United States Securities and Exchange Commission v. Ahmed et al

Filing 1611

ORDER: For the reasons set forth in the attached ruling, Oak's Motion to Seal 1242 is DENIED; Defendant's Motion for Leave to Arbitrate 1225 is MOOT to the extent that he seeks leave to pursue arbitration which is not prohibited by the Litigation Stay and is DENIED to the extent that he seeks leave to pursue arbitration against Oak which is prohibited by the Litigation Stay; Defendant's Motion to Stay Arbitration 1323 is DENIED; and Defendant's Motion for Fees for Arbitration Counsel 1371 is DENIED without prejudice to renew. Signed by Judge Janet Bond Arterton on 7/28/2020. (Davis, Caroline)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

v.
IFTIKAR AHMED,

Defendant, and

IFTIKAR ALI AHMED SOLE PROP; I-CUBED
DOMAINS, LLC; SHALINI AHMED; SHALINI AHMED
2014 GRANTOR RETAINED ANNUITY TRUST;
DIYA HOLDINGS LLC; DIYA REAL HOLDINGS, LLC;
I.I. 1, a minor child, by and through his next friends
IFTIKAR and SHALINI AHMED, his parents; I.I. 2, a
minor child, by and through his next friends
IFTIKAR and SHALINI AHMED, his parents; and I.I.
3, a minor child, by and through his next friends
IFTIKAR and SHALINI AHMED, his parents,

Relief Defendants.

Civil No. 3:15cv675 (JBA)

July 28, 2020

RULING ON DEFENDANT’S MOTIONS REGARDING OAK ARBITRATION

Defendant moves for “leave to file any arbitration and/or continue arbitration against
Oak,” (Mot. for Leave to Arb. [Doc. # 1225] at 1), for “a Court Order Staying the AAA
[arbitration] action that Oak has brought against the Defendant, pending appeal of the ruling
allowing that action to proceed,” (Mot. to Stay Arb. [Doc. # 1323] at 1), and for the release of
funds “to [r]etain legal counsel in the AAA matter with Oak,” (Mot. for Fees [Doc. # 1371] at
1).
I.

Background

The Court assumes the parties’ familiarity with the background of this case, including
the ongoing asset freeze and the nature of the relationship between Defendant and the Oak
entities (collectively, “Oak”). On December 20, 2018, Jed Horwitt, Esq. of Zeisler & Zeisler,
P.C., was appointed to serve as receiver for the assets subject to the Court’s ongoing asset

freeze order to “value the frozen assets and avoid over-freezing, to secure the judgment for
the SEC, to manage and maximize the value of frozen assets under the guidance of a neutral
third party, and to take necessary steps toward effectuating the judgment.” (Order
Appointing Rec. [Doc. # 1070] at 5.) In the Order Appointing the Receiver, the Court imposed
a stay of “[a]ll civil legal proceedings of any nature, including . . . arbitration proceedings . . .
to obtain possession of property of the Receivership Estate, wherever located . . . [or] against
any of the Defendants, including any wholly-owned owned subsidiaries and partnerships in
which a Defendant is a general partner” (the “Litigation Stay”). (Id. at 13.)
Oak previously moved to lift the litigation stay “for the limited purpose of
commencing an arbitration against defendant Iftikar Ahmed to recover damages it suffered
in connection with the very same fraudulent scheme that is the subject of this litigation.”
(Oak’s Mot. to Lift Lit. Stay [Doc. # 1132] at 1.) In pursuing an arbitration against Defendant,
Oak did “not seek to disturb the asset freeze or take priority over the SEC’s claim to any of
the frozen assets.” (Oak’s Mem. Supp. Mot. to Lift Lit. Stay [Doc. # 1133] at 4.)
The Court granted Oak’s motion to lift the litigation stay, finding that “maintaining the
stay as to Oak’s desired arbitration is not necessary to preserve the status quo of the
Receivership Estate” and recognizing the risk of irreparable injury to Oak if unable to timely
pursue its claims against Defendant due to “the possible dissipation of assets if and when the
Court releases [any residual] assets after the SEC’s judgment has been secured.” (Ruling on
Mots. to Lift Lit. Stay [Doc. # 1167] at 12 (internal quotation omitted).)
II.

