they say Blockfields, they'd say Blockvilles, they'd say, Blockvilles, the company. They refer to Blockville's representatives in what they told them. And then they say that Blockville's commingled the assets. They don't say that one of the individual directors and officers

can mingle the assets, or made the decision to commingled the assets, made the decision to commendable the assets or even made the misrepresentation that the assets would not be commingled. Instead, they say the company did so. That's why we think it's kind against the company and not the Dees and O's. The only allegation they have specifically to the Dees and O's is that after the fact, X post, February 6th, February 9th, February 20th, there were town halls and other meetings where they said, hey, we're in a bad spot. We're pulling the gates down. we're not on their withdrawals.

Sorry. Those are the allegations that's a Dizano's. And the actual counts, what they say is, quote, as former CEO and co-founder of defendant, they must have approved the misappropriation of funds and failed to ensure the proper disclosure of financial conditions. According to all these claims in reality are claims against Blockfills,

claims about the operations and conduct of Blockfills as a company as opposed to any one individual director and officer. In order to prosecute these claims in Illinois, the court in Illinois will be tasked with answering critical factual questions that are important to this case. Like one, did Blockfield commit fraud by its representatives making certain representations to the market? What did the Blockfield's customer agreements actually mean? Did Blockfields have a special or fiduciary relationship with any of its customers? Did Blockfields commingle its assets? Where they allowed to do it?

Where they're not allowed to do it? To the extent they're comigal, can you trace them? Can you trace them? These are all questions that are court of this proceeding, that if we have another proceeding in Illinois, they decided on the same thing, it runs the risk to one of conflicting rulings, but two, significant cost. Let's talk about cost for a second.

We have three D's and O's, each with their separate counsel, each with identification rights under their corporate documents, each with incoming claims, as I suspect, it's a very small D&O insurance policy, They were required to continue prosecuting or defending these claims will continue to expend resources that otherwise could be spent on creditors here. Last, they assert a fiduciary duty claim, which in our view is an estate claim. They don't identify any unique facts that make them any different than any other customer. Quite the contrary, they say that they have the same contract that everybody else had and they weren't given their opportunity to edit it.

They don't allege any special relationship between them and any particular director and officer. So these are generalized derivative plans that are owned by the estate and not these two pointers. Do I need to make any findings about that to rule on the motion today? No. To rule on the motion today, there are four factors. One is whether the movement has shown a reasonable probability of success and the merits. In this context is whether we have a shot, every organ, reorganizing. In this case, we have a term sheet already on file.

Two, whether the movement will be irrefably injured by denial of the relief. As we described, this cost, there's a risk of conflicting rulings as distraction. Three, whether granting preliminary relief will result in even greater harm to the non-moving party. This case has not been litigated for years. This is three weeks old. And these plaintiffs are part of the ad hoc committee. They're involved in the bankruptcy case. I suspect they'll be filing a claim, and they can adjudicate their claims here.

or whether granting the preliminary relief will be in the public interest, we contend, yes, that the types of costs and distraction and disruption that this case will cause if it's allowed to proceed against these three directors and officers by these two plaintiffs, will cause the type of harm that the automatic stay was intended to stop. So for those reasons, we think at a minimum the TRO should be granted today. Okay, thank you. Mr. Patterson, good morning. Can you hear me okay? Yes, I can now, Your Honor. There was about a five-minute delay when I could not hear you, but I can now, and thank you very much.

Well, welcome. It's good to have you here. Thank you. Your Honor, we oppose the motion for a temporary restraining order. Fiscally responsible, financial geniuses, monetary magicians. These are things people say about drivers who switch their car insurance to progressive and save hundreds. because Progressive offers discounts for paying in full, owning a home and more. Plus, you can count on their great customer service to help when you need it so your dollar goes a long way. Visit progressive.com to see if you could save on car insurance. Progressive Casualty Insurance Company and affiliates, potential savings will vary, not available in all states or situations.

In my view, it reads more like a motion for a preliminary injunction. and what I propose we do today is have a briefing on their motion and let them piggyback on our previously filed motion to lift the stay and that we argue both motions on April 16th as previously set forth by the court if that is convenient to the court. The facts are obviously our client was in discussions with Blockfills in December of 2025. And he executed an agreement with them in January of 2026. They agreed to keep his bitcoins and cash in trust. That's according to Exhibit 2, page 7 of our complaint in paragraphs 30 to 32, among other paragraphs in our complaint. On February 6, 2026, he submitted a letter of rescission and demanded the letter of rescission and demanded

the return of his personal property. That's in paragraph 53 and Exhibit 13 of our complaint. When he did not get the return of his property, he filed a complaint on March 6, 26. Thus far, there has been no challenge to the merits of the complaint that he filed. We obtained a temporary restraining order from Judge Connelly in the Northern District of Illinois on March 6, 2026, and they filed this bankruptcy. petition on Sunday, March 8, 26. We had a status before Judge Connelly on March 20, 26, and he extended the TRO until April 3rd. We have a status before him on April 1st.

