Celsius Network LLC

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

) FOR PUBLICATION

In re: )

) Chapter 11

CELSIUS NETWORK LLC, et al., ) Case No. 22-10964 (MG)

)

Debtors. ) (Jointly Administered)

)

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR THE

APPOINTMENT OF AN OFFICIAL PREFERRED EQUITY COMMITTEE

A P P E A R A N C E S:

MILBANK LLP

Attorneys for Community First Partners, LLC, Celsius SPV Investors, LP, and Celsius

New SPV Investors, LP

55 Hudson Yards

New York, NY 10001

By: Dennis F. Dunne, Esq.

Nelly Almeida, Esq.

Andrew M. Leblanc, Esq.

Melanie Westover Yanez, Esq.

JONES DAY

Attorneys to CDP Investissements Inc.

555 South Flower Street

Fiftieth Floor

Los Angeles, CA 90071

By: Joshua M. Mester, Esq.

KIRKLAND & ELLIS LLP

Attorneys for the Debtor

601 Lexington Avenue

New York, NY 10022

By: Joshua A. Sussberg, Esq.

Patrick J. Nash, Jr., Esq.

Ross M. Kwasteniet, Esq.

Christopher S. Koenig, Esq.

Dan Latona, Esq.

WHITE & CASE LLP

Attorneys for the Creditor Committee

111 S Wacker Dr Suite 5100

Chicago, IL 60606-5055

By: Michael Andolina, Esq.

Aaron Colodny, Esq.

Samuel P. Hershey, Esq.

Gregory F. Pesce, Esq.

David M. Turetsky, Esq.

Keith H. Wofford, Esq.

SUSAN ADLER, ESQ

Attorney for Andersen Invest Luxembourg S.A. SPF

630 Third Avenue

New York, New York 10017

MARTIN GLENN

CHIEF UNITED STATES BANKRUPTCY JUDGE

Pending before the Court is the motion (the “Motion,” ECF Doc. # 880) of Community

First Partners, LLC, Celsius SPV Investors, LP, Celsius New SPV Investors, LP, and CDP

Investissements Inc. (collectively, the “Requesting Equity Holders”) as beneficial holders, or

investment advisors managers of beneficial holders, of Series B Preferred Shares issued by

Celsius Network Limited (“CNL” and, together with its affiliated debtors and debtors in

possession, the “Debtors” and, the Debtors and their non-Debtor affiliates, collectively, the

“Celsius Entities”), for entry of an order appointing an official committee of the holders of

CNL’s preferred equity securities (an “Official Preferred Equity Committee”). The Debtors filed

an objection, (the “Debtors’ Objection, ECF Doc. # 1045). The Official Committee of

Unsecured Creditors (the “Committee”) also filed an Objection (the “Committee’s Objection,”

ECF Doc. # 1048.) Additionally, Andersen Invest Luxembourg S.A. SPF (“Andersen”), a .05%

equity security holder in CNL, filed a joinder (the “Andersen Joinder,” at ECF Doc. # 924.) The

Requesting Equity Holders filed a reply (the “Reply,” ECF Doc. # 1120) and an accompanying

declaration from Andrew M. Leblanc (the “Leblanc Declaration,” ECF Doc. # 1122) both of

which the Requesting Equity Holders sought, via a sealing motion, (the “Sealing Motion, “ECF

Doc. # 1118”) to file with redactions.1

For the reasons explained below, the Requesting Equity Holder’s Motion is DENIED.

I. BACKGROUND

A. General Background

On July 13, 2022 (the “Petition Date”), the Debtor filed voluntary petitions for relief

under Chapter 11 of the Bankruptcy Code. (Motion ¶ 18.) On July 27, 2022, the U.S. Trustee

appointed the Committee, which is comprised of seven members, each of whom holds crypto

assets through the Celsius platform. (Id. ¶ 20.) On September 14, 2022, the Court appointed an

examiner in these Chapter 11 Cases. (See ECF Doc. # 820.) At a hearing on September 1,

2022, the Debtors noted that they had engaged in meaningful discussions with the UCC

regarding a business plan and a potential restructuring and that both parties agreed to a

comprehensive diligence reporting framework. (Motion ¶ 21).

B. Composition of Requesting Equity Holders

The Requesting Equity Holders hold 87% of CNL’s Series B preferred equity

interests (Committee Objection ¶ 12 (citing Motion, Exhibits F-G).) They are represented by

two highly regarded, global law firms, Millbank LLP (“Milbank”) and Jones Day LLP (“Jones

Day.”) (Committee Objection ¶ 4.)

