Securities and Exchange Commission v. Nadel et al

Filing 129

First MOTION for attorney fees for ORDER AWARDING FEES, COSTS, AND REIMBURSEMENT OF COSTS TO RECEIVER AND HIS PROFESSIONALS by Burton W. Wiand. (Attachments: #1 Exhibit A - Standardized Fund Accounting Report, #2 Exhibit B - Receiver's First Interim Report, #3 Exhibit C - Receiver's fees through 02-28-09, #4 Exhibit D - Home Front Homes Litigation through 02-28-09, #5 Exhibit E - Categorization and summary of costs (Fowler White) through 02-28-09, #6 Exhibit F - Fee Schedule, #7 Exhibit G - Fowler White Fees through 02-28-09, #8 Exhibit H - PDR CPA bill through 02-28-09, #9 Exhibit I - Riverside bill through 02-28-09, #10 Exhibit J - E-Hounds bill through 02-28-09, #11 Exhibit K - Proposed Order)(Nelson, Carl)

Case 8:09-cv-00087-RAL-TBM Document 103-2 Filed 04/03/2009 Page 1 of 40

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIA
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 INESTMENT

PARTNERS, L.P., VALHALLA MANAGEMENT, INC. VICTORY IRA FUND, LTD, VICTORY FUND, LTD, VIKIG IRA FUND, LLC, VIKING FUND, LLC, AND VIKING MANAGEMENT,

Relief Defendants.

/

THE RECEIVER'S FIRST INTERIM REPORT
I. Introduction

Burton W. Wiand, the Court-appointed Receiver for (a) Defendants Scoop Capital,
LLC ("Scoop Capital") and Scoop Management, Inc. ("Scoop Management") (collectively

referred to as "Defendants"); (b) Relief Defendants Scoop Real Estate, L.P.; Valhalla
Investment Parners, L.P.; Victory IRA Fund, Ltd.; Victory Fund, Ltd.; Viking IRA Fund,

EXHIBITB

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LLC; and Viking Fund LLC (collectively referred to as the "Hedge Funds");l (c) Relief
Defendants Vŕlhalla Management, Inc. and Viking Management (along with Scoop

Capital

and Scoop Management are collectively referred to as the "Investment Managers"); and

(d) Venice Jet Center, LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel
Preserve, LLC; Laurel Mountain Preserve Homeowners Association, Inc.; Marguerite J.
Nadel Revocable Trust UAD 8/2/07; Guy-Nadel Foundation, Inc.; Lime Avenue Enterprises,
LLC; and A Victorian Garden Florist, LLC (all of the foregoing are collectively

referred to as

the "Receivership Entities"), hereby files this First Interim Report in order to inform the
Court, the investors, and others interested in the Receivership Entities of activities to date, as
well as the proposed course of action?
The Receiver was appointed on Januar 21,2009. By January 26,2009, the Receiver

established an informational website www.nadelreceivership.com. The Receiver has updated
this website periodically and continues to update it with the Receiver's most significant

actions to date; important court filings in this proceeding; and other news that might be of

interest to the public. This First Interim Report, as well as all subsequent reports, wil be
posted on the Receiver's website.

1 While these funds are referred to as hedge fuds, the Receiver's investigation has raised

serious question as to whether they were ever operated as legitimate investment vehicles. The Receiver wil refer to these funds as hedge funds thoughout ths Report although as noted the their operation. regarding Receiver has serious question
2 This First Interim Report is intended to report on information and activity for the Receiver's
first sixty days of appointment from January 21,2009 though March 23,2009. Thus, unless

otherwise indicated, the information reported herein reflects the information in the Receiver's
possession as of

March 23,2009.

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II. Procedural Background

On or about Januar 14, 2009, Arur Nadel ("Nadel"), the Hedge Funds' principal

investment advisor and the sole officer and director of Scoop Management and sole managing

member of Scoop Capital, fled Sarasota county and disappeared for nearly two weeks. On
Januar 21, 2009, the Securities and Exchange Commission (the "SEC" or "Commission")
fied a complaint in the United States Distrct Court for the Middle Distrct of Florida

charging the Defendants with violations of the federal securities laws (the "SEC Action").

The Commission alleges that Nadel used the Investment Managers to defraud investors in the
Hedge Funds from at least January 2008 forward by "massively" overstating investment
returns and the value of fund assets to investors in these

fuds and issuing false account

statements to investors. The Commission also asserts that Nadel misappropriated investor

funds by transferrng $1.25 milion from Viking IRA Fund and Valhalla Investment Partners,
L.P. to secret ban accounts. The Court found the Commission demonstrated a prima facie

case that Defendants committed multiple violations of federal securties laws.
The same day the Commission filed its complaint, the Cour

entered an order

appointing Burton W. Wiand as Receiver for Defendants and Relief Defendants (the "Order
Appointing Receiver"). (See generally Order Appointing Receiver (Doc. 8).)

On January 21, 2009, on the SEC's motion, the Court entered (i) an Order of

Preliminary Injunction and Other Relief as to Defendants Scoop Capital and Scoop
Management and all Relief Defendants (Doc. 7) and (ii) a Temporar Restraining Order and
Other Emergency Relief as to Nadel (the "TRO") (Doc. 9). Among other things, these orders

enjoined the Defendants and Relief Defendants from furter violations of federal securities

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laws and froze their assets. On February 3, 2009, the Court entered an Order

of Preliminary

Injunction and Other Relief as to Nadel (the "Februar 3 Preliminar Injunction") (Doc. 29),
the terms of which are essentially identicál to those of the TRO.3

On January 27,2009, on the Receiver's motion, the Cour entered an order expanding
the scope of the receivership and appointing the Receiver as receiver

also over the Venice Jet

Center, LLC, and Tradewind, LLC. (See Order, Jan. 27, 2009 (Doc. 17).) On February 11,
2009, on the Receiver's motion, the Court entered an order expanding the scope of the
receivership and appointing the Receiver as receiver also over Laurel Mountain Preserve,

LLC; Laurel Preserve, LLC; the Marguerite J. Nadel Revocable Trust UAD 8/2/07; and the
Laurel Mountain Preserve Homeowners Association, Inc. (See Order, Feb. 11, 2009
(Doc.

