Guo Wengui / Miles Guo — bankruptcy case · ORDER · ECF #1754

METADATA

Defendant: Guo Wengui / Miles Guo / Ho Wan Kwok
Court: CTB
Case No.: 22-50073
ECF #: 1754
Type: ORDER
Filed: 2023-05-04

FULL TEXT

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK and GENEVER \* HOLDINGS CORPORATION, \* Bridgeport, Connecticut \* April 27, 2023 Debtor. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF #1675 APPLICATION FOR APPROVAL TO/APPLICATION OF TRUSTEE, PURSUANT TO BANKRUPTCY CODE SECTIONS 327(a) and 328, BANKRUPTCY RULES 2014(a) and 2016 and Local Rule 2014 FOR ENTRY OF ORDER AUTHORIZING EMPLOYMENT AND RETENTION OF EDMISTON AND COMPANY LIMITED AS BROKER FOR SALE OF LADY MAY AND LADY MAY II #1696 MOTION OF CHAPTER 11 TRUSTEE, PURSUANT TO BANKRUPTCY CODE SECTION 363(b) FOR ENTRY OF ORDER AUTHORIZING (I) MOVING LADY MAY TO NAVIGABLE WATERS OF RHODE ISLAND AND (II) ENTRY INTO AND PERFORMANCE UNDER NEWPORT DOCKAGE AGREEMENT #1704 AMENDED ORDER SETTING STATUS CONFERENCE BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE APPEARANCES: For the Chapter 11 G. ALEXANDER BONGARTZ, ESQ. Trustee: Paul Hastings, LLP 200 Park Avenue New York, NY 10166 DOUGLAS S. SKALKA, ESQ. Neubert Pepe & Monteith, PC 195 Church Street New Haven, CT 06510 Proceedings recorded by electronic sound recording, transcript produced by transcription service. **Fiore Reporting and Transcription Service, Inc. 4 Research Drive, Suite 402 Shelton, Connecticut 06484 (203)929-9992**

APPEARANCES: (Cont'd) Chapter 11 Trustee: LUC A. DESPINS, ESQ. Paul Hastings 200 Park Avenue New York, NY 10166 For the U.S. Trustee: HOLLEY L. CLAIBORN, ESQ. Office of the United States Trustee The Giaimo Federal Building 150 Court Street, Room 302 New Haven, CT 06510 For the Debtor and ERIC A. HENZY, ESQ. Plaintiff, HK Zeisler & Zeisler, PC International and Mei Guo: 10 Middle Street, 15th Floor Bridgeport, CT 06604 For the Debtor: WILLIAM BALDIGA, ESQ. Brown Rudnick 601 13th Street NW, Suite 600 Washington, DC 20005 For Rui Ma, Weican Meng, KRISTIN MAYHEW, ESQ. Zheng Wu, and Official Pullman & Comley, LLC Committee of Unsecured 850 Main Street, 8th Floor Creditors: P.O. Box 7006 Bridgeport, CT 06601

Ho Wan Kwok - April 27, 2023 3 (Proceedings commenced at 1:05 p.m.) THE COURTROOM DEPUTY: No. 22-50073, Ho Wan Kwok. THE COURT: Good afternoon. If we could have appearances for the record starting with the Chapter 11 Trustee, please. MR. DESPINS: Good afternoon, Your Honor. Luc Despins, Chapter 11 Trustee. MR. BONGARTZ: Good afternoon, Your Honor. Alex Bongartz of Paul Hastings for the Chapter 11 Trustee. MR. SKALKA: Good afternoon, Your Honor. Douglas Skalka of Neubert, Pepe & Monteith as local counsel for the Chapter 11 Trustee. MS. CLAIBORN: Good afternoon. Holley Claiborn for the U.S. Trustee. MS. MAYHEW: Good afternoon, Your Honor. Kristen Mayhew, Pullman & Comley, on behalf of the Creditors Committee. MR. HENZY: Eric Henzy, Zeisler & Zeisler, for the debtor and also for Mei Guo and HK. MR. BALDIGA: Good afternoon, Your Honor. William Baldiga, Brown Rudnick, special defense counsel to the debtor. THE COURT: Good afternoon to everyone. Okay. There are three matters on the calendar today in the Kwok

and related Chapter 11 cases.

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Ho Wan Kwok - April 27, 2023 4 The first matter is an application for approval for the Trustee to retain a broker to sell the Lady May and the Lady May II. The second is the motion of the Chapter 11 Trustee for an order authorizing that the Lady May be moved to the navigable waters of Rhode Island, and with regard to that motion to enter into a dockage agreement. And then an order setting a status conference on issues that were addressed at a prior hearing with regard to the debtor's assertion of his Fifth Amendment privilege in response to discovery issues and an order for contempt. So Trustee Despins, are we proceeding first with the application to approve the retention of the broker? MR. DESPINS: Yes, Your Honor. Mr. Bongartz, will handle that. THE COURT: Okay. Thank you. MR. BONGARTZ: Good afternoon, again. Alex Bongartz, of Paul Hastings, for the Chapter 11 Trustee. I'll be addressing first the application to retain Edmiston as the yacht broker to sell -- to market and sell the Lady May and the Lady May II. There have been no objections filed to the retention application, but I want to note that we have received informal comments from the United States Trustee and did file a revised proposed order yesterday afternoon at

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Ho Wan Kwok - April 27, 2023 5 Docket No. 1713. I'm happy to walk the Court through that blackline or we can -- I'll make a few introductory remarks. I'm happy to proceed either way. THE COURT: Why don't you go ahead and make a few introductory remarks, please. MR. BONGARTZ: Yeah. Of course. So we filed this motion because we believe it is critical to engage a qualified and seasoned yacht broker to market the two yachts for sale. Edmiston, we believe, is highly qualified and has substantial experience in marketing luxury super yachts of the type of -- like the Lady May. One specific example to flag, and that makes Edmiston actually particularly suitable to market the Lady May, is that they have been marketing the sister ship of the Lady May for about a year and have an extensive list of interested parties through that process. So they are already well steeped in this market for super yachts and in particular Feadship, which is the manufacturer of the Lady May. THE COURT: May I just stop you right there. When you say the sister ship, what do you mean? MR. BONGARTZ: Yes. I believe that at around the time that the Lady May was manufactured, the manufacturer being Feadship, they also manufactured a nearly identical

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| | Ho Wan Kwok - April 27, 2023 6 | |----|------------------------------------------------------------------| | 1 | ship, same dimensions, same specifications, generally | | 2 | speaking. Definitely if you look at them in pictures they | | 3 | look virtually identical. And that ship I believe is called | | 4 | K-I-S-S, KISS, and has been on the market for about a year | | 5 | under the stewardship of Edmiston as the broker. | | 6 | THE COURT: And what's the sales price for that | | 7 | boat that's been on the market, that yacht that's been on | | 8 | the market for a year? | | 9 | MR. BONGARTZ: I believe the listing price is | | 10 | somewhat over \$30 million. It was reduced to 29. I'm | | 11 | sorry. | | 12 | THE COURT: Okay. Go ahead. | | 13 | MR. BONGARTZ: Okay. So as we've explained in our | | 14 | motion, Edmiston will be -- or would, if approved by this | | 15 | court, would be marketing the Lady May as well as the Lady | | 16 | May II. That process would include creating marketing | | 17 | materials, reaching out to their database of potential | | 18 | buyers. Marketing materials in this day and age are not | | 19 | just print materials. They would include video shoots. And | | 20 | then they would introduce the yacht to their extensive | | 21 | database of potential buyers. | | 22 | I should note that we've negotiated a couple of | | 23 | provisions in the engagement letter that are not standard. | | 24 | We specifically asked for them, for the benefit of the | | 25 | estate. For example, Edmiston -- we requested Edmiston and | | | |

Ho Wan Kwok - April 27, 2023 7 Edmiston agreed to provide the Trustee on a monthly basis with a log of all parties that they have contacted and parties that contacted them either directly or through a sub-listing broker. We've also negotiated a provision that would allow the Trustee to terminate the broker agreement after three months, in which case, if that option is exercised, the agreement would terminate ten days after such notice. We believe that the fee structure that was agreed upon is competitive. Just in a nutshell, there's a five percent commission that will come due if the buyer is sold in house, meaning to an interested party that is in Edmiston's internal database of contacts, and there would be a six percent commission if the Lady May is sold to a buyer that is introduced through a sub-listing broker. In the case of the Lady May, in either event, whether it's in house or through a sub-listing broker, the commission would be five percent. We've also negotiated provisions that require Edmiston to come to this court and seek an application if it desires or if it believes it is entitled to any payment under the indemnity. So that process would be funneled through this court. And, in addition to that, there is a carve out from any claim for indemnity. Specifically carved out are Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 7 of 95

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| | Ho Wan Kwok - April 27, 2023 8 | |----|----------------------------------------------------------------| | 1 | fraud, fraud from misrepresentations, knowing or willful | | 2 | violation of law, willful misconduct, et cetera. All that's | | 3 | detailed in our application. | | 4 | So with these remarks, unless the Court has any | | 5 | questions about what I've just said, I would turn to the | | 6 | blackline that we filed yesterday afternoon. | | 7 | THE COURT: I do have a few questions. | | 8 | So why does -- why would Edmiston need to work | | 9 | with a sub-listing broker? | | 10 | MR. BONGARTZ: Well -- | | 11 | THE COURT: Because that would increase the | | 12 | commission by a whole percent. So we're talking, you know, | | 13 | right now, if they sell it for 26 million they get a | | 14 | million-three. But if they have to use another broker, | | 15 | right, then that amount of money -- why would they need to | | 16 | use -- I'm just trying to understand. | | 17 | MR. BONGARTZ: Understood. The database, while | | 18 | extensive in the case of Edmiston, there may be a buyer that | | 19 | is already working with another broker and that is not | | 20 | within the universe of Edmiston's potential clients. | | 21 | THE COURT: Okay. | | 22 | MR. BONGARTZ: And if such another broker | | 23 | introduces the yacht to Edmiston -- sorry, is introduced to | | 24 | the yacht through another broken, then I understand it is | | 25 | customary in the industry that a sub-listing broker would | | | |

Ho Wan Kwok - April 27, 2023 9 get a portion of the fee. THE COURT: How does it get split? Because right now if a sub-listing -- if you take my example and the sub- listing broker brings forth the person, so it would be another \$260,000 that would be payable out of the sales proceeds. How does it get split between the two? MR. DESPINS: Your Honor, Luc Despins, for the record. It's a negotiation between the two brokers. It's not limited to the new broker getting the one percent. It could be more than that. And, as Mr. Bongartz mentioned, we receive bids from three different brokers. They all have the same structure except that the others had, or at least one other had a higher percentage, 7.5 percent. And so that it's a standard thing, which there are some brokers that control buyers, if you will, they have a relationship, and they're not going to bring them to the table unless they're guaranteed to get a cut from the existing broker. THE COURT: I understand that. I'm not -- I'm not asking that. I'm asking how is it going to be split? MR. DESPINS: It's a -- it's a negotiation between the two brokers. From our point of view, where obviously we want Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 9 of 95

Ho Wan Kwok - April 27, 2023 10 the lowest fee possible, but we're indifferent as to how the six percent is split between the two brokers. THE COURT: What happens if there is a dispute? Then I have to decide that? MR. DESPINS: Well, you have exclusive jurisdiction to -- for any disputes relating to Edmiston. So we're not -- if there's a dispute, we're not going to pay Edmiston. It would have to be resolved by this court obviously. THE COURT: Okay. All right. That's the question. All right. Go ahead, Counsel. MR. BONGARTZ: Okay. Sorry. I just want to make sure -- THE COURT: Oh, you don't have to go through the blackline by the way. MR. BONGARTZ: Okay. THE COURT: I've looked at it. MR. BONGARTZ: All right. All right. THE COURT: Okay. MR. BONGARTZ: So we believe that these -- we've shared these comments and the blackline with the U.S. Trustee's Office and we believe those comments were acceptable. Obviously, I defer to counsel if she has anything else to add. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 10 of 95

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Ho Wan Kwok - April 27, 2023 11 MS. CLAIBORN: Thank you, Your Honor. Holley Claiborn for the U.S. Trustee. I do want to point the Court to one material change from the original proposal. The original proposal contemplated no fee application of any kind for Edmiston, and the revised order that's been submitted to Your Honor contains a methodology whereby the payment of the compensation commission will be sought in conjunction with a motion to sell that the Trustee files and not the subject of a separate fee application. THE COURT: Okay. Thank you. I did see that. MS. CLAIBORN: Other than that, Your Honor, I have one another comment. And I would like to just tell the Court that we are okay with the new proposed order that was filed at ECF 1713. THE COURT: Okay. Thank you. I do have another question I failed to ask with regard to -- first of all, I see the time line, right, that the broker has submitted. And, okay, so it doesn't detail necessarily everything they're going to do, but I understand that they're going to take videos and pictures and they're going to put things on social media and they're going to have a broker's open house and things like that. I understand all that.