1 The Court concludes that, in ruling on the pending motion, it does not need to rely on, and it has not relied

on, the contents of several documents submitted with the Reply by the Requesting Equity Holders, which the

Debtors contend are confidential and would require redaction and sealing under Bankruptcy Code § 107(b). (See

Sealing Motion and related papers, ECF Doc. # # 1118, 1119, 1124, 1156.) Consequently, it is unnecessary for the

Court to rule on the Sealing Motion to resolve this Motion, and the Court declines to do so.

C. Requesting Equity Holders Legal Theories

The Requesting Equity Holders’ legal position is that Celsius account holders do not hold

claims at each Debtor entity. (Motion ¶ 4.) Further, they argue that the Celsius Entities are,

essentially, a conglomerate of three business lines conducted by separate and distinct legal

entities, including, without limitation: (i) the storage business, which is conducted by GK8,

whose equity the Debtors are seeking to sell; (ii) the mining operations, which are conducted by

Debtor Celsius Mining LLC (a subsidiary of CNL) and its non-Debtor subsidiary, Celsius

Mining IL Ltd. (collectively, the “Mining Entities” and, together with CNL and GK8, the “Non-

Customer Facing Entities”); and (iii) the retail customer-facing business, which is conducted

primarily through Celsius Network LLC and is thus separate from the Non-Customer Facing

Entities. (Id. ¶ 3). The Requesting Equity Holders contend that only the equity holders, and not

Celsius account holders, have claims against Non-Customer Facing Entities. (Id.). The Debtors

and Committee disagree and the Debtors have noted publicly that they believe Celsius account

holders have claims against all Debtor entities. (Debtors’ Objection ¶ 15; Committee Objection

¶ 22.)

D. Requesting Equity Holders’ Request for an Official Preferred Equity

Committee

On July 19, 2022, Milbank (on behalf of certain Requesting Equity Holders) submitted a

letter to the U.S. Trustee requesting the appointment of an Official Preferred Equity Committee.

(Motion. ¶ 22.) On July 22, 2022, Jones Day (on behalf of the other Requesting Equity Holder)

submitted a letter to the U.S. Trustee requesting the same. (Id.)

On July 28, 2022, after the Debtors filed three motions seeking to sell certain assets, the

Remaining Equity Holders renewed their request to the U.S. Trustee for an Official Preferred

Equity Committee. (Id. ¶ 23). The U.S. Trustee has not taken a position with respect to the

Motion and has asked that the Court grant whatever relief it deems proper. (Debtors’ Objection

¶ 14.)

E. The Requesting Equity Holders’ Participation in These Chapter 11 Cases

The Requesting Equity Holders are active participants in these Chapter 11 Cases.

Counsel for the Series B Holders participated in the first day hearing to make the equity holders’

views known on matters important to equity holders. (See id. ¶ 11 (citing July 18, 2022 Tr. 80:7-

83:10).) Counsel for the Series B Holders also participated in the September 14, 2022 hearing.

(See id. (citing Sept. 14, 2022 Hr’g Tr. 44:21-45:21, 45:24-46).) On August 2, 2022, CDP

Investissements Inc. filed a Declaration of Status as a Substantial Shareholder [ECF Doc. # No.

336] and on August 8, 2022, the Series B Holders filed a Declaration of Status as a Substantial

Shareholder [ECF Doc. # 444], signaling their appearances in these Chapter 11 Cases. (Id. ¶ 11.)

On September 7, 2022, the Series B Holders filed the Series B Holders’ Limited

Objection to Motion of the United States Trustee for Entry of an Order Directing the

Appointment of an Examiner [ECF Doc. # 734]. (Id. ¶ 12). The Debtors engaged with the

Requesting Equity Holders and included their comments on the relief granted by the:

• Order (I) Permitting Sale of the Debtors’ Mined Bitcoin in the Ordinary

Course and (II) Granting Related Relief [ECF Doc. # 514] (the “Mined

Bitcoin Order”);

• Order Approving Procedures for De Minimis Asset Sales [ECF

Doc. #692] (the “De Minimis Sale Order”);

• Order (I) Approving Bidding Procedures for the Potential Sale of Certain

of the Debtors’ Assets, (II) Scheduling Certain Dates with Respect

Thereto, (III) Approving the Form and Manner of Notice Thereof, (IV)