44).) On March 9, 2009, on the Receiver's motion, the Cour entered an order

expanding the scope of the receivership and appointing the Receiver as receiver also over the

Guy-Nadel Foundation, Inc. (See Order, March 9, 2009 (Doc. 8).) On March 17, 2009, on
the Receiver's motion, the Court entered an order expanding the scope of

the receivership and

appointing the Receiver as

receiver also over Lime Avenue Enterprises, LLC, and A Victorian

Garden Florist. (See Amended Order, March 17, 2009 (Doc. 81).)
Pursuant to the Order Appointing Receiver, the Receiver has the duty and authority to:

"administer and manage the business affairs, funds, assets, choses in action and any other
3 Both the TRO and the February 3 Preliminary Injunction required Nadel to make a sworn

accounting to the Court and the Commission of all funds received by him from any of the defendants or relief defendants and a sworn identification of all accounts in which he has an interest or has the power or right to exercise control. (Docs. 9, 29.) In response to these Orders, Nadel submitted a letter asserting his Fifth Amendment right against selfincrimination and refused to provide this information.

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! i f i i i I

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 necessar for the
protection of

I

the investors." (Order Appointing Receiver at 1-2.)
Nadel was

On January 27, 2009, Nadel surendered to the FBI in Tampa, Florida.

arested and charged with two counts of securities fraud and wire fraud based on the
fraudulent investment scheme discussed below. On January 30,2009, Magistrate Judge Mark
Pizzo of the United States Distrct Cour for the Middle Distrct of Florida denied Nadel's

request for a release on bond awaiting tral, deciding instead that Nadel should remain in jail
based on, among

other things, a risk of flight. On or about February 2, 2009, Judge Pizzo

entered a Detention Order denying bail and a Removal Order requiring that Nadel be

transferred to the Metropolitan Correctional Center in New York, New York to await tral.
See Us. v. Nadel, (U.S. Dist. Ct. M.D. Fla., Case No. 8:09-mj-01039-MAP (Docs. 5, 6)).

On February 26, 2009, Judge Denise Cote of the United States District Court for the

Southern Distrct of New York agreed to release Nadel on $5 milion bail, contingent on a

number of conditions including $1 milion in cash, living restrctions, and specific bond
guarantees. Judge Cote also required Nadel to fully and completely cooperate with the SEC.

As of the date of this Report, Nadel has not met the conditions for bail and is still being held
in the Metropolitan Correctional Center.
On February 27, 2009, the prosecution and Nadel's attorneys agreed to a 30-day
extension of a formal indictment. The prosecution requested the extension for the puroses of
conducting pre-indictment discovery, and Nadel agreed to waive his

right to a speedy tral.

As of

the date of

this Report, no indictment has been entered against NadeL.

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In the SEC Action, the Court required Nadel (or his counsel) to fie an appearance

along with a response to the Complaint on or before April 6, 2009. (See Order, March 6,
2009 (Doc. 60).) As of the date of this Report, no response to the Complaint has been filed by
Nadel or on his behalf.
III. The Receiver's Role and Responsibilties
The Receiver fuctions as an independent agent of the cour. The United States

Supreme Court has explained that:

(a receiver) . . . is an officer of the court; his appointment is
provisionaL. He is appointed on behalf of all paries, and not of

the complainant or of the defendant only. He is appointed for the benefit of all parties who may establish rights in the cause.

The money in his hand is in custodia legis for whoever can make out a title to it . .. It is the cour itself which has the care of the property in dispute. The receiver is but the creature of
the court; he has no power except such as are conferred upon

him by the order of his appointment and the course and practice

ofthe cour.
Booth v. Clark, 58 U.S. 322, 331 (1854). Generally, the

Receiver is charged by the Court

with maximizing investors' and creditors' recoveries. To this end, the Cour directed the
Receiver to engage in the following activities:

A. Operating the Business of the Receivership Entities.
The Court granted the Receiver the "full and exclusive poWer, duty, and authority" to

"administer and manage the business affairs, fuds, assets, choses in action and any other
property of the Defendants and Relief Defendants . . .." (Order Appointing

Receiver at 1.)

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B. Takig Possession of Receivership Property.
The Court directed the Receiver to "(t)ake immediate possession of all property, assets
and estates of every kind of the Defendants and Relief Defendants, whatsoever and
wheresoever, located, belonging to or in the possession of the Defendants and Relief

Defendants .. . ." (Order Appointing Receiver iˇi.)
C. Investigating Receivership Affairs and Recovering Funds.

The Court also directed the Receiver to "(i)nvestigate the manner in which the affairs
of the Defendants and Relief Defendants were conducted and institute such actions and legal

proceedings, for the benefit and on behalf of the Defendants and Relief Defendants and their

investors and other creditors as the Receiver deems necessary against those individuals,
corporations, parnerships, associations and/or unincorporated organizations, which the

Receiver may claim have wrongfully, ilegally or otherwise improperly misappropriated or

transferred monies or other proceeds directly or indirectly traceable from investors in the
Defendants or Relief

Defendants . . . ." (Order Appointing Receiver ~2.)

n. Reporting on Assets and Liabilties and Implementing Claims Process.

The Cour fuher directed. the Receiver to "(p )resent to this Court a report reflecting
the existence and value of the assets of the Defendants

and Relief Defendants and of the

extent ofliabilities, both those claimed to exist by others and those the Receiver believes to be
legal obligations of the Defendants and Relief Defendants." (Order Appointing Receiver iˇ3.)