Discussion
A. Motion for Leave to Arbitrate
a. Legal Standard

“[D]istrict courts may appoint receivers as part of their broad power to remedy
violations of federal securities laws,” and “[a]n anti-litigation injunction is simply one of the
tools available to courts to help further the goals of the receivership.” S.E.C. v. Byers, 609 F.3d
2

87, 92 (2d Cir. 2010). “The modification of a litigation stay is subject to a three-pronged test
first articulated by the Ninth Circuit in Wencke,” which “identified three factors for
determining whether, in a receivership context, an injunction against litigation should be
lifted,” S.E.C. v. Illaramendi, No. 3:11CV78 (JBA), 2012 WL 234016, at *4 (D. Conn. Jan. 25,
2012):
(1) whether refusing to lift the stay genuinely preserves the status quo or
whether the moving party will suffer substantial injury if not permitted to
proceed; (2) the time in the course of the receivership at which the motion for
relief from the stay is made; and (3) the merit of the moving party’s underlying
claim.

S.E.C. v. Wencke, 742 F.2d 1230, 1231 (9th Cir. 1984). “The first Wencke factor balances the
interests of the Receiver in preserving the status quo against the interests of the moving
party.” Illaramendi, 2012 WL 234016, at *5. To satisfy the third factor, the movant need only
have a “colorable claim that entitle[s] them to a trial on the merits,” and courts should not
attempt to “decide the merits” of the movant’s claim when considering a motion to lift a
litigation stay. Wencke, 742 F.2d at 1232. “The burden is on the movant to prove that the
balance of the factors weighs in favor of lifting the stay.” Id. at *4 (internal quotation omitted).
b. Arbitration Outside of the Scope of the Litigation Stay
Defendant moves “for leave to file any arbitration and/or continue arbitration against
Oak that was stayed in June 2018, based on this Court’s Preliminary Injunction Order.”1 (Mot.
for Leave to Arb. at 1.) Defendant now seeks to “file a counterclaim” in the arbitration
proceedings initiated by Oak against him and to resume “his earlier filed arbitration . . .
against Oak.” (Id.) Defendant’s Motion for Leave to Arbitrate makes no additional arguments

The Court’s Preliminary Injunction Order, issued near the outset of this case,
prohibited “any action to interfere with the asset freeze, including but not limited to, the
filing of any lawsuit . . . to impact the property and assets subject to this order.” (Prelim. Inj.
Order [Doc. # 113] at 21.) “As a result,” Defendant explains, he “agreed to Oak’s request to a
stay in the arbitration he had filed against Oak and various Oak related entities in May 2018.”
(Mot. for Leave to Arbitrate at 2.)
1

3

in support of his request. (See generally id. at 1-3.) On reply, while arguing in support of his
motion for leave to arbitrate against Oak, Defendant argues rather perplexingly that “[i]t is
beyond the jurisdiction of this Court as well as the mandate of the SEC to have to approve or
authorize any litigation or arbitration that the Defendant seeks to bring against his former
employers,” Oak. (Def.’s Reply to SEC’s Opp. to Mot. for Leave to Arb. [Doc. # 1245] at 1.)
Given Defendant’s lack of specificity regarding the arbitration he seeks to pursue
against Oak and his assertion that this Court lacks jurisdiction to “approve or authorize” such
arbitration, it is unclear to the Court what precisely Defendant seeks leave to do. Moreover,
the Litigation Stay prohibits proceedings against Defendant and certain other entities—not
including Oak—but it does not prohibit proceedings by Defendant. Thus it is also unclear to
the Court why Defendant believes that his arbitration against Oak is subject to the Litigation
Stay.
On reply, Defendant suggests without explanation that any arbitration against Oak is
covered by the Litigation Stay because it “falls under the category of ‘(c) against any of the
Defendants… partnerships in which a Defendant is a general partner…’ and ‘(d) … against
any of the Defendants’ past or present officers, directors, managers, members, agents, or
general or limited partners….’” (Def.’s Reply to SEC’s Opp. to Mot. for Leave to Arb. at 4-5.)
But in the absence of any explanation or any indication that Defendant remains a “general
partner” of any Oak entity against which he seeks to arbitrate, the Court sees no way in which
these provisions bring any arbitration against Oak within the scope of the current Litigation
Stay.2

