Case D-174 · AI Sanctions Case Tracker

In re Prince Global Holdings Limited et al.

U.S. Bankruptcy Court for the Southern District of New York, No. 26-10769 (MG), Chapter 15, April 2026 (NO COURT-IMPOSED SANCTION; no court order addresses the AI errors, firm apology and corrected filing only) (Sullivan & Cromwell LLP; Andrew G. Dietderich)

The case

In re Prince Global Holdings Limited et al., No. 26-10769 (MG) (Bankr. S.D.N.Y.), Chapter 15 cases before Chief Judge Martin Glenn. Debtors: Prince Global Holdings Limited and 29 affiliated British Virgin Islands entities of the Prince Group (30 debtors in total; 28 of them OFAC-designated on October 14, 2025, the remaining two, Amber Hill Ventures Limited and Lateral Bridge Global Limited, identified in the EDNY civil forfeiture complaint), the conglomerate whose chairman, Chen Zhi, was indicted in the Eastern District of New York on October 14, 2025 (wire fraud and money laundering conspiracies; forfeiture of approximately 127,271 Bitcoin). Foreign proceedings: provisional liquidation in the Eastern Caribbean Supreme Court, BVI High Court of Justice (Commercial Division), under section 170 of the BVI Insolvency Act, 2003; joint provisional liquidators (the "JPLs") Paul Pretlove, David Standish, and James Drury of Interpath, appointed ex parte on January 9, 2026, and continued inter partes on January 29, 2026. Sullivan & Cromwell LLP (Andrew G. Dietderich, Sharon Cohen Levin, Christopher J. Dunne, Jacob M. Croke, Alexa J. Kranzley) is counsel to the JPLs as authorized foreign representatives. Boies Schiller Flexner LLP represents Cosimo Borrelli, the purported sole director of 25 of the debtors; Kobre & Kim LLP represents Amber Hill and Lateral Bridge. Primary documents (all held in `files/sources/`, indexed in `files/sources-index.md`): the original section 1519 motion, Doc. 9 (filed April 9, 2026): https://storage.courtlistener.com/recap/gov.uscourts.nysb.334560/gov.uscourts.nysb.334560.9.0.pdf ; the Dietderich letter with Schedule A, Doc. 25 (filed April 18, 2026): https://storage.courtlistener.com/recap/gov.uscourts.nysb.334560/gov.uscourts.nysb.334560.25.0.pdf ; the corrected motion, Doc. 27, and its redline, Doc. 27-1 (filed April 18, 2026): https://storage.courtlistener.com/recap/gov.uscourts.nysb.334560/gov.uscourts.nysb.334560.27.0.pdf and https://storage.courtlistener.com/recap/gov.uscourts.nysb.334560/gov.uscourts.nysb.334560.27.1.pdf ; the Kobre & Kim letter, Doc. 36 (filed April 21, 2026): https://storage.courtlistener.com/recap/gov.uscourts.nysb.334560/gov.uscourts.nysb.334560.36.0.pdf ; the provisional-relief opinion, Doc. 38 (April 23, 2026), 2026 WL 1096899: https://govinfo.gov/content/pkg/USCOURTS-nysb-1_26-bk-10769/pdf/USCOURTS-nysb-1_26-bk-10769-0.pdf ; the recognition opinion, Doc. 82 (June 11, 2026), 2026 WL 1694259: https://govinfo.gov/content/pkg/USCOURTS-nysb-1_26-bk-10769/pdf/USCOURTS-nysb-1_26-bk-10769-1.pdf ; the recognition-order opinion, Doc. 89 (June 18, 2026), 2026 WL 1758972: https://govinfo.gov/content/pkg/USCOURTS-nysb-1_26-bk-10769/pdf/USCOURTS-nysb-1_26-bk-10769-2.pdf ; Charlotin database entry (dated April 18, 2026): https://www.damiencharlotin.com/hallucinations/ (source document: https://www.damiencharlotin.com/documents/2002/In_re_Prince_USA_18_April_2026.pdf). Provenance: added October 21, 2026, on Alex's inclusion ruling via main ("Add it"), outside the twice-weekly sweep, after primary-source verification from the CourtListener/RECAP docket documents and the govinfo opinions package, and reconciliation against the Charlotin database (see (3) below). Inclusion note: this matter falls outside the library's standing inclusion tiers, because no sanction, penalty, discipline, or other court-imposed consequence of any kind was imposed for the AI errors, and no court order addresses the conduct at all; it is included on Alex's ruling as a documented no-consequence admission, distinct from the no-sanction declinations at D-168 and D-173, where a court took the matter up and decided to impose nothing. Here the court never took it up.