As contemplated by the Order, the Receiver wil ultimately institute a claims process
primarly for the benefit of

the Receivership Entities' investors who have been defrauded and
the activities of

suffered legitimate losses as a result of

Nadel and others.

iIi

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iv. Overview of Preliminary Findings

The Receiver is in the process of reviewing voluminous records from the offices of

Receivership Entities, as well as records from more than thirty (30) different institutions,

including banks and brokerage firms. The Receiver also is in the process of obtaining
documents from additional third paries. The Receiver has formed some preliminary

conclusions based on his review of a portion of the records received. While these conclusions

are not final, and may change as the review becomes more complete, the Receiver believes
they should be shared with the Cour, the investors, and other potentially interested parties.
In the Commission's Emergency

Motion and Memorandum of Law in Support of

Temporary Restraining Order and Other Emergency Relief ("SEC's Emergency Motion")
(Doc. 2) and supporting papers, the Commission presented evidence showing Nadel
defrauded investors through his control of

the Hedge Funds' advisers and/or managers, Scoop

Capital and Scoop Management. Through the Investment Managers, Nadel, along with
Chrstopher Moody and Neil Moody, were

ultimately responsible for controlling the Hedge

Funds' investment activities. While the Commission's evidence showed that Nadel defrauded
investors since at least January 2008, the Receiver's investigation has uncovered evidence

showing that the fraud began at least as early as 2003 and in all likelihood before then.

The Receiver's investigation has revealed that for each Hedge Fund, the Hedge Fund's

performance as disclosed to investors from at least 2003 forward was based mainly on trading
results that Nadel purported to have in brokerage transactions cleared through Goldman Sachs
Group, Inc. (in which money was purortedly traded to generate the purported retus Nadel

was paying). The returns reported to investors and potential investors were based on fictitious

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performance results that were created by Nadel and then included in a database maintained by

Scoop Management. These fictitious performance results formed the basis of gross
misrepresentations to investors.

Below is a table comparing actual trading results in the Hedge Funds' Goldman Sachs
accounts to the values represented to investors and to distrbutions paid. Specifically, for each

year from 2003 to 2008, the table lists from, left to right, (1) the pertinent year; (2) the amount

of gains the Investment Managers represented that the Hedge Funds had achieved that year
(identified as "Company Represented Amounts"); (3) the actual combined total gain or loss
experienced

that year in the accounts for the Hedge Funds (identified as "Hedge Funds"); (4)

the difference between what the Investment Managers represented the Hedge Funds had
achieved in performance versus the actual trading results in the Goldman Sachs accounts for
the Hedge Funds (identified as "Difference"); and (5) the actual distrbutions paid by the

Hedge Funds for the pertinent year, including distributions to investors and management and
performance incentive fees paid (identified as "Distributions").
Gains/(Losses)
Hedge Funds

Year 2003 2004 2005 2006 2007 2008

Company Represented Amounts 23,716,749 46,950,345 61,169,058 50,003,778 54,665,571 36,334,794

(Per Goldman Sachs statements)

Total

272,840,295

17,237,008 4,637,878 5,739,301 (18,549,355) (24,989,307) (2,493,654) (18,418,129)

Difference 6,479,741

Distrbutions
16,729,147 49,329,387 75,078,840 75,444,122 60,034,321 73,443,310 350,059,127

42,312,467 55,429,756 68,553,133 79,654,879 38,828,448 291,258,424

As the above table shows, for 2003 through 2008, the Hedge Funds' performance as
represented to investors was significantly overstated and thus, false. For instance, for the

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years 2003 to 2008, the Investment Managers represented that the Hedge Funds' trading

activity generated more than $272 milion in gains when, in reality, the Hedge Funds'
investment accounts actually lost approximately $ i 8.4 milion. Further, while the Hedge
Funds lost approximately $18.4 milion for this same period, the Investment Managers stil
paid more than $350 millon in distrbutions to investors and fees. As this table shows, from
at least 2003 through 2008, the Investment Managers were making distrbutions and paying
fees that the investment performance of the Hedge Funds never supported. The Investment

Managers were also crediting fictitious profits to accounts where the accountholders were not
taking distributions. These fictitious profits were likewise

unsupported by the Hedge Funds'

investment performance and only served to further increase the Hedge Funds' insolvency.
This negative cash flow made the eventual collapse of

Nadel's enterprise inevitable.

In short, the investment returns and performance as represented to investors were
based on grossly overstated performance numbers created by Nadel, and the results reported
to investors were fiction. The tre results of the trading activity that actually occurred was

never included in data reported to investors or potential investors.
Evidence also shows that the Hedge Funds directly or indirectly

paid substantial fees
Receivership Entities, in the

to Scoop Capital and Scoop Management, and to other

form of

management, advisory, and/or profit incentive fees. As reflected by the table below,
according to the Hedge Funds' documents from 2003 through 2008, they

paid approximately

$97,168,122 in total fees. Profit incentive fees were paid to Scoop Management, Viking

Management and Valhalla Management based on a percentage of profits that never occurred
and thus signficantly depleted the Hedge Funds' assets

and diverted those assets to Scoop

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Capital and Scoop Management, which were controlled by Nadel, and to Valhalla

Management and Viking Management, which were controlled by Neil and Chrstopher
Moody.
Management

Penormance
Incentive Fees
5,929,187 11,737,586 15,292,264 12,500,945 13,666,393 9,083,698
Total Fees

Year
2003 2004 2005 2006 2007 2008

Fees
1,521,377 3,644,188 5,057,633 5,756,646 6,206,972 6,771,232

7,450,565 15,381,774 20,349,897 18,257,590 19,873,365 15,854,931

Total

28,958,048

68,210,074

97,168,122

Significant sums from the proceeds of Nadel's scheme also made their way into other

accounts controlled by Nadel and/or his wife, Marguerite NadeL. As of December 31, 2008,
according to the balance sheet for Scoop Management, Scoop Management

had transferred

approximately $17,177,896.56 to accounts owned either individually or jointly by the

Nadels.