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| Ho Wan Kwok - April 27, 2023 12 | |------------------------------------------------------------------| | But what I didn't see anywhere, and maybe I | | missed, is how are they going to market the sale of these | | two yachts? | | UNIDENTIFIED: (Indiscernible) | | I have no idea who that is and why they're on the | | phone. Who is Doug White? Oh, I'm sorry. I apologize. | | Forget it. In any event, we should get that changed. Okay? | | My question is this. Have you discussed -- have | | you or the Chapter 11 Trustee discussed with the broker how | | they're going to market the sale of these yachts? Are they | | going to -- is there going to be a possibility that someone | | could buy both or someone could buy one or the other? | | And then how is it going to be determined, I mean, | | it's going to be the Trustee that will bring the sale | | forward, but, you know, what is the highest and best offer | | with regard the sale of -- I think the broker needs to | | understand that at least from the Court's perspective there | | could be a situation where the sale of both would be more | | beneficial, but there also could be a situation where the | | sale of one versus another could be more beneficial to the | | estate. Right? We want to be able to obtain the highest | | and best offer for the sale of these two yachts. | | Now, from what I understand over the course of the | | last month or so, the Lady May II wasn't anywhere near the | | Lady May. It was in -- it's in some -- I don't know if it | | |

Ho Wan Kwok - April 27, 2023 13 still is, but it was in a warehouse in I think somebody said Mamaroneck. And so I have -- and how is the Lady May II going to be marketed if it's in a warehouse in Mamaroneck and the Lady May is going to be in Newport, assuming that the order enters allowing it to travel to Newport? MR. BONGARTZ: Let me take those questions in order. So we have maximum flexibility under the brokerage agreement the boats can be sold together, they can be sold separately, they will be marked -- THE COURT: Does it say that? MR. BONGARTZ: Yes. THE COURT: Okay. That's what I said. I may have missed it. I don't recall seeing that, but I'd want to make sure that that's clear to the broker. MR. BONGARTZ: Yes. It's the last -- second to last sentence of Section 2 of the Central Agency Sale Agreement. THE COURT: Okay. Let me get there, please. So I'm looking at the document that's signed by Trustee Despins and Dirk Johnson on 4/18/2023? MR. BONGARTZ: That is correct. If you -- THE COURT: All right. What provision am I looking at? Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 13 of 95

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| | Ho Wan Kwok - April 27, 2023 14 | |----|-----------------------------------------------------------------| | 1 | MR. BONGARTZ: If you look at -- it's page number | | 2 | 19 of 36 to go with the -- | | 3 | THE COURT: Okay. Yeah. Let me get there. | | 4 | MR. BONGARTZ: -- docketed. | | 5 | THE COURT: Go ahead. | | 6 | MR. BONGARTZ: Yes. It's the sentence towards the | | 7 | top of that page, carryover paragraph, the yachts shall be | | 8 | marketed and sold separately unless otherwise agreed by the | | 9 | owner. So we can -- | | 10 | THE COURT: It says yacht number one will be | | 11 | offered for sale at yacht number one price. Yacht number | | 12 | two will be offered at yacht number two price. No other | | 13 | prices shall be quoted without specific authorization from | | 14 | the owner. | | 15 | The broker shall submit all offers of any type to | | 16 | the owner for his consideration. The owner agrees to sell | | 17 | yacht number one to any customer who's ready, willing and | | 18 | able to purchase. And yacht number two. The yachts may be | | 19 | marketed and sold separately unless otherwise agreed to by | | 20 | owner. | | 21 | But it doesn't say that the yachts may be marketed | | 22 | and sold together. Right? I mean, all I'm saying is that | | 23 | needs to be out there, both, right? | | 24 | MR. DESPINS: Yes, Your Honor. Again, for the | | 25 | record, Luc Despins. | | | |

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Ho Wan Kwok - April 27, 2023 15 We've had extensive discussions with the various potential brokers about that. The advice I got from all of them is that if you sell it together, you will not get a penny more for the Lady May II in the sense that people will say -- THE COURT: Well, let's hope. MR. DESPINS: No, no. So there's no prohibition. THE COURT: We'll see if they're right. We'll see if they're right. MR. DESPINS: We'll make sure that it's clear that they can be marketed together. But generally people will say fine, through that in and I'll pay X, but the maximum price for the Lady May II is on a standalone basis. But we -- there's no -- there's no prohibition against doing it together, and we'll tell them, and we can correct this to make sure that we can. THE COURT: We don't know what's going to happen. Somebody may come in and offer to buy both of them for a price that's equal to somebody who's buying them separately but maybe has no contingencies and can pay in cash or whatever the situation may be. Right? MR. DESPINS: Right. THE COURT: So I need -- because I'm going to have to -- the Court is going to have to approve whatever happens, I mean, I want to make sure that the marketing of

Ho Wan Kwok - April 27, 2023 16 the yachts is designed to produce the highest offer for the estate. So where is -- is the Lady May II still in a warehouse in Mamaroneck? MR. BONGARTZ: It is currently in a warehouse. It needs to be re-commissioned and then put back in the water. That is -- that process has not yet begun, but we are planning to do so very soon, certainly during the month of May. And we will then move the Lady May also to Newport so that it can be -- so that it's in the same location as the Lady May I. And just to be clear, we will come back to this court to seek authorization to conduct any -- enter into any new contracts or conduct any repairs to the extent necessary in connection with the Lady May II. THE COURT: But the broker knows that the yacht is -- that the Lady May II is in Mamaroneck? MR. BONGARTZ: Absolutely. They are aware of that. THE COURT: And they're going to start -- MR. BONGARTZ: Yeah. THE COURT: -- they're going to start to sell it from its location in Mamaroneck? MR. BONGARTZ: They can't market it while it is currently under wraps. It's under a plastic flow right now Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 16 of 95

Ho Wan Kwok - April 27, 2023 17 in a storage facility. But, in any event, it could not be put immediately into the water unless it's first re- commissioned. The fluids need to be exchanged or filled up again. So there is a -- there's a process for that and it is going to happen in the very near future. So we are expecting that the boat, Lady May II, will also be moved to Newport during the month of May. And I should note that the broker has actually already visited the Lady May II in order to get a sense of the need for what needs to be done in order to get it ready for marketing and viewings. THE COURT: And if the broker, or the broker with -- the sub-broker, whatever, I forget the term, brings forth Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 17 of 95

a buyer for one or both and there's a motion to sell to a purchaser, are we -- are you contemplating that there's going to be an auction of that boat or that that sale is only going to be out on notice to people to object and possibly make a counter offer?

MR. DESPINS: Your Honor, it would be subject to higher and better offer, but I don't think that it would be best advised to announce that there will be an auction.

I mean, in the sense that we will give notice to people, people who visited the ship and all that, so they can -- they understand that it's subject to higher and

Ho Wan Kwok - April 27, 2023 18 better offer in the Bankruptcy Court, but I don't think we'd want to say that there will be an auction -- THE COURT: That's fine. Does the broker understand that though? MR. DESPINS: I believe he does, that it's subject to -- THE COURT: Well, we need to make sure he does, right? MR. DESPINS: We'll do that. THE COURT: That the broker understands that when someone comes and makes an offer for one or -- one or both, either or both of the yachts, that that person needs to understand that the Bankruptcy Court has to approve that and that it's possible that someone could offer a higher amount of money for that purchase. Right? MR. BONGARTZ: Yeah. THE COURT: I didn't see that. I'm not saying he should have said this by the way in the -- his affidavit, but I didn't see any indication that he was aware and I want to make sure that that's clear. MR. BONGARTZ: We will make sure that that is clear. THE COURT: Okay. All right. With regard to the -- does anyone else wish to be heard before I just talk with counsel about the order?

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Ho Wan Kwok - April 27, 2023 19 Go ahead, Attorney Henzy. MR. HENZY: Your Honor, for Mei Guo and HK, we do reserve all rights as to whether or not the boat can be sold. As you know, your summary judgment decision has been appealed. But with respect to this application, we take no position. THE COURT: You take no position? MR. HENZY: On this application. THE COURT: Okay. MR. HENZY: But I do want to be clear that that -- we are reserving all rights with respect to any sale of the boat. THE COURT: Okay. Thank you. MR. HENZY: Thank you, Your Honor. THE COURT: All right. With regard to the order that was submitted yesterday, at ECF 173, I'm just looking at the clean copy, I'm not looking at the redlines -- MR. BONGARTZ: Okay. THE COURT: -- so there's just a couple of things in here that I just want to have changed. So tell me, do you have it in front of you, Counsel? MR. BONGARTZ: Yes, I do. THE COURT: Okay. So on the top of the second page of the order, after the reference to that it's a core

Ho Wan Kwok - April 27, 2023 20 proceeding, you know, 28 USC 157(b)(2) -- MR. BONGARTZ: Yes. THE COURT: -- I'm going to delete the language on which the Court may enter a final order consistent with Article 3 of the United States Constitution. Because a reviewing court may not agree with that, so I'm not going to put that in there. All right? MR. BONGARTZ: Okay. THE COURT: In that same paragraph, about six to seven lines down, I don't have to find under 328(a) -- under 327(a) or 328 that the relief requested is in the best interest of the debtor's estate. That's if it was a 327(e) application. So I'm going to strike that language. And the Court having found that the relief requested in the application is in the best interest of the debtor's estate, their creditors and parties in interest, there's nothing that I can see in the code or the rules that requires that that needs to be a finding in connection with an application made under 327(a) or 328. Okay? MR. BONGARTZ: Okay. THE COURT: Then with regard to the next provision that appearing that proper and adequate notice of the application has been given and that no further notice is necessary, you need to establish that for me. Right? I didn't go look at your service. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 20 of 95

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Ho Wan Kwok - April 27, 2023 21 So you just need to tell me -- and I know we -- people use the word notice, but you really mean service, you mean people have been served -- MR. BONGARTZ: Yes. THE COURT: -- and they've had an opportunity to object. Right? So do you want that language in there? If you do, you need to make a record. MR. BONGARTZ: We would like that language in there. THE COURT: So go ahead. MR. BONGARTZ: And we have served the motion when it was filed on April 18 via ECF. And upon entry of the order granting the motion to expedite, we have served it in addition -- we have served both the order and the motion. Well, first of all, the order was automatically served via ECF. But on the additional parties that have, well, that have selected or chosen not to -- have requested hard copy service, we have also then served the order and the application on those parties as well. And I believe the certificate of service is on the docket to that effect. I unfortunately don't have the specific docket number handy. THE COURT: Okay. That's fine. I just want you to make that record. Okay? MR. BONGARTZ: Okay.

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Ho Wan Kwok - April 27, 2023 22 THE COURT: And then the first ordered paragraph, this is my final change by the way -- MR. BONGARTZ: Okay. THE COURT: -- so it says the application is approved as set forth herein. All objections to the relief requested in the application, whether filed or not, I'm not going to say that. I could say whether filed or not raised during the hearing, right? MR. BONGARTZ: Okay. THE COURT: Then it's fine with me if that's fine with you. MR. BONGARTZ: That is fine. There were no filed objections. And I'm -- THE COURT: Okay. MR. BONGARTZ: No objections were raised. So I would add the words or not raised -- THE COURT: We can take of this. MR. BONGARTZ: Oh, okay. THE COURT: I'm not -- I'm just explaining to you what it's going to look like when we're done. All right? MR. BONGARTZ: Okay. THE COURT: So it's minimal changes, but there are going to be changes to the form of the -- and I don't find that they're -- that they in any way impact the ability of the Trustee to retain the broker and, therefore, the

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| | Ho Wan Kwok - April 27, 2023 23 | |----|---------------------------------------------------------------| | 1 | Trustee's application is going to be approved, it's just | | 2 | certain language in the order that I'm not going to put in | | 3 | that order. Okay? | | 4 | MR. BONGARTZ: Understood. | | 5 | THE COURT: All right. So for all the reasons | | 6 | that have just been stated on the record, the Trustee's | | 7 | application for approval to employ a broker to market and | | 8 | attempt to sell the Lady May and the Lady May II is granted, | | 9 | and the proposed order submitted by counsel at ECF 1713, | | 10 | with the changes noted on the record, will enter. | | 11 | MR. BONGARTZ: Thank you, Your Honor. | | 12 | THE COURT: Okay. Thank you. | | 13 | Now are you proceeding? | | 14 | MR. DESPINS: Your Honor. | | 15 | THE COURT: You're going to take care of the next | | 16 | motion? | | 17 | MR. DESPINS: No. I just wanted to make just a | | 18 | quick editorial comment regarding the sale process. | | 19 | THE COURT: Sure. Sure. | | 20 | MR. DESPINS: Your Honor knows this because you've | | 21 | been a bankruptcy judge for a long time, but some people, | | 22 | potential buyers, will perceive that there's blood in the | | 23 | water because a Trustee's involved. And so they will be -- | | 24 | we will receive I'm sure very low bids from some of these | | 25 | bottom fishers and that's par for the course. | | | |

Ho Wan Kwok - April 27, 2023 24 Our public posture is that we're not in a rush to sell this. On the other hand, I'm well aware that the costs of owning that boat is/are, sorry, my editorial comment, insane, including \$45,000 a month to moor the boat in Newport. So there's a balance that will have to be struck here. I'm sure that there will be interest. The question is where do we draw the line between what is a completely unacceptable bid and and considering all the costs involved, et cetera, et cetera, so that, you know, the story remains, you know, to unfold. The sister ship has been for sale for a year and a half. That's because they're asking \$32 million for a year. And the broker told me that's clearly not achievable. So that tells you that these ships don't get sold on two-weeks, three-weeks, or two-months notice. It can be a long process. Obviously, we want to sell this as quickly as we can. So I want to make sure the Court knew about this background. THE COURT: Understood. Thank you. All right. Then we'll move on to the next, the motion for the order to move the Lady May to the navigable waters of Newport, Rhode Island. Counsel, are you going to be handling that as Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 24 of 95

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Ho Wan Kwok - April 27, 2023 25 well? MR. BONGARTZ: Yes, I will. THE COURT: All right. Please proceed. MR. BONGARTZ: Okay. So the next matter is the motion to move the Lady May to Newport, Rhode Island and enter into a dockage agreement with the Safe Harbor Newport Shipyard located in Newport, Rhode Island. So this is -- this motion is probably best understood as the first step in a two-step process. We are ultimately -- ultimately we intend to move the Lady May into the foreign trade zone in Newport, Rhode Island, which is also located at the same shipyard by the way. But as an initial step, we first need to move the boat there. And as Your Honor is well aware, earlier in the case a stipulated order was entered that required the Lady May to be returned to the navigable waters of Connecticut and remain in the navigable waters of Connecticut, so we need relief from that restriction. Now, as Your Honor will also recall, at the time the restriction was put in place there were concerns that given the track record of the Lady May having been moved outside the jurisdiction of the New York Court in connection with the New York State Court litigation, there were concerns that the boat could potentially be moved out of Connecticut waters again and, hence, as part of the

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Ho Wan Kwok - April 27, 2023 26 stipulated order, which the parties at the time and the parties to that order agreed to, the Lady May would remain in Connecticut waters.

