#1BlockFi May 8, 2023 Wallet Withdrawal Motion In re BlockFi Inc., No. 22-19361 (MBK) United States Bankruptcy Court for the District of New Jersey Judge Michael B. Kaplan 1#2BlockFi The Wallet Withdrawal Motion The Debtors seek to do right by their clients: ✓ Honor client withdrawals from Client Wallet Accounts as of the Platform Pause Time Stamp and return the crypto in Omnibus Wallet Accounts to clients promptly; and Update the User Interface to reflect proper accounting of digital assets as of the Platform Pause Time Stamp. See Amended Declaration of Amit Cheela [Docket No. 822] (the "Cheela Declaration"), ¶ 80. Case 22-19362-MBK Dac 121 Filed 12/19/22 Entered 12/19/22 16:02:48 Document Page 5 of 43 COLE SCHOS2 9.5. Machet E Was Eag Har Ne. 081995) 1. Sima Eat (NI Bac No. 28432168 Case 23 Main Sures Hacksack, (291) 489-30007603 maisons donche.com wwwse@leacht. KIRKLAND & ELLIS LIP KIRKLAND & ELLIS INTERNATIONALILF Josu A. Sussberg, 1 Cate berg, PC, ta Christine A. Ch.P.C. de proce 40t Lexington Avus New York, New York: 10022 (212) 446-4800 niasbergaiainkland.மனது [email protected] Proped for Debars and tors on Pion HAVNES AND BOONE, ELS Ritz, E. (Bar No 47311992) Keene Katr, og dette pro 14 Rockie Plaza, 2 Flor New York, New York 2012 22123699-7 TUDÁNDOGO.COM AN kuri kathayen.com Proposed mye for Dubmers and Deborsie Passion UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY Aze Exetes Chapter 15 E o 22-10362 (NRK) di Adi DEBTORS' MOTION FOR ENTRY OF WITHDRAWALS FROM WALLET ACCOUNTS, (B) UPDATE THE USER AN ORDER (1) AUTHORIZING THE DEBTORS TO (4) HONGR INTERFACE TO PROPERLY REFLECT TRANSACTIONS AND ASSETS AS OF THE PLATFORM PAUSE, AND (C) CONDUCT ORDINARY COURSE RECONCILIATION OF ACCOUNTS, AND OR GRANTING RELATED RELIEF UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY HONORABLE CHIEF JUDGE MICHAEL KAPLAN TO THE 'The Dinthose chapter 11 cases, along with the last Debtor's ladestas identification er, Blockflac (15) Blacks Indong LLC ES LIC(51) LC9937) adess is 20 Montenery Sect. Bute 23. Jersey City, N87302 7) Riud fational Lad tycksaved ORTH afy 154 15017 Ree Aineks Waller (2422) Black Services, Inc. (596) and stock Lending LLE 1541 The location af den sis service 8. Desc Main 2#3The Omnibus Wallet Accounts M $25,000.00 to BlockFi Wallet Notional Value of Custodial Omnibus Wallets as of the Platform Pause Time Stamp $296,950,551.82(¹) Cheela Decl. ¶ 81. (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. 3#4The Wallet Withdrawal Objection The Troutman Ad Hoc Committee Ⓒ Ⓒ $25,000.00 STCONT BlockFi Wallet Notional Value of Custodial Omnibus Wallets as of the Platform Pause Time Stamp (¹) $296,950,551.82(¹) Cheela Decl. 181. See Troutman Ad Hoc Committee Response [Docket No. 834], ¶ ¶ 9, 23. (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. (2) Price conversion using digital asset prices as of 01:15 UTC on November 11, 2022. Asks that~$375 million (²) of Requested BIA to Wallet Transfers by 48,185 clients after the Platform Pause Time Stamp should also be entitled to recovery from the digital assets in the Custodial Omnibus Wallets#5BlockFi Wallet and BlockFi Interest Accounts BlockFi provided two distinct products: BlockFi Wallet and BlockFi Interest Account. BlockFi Wallet Balance $25,000.00 Gemini USD GUSD Ethereum ETH PAX Gold PAXC Wallet USD Coin USDC DUSD 466,819.92186272 27.03916017 > 2.91967318 5,000.17205460 See Cheela Decl. 111119, 43. See Stipulated Facts [Docket No. 842], 11124-32, 38-46. BlockFi Interest Account $25,041.05 $33234 ⒸM Ⓒ $24.90 www Cam ww 2330202 > BlockFi 10007 5#6F Balance $25,000.00 Gemini USD GUSD Ethereum ETH PAX Gold PAXG Wallet USD Coin USDC GUSD 86.42% ETH 466,819.92186272 > 27.03916017 > 2.91967318 > 5,000.17205460 > See Cheela Decl. 11 19, 25. See Stipulated Facts [Docket No. 842], ¶ 1 38-46 BlockFi BlockFi Wallet BlockFi Wallet is a custodial, non-interest bearing account, used by BlockFi clients to store digital assets on the BlockFi platform and facilitate trading on the BlockFi platform. The digital assets in BlockFi Wallet are not rehypothecated for BlockFi's revenue-generating activities. BlockFi maintained omnibus wallets (by coin) at BitGo and Fireblocks, which held the digital assets that clients had placed in their BlockFi Wallets - and BlockFi did not own or rehypothecate them. 6#7BlockFi Interest Account BlockFi Interest Account is an interest-bearing account, which provides yield to investors who store their digital assets on the BlockFi platform. The digital assets in BIA may be rehypothecated (e.g., lent out to others) for BlockFi's revenue-generating activities, and thus may or may not be in BlockFi's possession at any given time. This is all clearly disclosed as it is a key part of BlockFi's business model. See Cheela Decl. ¶ ¶ 43-44. See Stipulated Facts [Docket No. 842], ¶ ¶1 24-32. My Interest Account Accent Salance $25,041.05 Tender Pa $352.54 ST.34% ... Bitcoin ww Accent DAVAO 23:22 G252 GURD $24.90 Ethereum EPH Ⓒhainik L USOC 8TH 24.22% 0.223246877 7.568.00 > 2:16105662> 55.28229626 > 1000 BlockFi 7#8Separate Wallets, Separate Products 905.000.00 BlockFi Wallet Custodial Wallets B BitGo BitGo Custodial Wallets A Fireblocks A Fireblocks Wallet LLC Wallets International Vault Wallets See Cheela Decl. ¶ ¶ 22-24, 26.; see Stipulated Facts [Docket No. 842], ¶ ¶ 24-32,38-44.. . . . . . (1) BlockFi International Ltd. has a wallet subaccount with Fireblocks. Cheela Decl. 1 24.. (2) BlockFi Lending LLC also had Rehypothecateable Wallets for loan collateral and BlockFi Private Client. BlockFi Interest Account Rehypothecateable Wallets(2) BlockFi BlockFi Inc. BIA Wallets BlockFi International BIA Wallets(¹) 8#9BlockFi Events Leading to the Platform Pause 9#10November 2022 SUNDAY 30 6 13 20 27 See generally Cheela Decl. 1 51-54. MONDAY 31 7 14 21 28 TUESDAY 1 8 15 22 29 WEDNESDAY 2 9 16 23 30 THURSDAY 3 10 17 24 FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 10#11November 2022 SUNDAY 30 13 20 FTX Faces Media Onslaught 27 MONDAY 31 7 14 21 28 TUESDAY 8 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 See generally Cheela Decl. 151-54. https://twitter.com/cz_binance/status/158928342170429 0306?lang=en Thread CZ Binance ✓ @cz_binance As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4 9:47 AM