These amounts are in addition to the amounts Mrs. Nadel received from Scoop Management

as compensation. According to its balance sheet, Scoop Management also transferred
approximately $6,433,804.40 to other entities controlled by NadeL. To date, the Receiver has

not uncovered any source of income for Nadel or his wife (during the time of Nadel's
scheme) that was not in some manner fuded with money from that scheme.

Documentation and other information that the Receiver has collected shows that
money derived from the scheme was used hy Nadel to purchase and/or fud other businesses.
The Receiver has expanded the Receivership to include additional businesses controlled by

Nadel in the Receivership. See discussion of expansion at Section V.B. below.

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I i i I i

To date, the Receiver has discovered and identified approximately 371 investors who

I f

invested slightly more than $397 milion. Based on documentation analyzed to date, it
appears that investors have out of pocket losses of approximately $168 milion. The Receiver

I

has also discovered that some investors were paid more than their total investments. These
overpayrents were "fictitious profits." At this time, the Receiver has discovered

approximately $53.5 milion in such fictitious profits. Furher, it appears that, although
separately numbered investor accounts were used in communications with investors and

brokerage accounts were used for each Hedge Fund, in reality there were not separate funds.
Due to the method Nadel used to trade securities, distinctions made between the individual

Hedge Funds and between investor "accounts" have little meanng. The documents reviewed
reveal that Nadel treated the Hedge Funds as a single source of money regardless of with

which Hedge Fund investors purportedly invested. The Receiver has reached the preliminary

conclusion based on available research and evidence that investor fuds were commingled in
Nadel's and the Receivership Entities' accounts.
A. Nadel's Trading Activities in the Hedge Funds.

In the Executive Sumaries disseminated to investors, Nadel represented that the
Hedge Funds were generating the anual returns reflected in the table below, primarily
through trading in the quadruple Qs.4

4 The term "Quadruple Qs" (ticker symbol: QQQQ) refers to the NASDAQ-I00 Tracking

I

Stock, an exchange-trading fud ("ETF") listed on the NASDAQ intended to track the
NASDAQ index.

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the amount of returns he represented to investors. Rather, based on the documents the

Receiver's financial expert has analyzed to date, the Hedge Funds as a whole lost significant sums from their inception. Specifically, the table below shows the actual account profits and
losses for the Hedge Funds for the indicated time.

Account Name
Scoop Real Estate Ltd.
2/1/04 - 12/31/08

Account Profit/Losses
($6,637,880)

Overall Annualied Rate of Return
-33.35%
3.98%

Valhalla Investment Partners, LP
10/01/02 - 12/31/08

$2,863,875

Vikng Fund LLC 3/01/03 -12/31/08
Viking IR Fund Ltd.
3/01/03 - 12/31/08

($8,073,752)
($2,053,443)
$1,825,701
. .

-19.40% -24.53% -16.70%
-18.45%
-18.63%

Victory Fund, Ltd.
6/01/02 - 12/31/08

Victoiy Fund, Ltd.
2/01/03 - 8/31/03

($66,776)
($5,941,164) ($18,083,439)

Victoiy IR Fund, Ltd.

Hedge Fund Total

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Between 2002 and 2008, the highest anualized rate of return Nadel appears to have
achieved was approximately 4%, while the rest of the Hedge Funds experienced anualized
retus of -16.70% to -33.25%.

While these actual performance numbers demonstrate the

disparty between what Nadel and others were claiming the Hedge Funds were achieving, the

performance of each individual Hedge Fund is not significant because it appears that Nadel

arbitrarily allocated daily results of trading transactions among the Hedge Funds. This
activity resulted in the commingling of the Hedge Funds' assets and makes the

performance

results of each individual Hedge Fund immateriaL. In short, Nadel was losing signficant

sums of money while representing that he was achieving anual returns from 18.93% to

48.67% (for years with full activity).

Further, as shown by the char below, while the Hedge Funds' accounts experienced
losses, allbut one of

Nadel's personal accounts and other accounts maintained essentially for

the benefit of Nadel and in the sole control of Nadel (collectively referred to herein as
"Nadel's Accounts") experienced significant gains.
Account N arne

Account ProfitlLosses
$11,331,464
$737,141

Overall Annualized Rate of Return
49.37%
36.72% 71.62%
-15.49%

Scoop Capital LLC
12/01/04 - 12/31108

Scoop Management
10/01102 - 12/31108

Arhur Nadel
6/01102 - 10/31108

$10,781,029
$10,033

Marguerite Nadel
8/01107 - 1130109

Non-Fund Total

$22,859,667

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The trading activity in the Hedge Funds' accounts and Nadel's Accounts appears to
have been essentially the same, and trading in those accounts was done concurently.

Virtally all trading allocated to every account was in quadruple-Qs. Given the dramatic
differences in trading results in Nadel's accounts as compared to the Hedge Funds' accounts

and preliminary information received by the Receiver concerning Nadel's trading practices,
the Receiver believes that this evidence may indicate that Nadel engaged in a fraudulent
practice known as "cherr picking." In cherr picking, the trader.

allocates profitable trades to

himself and unprofitable trades to clients. See, e.g., S.E. C. v. K. W Brown and Co., 555 F.
Supp. 2d 1275, 1302-1307 (S.D. Fla. 2007) (holding that "cherry-picking" day-trading
scheme operated by officers constituted scheme to defraud under Securities Exchange Act).

