Conlan v. Alternative Asset Management Acquisition Corp. was filed in the United States District Court for the District of Colorado on June 14, 2022, claiming Defendants illegally profited from violations of securities laws. The complaint seeks to avoid multiple actual and constructive fraudulent transfers.
Plaintiff is court-appointed substitute receiver Mark Conlan (the “Receiver”), serving as representative and fiduciary of the creditors of the defendants named in the action brought by the Securities and Exchange Commission (“SEC”) captioned United States Securities and Exchange Commission v. Mediatrix Capital Inc., et al., No. 1:19-cv-02594-RM-SKC (the “SEC Action”). Defendants Alternative Asset Management Acquisition Corp., Autumn Gold Service, Crown Financial Services, Crown Private Limited, Marta Nystrom, Mercury Alternative Fund, Patricia Velcich, Phenom Ventures, Ritossa Investment Holding Ltd., and Y Man Investments are brokers that allegedly received funds in connection with the foreign currency trading scheme at issue in the SEC Action.
The SEC Action names individuals Michael A. Young, Michael S. Stewart, and Bryant E. Sewall and entities Mediatrix Capital Inc. (“Mediatrix”), Blue Isle Markets Inc., and Blue Isle Markets Ltd. (collectively, the “Receivership Defendants”).
The individual defendants named in the SEC Action formed Mediatrix in 2015 and jointly operated it to solicit investors to invest in their currency trading program. From March 2016 to September 2019, Mediatrix made two related securities offerings: the Managed Account Foreign Exchange Funds (“MAFEF”) and the Mediatrix Capital Fund Ltd. The Receivership Defendants offered investments through the MAFEF, claiming to investors that their monies would be pooled and traded according to the Receivership Defendants’ purported algorithmic trading strategy in foreign currency markets.
Unbeknownst to the investors, the Receivership Defendants pooled all monies acquired by Mediatrix and transferred large portions of those funds into other pooled accounts at prime brokerage firms. The Receivership Defendants then provided investors with false account statements showing that their investments had grown through profits from the underlying trades, when in reality, the brokerage accounts reflected substantial losses. In total, Receivership Defendants raised over $125 million from investors to operate the scheme, despite approximately 75% of investor monies having been misappropriated, lost in trading, or improperly spent to perpetuate the fraud.
Because the Receivership Defendants used brokerage accounts to further their scheme, the instant Defendants received more than $1 million in proceeds and commissions from the Receivership Defendants’ fraud. The Receiver alleges that these transfers are fraudulent and may be avoided, and seeks a judgment declaring these Defendants’ commissions are avoided and set aside as fraudulent transfers. The complaint further asks the court to direct these Defendants to disgorge commissions received in relation to the Mediatrix investment scheme and be preserved for the benefit of the receivership estate in the SEC Action.