Now, fast forward. As you know, and the Court has found that the Lady May is property of the estate, it's not property of HK USA -- and over the last month -- and I point to the management agreement and other agreements that this court has approved, the Trustee has taken control of the Lady May. So we believe there is no longer a need to continue the restriction that the Lady May remain in Connecticut waters.

I should also note that we are -- we strongly believe, and we have conferred with this -- on this point with our -- with the yacht broker, that there are substantial advantages to having the Lady May in Newport now versus keeping it in Bridgeport. Newport is a well-known hub for marketing and selling super yachts. Bridgeport is not.

Edmiston, the broker, has a fully-staffed office in Newport. And, as I've indicated earlier, they want to start marketing as soon as possible. They need to be liaising with the crew. They need to be taking pictures, videos. They need to be around the boat. Traveling back and forth is just not practical.

Newport also has other significant brokerage

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Ho Wan Kwok - April 27, 2023 27 houses. So to the extent a buyer is introduced through a sub-listing broker, there are certain -- there are numerous benefits from having access to those resources in Newport. And as a purely practical matter, potential buyers are obviously aware that Newport is a hub for buying and selling super yachts, so they are more likely to frequent that shipyard. And, in particular, yeah, in particular the Safe Harbor Shipyard where the Lady May would be docked. And one final point. Even though the Lady May will not immediately be transferred into the foreign trade zone, Edmiston will commence marketing right away. This is not -- they're not going to wait until then. And my understanding is, I'm not the expert on the foreign trade zones' laws, but it can be marketed. Even while it is not yet in the FTZ, the foreign trade zone, it can be marketed to non-U.S. residents. So for all these reasons we believe there is -- that it is in the best interest of the estate to move the Lady May now to Newport. I am not going to hide anything here. We fully understand that the docking -- the dockage fee in Newport is substantially higher than in Bridgeport. That is just a function of Newport being a hub for, again, the marketing, selling and docking of yachts of the size like the Lady May

and there's just nothing we can do about that,

Ho Wan Kwok - April 27, 2023 28 unfortunately. We have, and this is the second part of the relief we're seeking in this motion, we have entered into a dockage agreement obviously subject to Your Honor's approval. And as part of that agreement, negotiated a series of modifications similar to what we had agreed to with the Bridgeport marina about a month ago, but with I would say additional protections as it relates to the indemnity. But let's just go just really quickly. The Bankruptcy Court has exclusive jurisdiction over any dispute that may arise out of the agreement. And as far as the indemnity, to the extent that the shipyard, I've been using the acronym SHM which stands for Safe Harbor Marina, SHM, to the extent that they believe there is a -- they have a claim for -- claim under the indemnity, they must come to this court and file an application. And as is customary there are -- there's a series of exclusions, including for fraud, willful misconduct, gross negligence, et cetera. So a couple of points. While we have received informal comments from the U.S. Trustee's Office, and we've tried to accommodate as much as we could, those comments -- and I want to flag that paragraph 4 was, which by the way we've, I apologize if I've

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Ho Wan Kwok - April 27, 2023 29 taken this out of order, but we did file a revised proposed order earlier this morning.

And in that proposed order you will see that we have added a paragraph 4 to make clear that the shipyard, Safe Harbor Shipyard, would have to give notice three days, three business days' notice, in advance that they believe that a lien is being imposed as a result of nonpayment under the dockage agreement.

And then to the extent they desire to exercise any rights to liquidate that lien, they would have to come to this court and seek approval of that. That's a -- that was something that the U.S. Trustee requested. We have run this by the shipyard. They've agreed to that. And my understanding is that the language, as reflected in the order filed this morning, is acceptable to the U.S. Trustee.

I should also note, and this was reflected in the order we filed this morning, we made a few minor, clarifying changes to the rider. This was done at the request of the shipyard. I apologize. For some reason, my hard copy printout does not have the blackline of the rider attached to it, so if I may have just another second and pick another copy. I apologize for that. THE COURT: That's fine.

MR. BONGARTZ: The printout was just cut off one page early.

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Ho Wan Kwok - April 27, 2023 30 So we have added that obviously, and this subject to the Court approving obviously this motion, that the Trustee's authorized to enter into the dockage agreement. That was -- we added that provision at the request of the shipyard. Any claims would obviously -- can only be asserted against the Trustee in its capacity, in his capacity as Trustee. There's no claims against Mr. Despins in his personal capacity or Paul Hastings. In paragraph 4 of the rider, we -- and this was at the request of the shipyard, there's a -- it's not a carve out, but it reflects the fact that any liens to the extent it may arise is actually governed by the new language that we -- that I just referenced and that was agreed upon with the U.S. Trustee. To the extent there are any liens, there is a separate process to give notice and come to this court to enforce or liquidate any lien. And then the rest is just verbiage in the carve out. But as you can see, it covers basically the same litany with the exception of breach of fiduciary duty and self-dealing, which don't -- we don't believe apply in the first instance because there are no fiduciary duties as between the shipyard and the estate. I mean, there's duties, there's contractual obligations, of course, but the reference to fiduciary duty didn't make much sense and they've asked us to take that out.

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Ho Wan Kwok - April 27, 2023 31 So those are the changes to the rider. And I'm also happy to briefly recap the changes that were made to the proposed order. And I have extra copies with me in case folks want to take a look at this. I'm not -- I obviously apologize for not having filed it sooner than this morning. THE COURT: Okay. Does anyone else wish to be heard on the Trustee's motion? I may have some questions, Counsel, too, but I'd like to hear from others first. MR. BONGARTZ: Okay. MS. CLAIBORN: Your Honor, Holley Claiborn for the U.S. Trustee. I do have a couple of comments to make. First of all, I do want to echo the comments made by Attorney Bongartz about the changes to the lien language. Those were as a result of the U.S. Trustee's comments. The prior existing small print of the agreement provided that the shipyard could simply impose a lien and then sell the yacht exercising its lien rights and so we have scaled that back. Those lien rights would have been as a result of any nonpayment under the agreement and now they are revised and addressed properly so that the estate has an opportunity to weigh in on any lien that may be imposed as to whether or not they can exercise it or not.

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Ho Wan Kwok - April 27, 2023 32 And then with respect to Section 17 of the agreement, that's another area of concern for the U.S. Trustee. That is the section that deals with the liability and indemnity provisions. And similar to Your Honor's hearing from me in conjunction with the motion to enter into the agreement with the Bridgeport marina, the language in this agreement is similar, not as broad, but similar in that it disclaims responsibility for a whole myriad of things and that puts the estate at risk. The changes that the Trustee negotiated to limit the indemnification process and procedure are much appreciated. I just want to note that for the record there are some exposures still to the estate under this agreement that have not been addressed. I understood the Court's comments and concerns at the last hearing and I take those into consideration. I just want to make it clear to the Court that we remain concerned about the scope of this agreement and the protections that the shipyard has kept for itself at the risk of the estate. But the U.S. Trustee is not objecting to the entering into this agreement. THE COURT: Okay. Thank you. Does anyone else wish to be heard? Attorney

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Ho Wan Kwok - April 27, 2023 33 Henzy? MR. HENZY: Thank you, Your Honor. Yeah. For Mei Guo and HK. We did file a reservation of rights, Your Honor. It's document No. 1712. No position on the motion, but again reserving rights with respect to any sale and also with respect to funding under the various obligations the U.S. Trustee, I'm sorry, that the Trustee is undertaking. THE COURT: Okay. Thank you. MR. HENZY: Thank you, Your Honor. THE COURT: Anyone else wish to be heard? (No response) THE COURT: All right. I have a couple of questions, Attorney Bongartz, with regard to the commercial yard and dockage license and service agreements with Safe Harbor Newport Shipyard. The document that's attached to 1696, on page 20, I think that's the agreement, right? That starts the agreement? MR. BONGARTZ: Correct. THE COURT: So it says that does the vessel have a tender? And it says yes. But there isn't going to -- the tender isn't going to be there for a while, right? So is the cost of docking at the -- at this marina, at the shipyard, going to be the same whether the tender's there or

Ho Wan Kwok - April 27, 2023 34 not? Or is it going to increase once the tender gets there? MR. BONGARTZ: When we're referring to the tender, when the Lady May -- I assume you're referring to the Lady May II in this instance. Yes. THE COURT: Well, that's what I've been told is the tender. Is it not? MR. BONGARTZ: There is another tender that is actually the boat that goes inside the Lady May I. THE COURT: Okay. MR. BONGARTZ: That is currently in storage in Florida I believe. THE COURT: So that's the length -- the 21 feet -- that's what that means? That's the tender that goes inside the boat? MR. BONGARTZ: Yes. Because the actual Lady May II is not -- it's more than 50 -- THE COURT: Right. It's 50. MR. BONGARTZ: It's 50 feet. THE COURT: Yeah. Okay. MR. BONGARTZ: It's very large. THE COURT: That's why I'm asking the question. So now there's another part of this Lady May that's somewhere else. It's in Florida? MR. BONGARTZ: Yeah. It's in a storage pod I understand in Florida. But I don't know -- Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 34 of 95

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| | Ho Wan Kwok - April 27, 2023 35 | |----|---------------------------------------------------------------| | 1 | THE COURT: Is it going to stay there or is it | | 2 | going to go to Newport and become part of the Lady May? | | 3 | MR. DESPINS: It's going to become part. That one | | 4 | needs to be sold with the Lady May because it's a safety -- | | 5 | THE COURT: So is it going to be inside the boat | | 6 | so it shouldn't need additional dockage? | | 7 | MR. BONGARTZ: It fits inside the boat. I've been | | 8 | -- | | 9 | THE COURT: Right. But what I'm -- all I'm asking | | 10 | is cost, right? All I'm trying to drill down here is cost. | | 11 | MR. BONGARTZ: There is no -- | | 12 | THE COURT: Is there -- is there an additional | | 13 | cost with regard to the tender? | | 14 | MR. BONGARTZ: No. | | 15 | THE COURT: Okay. Thank you. All right. | | 16 | Then with regard to -- assume that this motion is | | 17 | granted, when -- and maybe, again, I could have missed this, | | 18 | there's a lot of papers, as you know, in the case -- so when | | 19 | will the Lady May leave Bridgeport to go to Newport and | | 20 | who's going to get her there? The crew that's here? Or | | 21 | how's that going to work? | | 22 | MR. BONGARTZ: The when is either Monday or | | 23 | Tuesday next week. There's a little bit of uncertainty | | 24 | about the weather. But we would like to move it as -- | | 25 | THE COURT: If you rely on the weather, it doesn't | | | |

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Ho Wan Kwok - April 27, 2023 36 sound very good for the weekend. MR. BASSETT: But definitely as soon as possible. THE COURT: Okay. MR. BONGARTZ: Assuming this is approved. In terms of who is going to move her? It is the current captain and the current crew that will stay with the ship, and they will -- the captain will navigate the Lady May up to Newport. In fact, the proposed order includes a specific provision to relieve the captain of his own duty to keep the boat and the Lady May in Connecticut waters. He'd asked for that clarification and we've made sure that would be included. THE COURT: And is he going -- he and the crew going to stay with the boat -- MR. BONGARTZ: Yes. THE COURT: -- until it's sold? MR. BONGARTZ: Yes. THE COURT: The yacht until it's sold? MR. BONGARTZ: Yes. THE COURT: Okay. I just am trying to figure out how it all works. Okay. All right. Let me see if I had any other questions. (Pause.) THE COURT: So, again, it's just I'm just trying