Analysis of the trading activity and cash flows is ongoing. However, in light of the fact that

Nadel traded the same investments for all Hedge Funds and the accounts he owned and/or
controlled for his benefit and that there was a wide disparity between the results allocated to

the Hedge Funds' accounts and those allocated to Nadel's Accounts, there is no apparent
logical explanation other than the improper diversion of profitable transactions by Nadel.
B. Funds located by the Receiver.
At the outset of the Receivership, approximately $556,758.33 in cash and cash

equivalents in financial accounts titled in the name of the Hedge Funds and Investment
Managers (which include Scoop Management, Scoop Capital, Valhalla Management, and

Victory Management) had been identified and frozen pursuant to the Court's TRO and
Preliminar Injunction Orders. In addition, cash and cash equivalents in financial accounts

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titled in the name of other Receivership Entities5 at the time the entities were brought into
receivership were approximately $556,654.72. Thus, total cash and cash equivalents at the
inception of the Receivership and as the Receivership was expanded to include each

additional Receivership Entity indicated was approximately $1,113,413.05.6
One of the Receiver's highest priorities is to locate and recover any additional fuds.
The Receiver has retained a forensic accounting firm to assist in tracing funds. As of

the date

of this report, the Receiver has also identified and recovered $120,000.7 From January 21,
2009 through February 28,2009, the Receiver also received $260,789.98 in business income

from ongoing operations of some Receivership Entities, $9,371 in interest/dividend income
and $30 in miscellaneous income. The Receiver wil continue to diligently investigate, and

wil update the Court and the investors if additional funds are located.
V. The Receiver's First Sixty Days

In the first sixty days, the Receiver took a number of steps to fulfill his mandates
under the Order Appointing Receiver.

5 These other Receivership Entities include Venice Jet Center, LLC; Tradewind, LLC; Laurel
Mountain Preserve, LLC; Laurel Preserve, LLC; and the Marguerite J. Nadel Revocable Trust UAD 8/2/2007.

6 This amount does not include any sum for non-cash or non-cash equivalent assets the
Receiver has recovered. For a

discussion ofthese assets, please refer to Sections V.B. & V.D.

below.
7 This amount is comprised of two $60,000 payments the Receiver recovered from two
i ě r

individuals. The Receiver determined that the transfers made to these individuals in the amount of $60,000 each were an improper diversion of investor fuds and obtained court
orders to recover these funds.

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A. Taking possession of Receivership Property.
1. Physical premises and tangible assets.
On the day of his appointment, the Receiver took possession of the Receivership

Entities' offices at 1618 Main Street, Sarasota, FL 34236 (the "Office"). The Office was used

by Nadel as the headquarters for administering his control of the Receivership Entities. The
Receiver secured the premises by changing the locks. The Receiver has inventoried all of the
physical property at the premises and is in the

process of removing the Office's contents to
""

either the Receiver's offices in Tampa, Florida, or his information technology expert's offices

in Clearater, Florida. The Receiver is also attempting to sell any of these contents that have

value and that may be sold at this time and returnng or otherwise disposing of any leased
equipment.

The offce contained books and records of the Receivership Entities and Mr. Nadel,

some office furniture, and computer and other electronic equipment. Based on bids from

fuiture liquidators, the estimated resale value of the futue and offce fixtues is $3,400.
The Receiver has provided change of address notifications to the United States Postal Service
and Federal Express, as well as all known service providers to the Receivership Entities.

The Receiver also removed several servers and related computer equipment from the
premises that were used by the Receivership Entities and

Mr. NadeL. The Receiver retained

experienced forensic information technology experts with the firm ofE~Hounds, Inc. to assist

in securng and analyzing the electronic data on the computers. E-Hounds personnel have
secured the data, and are underway in their forensic analysis.

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Since obtaining

control of the Receivership Entities, the Receiver and his

professionals have had discussions - including continuing discussions - with a number of
people associated with Nadel and/or the Receivership Entities, including officers of some of

the Receivership Entities and persons responsible for maintaining the financial books of
Receivership Entities, for operating the business of Receivership Entities, for performing
accounting services, and for administering

the Hedge Funds.

The Receiver and his professionals have also reviewed documents located in the
Office; documents obtained from the accountant for one or more Receivership Entities;

information stored on the Receivership Entities' computer network; documents obtained from

other businesses controlled by Nadel; documents obtained from financial institutions and
other third parties, including lawyers and others who assisted Nadel's businesses with their
transactions; and information available in the public record.
B. Expansion of the Receivership.
As a result of the review of these records and of the discussions noted above, the

Receiver sought and successfully obtained the expansion of the Receivership to include:

Venice Jet Center, LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel Preserve,

LLC; Laurel Mountain Preserve Homeowners Association, Inc.; the Marguerite J. Nadel
Revocable Trust UAD 8/2/07; the Guy-Nadel Foundation, Inc.; Lime Avenue Enterprises,
LLC; and A Victorian Garden Florist, LLC. The Receiver's investigation revealed that Nadel
had control and/or a full or parial interest in

these additional businesses and thatthey were

purchased and/or funded with money derived from Nadel's fraudulent investment scheme.

Furher, by virte of Scoop Capital's ownership interest in Home Front Homes, LLC and

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Summer Place Development Corporation the Receiver also has control of these entities
although for varous reasons a formal order expanding the Receivership to include Home

Front Homes or Summer Place Development has notbeen sought.

Included in the discussion below of these entities is a description of assets the
Receiver has acquired as a result of their inclusion in the Receivership. Where possible the
Receiver has included estimated values of these assets. However, given the state of the u.s.

economy at the time of this Report, it is important to note that any such estimations,
valuations or appraisals are subject to change. In particular, due to the poor state of the real
estate markets, the estimates provided may differ markedly from the actual amounts realized

upon the sellng of any real property.
1. Venice Jet Center, LLC.