Now, my understanding is that Judge Connelly has decided that on April 1st, he wants to hear what I'm doing with this. You're asking me to forego this stage of the proceedings and conduct an evidentiary hearing in a couple of weeks. Why would I do that to Judge Kinelli when he's asking a question that he'd like me to answer? What I would – what I will tell Judge Kinelli is that you have the matter under briefing, and we have a hearing schedule for April 16th. Okay.

I'll tell you right now. I'm not – I'm not going to – I'm not going to do that to Judge Kinelli. He's asked the question. He deserves an answer. And I'm going to provide a ruling today. What I do in that ruling is still open, but I think I would encourage you to direct your arguments towards the merits of the factors for a preliminary injunction under Section 105A. Okay.

Obviously, it's a little disconcerting to have them leapfrog my own motion to lift the stay, which sets forth the arguments and the case law for lifting the stay and transferring the entire case to Judge Connelly. But let's talk about what they allege in this TRO. They haven't, as I mentioned, they have not suggested anything to negate the merits of our complaint. That is, they don't challenge in any kind of evidentiary way the fact that this Bitcoin can be traced and is a res just as much as a painting. as a res or a diamond ring as a res, this Bitcoin was submitted to them in trust, and it can be traced, and we can recover it. Our case is not in common with the other creditors, to my knowledge, even though they have listed us in a group with those other creditors, because I don't know

any other creditor that had a submission of their Bitcoin in cash in January of 2026. I don't know any other claimant or creditor who issued a letter of rescission on February 6, 2026. And I don't know any other claimant or creditor who had their bitcoin swept from a trust account within an hour after depositing it. So this is a constructive trust claim against the companies, and that's why I think it should be heard by Judge Connelly. these are personal claims to Mr. Bertram and his company. They are not general claims. I know there's been some broad...

The language that you include in count 10 is classic derivative claim type language. You talk about the fiduciary duties that are owed to creditors such as your client. Yes. I've seen a lot of complaints, and this is classic derivative claim language. I think it's hard to understand how you're arguing that those are direct claims. I understand that we have that language in that count, but remember, no complaint is bad in substance if it notifies them of what we're arguing. And I think the fiduciary aspect of this case, they are 180 degrees to the wrong. I understand that there is a case from the Delaware Supreme Court that says that based on the zone of insolvency alone, a general creditor will not have a direct claim against the officers of the company.

I understand that. But this is a trust case, a constructive trust case, just as if somebody submitted money to my client fund trust account, and then if I embezzled it, or swept it into my general account, that individual client has a claim against me. It's not the claim of my firm against me. It's a claim of the individual against me for sweeping the money out of the trust account. And so we have an individual claim. Yes, we say that they should have known that they were insolvent. There's no question we're saying that.

But the fiduciary duty claim is an individual claim based on their misappropriation of money that they were supposed to keep in trust. And therefore, we don't have the ruling of the Delaware Supreme Court is not on point in that respect. And as a matter of fact, even in their brief at page 18, they described two cases which support my point rather than their point. They say that if there's a claim that affects an individual rather than the mass of creditors, then there is a claim individual, and it is not a derivative claim. And that's what we are alleging to in this situation.

And I direct the court's attention. There's two cases that they cite on page 18 of their brief or motion papers where they say, if somebody has an individual claim, it's not a general claim, it's not a derivative claim. And so that's the situation that we have here. The representations that we allege are representations that were personal to him, and it was his agreement. And I don't know if anybody else had a similar agreement with him. That hasn't been determined. I'm sorry, just I understand. Who's the him and the his?

Which individually you're referring to? Sorry, Judge. That's okay. Mr. Mr. Bertram, the representations were made to Mr. Bertram. And I don't know if the same or similar representations were made to others. We alleged that he had personal conversations with representatives of blockfills, and that is part of our individual claims, and that's unique to him. So it seems to me that we have a unique claim, not a general claim, as to the other creditors or claimants. Now, with respect to the burden, there is no burden that is going to take place in the next

16 days. I'm not going to issue discovery in the next 16 days. I couldn't. I'm not going to make a claim for indemnity, and nobody else is going to make a claim for indemnity. There wouldn't be a claim for indemnity if we get our res. How do you know what the DNO defendants are going to do? They're going to have to, they've already incurred costs, I'm assuming.