What happened

Sullivan & Cromwell used AI tools (the letter does not identify which) in preparing the JPLs' Emergency Motion for Entry of Orders Granting (I) Ex Parte Relief and (II) Provisional Relief, Pursuant to Section 1519 of the Bankruptcy Code, filed April 9, 2026 (Doc. 9), and the motion went out containing fabricated and misquoted authorities. Boies Schiller Flexner brought the errors to the firm's attention; Dietderich states he "became aware Thursday evening" (April 16, 2026) and filed a letter to the court on Saturday, April 18, 2026 (Doc. 25), with a Schedule A itemizing the corrections, and filed the corrected motion with a redline the same day (Docs. 27, 27-1). Schedule A lists 42 paragraph-level corrections across six filings: 21 in the section 1519 motion itself, and 21 more in the Verified Petition (1), the joint-administration motion (1), the recognition-hearing scheduling motion (2), the Chissick Declaration (7), and the Pretlove Declaration (10). The firm states the errors in the other filings are not AI-related ("non-substantive and/or clerical"), and it does not allocate the motion's errors item by item between AI and manual error: the letter says the inaccuracies "include" AI hallucinations and that other errors "appear to have resulted in whole or in part from manual error." Kobre & Kim's April 21, 2026 letter (Doc. 36) counts the motion's damage as "no less than 28 erroneous citations in the Motion — including, but not limited to, fabricated quotations from an opinion from this Court" (a party's count and characterization, not a court finding). The worst items, verified by comparing Doc. 9 against Doc. 27 and Schedule A: (a) In re Soundview Elite Ltd. cited at motion ¶¶ 26 and 33 as 503 B.R. 571, 588–90 (Bankr. S.D.N.Y. 2014), the correct citation is 543 B.R. 78 (Bankr. S.D.N.Y. 2016), and quoted at ¶ 33 for language that does not appear in the opinion ("The irreparable harm here is the risk that the estate's assets will be dissipated or otherwise placed beyond the reach of this Court, such that any relief awarded at a later time would be meaningless"); the corrected motion deletes the quotation and substitutes a paraphrase parenthetical citing 543 B.R. at 117, 119–20. (b) In re Three Arrows Capital, Ltd.: the ¶ 27 citation to 2022 WL 17985951, at 7 and the ¶ 34 quotation attributed to that WL number ("Where the foreign representatives lack information regarding the debtor's assets and their location, provisional relief is appropriate to ensure that estate property can be identified and preserved") are both deleted outright in the corrected motion; at ¶ 55 the WL number itself was garbled to 2022 WL 1798595169 (correct: 2022 WL 17985969) with a misstated parenthetical; and at ¶ 42 the discovery standard quoted from Three Arrows, 647 B.R. 440, 451, was misquoted in wording and numbering. (c) In re BYJU's Alpha, Inc., 2024 WL 1455586: pincites throughout were given in a nonexistent format ("at 6–7," "at 7," without star pagination; correct pincites include 1, 8, 10), and a district-court affirmance, "aff'd, 2024 WL 3474561 (D. Del. July 18, 2024)", cited at ¶¶ 27 and 33 is deleted in both places in the corrected motion. (d) Motion ¶ 52 n.2: the citation to Calderon-Cardona v. Bank of New York Mellon, 821 F.3d 161, 169 (2d Cir. 2016), with its parenthetical, is deleted entirely, and the parenthetical quotation attributed to Hausler v. JPMorgan Chase Bank, N.A., 770 F.3d 207, is replaced with the opinion's actual language (and its pincite corrected from 212 to 211). (e) Motion ¶ 59: a statutory quotation, section 1519(b) supposedly permits the court to grant relief "on an ex parte basis", is deleted entirely. (f) Misquotations corrected at ¶ 34 (In re Team Systems International, LLC, 2023 WL 1428572: quoted language replaced with the opinion's actual "cause for concern" / "may move or conceal assets" language, pincite 8 corrected to 12) and ¶ 40 (In re Innua Canada Ltd.: quotation restored to the opinion's actual bracketed wording, and a case number deleted). The remaining motion corrections are wrong or missing pincites, docket numbers, and cross-references (e.g., Oi S.A., Muscletech, GHR Energy, M4 Enterprises, Worldwide Educational Services, Iovate Health Sciences, ENNIA Caribe, Picard). The Pretlove Declaration corrections include a garbled citation at ¶ 9 n.3 rendering a Three Arrows-related year as "20234" and wrong titles for the UN OHCHR and Amnesty International reports at ¶ 23 n.4.