Venice Jet Center, LLC ("VJC"), is a Florida limited liability company formed in

April 2006. Its principal address is the Offce, and Nadel was its registered agent and the
managing member. The assets ofVJC were purchased with proceeds of

Nadel's scheme, and

over time additional proceeds of the scheme were transferred to VJC. VJC is a viable
business with potential to generate assets for the Receivership estate.
On Januar 27, 2009, the Cour expanded the Receivership to include VJC. VJC is a

fully operating FBO business. It includes a flight school, fueling service, hangar rentals, and
a café. Since

the Receiver's appointment as Receiver ofVJC, he has taken control ofit and is

continuing to operate the business. The Receiver is continuing VJC's longstanding pursuit of
a permit to build new hangers at the VJC. The Receiver believes that the permit to build more

hangars, which was requested well before the Receiver's appointment, wil make the VJC

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more attractive to potential purchasers and ultimately increase the value of the business. The
Receiver has encountered some problems in connection with the. ongoing management of

the

VJC. The City of Venice (the "City"), in contravention of its lease and specific direction

from the Federal Aviation Authority ("FAA"), has refused to grant VJC authorization to
develop four hangars at the VJC facility. The City officials have publicly

anounced their

intent to terminate

the VJC lease with the City and take over VJC's operations. The Receiver

intends to vigorously resist any unwarranted interference by the City with what appears to be
a substantial and valuable property right ofVJC (and of

the Receivership estate).

The Receiver has possession and control of a building owned by VJC located at 400

Airport Avenue East, Venice, Florida, 34285 (the "VJC Building"). The VJC Building has

one known encumbrance: a loan with Nortern Trust Bank, N.A., on which there is a
remaining balance of $1 ,978,274.00.

The Receiver estimates VJC has significant value in excess of the funds owed to
Northern Trust. However, this value is subject to change depending on the resolution of the
hangar permit issue. The Receiver has received significant interest in the purchase of VJC.

Parties interested in marketing or purchasing ths property should contact the Receiver
directly.
2. Tradewind, LLC.

The information reviewed to date shows that Nadel was also the managing member of

Tradewind, LLC ("Tradewind"). Tradewind was formed in Delaware in Januar 2004, and

registered for the first time in Florida in March 2008. Nadel was Tradewind's managing

member and its registered agent, and Tradewind's principal address was the Offce. The

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Receiver discovered that Tradewind owns and controls five planes and one helicopter.
Tradewind also owns 31 airort hangars at the Newnan-Coweta County Airport in Georgia

(the "Georgia Hangars"). The Receiver's investigation revealed that Tradewind was funded
with money from Nadel's scheme.

Similar to VJC, Tradewind appears to be a viable business

with potential to generate assets for the Receivership estate.
On January 27, 2009, the Court expanded the Receivership to include Tradewind.

Tradewind is a fully operating business. Since the Receiver's appointment as Receiver of
Tradewind, he has taken control of it and is continuing to operate the business. Tradewind
collects approximately $28,000 in monthy rent (mainly from the hangars) and incurs varying
monthly expenses, which include land rent, loan payments, payroll, and various

utilities. The
its assets.

Receiver is entertaining offers

to purchase this business or any of

The Receiver has possession and control of the Georgia Hangars. The Georgia
Hangars have one known encumbrance: a loan with the Bank of Coweta with a remaining
balance of approximately $963,106.37, and monthly payments of $8,055. There is also

monthly rent of $2,805 due to the Newnan Coweta Aviation Authority. The Receiver has

been making these monthly payments as he believes they are in the best interest of the
Receivership.

The Receiver also has possession and control of the five planes and helicopter. The
following table shows the year, model, and known encumbrances relating to each aircraft.

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Aircraft in Receiver's Possession

Piper PA-28/140
Cessna 152

1971

Ailane
Airplane Airplane

None. None.

1978

Learjet 31A

1996

Loan with General Electric Capital Corporation ("GECC") entered into on May 17, 2006, for approximately $2.4 million.

Citation

1992

Ailane
Airplane
Helicopter

Loan with VFS Financing, Inc. ("VFS") entered into on May 23,2008, for approximately $2.1

millon
Baron
Schweizer 300
1977
1997

None.
None.

The Receiver currently is negotiating with GECC and VFS to reach an agreement for
disposition of the LearJ et and Citation in a manner that would be in the best interest of the
Receivership estate. Also, the Receiver is currently evaluating the value of the other aircraft

and determining the appropriate method of their disposition.
3. Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; and

Laurel Mountain Preserve Homeowners Association, Inc.
The Receiver's investigation revealed that Laurel Mountain Preserve, LLC ("Laurel

Mountain"), was a North Carolina limited liabilty company formed in or about December
2003. Laurel Mountain was "withdrawn" as a limited liabilty company in January 2006. Its
pnncipal address was the Office, and its manager and member was NadeL. Laurel Preserve,

LLC ("Laurel Preserve"), was formed as a North Carolina limited liabilty company in
February 2006. Its principal address was the Offce, Nadel was its registered agent, and the

"Registered Offce" address was a home in Fairview, Nort Carolina titled in the names of
Nadel and his wife. The manager was Nadel, and although Laurel Preserve's 2006 Operating

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Agreement identifies Nadel and his wife as members of Laurel Preserve with each having

made a "capital contribution" of $750, the Laurel Preserve 2007 federal income tax return
identifies Scoop Capital as owner of 100% of Laurel Preserve.
Laurel MountaiIě Preserve Homeowners Association, Inc. (the "HOA"), is a Nort

Carolina non-profit corporation formed in March 2006. Its principal address was the
Fairview, Nort Carolina home, and its registered agent was NadeL.

Documentation reviewed and information obtained by the Receiver showed that
Laurel Preserve holds title to approximately 420 acres near Ashevile, North Carolina in

Buncombe and McDowell counties, intended for development of home-sites (the "Laurel

Mountain Property"). The Laurel Mountain Property was originally purchased by Laurel
Mountain in 2003 and then "sold" to Laurel Preserve in February 2006. Laurel Mountain

provided financing for that purchase in the form of a $2,900,000 loan to Laurel Preserve.

