Securities and Exchange Commission v. Nadel et al

Filing 1133

Unopposed MOTION for miscellaneous relief, specifically for (1) Possession of Brokerage Accounts Controlled by Arthur Nadel; (2) Authorization to Relinquish Remaining Brokerage Accounts; and (3) Partial Modification of Asset Freeze by Burton W. Wiand. (Attachments: # 1 Exhibit A - Proposed Order)(Morello, Gianluca)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

Case No. 8:09-cv-0087-T-26TBM

ARTHUR NADEL,
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.
VICTORY IRA FUND, LTD,
VICTORY FUND, LTD,
VIKING IRA FUND, LLC,
VIKING FUND, LLC, AND
VIKING MANAGEMENT,
Relief Defendants.
____________________________________/
RECEIVER’S UNOPPOSED MOTION FOR (1) POSSESSION OF BROKERAGE
ACCOUNTS CONTROLLED BY ARTHUR NADEL; (2) AUTHORIZATION TO
RELINQUISH REMAINING BROKERAGE ACCOUNTS; AND
(3) PARTIAL MODIFICATION OF ASSET FREEZE
Burton W. Wiand, as Receiver (the “Receiver”), moves this Court for various relief
related to his efforts to close various brokerage accounts opened or held through Shoreline
Trading Group, LLC (“Shoreline”) and custodied at Goldman Sachs Execution & Clearing,
L.P. (“GSEC”) which were frozen by this Court after the collapse of the Ponzi scheme
perpetrated by Arthur Nadel (“Nadel”). In this Motion, the Receiver seeks an order (1)

granting him possession of the contents of two brokerage accounts containing proceeds of
Nadel’s scheme, which will entail a partial modification of the asset freeze currently in place,
(2) authorizing him to relinquish the contents of the remaining accounts funded with scheme
proceeds but which now contain worthless or otherwise de minimus holdings, and (3)
modifying the asset freeze for the limited purpose of permitting the custodian of the accounts
to proceed with those transfers and relinquishments, and thereafter to close or otherwise
handle said accounts as determined by the custodian in the normal course of business.
BACKGROUND
On January 21, 2009, the Securities and Exchange Commission (“Commission”)
initiated this action to prevent the defendants from further defrauding investors of hedge
funds operated by them. That same day, the Court entered an order (the “Order Appointing
Receiver”) appointing Burton W. Wiand as Receiver for various entities, including
Defendants Arthur Nadel, Scoop Management, LLC, and Scoop Capital, LLC; and Relief
Defendants Scoop Real Estate, L.P.; Valhalla Investment Partners, L.P.; Victory Fund, Ltd.;
Victory IRA Fund, Ltd.; Viking IRA Fund, LLC; and Viking Fund, LLC (collectively, the
“Receivership Entities”). (See generally Order Appointing Receiver (Doc. 8).)
Pursuant to the Order Appointing Receiver, in relevant part the Receiver has the duty
and authority to “administer and manage the business affairs, funds, assets, choses in action
and any other property of the Defendants and Relief Defendants; marshal and safeguard all of
the assets of the Defendants and Relief Defendants; and take whatever actions are necessary
for the protection of the investors.” (Order Appointing Receiver at 1-2.) In particular, the
Receiver was directed to:

2

[t]ake immediate possession of all property, assets and estates of every kind of
the [Receivership Entities], whatsoever and wheresoever located belonging to
or in the possession of the [Receivership Entities], including but not limited to
all offices maintained by the [Receivership Entities], rights of action, books,
papers, data processing records, evidences of debt, bank accounts, savings
accounts, certificates of deposit, stocks, bonds, debentures and other
securities, mortgages, furniture, fixtures, office supplies and equipment, and
all real property of the [Receivership Entities] wherever situated, and to
administer such assets as is required in order to comply with the directions
contained in this Order, and to hold all other assets pending further order of
this Court . . . .
Doc. 8.
a. The Accounts
The Receiver’s investigation revealed that a number of brokerage accounts opened
with or held through Shoreline were funded solely with proceeds from Nadel’s fraud. Of
relevance to this motion, these accounts included the following:
Account Name

Account Number

Arthur Nadel
Neil Moody Revocable Trust
Chris Moody Revocable Trust
Papa Bear Investments (NVM)
Clark-Nadel Rev. Trust
Victory Fund, Ltd.