Nov 6, 2022. Twitter for iPhone 25.0 22.4 20.0 17.5 15.0 12.5 10.0 7.5 5.0 2.5 0 USD 21 24 27 ... Nov 7 10 13 16 11 19#12FTX Experiences Massive Withdrawals November 2022 SUNDAY 30 13 20 27 MONDAY 31 7 14 21 28 TUESDAY 8 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 REUTERS World ✔ ធ Aa Finance Business ✓ Markets ✔ Breakingviews Legal By Tom Wilson and Angus Berwick Technology ✓ Investigations 1 minute read - November 8, 2022 1:10 PM EST - Last Updated 6 months ago Crypto exchange FTX saw $6 bln in withdrawals in 72 hours See generally Cheela Decl. 151-54. Tom Wilson and Angus Berwick, Crypto exchange FTX saw $6 bln in withdrawals in 72 hours, Reuters, November 8, 2022, 1:10 PM EST, https://www.reuters.com/business/finance/crypto-exchange-ftx-saw-6-bln-withdrawals-72-hours-ceo-message-staff-2022-11-08/ 12#13November 2022 SUNDAY 30 6 13 FTX.COM Suspends Withdrawals 20 27 MONDAY 31 7 14 21 28 TUESDAY 8 10 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 FTX By Tracy Wang Business FTX Exchange Halts All Crypto Withdrawals Customer withdrawals that were previously processing but backlogged have been halted altogether, according to an announcement in the FTX Support Telegram group. Nov 8, 2022 at 4:51 p.m. EST See Cheela Decl. 1 51-52. Tracy Wang, FTX Exchange Halts All Crypto Withdrawals, CoinDesk, November 8, 2022 at 4:51 p.m. EST, https://www.coindesk.com/business/2022/11/08/ftx-exchange-halts-all-crypto-withdrawals/ coindesk Updated Nov 9, 2022 at 12:51 p.m. EST 13#14November 2022 SUNDAY 30 6 13 Binance Offers to Rescue FTX 20 27 MONDAY 31 7 14 21 28 TUESDAY 8 10 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 The New York Times Crypto World Is Rocked as World's Largest Exchange Rescues Rival Binance, the world's largest cryptocurrency exchange, said it had reached a deal to buy FTX, amid fears the industry could enter another meltdown. November 8, 2022 See generally Cheela Decl. 11 51-54. David Yaffe-Bellany and Erin Griffith, Crypto World Is Rocked as World's Largest Exchange Rescues Rival, The New York Times, November 8, 2022, https://www.nytimes.com/2022/11/08/technology/binance-ftx-deal-crypto.html 14#15November 2022 SUNDAY 30 6 13 20 Binance Backs Out of FTX Deal 27 MONDAY 31 7 14 21 28 TUESDAY 8 15 22 29 WEDNESDAY THURSDAY 2 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 See generally Cheela Decl. 151-54. https://twitter.com/binance/status/1590449161069268992 SATURDAY 5 12 19 26 Binance @binance As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com. 4:00 PM - Nov 9, 2022 17.4K Retweets 308 6,956 Quotes 301 17 Binance @binance - Nov 9, 2022 In the beginning, our hope was to be able to support FTX's customers to provide liquidity, but the issues are beyond our control or ability to help. 1 1.198 8,331 al 61.9K Likes 953 Bookmarks 397 ↑ Binance @binance Nov 9, 2022 Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market. 1 945 8,401 h *** Binance @binance Nov 9, 2022 As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger. 17 814 7,266 hi 1 15#16November 2022 SUNDAY 30 6 13 20 November 10, 2022 27 MONDAY 31 7 14 21 28 TUESDAY 8 5 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 Cheela Decl. 154. See Stipulated Facts [Docket No. 842], ¶¶ 13, Ex. L. FRIDAY 4 11 18 25 SATURDAY 5 12 19 26 9:30 a.m. (prevailing Eastern Time) BlockFi holds a special meeting of the Board of Directors and discusses, among other things, the possibility of implementing the Platform Pause. 16#17November 2022 SUNDAY 30 6 13 20 November 10, 2022 27 MONDAY 31 7 14 21 28 TUESDAY 8 5 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 Cheela Decl. 154. See Stipulated Facts [Docket No. 842], ¶¶ 13, Ex. M. SATURDAY 5 12 19 26 3:45 p.m. (prevailing Eastern Time) BlockFi holds a special meeting of the Board of Directors and determines that it is in the best interest of the Company, its clients, and other creditors to implement the Platform Pause. 17#18November 2022 SUNDAY 30 6 13 20 BlockFi Pauses Platform Activity 8:15 p.m. (prevailing Eastern Time) 27 MONDAY 31 7 14 21 28 TUESDAY 8 5 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 Cheela Decl. 153, Ex. J. Stipulated Facts [Docket No. 842], ¶ 17, Ex. P and Ex. Q. SATURDA 5 12 19 26 268 Update from BlockFi Announcement sprcdn-assets.sprinklr.com/2024/d... C We are the res Given able to Our pr interes Until t client soon a Accou We int that th to. BlockFi @BlockFi. Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time. We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to. BlockFi 18 :#19BlockFi General Terms of Service By applying for a BlockFi Account or using the Online Platform, you acknowledge that you have read, understood and agree to comply with the Terms. Cheela Decl. 116, Ex. A (BlockFi General Terms of Service). See Stipulated Facts [Docket No. 842], ¶ 1. 19#20BlockFi Wallet Terms of Service BlockFi BIA US Terms of Service BlockFi BIA Non-US Terms of Service BlockFi Private Client Terms of Service BlockFi and our third-party partners may experience cyber-attacks, extreme market conditions, or other operational or technical difficulties which could result in the immediate halt of transfers and withdrawals of cryptocurrency either temporarily or permanently. Cheela Decl. 117, Ex. B (BlockFi Wallet Terms of Service, D.5), Ex. C (BlockFi BIA US Terms of Service, C.3.), Ex. D (BlockFi BIA Non-US Terms of Service, E.3), Ex. F (BPC Terms of Service, F.9). See Stipulated Facts [Docket No. 842], ¶ ¶ 2-4, 6. 20#21BlockFi Wallet Terms of Service BlockFi BIA US Terms of Service BlockFi BIA Non-US Terms of Service BlockFi Trading Terms of Service We reserve the right to limit access to your accounts, which can include temporarily or permanently removing your online access, restricting your account and/or closing your accounts without prior notice to you unless prior notice is required by law. We do not bear liability for such actions. Cheela Decl. ¶ 8, Ex. B (BlockFi Wallet Terms of Service, § G.12), Ex. C (BlockFi BIA US Terms of Service, § G.11); (BlockFi BIA Non-US Terms of Service, § 1.11); Ex. E (BlockFi Trading Terms of Service, § 1.12). See Stipulated Facts [Docket No. 842]], 1112-5. 