They're going to have to be in front of Judge Cannelly next week. That sounds like a basis to, write your advancement letter? Well, if they had done that, it should have been included in their papers. In other words, this is the dog that did not bark. In the absence of proof, I am saying that they haven't made an indemnity claim

and they haven't incurred in any indemnity fees and they haven't made a claim to the DNO carrier. But maybe more important, there won't be an indemnity claim if we get our res back. If we get our Bitcoin back, there's no insurance that will be paid out. There's no indemnity that will be paid out. We want our Bitcoin.

We want our Res returned to us. That's the cost. The last status before Judge Connelly was 15 minutes. And so the fact that we have a status on April 1 is not going to be a lengthy hearing. But I do want clarification on one thing. We say in our motion to lift us day at footnote four that our understanding of the first day motions would not permit them, Blackfields, to access our Bitcoin or our cash. and my understanding is that none of the first-day orders that were entered by Your Honor would allow them to do that.

In which case then, as long as that's true, then there is no need for me to ask you for a TRO prohibiting that while we litigate these issues or for asking Judge Connelly to extend his TRO again while we litigate these issues. So I just mentioned that to avoid any potential confusion on that. the way I view these first day orders, the cash collateral orders, it does not affect what Mr. Bertram deposited with the company. So if that's true, if that's true, then there's no harm to you if I were to, or to your clients, if I were to enter this order today, right?

Well, there's no one. You just argued that you can't be harmed. I understand. No, no, I understood. the harm is, the harm exists not in the next 16 days. I can see that, right? The issue then is on the 16th, when you consider our motion to lift the stay, the entire stay, what is the harm at that point?

Is there harm to the creditors at that point or to the bankrupt estate at that point? And I'm willing to have that argument, and I'm anticipating having that argument. And that's how I think it should take place. In other words, there's no emergency now that's going to take place before the 16th. That negates the issue of the TRO. It doesn't negate their preliminary injunction request. We should have a hearing on that. And I'm prepared to brief their motion because I've only had it overnight.

And I could submit that by April 6, which is the date when their response to our motion to lift the state is also due. So that's what I suggest. I don't think that the court should reverse the burden of proof and place it on me to demonstrate an absence of harm. At the TRO stage, the burden is on them to demonstrate that there's extraordinary harm or an emergency here, and there is no emergency here. We set up our briefing in the ordinary course. And I don't think the court respectfully should reward gamesmanship just because they leapfrogged our motion to lift the stay and got an earlier hearing date on that. I did not ask for an early hearing date. I wanted my opponents to have a time to argue the motion on the merits,

and then we'll argue it on the 16th. So in the meantime, there is no indemnity, there's no D&O insurance, there's no discovery that's going to be issued, there's no burden. And there won't be any burden ultimately on the estate if they return our property. It's our property. It is trace. That's an issue to be decided, right? that yes but on these you may be right about that but that's not that's not an issue that i can

decide today well you can understand you could you could decide the likelihood based on based on the contract that said that they were going to keep it in trust that's all i'm saying in terms of for the next 16 days there is no likelihood of success on the merits or any emergency that requires immediate action an immediate award there's no there's no There's no reason for that. Well, when we look at the likelihood of success on the merits in the context of a bankruptcy case in a motion like this, we're looking at the likelihood that the reorganization will succeed. I think you're arguing a different issue, I think.

Well, for example, if we succeed in compelling the return of our res, then the reorganization can proceed without us, without any difficulty. As a matter of fact, they'd probably be happy to see us go. Right? I have no doubt. So I don't see us in, you know, if anything, we would complicate by remaining in the bankruptcy. We would complicate the reorganization because we're going to assert our individual claim that the res is ours. And so actually, we have suggested in our motion papers to lift the stay that duplicative litigation is avoided.

if you lift the stay and allow Judge Connelly to decide the case, it's simpler, it's easier, and you avoid any kind of residue de Kata or collateral estoppel effect or anything, if you just let him decide the matter. And the term sheet that's been discussed among the creditors can either proceed or fail as the parties proceed. But I'm the tail wagging the dog on that. I'm not going to get into that. and it would be more confusing for me to do so.

So it is traceable. They haven't negated the fact that it's traceable. That's in paragraph 49 of our motion to look to stay and it's other. And therefore, I ask that the court deny the TRO, but continue the preliminary injunction to April 16th and let them piggyback on the briefing schedule that we've already said. We will provide our brief on April 6th, which is faster than we'd normally be entitled to in order to get this thing heard on a preliminary injunction basis.