2 Defendant attempts to draw an analogy to the Motion to Intervene and Lift Litigation

Stay by non-party NMR e-tailing, LLC ([Doc. # 1097]), which sought leave to continue
litigation against Oak entities. (See id. at 4 (“The SEC completely misstates the Defendant’s
intentions. The Defendant is seeking to arbitrate against Oak, akin to NMR’s request to
litigate against ‘OIP’ (plus additional Oak related entities and persons).”).) But NMR sought
leave of this Court to continue that ancillary proceeding only “in an abundance of caution”
4

The SEC suggests that if Defendant needs leave from this Court to pursue his
arbitration against Oak, then Defendant must be seeking “to obtain possession of property
of the Receivership Estate,” which the Litigation Stay prohibits. Otherwise, the SEC reasons,
Defendant’s arbitration against Oak would fall outside the scope of the Litigation Stay, and
he would not need this Court’s leave to pursue it. (See SEC Opp. [Doc. # 1243] at 2.)
Defendant is correct in noting that the Court need not “approve or authorize”
proceedings “against [Defendant’s] former employers,” unless those proceedings are
otherwise covered by the terms of the Litigation Stay. Upon reviewing the provisions of the
Litigation Stay, the Court agrees that if Defendant does not seek “to obtain possession of
property of the Receivership Estate,” then his arbitration against Oak is not prohibited by
the Litigation Stay, and he need not seek this Court’s leave to pursue it. Therefore, to the
extent Defendant seeks leave to pursue arbitration against Oak which is not prohibited by
the Litigation Stay, his Motion for Leave to Arbitrate is DENIED as moot.
c. Arbitration Within the Scope of the Litigation Stay
To the extent Defendant seeks leave to pursue arbitration against Oak which is
prohibited by the Litigation Stay, the Court will consider whether lifting the Stay to permit
such arbitration is proper.
Receiver Jed Horwitt objects to Defendant’s request because “the Motion provides no
details as to the nature of the Defendant’s claims against Oak or any representation that such
claims do not concern, or will not ultimately impact, any Receivership Assets or the
Receivership Estate generally.” (Receiver’s Resp. to Mot. for Leave to Arb. [Doc. # 1240] at
2.) The Receiver explains that his counsel “requested copies of the Defendant’s arbitration
complaint and counterclaim from the Defendant” and “agreed to keep the requested
documents confidential,” but nonetheless “the Defendant declined to provide the same to the

and out of concern that Defendant was a party to that proceeding. (NMR’s Mot. to Lift Lit.
Stay at 1-2.) Thus, Defendant’s analogy fails.
5

Receiver.” (Id.) Thus, “[w]ithout being able to understand the nature of the Defendant’s
complaint and counterclaim to determine what impact, if any, the same may have on any
specific Receivership Asset or on the Receivership Estate as a whole, . . . the Receiver has no
choice but to object to the Motion.” (Id. at 2-3.) The Receiver concludes that, in his view, this
lack of notice as to the relief sought is a key difference between Defendant’s motion and
previously granted motions to lift the litigation stay, wherein the parties seeking permission
to litigate assured the Court that they did not seek to disturb any assets of the Receivership
Estate or jeopardize the judgment in this case. (See id. at 3.)
The SEC similarly opposes Defendant’s motion “[o]n the current record,” because
“Defendant does not provide any assurance that the arbitration in which he intends to
engage will not seek assets of the Receivership Estate or impact the performance of the
Receiver’s duties.” (SEC Opp. at 1, 3.) The SEC also argues that “[g]ranting the Motion would
give Defendant free rein to engage in improper litigation, such as seeking to re-litigate issues
already decided by this Court or to obtain assets frozen by this Court.” (Id. at 2.)
Non-party Oak also opposes Defendant’s motion to arbitrate against it. (Oak Opp.
[Doc. # 1241].) Oak argues that Defendant “provides no justification whatsoever in his
motion papers for lifting the stay of litigation,” “[n]or does Mr. Ahmed provide any detail
concerning the claims and counterclaims he plans to pursue or concerning the remedies he
seeks in the arbitration.” (Id. at 2.) Oak posits that Defendant plans to “re-litigate certain
issues that he has already litigated and lost in this action” and attempts “to gain direct
possession and control of assets that, if he were to prevail in the arbitrations, are subject to
the asset freeze order entered by this Court.” (Id.) Oak explains that the arbitration
Defendant seeks to pursue would “clearly violate[] the express terms of the asset freeze
order entered by this Court,” which “expressly directed anyone in possession or control of
any funds or other assets belonging to Mr. Ahmed to ‘hold and retain within their control and