75K0 (the “75K0 Account”)
4EDL (the “4EDL Account”)
4P2K (the “4P2K Account”)
4VRX (the “4VRX Account”)
4J5V (the “4J5V Account”)
750A (the “750A Account”)

The Receiver’s investigation revealed that, of these accounts, only the 75K0 Account (in the
name of Arthur Nadel) and the 4J5V Account (in the name of Clark-Nadel Rev. Trust)
(collectively, the “Accounts”) have any value, with a total collective cash balance of
approximately $6,000.00.1 Neither Arthur Nadel nor the Clark Nadel Rev. Trust are included

1

The Receiver has also determined that the 4P2K Account (Chris Moody Revocable Trust)
contained securities that continued to be actively traded and were not delisted or otherwise
worthless. The Receiver is in the process of arranging for GSEC to transfer those securities
to the Receiver.

3

in this Receivership, but the Accounts are currently frozen by order of this Court (see Doc.
7). Accordingly, a modification of the asset freeze and an order of the Receiver’s authority
over the Accounts is needed for GSEC to be able to transfer the Accounts’ contents to the
Receivership.
With respect to the contents of the 4EDL Account, the 4VRX Account, and the 750A
Account (collectively, the “Remaining Accounts”), the Receiver’s investigation has
revealed that the holdings in the Remaining Accounts are essentially valueless, and any effort
to gain possession of the contents of those accounts would not be in the best interests of the
Receivership estate and would result only in the unnecessary expenditure of Receivership
funds.2 The gathering of such evidence and subsequent preparation of a motion to file with
this Court would not be in the Receivership’s best interests as the costs of doing so would
exceed the value of the pertinent accounts.

Thus, the Receiver seeks an order authorizing

him to relinquish all interests of the Receivership in the Remaining Accounts.
ARGUMENT
The Court’s power to supervise an equity receivership and to determine the
appropriate actions to be taken in the administration of the receivership is extremely broad.
SEC v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992); SEC v. Hardy, 803 F.2d 1034, 1038

2

For example, the sole position in the 750A Account is worthless. Further, because the
Neil Moody Revocable Trust and Papa Bear Investments are not included in the
Receivership, GSEC informed the Receiver that it would require documentation from Neil V.
Moody, the listed owner of the 4EDL Account and the 4VRX Account, clarifying the
Receiver’s authority over those accounts in order for those accounts to be transferred to the
Receiver. As the total value of the 4EDL Account and the 4VRX Account is less than $50,
the Receiver believes that obtaining such documentation would neither be economical nor
practical.

4

(9th Cir. 1986). The Court’s wide discretion derives from the inherent powers of an equity
court to fashion relief. Elliott, 953 F.2d at 1566; SEC v. Safety Finance Service, Inc., 674
F.2d 368, 372 (5th Cir. 1982). Those powers include the power to order the transfer of
property. See SEC v. American Capital Investments, Inc., 98 F.3d 1133, 1144 (9th Cir. 1996)
(abrogated on other grounds). The relief sought by the Receiver falls squarely within those
powers.
Given the Court’s wide discretion and authority and the Order Appointing Receiver,
the Receiver is entitled to possession of the Accounts. As discussed above, the evidence
uncovered by the Receiver’s investigation shows that the Accounts were funded solely with
scheme proceeds. Additionally, in related “clawback” litigation against profiteers of Nadel’s
scheme, this Court determined that Nadel operated a Ponzi scheme from at least 2000
forward. See Burton W. Wiand, as Receiver v. Vernon M. Lee, et al., Case No. 8:10-cv-210T-EAK-MAP (January 23, 2013 M.D. Fla.) (Doc. 169).
A.