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Ho Wan Kwok - April 27, 2023 37 to figure out how it works, right, and how the estate's interest is protected. So do you already have a slip or a space that is designated for the Lady May when it arrives? MR. BONGARTZ: Yes. THE COURT: Okay. I would assume so, but I don't know that. MR. BONGARTZ: We have a reserved spot. THE COURT: Okay. So this location, I think used to be Newport Offshore, didn't it? Do you know what Newport Offshore was? That was a company that went into Chapter 11. They used to make and house yachts in Newport. Not just yachts. I suppose they made other boats. But it appears to me from what you've shown me that this is, you know, I think that's the spot. So it's -- where is the -- if you look, if you at all know how -- where that is, that's closer to the Newport Bridge than to the other end of Newport that goes out toward the ocean. So you said a term that I had a question about. Let me think about that for a second. Oh, the foreign, the sales zone. So where's that in relation to, if you know, to actually where the boat is going to be docked? MR. BONGARTZ: My understanding is it's not a geographical location, but it's a legal designation. THE COURT: Okay. MR. BONGARTZ: Now, you have to be within Newport,

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Ho Wan Kwok - April 27, 2023 38 Rhode Island to take advantage of that. But you can be both -- there could be boats at the -- sorry, at the Safe Harbor Newport Shipyard that are inside the foreign trade zone, and then there could be a boat right next to it that is outside the zone. I mean, it's not like there's a -- THE COURT: It's not like you have to be in a specific -- MR. BONGARTZ: -- line on the ground or -- THE COURT: -- point of Newport Harbor. I have no idea. MR. BONGARTZ: No, no. THE COURT: I'm just asking the question. I mean, I'm just asking. Because there's a benefit to it being in this zone, correct? MR. DESPINS: Yes, there is a benefit. THE COURT: Yeah. MR. BONGARTZ: Yeah. No. The principal benefit of being in the foreign trade zone is that you can show it to non, sorry, you can show it to U.S. residents. You can't do it right now because the Lady May is in U.S. waters based on a -- as a visiting boat. It's not passed customs. And then the other benefit is, in the event of a sale, it allows the buyer to reduce and potentially avoid customs duties. THE COURT: Okay. Custom fees?

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Ho Wan Kwok - April 27, 2023 39 MR. BONGARTZ: Custom. Yeah. THE COURT: Yeah. Right. MR. BONGARTZ: Duties. Yeah. Fees. Yes. Yes. THE COURT: Okay. That's what I -- I mean, I thought that's what I heard someone say at some point. All right. Then when the broker -- the boat gets -- the yacht gets to Newport, it's at SHM and it's docked at its slip, the broker agreement says they're going to do all kinds of things. They're going to have open houses, all those kind of things. But I assume that at some point, and I guess it would have to work through the Trustee, but I'm not sure this is true, someone's going to want to -- if they're really going to want to buy it, they're going to want to take it out, right? MR. BONGARTZ: Mm-hmm. THE COURT: For a sea trial. So who's going to -- who's going to do that? The captain and crew? MR. BONGARTZ: The captain. The captain. THE COURT: Okay. MR. BONGARTZ: The existing captain and crew will take the boat out. THE COURT: Okay. But does the Trustee have to be made aware of that or do they already have the authority to do that? When I say they, I mean the captain and the crew.

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Ho Wan Kwok - April 27, 2023 40 MR. BONGARTZ: I don't -- I don't know if we've had that specific discussion. MR. DESPINS: They do, Your Honor. And I, for better or worse, I get a report every day of the location of the Lady May -- of course, it's always in Bridgeport -- but so I can see where it's been, whether it has moved or not. So they have to tell me in advance whether they take it out. THE COURT: Okay. I think that might make sense, unfortunately, for you to get that information because it will also help you understand -- I think it could help you understand if things are progressing toward a sale. So, okay. Let me just see if I had any other questions. (Pause) THE COURT: I don't have any other questions at the moment. Okay? MR. BONGARTZ: I have one final thought I wanted to communicate. THE COURT: Sure. MR. BONGARTZ: In circling back to what I said at the beginning that this is the initial, the first step of a two-step process, the second step will be to actually put the Lady May into the foreign trade zone. And we will come back to this court to request

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Ho Wan Kwok - April 27, 2023 41 approval to do so, but I just want to preview that there is actually an application process that goes along with that and we will need to post a bond called the FTZ Indemnity Bond. And there's some modifications I understand that will have to then be made at that point to the dockage agreement. So we'll come back. I'm not asking for Your Honor to approve anything in that regard right now, but I just wanted to make sure that you are aware that that's forthcoming and very likely in the near future. This is not something we're going to be doing months down the road. This is going to happen in the next few weeks. THE COURT: But the foreign trade zone will be where the boat is docked -- MR. BONGARTZ: Yes. THE COURT: -- once that agreement is approved and all whatever you need to do to be -- MR. BONGARTZ: Yes, yes. THE COURT: -- considered part of it? MR. BONGARTZ: Yes. THE COURT: Okay. MR. BONGARTZ: The foreign trade zone, it will not move to a different location. THE COURT: Okay. All right. Then I'm looking at the order that was submitted today about 11:05 a.m. I'm looking at the redline version.

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| | Ho Wan Kwok - April 27, 2023 42 | |----|----------------------------------------------------------------| | 1 | MR. BONGARTZ: Okay. | | 2 | THE COURT: And I understand the U.S. Trustee's | | 3 | Office comments that certain of these additions are helpful | | 4 | and address some of the concerns that the U.S. Trustee's | | 5 | Office had, but the U.S. Trustee's Office still has concerns | | 6 | about some other provisions in the boat -- in the boat, I'm | | 7 | sorry, in the agreement that aren't completely addressed. | | 8 | But I'm seeing only, and I could be, again, missing | | 9 | something, that the agreement with the -- with SHM is -- has | | 10 | its standard terms and it's, I think, nine pages without the | | 11 | rider. And then there's the rider that's going to be | | 12 | attached to the agreement. Correct? | | 13 | MR. BONGARTZ: That is correct. | | 14 | THE COURT: And the rider, so the amended rider is | | 15 | really what's going to be part of the order, right, not the | | 16 | -- there was I think an addition -- there was a rider at | | 17 | first, but then it's been amended? | | 18 | MR. BONGARTZ: Correct. That is exactly right. | | 19 | THE COURT: So I don't have any changes to the | | 20 | redline version of the order that you submitted. So I would | | 21 | just like you to -- I'm going to grant the motion. I'd like | | 22 | you to submit -- does 1714 have a clean copy? | | 23 | MR. BONGARTZ: Yes. | | 24 | THE COURT: Oh, it does. | | 25 | MR. BONGARTZ: Yes, it does. | | | |

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| | Ho Wan Kwok - April 27, 2023 43 | |----|--------------------------------------------------------------| | 1 | THE COURT: It's the first part of the -- | | 2 | MR. BONGARTZ: Yes. | | 3 | THE COURT: Okay. All right. So we'll have to -- | | 4 | we'll enter the clean version, the unedited version, so hold | | 5 | on one second, please. | | 6 | (Pause) | | 7 | THE COURT: All right. So then for the reasons | | 8 | that we just went through on the record and have been stated | | 9 | on the record, the motion for the order filed by the Chapter | | 10 | 11 Trustee authorizing the Trustee to enter into -- to move | | 11 | the Lady May to the waters, the navigable waters of Rhode | | 12 | Island, and to enter in and perform under a Newport dockage | | 13 | agreement is granted. | | 14 | And the proposed order that was submitted earlier | | 15 | today that we've just discussed on the record will enter. | | 16 | MR. BONGARTZ: Thank you, Your Honor. | | 17 | THE COURT: Okay. Thank you. | | 18 | MR. BONGARTZ: I don't have anything further. | | 19 | THE COURT: Okay. Thank you. | | 20 | MR. BONGARTZ: So I think I'm going to pass the | | 21 | podium on to Mr. Despins. | | 22 | THE COURT: Certainly. | | 23 | MR. DESPINS: Yes. Your Honor, the other matters, | | 24 | well, there is a contested issue regarding the proposed | | 25 | order. | | | |

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Ho Wan Kwok - April 27, 2023 44 But before that, I believe Mr. Baldiga was going to make a statement regarding the conflict issue that I raised. And I think we have a resolution. THE COURT: Okay. Let me, before you do that -- that's fine, that's absolutely fine. The clerk's office has pointed out to me, Mr. Baldiga, that you have to file an appearance now. I mean, you're not debtor's counsel anymore. You're counsel -- I'm sorry, in the bankruptcy case, right? You're here appearing as counsel for the debtor in proceedings in New York, correct? MR. BALDIGA: Yes. THE COURT: Okay. So you don't have an appearance on file in this -- in these Chapter 11 cases right now because your prior appearance was withdrawn because you were counsel to the debtor in possession, which was withdrawn. And I understand that. So you've got to file some kind of appearance on the docket of this case. And I think you say you're counsel to the debtor in the criminal proceedings, whatever it is, right, but it's got to be filed. The clerk's office has correctly pointed out to me that that is -- those are our rules. So today or tomorrow when you're back in your office, someone needs to do that for you. Okay? And anybody else that's going to appear in

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Ho Wan Kwok - April 27, 2023 45 the case. So, for example, if you were going to file some pleading and there's some one of your colleagues is also appearing, they've got to file a notice of appearance. Okay? MR. BALDIGA: Yes. Thank you. THE COURT: Okay. That's all. I just didn't want to forget to say that before you went any further. But if you would like to speak then with regard to -- You're saying, Trustee Despins, that you two have reached an agreement in connection with your concerns -- MR. DESPINS: Correct. THE COURT: -- about the representation by Brown Rudnick of the debtor, the individual debtor, in the criminal proceedings and prior representation as debtor in possession counsel? MR. DESPINS: That's correct, Your Honor. THE COURT: Okay. Go ahead, Mr. Baldiga. If you would just state your name for the record, please. MR. BALDIGA: Sure. William Baldiga, Brown Rudnick. And, Your Honor, just as per the discussion just now, Brown Rudnick is special counsel for Mr. Kwok's criminal defense in the pending criminal proceeding. And I do appreciate the opportunity to talk to Mr. Despins as to what we are doing, what we're not doing, and I

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| | Ho Wan Kwok - April 27, 2023 46 | |----|----------------------------------------------------------------| | 1 | think this will, well, it has alleviated the concerns. And | | 2 | I think also any concerns that the Court may have. And I am | | 3 | making certain representations for the benefit of the Court | | 4 | in that regard that I've already made to Mr. Despins. | | 5 | THE COURT: Okay. Thank you. | | 6 | MR. BALDIGA: Our defense of Mr. Kwok in the | | 7 | pending criminal case in the Southern District of New York, | | 8 | which is Docket 23-CR-118, there's also a parallel SEC case, | | 9 | which we expect to be stayed, as is customary in these, has | | 10 | not and will not interfere with our continued full and | | 11 | timely compliance with the discovery as propounded on our | | 12 | firm in the Chapter 11 case, including any depositions. | | 13 | You may remember that I was before you more times | | 14 | than I think any of us would care to remember back in August | | 15 | and September in that regard and I think you've heard and | | 16 | saw that we've worked very hard to be compliant and we have. | | 17 | But if there's more required of us, we will | | 18 | continue to honor the subpoena served on our firm. | | 19 | There appears, and I use that word intentionally, | | 20 | to be a separate criminal investigation with respect to | | 21 | possible bankruptcy crimes that may relate in some way to | | 22 | the Kwok Chapter 11 case. | | 23 | Neither Brown Rudnick nor the Trustee knows the | | 24 | targets of that separate criminal investigation. We don't | | 25 | know what the subject matter of that investigation or don't | | | |

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| | Ho Wan Kwok - April 27, 2023 47 | |----|--------------------------------------------------------------| | 1 | know whether the subject matters of that investigation | | 2 | covers actions that date after our involvement in the | | 3 | Chapter 11 case was terminated or charges may at some point | | 4 | be brought. | | 5 | Brown Rudnick has confirmed to the Trustee, and I | | 6 | so confirm to the Court, that our engagement from Mr. Kwok | | 7 | does not extend to that separate criminal proceeding, | | 8 | whatever that is. | | 9 | THE COURT: And there isn't one that you're aware | | 10 | of. You're saying there may be? | | 11 | MR. BALDIGA: No. There is one. | | 12 | THE COURT: Oh, there is one. | | 13 | MR. BALDIGA: Mr. Despins -- we found out about it | | 14 | -- | | 15 | THE COURT: Oh, because of the subpoena that you | | 16 | showed -- okay. | | 17 | MR. BALDIGA: -- the subpoena upon the Trustee. | | 18 | And because of a prior protective order entered by this | | 19 | court, the Trustee was obligated to share that subpoena with | | 20 | us to seek our consent or whether we had an objection to the | | 21 | production of certain materials. We said we had no | | 22 | objection. That's how we found out about this. | | 23 | THE COURT: So the proceeding has actually been | | 24 | brought? It's not just seeking -- | | 25 | MR. BALDIGA: It's a -- it appears to be a grand | | | |