Approving Contract Assumption and Assignment Procedures, and (V)

Granting Related Relief [ECF Doc. # No. 687] (the “GK8 Bidding

Procedures Order”); and

• Interim Order (I) Authorizing the Debtors to (A) Continue to Operate

Their Cash Management System, (B) Honor Certain Prepetition

Obligations Related Thereto, (C) Maintain Existing Business Forms, and

(D) Continue to Perform Intercompany Transactions, (II) Granting

Superpriority Administrative Expense Status to Postpetition

Intercompany Balances, and (III) Granting Related Relief [ECF Doc. # 56]

(the “First Interim Cash Management Order”);

• Second Interim Order (I) Authorizing the Debtors to (A) Continue to

Operate Their Cash Management System, (B) Honor Certain

Prepetition Obligations Related Thereto, (C) Maintain Existing

Business Forms, and (D) Continue to Perform Intercompany

Transactions, (II) Granting Superpriority Administrative Expense Status

to Postpetition Intercompany Balances, and (III) Granting Related

Relief [ECF Doc. # 513] (the “Second Interim Cash Management Order”);

and

• Third Interim Order (I) Authorizing the Debtors to (A) Continue to

Operate Their Cash Management System, (B) Honor Certain Prepetition

Obligations Related Thereto, (C) Maintain Existing Business Forms, and

(D) Continue to Perform Intercompany Transactions, (II) Granting

Superpriority Administrative Expense Status to Postpetition

Intercompany Balances, and (III) Granting Related Relief [ECF

Doc. # 699] (the “Third Interim Cash Management Order” and together

with the First Interim Cash Management Order and the Second Interim

Cash Management Order, the “Interim Cash Management Orders”).

(See id.)

F. The Debtors’ Special Committee

CNL formally formed a special committee (the “Special Committee”) on or around June

19, 2022, currently comprised of two disinterested directors both appointed on or around June

30, 2022. (Declaration of Alex Mashinsky, Chief Executive Officer of Celsius Network LLC, In

Support of Chapter 11 Petitions and First Day Motions ¶ 128, ECF Doc. #23.) The Special

Committee of the Board of CNL (“Special Committee”) has a fiduciary duty to maximize value

for all stakeholders. (Committee Objection ¶ 4). One of the two members of the Special

Committee were designated by affiliates of significant preferred equity holder WestCap

Management LLC (“WestCap.”). (Id.)

G. The Motion

On September 22, 2022, the Requesting Equity Holders filed the Motion seeking the

appointment of an Official Preferred Equity Committee for four main reasons. First, on the

grounds that they are not adequately represented, such that appointment of the Committee is

necessary at this time. Second, on the grounds that the Chapter 11 Cases are sufficiently

complex to justify the appointment of such a committee. Third, on the grounds that the Debtor is

not “hopelessly insolvent,” such that equity may get a recovery. Fourth, on the grounds that the

benefits of an Official Preferred Equity Committee outweigh the costs.

II. THE DEBTOR’S OBJECTION

The Debtors’ Objection argues that 1) equity holders are adequately represented such that

a committee is not necessary at this time; 2) the Requesting Equity Holders have not

demonstrated that they have a substantial likelihood of recovery; and 3) other factors such as the

cost to the estate and the complexity of the case do not favor appointing an Official Preferred

Equity Committee.

As to adequate representation, the Debtors argue that the Requesting Equity Holders have

been able to meaningfully participate in these Chapter 11 Cases and that they are not entitled to

“exclusive representation.” (Debtors’ Objection ¶¶ 19–28.) As to the likelihood of equity

recovery, the Debtors note that the fact that equity may recover is not enough to satisfy the

burden required to appoint an Official Preferred Equity Committee. (Id.¶¶ 29–37.) As to the

other factors Courts consider, such as timeliness and cost to the estate, the Debtors argue that the

request is untimely and that that the costs outweigh the benefits. (Id. ¶¶ 42–44.)

III. THE COMMITTEE’S OBJECTION

The Committee opposes the Motion for largely the same reasons as the Debtors but puts

forth some unique objections. First, the Committee claims that the Requesting Equity Holders

have not demonstrated that there are unique circumstances here that prevent the board of

directors from being a fiduciary for shareholders. (Committee’s Objection ¶¶ 16–18.) The

Committee notes that one of the members of the board was appointed by a significant preferred

equity holder. (Id. ¶ 18).