According to documentation retrieved from the Office, Laurel Mountain and Laurel

Preserve received significant fuding in the form of "loans" from Scoop Capital, Scoop
Management, Tradewind, Nadel and Mrs. Nadel and BB&T Ban. On February 11,2009, the
Cour expanded the Receivership to include Laurel Mountain, Laurel Preserve, and the HOA.
Since the Receiver's appointment as Receiver of these entities, he has taken control of them
and

is working on marketing for sale the Laurel Mountain Property. This property currently

does not generate any income.

The Laurel Mountain Property encompasses 29 lots, including 23 estate-sized and 6
cottage-sized lots. There is also a cabin on this property that, according to the Buncombe

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County Property Appraiser, is valued at $319,800. The Laurel Mountain Property is fully
developed: infrastructure and utilities are currently in place and are fully functionaL.
The Laurel Mountain Property has three known encumbrances. The first

encumbrance

is a $360,157.37 loan from BB&T Ban. The second encumbrance is a $1,900,000 interest
only loan from Wachovia Bank, N.A. There is a monthly payment of $5,149.66 due on this

latter loan and the Receiver presently is not making payments on this loan. The third
encumbrance is an easement of approximately 169 acres of the Laurel Mountain Property,
which was granted to a land conservancy in 2005. It

appears that this donation was made in

par for the N adels' own tax benefit. The Receiver is contemplating whether it would be in

the best interests ofthe Receivershipto seek to

recover this easement from the conservancy as

it may create an exponential increase in the value of the full acreage.
The Receiver has consulted

with a realtor who previously listed the property and is

entertaining offers to purchase or proposals to market this developed property either by lot or
in its entirety. The Receiver is stil evaluating the current value of this property, but it appears

that the value is higher than the amount of the encumbrances. For more information
regarding this property, please refer to http://ww.1aurelmountainpreserve.com/. Paries

interested in marketing or purchasing this property should contact the Receiver directly.
4. Marguerite J. Nadel Revocable Trust UAD 8/2/2007.

The Marguerite J. Nadel Revocable Trust Under Agreement Dated 8/2/2007 (the
"Trust") was created on August 2, 2007. The trustee is identified as Mrs. NadeL. The
Receiver's investigation revealed that the Trust was fuded entirely with proceeds of

Nadel's

scheme through (1) a transfer of

$500,000 from Scoop Management in

August 2007 and (2) a

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transfer of $150,000 from Scoop Capital on the day before Nadel fled. It also revealed that

Nadel controlled the account in which the money held by the Trust purchased and sold
securities. Significantly, as alleged in the criminal complaint against Nadel, in an apparent
note Nadel left for his wife before fleeing, he instructed her to "use the trust (yours) to your
benefit as much and as soon as possible." United States v. Nadel, Case No. 09 MAG 169

(S.D.N.Y.), Compl. ii 17, attached as Exhibit 14 to the Receiver's Declaration in Support of
Second Unopposed Motion to Expand receivership (Doc. 37-15).
Since the Receiver's appointment as Receiver of

this Trust, he has taken control ofthe

ban account owned by the Trust. Currently, there is approximately $381,142.34 remaining

in this account.
5. Guy-Nadel Foundation, Inc.

The Guy-Nadel Foundation, Inc. (the "Foundation"), is a Florida non-profit
corporation formed in December 2003 for "charitable, educational and scientific puroses."

Nadel was the Foundation's incorporator and its registered agent. Furter, according to its

2006 federal tax return, the Foundation's President is NadeL. The Foundation's current

principal address is the Office.

The Receiver has gathered information that indicates the Foundation was fuded with
proceeds of

Nadel's scheme, which were transferred directly from Scoop Capital or indirectly

though transfers from the Nadels' personal accounts. In addition, in December 2003 and
December 2004, the Foundation was deeded approximately 22 lots located in North Carolina

from Laurel Mountain and Nadel and his wife. These lots are essentially adjacent to each
other. The lots appear to have been purchased by Laurel Mountain and the Nadels as par of

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the same general transaction in which Laurel Mountain purchased tie Laurel Mountain

Property. At the time of those transactions, Nadel was already peretrating his scheme, and
essentially all of

the Nadels' income was derived from that scheme.

Additionally, the Receiver has possession and control of two small parcels of

unmproved land in Thomasvile, Georgia (this land is separate from the Thomasvile
Property discussed in section V.D.1.a, below) owned by the Foundation. Accordingto the
Thomas County Tax Assessor's Office, one of the parcels is approximately 1.17 acres with a

land value of $30,762 and a free-standing garage with a value of $3,928. The other parcel is
.12 acres with a land value of $4,276.

On March 9, 2009, the Court expanded the Receivership to include the Foundation.

Since the Receiver's appointmentas Receiver of the Foundation; he has taken control of it
and is working on marketing the real property owned by the Foundation.

6. Lime Avenue Enterprises, LLC, and A Victorian Garden Florist, LLC.
Lime Avenue Enterprises, LLC ("Lime") is a Florida limited liability company formed

in August 2006 for "any and all lawful business." Lime owns a building located at 599 North
Lime Avenue, Sarasota,

Florida 34237 (the "Lime Building"). Lime purchased the Lime
other information reviewed by the Receiver
purchasing the Lime

Building in August 2006. Public records and

indicate that Lime was formed by the Nadels for the specific purpose of

Building. The Lime Building houses a flower shop, which is owned by A Victorian Garden
Florist, LLC ("Victorian Garden"), a Florida limited liabilty company formed in April 2005.

The Receiver's investigation revealed that Lime and Victorian Garden were funded with
proceeds from Nadel's scheme.

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On March 17, 2009, the Cour expanded the Receivership to include Lime and
Victorian Garden. Since the Receiver's appointment as Receiver of these entities, he has
taken control of them and is working on reviewing their books and records and determning
the most prudent course of action to take. In that regard, the Receiver is evaluating whether

the flower shop's operations are profitable and whether it is in the best interest of the
Receivership estate to maintain ownership of

this business.

