Benthos Master Fund, Ltd. v. Etra

Background

Benthos Master Fund, Ltd. petitioned to confirm an arbitration award against Aaron Etra. The opinion states that Benthos is a California investment firm and Etra is a New York attorney. Etra served as an escrow agent for a transaction in which Benthos agreed to pay $5 million for Bitcoin. Benthos claimed that Etra released $4.6 million without authorization, violating his contractual and fiduciary duties, and that Benthos ultimately received no Bitcoin.

The escrow agreement required disputes to be decided by arbitration under the United Nations Commission on International Trade Law rules. Benthos began arbitration on June 28, 2019. Although Etra received notice and communicated with the arbitrator by email, he did not attend the March 17, 2020 hearing or present evidence. The arbitrator issued an award on April 9, 2020.

Arbitration Award and Opposition

The arbitrator found that Etra released the funds without proper authorization and breached his contractual and fiduciary duties through conduct that was either willful or grossly negligent. The award provided Benthos $5,254,561.12, including damages, arbitration costs, and pre-award interest. It also provided post-award interest at a simple annual rate of 4% beginning May 1, 2020.

Etra, representing himself, filed a late letter that the Court treated as his opposition. He argued that the arbitration was one-sided and referred to an earlier related proceeding. The Court explained that the earlier proceeding did not decide whether Etra acted lawfully in releasing Benthos’s funds. Etra also cited the hardship of a large judgment, but the Court held that hardship was not a legal basis to avoid or delay confirmation.

Court’s Analysis

The Court applied the deferential standard governing confirmation of arbitration awards. Under that standard, a court generally must confirm an award unless it is vacated, modified, or corrected. Confirmation is proper when the arbitrator acted within the authority granted by the parties’ agreement and the award has at least a minimally supportable basis in that agreement and the facts.

The Court found that arbitration was appropriate because both parties signed the escrow agreement, which expressly required arbitration of their disputes. It also found no basis to disturb the award. The arbitrator acted within his authority in determining that the release of the $4.6 million was unauthorized and breached Etra’s contractual and fiduciary duties. The Court also found that the arbitrator acted within his authority in concluding that the breach resulted from gross negligence or willful misconduct.

Disposition

Judge Alison J. Nathan granted Benthos’s petition to confirm the arbitration award. The Clerk was directed to enter judgment for Benthos in the amount of $5,254,561.12, plus interest accrued since May 1, 2020, at a simple annual rate of 4%, with post-judgment interest continuing at the same rate. The Court also directed that the case be closed and that Benthos serve Etra with the order and judgment and file proof of service.