6

prohibit the withdrawal, removal, transfer or other disposal of any such funds or other
assets.’” (Id. at 3 (quoting Prelim. Inj. Order at 20-21).)3
Defendant responds that he “is perplexed why the SEC believes that the Defendant
would bring a claim against his own assets under the Receiver” and “does not even
understand the SEC’s rather inane and strange statement” that he is “presumably seeking to
engage in arbitration to obtain possession of the property of the Receivership Estate.” (Id. at
2, 4 (internal quotations omitted).) Separately, Defendant argues that because Oak was
granted leave to arbitrate against Defendant, “the only equitable result here” is to grant him
leave to arbitrate against Oak. (Def.’s Reply to Oak’s Opp. to Mot. for Leave to Arb. [Doc. #
1247] at 2.)
But the Court shares the parties’ concerns about the nature of the arbitration
Defendant intends to pursue, especially in light of his contention that he “does not need to

3 In opposing Defendant’s Motion for Leave to Arbitrate, Oak moves to seal portions

of certain supporting exhibits, including a copy of Defendant’s arbitration complaint, a copy
of Defendant’s answer and counterclaims in Oak’s arbitration against him, as well as any
references to the contents of those documents. (Oak’s Mot. to Seal [Doc. # 1242].) Oak
explains that the pleadings in those proceedings “have been designated as ‘Confidential’” and
that “the parties and the participating arbitrators” have deemed the information they contain
“to be highly sensitive and confidential in nature.” (Id. at 2.) No party filed any objection to
Oak’s Motion to Seal.
Beyond the documents’ designation as confidential in the arbitration proceedings,
Oak has not made any arguments in support of its request for sealing which might overcome
the presumption of public access to documents filed in a federal proceeding. But the “mere
existence of a confidentiality agreement, however, does not demonstrate that sealing is
necessary,” Church Ins. Co. v. Ace Prop. & Cas. Ins. Co., 2010 WL 3958791, at *3 (S.D.N.Y. Sep.
23, 2010) (internal quotation omitted), and district courts “have consistently refused to seal
the record” of arbitration proceedings, “notwithstanding the existence of” any agreement
regarding confidentiality, Aioi Nissay Dowa Ins. Co. Ltd. v. ProSight Specialty Management Co.,
Inc., 2012 WL 3583176, at *6 (S.D.N.Y. Aug. 21, 2012).
In the absence of any specific argument regarding the need for sealing beyond the
confidentiality of these documents in related arbitration proceedings, the Court cannot
conclude that any privacy interests at stake outweigh the public’s interest in access to court
proceedings, and thus Oak’s Motion to Seal [Doc. # 1242] is DENIED. Oak shall file
unredacted versions of Docs. No. 1241, 1241-1, and 1241-2.
7

give any assurance about the impact of the arbitration against the Receivership Assets
because (1) Defendant is pro se and cannot give legal assurances and (2) these assets already
belong to the Defendant” and in light of his continued arguments regarding whether “Oak has
already seized and held onto many tens of millions of dollars of the Defendant’s legally
earned assets.” (Id. at 2-3.)
Moreover, Defendant’s refusal to provide details or assurances about the nature of
the intended arbitration proceedings largely prevents the Court from thoroughly and
appropriately analyzing his request using the applicable Wencke factors. But insofar as the
Court is able to apply these factors, they weigh against lifting the stay. As to the first Wencke
factor, in the absence of any assurance that Defendant does not seek to disturb the
Receivership Estate, the Court concludes that “refusing to lift the stay genuinely preserves
the status quo.” Wencke, 742 F.2d at 1231. And as to the third factor, the Court cannot reach
any conclusions about “the merit of” any “underlying claim” that is currently prohibited by
the Litigation Stay, in the absence of any details about that claim. Thus, to the extent that the
arbitration which Defendant seeks to pursue against Oak is “to obtain possession of property
of the Receivership Estate, wherever located” or is otherwise governed by the terms of the
Litigation Stay, Defendant’s Motion for Leave to Arbitrate [Doc. # 1225] is DENIED for failure
to demonstrate good cause why the Litigation Stay should be lifted.
B. Motion to Stay Arbitration
Defendant moves “for a Court Order staying the [American Arbitration Association]
Action that Oak has brought against the Defendant, pending appeal of the ruling allowing
that action to proceed now pending with the Second Circuit Court of Appeals.” (Mot. to Stay
Arb. at 1.)4 Defendant argues that because he has appealed this Court’s ruling, which lifted
the Litigation Stay to permit Oak to proceed with that arbitration, “jurisdiction, therefore,