Second, the Committee argues that the interests of Preferred Equity Holders are aligned

with the Committee’s interests. (Id. ¶ 21). They note that the Committee’s duty to maximize

value to the estate will “inhere to the benefit of shareholders.” (Id.) Further, the Committee

argues that the “inevitable disagreement among stakeholders” is not a basis for forming a

statutory committee. (Id. ¶ 22).

Third, the Committee argues that the preferred equity holders will be adequately

represented by Milbank and Jones Day, even in the absence of a statutory committee. (Id. ¶ 15).

The Committee notes that the Requesting Equity Holders, who hold 87% of the CNL Series B

preferred stock, would be the overwhelming beneficiaries of an equity committee. (Id.) They

note that “even if the remaining 13% of the preferred equity was widely held, that fact would not

outweigh the grossly disproportionate benefits to the well-counseled and well-heeled investors.”

(Id.)

IV. LEGAL STANDARD

Section 1102(a)(2) of the Bankruptcy Code provides that “[o]n request of a party in

interest, the court may order the appointment of additional committees of creditors or of equity

security holders if necessary to assure adequate representation of creditors or of equity security

holders.” 11 U.S.C. § 1102(a)(2). “Appointment of committees of equity security holders is the

exception rather than the rule in chapter 11 cases.” 7 COLLIER ON BANKRUPTCY § 1102.03 (16th

ed. 2022).

The term “adequate representation” is not defined in the Bankruptcy Code; instead,

bankruptcy courts have absolute discretion in determining whether an official equity committee

is warranted under the specific facts and circumstances of each case. In re Eastman Kodak Co.,

No. 01-16034, 2012 WL 2501071, at *1 (Bankr. S.D.N.Y. June 28, 2012) (citing In re Spansion,

Inc., 421 B.R. 151, 156 (Bankr. D. Del. 2009); In re Beker Indus. Corp., 55 B.R. 945, 948

(Bankr. S.D.N.Y. 1985)). To determine whether there is “adequate representation,” courts

generally consider: (i) whether equity holders are adequately represented by stakeholders already

at the table; (ii) the complexity of the case; (iii) whether the debtors are hopelessly insolvent; (iv)

the delay that would result from the appointment of an official equity committee and the timing

of the request relative to the status of the case; and (v) whether the costs associated with such

committee significantly outweigh the need for adequate representation of equity holders. See,

e.g., In re Williams, Inc., 281 B.R. 216, 220 (Bankr. S.D.N.Y. 2002). No one factor is

dispositive, and the weight attributed to each factor depends upon the facts and circumstances of

each case. In re Kalvar Microfilm, Inc., 195 B.R. 599, 600– 01 (Bankr. D. Del. 1996).

V. DISCUSSION

The Court agrees with the Committee and the Debtors that appointment of an Official

Preferred Equity Committee is inappropriate for three reasons. First, the equity holders are

adequately represented by already existing stakeholders and do not need additional

representation. Second, the Requesting Equity Holders have not met their burden to demonstrate

that there is a substantial likelihood of equity recovery. Finally, other factors such as the balance

of costs and benefits to the estate, as well of the complexity of these Chapter 11 Cases, do not

weigh in favor or appointing an Official Preferred Equity Committee.

A. Whether there is Adequate Representation by Existing Stakeholders

The question whether equity holders are adequately represented requires the movant to

demonstrate not merely “whether the shareholders are ‘exclusively’ represented, but whether

they are ‘adequately’ represented.” Williams, 281 B.R. at 223 (internal citation omitted). The

Requesting Equity Holders have not met that burden. Preferred equity holders are adequately

represented by three different constituencies: 1) the Requesting Equity Holders; 2) the Debtors’

board and; 3) the Committee.

1. Adequacy of Representation by Requesting Equity Holders

The preferred equity holders are adequately represented by the Requesting Equity

Holders. The Requesting Equity Holders have already demonstrated their ability to advocate for

their own interests without the title of an official committee and the burden such committee

would have on the estate’s resources. See Spansion, 421 B.R. at 163. As in Spansion, the

Requesting Equity Holders are “well organized, well represented by counsel, and adequate to the

task of representing [their] interests without ‘official’ status.” Id. The Requesting Equity

Holders have made numerous appearances in these cases to date, including filing an objection to

the motion of the U.S. Trustee for the appointment of an examiner [ECF Doc. # 734] as well as

negotiating first day relief and engaging with the Committee and the Debtors with respect to the

procedures for certain asset sales. (Committee’s Objection ¶ 14.)