The rule and the sanction

No sanction was imposed, and no court order in this matter addresses the AI errors at all. The only rule invoked on this record is the one Dietderich invoked against his own firm: "The Firm and I are keenly aware of our responsibility to ensure the accuracy of all submissions including under Local Bankruptcy Rule 9011-1(d), and I take responsibility for the failure to do so" (Doc. 25). The letter states the firm's AI policies "were not followed in connection with the preparation of the Motion," that its citation-review process "did not identify the inaccurate citations generated by AI," and apologizes: "We sincerely regret the errors in the Motion and the burden they have imposed on the Court and the parties, and I apologize on behalf of our entire team." It records remedial measures, a full review of the circumstances, a re-review of all filings in the matter (confirming no other AI-related errors), an evaluation of further training and review enhancements, and a personal call to Boies Schiller Flexner to thank them and apologize. The court's April 23, 2026 opinion (Doc. 38, 2026 WL 1096899) decides the matter entirely on the corrected papers and never mentions the errors, the letter, or AI: it opens, "Pending before the Court is the Corrected Emergency Motion for Entry of Orders Granting (I) Ex Parte Relief and (II) Provisional Relief, Pursuant to Section 1519 of the Bankruptcy Code (the 'Provisional Relief Motion,' ECF Doc. # 27)," and concludes, "the Court GRANTS the Foreign Representatives' Provisional Relief Motion." Kobre & Kim's April 21 letter (Doc. 36), which invoked the "fake and erroneous caselaw citations" in asking the court to adjourn the April 22 hearing so the objectors could "confirm that there are no other hallucinations or false citations in the JPLs' papers," was not granted: the opinion issued the next day does not cite Doc. 36, and no adjournment, order to show cause, certification or disclosure requirement, fee award, or referral appears anywhere in the located record. The recognition opinion (Doc. 82, June 11, 2026, 2026 WL 1694259) and the recognition-order opinion (Doc. 89, June 18, 2026, 2026 WL 1758972) are likewise silent on the AI episode. Borrelli's June 23, 2026 notice of appeal (S.D.N.Y. No. 26-cv-5279) challenges recognition, not the AI errors. Recorded outcome, as it stands through the October 21, 2026 verification: the apology, the itemized Schedule A, and the same-day corrected filing closed the matter with no court-imposed consequence, do not present the apology as a sanction, a court-ordered correction, or a judicial finding. Limitation: this rests on the published opinions and the docket documents located on CourtListener/RECAP and govinfo; hearing transcripts were not reviewed, and no transcript passage addressing the episode was located in any filing or opinion. Charlotin reconciliation: Charlotin's database does carry this matter (case name "In re Prince Global Holdings Limited, et al.," court "S.D. New York (Bankruptcy)," date April 18, 2026, the letter's date, there being no decision date; party "Lawyer"; AI tool "Unidentified"; outcome "Firm apologised"; no monetary penalty and no professional sanction recorded), and his held source document is the same Doc. 25 letter. His hallucination itemization is a four-item sample, not the full Schedule A: (1) a fabricated/non-existent-or-incorrect Westlaw citation for Three Arrows Capital; (2) the garbled/doubled Soundview Elite citation; (3) the false Soundview Elite quotation; (4) an erroneous citation with impossible year formatting ("20234"), item (4) in fact comes from the Pretlove Declaration (¶ 9 n.3), not the motion, and his items omit the deleted Three Arrows quotation, the deleted BYJU's affirmance, the Calderon-Cardona deletion, and the section 1519(b) statutory misquote. His outcome and no-penalty fields match the primary record; his metadata is used here for cross-check only, and the primary documents govern.

How the lawyer responded

NOT GRADED, flagged to main on October 21, 2026, for a ruling. The standing framework grades the lawyer's response from the court order's record; here no court order addresses the conduct, so there is no order-based record to grade from, and no grade is assigned rather than inventing one. For main's ruling, the response facts recorded in the firm's own letter (Doc. 25) are: the errors were flagged by opposing counsel (Boies Schiller Flexner), not self-discovered and not court-flagged; the partner states he became aware on Thursday evening, April 16; disclosure to the court, an itemized Schedule A of all corrections, a corrected motion with redline, a re-review of all other filings, and apologies to the court and to opposing counsel all followed on Saturday, April 18, before any court inquiry, order to show cause, or sanctions motion.

---

How it could have been avoided

This is the policy-on-paper failure in its purest documented form: the firm had the right policy, access to AI tools conditioned on two mandatory, tracked training modules that "repeatedly emphasize[] the risk of AI 'hallucinations,'" instruct lawyers to "trust nothing and verify everything," and make unverified AI output a policy violation, plus an Office Manual rule that lawyers "must independently check all answers, case citations, and other information or work product received from an AI Program" before anything goes to a court, and the April 9 motion still went out with a fabricated quotation from a bankruptcy opinion, a garbled Westlaw number, and a statutory quotation that does not exist, because on this filing nobody actually ran the check. A policy mitigates nothing unless a named reviewer pulls every cited authority in full before filing, and emergency ex parte papers, filed fast, read first, and relied on earliest, are where that step matters most, not where it gets skipped. The verification itself is mechanical and would have caught every headline item here: a reporter citation whose volume, year, and pincites cannot coexist (503 B.R. 571 (2014) for a 2016 opinion reported at 543 B.R. 78), a Westlaw number with two extra digits, pincites in a format the cited opinion does not use, and quotations that return no hit in the opinion text. The response half of the lesson is the one the D-173 entry teaches from the other side: when the errors surfaced, the firm disclosed them to the court itself, itemized every correction in a schedule, apologized to the court and directly to the opposing counsel who had flagged them, re-reviewed every other filing in the case, and put a clean corrected motion and redline on the docket the same day, and on this record the episode ended there. Objecting counsel's papers are also part of the record other firms should note: the burden of re-checking an opponent's corrected filing, on a compressed schedule, was the objectors' stated grievance (Doc. 36), and unverified AI work exports that burden to everyone else in the case.

Sources