4 Relief Defendants join Defendant’s request to stay Oak’s arbitration action. (Rel.

Defs.’ Resp. to Mot. to Stay Arbitration [Doc. # 1345].)
8

has now shifted to the Second Circuit Court of Appeals and no further action can be taken
until the appellate courts have considered the merits of allowing Oak to arbitrate against the
Defendant.” (Id. at 3.) Defendant explains that “[a]llowing the arbitration to proceed while
the issue is under appellate jurisdiction does not maintain the status quo” and would thus be
inappropriate because “[d]istrict courts only have the power to grant such relief as may be
necessary to preserve the status quo pending an appeal.” (Id. at 3.) “As such,” Defendant
concludes, “the arbitration cannot proceed and a stay of proceedings is appropriate while an
appeal of the order allowing arbitration is pending because proceeding with arbitration
interferes with the appellate court’s jurisdiction to reserve, modify or affirm the ruling
allowing arbitration to proceed.” (Id.) In doing so, Defendant appears to characterize the
relief requested as declaratory in nature, suggesting that the arbitration should
automatically be “stayed until the appellate courts issue a ruling on that appeal,” and thus
the Court should “simply stat[e] such,” because Defendant “needs a Court Order stating that
the AAA action is stayed” to provide to the arbitrator. (Mot. to Stay Arb. at 2 n.1.)
The SEC responds that “as outlined in Defendant’s own Motion, this Court is likely
without jurisdiction to grant Defendant’s requested relief” because jurisdiction over this
issue has shifted to the Second Circuit. (SEC Opp. to Mot. to Stay Arb. [Doc. # 1365] at 1.) The
SEC also argues that the relief Defendant seeks is improper under Federal Rule of Civil
Procedure 62.5
Rule 62(c) provides that “an interlocutory or final judgment in an action for an
injunction or receivership” is not automatically stayed “even if an appeal is taken” “[u]nless
the court orders otherwise.” Rule 62(d) further provides:

5 The Receiver takes no position as to the motion to stay because he “has concluded

that the relief requested would not adversely impact the Receiver’s ability to fulfill his
primary obligation in this receivership—to fully secure the Required Amount through the
liquidation of Receivership Assets—or to execute in any other regard his duties pursuant to
the Appointment Order.” (Receiver’s Resp. to Mot. to Stay Arbitration [Doc. # 1359] at 2.)
9

Injunction Pending Appeal. When an appeal is taken from an interlocutory or
final judgment granting, dissolving, or denying an injunction, the court in its
discretion may suspend, modify, restore, or grant an injunction during the
pendency of the appeal upon such terms as to bond or otherwise as it
considers proper for the security of the rights of the adverse party.

Rule 62(d) “has been narrowly interpreted to allow district courts to grant only such relief
as may be necessary to preserve the status quo pending an appeal where the consent of the
court of appeals has not been obtained.” Int’l Ass’n of Machinists and Aerospace Workers, AFLCIO v. Eastern Air Lines, Inc., 847 F.2d 1014, 1018 (2d Cir. 1988); see also Ideal Toy Corp. v.
Sayco Doll Corp., 302 F.2d 623, 625 (2d Cir. 1962) (“[S]ound judicial administration demands
that unless the judge is satisfied that his order was erroneous he shall use his power under
Rule 62(c) only to preserve the status of the case as it sits before the court of appeals.”).
Under Rule 62, there are four factors that “regulat[e] the issuance of a stay” of a
district court’s order pending appeal of that order: “(1) whether the stay applicant has made
a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure
the other parties interested in the proceeding; and (4) where the public interest lies.” Hilton
v. Braunskill, 481 U.S. 770, 776 (1987); accord Hirschfield v. Bd. of Elections in City of N.Y., 984
F.2d 35, 39 (2d Cir. 1993). “Although the weighing of these factors is flexible and within the
Court's discretion, the movant's burden of establishing a favorable balance of these factors
is a heavy one and more commonly stay requests will be denied.” Optimum Shipping &
Trading, S.A. v. Prestige Marine Servs. Pte. Ltd, 613 F. Supp. 2d 502, 503 (S.D.N.Y. 2009).

