Commodity Futures Trading Commission v. Financial Tree et al

Filing 92

ORDER signed by District Judge Troy L. Nunley on 10/8/2020 GRANTING 62 Joint Motion to Modify Preliminary Injunction with Respect to Defendant John P. Glenn. The Court hereby MODIFIES the 33 Preliminary Injunction. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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COMMODITY FUTURES TRADING
COMMISSION,
Plaintiff,

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v.

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ORDER

FINANCIAL TREE dba FINANCIAL
TREE TRUST; FINANCIAL SOLUTION
GROUP dba FINANCIAL SOLUTION
GROUP TRUST; NEW MONEY
ADVISORS, LLC; THE LAW FIRM OF
JOHN GLENN, P.C.; JOHN D. BLACK
aka JOHN BARNES; CHRISTOPHER
MANCUSO; JOSEPH TUFO; and JOHN
P. GLENN,
Defendants;

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No. 2:20-cv-01184-TLN-AC

SUISSE GROUP (USA) LLC; JMC
INDUSTRIES LLC; LANDES CAPITAL
MANAGEMENT, LLC; KINGDOM
TRUST LLC; HERBERT CASWELL;
ANNE MANCUSO; and TYLER
MANCUSO,

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Relief Defendants.

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Presently before the Court is Plaintiff Commodity Futures Trading Commission (“CFTC”)

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and Defendant John P. Glenn’s (“Glenn”) Joint Motion to Modify Preliminary Injunction with

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Respect to Defendant John P. Glenn. (ECF No. 62.) No party objects to this motion. For the

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reasons set forth below, CFTC and Glenn’s joint motion is GRANTED.

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I.

FACTUAL AND PROCEDURAL BACKGROUND

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On July 2, 2020, this Court issued a Statutory Restraining Order (“SRO”), freezing assets,

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prohibiting the destruction of records, and requiring CFTC be provided immediate access to those

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records. (ECF No. 9.) On July 28, 2020, the Court issued a Preliminary Injunction (“PI”) that

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continued the terms set forth in the SRO and additionally required a complete accounting from

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Defendants and Relief Defendants1 and prohibited Defendants from committing future violations

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of the Commodity Exchange Act (“Act”) and Commission Regulations or engaging in

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commodity-related activities. (ECF No. 33.)

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In a joint motion submitted by counsel for CFTC, the parties currently seek to modify the

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conditions of the asset freeze as it pertains to Glenn, so that he may use money from legitimate

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sources of income earned, obtained, and/or borrowed from third parties after July 2, 2020 (the

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effective date of the SRO) (ECF No. 9), that is not derived from the conduct alleged in the

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Complaint (ECF No. 1) and is not otherwise related to this case (“Legitimate New Income”) to

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pay for: (1) his reasonable living expenses (“Glenn Living Expenses”); (2) certain reasonable

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living expenses for his daughter, Genevieve Glenn (“Genevieve Living Expenses”); (3)

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reasonable attorney’s fees in connection with the instant litigation (“Glenn Attorney Fees”); and

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(4) reasonable business expenses of Glenn’s law firm (“Glenn Law Firm Business Expenses”)

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(collectively, “Reasonable New Glenn Expenses”). (ECF No. 62 at 1–2.)

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II.

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“The district court has inherent power as a court of equity to order such temporary,

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STANDARD OF LAW

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The July 28, 2020 PI was issued against Defendants John D. Black and his affiliated
entities Financial Tree, Financial Solution Group, and New Money Advisors, LLC; Christopher
Mancuso; Joseph Tufo; and Glenn and The Law Firm of John Glenn, P.C. (collectively,
“Defendants”) and Relief Defendants Suisse Group (USA) LLC; JMC Industries LLC; Landes
Capital Management, LLC; Kingdom Trust LLC; Herbert Caswell; Anne Mancuso; and Tyler
Mancuso (collectively, “Relief Defendants”). (ECF No. 33.)
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ancillary relief in order to preserve the status quo so that an ultimate decision for the [CFTC]

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could be effective.” CFTC v. Muller, 570 F.2d 1296, 1300 (5th Cir. 1978) (citing SEC v. Manor

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Nursing Centers, Inc., 458 F.2d 1082, 1105–06 (2d Cir. 1972)). “When modifying a preliminary

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injunction, a court is charged with the exercise of the same discretion it exercised in granting or

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denying injunctive relief in the first place.” Sierra Club v. U.S. Army Corps of Eng’rs, 732 F.2d

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253, 256 (2d Cir.1984); see also Gonzalez v. Axess Trade Co., Inc., No. 04 Civ. 3762(RCC), 2005

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WL 1384019, at *4 (S.D.N.Y. Jun. 9, 2005). The same is true for equitable relief, like the PI in

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this case, that has been issued under the Act. See CFTC v. British Am. Commodity Options

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Corp., 560 F.2d 135, 141 (2d Cir.1977) (holding that courts are vested with continuing equitable

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discretion over statutory injunctions); see also CFTC v. Battoo, 66 F. Supp. 3d 1095, 1096 (N.D.

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Ill. 2014), aff’d, 790 F.3d 748 (7th Cir. 2015) (district judge has discretion to revise a preliminary

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remedy if persuaded that change had benefits for the parties and the public interest).

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III.

ANALYSIS

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Here, the Court finds good cause exists to grant the requested modification to the PI.