Further, the Requesting Equity Holder’s argument that that they cannot represent all

preferred equity holders is not compelling. While it is true that the Requesting Equity Holders

represent 87%, and not 100% of the preferred B Stock, the Requesting Equity Holders have not

indicated any issues on which their interests are dis-aligned with the remaining equity holders

(the “Remaining Equity Holders”), such that a formal statutory committee would add value for

the Remaining Equity Holders. (Committee Objection ¶ 15.) Even if the remaining 13% of the

preferred equity was widely held, that fact would not outweigh the grossly disproportionate

benefits to the well-heeled investors. See In re SunEdison, Inc., 556 B.R. 94, 103 (Bankr.

S.D.N.Y. 2016) (denying appointment of equity committee “[n]otwithstanding the admitted

complexities of the Debtors’ cases and the number of outstanding common shares and holders of

record”); Williams, 281 B.R. at 223 (“[W]hile there is a large number of shareholders, not every

case with such a large number will require an official equity committee. Indeed, if Congress’

intent was otherwise, it would have mandated the appointment of equity committees instead of

leaving it within the discretion of the UST and the Court.”).

2. Adequacy of Representation by the Debtors’ Management Team

The Requesting Equity Holders also have not demonstrated that the Debtors’ board of

directors will not provide adequate representation. The “usual presumption [is] that the Board

will pay due (perhaps special) regard to the interests of shareholders. In re Oneida Ltd., No. 06-

10489 (ALG), 2006 WL 1288576, at *2 (Bankr. S.D.N.Y. May 4, 2006). Courts have generally

only found the Debtors’ board to be insufficient fiduciaries where there are special circumstances

that render the board unable to adequately represent equity holders. For example, in Oneida, the

Court appointed an official equity committee where the board consisted of only secured lenders

who had proposed a plan that paid unsecured creditors and wiped-out equity. Id. Here, the

Requesting Equity Holders have not demonstrated that special circumstances exist to render the

Debtors’ board an inappropriate fiduciary. Unlike in Oneida, to date, no plan or reorganization

has been proposed, so there is no evidence equity holders are being disfavored, and the Debtors’

board contains equity holders, rather than being controlled exclusively by unsecured creditors.

(See Committee Objection ¶ 18.) Further the fact that the Debtors have communicated a desire

to work to maximize customer value, does not mean they are foregoing their fiduciary duty to

shareholders. As the Committee notes, since “Celsius’ asset deployment is dependent on users

entrusting their crypto assets to Celsius,” it is proper to “actively engage with the Committee to

develop a viable exit from chapter 11 that will result in maximum recoveries to its customers.”

(Committee’s Objection ¶ 18.)

3. Adequacy of Representation by the Committee

The Requesting Equity Holders will also be represented by the Committee. The

Committee has a duty to maximize the value of the Debtors’ estates. (Committee Objection 21).

The Requesting Equity Holders assert that the interests of customers and equity holders are

“uniquely adverse” due to the Committee’s view that customers hold claims against every

Debtor entity. (See Motion ¶¶ 29–30.) But the Requesting Equity Holders provide no legal

support for the proposition that a disagreement on certain legal issues related to distribution,

renders the appointment of an equity committee necessary. They cite In re Pilgrim’s Pride

Corp. for the proposition that an equity committee should be appointed where the interests of

shareholders and unsecured creditors diverge. (Motion ¶ 45 (citing 407 B.R. 211, 217 n.17

(Bankr. N.D. Tex. 2009).). But Pilgrim’s Pride does not stand for the proposition that any

disagreement between equity and unsecured creditors merits a statutory equity committee. In

Pilgrim’s Pride there was substantial public evidence that the Debtors’ assets exceeded their

liabilities and the Debtors’ largest shareholder served as “creditor, as guarantor of Debtors’ bank

debt and as Debtors’ contractual counterparty” such that the Debtors’ board and creditors’

committee could not adequately represent equity. Id. at 217–218. Here, in contrast, all the

public information points to the Debtors’ insolvency and while there may be legal disagreements

among parties, the Debtors do not serve as both the largest shareholder and a creditor such that

their fair representation of all stakeholders is precluded. Id. Finally, in Pilgrim’s Pride the risk

of burdening the debtor with unnecessary fees was not present, given that under then governing

Fifth Circuit standards, “professionals representing an equity committee may not be entitled to

compensation if the subject case ultimately provides no return to equity[.]” Id. at 217.