The parties dispute precisely what the “status quo pending an appeal” is in this

situation. The SEC argues that because the Court “explicitly lifted . . . the litigation stay against
Defendant thereby allowing Oak to pursue an arbitration, . . . the status quo is that the
arbitration can proceed.” (SEC Opp. to Mot. to Stay Arb. at 3.) Thus, the SEC argues,
“Defendant’s Motion does not seek to preserve this status quo, but rather does the opposite
by improperly seeking a new order from the Court that would prevent Oak from pursuing
10

the arbitration while this issue is on appeal.” (Id.) Oak agrees, arguing that “the status quo as
of the date of Mr. Ahmed’s appeal (challenging the Court’s Order) expressly empowered Oak
to proceed with its arbitration.” (Oak Opp. to Mot. to Stay Arb. [Doc. # 1364] at 3.) In contrast,
Defendant maintains that the “meaning of ‘status quo’ is to ‘preserve the controversy,’” and
thus that “the status quo is not allowing the AAA action to proceed, but rather, is interim
injunctive relief (i.e. stay pending appeal).” (Reply to SEC Opp. to Mot. to Stay Arb. [Doc. #
1381] at 4.)
The Court need not resolve this dispute regarding the status quo because Defendant
has otherwise failed to meet his burden of showing that the four factors which the Court
must consider weigh in his favor.6 First, Defendant’s Motion to Stay makes no argument
whatsoever as to his likelihood of success on the merits of his appeal, and the Court is not
otherwise persuaded that Defendant has a “substantial possibility . . . of success on appeal.”
On reply, Defendant argues that he “has made a strong showing on the merits of granting a
stay of the AAA proceeding” because a stay would “preserve the status quo.” (Reply to Oak’s
Opp. to Mot. to Stay Arb. at 4, 6). However, he has failed to address the likelihood of success
of his appeal.

In lieu of the necessary legal arguments in support of his motion, Defendant
generally rests on his assertion—contrary to the clear statement in Rule 62(c) that the filing
of an appeal does not automatically justify a stay of the order appealed from—that “there is
an appeal pending and . . . the arbitration is stayed until the appellate courts issue a ruling
on that appeal.” (Mot. to Stay Arb. at 3-4.) He also notes that he “is pro se” and asks that “[i]f
the Defendant needs to adhere to a legal standard, he requests that the Court give him an
opportunity to refile his Motion adhering to those standards.” (Mot. to Stay Arb. at 2 n.1.)
6

The Court doubts whether Defendant’s request, under these circumstances, falls
within the scope of the leeway typically afforded to pro se parties. Regardless, in their
oppositions to Defendant’s motion, the SEC and Oak plainly identified and argued the
governing standards for a motion to stay, providing Defendant ample opportunity to respond
to those standards. On reply, Defendant maintained that he “believes that the fact that the
‘controversy must be preserved’ for appellate review is enough of a reason” for the Court to
grant the requested stay, but he nonetheless endeavored to “respond[] to Oak’s listing of four
factors.” (Reply to Oak’s Opp. to Mot. to Stay Arb.[Doc. # 1382] at 4.)
11

