Securities and Exchange Commission v. Woods, Livingston Group Asset Management Company d/b/a Southport Capital, and Horizon Private Equity, III, LLC was filed in the United States District Court for the Northern District of Georgia on August 20, 2021. The SEC alleges that Defendants defrauded investors, many of whom were elderly, with illusory promises of guaranteed returns for their investment in the Defendants’ affiliated fund.

Continue Reading New Complaint – SEC v. Woods, et al.

Mills v. Trustmark National Bank, et al. was filed in the Southern District of Mississippi on August 19, 2021 by a receiver appointed on behalf of companies engaged in a scheme to defraud investors by producing false deeds for the purchase and sale of timber.

Plaintiff Alysson Mills (“Plaintiff”) is the Receiver for Arthur Adams (“Adams”) and his company turned Ponzi scheme Madison Timber Properties, LLC (“Madison Timber”).  The defendants are Trustmark Corporation d/b/a Trustmark National Bank (“Trustmark”), Southern Bancorp Bank (“Southern”), Riverhills Bank (“Riverhills”), Bennie Butts (“Butts”), and Jud Watkins (“Watkins”) (collectively, “Defendants”).  Butts and Watkins were employees of Trustmark and Riverhills during the alleged Ponzi scheme.


Continue Reading New Complaint – Mills v. Trustmark National Bank, et al.

Chang, et. al. v. Interactive Brokers LLC (“IB”) was filed in the Northern District of California on August 2, 2021. The complaint seeks civil damages for claims of aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violation of California Business and Professions Code.

Continue Reading New Complaint – Chang, et. al. v. Interactive Brokers LLC

The collapse of a Ponzi scheme usually follows a familiar pattern.  When the scheme is exposed, the company created by the schemer—which is usually little more than a sham entity—is placed into receivership or declares bankruptcy (or both).  A receiver or bankruptcy trustee is then tasked with recovering any funds belonging to the estate so that they may be distributed to creditors.  As part of this process, these court-appointed parties step into the shoes of the company and may bring any litigation that the company itself could have brought.  Bankruptcy trustees are also granted the exclusive right to bring “general claims” on behalf of the entities’ creditors.

This process creates a thorny question: who may seek recovery from a third party alleged to have been involved in the fraud?  Creditors that lent funds to sham companies often pursue claims against financial institutions that banked the schemers on aiding-and-abetting theories.  Yet receivers and trustees also often bring these claims, leading to duplicative litigation and the question of who properly “owns” the claim.

A recent decision by the U.S. District Court for the District of Minnesota provides important guidance on this question.  Ritchie v. JPMorgan Chase & Co., No. 14-cv-04786, 2021 WL 2686079 (D. Minn. June 30, 2021) untangles who has standing to bring claims against a third party alleged to have aided and abetted a Ponzi scheme.  As the Court explains, “general” claims for loss of funds belong exclusively to court-appointed bankruptcy trustees.  Third parties may only bring particularized claims that arise from injuries “directly traceable” to the defendant’s conduct.  Ritchie thus serves as a touchstone in disputes over standing in Ponzi litigation.


Continue Reading Minnesota Court Untangles Who Owns What Claim in the Fallout of a Ponzi Scheme

Abidog v. New York Life Insurance Co. was filed in the Superior Court of the State of California on June 18, 2021, seeking damages and rescission of unregistered promissory notes sold in a Ponzi scheme that deprived elderly and other unwitting investors of their life savings.  The fifteen-count complaint alleges violations of California statutory and common law, as well as federal securities law.

Defendant Felix Chu is a former agent of Defendants New York Life Insurance Company and NYLIFE Securities LLC (collectively, “New York Life”) who used his role at New York Life to perpetrate the Ponzi scheme.  Plaintiffs are investors in the scheme.


Continue Reading New Complaint – Abidog v. New York Life Insurance Co.

Wiand v. ATC Brokers Ltd, et al. was filed in U.S. District Court for the Middle District of Florida, on May 28, 2021.  The complaint was filed by a Receiver appointed in an action brought by the Commodity Futures Trade Commission (the “CFTC”) alleging the operation of a Ponzi scheme.  The complaint alleges (1) aiding and abetting fraud, (2) aiding and abetting breach of fiduciary duties, (3) gross negligence, and (4) simple negligence.  In addition, the complaint seeks to avoid alleged fraudulent transfers received by ATC Brokers Ltd.

Plaintiff is the court appointed Receiver over Oasis International Group, Limited, Oasis Management LLC, and Satellite Holdings Company (the “Oasis Entities”) in an action filed by the CFTC, titled Commodity Futures Trade Commission v. Oasis International Group, Limited, et al., Case No. 8:19-cv-00886-VMC-SPF (M.D. Fla. Apr. 15, 2019).  Defendants include: (1) ATC Brokers Ltd., the exchange firm the Ponzi scheme operators used to carry out the scheme; (2) Spotex LLC, the entity that provided the software used to carry out the Ponzi scheme; and (3) an owner of both entity Defendants.


Continue Reading New Complaint – Wiand as Receiver for Oasis International Group, Limited, et al. v. ATC Brokers Ltd, et al.

Whitmore v. Horwitz was filed in the Central District of California on April 20, 2021, seeking class certification and unspecified civil damages. The complaint alleges fraud by omission, aiding and abetting fraud, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.

Plaintiffs are a group of investors seeking to represent a class of those who invested in Horwitz’s company, 1inMM Capital, LLC (“1inMM”). The defendants are Zachary Horwitz, 1inMM, and City National Bank (“City National”), the bank that Horwitz and 1inMM used.


Continue Reading New Complaint – Whitmore v. Horwitz

Plaintiff Surefire Dividend Capital, LP (“Plaintiff”) filed Surefire Dividend Capital, LP v. Industrial and Commercial Bank of China Financial Services LLC in the Supreme Court of New York for the County of New York on April 15, 2021, claiming at least $46,598,676.84 in money damages, along with its costs and attorneys’ fees.  Specifically, the complaint alleges claims for aiding and abetting fraud and aiding and abetting breach of fiduciary duty against Defendant Industrial and Commercial Bank of China Financial Services LLC (“ICBC”).

Plaintiff is an entity investor in Broad Reach Capital, LP (“Broad Reach”)—a purported hedge fund allegedly turned Ponzi-scheme ran by Brenda Smith (“Smith”).  The defendant served as the clearing broker for Broad Reach, maintained several accounts on behalf of Broad Reach, and allowed many transfers from the Broad Reach accounts to other accounts controlled by Smith, both internally and externally.


Continue Reading New Complaint – Surefire Dividend Capital, LP v. Industrial and Commercial Bank of China Financial Services LLC