21#22BlockFi General Terms of Service You acknowledge and agree that BlockFi, in its sole discretion, may suspend or discontinue your, and refuse any and all current and future, access to or use of you BlockFi Account at any time without notice to you. BlockFi reserves the right to refuse service, terminate relationships, and cancel orders or transactions in its discretion. Cheela Decl. 116, Ex. A (BlockFi General Terms of Service, Registration & Acceptable Use of the Online Platform). See Stipulated Facts [Docket No. 842], 1 1. 22#23Major News Outlets Report on BlockFi's Platform Pause November 2022 SUNDAY 30 6 13 20 27 MONDAY 31 7 14 21 28 TUESDAY 8 5 15 22 29 WEDNESDAY THURSDAY 2 9 16 23 30 3 10 17 24 FRIDAY 4 11 18 25 Bloomberg 19 26 WSJ Crypto Lender Block Fi Suspends Withdrawals in FTX Contagion Bloomberg - November 10, 2022 at 8:33 P.M. ET Crypto Lender Block Fi Halts Withdrawals, Citing FTX's Problem Wall Street Journal - November 10, 2022 at 11:55 P.M. ET THE STRAITS TIMES Crypto Lender Block Fi Suspends Withdrawals in FTX Contagion The Straits Times - November 11, 2022 at 5:43 A.M. ET Cheela Decl. 164; Hannah Miller, Crypto Lender BlockFi Suspends Withdrawals in FTX Contagion, BLOOMBERG (Nov. 10, 2022, 8:33 PM), https://www.bloomberg.com/news/articles/2022-11-11/blockfi-pauses-withdrawals-says-can-no-longer-operate-as-usual?srnd=all&leadSource=uverify%20wall#xj4y7vzkg; Elaine Yu, Crypto Lender BlockFi Halts Withdrawals, Citing FTX's Problems, WALL ST. J. (Nov. 10, 2022, 11:55 PM), https://www.wsj.com/articles/crypto-lender-blockfi-halts-withdrawals-citing- ftxs-problems-11668142538; See Crypto Lender BlockFi Suspends Withdrawals in FTX Contagion, STRAITS TIMES (Nov. 11, 2022, 5:43 AM), https://www.straitstimes.com/business/crypto-lender-blockfi-suspends-withdrawals-in-ftx-contagion. 23#24The Result of the Platform Pause The Platform Pause Time Stamp November 10, 2022, 8:15 p.m. (prevailing Eastern Time) BIA to Wallet requests initiated on the User Interface PRIOR TO the Platform Pause Time Stamp Wallet to BIA requests initiated on the User Interface PRIOR TO the Platform Pause Time Stamp Off-platform withdrawal requests initiated on the User Interface PRIOR TO the Platform Pause Time Stamp Trade requests initiated on the User Interface PRIOR TO the Platform Pause Time Stamp Posting of Loan Collateral PRIOR TO the Platform Pause Time Stamp PRIOR TO the Platform Pause Time Stamp See Cheela Decl. 159-60. BIA to Wallet requests initiated on the User Interface AFTER the Platform Pause Time Stamp Wallet to BIA requests initiated on the User Interface AFTER the Platform Pause Time Stamp Off-platform withdrawal requests initiated on the User Interface AFTER the Platform Pause Time Stamp Trade requests initiated on the User Interface AFTER the Platform Pause Time Stamp Posting of Loan Collateral AFTER the Platform Pause Time Stamp AFTER the Platform Pause Time Stamp 24 X X X X X#25The User Interface After the implementation of the Platform Pause, it took the Debtors time to fully disable client-facing transfer request functionality on the User Interface. The process to fully disable the User Interface is complex and requires numerous engineers and UI and UX designers to both troubleshoot and disable aspects of the User Interface. Cheela Decl. 11 66. Transfer Request L ances Interest Account $23,641.35 Transfer Bitcoin BTC Basic Attention Token Ethereum ETH Uniswap UNI Litecoin LITE Home Balance Chainlink LINK B9 Credit Card $4,52.09 3.99833 $15,500.02 0.12093678 $3,248.19 1.10285425 $1,023.18 3.92894729 $2,918.01 3.29802778 $1,102.92 45.91891003 Settings BlockFi 25#26Disabling the User Interface November 10 4 268 November 11 Posted by u/Brandon BlockFi Community Manager 1 month ago O Update from BlockFi Announcement spredn-assets.sprinklr.com/2024/d... C We are shocked and dismayed by the news regarding the rest of the world, found out about this situation t Given the lack of clarity on the status of FTX.com, FT able to operate business as usual. Our inority has been and will continue to be to prote Until there is further clarity, we are limiting platform i client withdrawals as allowed under our Terms. We w soon as possible. We request that clients not deposit Accounts at this November 10 8:15 p.m. (prevailing Eastern Time) BlockFi implements Platform Pause. We intend to communicate as frequently as possible that this will be less frequent than what our clients an to. Cheela Decl. 172, Ex. J. Stipulated Facts [Docket No. 842], ¶ 17, Ex. P and Ex. Q. November 12-14 BlockFi @BlockFi Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time. BlockFi We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to. November 15 - 17 BlockFi November 18 26#27Peated by Brandon Bock Ọ Community Manager 1 month ago @o 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Given able Disabling the User Interface lack of clarity- to operate business as usual. Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t status of FTX.com, FTX US and Alameda, we are not We intend to that this will b 10, BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. Wa the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pasir client withdrawals as allowed under our Terms. We will share more specifics www soon as possible We rec ot deposit to BlockFi Wallet or Ins Accounts at this time. We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 See Cheela Decl. 172. Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet BlockFi Interest Accounts at this time. For further questions, please contact our Client Success team. Got it November 11, 2022 BookFi Update Ⓒo November 11, 2022 BlockFi Update November 11 BlockFi's engineers investigate ways to fully disable the client- facing transfer request functionality November 12-14 November 15 - 17 BlockFi November 18 27#28Peated by Brandon Bock Ọ Community Manager 1 month ago @0 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Disabling the User Interface Given lack of clarity- able to operate business as usual Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t We intend to that this will b 10, status of FTX.com, FTX US and Alameda, we are not BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as www We rec soon as possible Accounts at this time. ot deposit to BlockFi Wallet or Interest We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 > BlockFi November 11 12:14 p.m. (prevailing Eastern Time) BlockFi posts an in-app, "dismissible" pop-up message, available to all of BlockFi's clients using Android and iOS devices. BlockFi clients needed to click the "Got It" button to enter into the app. November 11 Cheela Decl. 166, Ex. P. Stipulated Facts [Docket No. 842], ¶ 19, Ex. S. November 12-14 Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time. For further questions, please contact our Client Success team. November 15 - 17 Got it BlockFi X November 18 28#29November 11 Alerts The Debtors posted an in-app, "dismissible," pop-up message which was available to all of BlockFi's clients using Android and iOS devices as an alert-style message in the BlockFi app, regarding the implementation of the Platform Pause. Nov. 11 12:14 PM Cheela Decl. ¶ 66, Ex. P. See Stipulated Facts [Docket No. 842], 119, Ex. S. Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. X We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time. For further questions, please contact our Client Success m. Got it 29#30November 11 Alerts Once the In-App Notice was active, a client could not access their BlockFi account without first affirmatively clicking a button on the User Interface to "dismiss" the message. Nov. 11 12:14 PM Cheela Decl. 11 66, Ex. P. Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. X We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time. For further questions, please contact our Client Success team. Got it 30#31Peated by Brandon Bock Ọ Community Manager 1 month ago @o 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Disabling the User Interface Given lack of clarity- able to operate business as usual Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t We intend to that this will b 10, status of FTX.com, FTX US and Alameda, we are not BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. Wa the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pasir client withdrawals as allowed under our Terms. We will share more specifics www soon as possible We rec ot deposit to BlockFi Walet or Ins Accounts at this time. We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet BlockFi Interest Accounts at this time. For further questions, please contact our Client Success team. Got it November 11 12:17 p.m. (prevailing Eastern Time) BlockFi publishes an update on their website regarding the Platform Pause and transmits the message via email to all 650,000+ clients. November 11 Cheela Decl. 167, Ex. Q; Cheela Decl. ¶ 68, Ex. R. Stipulated Facts ¶ 20-21, 81, Ex. S, Ex. T, Ex. Q. November 12-14 Back to blog BLOCKFINEWS November 11, 2022 BlockFi Update Published, 11 November, 2022 Share article in Block Fi November 11, 2022 BlockFi Update As always, we want to provide important updates to you about our business as transparently, em We are in the heartbreaking position of sharing the following news with you We are shocked and dismayed by the news regarding FTX and Alameda. We, like the situation through Twitter. Given the lack of clarity on the status of FIX.com, FTX US and A as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pausing clien We will share more specifics as soon as possible. We request that clients not deposit to Bloc We intend to communicate as frequently as possible going forward but anticipate that clients and other stakeholders are used to For further questions, please feel free to contact our Client Success team Last updated on November 11th, 2022 November 15 - 17 Dear DocFi Clients BlockFi BlockFi As always, we want to provide important paste you about ur business es transparenty, empathetically and We are in the heartbeaung position of sharing the following 1. We are secedent damayed by the regarding FIX endAlameda. We, e the rest of the world found out about this siunion through Twitter Over the lack of clarity on the statue of FTX.com FIX US and Alaneda, ve are not able to operate business as usual 2.Our pionty has been and will continue to be to potect our des and their interess 3. Until there is further clarity, we are limiting platform adivily including pusing client withdrawals se allowed under our Terms. We will share more spestis as soon as possible. We request that clients not deposit o Bi Walet s Asal 4. We intend to communicace as frequently as possible going forward but anticipate that this vi frequent than what our clens and other stakeholders are used to For further questions, please teal free to contact our client Success tam 31#32Peated by Brandon Bock Ọ Community Manager 1 month ago @o 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Disabling the User Interface Given lack of clarity- able to operate business as usual Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t We intend to that this will b 10, status of FTX.com, FTX US and Alameda, we are not BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. Wa the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pasir client withdrawals as allowed under our Terms. We will share more specifics www soon as possible We rec Accounts at this time. ot deposit to BlockFi Wallet or Ins We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet BlockFi Interest Accounts at this time. For further questions, please contact our Client Success team. Got it November 11, 2022 BookFi Update Ⓒo November 11, 2022 BlockFi Update BlockFi's engineers investigate ways to fully disable the client- facing transfer request functionality November 11 See Cheela Decl. 172. Stipulated Facts [Docket No. 842], ¶ ¶ 82-83. November 12-14 ios Transfers are currently paused November 15 6:00-6:12 p.m. (prevailing Eastern Time) BlockFi introduces pop-up alert message on iOS and web based versions of the User Interface BlockFi November 15 - 17 November 18 32#33Peated by Brandon Bock Ọ Community Manager 1 month ago @o 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Given able Disabling the User Interface lack of clarity- to operate business as usual. Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t status of FTX.com, FTX US and Alameda, we are not We intend to that this will b 10, BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. Wa the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pasir client withdrawals as allowed under our Terms. We will share more specifics www soon as possible We rec Accounts at this time. ot deposit to BlockFi Wallet or Ins We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet BlockFi Interest Accounts at this time. For further questions, please contact our Client Success team. Got it November 11, 2022 BookFi Update Ⓒo November 11, 2022 BlockFi Update See Cheela Decl. 172. Stipulated Facts [Docket No. 842], 184. BlockFi's engineers investigate ways to fully disable the client- facing transfer request functionality November 11 November 12-14 iOS Transfers are currently paused November 17 9:29 a.m. (prevailing Eastern Time) BlockFi introduces pop- up alert message on Android based versions of the User Interface BlockFi November 15 - 17 November 18 33#34Peated by Brandon Bock Ọ Community Manager 1 month ago @o 268 Update from BlockFi Announcement B sprcomassons sprinkl.com/2024,... We are shocked and dismayed by the news regarding FTX and Alameda We, Ske the rest of the world, found out about this situation through Twitter Disabling the User Interface Given lack of clarity- able to operate business as usual Until there is client withdr Our priority has been and will continue to be to protect our clients and their interests soon as possi Accounts at t We intend to that this will b 10, status of FTX.com, FTX US and Alameda, we are not BlockFi @BlockFi - Nov 10 We are shocked and dismayed by the news regarding FTX and Alameda. Wa the rest of the world, found out about this situation through Twitter Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we able to operate business as usual. Our priority has been and will continue to be to protect our clients and their interests Until there is further clarity, we are limiting platform activity, including pasir client withdrawals as allowed under our Terms. We will share more specifics www soon as possible We rec Accounts at this time. ot deposit to BlockFi Wallet or Ins We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to November 10 See Cheela Decl. 172. Update to your account We are shocked and dismayed by the news regarding FTX and Alameda. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual. Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet BlockFi Interest Accounts at this time. For further questions, please contact our Client Success team. Got it November 11, 2022 BookFi Update Ⓒo November 11, 2022 BlockFi Update BlockFi's engineers investigate ways to fully disable the client- facing transfer request functionality November 11 Transfers are currently paused November 12-14 ios November 15 - 17 BlockFi By November 18, 2022, client- facing transfer request functionality is fully disabled on all versions of the User Interface November 18 34#35The Wallet Withdrawal Objection The Troutman Ad Hoc Committee Ⓒ Ⓒ $25,000.00 STCONT BlockFi Wallet Notional Value of Custodial Omnibus Wallets as of the Platform Pause Time Stamp (¹) $296,950,551.82(¹) Asks that~$375 million (²) of Requested BIA to Wallet Transfers by 48,185 clients after the Platform Pause Time Stamp should also be entitled to recovery from the digital assets in the Custodial Omnibus Wallets Cheela Decl. 181. See Troutman Ad Hoc Committee Response [Docket No. 834], ¶ ¶ 9, 23. (1) Price conversion using end-of-day digital asset prices at 11:59 UTC on November 28, 2022. (2) Price conversion using digital asset prices as of 01:15 UTC November 11, 2022. 35#36Clients External Wallets BlockFi's Business BlockFi Wallet Client (Non-Estate) Property Deposits 525.00009 Off-Platform Withdrawals Custodial Omnibus Wallets The BitGo Custodial Wallets BlockFi Trading LLC BitGo See Cheela Decl. 119-46. See Stipulated Facts [Docket No. 842], ¶ ¶ 38-45. Wallet LLC Wallets BlockFi Wallet LLC A Fireblocks International Vault Wallets BlockFi International Ltd. Fireblocks BlockFi Employees viivi TITT True-Up Process (T+1) and/or Batching Process O BlockFi Estate Property Rehypothecateable Wallets BlockFi Inc. BIA U.S. Clients BlockFi Lending LLC Loans U.S. Clients BlockFi International Ltd. BIA and Loans (non-U.S. Clients) BlockFi BlockFi's Revenue Generating Activities 36#37A "Click" Does Not Immediately Transfer Anything The Debtors' system for collecting transfer request data is separate and distinct from the Batching and True-Up Processes the Debtors utilize for effectuating client transfer requests. The mere act of clicking a button on the User Interface has no automatic impact on digital assets in Custodial Omnibus Wallets and Rehypothecateable Wallets. $25,000.00 ⒸHO.COMM 27 2 7653139 ↓ ⒸBLOCK Fully Automated Email Upon "Click" of Button on the User Interface + Transfer Request Transfer Request Data BlockFi's System to Collect Transfer Request Data Cheela Decl. 1 36. See Stipulated Facts [Docket No. 842], 151. || Clients External Wallets Deposits Off- Platform Withdrawa Is Custodial Omnibus Wallets The BitGo Custodial Wallets BlockFi Trading LLC B BitGo Wallet LLC Wallets BlockFi Wallet LLC Fireblocks International Vault Wallets BlockFi International Ltd. A Fireblocks BlockFi Employees iiii True-Up Process (T+1) and/or Batching Process OO BlockFi Rehypothecateable Wallets BlockFi Inc. BIA U.S. Clients BlockFi Lending LLC Loans U.S. Clients BlockFi International Ltd. BIA and Loans (non-U.S. Clients) BlockFi's Financial System to Effectuate Transfer Requests 37#38The User Interface Transfer Request 2 ances Balance $23,641.35 Transfer Interest Account Basic Attention Token Bitcoin BTC Ethereum ETH Uniswap UNI Litecoin LITE Home Chainlink LINK Credit Card $4,52.09 3.99833 $15,500.02 0.12093678 $3,248.19 1.10285425 $1,023.18 3.92894729 $2,918.01 3.29802778 $1,102.92 45.91891003 8 Settings See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], 1163. When a BlockFi client initiates a transfer request by clicking the requisite buttons on the User Interface: 1 2 BlockFi 3 The trade, transfer, or withdrawal request is collected by the Company-Facing Interface to subsequently be effectuated via the manual True-Up and/or Batching Processes The request is immediately displayed on the User Interface The client receives a fully automated email It is not until the Debtors' employees undertake the Batching and/or True-Up processes that client transfer requests are (or can be) actually effectuated 38#391 Illustrative Transfers - Pre-Platform