And that will allow the court plenty of time to decide what is better. What is better for the bankrupt estate? What is better for us? You can balance both those issues. And I think that provides for a more reasoned decision rather than rushing it on no briefing from us, just argument, and letting them leapfrog our motion to lift the stay. Okay. So I suggest we keep the status quo.

Thank you, Judge. Thank you, Mr. Patterson. Mr. Evans, any response? Joseph Evans, Big Governor Will & Schulte for the debtor, is just a brief response. I want to start with one of the last things that Mr. Patterson says, is that he wants the judge in Illinois to determine whether it's his client's res or not. What he's asking for is the judge in Illinois to determine whether the assets provided

had bought those customers or property or bought those estate. No, it's a core issue. It's a core issue. It's a core issue. I'm not finding it. And with respect to the uniqueness of his client's claims as compared to other creditors, they put in paragraph 18 of their complaint that it's the same contract that everybody else signed they weren't able to give an edit, they weren't able to make any negotiations.

It was on their website. That was a contract. That's it. And so these aren't unique claims to them. And so, Your Honor, his motion is seeking a relief from stay to pursue blockvills in Illinois that's a different thing than what we're in front of today here today we're seeking a TRO for the plans against the three directors and officers and all of the allegations that mr. Patterson cited about the misrepresentations

and the promises and the lies and the things that they're saying what they're wronged by in their complaint those are all attributable to either block bills representatives or people other than those three DNOs their gripe is with the company and these are company claims that must be I'm nothing more wrong. Okay, okay, thank you. I'm going to take a recess for probably about five, ten minutes. I'm sorry, does anybody else wish to be heard?

Your Honor. Yes. Apologies, Your Honor. I have been, this is Jane Van Lera from Cleary Gottliebstein and Hamilton on behalf of the ad hoc group of Blockfield customers. And I apologize. I have been trying to log on through Zoom, but just have been unable to do so. So I apologize for that. Just very briefly, Your Honor, I wanted to express our support in favor of the TRO.

We are concerned about the prejudice that may be caused to the estate claims and to the D&O policy that those are assets that should accrue to the benefit of all of the customers and creditors in this case. And I think in the words of Mr. Patterson, on the analogy he used, the dog could bark tomorrow, right? they could ask for an indemnity tomorrow. And so we do think it's important to preserve the status quo. And I think as Your Honor articulated and suggested in your questioning, it's clear that there is not a prejudice to the movement here of extending that TRO.

Thank you very much. Okay, thank you. member of chipman brown cistero and cole we represent joseph perry the interim CEO i had not intended to speak this morning i just want to make it clear that if the if the tRO is not granted today there will be an indemnification and advancement request made immediately and frankly i'll be buying a plane ticket to chicago for the hearing on april first because it's an in-person hearing even if it will only take 15 minutes of that court's time it'll take substantially more and that will be an indemnipation an indemnifiable expense okay thank you thank you right appreciate it mr. Sammis good

morning good morning first good to see you I don't want to get lost happy opening day I know that you made that remark at beginning but I'll just figure I'll just carry it forward your honor Chris Sammis from ice Miller on behalf of of mr. Hammer your honor all I wanted to do was eliminate any speculation we have already put the carriers on notice the debtors filed their bar date motion yesterday and we're going to be submitting an indemnification claim that we're currently working on now so we We are incurring costs, as this goes, and significant costs.

We've been on the phone with Mr. Hammer trying to establish the facts of the case so that we're able to adequately defend him in whatever realm we end up ultimately defending him in. But the point is, is that we are incurring costs and they are significant. Thank you. Thank you. MR. Anybody else? MR.

Okay. We'll be in a brief recess. MR. I appreciate the arguments of the parties, but I'm prepared to rule – this is my ruling on the debtor's motion for a temporary – restraining order file the docket number three in this adversary proceeding which is number 26-504 I've reviewed the motion the papers that were filed in connection with the motion including the Hearst Declaration and the attachments

to it and I've considered the arguments of counsel that I've heard today I'm going to grant a temporary restraining order under section 105 of the Bankruptcy Code and federal rule civil procedure 65B, which is made applicable here by bankruptcy rule 7065. My ruling is going to be narrow this morning. It doesn't address and expressly reserves all questions regarding the scope of the automatic stay under Section 362, including whether the automatic stay already applies to any claims that have been asserted against the D's and O's in the the Chicago litigation, including whether any claims in that litigation, are property of the debtors of states under Section 541 of the Bankruptcy Code.

