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Zayed v. Allen

United States District Court, D. Minnesota

March 10, 2015

R.J. Zayed, in his Capacity as Court-Appointed Receiver for Oxford Global Partners, LLC, Universal Brokerage FX, and Other Receiver Entities, Plaintiff,
v.
David and Dao Allen, Judith Averett, Patricia and Jasper Calandra, Rose Furner, Mark Hanby, Adel (

R.J. Zayed, Tara C. Norgard, Russell J. Rigby, and Brian W. Hayes, Carlson, Caspers, Vandenburgh & Lindquist, for Petitioner.

James R. Behrenbrinker, Behrenbrinker Law Firm,, for Defendant Hilal.

Mark Stoltenberg, Pro Se,

Karl L. Cambronne, Chestnut Cambronne, for Defendants Robert and Dianne Birk.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, District Judge.

This matter is before the Court on the Plaintiff's Motion for Summary Judgment [Doc. No. 139] and Defendant Stoltenberg's Motion to Dismiss and Opposition to Summary Judgment [Doc. No. 157]. For the reasons set forth herein, the parties' motions are denied without prejudice.

I. BACKGROUND

On July 15, 2013, the Receiver filed the Complaint [Doc. No. 1] in the instant suit, seeking the return of alleged receivership assets from 32 Defendants. The Receiver asserted claims of fraudulent transfer under Minn. Stat. § 513.41, et seq., and unjust enrichment. Most Defendants settled their claims with the Receiver prior to the filing of the Receiver's summary judgment motion. (See Pl.'s Status Report at 3; 5 [Doc. No. 119].) This ruling addresses the Receiver's Motion for Summary Judgment as it pertains to the four remaining Defendants: Adel ("A.K.") Hilal, Mark Stoltenberg, and Robert and Dianne Birk.[1]

This case arises out of a $190 million Ponzi scheme operated by Trevor Cook.[2] The collapse of Cook's Ponzi scheme led to criminal prosecutions for Cook and his business colleagues, see, e.g., United States v. Cook, No. 10-CR-75 (JMR) (D. Minn.); United States v. Beckman, No. 11-CR-228 (MJD/JJK) (D. Minn.), and spawned numerous civil lawsuits, including this one. See, e.g., Zayed v. Associated Bank, N.A., ___ F.3d ___, 2015 WL 855707 (8th Cir. Mar. 2, 2015); Zayed v. Buysse, No. 11-CV-1042 (SRN/FLN) (D. Minn.); CFTC v. Cook, No. 09-CV-3332 (MJD/FLN) (D. Minn.); SEC v. Cook, 09-CV-3333 (MJD/FLN) (D. Minn.). Cook operated the Ponzi scheme with his colleagues Patrick Kiley, Chris Pettengill, Gerald Durand, and Jason Bo-Alan Beckman ("Bo Beckman"). Order of 9/27/12 at 2-3, Buysse, No. 11-CV-1042, ECF. No. 260.

As this Court noted in Buysse, as of January 2007, Cook and his business colleagues solicited investors to participate in a fabricated foreign currency trading program. Id. at 2. Cook operated various entities in connection with his sham foreign currency program, generally identified by the terms "Oxford" and "UBS, " including Oxford Global Advisors, Oxford Global Partners, LLC, the Oxford Private Client Group, LLC, UBS Diversified, UBS Global Advisors, LLC, Universal Brokerage FX (collectively, the "Oxford Entities" and the "UBS Entities"), as well as an entity known as Crown Forex. Id. at 3. Cook withheld from investors the fact that he diverted their funds for other purposes including: (1) making payments of interest and principal to other investors; (2) purchasing an ownership interest in two trading firms; (3) working on real estate development in Panama; (4) paying personal expenses; (5) acquiring his Minneapolis headquarters, the Van Dusen Mansion; and (6) providing funds to Crown Forex, SA in an effort to deceive Swiss banking regulators. Id. at 5-6. In total, over 700 people invested approximately $158 million in Cook's Ponzi scheme. See Receiver's Third Am. Final Claims List, SEC v. Cook, No. 09-CV-3333, ECF. No. 1110-1.