Pause Client A initiates transfer request on User Interface to move 10 BTC from BIA to Wallet Balances B 2 Ł See Cheela Decl. 1 49. See Stipulated Facts [Docket No. 842], 1163. Balance $23,641.35 Interest Account Bitcoin BTC Basic Attention Token BAT Ethereum ETH Uniswap UNI Home Litecoin LITE Chainlink LINK Transfer 19 Credit Card $4,52.09 3.99833 $15,500.02 0.12093678 $3,248.19 1.10285425 $1,023.18 3.92894729 $2,918.01 3.29802778 $1,102.92 45.91891003 8 Settings Transfer Request B B Wallet B 4 Coin Balances B B B 4 → → B B B → B → P S B B B B B B BlockFi B B BIA B B B B B B B 39 B B B B B#40Illustrative Transfers - Pre-Platform Pause Balances $ Wallet Bitcoin BTC Balance +10 BTC Transfer Basic Attention Token BAT $4,52.09 3.99833 $15,500.02 0.12093678 2 The request is immediately displayed on the User Interface B B Wallet B B 4 Coin Balances B B 4 → → B B B B → → P S B B B B B B B B BlockFi See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], ¶ 63. BIA B B B B B B B 40 B B B B B#413 Illustrative Transfers - Pre-Platform Pause The client receives a fully automated email See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], 1163. BlockFi Fully Automated Email Upon "Click" of Button on the User Interface B B B Wallet 4 Coin Balances B B B B B B 4 → → → B → P S B B B B B B BlockFi B B BIA B B B B B B B 41 B B B B B#42Illustrative Transfers - Pre-Platform Pause Client A requests to transfer 10 BTC from BIA to Wallet ------ See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], ¶ 63. 4 Company- Facing Interface collects the transfer request B B Wallet B 4 Coin Balances B B B 4 → → B B B → B → P S B B B B B B BlockFi B B BIA B B B B B B B 42 B B B B B#43Illustrative Transfers - Pre-Platform Pause BlockFi BlockFi Employees conduct the True-Up Process and/or the Batching Process with respect to transfer request data collected on the Company-Facing Interface 5 BlockFi Employees TITT True-Up Process (T+1 business day) Batching Process 18 Hours for Crypto; ASAP for Fiat (No Later than T+7) See Cheela Decl. 1 38. See Stipulated Facts [Docket No. 842], ¶ ¶ 51, 55, 56, 57.. B B B Wallet Coin Balances B B 4 B B B B A 4 → → → → B +10 BTC P S B B B B B B BIA B B B B B B B B B B -10 BTC 43 B B B B#44P $25.000.00 User Col The True-Up Process The True-Up Process is a partially manual, multi-step process undertaken by the Debtors' Treasury and Financial Operations Teams to effectuate client transfer request data collected by the Company-Facing Interface. The True-Up process occurred once each business day, generally between 9:00 a.m. and 11:00 a.m. (prevailing Eastern time). 1 270707 &000172 + ↓ ⒸBlocki Fully Automated Email Upon "Click" of Button on the User Interface ↓ BlockFi Employees 4141 + Transfer Request Data Cheela Decl. 11 40-42. Stipulated Facts [Docket No. 842], ¶ ¶ 65-66. E 2 3 BlockFi BlockFi clients initiate transfer requests on the User Interface. Client receives an automated email and User Interface reflects the book entry for the request. Data regarding client transfer requests is automatically collected in the Company-Facing Interface. The data in the Company-Facing Interface is reviewed by BlockFi's Treasury team on the business day following clients' transfer requests. The Treasury team also reviews current Custodial Omnibus Wallet balances to calculate the digital assets that are needed to reconcile the Custodial Omnibus Wallets so that the balances match the transfer request data reflected in the Company-Facing Interface (the “True-Up Amounts”). 44#45The True-Up Process (Cont'd) 4 Once each business day, by reference to the prior day's closing balances in Custodial Omnibus Wallets, members of BlockFi's Treasury team effectuate transfers amongst the their Custodial Omnibus Wallets and Rehypothecated Wallets so that the balances in the Custodial Omnibus Wallets and Rehypothecated Wallets match the balances reflected on the User Interface, with a 1-5% buffer in the Custodial Omnibus Wallets. BlockFi Employees ŠŤAŤ 个 Custodial Omnibus Wallets The BitGo Custodial Wallets BlockFi Trading LLC BitGo Cheela Decl. 11 40-42. See Stipulated Facts [Docket No. 842], ¶ ¶ 65-66. Wallet LLC Wallets BlockFi Wallet LLC ▲Fireblocks International Vault Wallets BlockFi International Ltd. A Fireblocks D Rehypothecateable Wallets BlockFi Inc. BIA U.S. Clients BlockFi Lending LLC Loans U.S. Clients AF Transfers of Digital Assets Amongst Omnibus Wallets via Fireblocks and/or BitGo C C BlockFi International Ltd. BIA and Loans (non-U.S. Clients) 6 = Transfer Request Data BlockFi Digital assets are transferred amongst the Rehypothecated Wallets and Custodial Omnibus Wallets such that the digital assets in the Custodial Omnibus Wallets match the request data in the Company-Facing Interface from the prior business day. 45#46BlockFi BlockFi BIA US and Non-US Terms of Service Withdrawals 1. You may make a request for complete or partial withdrawal of principal from your Crypto Interest Account at any time. Any withdrawal of principal will be transferred instantly to your BlockFi Wallet and any withdrawal from your BlockFi Wallet will be subject to BlockFi Wallet Terms. Any interest that has accrued but not been credited to your account on a month-end basis is not eligible for withdrawal until the fifth business day of the following month. If you are an existing U.S. client, please note that any assets you withdraw from your Crypto Interest Account on or after February 14, 2022 will not be eligible for transferring back into your Crypto Interest Account. 2. Withdrawal limits based on frequency and amount may apply from time-to-time and will be described in your Crypto Interest Account interface and on our Website at https://blockfi.com/fees. 3. BlockFi and our third party partners may experience cyber-attacks, extreme market conditions, or other operational or technical difficulties which could result in the immediate halt of transfers and withdrawals of cryptocurrency either temporarily or permanently. BlockFi is not and will not be responsible or liable for any loss or damage of any sort incurred by you as a result of such cyber- attacks, operational or technical difficulties or suspensions of transfers or withdrawals. Cheela Decl., Ex. B (BlockFi Wallet Terms of Service, C), Ex. C (BlockFi BIA US Terms of Service, E.). Stipulated Facts [Docket No. 842], 112-3. 