We'll address those questions at a preliminary injunction here, and we'll talk about scheduling. So today's ruling with solely on Section 105A. I'll make the following findings based upon the verified complaint which Mr. Renzi has verified under penitently perjury and on again the Hearst Declaration and the exhibits attached to it these findings are purely for the purposes of this temporary restraining order they are not findings of fact or any other purpose and nothing in this ruling should give

preclusive effect to any subsequent proceeding in this court or any other court The debtors operate under the name Blockbills, and they provided cryptocurrency trading infrastructure and technology to institution and professional customers globally, including spot trading, over-the-counter derivatives, borrowing and lending, and cryptocurrency mining services. The debtors filed their petitions for relief under Chapter 11 on March 15, 2006, and these cases are being jointly administered before this court under case number 26-1-1-1. and the debtors are continuing to act as debtors in possession the individual defendants Nichols Hammer is a debtor's former CEO and co-founder Gordon Wallace is a debtor's president and co-founder Joseph Patrick Terry is the debtor's interim CEO and I'll call them collectively the D's and I make no finding at this time regarding the nature scope or validity of the claims assert against the DNO's

in the pre-petition litigation in Chicago and nothing in this rule should be considered to constitute a determination of their individual liability or the extent of their respective roles. On March 20 or I'm sorry March 5th, 2006, 154-8199 Alberta Limited and Robert J. Bertram filed their lawsuit in the United States District Court for the Northern District. of Illinois where the case has been identified as case number 26 cv-cv-02451 and that lawsuit names his defendants each of the debtors and the three D&Os who I just identified the claimants allege among other things that they deposited certain Bitcoin and US dollars with block bills in January and that block bills is wrongfully retained and commingled the assets the complaint in the pre-petition litigation asserts 11 counts nine of those counts are

asserted solely against the debtors two counts that were in issue today count five which alleges aiding and abetting fraud and count 10 which alleges breach of fiduciary duties are asserted it asserted against these D's and O's the pre-petition litigation has been automatically stated against the debtors by operation of section 362 whether and to what extent any claim in that litigation against the D's and O's as separately stayed by Section 362 is a question that I'll reserve for the preliminary injunction hearing.

On March 5, 26, the claimants moved for a temporary restraining order in the Illinois District Court seeking to enjoin block bills and the D's and O's from certain activities and to freeze assets that the claimants allege are their property. And on March 6th, 2026, the Illinois court did enter an ex parte temporary restraining order. On March 20th, the court held a telephonic status hearing and extended that order through April 3rd. And as I understand it, it was conditioned on receiving further advice from this court regarding the extent of the automatic stay as it relates to the D's and O's.

and an in-person hearing in the Illinois District Court is scheduled for April 1, 2006, which is only six days from today. Clearly, as I understood the court's minute entry, the court is expecting my answer, and I'm giving him an answer. The indemnification obligations are provided for under the organizational documents of certain of the debtors, and those obligations run in favor of the D's and O's, Specifically, it appears that the bylaws of Railis Technology Group Holdings, Inc., which is the Delaware Corporation,

obligates the corporation to indemnify any person who is or was a director, officer, employee, or agent against expenses incurred in connection with any threatened pending or completed litigation. the articles of the association of other entities contain similar sort of language. And the court does find today that continuation of the pre-petition litigation against the deeds and O's would trigger or would create a substantial risk of triggering defense cost advancement and indemnification obligations under those provisions. Again, I'm making no finding at this time. regarding the magnitude of those obligations or whether any particular obligation is enforceable. The Verify complaint states that certain of the D's and O's are integral to the debtors

restructuring efforts, and specifically the debtors have asserted that the continuation of the pre-petition litigation against those D's and O's would distract key personnel at a critical stage of these Chapter 11 cases. And the court accepts that representation to be true for the purposes of the TRO. Since the petition date, the debtors have also been involved in negotiating a framework for an exit plan with an ad hoc group of customers that would provide for a debt for equity exchange transaction. I would note that the related term sheet has not been executed. It is a finding, to my knowledge, and I make no finding at this time about the likelihood that the judge. debtors will successfully concern the plan, that question would be reserved for preliminary injunction hearings.