Accordingly, Pilgrim’s Pride is inapposite.

B. Whether There is a Substantial Likelihood that Equity Will Recover

The Requesting Equity Holders have not shown that there is substantial likelihood that

equity will recover. “[G]enerally no equity committee should be appointed when it appears that

a debtor is hopelessly insolvent because neither the debtor nor the creditors should have to bear

the expense of negotiating over the terms of what is in essence a gift.” In re Emons Industries,

Inc., 50 B.R. 692, 694 (Bankr.S.D.N.Y.1985). Equity committees “should not be appointed

unless equity holders establish that (i) there is a substantial likelihood that they will receive a

meaningful distribution in the case under a strict application of the absolute priority rule.” In re

Williams, 281 B.R. at 223.

Here, no party has stated that the Debtors are “hopelessly insolvent.” The Requesting

Equity Holders put forth no more than a contingent legal theory in support of their contention

that equity will recover. Their theory is that because customers will not have valid claims

against Non Customer Facing Entities, there will recoveries for equity. (Motion ¶ 42). But both

the Committee and the Debtors strongly contest this legal theory and the Court has yet to rule on

this issue. (Debtors’ Objection ¶ 31; Committee’s Objection ¶ 22). Moreover, the fact that

equity holders may be entitled to recovery depending on this Court’s ruling in certain disputes in

these Chapter 11 Cases is insufficient to satisfy the Requesting Equity Holders’ high burden that

there is a “substantial likelihood” of recovery. Williams, 281 B.R. at 223. All the other

information available indicates that the Debtors are likely insolvent: the Debtors’ CFO stated

under oath that the Debtors are insolvent and the Debtors’ latest operating report indicates that

the Debtors’ current liabilities are approximately $329 million greater than their current assets.

(Committee’s Objection ¶ 26; Debtors’ Objection ¶ 30.)

C. Whether Other Factors Support Appointing an Equity Committee

The other factors Courts often consider, such as the cost to the estate and the

complexity of these Chapter 11 Cases, do not support appointment of an Official

Preferred Equity Committee.

An Equity Committee should not be appointed if “the cost of the additional

committee sought significantly outweighs the concern for adequate representation.” See

Beker Indus. Corp., 55 B.R. at 949. The Requesting Equity Holders are already

adequately represented, so there is minimal benefit to the estate to the appointment of

an Official Preferred Equity Committee. (See Infra § V.A). The cost to the estate, on

the other hand, is considerable. The estate would be forced to fund the legal fees of an

Official Preferred Equity Committee to advance a contingent legal theory which would

divert money from creditor recovery, when it appears at this point unlikely equity will

get any recovery. (See Infra § V.B.) The Requesting Equity Holders are not pro se

litigants who would otherwise be incapable of advancing their interests, they are

sophisticated financial institutions who are already represented by highly competent

counsel. See Spansion, 421 B.R. at 163-64 (denying a motion to appoint an equity

committee because the equity security holders were “well organized, well represented

by counsel, and adequate to the task of representing its interests without ‘official’

status.”).

Further, nothing precludes the Requesting Equity Holders from seeking an

award of their fees as an administrative expense under Section 503(b) of the bankruptcy

code if they make a “substantial contribution” to the case. See, e.g., Williams, 281 B.R.

at 223 (noting that “in most cases, even those equity holders who do expect a distribution

in the case can adequately represent their interest without an official committee and can

seek compensation if they make a substantial contribution in the case”). Accordingly, the

costs to the estate of appointing an Official Preferred Equity Committee significantly

outweigh any benefits.

Finally, while these Chapter 11 Cases are certainly complex, that fact does not cut in

favor of granting an Official Preferred Equity Committee. The Requesting Equity Holders

correctly note that this fact is undisputed, but do not provide any justification for why this

complexity merits the appointment of an Official Preferred Equity Committee. (Motion ¶ 40.).

In fact, as the Debtors point out, this complexity may cut against appointing an Official

Preferred Equity Committee, as due to the number of stakeholders involved there is a higher risk

of duplication of efforts, given that the Examiner and other parties are already looking into some

of the same questions as the Requesting Equity Holders. (Debtors’ Objection ¶ 42.)

VI. CONCLUSION

Therefore, for the reasons explained above, the Objections are SUSTAINED and the

Motion is DENIED.

IT IS SO ORDERED.

Dated: October 24, 2022

New York, New York

Martin Glenn

_____ __________

MARTIN GLENN

Chief United States Bankruptcy Judge