46#47Ⓒ $25,000.00 Mem (ta.com The Batching Process The True-Up Process is a partially manual, multi-step process undertaken by the Debtors' Financial Operations team to effectuate requests from BIA to Wallet and then ultimately off-platform to clients' external wallets. 1 2 4661206272 27034807 MER 500017500 + ↓ Ⓒ Blackfi Fully Automated Email Upon "Click" of Button on the User Interface 00 ÕìÌì ↓ BlockFi Employees + Transfer Request Data Batch Cheela Decl. 1 1 37-39. Stipulated Facts [Docket No. 842], 111 58. 2 3 BlockFi clients initiate transfer requests on the User Interface by clicking the requisite button(s). Data regarding client transfer requests is automatically collected in the Company-Facing Interface. Client receives an automated email and User Interface reflects the book entry for the request. The Debtors' Financial Operations team would "batch" request data on the Company-Facing Interface and then send such batches of withdrawal request data to the Debtors' Fraud and Security team. 47#48The Batching Process (Con't) BlockFi Fraud and Security TTTT BlockFi Financial Operations 00 ↑↑↑↑ BlockFi Financial Operations 000 TITI A A Batch 4 5 6 Cheela Decl. 1 1 37-39. Stipulated Facts [Docket No. 842], 1111 58. The Debtors' Fraud and Security team would run automated fraud checks. The automated fraud check system would identify and flag certain off- platform withdrawal requests, which the Debtors' Fraud and Security team would manually review. Depending on the facts of the particular situation, the process described in steps 3 and 4 can either be completed reasonably quickly, or can take numerous days to complete Each business day, the Debtors' Financial Operations team would review the withdrawal request data that had been reviewed by the Debtors' Fraud and Security team and had cleared fraud checks and hold time; The Debtors' Financial Operations team would again “batch” such withdrawal requests (i.e., organize the requests for processing) according to the time of request and whether such withdrawal request was for digital currency, ACH, or wire (requests for digital withdrawals always had an 18- hour fraud-check holds, request for cash/ACH withdrawals were manual); 48#49The Batching Process (Con't) BitGo 7 Two times each business day, the Debtors' Financial Operations team would upload and submit the valid withdrawal request data to BitGo (in the instance of on- chain digital currency withdrawal requests), and Silvergate (in the instance of ACH or wire fiat withdrawal requests). 8 If there were sufficient digital assets in the BitGo Custodial Wallets to effectuate the transfer and withdrawal requests, BitGo would then effectuate such requests by facilitating the movement of digital assets from the BitGo Custodial Wallet to the applicable clients external wallets. Depending on the circumstances, this could happen on the same day as the transfer request. Otherwise, the Financial Operations team could move additional funds to the BitGo Custodial Wallets in order to effectuate BIA to Client Wallet Account transfer request and a Wallet to external wallet withdrawal requests. Cheela Decl. 1 1 37-39. Stipulated Facts [Docket No. 842], 1111 58. 49#50The True-Up and Batching Processes Digital assets only move from Rehypothecateable Wallets to Custodial Omnibus Wallets and from the BitGo Custodial Wallet to an external wallet via manual intervention by the Debtors' employees through the True-Up Process and/or Batching Process (whichever comes sooner). I Illustrative Process to Effectuate a Requested BIA to Wallet Transfer BlockFi BlockFi employees review transfer request data from Employees the prior business day, calculate True-Up Amounts, and effectuate transfers so that the digital assets in 0000 ITT the Custodial Omnibus Wallets match request data in the Company-Facing Interface BIA BlockFi employees review and batch transfer request data and upload request data to BitGo within 7 days BlockFi Employees 0 0 0 0 See Cheela Decl. 1 1 37-42. See generally Stipulated Facts ¶¶ 51, 53, 56, 57, 58, 62, 64, 65. True- Up (T+1) Batching Process Custodial Omnibus Wallets BitGo Custodial Wallets Client External Wallet BlockFi I L I I 1 I I I 1 I I I I 1 1 50#51The Attempted Post-Platform Pause Transactions During the UI Delay Period, a number of clients continued to attempt to enter requests for transactions on the User Interface with respect to the digital assets in their Client Wallet Accounts Coin Balances Balances A B 23 Ł Bitcoin BTC Ethereum ETH Interest Account Basic Attention Token BAT Uniswap UNI Litecoin LITE Chainlink LINK Home See Cheela Decl. 1 49. See Stipulated Facts [Docket No. 842], 11 88. Balance 3,641.35 Transfer 1.9 Credit Card $4,52.09 3.99833 $15,500.02 0.12093678 $3,248.19 1.10285425 $1,023.18 3.92894729 $2,918.01 3.29802778 $1,102.92 45.91891003 8 Settings 1 Transfer Request Client A initiated transfer request on User Interface to move 10 BTC from BIA to Wallet B B → Wallet B B 4 B B B B B 4 → → → B → P S B B B B B B BlockFi B B BIA B B B B B B B 51 B B B B B#52The Attempted Post-Platform Pause Transactions Balances A Wallet Balance +10 BTC Transfer Basic Attention Token BAT K $4,52.09 3.99833 2 The request was immediately displayed on the User Interface Wallet Coin Balances B B B B B B B 4 → → 4 B B → → B P S B B B B B B B B BlockFi See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], ¶ 63, 88. BIA B B B B B B B 52 B B B B B#533 The Attempted Post-Platform Pause Transactions The client received a fully automated email See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], 11 88. 14 BlockFi Fully Automated Email Upon "Click" of Button on the User Interface B B B Wallet 4 Coin Balances B B B B B B 4 → → → B → P S B B B B B B BlockFi B B BIA B B B B B B B 53 B B B B B#54Illustrative Transfers - Pre-Platform Pause Client A requests to transfer 10 BTC from BIA to Wallet ------ See Cheela Decl. 149. See Stipulated Facts [Docket No. 842], 11 88. 14 4 Company- Facing Interface collected the transfer request B B Wallet B 4 Coin Balances B B B 4 → → B B B → B → P S B B B B B B BlockFi B B BIA B B B B B B B 54 B B B B B#55The Attempted Post-Platform Pause Transactions BlockFi Employees did not conduct the Batching and/or True-Up Process with respect to the transfer requests initiated on the User Interface after the Platform Pause Time Stamp. 