But for the purposes of a TRO today, and for this purpose only, I find that there was no evidence before this court suggesting that the debtor's restructuring is infeasible or is not likely to succeed. This is an emergency application. The debtors commenced this adversary proceeding yesterday on March 25th, and the April 1 hearing date before Judge Kevney is only six days away, and the TRO in that court expires on April 3rd. If I were to not act before April 1st, it appears to me that the claimants would seek to proceed against the D's and O's in the Illinois District Court, while the core legal questions at issue here, including the extent of the automatic stay, and whether those claims are inextricably interwoven with these bankruptcy cases would remain undecided. I would note that the debtors have served a copy of the motion

on the claimants, and they have appeared today. I clearly have jurisdiction over this proceeding under 28 U.S.C. Secretary, 157 and 1334 and this matter has been referred to me by the amended standing order of reference from the district court dated February 29 2012 this is a court proceeding under 28 USC 157 B2 and venue is proper here under 28 USC 1408 and 1409 to move on to the legal standard under section 105 it authorizes this court to issue any order process or judgment that is necessary or appropriate to carry out the provisions of Title 11 and a request for injunctive relief under Section 105 is evaluated under the traditional or traditional preliminary injunction standard adapted to the bankruptcy court as established in this circuit by numerous cases that standard requires the court to consider four factors First, to look at whether there's a reasonable probability of success on the merits of the request for preliminary injunction,

whether the movement will suffer irreparable harm absent relief being granted today, and third, whether granting the relief will result in a greater harm for the non-moving party, and fourth, whether granting relief serves the public interest. This is a balancing test, no single factor determines the analysis. for the purposes of a TRO, the court applies the same framework on an expedited basis, given the requirements of Rule 65B, with particular attention of whether immediately irreparable harm will result before the matter can fully be heard. I note that, again, I'm applying Section 105 only. I'm not adjudicating the automatic stay issues, and I'm not determining whether

the funds at issue are property of the estate under Section 541. That is for another day. This TRO is designed solely to preserve the status quo and prevent irreparable harm to these days pending a full hearing on those questions. As to the first factor, which is probability of success on the merits, I find that the debtors had demonstrated a reasonable probability of success on the merits of the request for a preliminary injunction.

Again, my finding is deliberately limited at this stage, but a preliminary injunction under Section 105 is warranted where, among other things, claims against non-debtor co-defendants are so intertwined with claims against the debtors that permitting the litigation to proceed would effectively require litigations of issues central to this debtor's reorganization. Here, the two counts against D's and O's in the pre-petition litigation,

share their entire factual predicate with the nine counts that are asserted solely against the debtors. Can you pay a white chocolate mocha, bullish sugar, free vanilla? Turn her off. And de-cats. Please make a note of the participant for participation of future hearings. Don't need to hear her coffee order. Count five, again, alleges aiding and abetting fraud, cannot be adjudicated without a prior determination of whether block bills committed the underlying fraud. And that's a question that is squarely at the center of the debtor's Chapter 11 cases.

And that will affect all of the debtors' customers and creditors, not only these two claimants who were before me today. Similarly, count two raises questions about the Deeds and owes alleged fiduciary duties to creditors and the conduct of the debtor's business in the period before the petition date. Those are matters that likewise will be addressed in this court. So this court finds, on the record, here, that the debtors have made a sufficient showing of a reasonable probability success on their Section 105 preliminary injunction claim to warrant interim protection. I expressed no view at this time on the merits of the underlying claims or the defendant. in the Chicago litigation.

Next to look at irreparable harm, and I find that the debtors have demonstrated that immediate irreparable harm to these states will result absent a TRO. I found three bases for this finding. First, the debtors have contractual indemnification obligations to the D's and O's under their organizational documents. These obligations are not contingent on a finding of liability.

ability, advancement of defense costs begins when the litigation is initiated. And if the Illinois hearing proceeds on April 1st without relief from this court, indentification obligations will begin accruing against the estates as an immediate and direct consequence. And that would constitute a state harm that can't be undone. Second, the continuation of the pre-petition litigation creates a concrete risk that factual findings and if an rulings will be made in a proceeding to which the debtors are not parties because of the aerobatic stay, but from which those findings could nonetheless be used against the debtors through principles of estoppel or other principles.

And this has been found on numerous occasions in other cases to constitute the precise risk of irreparable harm that warrants extension of protection to non-debtor of co-defendants. Third, the D's and O's who remain active in the debtors restructuring will have to contend with the burden of defending complex litigation in the Illinois District Court simultaneously with their obligations to this court and the debtors and the reorganization process. That's a drain on management time and attention, and the resource demands of responding to discovery that would ultimately flow in both directions. between the pre-petition litigation and these Chapter 11 cases constitute irreparable harm to the debtor's estates. The balance of harms, which is another factor to consider, favors entry of a temporary restraining order, as the claimants argued here nothing is going to happen in the next 16 days. The harm to the debtors of states from denial relief, though, as I've described as immediate,

concrete in at least one respect being the accrual of advancement obligations which is self-executing should the Illinois proceedings continue by contrast the harm to the claimants from a short duration TRO is limited as as I believe that the claimants have conceded the pre-petition litigation is already stayed as to the debtors the claimants ability to prosecute their nine counts against the debtors is stayed regardless of what I do with the TRO. But the TRO will temporarily hold prosecution of the two D&O counts only, and only for the short period until this court conducts a preliminary injunction hearing.