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Permitting the Reasonable New Glenn Expenses provides an incentive and ability for Glenn to

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continue operating his business, which is important to ensure Glenn’s ability to satisfy any

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judgment that may ultimately be entered against him. See CFTC v. Morgan, Harris & Scott, Ltd.,

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484 F. Supp. 669, 678 (S.D.N.Y. 1979) (purpose of granting injunctive relief was, in part, to

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ensure ability to later compensate defrauded consumers). Furthermore, permitting such expenses

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enables Glenn to purchase basic necessities as well as engage in constitutionally-protected

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activity (such as spending untainted income on reasonable attorney’s fees in connection with any

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related criminal investigation). (See ECF No. 62 at 2.) Finally, the Court notes that the proposed

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modification appears reasonable because it is narrowly-tailored to permit Glenn to use only

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legitimate income, while safeguarding CFTC’s right to object to any expenditure as unreasonable

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and to request any and all appropriate relief from the Court. (See id.) Accordingly, the Court

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finds good cause exists to lift the asset freeze as it pertains specifically to Glenn, and only to the

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extent that he may use Legitimate New Income to pay for his Reasonable New Glenn Expenses as

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detailed herein.
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IV.

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For the foregoing reasons, the parties’ joint motion is GRANTED. (ECF No. 62.) The

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CONCLUSION

Court hereby modifies the July 28, 2020 PI (ECF No. 33) as follows:
1. Except as modified herein, the PI issued on July 28, 2020 (ECF No. 33), shall remain

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in full force and effect pending trial, final disposition of this action, or further order of this Court,

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and the Court retains jurisdiction of this matter for all purposes.

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2. Nothing in the PI shall prevent Glenn from earning income from legitimate business

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activities. Subject to the reporting requirements of this Order, Glenn may use Legitimate New

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Income for the aforementioned Reasonable New Glenn Expenses. To facilitate those

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expenditures, Glenn may open the following bank accounts at the Bank of Colorado:

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a) One personal bank account in Glenn’s name (“New Glenn Personal Account”);

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b) One business operating account in the name of John Glenn Law, LLC (“New

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Glenn Law Firm Business Account”), a new entity registered with the

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Colorado Secretary of State, separate from Glenn’s existing law firm (The Law

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Firm of John Glenn, P.C., which is a Defendant in this case); and

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c) One IOLTA (COLTAF) trust account in the name of John Glenn Law, LLC

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COLTAF (“New Glenn Law Firm IOLTA Account”) (collectively, the “New

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Glenn Bank Accounts”).

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3. As a condition of the expenditures and activities permitted by Paragraph 2, Glenn must
comply with the following:

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a) The New Glenn Personal Account shall be in Glenn’s name only.

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b) The New Glenn Law Firm Business Account and the New Glenn Law Firm

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IOLTA Account shall be in the name of John Glenn Law, LLC only.
c) Glenn is prohibited from providing any other entity or individual any control,

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direct or indirect beneficial interest, discretionary authority, signatory

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authority, or power of attorney over any New Glenn Bank Account.

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d) Upon opening each New Glenn Bank Account, Glenn shall immediately notify
CFTC as to the type of account (i.e., checking, savings, etc.), the account
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number, and the name on the account.
e) Glenn shall deposit all Legitimate New Income into one or more New Glenn
Bank Accounts.

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f) Glenn shall not open any safety deposit boxes.

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g) Within 30 days of the date of electronic filing of this Order, Glenn shall

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provide CFTC with three months of personal and business financial records

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preceding July 2, 2020, sufficient to substantiate Glenn’s living expenses,

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Glenn’s expenditures on Genevieve Glenn’s living expenses, and Glenn’s

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business expenses during that three-month period. The purpose of this

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provision is to provide a baseline to assess the reasonableness of the New

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Glenn Expenses.

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h) Within 30 days of the date of electronic filing of this Order, and every 30 days

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thereafter, Glenn shall provide CFTC with a detailed description of all

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Legitimate New Income and all expenditures made by Glenn and the New

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Glenn Law Firm within the preceding 30-day period. The description shall

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make clear the nature of each expense and be supported by records sufficient to

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substantiate each expense, to enable CFTC to assess whether, in CFTC’s view,

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the expenses constitute Reasonable New Glenn Expenses, as opposed to

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expenses that are unreasonable or otherwise disallowed by this Order. Such

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records shall include, at minimum, monthly account statements from each New

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Glenn Bank Account, with notations, if necessary, to clarify the nature of each

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expenditure.

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i) To the extent Glenn borrows money from third parties to pay Glenn attorney

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fees, Glenn shall, within 30 days of borrowing such funds, submit to CFTC: (i)

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documents sufficient to evidence the provision of funds to Glenn, any

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repayment terms, and the transfer of funds to Glenn’s attorney; (ii) an affidavit

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from the third party establishing that such funds were not derived, directly or

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indirectly, from the conduct alleged in the Complaint (ECF No. 1); and (iii) an
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affidavit from Glenn establishing that Glenn intends to repay the loan with

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future Legitimate New Income.

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j) If any New Glenn Bank Account is closed, either by Glenn or the bank, then

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Glenn shall immediately notify CFTC and provide copies of documents

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relating to the closing of the accounts, including close-out statements and all

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documents reflecting the reason the accounts were closed.

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k) Glenn shall cooperate with all reasonable CFTC requests for additional

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information, including follow-up requests for additional documents or

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information substantiating Glenn’s expenditures.

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4. CFTC retains the right to object to any expenditure as unreasonable or otherwise

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disallowed by this Order, and to request any and all appropriate relief from this Court in the event

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of such expenditures.

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IT IS SO ORDERED.
DATED: October 8, 2020

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Troy L. Nunley
United States District Judge

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