5 Block Emplo Platform ÅMi Pause See Cheela Decl. 1 55. Stipulated Facts [Docket No. 842], ¶ ¶ 76, 77, 79. Process ocess +7) Wallet B BlockFi Coin Balances BIA B B B NO TRANSFER OF DIGITAL ASSETS FROM BIA TO WALLET 55#56The Troutman Ad Hoc Committee Argues that a "Click" on the User Interface Creates an Ownership Interest of the Digital Assets Held in the Custodial Omnibus Wallets(¹) This is not, and cannot be, the case. $25,000.00 PAX Geld Wallet UND C 404.0195214272 2TOMOT 21967318 5.000 17205460 + 5214:30 O BlockFi Fully Automated Email Upon "Click" of Button on the User Interface + Transfer Request Transfer Request Data # See Troutman Ad Hoc Committee Response [Docket No. 834], 19, 23: Bona Fide Transfer of Digital Assets 56#57The Wallet Withdrawal Objection The Troutman Ad Hoc Committee Ⓒ Ⓒ $25,000.00 STCONT BlockFi Wallet Notional Value of Custodial Omnibus Wallets as of the Platform Pause Time Stamp (¹) $296,950,551.82(¹) Cheela Decl. 181. See Troutman Ad Hoc Committee Response [Docket No. 834], ¶ ¶ 9, 23. (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. (2) Price conversion using digital asset prices as of 01:15 UTC on November 11, 2022. Asks that~$375 million (²) of Requested BIA to Wallet Transfers by 48,185 clients after the Platform Pause Time Stamp should also be entitled to recovery from the digital assets in the Custodial Omnibus Wallets 57#58(1) The Current State of Affairs Title to assets contained in the Custodial Omnibus Wallets belongs only to those clients with holdings represented in the Custodial Omnibus Wallets as of the Platform Pause Time Stamp. Those clients own the digital assets in the Custodial Omnibus Wallets-not BlockFi or anyone else. Custodial Wallet Assets $297 million (¹) Wallet Claims $297 million (1) ..... Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. - BIA Claims $1.2 billion (1) See Cheela Decl. 181. BlockFi 58#59The Current State of Affairs Digital Assets in the Custodial Wallet Accounts owned by BlockFi clients who held digital assets in the Custodial Omnibus Wallets as of the Platform Pause Time Stamp. (1) Custodial Wallet Assets $297 million (¹) Clients who had title to digital assets in the Custodial Omnibus Wallets as of the Platform Pause Time Stamp. Wallet Claims $297 million (1) ..... Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. - Includes clients with BIA holdings as of the Platform Pause Time Stamp who requested to move to Wallet after the Platform Pause Time Stamp. BIA Claims $1.2 billion (1) BlockFi See Cheela Decl. 181. 59#60Troutman Ad Hoc Committee Requests to Dilute Recoveries for Clients who Had Digital Assets in BlockFi Wallet as of the Platform Pause Custodial Wallet Assets $297 million (¹) ~$375 million (4) of Attempted BIA to Wallet Transfers after the Platform Pause Time Stamp Wallet Claims $297 million (¹) +$375 million (2) $672 million (3) (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. Price conversion using digital asset prices as of 01:15 UTC on November 11, 2022. (2) (3) For demonstrative purposes; the Debtors make no waivers or admissions and reserve all rights. ... BIA Claims $1.2 billion (1) -$375 million (2) $863 million (3) BlockFi See Cheela Decl. 181. 60#61Troutman Ad Hoc Committee Requests to Dilute Recoveries for Clients who Had Digital Assets in BlockFi Wallet as of the Platform Pause Custodial Wallet Assets $297 million (¹) Wallet Claims $672 million (²) (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. (2) For demonstrative purposes; the Debtors make no waivers or admissions and reserve all rights. BIA Claims $863 million (2) BlockFi See Cheela Decl. 181. 61#62Troutman Ad Hoc Committee Requests to Dilute Recoveries for Clients who Had Digital Assets in BlockFi Wallet as of the Platform Pause Significant Decrease in Wallet Holder Recoveries Custodial Wallet Assets $297 million (¹) { Wallet Claims $672 million (²) (1) Price conversion using digital asset prices as of 11:59 UTC on November 28, 2022. (2) For demonstrative purposes; the Debtors make no waivers or admissions and reserve all rights. BIA Claims $863 million (2) BlockFi See Cheela Decl. 181. 62#63BlockFi The Wallet Withdrawal Motion The Debtors seek to do right by their clients: ✓ Honor client withdrawals from Client Wallet Accounts as of the Platform Pause Time Stamp and return the crypto in Omnibus Wallet Accounts to clients promptly; and Update the User Interface to reflect proper accounting of digital assets as of the Platform Pause Time Stamp. See Cheela Decl. 80. Case 22-19362-MBK Dac 121 Filed 12/19/22 Entered 12/19/22 16:02:48 Document Page 5 of 43 COLE SCHOS2 9.5. Machet E Was Eag Har Ne. 081995) 1. Sima Eat (NI Bac No. 28432168 Case 23 Main Sures Hacksack, (291) 489-30007603 maisons donche.com wwwse@leacht. KIRKLAND & KIRKLAND & ELLIS INTERNATIONALILF & ELIIS LIP Josu A. Sussberg, 1 berg, PC, ta Cate Christine A. Ch.P.C. de proce 40t Lexington Avus New York, New York: 10022 (212) 446-4800 niasbergaiainkland.மனது [email protected] Proped for Debars and tors on Pion HAVNES AND BOONE, ELS Ritz, E. (Bar No 47311992) Keene Katr, og dette pro 14 Rockie Plaza, 2 Flor New York, New York 2012 22123699-7 TUDÁNDOGO.COM AN kuri kathayen.com Proposed mye for Dubmers and Deborsie Passion UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY Aze Exetes Chapter 15 E o 22-10362 (NRK) di Adi DEBTORS' MOTION FOR ENTRY OF WITHDRAWALS FROM WALLET ACCOUNTS, (B) UPDATE THE USER AN ORDER (1) AUTHORIZING THE DEBTORS TO (4) HONGR INTERFACE TO PROPERLY REFLECT TRANSACTIONS AND ASSETS AS OF THE PLATFORM PAUSE, AND (C) CONDUCT ORDINARY COURSE RECONCILIATION OF ACCOUNTS, AND OR GRANTING RELATED RELIEF UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY HONORABLE CHIEF JUDGE MICHAEL KAPLAN TO THE 'The Dinthose chapter 11 cases, along with the last Debtor's ladestas identification er, Blockflac (15) Blacks Indong LLC ES LIC(51) LC9937) (24223 Blacks adess is 20 Montenery Sect. Bute 23. Jersey City, N87302 7) Riud fational Lad tycksaved ORTH afy 154 15017 Ree Aineks Waller Fi Services, b: (596) and stock Leeding LEE 0543. The location af dark lif service 8. Desc Main 63