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Ho Wan Kwok - April 27, 2023 48 jury proceeding. THE COURT: Okay. MR. BALDIGA: Whether you call that a proceeding or not, I -- THE COURT: I understand. Okay. Thank you. Now I understand what you're saying. Go ahead. MR. BALDIGA: That's all we know. And it's conceivable that it's not a grand jury proceeding, it's something else, but we don't know what that would be. It's not intended that, frankly, any of us know at this point. THE COURT: Okay. MR. BALDIGA: As far as we can tell. In any event, our engagement does not extend to that, whatever that is. THE COURT: Okay. MR. BALDIGA: And we will not accept any engagement as to that investigation just to obviate any concerns as to potential conflicts of interest. During the period of our representation of Mr. Kwok as debtor in possession here, Brown Rudnick had no knowledge of any criminal investigation of Mr. Kwok. The only proceeding in this Chapter 11 case in which we've advocated since the Trustee's appointment, other than at the hearings last fall, which I already mentioned in connection with our compliance with the Trustee's discovery

Ho Wan Kwok - April 27, 2023 49 on us, is as to this request for a limited stay that we were here last week to preserve Mr. Kwok's Fifth Amendment rights. And Brown Rudnick is not a necessary witness in connection with that stay requested. In fact, no one has seen the need for any witnesses. But there doesn't seem to be a material fact in dispute. And based on these representations, and of course the continuing truth of them, the Trustee seeks no relief. But I'll let Mr. Despins speak to that. And Brown Rudnick feels that there is no conflict. But, again, Mr. Despins is committing not to seek relief based on the continuing truth of those representations. THE COURT: Okay. MR. BALDIGA: Thank you. THE COURT: Thank you. MR. DESPINS: For the record, Luc Despins, Chapter 11 Trustee. That's correct, Your Honor. That's accurately stated. Thank you. THE COURT: Okay. Thank you, both. Now, there's still an issue of this order, right? MR. DESPINS: Yes. MR. BALDIGA: Yes. THE COURT: Okay. So go ahead. MR. DESPINS: So, Your Honor, Docket 1699, I Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 49 of 95

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Ho Wan Kwok - April 27, 2023 50 contain as Exhibit B a mark to show a changes version. I think that's probably the best order to look at. THE COURT: 1699? MR. DESPINS: 1699, correct. At pages -- because there's various exhibits, but at pages 11 of 30, that's where -- the marked to show changes order. THE COURT: Okay. MR. DESPINS: But let me try to capture the disagreement in a nutshell. You know, memory is a fickle thing, but my recollection, and I think Mr. Bassett's recollection from -- what had been agreed at the last hearing, and that's where there's a disagreement because their recollection is different, is that they would seek from -- permission from the Department of Justice and from the criminal court permission for them to give to us whatever is produced to them by the Department of Justice in the criminal case. Their understanding is, no, that's not what they agreed to. That they agreed that we could -- they would seek permission from the DOJ and from the Court for the DOJ to give to us directly documents. And that doesn't work at all. The DOJ is not going to give us documents. As I said before, when I was on Zoom, we don't exist in that criminal proceeding. There are two parties to it. The DOJ, the defendant. The defendant is a debtor in

Ho Wan Kwok - April 27, 2023 51 this court. And the only portal for us to access to these documents is through the defendant. And, as we said before, there's no act of production issue at all for them to turn over to us the documents that the DOJ gives to them because these are not - - you know, it's not a recognition by them that these documents are accurate or they show anything. The only recognition is they got it from the DOJ. That's all. So there's no act of production issue at all. So all of the dispute with respect to the terms of the order it really turns on that issue, because they would like the DOJ to give us the documents. That will never happen. I know that. And remember that we are taking the risk that the criminal court says no, we're not going to allow you, defendant, to give the documents you get from the DOJ to the Trustee. It expressly says that in the order. And so that's where we are. Basically there's a disagreement over what was agreed to. That's my recollection. That's all. Unfortunately, we have no transcript. Perhaps Your Honor has a transcript. We couldn't find the transcript. It was not available. THE COURT: Was there a request made for a transcript? MR. DESPINS: Perhaps by PAX. Yes. But I don't Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 51 of 95

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Ho Wan Kwok - April 27, 2023 52 think it's -- the transcript from the 18th was available, but not from the 20th. So we're kind of in a -- we're guessing or we're relying on our memory. So I'll let Mr. Baldiga, you know, address this. MR. BALDIGA: Again, Your Honor, Mr. Baldiga for Mr. Kwok. The proposed orders, again, before you, each have been submitted. The debtor's at Docket 1698 and the Trustee's at 6699. The Trustee then as part of 1699 redlined but against a different version. So I just want to make it clear that the debtor's suggested order is at 1698. There's not too much difference in what the Trustee redlined from, but there are a few differences. Your Honor, we actually have a very distinct memory of what we agreed to and we think the Court will as well. We did not agree and we wouldn't have agreed and I'll explain why. But, in any event, we start from we're here to have an order entered as to what was agreed. And what we agreed to, and there was an extensive discussion about this, we will ask the Government and we will -- and then the request was not just the Government but you also have to ask the Court. Well, we wouldn't have had to ask the Court if we

Ho Wan Kwok - April 27, 2023 53 were just agreeing to turn over whatever we got from the DOJ. And we wouldn't have done that, Your Honor, for at least five reasons. Well, first of all, we didn't, but I'll go further. We shouldn't have to go further, but we wouldn't have for several reasons. We have no idea what DOJ may turn over to us. No idea. There is -- our client would not be able to make a knowing agreement in that regard because we have no idea. The client has no idea what DOJ may turn over. Our firm has no idea what the DOJ may turn over. No one, the Trustee, us, our client, this court has any idea what rights there could be implicated by what - - the Government has told us to expect several tetrabytes -- and I'm not a tech person, I have no idea what a tetrabyte is, except it sounds like a lot -- several tetrabytes of information. Importantly, Your Honor, DOJ is obligated to turn over this to counsel. It's not, as the Trustee seems to now maybe wish it were, that these are Mr. Kwok's materials. That's not what we're talking about. This is whatever DOJ has taken in the course of its investigation from who knows who. So we're not even now talking about materials of Mr. Kwok. How could we ever make a commitment, and we never Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 53 of 95

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Ho Wan Kwok - April 27, 2023 54 would have made a commitment, to turn over something that we haven't seen, are not our client's materials, and we have no idea what they --[ what to even expect. Next, there are Fifth Amendment issues here perhaps. There is -- and I'll come -- I'll come back to that. Then there's the issue, Your Honor, of privilege. I think this court, certainly Mr. Henzy, and almost certainly the Trustee thought that maybe they were done debating the issue of privilege. I know I sat in the back of the courtroom for more hearings than anyone cared to admit about the so-called consent order of Docket 856 about what is -- what the debtor has a privilege to and what the debtor has assigned to the Trustee. But, Your Honor, there are three categories of materials in that consent order, 856, which the debtor assigned to the Trustee. The three categories are assets of the debtor. Two, are the debtor's financial condition. And three, documents as to the administration of the estate in between the petition date and when the Trustee was appointed. Of these tetrabytes of data that we may get from DOJ, or we should get from DOJ, we have no idea what subset of those may fall into any of those three categories. But

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| | Ho Wan Kwok - April 27, 2023 55 | |----|----------------------------------------------------------------| | 1 | the debtor, and Mr. Henzy can speak more to what, I mean, we | | 2 | were not involved in the negotiation of that order, but the | | 3 | debtor may or may not have attorney-client or any other | | 4 | privilege as to some subsets of that data. We have no idea. | | 5 | And neither will anybody else until that data is reviewed. | | 6 | THE COURT: Right. Let me just -- I'm a little | | 7 | confused at the moment, so give me a second. | | 8 | MR. BALDIGA: Okay. | | 9 | THE COURT: But what is it that you're -- that | | 10 | you, as special counsel to Mr. Kwok, are agreeing to do | | 11 | aside from -- | | 12 | MR. BALDIGA: Exactly what we have in our proposed | | 13 | order, we will -- | | 14 | THE COURT: Well, your proposed order says -- 1698 | | 15 | is your proposed order, correct? | | 16 | MR. BALDIGA: Yes, Your Honor. | | 17 | THE COURT: Okay. So it says request -- you'll | | 18 | promptly request that the Assistant United States Trustee | | 19 | from the Southern District of New York assigned to the | | 20 | criminal prosecution of the debtor, the Government, | | 21 | including, if necessary, by filing a motion with the United | | 22 | States Court of the Southern District of New York, to modify | | 23 | any existing protective order, provide to the Trustee the | | 24 | documents and materials the Government produces to the | | 25 | debtor as part of the Government's disclosures to the | | | |

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Ho Wan Kwok - April 27, 2023 56 debtor. And as part of such request, the debtor shall inform the Government and the criminal court of this order. MR. BALDIGA: Yes. THE COURT: So what -- you keep talking about the DOJ. MR. BALDIGA: That is the Government. THE COURT: So what is it -- MR. BALDIGA: The Government acts in that proceeding -- THE COURT: -- that you're not agreeing to turn over that the Trustee thought you were? MR. BALDIGA: I'm sorry? THE COURT: You said I would never agree to -- I think you said I've never agreed to turn over what the DOJ has because I don't know what they have. MR. BALDIGA: We're talking about at last week's hearing -- THE COURT: Yeah. MR. BALDIGA: -- we did not -- we had an agreement. Our agreement was that we would make a request to the Government and a request to the Court that the Government turn over to the Trustee whatever it was going to turn over to us and leave it to them. And you heard Mr. Best explain at length the Government may impose restrictions on that, may do it, may

Ho Wan Kwok - April 27, 2023 57 not. The Court may have restrictions. We don't know. But we're out of it. We will do everything we can to facilitate by making that request and then we step out of it. It's totally up to the Government. That's the agreement that was made. And I'm confident that when there is a transcript it will bear that out. So we did not agree to produce anything, including -- because the whole reason we're here is that the debtor producing things may implicate his Fifth Amendment rights. THE COURT: So you're saying that the problem you have is that it's not an act of production by the debtor. It's an act of production by the Government. MR. BALDIGA: That's right. If the Government chooses to produce something to the Trustee, there's no Fifth Amendment rights implicated. THE COURT: Well, it wouldn't be to the Trustee. Isn't it -- it's not -- would it be directly to the Trustee or it would it be to you -- MR. BALDIGA: That's what we agreed to. THE COURT: Okay. So it would be from the Government -- MR. BALDIGA: To the Trustee. THE COURT: You would make a motion. You would agree first at least to ask and then -- but also file a Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 57 of 95

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Ho Wan Kwok - April 27, 2023 58 motion in the -- MR. BALDIGA: Southern District case. Yeah. THE COURT: -- criminal proceedings that we've all talked about in the past. The indictment was handed down and somebody showed it to me, whatever day of that hearing it was. Right? MR. BALDIGA: Yes. THE COURT: That case. And you've already stated on the record what its number is. I don't remember what its number is. MR. BALDIGA: Right. And that's the only -- THE COURT: Okay. And so you're saying -- MR. BALDIGA: -- proceeding in which we represent the client. THE COURT: -- that you'll ask them to give that information to the Trustee? MR. BALDIGA: Yes. THE COURT: But you're not producing any information to the -- that Mr. -- MR. BALDIGA: That's right. As Mr. Best explains, it takes our Fifth Amendment rights out of it. THE COURT: Okay. I don't recall, sitting here, exactly what was said, but I understand your position. That's why I was asking. MR. BALDIGA: Okay.

