In re GigaWatt

Case Type:
Case Status:
20-1156 (9th Circuit, Jan 29,2021) Not Published
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the order of the U.S. Bankruptcy Court for the Eastern District of Washington (BC) denying a creditor’s motion for reconsideration of its approval of certain assets’ sale by the U.S. chapter 11 trustee (TR) in a crypto-miner’s bankruptcy. The BAP did not opine as to the sale order itself, as appellant’s failure to file an appeal nor tolling motion within the 14-day deadline set in Federal Rule of Bankruptcy Procedure 8002 obviated its jurisdiction, and rejected TR’s statutory mootness claim per its own binding precedent.
Procedural context:
Seventeen days after the BC had approved the TR’s proposed asset sale to EcoChain, Inc. (Eco), in an order (Sale Order) that deemed Eco to be a good-faith purchaser under § 363(m) of the Bankruptcy Code (Code), Jun Dam (Dam), a creditor of Giga Watt Inc. (GWI, Debtor, or GigaWatt, its seemingly common alternative moniker), filed a motion for reconsideration of that very order (Reconsideration Motion) and an adversary complaint against the TR (Complaint) under Federal Rules of Bankruptcy Procedure 9024 and 7003 (Rules collectively, and Rule individually), respectively. Dam proceeded to appeal both orders. The Complaint’s dismissal on September 17, 2020, he appealed to the U.S. District Court for the Eastern District of Washington (DC), where it remained pending as of the BAP’s opinion, the record having only been certified complete on December 30, 2020. As for the BC’s order denying his request for reconsideration (Reconsideration Order) from June 18, 2020, Dam tendered his notice of appeal (Notice) with the BAP on June 25, 2020, thirty-seven days after the Sale Order’s entry and seven days after the Reconsideration Order’s release. The Notice designated the Sale Order as the sole edict being challenged. Accordingly, the TR moved to dismiss the appeal for lack of jurisdiction due to Dam’s noncompliance with Rule 8002’s temporal deadline of fourteen days. The BAP began with two determinations: that while it lacked jurisdiction to review the Sale Order, the appeal was not statutorily moot, as prior precedent—Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC)—had concluded that § 363(m) “does not apply to lien-stripping under § 363(f).” It thereupon focused on whether the BC had abused its discretion in denying the Reconsideration Motion.
The underlying proceedings came about as a result of a uniquely modern phenomenon: crypto-mining of crypto-currency. GWI owned the “Giga Watt Project,” which consisted of facilities built (and yet to be built) in eastern Washington in which computers used to solve the math puzzles required to win stacks of virtual currency, known as “miners” or “cryptocurrency miners,” were housed. GWI raised funds for these expensive operations by selling “WTT tokens” in what it referred to as an “initial coin offering.” Essentially, token holders could provide their own miners or they could buy miners from Giga Watt’s Singapore-based partner. Dam purchased 1,025,660 WTT tokens for approximately $1.03 million, but never purchased or provided miners for installations in any one of GWI’s facilities. Within one year, the value of digital currencies plummeted even as the price of electricity climbed, ultimately resulting in GWI’s wholesale collapse. Overwhelmed, GWI turned to chapter 11, opening its reorganization case with the filing of a voluntary petition on November 19, 2018. Dam filed a proof of claim for $5,391,720.37, based on his projection of his lost profits over the fifty-year token period, on February 14, 2019. Meanwhile, GWI’s case was soon turned over to the management of the TR, who eventually decided to sell GWI’s “TNT Facility, including certain miners located there.” Among the relevant details, the sale was to be free and clear of liens, and the proposed buyer—EcoChain, Inc. (Eco)—agreed to a purchase price of $200,000, subject to overbidding. The Non-Profit Creditors’ Committee of WTT Token Holders and Miners (Committee), of which Dam was a member, objected to this proposed sale for a number of reasons. Unconvinced, the BC approved the sale on May 19, 2020. No one obtained a stay of the Sale Order so memorializing, and the sale closed within days of its docketing. Dam made his first move only seventeen days after the BC had entered the Sale Order with the filing of the Complaint and Reconsideration Motion. The BC denied the latter on June 18, 2020, and dismissed the former on September 17, 2020. Dam formally appealed the Reconsideration Order to the BAP on June 25, 2020, and the Complaint’s dismissal to the DC on September 29, 2020.
Robert J. Faris; Julia W. Brand; and Scott H. Gan

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