Any claims the claimants have are preserved and will be addressed in due course in these bankruptcy cases. So on that record, the balance of harms clearly favors a TRO. And finally, I'm to look at the public interest. And I find that a TRO serves the public interest here. Congress established the bankruptcy system to provide an orderly and centralized forum for the resolution of claims against a debtor and to provide the debtor with a breathing spell from creditor pressure, sufficient to provide time to amaze. a reorganization granting a TRO to allow this court to adjudicate the fundamental questions of the scope of the stay ultimately and the state property rights

before those questions are potentially rendered mood or prejudice by proceedings and another forum serves the very purpose for which Congress enacted the bankruptcy code I'm not going to allow piecemeal litigation in another court to generate perclusive findings on issues that accord to these bankruptcy cases and that would undermine these cases and the potential reorganization. So I'm satisfied that the specific requirements of federal rule of civil procedure 65B are met. The verified adversary complaint is verified under penalty of perjury by Mr. Renzi. He stated that he's reviewed the allegations and that they are true to his knowledge.

constitutes a verified pleading sufficient to support emergency relief under Rule 65B1A. I further find that the reasons for granting relief without awaiting a full adversarial hearing are set forth adequately in the papers as supplemented by the inventory record and the argument today. The Illinois in-person hearing is six days away. The existing TRO in Illinois expires in nine days and the time required to schedule and conduct a contested preliminary injunction hearing before this court makes it impossible to provide the claimants

with full advance notice in a response period before April 1 while still giving this court's order any practical effect. These circumstances provide the basis required by Rule 65B1B for acting on shorter notice and ordinarily would be required. And I note that, that Council for the claimants has appeared today and they have been heard and I've had the opportunity to consider their arguments.

I'm going to waive the requirement of a bond under Rule 65C. These debtors are debtors in possession of Chapter 11 and requiring a bond would constitute a drain on assets held for the benefit of all creditors without a corresponding benefit that I can see given that the harm to the claimants from the TRO is minimal and any claims they may have are fully preserved in the claims process and particularly given the claimant's argument that the funds attributed to them are held and trusted and are not estate assets anyway that's an issue for another day but it certainly supports the finding that a bond is not required So specifically, my ruling is that I will enter a temporary restraining order into Section 105 and federal rule of civil procedure 65B.

Pending at hearing and determination on the debtor's request for a preliminary injunction, 154-8199, Alberta Limited, and Robert J. Bertram are enjoined from commencing, continuing or otherwise prosecuting an action of proceeding against Nicholas Hammer, Gordon Wallace, and Joseph Patrick Perry. in connection with the claims asserted against them, in that pre-petition litigation and any other litigation that they may seek to bring. And when I talk about the pre-petition litigation, I'm again talking about case number 26-CV-02451 pending in the United States District Court for the Northern District of Illinois.

The scope of this order is limited to the individual D&Os. I'm going to schedule a preliminary injunction hearing Under Rule 65, assuming that the order gets entered today, which is what I'm going to do, I have to hold the hearing within 14 days. 14 days is April 9th, so I'd suggest we get our calendars out and decide on a date. If you'd, I'd ask the debtors that, though if they wish to consult with counsel for the claimants offline on scheduling,

that might make sense too. But my issue frankly is that I have extremely limited availability of April 6th. In a pinch, I could give you the afternoon of the 8th, but that's the only date that I'm in Delaware. Your Honor, with the party's agreement, could we do it on the 16th? I'm just wondering because I remember that Mr. Patterson said he has suggested the 16th as a, and I'm wondering if the party's consent.

Yeah, you've got your second day hearing on the 16th. It's scheduled for 2.30. If I could probably move it up a little earlier, but if you think that gives you enough time to accomplish everything, I know it's a few weeks out and a lot can change, but if you think that it gives enough time to handle everything, I'd certainly be up for that. I think we've already cleared that date with our management team,

so at the extent that Mr. Patterson is agreeable to that, it seems to me that would make sense. Well, we'd also, frankly, be responsive to Mr. Patterson's concerns that these proceedings are leapfrogging the motion for the relief in the automatic stay, which is I understand Mr. Gallup, Mr. Patterson, that's scheduled for April 16th? Correct. It is? Yes, it is, Your Honor.