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| | Ho Wan Kwok - April 27, 2023 59 | |----|---------------------------------------------------------------| | 1 | THE COURT: Your point is you can -- you, as | | 2 | counsel to the -- to Mr. Kwok in the criminal proceedings | | 3 | have not agreed to produce any documents, that any | | 4 | production has to go from -- has to be had if at all through | | 5 | the Government to the Trustee? | | 6 | MR. BALDIGA: That's right. | | 7 | THE COURT: Okay. | | 8 | MR. BALDIGA: And, again, for several reasons. | | 9 | And I haven't even gotten to the -- one is the client | | 10 | doesn't know what it is. We don't know what it is. | | 11 | And other than the Government, they -- but it's | | 12 | certainly beyond the client's materials. So it's not like | | 13 | our client should know what's in there already. We don't | | 14 | know. So how can you have an agreement as to something you | | 15 | don't even know what it is? | | 16 | Second, there may be Fifth Amendment rights | | 17 | implicated by some of that, which you don't know until you | | 18 | look at it, but we wouldn't know. | | 19 | Third, there could be privilege issues or not. | | 20 | There were certain privileges assigned to the Trustee. | | 21 | THE COURT: Well, privilege issues can be dealt | | 22 | with. So I understand what you're saying -- | | 23 | MR. BALDIGA: Okay. | | 24 | THE COURT: -- but that can be handled. | | 25 | MR. BALDIGA: And then there are national security | | | |

Ho Wan Kwok - April 27, 2023 60 restrictions. We have been told -- THE COURT: What does that mean? MR. BALDIGA: Well, we have been told, my firm, that the Government intends to enforce a procedure under CIPA, the Classified Information Procedures Act, 18 USC App 3, for very significant restrictions on the review of certain of the materials that would require, for example, any attorney at my firm that reviews any materials to obtain top secret national security clearance, which takes a while. We can't make any commitment as to what we do with things that we ourselves have to get a national security clearance for. We would never purport to do it. Now, I've never done that. I'm a bankruptcy lawyer. But my partners, Mr. Best and Mr. Crook, have done this before and they say it's an elaborate process. We can't -- we, ourselves, can't turn things over. The Government has a process to make sure that the people whose eyes are reviewing things have the necessary clearances. We can't administer that. Our client can't administer that. So we can't produce anything. We can't by federal law. And let me -- and then I don't think we have to go back to the merits because, again, we're here to implement an agreement that was made on the 20th and not to reargue, but the Trustee went down the path again of saying that Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 60 of 95

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Ho Wan Kwok - April 27, 2023 61 there's no act of production with respect to a pile of documents that none of us know about. And to that another reason is the Trustee has a subpoena to the debtor. We have no idea. And that's what we're here all about, right, the enforcement of a subpoena to the debtor. There's no one, including this court, who has any idea what portion of those documents may or may not be subject to the Trustee's prior subpoena. We don't know. How could we ever make an agreement as to things that have never even been subpoenaed from anyone? Maybe some of that is subpoena to the subpoena. But until someone looks at the documents and matches them up against the subpoena, we're all just guessing. That's why if they want to send a subpoena to the Government, we said go ahead and we'll ask the Government to comply. We'll take the debtor out of it. All of the Trustee's cases that he cites that we talked about at the last hearing, *Harris*, *Baltimore*, *Ross*, and so forth, are all Section 521(4) cases. They have to do with turnover of property of the estate. And the cases are legion that those do not implicate Fifth Amendment concerns because you're giving the Trustee what the Trustee owns. And you don't have Fifth Amendment implications from that because it's not testimonial.

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| | Ho Wan Kwok - April 27, 2023 62 | |----|------------------------------------------------------------------| | 1 | Turnover and surrender. Surrender is the key to | | 2 | every one of those cases, including Ross, which Mr. Bassett | | 3 | made much of at the hearing. It's a -- those are surrender | | 4 | cases or turnover cases. We're not here talking about | | 5 | turnover or surrender. | | 6 | I can tell you what Mr. Kwok has today. Nothing. | | 7 | He's incarcerated and bail has been denied. He can't -- | | 8 | THE COURT: Did he turn over any documents to the | | 9 | Government as part of this proceeding yet? | | 10 | MR. BALDIGA: Well, the Government didn't actually | | 11 | ask him. The Government seized it. Whatever Mr. Kwok has - | | 12 | - THE COURT: Okay. So they have information is | | 13 | what you're saying that otherwise might have been produced | | 14 | by Mr. Kwok -- | | 15 | MR. BALDIGA: The Government? | | 16 | THE COURT: -- because they seized it? | | 17 | MR. BALDIGA: Well, the Government seized, and | | 18 | this is another point the Trustee has made, the Government | | 19 | did a seizure, several seizures, in Greenwich, in New | | 20 | Jersey, in New York, on the day of Mr. Kwok's arrest. Mr. | | 21 | Kwok was in shackles and handcuffs during the seizure. | | 22 | We have an inventory, but it doesn't go into much | | 23 | detail. They seized a lot of things. We haven't seen what | | 24 | they seized. We don't know. It goes well beyond what Mr. | | 25 | Kwok owns. There was no requirement that they seize only | | | |

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Ho Wan Kwok - April 27, 2023 63 what Mr. Kwok has. So they talk about all these devices, computers, and so forth. That's not limited to what Mr. Kwok -- whatever was -- the Government seized what they seized. But they -- it wasn't a process of asking Mr. Kwok to hand over anything. He was taken away. And then the Government did its seizure. So there are three categories of possible materials here that the Trustee wishes to have the Court deal with. It's what the debtor has. Well, I can -- I can be clear in my representation this debtor, incarcerated for at least the foreseeable future with bail denied, has nothing. Okay. So that's pretty clear. That's the (indiscernible). It's what the Government has seized from the debtor's -- from the debtor and others. We don't know what that is. It goes well beyond what the debtor had. It could be from hundreds of other parties. We don't know. So we can't even have an intelligent debate, and no one can make intelligent rulings as to that until we know what we're talking about, and only the Government can administer that. And third, then, and I think this is the key to the whole contempt proceeding, what others have under the debtor's control. That goes exactly to the Fifth Amendment

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Ho Wan Kwok - April 27, 2023 64 concern because the heart of the indictment is that the debtor controlled third parties with a tremendous overlap between the Trustee's allegations in the Chapter 11 case and Mr. Kwok's indictment. So the Trustee has said we'd -- we want the debtor to exercise his control and turn over things in the possession of other third parties. That's exactly what is implicated by the Fifth Amendment and that he cannot do and will not do. That is testimonial. And there is not a single case that says that that type of thing is not testimonial. And that's the -- that's the nub of the issue. And the Trustee's response at Docket 1670 to the debtor's contempt response has six arguments. And I think it's instructive to go through those six. The first argument is that the debtor prior to his arrest had no reasonable apprehension of criminal risk and so Fifth Amendment isn't implicated. Well, if that was ever a good argument, it certainly isn't today. I mean, that's mooted at best. Second, the production of estate property is not testimonial. We agree. Those are the one -- those are the turnover cases, but that's not what we're arguing about here because the debtor has nothing. Third, that the debtor must assert the Fifth Amendment in a particularized manner. We've agreed. In

Ho Wan Kwok - April 27, 2023 65 both consent orders that you see, we've agreed to that, so that's no longer an issue. The Trustee can ask however many questions he wants and the debtor will deal with each of those in turn, one by one, and either assert his Fifth Amendment rights or not. THE COURT: How is that going to occur? I'm just -- when and how is that going to occur? So if you have an agreement that the Trustee needs particularized findings, right, he needs to be able to determine -- he needs to be able to ask questions, even to which Mr. Kwok can assert his Fifth Amendment privilege, right? MR. BALDIGA: Right. THE COURT: So when and how is that going to happen? MR. BALDIGA: We have -- I think we'll have to ask the Government. The Government is -- that's the whole reason we asked for a stay here, Your Honor. This whole thing is a little bit -- THE COURT: Why would you have to ask the Government? MR. BALDIGA: Well, because he -- THE COURT: I'm just asking. MR. BALDIGA: -- he can't get visitors except for Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 65 of 95

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Ho Wan Kwok - April 27, 2023 66 his legal counsel. THE COURT: He can't get -- I have no idea, Mr. Baldiga. MR. BALDIGA: No. That's why this whole thing -- THE COURT: I'm just asking the question. MR. BALDIGA: Again, we're all here as bankruptcy lawyers talking about how the Fifth Amendment works. Someone is going to have to -- THE COURT: Well, it's not about the Fifth Amendment. It's about he's in jail. MR. BALDIGA: He's in jail. THE COURT: And can somebody come and ask him questions? I don't -- I mean -- MR. BALDIGA: No. THE COURT: Okay. That's what I'm asking. MR. BALDIGA: No. You can't have a stenographer. We can barely get in an interpreter. Sometimes, after a very long clearance for security purposes, it's -- and we, even our own ability to access our client is very limited. I mean, that's why the whole idea that a client should be able to, well, look at all of these tetrabytes of data so he can exercise his constitutional rights or not is in the context of this criminal proceeding beyond preposterous. I just don't see how it would ever happen.

Ho Wan Kwok - April 27, 2023 67 He can't -- he can't be on the internet, for example. THE COURT: Well, I don't know about -- I have no idea about that. But it seems like if you're in jail I can -- MR. BALDIGA: Well, I can. I can represent that. THE COURT: -- that I could see how that could happen. But I was asking questions about whether some party other than the Government could go ask him questions while he's in jail, or present to him a list of questions to which he could assert his Fifth Amendment privileges? Because, at some point, and I'm not suggesting I know the point, right, but at some point, I think the Trustee is entitled to that record, right? He needs to be able to make that record even if -- because it has to be specified in order for the Trustee to ask any court to make some kind of inference. So, for example, you're talking about the issues in the cases that say it's not testimonial when you turn over documents, which I've read those cases. MR. BALDIGA: Yes. THE COURT: You know, a week or so ago. So the Trustee's asked for documents prior to when -- and I think I asked this question last week, I think I did, but maybe I didn't ask it well, I don't know -- that Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 67 of 95

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Ho Wan Kwok - April 27, 2023 68 about the assets of the estate, right, what assets do you have? And that question's never been answered other than what was in the debtor's schedules and statements, right? But, at some point, you know, you just mentioned the New Jersey house -- I mean, that was never even mentioned in the Chapter 11 proceedings at all. MR. BALDIGA: And all -- and all we're talking is the -- that's a location not owned by the debtor that was -- there were -- there were properties -- there was material seized at that house. THE COURT: But the debtor's never testified one way or another whether he owned that property. Doesn't the Trustee have the right to the -- MR. BALDIGA: I wouldn't know that. THE COURT: Well, in this court anyway? MR. BALDIGA: Okay. THE COURT: Okay. MR. BALDIGA: I don't know. THE COURT: I have no idea about anywhere else, right? I'm just focusing on this court. Doesn't the Trustee have the right to ask him that question? Even if Mr. Kwok asserts the Fifth Amendment. MR. BALDIGA: And I will commit that we -- we intend -- we've told the Trustee you draft up as many

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Ho Wan Kwok - April 27, 2023 69 questions as you want. I fully expect Mr. Kwok to take the Fifth with respect to each. And I think it's implicit in the commitment we've made to the Trustee to do our best here without waiving constitutional protections. We will -- we will have translated those questions and we will take them to Mr. Kwok. We can access our client. So we will do that. THE COURT: Well, okay. Wouldn't that solve the problem then? At least in the short run for the Trustee. MR. BALDIGA: Well, that would take care of his testimony. Yeah. THE COURT: I mean -- MR. BALDIGA: But the Trustee goes beyond that to the documents the DOJ has in which we've thrown up hands and say -- THE COURT: Okay. Well, why can't we separate the two at least for now -- MR. BALDIGA: Okay. THE COURT: -- until we figure this out. MR. BALDIGA: I think we have. THE COURT: Why can't we -- MR. BALDIGA: And I think the -- THE COURT: Okay. MR. BALDIGA: -- the Trustee and us have been contemplating, which is the reason why they've drafted these Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 70 of 95

| | Ho Wan Kwok - April 27, 2023 70 | |----|-----------------------------------------------------------------| | 1 | questions, is that it wouldn't just be for the fun of it, we | | 2 | would take those questions to Mr. Kwok, and with the full | | 3 | expectation, but, you know, until we talk to our client one | | 4 | by one, with the full expectation though that he will invoke | | 5 | his Fifth Amendment rights as to each. That's what we would | | 6 | expect. And so the testimonial aspects will be -- | | 7 | THE COURT: But I think they need the record. I | | 8 | think they're entitled to a record. You know, that's what | | 9 | I'm suggesting is. I mean -- and you're right. We're in a | | 10 | bankruptcy court. But for good -- | | 11 | MR. BALDIGA: But he can't -- | | 12 | THE COURT: -- for good or for bad, we've had | | 13 | Fifth Amendment issues come up in bankruptcy proceedings. | | 14 | MR. BALDIGA: Yeah. | | 15 | THE COURT: Okay? And in every situation in which | | 16 | they've come up, the person who has asserted the Fifth | | 17 | Amendment privilege has had to answer specific questions, | | 18 | even if the answer is I'm asserting my Fifth Amendment | | 19 | privilege against self-incrimination, so that there's a | | 20 | record established that whomever the party was, whether it's | | 21 | a Trustee or creditor or whomever, then has established for | | 22 | purposes of whatever it is that that person is trying to | | 23 | prove, in whatever proceeding it is before the Court, right? | | 24 | And so it sounds like you agree that that can | | 25 | happen. | | | |

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Ho Wan Kwok - April 27, 2023 71 MR. BALDIGA: Well, we agree that we will try to make it happen. I think the distinction, Your Honor, is we're before the same court that granted bail to Sam Bankman-Fried and Bernie Madoff that has denied bail to our client, which I don't -- my partners at least -- and we do a lot of bankruptcy crime work on both sides -- we can't remember a case where there is indefinite incarceration and such restrictions on access. So, yes, there are bankruptcy cases in which the Fifth is invoked at an examination because arrest doesn't stop on its own a deposition necessarily. But this is different. Being incarcerated in -- under these conditions with extremely limited access, and then that's even before you get to the national security concerns, it's a challenge, which is why a stay was we thought the obvious way to go. And we understand bankruptcy estates have to be administered, but we're trying to do that consistent with the Fifth Amendment rights. But even with that, we're trying to be cooperative. I commit if it's not -- I think it's implicate in both orders, but I commit on top of that that we will take those questions and I believe that we will come back with the invocation of Fifth Amendment to each of them, or maybe

