In re OneTRADEx, Ltd.

• Decision Date: 14 November 2022
• Docket Number: Case No. 19-13257 (MG)
• Citation: 645 B.R. 184
• Parties: IN RE: ONETRADEX, LTD. (In Provisional Liquidation), Debtor in a Foreign Proceeding.
• Court: U.S. Bankruptcy Court — Southern District of New York

645 B.R. 184

IN RE: ONETRADEX, LTD. (In Provisional Liquidation), Debtor in a Foreign Proceeding.

Case No. 19-13257 (MG)

United States Bankruptcy Court, S.D. New York.

Signed November 14, 2022

FOLEY & LARDNER LLP, Attorneys for the Kenneth Krys as Foreign Representative for OneTradeEx, Ltd. (In Provisional Liquidation), 90 Park Ave, 29th Floor, New York, New York 10016, By: Katherine R. Catanese, Esq., Alissa Nann, Esq.

MEMORANDUM OPINION AND ORDER GRANTING THE FOREIGN REPRESENTATIVE'S MOTION TO CLOSE THIS CHAPTER 15 CASE PURSUANT TO BANKRUPTCY RULE 5009(c)

MARTIN GLENN, CHIEF UNITED STATES BANKRUPTCY JUDGE

Pending before the Court is the Final Report and Motion for an Order Closing the Chapter 15 Case ("Motion," ECF Doc. # 20-1) filed by Kenneth Krys (the "Foreign Representative" or "Krys") on September 14, 2022. Krys is the Foreign Representative for the foreign debtor, OneTRADEx, Ltd. (the "Debtor"). (Id. at 1.)

The Foreign Representative submits that the Chapter 15 case ("Chapter 15 Case") has been fully administered. (Id. ¶ 17.) He has requested that the case be closed pursuant to sections 350 and 1517 of the Bankruptcy Code, Rule 5009 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules") and Local Rule 5009-2(a). (Id. ) The objection deadline was October 12, 2022. (See ECF Doc. # 22.) No objections have been filed as of the opinion date.

For the reasons discussed below, the Court GRANTS the Motion to close the case.

I. BACKGROUND

A. Foreign Proceeding and Recognition

This Chapter 15 Case arises from the Debtor's foreign main proceeding commenced by the Cayman Islands Monetary Authority ("CIMA") pursuant to section 104(3) of the Companies Law in the Financial Services Division of the Grand Court of the Cayman Islands (the "Cayman Court"), FSD CAUSE NO: 166 OF 2019 (ASCJ) (the "Cayman Action"). (Motion at 1.) On September 30, 2019, the Cayman Court entered an order appointing Krys and Angela Barkhouse as Joint Provisional Liquidators (each a "JPL" and collectively, the "JPLs") of the Debtor in the Cayman Action.¹ (Id. ¶ 4.)

On October 9, 2019, the JPLs commenced the Chapter 15 Case by filing a petition in this Court. (Id. ¶ 5.) The JPLs commenced the Chapter 15 Case to protect the Debtor's assets while it pursued liquidation in the Cayman Islands because a majority of the Debtor's client accounts and assets were held by custodian Interactive Brokers LLC ("IB") in the United States. (Id. ) On November 18, 2019, this Court entered the Order Granting Recognition of Foreign Main Proceeding Pursuant to Chapter 15 of the Bankruptcy Code and Related Relief (the "Recognition Order," ECF Doc. # 10). (Id. ¶ 6.) The Recognition Order granted recognition of the Cayman Action as a foreign main proceeding (as defined in 11 U.S.C. § 101(23) ). (Id. )

B. Debtor's U.S. Assets and Related Proceedings

The Debtor was a registered broker-dealer with operations conducted in the Cayman Islands. The Debtor's primary custodian for its assets in the U.S. and its clients’ assets in the U.S. was IB, which is headquartered in Greenwich, Connecticut. (Id. ¶ 8.) The Debtor held a master account at IB containing various assets, which are held in certain sub-accounts. Approximately 287 of the sub-accounts held assets of clients of the Debtor (the "Client Sub-Accounts"). (Id. ) The other sub-accounts held assets of the Debtor (the "Debtor Accounts," and together with the Client Sub-Accounts, collectively, the "Accounts"). (Id. )

Debtor has not been a party to any litigation in the U.S. but was aware of two U.S. actions where property under Debtor's control was at issue. (Id. ¶ 9.) The first case, In the Matter of Dick Family Trust No. 1 and Dick Family Trust No. 2 , JAG No. 2016-0426, was pending in the Probate Court for Jefferson County, Colorado. (Id. ¶ 10.) The assets held by Debtor at issue in that action have been distributed in accordance with that court's November 9, 2018, order requiring the beneficial owner of certain family trust stock to transfer the same. (Id. )

