Breach of Fiduciary Duty

Christian Fiene and Erik Kiser v. Matthew Schweinzger was filed in the Northern District of Illinois on October 27, 2021, seeking damages of more than $500,000 for state statutory and common law claims related to the Defendant’s role in a Ponzi scheme orchestrated by Zachery Horwitz and his company, 1inMM Capital, LLC (the “Horwitz Scheme”).

The Horwitz Scheme defrauded investors by representing that proceeds from each promissory note placed in 1inMM’s offering were going to be used to purchase the rights of particular movies, which would then be licensed to major streaming services such as HBO and Netflix.  However, Horwitz and 1inMM had no relationship with HBO or Netflix and had no plans to license any movie rights to those companies.

Plaintiffs Fiene and Kiser are two individuals who were duped into investing into the Horwitz Scheme.  Defendant Schweinzger, the Plaintiffs’ former college classmate, is a principal of JJMT Capital, LLC (“JJMT”), which Plaintiffs allege was created for the sole purpose of selling promissory notes to fund the Horwitz Scheme’s fake film licensing deals.  JJMT was paid 15% commission on each investment.


Continue Reading New Complaint – Fiene v. Schweinzger

Sedlar-Sholty, et al. v. Acclivity West, LLC, et al. was filed in the Superior Court of the State of California, County of Los Angeles on July 19, 2021 seeking damages for negligence, breach of fiduciary duty, and negligent and intentional misrepresentation in connection with a life settlement investment Ponzi scheme.

Plaintiffs are numerous individual and trustee investors who made investments in life insurance policies, either independently or through their retirement programs.  Defendants are Acclivity West LLC (“Acclivity West”), a California company, and several owners and employees of Acclivity West.
Continue Reading New Complaint – Sedlar-Sholty, et al. v. Acclivity West, LLC, et al.

Morrison, et al. v. Rockwell, et al. was filed in California Superior Court, Marin County, on May 28, 2021. The complaint seeks civil damages for claims of breach of fiduciary duty, multiple violations of the California Corporations Code, constructive fraud, breach of contract, and negligence.

Plaintiffs are a group of investors who used Defendants as investment advisors.  Defendants are a series of corporate entities, Dow Rockwell, LLC, Rockwell Retirement Partners, and Marin Wealth Management, LLC, an individual investment advisor, Rick Rockwell, and many unnamed defendants Plaintiffs believe may have been involved in aiding Defendants.


Continue Reading New Complaint – Morrison v. Rockwell

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.

IMG Memorial Fund 1 was filed in the Southern District of New York on April 14, 2021, alleging that various defendants, including individuals and investment funds, violated federal securities laws and the common law through their use of a proprietary trading platform.  Specifically, the complaint alleges violations of Sections 10(b) and 20(a) of the Securities Act, along with common law claims for breach of fiduciary duty and negligent misrepresentation.

Plaintiff IMG Memorial Fund 1 is a family investment fund.  Defendant Jeffrey Spotts is the principal individual who created various investment funds, including the Prophecy Special Opportunities Fund and Prophecy Special Ops GP LLC (collectively, “Prophecy”).  Defendant Vantage Consulting Group is an investment advisor with an ownership interest in defendant investment fund First Landing Fund LLC, which is co-controlled by individual defendants, Mark Finn and David Schippers (collectively, “First Landing”).


Continue Reading New Complaint – IMG Memorial Fund 1, LLC v. First Landing Fund, LLC, et al.

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