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| | Ho Wan Kwok - April 27, 2023 72 | |----|----------------------------------------------------------------| | 1 | answers to some of them. But we just don't know. | | 2 | THE COURT: I understand. | | 3 | So I'm trying to -- so there's two issues. The | | 4 | issues of the questions that the Trustee has, would like | | 5 | answers to, even if it's an assertion of a Fifth Amendment | | 6 | privilege, and/or the request for production of a document | | 7 | that the -- because I looked at -- I'm not saying I studied | | 8 | it, okay, but I understand that -- today's what, the 27th, | | 9 | so the other day, I guess I don't know what day it was, but | | 10 | -- | | 11 | MR. BALDIGA: A week ago I think. | | 12 | THE COURT: Well, no. I think the order that was | | 13 | submitted was on Monday, the 24th. | | 14 | MR. BALDIGA: Yes. | | 15 | THE COURT: And it -- by the Trustee. And -- | | 16 | MR. BALDIGA: I think by both of us. | | 17 | THE COURT: Oh, I don't know. It's 1699 that has, | | 18 | attached as Exhibit A, a request to debtor regarding | | 19 | associated entities and associated individuals listed in the | | 20 | 2004 subpoena. And there are 202 questions and/or requests. | | 21 | MR. BALDIGA: Yes. | | 22 | THE COURT: So what I'm trying to understand is, | | 23 | and I think is, are you saying that you will produce -- you | | 24 | will at some point soon have access to your client and will | | 25 | be able to get a response to all 100 -- all 202 of these | | | |

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| | Ho Wan Kwok - April 27, 2023 73 | |----|----------------------------------------------------------------| | 1 | questions or requests -- | | 2 | MR. BALDIGA: Yes. | | 3 | THE COURT: -- set forth in Exhibit A? Okay. | | 4 | MR. BALDIGA: Yes. | | 5 | THE COURT: So you're saying you'll do that? | | 6 | MR. BALDIGA: Yes. | | 7 | THE COURT: Okay. So that's one issue. | | 8 | Then the other issue is the production of | | 9 | documents that are in the control of the United States | | 10 | Attorney's Office for the Southern District of New York. | | 11 | That's the second issue, correct? | | 12 | MR. BALDIGA: Yes. | | 13 | THE COURT: And your position -- when I say you, | | 14 | I'm obviously speaking of you as counsel to Mr. Kwok -- | | 15 | MR. BALDIGA: Understood. | | 16 | THE COURT: -- is that you'll request them through | | 17 | the Assistant U.S. Attorney who's handling the matter. And, | | 18 | if you need to, you'll file a motion with the Court. But | | 19 | that you're not producing anything because you can't for | | 20 | many reasons of the -- you recited five on the record. | | 21 | MR. BALDIGA: Yes. | | 22 | THE COURT: Okay. So that's your position. So -- | | 23 | MR. BALDIGA: And then the third category is | | 24 | documents under the control of third -- | | 25 | THE COURT: Oh, right. | | | |

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| | Ho Wan Kwok - April 27, 2023 74 | |----|---------------------------------------------------------------| | 1 | MR. BALDIGA: -- parties. | | 2 | THE COURT: Okay. That's fair. | | 3 | MR. BALDIGA: And that -- I don't think there's a | | 4 | serious argument that that is not testimonial. That is at | | 5 | the heart of something that's testimonial. | | 6 | Because the Trustee's allegations, as I understand | | 7 | them from Mr. Henzy, in the bankruptcy case since we left it | | 8 | and the criminal indictment have a tremendous amount of | | 9 | overlap as to much of the bankruptcy case, as this court | | 10 | knows more than anyone else, seems to be, from my read, | | 11 | about what entities or alter egos or what does Mr. Kwok | | 12 | control or not, and the indictment is frankly all about | | 13 | that. | | 14 | And so it would be the essence of a Fifth | | 15 | Amendment violation to have Mr. Kwok compelled to admit that | | 16 | he controls someone by instructing them to turn over | | 17 | something when that's what he's indicted about. | | 18 | THE COURT: Okay. I hear your point. I'm not | | 19 | sure the indictment is all about that when you say that. I | | 20 | mean, not from the Bankruptcy Court perspective. Maybe it | | 21 | is from the criminal court perspective. | | 22 | What the bankruptcy court perspective is is the | | 23 | Trustee was appointed to investigate the affairs, financial | | 24 | affairs and -- of the debtor, and to locate assets that | | 25 | belong to or are controlled by the debtor and turn them into | | | |

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Ho Wan Kwok - April 27, 2023 75 cash and pay claims, right? That's what the Bankruptcy Court's perspective is? MR. BALDIGA: Yeah. THE COURT: And the indictment is based on criminal laws and things that aren't really relevant to the Trustee trying to -- MR. BALDIGA: No, not at all. THE COURT: -- exercise his duties and -- MR. BALDIGA: No, just the opposite. Most of the claims in the case, as I understand it, are on account of so-called victims of the alleged crimes. THE COURT: We haven't even gotten to the claims yet. MR. BALDIGA: No. But as I understand it -- THE COURT: And who knows if any of those claims are valid? You know -- MR. BALDIGA: No idea. THE COURT: -- I hear what you're saying, but I don't think the two work in tandem. MR. BALDIGA: So the indictment in shortest hand is that Mr. Kwok influenced or controlled securities offerings or membership offerings by entities other than himself, and that he was in control of them even though technically not an officer, director or owner of any of those. And that is, as I understand it --

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| | Ho Wan Kwok - April 27, 2023 76 | |----|---------------------------------------------------------------| | 1 | Again, there are a lot of docket entries since I | | 2 | left the Chapter 11 case. There are a lot of allegations, | | 3 | including in the 202 -- really, the 202 questions that the | | 4 | Trustee intends to put to Mr. Kwok are largely about do you | | 5 | control this entity? Do you control that entity? | | 6 | And the heart of the criminal case is -- | | 7 | THE COURT: Okay. I see what you're saying. | | 8 | But I still think that regardless of what you've | | 9 | just said, you've said to the Court that those questions | | 10 | will be provided to the debtor and he will answer them -- | | 11 | MR. BALDIGA: Yes. | | 12 | THE COURT: -- even if the assertion is -- even if | | 13 | the answer is I'm asserting my right against self | | 14 | incrimination under the Fifth Amendment? | | 15 | MR. BALDIGA: Exactly. | | 16 | THE COURT: Okay. So I think that if we have to | | 17 | do things in increments, maybe -- I don't know yet. I have | | 18 | to go back -- you all can continue to talk, right, about the | | 19 | issue of how you want to try to get whatever information the | | 20 | Government has. It seems to me that you've made some | | 21 | progress, but you haven't made complete progress. | | 22 | But you do have an agreement on these 202 | | 23 | questions, so let's just get that started. Right? | | 24 | MR. BALDIGA: Fair enough. | | 25 | THE COURT: Why don't we get that started. | | | |

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Ho Wan Kwok - April 27, 2023 77 Then with regard to -- so the other two issues would be the process from which, through which on agreement, if there is an agreement, that the Trustee could attempt to obtain documents from the Government in the criminal proceeding and the issues related to documents or information that would be in the control of third parties. MR. BALDIGA: Yes. THE COURT: That's what we have left? MR. BALDIGA: Yes. THE COURT: Right? Okay. So, Trustee Despins, what -- And you don't have to leave Attorney Baldiga, just in case there's questions. So can't we start with the 202 issues? I mean, I have to go figure out what you both said. MR. DESPINS: Yes. THE COURT: I don't know sitting here. MR. DESPINS: Exactly. THE COURT: I'm not going to -- I can't remember everything you said. Right? And it does appear that there was a request for a transcript entered, excuse me, filed, but, you know, the hearing was seven days ago. If it wasn't requested on any expedited manner, there isn't going to be a transcript in an expedited manner. So I'm going to have to

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Ho Wan Kwok - April 27, 2023 78 figure out what you both said on the issue of -- I recall the discussion, no question, about how there was going -- there was going to be an attempt to get information out of the criminal proceedings, but I don't remember what was said. I can't -- I just can't remember. MR. BALDIGA: Fair enough. And I think, you know, as we've reflected, we're all, as we've said, Mr. Despins and I have both said, we're doing this from memory. We all have good notes. We all have good colleagues who took notes. But the record will reflect it. THE COURT: And then the, you know, the issue of the third parties, again, I don't know how we deal with that at the moment. Do your 202 questions, I have no idea, I mean, Trustee Despins, I've looked at them. But have I looked at them from the perspective of what you're seeking to obtain as information that would be responsive to your discovery? MR. DESPINS: This certainly goes a long way on the issue of control. So basically we're asking directly did you control so-and-so, that company? And I assume he's going to plead the Fifth. We're going to get a document back from them that presumably will be sworn to by Mr. Kwok and they will say I assert my Fifth Amendment rights and off we go from there. So I think that -- we can submit an order that really boxes

Ho Wan Kwok - April 27, 2023 79 that in that should be not controversial. The question is how much time? We would think that just to get that 30 days should be sufficient. We know he's going to take the Fifth with regards to all of them so there's not a lot of need to spend a lot of time on this. So 30 days should be sufficient so we can have a return from them which will be a sworn statement with the answers to these questions. And we all know what the answers will be, but. THE COURT: Well, I do think that they're entitled to that record, specifically with regard to the questions. And you have no quarrel with that, so fine. MR. DESPINS: Yeah. THE COURT: So you'll produce an order. You know, today's what? Thursday. I don't know if you're going to have an order by tomorrow. MR. DESPINS: Yes, we will. THE COURT: Okay. So then you both can talk about that. With regard to the issues of obtaining documents from the Government, I'm going to have to go back and figure that out. Do we have hearing -- you know, I'm saying this, and I'm not saying it in a flippant manner, I'm not trying to, but don't we have hearings on Tuesday in this case? I Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 79 of 95

Ho Wan Kwok - April 27, 2023 80 think we do. Let me take a look. Yes, we do. MR. DESPINS: Yes, we do. THE COURT: And some of them are about the discovery issues. Just one actually. But, you know, either you'll have an agreement at that time or you won't with regard to the issues that we've just discussed this afternoon, which are the -- which is the -- how do you get the information from the Government? Is there an agreement that it's going to be done by the debtor requesting it through the U.S. Attorney's Office and/or the Court, or is it going to be that the documents are produced to the debtor and then turned over? I think that's the issue, isn't it? MR. DESPINS: That is the issue, Your Honor. MR. BALDIGA: Yeah. THE COURT: Okay. MR. BALDIGA: May I ask? I have a personal commitment at 4 o'clock in Boston. And Mr. Best is on trial, which is why he's not here. And it will be next week as well. MR. DESPINS: Zoom. THE COURT: Yes, you could appear remotely if that's your request. MR. BALDIGA: Or if it's in the morning, I could be here. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 80 of 95

Ho Wan Kwok - April 27, 2023 81 THE COURT: It's not in the morning unfortunately. It starts at 1:00 p.m. MR. BALDIGA: Then, if I could, Your Honor, that would it -- THE COURT: Well, if you have an agreement, you don't have to appear. MR. BALDIGA: I understand. But it would be a terrible thing to make an agreement because I'd have to drive -- THE COURT: This is what I'm going to do though. I'll make -- I'll continue this to -- we'll continue this, what is a status, a status conference, right, until -- I mean, there's four matters on at 1:00 and one matter on at 2:00. I try to space them out because obviously it takes long to discuss these issues. Right? I don't know if you want to join at 1:00 or you want to join at 2:00. MR. BALDIGA: It doesn't really matter. THE COURT: Okay. All right. I'd like to try to address, if there isn't an agreement between the two of you, which there may not be, I'd like to try to address the other matters first because -- MR. BALDIGA: Of course. So why don't I plan to join at 2:00. THE COURT: Yeah. I mean -- MR. BALDIGA: Okay. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 81 of 95

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| | Ho Wan Kwok - April 27, 2023 82 | |----|------------------------------------------------------------| | 1 | THE COURT: -- I think that we'll continue this | | 2 | hearing until 2:00. All right? | | 3 | Some of the other matters, looking at them on a | | 4 | calendar, that's all I'm doing right now, look as though | | 5 | they may not be controversial or take a lot of time. | | 6 | MR. BALDIGA: You do have things in this, in this | | 7 | case that are not controversial? | | 8 | THE COURT: Yes, we do. Some we do. | | 9 | MR. BALDIGA: Very good. | | 10 | THE COURT: But I don't know that. So that's why | | 11 | I don't want you to be sitting on the phone for an hour if | | 12 | you don't have to be. | | 13 | MR. BALDIGA: Understood. | | 14 | And can I just on the issue of the transcript, | | 15 | because I think everybody agrees that we all need a | | 16 | transcript, were you going to request that on an expedited | | 17 | basis? | | 18 | THE COURT: It was the creditor PAX that ordered | | 19 | the transcript. | | 20 | MR. DESPINS: PAX requested it. | | 21 | MR. BALDIGA: Oh, PAX and the debtor are good | | 22 | friends. Could we have a copy when you get it? | | 23 | THE COURT: Well, you all have to work that out. | | 24 | I'm not getting involved in that. | | 25 | MR. BALDIGA: Okay. | | | |