The second case, Simpson v. Melissa Gayheart as trustee of MSJJ Retirement Group Trust , Case No. 18-8673 (PGG), was pending in the United States District Court for the Southern District of New York. Plaintiffs alleged that Debtor held assets of party MSJJ Retirement Group Trust ("MSJJ") as a broker. (Id. ¶ 9.) The court in that action entered an order on July 25, 2019, requiring MSJJ to turn over assets to the plaintiff in that action. (Id. ) The Foreign Representative claims that Debtor itself was not subject to the order. (Id. ) The Foreign Representative also reports that the assets were ultimately rejected by the Dutch tax authorities and that an appeal is currently pending that is futile because Dutch tax authorities are seeking to reclaim other amounts and there is no trustee for the assets in question. (Id. )

C. Disposition of U.S. Assets and Completion of Foreign Representative's Tasks

On January 20, 2020, the Grand Court of the Cayman Islands entered an order allowing the JPLs to transfer all the assets that were held by IB in the United States to certain clients, and any reserves were directed to be transferred and held at a Cayman Islands’ bank. (Id. ¶ 11; "Cayman Transfer Order," Ex. C to Motion, ECF Doc. # 20-4.)

Accordingly, on January 23, 2020, the Foreign Representatives filed a request with this Court to amend the Recognition Order to entrust them with the distribution of the assets in the Accounts so that the assets could be released to the Foreign Representatives and administered through the Cayman Action. (Id. ¶ 12.) On February 20, 2020, the Court entered an order giving the Foreign Representatives the authority to: "(a) distribute client assets in accordance with the Cayman Order ... and (b) be entrusted with those assets in the Debtor Accounts; provided, however, that such assets are hereby subjected to the jurisdiction and administration of the Cayman Court in the pending Cayman Action." (Id. ¶ 13; "Amended Recognition Order," ECF Doc. # 17.)

On March 7, 2022, the Grand Court of the Cayman Islands entered an Order directing the Foreign Representatives to abandon, forfeit or disclaim all assets held in Debtor's accounts with IB. (Id. ¶ 15.) The Foreign Representative is in the process of closing the remaining accounts. (Id. )

The Foreign Representative claims that there are no longer assets in the United States to protect and nothing left for him to do in the Chapter 15 Case. (Id. ¶ 16.) He also claims that other than the instant Motion, no other matters remain in the Chapter 15 Case that relate to the Cayman Action or relief sought in this proceeding. (Id. ) Finally, the Foreign Representative claims that the remaining items remaining to be completed in the Cayman Action are largely administrative, including approval of the JPL's fees and expenses, distribution of recovered assets, return of any reserved amounts not used to pay the JPL's fees and expenses, and closing of the liquidation. (Id. ) Thus, the Foreign Representative seeks entry of a proposed order closing the Chapter 15 Case. (Id. ¶ 17; "Proposed Order," Ex. A to Motion, ECF Doc. # 20-2.)

II. LEGAL STANDARDS

The Motion asserts four legal bases for its Proposed Order closing the Chapter 15 Case: (1) section 1517(d) of the Bankruptcy Code, (2) section 350(a) of the Bankruptcy Code, (3) Federal Rule of Bankruptcy Procedure 5009(c), and (4) Local Rule 5009-2(a). Section 1517(d) provides:

The provisions of this subchapter do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist, but in considering such action the court shall give due weight to possible prejudice to parties that have relied upon the order granting recognition. A case under this chapter may be closed in the manner prescribed under section 350 .

11 U.S.C. § 1517(d) (emphasis added).

Section 350, in turn, provides:

After an estate is fully administered and the court has discharged the trustee, the court shall close the case.

11 U.S.C. § 350(a).

A bankruptcy estate is not actually created in a chapter 15 case. See In re Lupatech S.A. , 611 B.R. 496, 503 (Bankr. S.D.N.Y. 2020) (citing In re Fairfield Sentry Ltd. , 458 B.R. 665, 683 (S.D.N.Y. 2011). Thus, courts in the chapter 15 context have found that "fully administered" means that administrative claims have been provided for, and that there are no outstanding motions, contested matters or adversary proceedings. Lupatech S.A. , 611 B.R. at 503 (citing In re Kliegl Bros. Universal Elec. Stage Lighting Co., Inc. , 238 B.R. 531, 546 (Bankr. E.D.N.Y. 1999) ). Bankruptcy Rule 5009(c) presumes that a chapter 15 case has been fully administered once the following chain of events has occurred:

• The purpose of the foreign representative's appearance in the court is completed;

• The foreign representative files a final report describing the nature and results of the representative's activities in the court;

• The foreign representative transmits the report to the U.S. Trustee and gives notice of its filing to the debtor, all persons or bodies authorized to administer foreign proceedings of the debtor, all parties to litigation pending in the United States in which the debtor was a party at the time of the filing of the petition, and such other entities as the court may direct;

• The foreign representative files a certificate with the court that notice has been given; and

• No objection is filed by the U.S. Trustee or a party in interest within 30 days after the certificate is filed.

See FED. R. BANKR. P. 5009(c) ; see also Lupatech S.A. , 611 B.R. at 503.

Local Rule 5009-2(a) provides additional instruction for closing Chapter 15 cases:

Closing the Case. In a case under chapter 15 of the Bankruptcy Code, the Court shall close the case when there is a presumption under Bankruptcy Rule 5009(c) that the case has been fully administered or the Court, after notice and a hearing, determines that

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