In July 2009, Cook's scheme began to collapse as certain investors who had requested the return of their investments filed suit when Cook failed to return their funds. See Second Am. Compl. ¶ 54, Phillips v. Cook, No. 09-CV-1732 (MJD/FLN), ECF. No. 1. The SEC and CFTC filed suits against Cook shortly thereafter. See Compl., SEC v. Cook, 09-CV-3333, ECF No. 1; Compl., CFTC v. Cook, 09-CV-3332, ECF No. 1.

In November 2009, this Court created a receivership to preserve and apportion any assets involved in Cook's Ponzi scheme on behalf of the victims of the fraud. See Order of 11/23/09 at 7, CFTC v. Cook, 09-CV-3332, ECF No. 21. R.J. Zayed was appointed as the Receiver and given "full power to sue" in order to perform all acts necessary to preserve the value of the assets. Id. at 6-7. A primary duty of a court-appointed receiver is to maximize distributions for the benefit of the receivership's investors and creditors. See Scholes v. Lehmann, 56 F.3d 750, 755 (7th Cir. 1995). On July 20, 2010, the Court entered an Order granting the Receiver permission to commence summary proceedings, or "clawback actions, " to recover Receivership assets transferred to third parties. Order of 7/20/10, SEC v. Cook, 09-CV-3333, ECF No. 380; see also Order of 7/20/10, CFTC v. Cook, 09-CV-3332, ECF No. 350. Via clawback actions, "a trustee or receiver puts all parties that transacted with the purveyor of a failed Ponzi scheme onto a parity in the matter of restitution" and "the property that... remain[s] in-hand with the purveyor as of the collapse, [is] augmented by recoveries of funds from those lenders and investors who got out early." In re Petters Co., Inc., 440 B.R. 805, 806 (D. Minn. 2010). The investors who get out early are often referred to as "winning investors, " if only because they received some return on their investment, in contrast to "losing investors, " who received nothing. See Donell v. Kowell, 533 F.3d 762, 770 (9th Cir. 2008).

After pleading guilty to his role in the fraud, Cook received a 25-year prison sentence. Sentencing J., United States v. Cook, No. 10-CR-75, ECF No. 18. Cook's business partner Chris Pettengill also pleaded guilty to participating in the fraud and is serving a seven-and-a-half-year prison sentence. Sentencing J., United States v. Pettengill, 11-CR-192 (MJD), ECF No. 32. A jury convicted Beckman, Kiley, and Durand on charges of conspiracy and multiple counts of mail and wire fraud. Jury Verdicts, United States v. Beckman, 11-CR-228 (MJD/JJK), ECF Nos. 303, 305, 307. Beckman is serving a 32-year sentence, Am. Sentencing J., United States v. Beckman, 11-CR-228, ECF No. 414, and Kiley and Durand are each serving a 20-year sentence, id. ECF Nos. 392 & 415.

A. SEC v. Beckman Litigation

In March 2011, the SEC filed a separate suit against Beckman and his registered investment advisory firm, the Oxford Private Client Group (the "OPCG"). SEC v. Beckman, 11-CV-574 (MJD/FLN) (D. Minn.) (hereinafter "Beckman SEC").[3] In the SEC action against Beckman, the SEC alleged that he played a significant role in Cook's foreign currency scheme, raising almost twenty-five percent of the invested funds, i.e., $47.3 million of the $194 million. Compl. ¶ 3, Beckman SEC, 11-CV-574, ECF No. 1. The SEC further alleged that through Beckman or the OPCG, investors suffered losses of at least $39.1 million, with the remaining $8.2 million returned to investors in the form of purported returns or interest payments. Id . ¶ 4. In addition, the SEC asserted that Beckman received approximately $7.8 million from accounts containing the investors' funds - money that he used to pay for million dollar homes, luxury cars, country club expenses, and foreign travel. Id . ¶ 6. The SEC named Beckman's wife, Hollie Beckman, as a relief defendant in the lawsuit because she was a joint account holder of several accounts that received investors' funds. Id . ¶ 28. The SEC identified numerous accounts containing investor funds to which the Beckmans maintained ...


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