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| | Ho Wan Kwok - April 27, 2023 83 | |----|----------------------------------------------------------------| | 1 | THE COURT: But I don't know if it was ordered on | | 2 | an expedited basis or not. And if it wasn't then it will -- | | 3 | you know, we have no control over the court reporters. | | 4 | MR. BALDIGA: Okay. I just, you know, we just | | 5 | didn't want waste -- | | 6 | THE COURT: We have no control, you know. | | 7 | MR. BALDIGA: -- but we'll work that out. | | 8 | THE COURT: Yeah. You can work that out. | | 9 | MR. BALDIGA: Okay. | | 10 | THE COURT: Okay? | | 11 | MR. DESPINS: Well, we have the one from the 18th. | | 12 | It was requested on the same basis, meaning non-expedited, | | 13 | so. | | 14 | THE COURTROOM DEPUTY: It is a longer -- the 20th | | 15 | was a longer -- | | 16 | MR. DESPINS: The 20th was a longer transcript. | | 17 | THE COURT: Well, you can -- I mean, there's, you | | 18 | know, you can contact the -- | | 19 | MR. HENZY: There's no way to know. There's no | | 20 | way to know. We've been giving the transcriber a lot of | | 21 | business, Your Honor. There's no way to know whether the | | 22 | transcript -- | | 23 | THE COURT: No, I know. | | 24 | MR. HENZY: -- will be available. | | 25 | THE COURT: Then you contact the reporter -- | | | |

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Ho Wan Kwok - April 27, 2023 84 MR. HENZY: Yeah. Right. THE COURT: -- and you see what the reporter says. MR. HENZY: Okay. THE COURT: That's all you do. MR. DESPINS: We'll do that. MR. BALDIGA: We'll do that without bothering the Court. THE COURT: Yeah. You just contact the reporter and find out what the status is. That's all. MR. BALDIGA: We appreciate that very much, Your Honor. THE COURT: All right. So I think, unless I'm -- MR. BALDIGA: And thank you for permission to appear remotely. THE COURT: Yes. That's fine. MR. BALDIGA: I know it's not the favored -- THE COURT: Well, it's not -- MR. BALDIGA: way to do it, but I appreciate it. THE COURT: -- because I think we make -- MR. BALDIGA: I just wanted to express my appreciation. THE COURT: And I appreciate that. The reason it's not favored is because, as you know, there's so much going on in this case. MR. BALDIGA: Yes.

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| | Ho Wan Kwok - April 27, 2023 85 | |----|----------------------------------------------------------------| | 1 | THE COURT: It's very difficult, no matter what | | 2 | anyone says, to address these really serious issues looking | | 3 | at people's faces on a black screen. I'm sorry, but it is. | | 4 | I think it's -- this is a very -- I mean, you know, you | | 5 | could argue every case is a very important case no matter | | 6 | who it is, whether it's a debtor trying to save a car or | | 7 | this situation. | | 8 | We -- this court, has been back in person since | | 9 | February of 2022. The Court is a place and it's a place for | | 10 | a reason. It has, as do all of you, serious obligations to | | 11 | the public and to ensure that the laws are properly | | 12 | followed. | | 13 | And whether or not it's intentional, and I don't | | 14 | think it is, I've never thought that it is, some people | | 15 | argue that it is, there's a lot less formality and | | 16 | understanding of the importance when I'm -- when people are | | 17 | on a screen looking at each other. | | 18 | I could tell you stories, which I'm sure you don't | | 19 | want to hear about some of the things that have happened | | 20 | when people are on a screen and think it's not a big deal. | | 21 | MR. BALDIGA: My wife is a college professor. I | | 22 | think her stories would top yours. | | 23 | THE COURT: I'm sure they would, actually, | | 24 | unfortunately. | | 25 | But all that being said, under specific | | | |

Ho Wan Kwok - April 27, 2023 86 circumstances of a case, including what you've requested, that your partner's on trial, you have to be in Boston, I'm going to allow it. But I do think that even in what people think are routine matters, not in a -- not in this Chapter 11 case, I'm just saying as a whole, the judges of this district have decided and been encouraged to decide that people should be in person in court. MR. BALDIGA: It is more effective. THE COURT: And it's not as if the three of us made this decision without people who are, you know, in authority suggesting that we should be in person. MR. BALDIGA: Understood. THE COURT: And so that's all I want to say about that, except that I also do agree that a court is a place for a reason and I think we can't -- none of us, and I'm not suggesting any of you have, none of us, when I'm saying none of us I mean the whole, should lose sight of that. Because the minute that we do lose sight of that, I think it can undermine the system -- MR. BALDIGA: Appreciate it. THE COURT: -- and don't want, we don't, none of us want to do that. So in any event, that was a long way of saying, yes, you can appear. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 86 of 95

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Ho Wan Kwok - April 27, 2023 87 MR. BALDIGA: Okay. And thank you for your -- THE COURT: You'll have to contact the -- you'll have to have someone from your office -- and Mr. Best is going to have to file an appearance, you know, when I talked about -- MR. BALDIGA: We will. THE COURT: -- what are somewhat administerial things, but they're not, they're important, you know, you'll have to contact -- I guess Calendar Connect is that where Attorney Baldiga and Attorney Best would get that information? THE COURTROOM DEPUTY: Yes. THE COURT: To get the information which hasn't even been created yet, Mr. Baldiga, because we haven't created any information for next week's hearings yet -- MR. BALDIGA: Okay. THE COURT: -- because they're in person. So the clerk's office staff will have to do that. And then they will -- they'll get that information to you. MR. BALDIGA: Very good. THE COURT: Okay? MR. BALDIGA: Thank you very much. THE COURT: Thank you. Is there anything further we need to address today?

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| | Ho Wan Kwok - April 27, 2023 88 | |----|--------------------------------------------------------------| | 1 | MR. DESPINS: Your Honor, two minutes for an | | 2 | update? | | 3 | THE COURT: Sure. Go right ahead. | | 4 | MR. DESPINS: And I'll -- | | 5 | THE COURT: Before you say anything. | | 6 | So just so it's clear for the record, we're | | 7 | continuing the status conference to next Tuesday, May 2nd at | | 8 | 2:00 p.m. And Mr. Baldiga will be allowed to appear | | 9 | remotely. | | 10 | MR. BALDIGA: Thank you. | | 11 | THE COURT: Okay. Thank you. | | 12 | Sorry, Trustee Despins. I just need to make that | | 13 | statement for the record. | | 14 | MR. DESPINS: No problem, Your Honor. | | 15 | I'll start with the unusual good news. I would | | 16 | put the caveat that it's not done yet, but it appears as if | | 17 | the Sherry-Netherland will agree to abate the \$87,000 a | | 18 | month maintenance, because the apartment is not useable, for | | 19 | a period of -- to an amount that's about 12,000, so that's a | | 20 | huge delta. Not a done deal, but the early indication is | | 21 | that they will do that. | | 22 | Now, because I start with good news, I have to | | 23 | give you the other news, which is that the insurance company | | 24 | has cancelled the insurance for the Sherry-Netherland. | | 25 | THE COURT: Effective when? | | | |

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Ho Wan Kwok - April 27, 2023 89 MR. DESPINS: End of May. THE COURT: Because there's no money to pay the premium or because of the fire? MR. DESPINS: No, no, no. Because they say that there's been a change in circumstance. Yes, there has been a change in circumstance. Actually the premium should be reduced because there's nothing going on there. But I'm being facetious. But they -- you'll hear more about this, but there's no way we can let that terminate. And the -- so there's a lot of pieces relating to the apartment. That company that owns the Sherry-Netherland apartment has about \$60,000 left in the bank account. We need to hire a law firm that is specialized on insurance coverage disputes. And so we'll come back to that because -- THE COURT: Do you mean Genever USA? Is that what you're talking about? MR. DESPINS: Yeah. THE COURT: Okay. MR. DESPINS: Genever. THE COURT: Okay. When you say company that owns, I just -- MR. DESPINS: Yeah. Genever. THE COURT: Yeah.

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Ho Wan Kwok - April 27, 2023 90 MR. DESPINS: Genever Holdings, USA. THE COURT: Genever, Genever, however -- MR. DESPINS: And we call it USA. Yeah. THE COURT: Okay. MR. DESPINS: That's the entity. It has \$60,000 left in the bank account. So there's the issue of retaining, because this is really a specialty. First of all, we have a conflict with AIG. But two, there's -- it's a real specialty to deal with coverage disputes involving fires, so I've -- I'm in the process of finalizing that. There may be a need for inter-estate financing, meaning -- THE COURT: I understand, yeah. MR. DESPINS: -- the Kwok estate financing Genever. Of course that assumes that the Kwok estate would have some money, but that's, you know, we don't have it now. So there are a lot of complex issues here. There are possibilities of selling this apartment at the -- what I would call scavenger price. But of course that may not be optimal. That depends also on insurance coverage issues. So there's guaranteed there will be an insurance coverage dispute. I say this always jokingly, but insurance companies don't make money by paying on claims.

Ho Wan Kwok - April 27, 2023 91 They make money by not paying on claims. Sorry. And so they are doing that here. So they've sent us a reservation of rights letter. But we started fairly modestly by saying, look, you need to clean up the dust, the soot, and the damage to the apartment because it continues through the air conditioning system to be sent to other apartments throughout the -- it's a hotel actually -- and they responded saying suspicious circumstances, we're not advancing a penny. And of course that's not a basis to deny coverage. They have to prove arson. And my bet is they won't be able to prove that. And so there will be a -- there will be a fight over that money, over getting money for that apartment. So spending a lot of time on that, Your Honor, these days. I wanted to make sure that you knew about this because sometimes we hit you with things at the last minute and there's been no warning. So this issue is a complex and hot issue and we will come back to the Court with more on that I think soon. THE COURT: Has the sales process still -- I mean, I understand, I haven't seen, I have no idea other than representations, which are fine, but has the sales process just been not proceeding because of the fire? MR. DESPINS: In a bizarre way, Your Honor, we Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 91 of 95

Ho Wan Kwok - April 27, 2023 92 have gotten more interest that we've had in the last year -- THE COURT: Okay. MR. DESPINS: -- but from scavengers. Basically people saying, oh, this is going to be a great unfortunately to buy this for pennies on the dollar. And, you know, just to, so you understand the thinking there, is that, I'm not going to use real numbers, but we have the ability under the policy, if there is coverage, to sue the insurance company and to get the cost of refurbishing the apartment, even though you haven't spent a penny doing it. So I want to make sure, it was not obvious to me, that the policy says that you can get paid from the insurance company the amount of repairs even though you have not incurred those repairs. So if -- and I have an expert that's doing this now, if the repairs, for example, just round numbers, are -- would be \$10 million, and I'm not saying that's the number, but -- and if I can sell the apartment to what I call scavengers for just to pick a number \$17 million, well, that's, in theory, \$27 million. We were selling the apartment for 32.5. So I'm not saying I'm selling it for the 27, but I -- so these are the calculations that are going on right now. Case 22-50073 Doc 1754 Filed 05/04/23 Entered 05/04/23 14:02:09 Page 92 of 95

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Ho Wan Kwok - April 27, 2023 93 However, if the cost of repairs are only \$3 million, you would never sell to a scavenger at 17, because 17 plus 3 gives you -- gets you to 20, and certainly that apartment is worth more than 20, a lot more than 20 if there is insurance coverage. But the insurance coverage issue is an issue we own anyway whether you sell to a scavenger or not. The insurance company will fight on coverage. That's what they do. So more to come. So the sale price has not started. In fact, that's why we modified -- remember, we modified the emergency order to allow for visits to occur for potential interested parties, and there are some people that have gone to see the apartment. So it's -- it's a complex process. And the last piece that I didn't discuss is the other owners in the building. The apartment below it was completely destroyed by water. They gutted it. And the insurance company for that apartment is the same insurance company that we have. So this is going to be another interesting spy versus spy. So that's just for old people who love this stuff. So it's going to be AIG versus AIG. But then there are other people in the building above that are insured by CHUB. And so CHUB is going to assert probably a claim against Genever, so that this is an

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Ho Wan Kwok - April 27, 2023 94 -- endless permutations here. We have \$11 million of third-party coverage if there is coverage. So, you know, there would be a greater and more fuller description, Your Honor, to Your Honor eventually of this whole situation, but I wanted you to know that there's a lot of work being done around there. And, you know, there are challenges. One of them that the estate is facing now is the lack of cash obviously for all sorts of reasons. These toys that he had cost incredible amounts of money. They're just -- and we know that now. So that's the report I wanted to give Your Honor. Also, I forgot to mention, the motion to abandon, remember that we had scheduled, you had scheduled a hearing for May 2nd or 5th, that motion has not been filed. And so, therefore, we will not need that hearing. That hearing should be pushed back probably 30 days. THE COURT: Okay. I don't remember when it's scheduled either, but I'll take a look at it. MR. DESPINS: It's the 2nd or 5th of May. THE COURT: Okay. MR. DESPINS: And that's it for today, Your Honor. THE COURT: Okay. Thank you. Does anyone else wish to be heard on any matters?

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Ho Wan Kwok - April 27, 2023 95 (No response) THE COURT: Okay. Then that is the last matter on today's calendar, so court is adjourned. Thank you. (Proceedings concluded at 3:08 p.m.) I, CHRISTINE FIORE, court-approved transcriber and certified electronic reporter and transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above- entitled matter. 14 May 3, 2023 15 Christine Fiore, CERT