So it also sounds like maybe the fairest path forward if the parties are amenable to the TRO lasting until the 16th, varying from what the rule requires. Well, certainly it's acceptable to the debtors. I have to that Mr. Patterson speak for himself. Is that acceptable, Mr. Patterson? Your Honor, my only concern is if we're going to have an evidentiary hearing that, I assume, if we take longer than the 16th that you've got the 17th available to, and I don't want to be presumptuous as to what your schedule is. Yeah, sure. We'd make the time for you without having to come back to Delaware. We could do it.

Then I would certainly adhere to what I said, what I told the court earlier. I would request, if I can, that the status quo be maintained as to our bid. and cash, that is that it will not be accessed or used in the interim before we have this preliminary injunction hearing. I think that the cash collateral order don't authorize them to do it, but I believe in belt and suspenders in certain circumstances, and I don't want to face something where somebody has done something that minimizes or eliminates my ability to trace the Bitcoin in cash. Mr. Hurst, any response to that, or do you want to check with your colleagues before responding?

I mean, I think that this is, like, a really big case issue, right? Yes. I don't know if we're not doing anything with any Bitcoin, really, in the next couple of weeks. As long as the status quo is maintained, Your Honor, that's all I'm asking at this point. Yes, I understood, Mr. Patterson. Mr. Evans. So, Your Honor, I'm not exactly sure what he says, status quo, what he means, but we'll comply with the cash collateral order that's on file.

I think that you may have a difference of opinion on what the cash collateral order requires or doesn't require and whether it's his res or he has any kind of special interest I'm not aware of, then you can come forward with that but we'll comply with the current order that's on file. Mr. Gallert.

You're on right, I stand because I don't think the cash collateral order really gets too far into this particular issue. So if I'm standing behind the cash collateral order doesn't really address Mr. Patterson's question. But, Your Honor, if his back, Mr. Patterson asked to be, he gave his interpretation of the cash file order and is asking for something outside of the scope of what this proceeding is about. So if he wants to make a motion about traceability of his assets, and he thinks he can do that, then maybe you should, but I don't think this is the right appropriate venue for that discussion. Then the question then I would have, Your Honor, when can we be heard in RTO?

Well, you haven't filed it yet. I'm saying, you know, that's what we would have to do then, if they're not going to say. by the idea that they're not going to dissipate the race. I'm not going to make any findings of whether the race exists or not. I'm asking. What I will order is continuing compliance with all the debtor's obligations as a debtor in possession, including, among other things, compliance with any orders of this court. We'll do.

Thank you. Okay. Okay. I reviewed the form of order, and it does – unless you discern any differences, I think it syncs up with the relief that I've ordered here on the record today. So I'd be prepared to enter that order if it's uploaded. Okay, Your Honor. So I will upload that order.

I'll put in the April 16th hearing date. We have to figure out an objection deadline. I'd like to line that up with the objection deadline for lift stay motion, which right now is the sixth. It might make sense to move that deadline, more than. ninth so that our objection to the lift stay would be doing the ninth and mr. Patterson's objection to the you know a briefing with respect to the preliminary injunction would also be doing the ninth at say four o'clock that would be my

proposal well I'm certainly okay with that mr. Patterson mr. Geller I'm fine with that judge okay thank you so just for the purposes of clarity the hearing on the 16th on the stay relief motion will be an evidentiary hearing. So we'll go forward with all those issues on the same day, the chlorine injunction and the state relief motion. Okay, now you had said that maybe you'd want to move it up from 2.30 or should we just say 2.30 and we'll see? Why don't you see how it looks like things are shaking after that hearing and if we need to move it up? you know i may be able to move it up a half hour or even even an hour but why don't we what

why don't why don't why don't you check in with uh with with chambers maybe towards the beginning of the week of the 13th and um if we can move it or um we will and if you right no that that makes sense your honor and so when i upload the order it'll say april 16th at 2 30 and uh then we'll check in with chambers we'll see okay yes please thank you okay is there anything else for me today Okay, I appreciate the party's thoughtful arguments on this, and I'll look forward to seeing everybody back on the 16th. I think I'll see you sooner, right? Isn't there a second? Yes.

Yeah, I think that's the 30th of the 31st. We have that cash collateral interim, second interim. Yes, cash collateral, yes. So I'll look forward to seeing everybody on Tuesday, then. Okay, thank you. Thank you, Your Honor. We're adjourned.