Second, Defendant argues that he will be irreparably injured in the absence of a stay
because “the continuation of [the arbitration] effectively renders Defendant’s appeal moot”
and because he “is pro se, does not know arbitration law and is irreparably injured without
the aid of an attorney in this matter.” (Id. at 6.) But the only risk of injury Defendant faces in
the arbitration proceeding is financial; Oak plainly indicated in its Motion to Lift the
Litigation Stay that in the subject arbitration, it “seeks compensatory damages in an amount
not less than $20 million, plus interest; consequential damages in an amount not less than
$15 million, plus interest; punitive damages in the amount to be determined at the
arbitration hearing and such other relief as the arbitrator deems just and equitable.” (Mem.
Supp. Oak Mot. to Lift Lit. Stay [Doc. # 1133] at 3.) And “[m]ere injuries, however substantial,
in terms of money, time and energy necessarily expended in the absence of a stay, are not
enough” to show irreparable harm. Sampson v. Murray, 514 U.S. 61 (1974). Defendant offers
no explanation of why any such damages, if awarded, might be the type of “expenditures”
which “cannot be recouped” and thus produce an “irreparable” “resulting loss.” Philip Morris
USA Inc. v. Scott, 561 U.S. 1301, 1304 (2010). Thus the Court concludes that Defendant has
not made a showing of irreparable harm, “which is always a central inquiry in assessing any
motion for injunctive relief.” Optimum Shipping & Trading, S.A., 613 F. Supp. at 503.
Third, Defendant argues that “Oak is not harmed by stay of the AAA proceedings,
pending appeal” because “[t]he assets are frozen” and “[t]herefore, there is no risk of any
dissipation of the assets.” (Reply to Oak’s Opp. to Mot. to Stay Arb. at 7.) But the Court
concluded in its ruling lifting the litigation stay that “[g]iven the possible dissipation of assets
if and when the Court releases assets after the SEC’s judgment has been secured, Oak would
likely suffer injury if” forced to wait until the conclusion of this litigation (and thus the
release of frozen assets) to commence its arbitration. (Ruling on Mots. to Lift Lit. Stay at 13.)
In the absence of any new argument to the contrary, the Court concludes for the same
reasons that issuance of the stay Defendant seeks would likely substantially injure Oak.
12

Fourth, Defendant argues that “public interest lies in seeing that litigants have their
constitutional and due process rights to an appeal be preserved and heard in its entirety and
not mooted.” (Reply to Oak’s Opp. to Mot. to Stay Arb. at 8.) Oak argues that “there is nothing
in the record to suggest that the public interest cuts in favor of issuing a stay.” (Oak. Opp. to
Mot. to Stay Arb. at 6.) This factor does not weigh heavily in either party’s favor.
In weighing these factors, the Court concludes that Defendant has not met his heavy
burden to demonstrate that a stay of the Court’s ruling lifting the litigation stay to permit
Oak to proceed with its arbitration is warranted. Defendant’s Motion to Stay Arbitration
[Doc. # 1323] is DENIED.7
C. Motion for Fees for Arbitration
Defendant moves for the release of funds to retain legal counsel to defend himself in
Oak’s arbitration against him. (Mot. for Fees for Arb. Counsel [Doc. # 1371].) He argues that
“there are tens of millions of dollars of assets frozen above the judgment amount” and thus
that “both law and equity favor a release of funds for Defendant to retain counsel” in the
arbitration. (Id. at 2.) Thus, he “is seeking a release of $350,000 . . . so that Defendant can be
represented in the AAA matter with Oak,” “[w]ith the right to request more if needed.” (Id. at
3.) Defendant’s motion provides no additional information, much less documentation, about
his inability to pay counsel absent a release of funds from the asset freeze, the identity of any
counsel he intends to hire, the source of his apparent belief that acquiring counsel in the
arbitration will cost $350,000, or any other supporting information.
The Receiver “objects to the release of such funds for two reasons”: first, because
“utilizing Receivership Assets to retain and pay for counsel to represent the Defendant’s
interests in the Arbitration does not advance any interest of the Receivership Estate,” and

7 Defendant filed a notice in further support of his Motion to Stay Arbitration, which

details a variety of objections to the arbitrator’s decisions. (Not. Supp. Mot. to Stay Arb. [Doc.
# 1601].) But this Court is not the proper venue for Defendant to raise such objections, and
the Court does not consider those objections in reaching its decision here.
13