The Receiver Is Entitled To Possession Of The Accounts
The Receiver is entitled to possession of the Accounts, as each was funded with

proceeds of Nadel’s scheme. Both of the Accounts were opened by Nadel, with the 75K0
Account opened in Nadel’s personal capacity and the 4J5V Account opened in Nadel’s
capacity as trustee for the Clark-Nadel Rev. Trust. The 75K0 Account has a current balance
of approximately $2,176.24, while the 4J5V Account has a current balance of approximately
$3,646.35. While the Receiver was appointed to serve as receiver for the Receivership
Entities, he did not serve as Receiver for Arthur Nadel in any capacity, including his
individual capacity or capacity as trustee of the Clark-Nadel Rev. Trust. However, the

5

Receiver’s investigation has shown that Nadel funded the Accounts exclusively using
scheme proceeds. Thus, any remaining balance rightfully belongs to the Receivership estate.
For this reason, the Receiver requests that this Court enter an Order awarding possession of
the Accounts to the Receivership estate.
B.

A Partial Modification Of The Asset Freeze Is Required To Effectuate Transfer
Of The Accounts
The Receiver seeks to acquire ownership of the Accounts in the most efficient

method possible without any violation of the asset freeze currently in place. Pursuant to the
asset freeze provision of the Preliminary Injunction Order entered on January 21, 2009 (Doc.
7), financial institutions and depositories containing assets or property belonging to the
defendants and relief defendants are restrained from transferring, liquidating, or otherwise
disposing of those assets or property. Therefore, the Receiver requests a partial modification
of the asset freeze solely to permit the Receiver to receive possession of the Accounts and
their assets and to permit GSEC to dispose of the worthless position in the 750A account and
close or otherwise handle the accounts in the normal course.
C.

Pursuing Possession Of The Remaining Accounts Would Be Uneconomical And
Result Only In Unnecessary Expense To The Receivership Estate
The Receiver’s investigation revealed that the total combined value of the Remaining

Accounts was less than $50, with the majority of securities positions in those accounts
having no value. While the Receiver has taken steps to gain possession of securities in
accounts where the underlying securities have some material value, see, e.g., Footnote 1
above, the Receiver believes the de minimus value of the positions held in the Remaining
Accounts do not justify the expenditure of time and resources by the Receiver’s team. Thus,

6

the Receiver seeks an Order allowing the Receiver to relinquish possession or control of the
Remaining Accounts.
CONCLUSION
Based upon the foregoing, the Receiver respectfully moves the Court for an Order in
substantially the form attached as Exhibit A (1) granting the Receiver possession of the
contents of the 75K0 Account and the 4J5V Account custodied at GSEC; (2) modifying the
asset freeze for the limited purpose of allowing the Receiver to gain possession of the
contents of the 75K0 Account and the 4J5V Account and permitting GSEC to dispose of the
worthless position in the 750A account and close or otherwise handle all of those accounts in
the normal course of business; and (3) authorizing the Receiver to relinquish possession or
control of the Remaining Accounts at GSEC.
CERTIFICATE UNDER LOCAL RULE 3.01(g)
Undersigned counsel has conferred with counsel for the SEC and is authorized to
represent to the Court that this motion is unopposed.

s/ Gianluca Morello
Gianluca Morello, FBN 034997
[e-mail]
Michael S. Lamont FBN 0527122
[e-mail]
Jared J. Perez, FBN 0085192
[e-mail]
Wiand Guerra King P.L.
5505 W. Gray Street
Tampa, FL 33609
Tel: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand

7

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on July 25, 2014, I electronically filed the foregoing
with the Clerk of the Court by using the CM/ECF system.

s/Gianluca Morello
Gianluca Morello, FBN 034997

8