second, because “the aggregate value of the distributions requested by the Defendant and
Relief Defendants for attorneys’ fees causes the Receiver some concern given the
Receivership Estate’s continued exposure to market risk.” (Receiver’s Opp. to Mot. for Fees
for Arb. Counsel [Doc. # 1398] at 2.)
The SEC also opposes Defendant’s request, arguing that the Court “should decline to
release assets that Defendant (and Relief Defendants) previously pledged as a supersedeas
bond,” because “it is Defendant who specifically asked for the asset freeze to remain in place
since judgment was entered.” (SEC Opp. to Mot. for Fees for Arb. Counsel [Doc. # 1399] at 12.) The SEC argues that the Court should “reject the instant request until the SEC’s judgment
has been satisfied” to ensure that the security of that judgment is not jeopardized by the
release of funds from the asset freeze. (Id.) Separately, the SEC argues that “Defendant has
not shown that he depends on the release of funds to hire counsel,” and that even if he were
to offer such assurances, “neither the SEC nor the Court has any way to sufficiently verify
that the Defendant depends on the release of funds to hire counsel, since the Defendant has
fled the jurisdiction and remains a fugitive,” and thus “the Court would have no ability to
enforce such an order or sanction the Defendant for violating it.” (Id. at 3.) It also argues that
it “is clear that the Defendant has funded his lifestyle in some manner unbeknownst to the
SEC or this Court” for the several years he has lived in India since fleeing the United States.
(Id.) Finally, the SEC argues that Defendant’s request should be denied because it is “vague
and excessive” in the absence of information about the identity of his counsel or “evidence
that he cannot find qualified counsel for less than the $350,000 he requests.” (Id. at 4.)
On reply, Defendant reiterates his argument that “there are tens of millions of dollars
of assets over-securing the SEC’s judgment” and thus that assets should be released for his
arbitration counsel. (Reply to SEC’s Opp. to Mot. for Fees for Arb. Counsel [Doc. # 1400] at
2.) Defendant states that “attorneys are expensive and the Defendant cannot afford any
counsel without the release of his own funds to retain such counsel” because he is “indigent
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as a result of the asset freeze ordered by this Court.” (Id. at 4.) He claims that he “is a cancer
patient in need of medical treatment,” “is unable to get employment as he is stateless and
without any legal papers held in India,” and that he “is now in a precarious situation where
he needs living expenses just to survive” because he “has been sleeping on various friends’
couches, yet such generosity is also limited and imminently going to end.” (Id.) Defendant
also argues that he is “not confined by his choice” in India and that it is the fault of the SEC
that he is “still . . . stuck in India.” (Id.) Defendant also notes that he “has already submitted
multiple affidavits that he does not have any funds to hire counsel.” (Id. at 6.)
The Court has previously established certain requirements for Defendant’s requests
for release of funds from the asset freeze, and it sees no reason to deviate from those
requirements as to this request. Specifically, the Court has repeatedly denied Defendant’s
requests for release of funds which lack any explanation for the amount requested and which
fail to provide the identity of the individual or entity who will receive payment. (See, e.g.,
Ruling Denying without Prejudice Mot. for Release of Funds for Cancer Treatment [Doc. #
1018] (denying request for release of funds for Defendant’s medical treatment in the absence
of documentation regarding the identity of the physician, the facility to which payment
should be sent, and the anticipated fees); Ruling Denying without Prejudice Mot. for Release
of Funds for Med. Treatment [Doc. # 1257] (rejecting argument that Defendant need not
provide supporting documentation for his request because of “excess assets that remain
frozen” and instead requiring “at least the name and address of the physician,” “the
location/facility to which payment is to be sent,” “documentation of [Defendant’s] inability
to indicate the exact amount of fees to be assessed,” and “the basis for his representation”
regarding the necessary amount of funds); Ruling Granting Defendant’s Mot. for App. Fees
[Doc. # 1405] (granting with modification Defendant’s vague motion for appellate fees and
requiring Defendant to submit to the Court, prior to the release of any funds, identification

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of the counsel to be hired, invoices from counsel, and documentation of Defendant’s inability
to pay counsel absent release of frozen funds).)
In the absence of any such documentation in support of the amount of his request
beyond the notation that “attorneys are expensive,” and in the absence of any information
regarding the intended recipient of these funds, Defendant’s Motion for Fees for Arbitration
Counsel [Doc. # 1371] is DENIED without prejudice to renew. Any renewed motion shall
include at least documentation of Defendant’s inability to retain counsel without a release of
funds from the Receivership Estate, the identity of the counsel Defendant intends to retain,
and an estimate by that counsel of the cost of representing Defendant in the Oak arbitration.
III.

Conclusion

For the reasons set forth above, Defendant’s Motion for Leave to Arbitrate [Doc. #
1225] is MOOT to the extent that he seeks leave to pursue arbitration which is not prohibited
by the Litigation Stay and is DENIED to the extent that he seeks leave to pursue arbitration
against Oak which is prohibited by the Litigation Stay. Defendant’s Motion to Stay Arbitration
[Doc. # 1323] is DENIED. Defendant’s Motion for Fees for Arbitration Counsel [Doc. # 1371]
is DENIED without prejudice to renew.

IT IS SO ORDERED.
/s/
Janet Bond Arterton, U.S.D.J.

Dated at New Haven, Connecticut this 28th day of July, 2020.

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