The Receiver has possession and control of the Lime Building. The Lime Building
has one known encumbrance: a mortgage owed to the individuals who sold the building to
Lime on which the balance is approximately $600,000. The Receiver is presently attempting

to determine the value of this property. The Receiver also has possession and controloftwo vans owned by Lime: a 1999 Ford van and a 2003 Dodge van. The Receiver does not have

any estimation of value of these vans at this time. There are no known encumbrances on
these vans.

7. Home Front Homes, LLC.

Home Front Homes, LLC ("Home Front Homes") is a Florida limited-liability

company that was formed in 2006 for the purpose of "any and all lawful business." The
Receiver has not sought a formal order expanding the Receivership to include Home Front
Homes. However, as of April 15,2008, Nadel was the sole managing member of

Home Front

Homes, and Scoop Capital owns a majority equity interest in Home Front Homes. By virte
of this controlling interest, the Receiver has assumed control over Home Front Homes and is
directing the operation of that company for the benefit of the Receivership estate.

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Home Front Homes is engaged in the business of manufactung, marketing, and

selling energy-efficient homes. Home Front Homes is an operating business. The Receiver
intends to sell Scoop Capital's equity interest in this entity in a maner which would be most
beneficial to the Receivership estate. To date, the Receiver has not

sought to bring this

business as a whole into the Receivership and likely wil not do so absent a necessity to
protect the operation from creditors while the business or the Receiver's interest therein is
being sold. Paries interested in marketing or purchasing this business should contact the

Receiver directly.
8. Summer Place Development Corporation.

Summer Place Development Corporation ("Summer Place") is a Florida company that

was formed in 2005 for the purose of "any and all lawful business." The Receiver has not
sought a formal order expanding the Receivership to include Sumer Place. However, as of
January 20,2007, Nadel was a managing member of Summer Place, and Scoop Capital owns

a fifty-percent interest in Sumer Place. By virtue of this fifty-percent interest, the Receiver

has not assumed full control over. Sumer Place, but is working with the other managing

member and fifty-percent owner in directing the operation of Summer Place for the benefit of
the Receivership estate.
Summer Place is the owner of a proposed affordable residential housing development

site in Manatee County, Florida. Summer Place is an operating business. The Receiver
intends to sell Scoop Capital's equity interest in ths entity

in a maner which would be most

beneficial to the Receivership estate. Paries interested in marketing or purchasing this

business should contact the Receiver directly.

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C. Securing Receivership Funds.

Upon his appointment, the Receiver was initially concerned that the Receivership
Entities might hold positions in volatile.securities that would require an exit strategy to avoid
or minimize losses. The Receiver immediately investigated the nature of the Receivership's

holdings and determined that no such exit strategies were required because almost all of the
relatively liquid holdings were in cash or cash equivalents.8

The Receiver coordinated with the SEC to move swiftly to freeze all funds of which
they were aware. The Receiver and his attorneys engaged in a preliminary review of
documents and other information for the purose of identifying institutions that potentially

held relevant financial accounts or lines of credit. The Receiver immediately forwarded

copies of the asset freeze orders to the pertinent institutions and confirmed that they
understood their obligations under the freeze orders.

Receivership funds are curently being held in six different institutions: (1) Northern
Trust Ban, N.A.; (2) Wachovia Ban, N.A.; (3) Shoreline Trading Group, LLC; (4) Branch

Baning and Trust Company ("BB&T"); (5) Bank of Coweta; and (6) Thomasvile National
Ban. VJC also maintains an insignificant amount of funds in a small operating account with

Ban of America. Attached as Exhibit A to this Interim Report. is a cash accounting report
showing the amount of money on hand at inception of the Receivership (Januar 21, 2009)

less operating expenses plus revenue through February 28,2009. This cash accounting report
does not reflect non-cash or non-cash equivalent assets. Thus, the value of all property

8 See Section V.D.2.b. infra for a discussion of

the Receivership estate's securities holdings.

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discussed in Section V.B. above and Section V.D.below is not included in this report. All
Receivership funds are curently being held in non-interest bearing accounts. The Receiver is

contemplating the most appropriate action to take with respect to these fuds in light of the

curent state of the economy and financial institutions. He wil likely consolidate the funds

into one to three institutions and wil explore the relative benefits and risks of moving the
funds into interest-bearng accounts and/orrevenue-generating investments.
D. Other Assets Recovered.
In addition to the assets discussed II conjunction with the expansion of the

Receivership in section V.B. above, the Receiver has

also recovered a number of other assets,

most of which are in the process of being valued, assessed, and otherwise analyzed for

liquidation, disposition, or other action. Again, given the state of the U.S. economy at the
time of submission of this Report, the Receiver emphasizes that any estimates, appraisals, or

valuations are subject to change because of market forces. In paricular, due to the poor state
of

the real estate markets, the estimates provided in section V.D.l below may be significantly
such real property.

different fromthe amounts realized upon sellng

1. Real Property.
a. Thomasvile, Georgia.

The Receiver has possession and control of approximately 14 acres in Thomasvile,

Georgia (the "Thomasvile Property"); The Thomasvile Propert encompasses 45 lots, 44 of
which are vacant. A home on one of the Thomasvile Property lots was built by Home Front

Homes. After its purchase, approximately $750,000 of infrastrcture was added to the

Thomasvile Property. The Thomasvile Property is fully developed: infrastructue and

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utilties are currently in place and are fully fuctionaL. First Realty & Appraisal Services,

Inc., prepared appraisal reports of two lots on the Thomasvile Property. As of February 5,

2009, the lot with the home on it was valued at $123,500. Also as of February 5, 2009, a
vacant lot on the Thomasvile Property was valued at $14,000.

The Thomasvile Property has two known encumbrances. The first encumbrance is a

$600,000 loan, on which a $576,000 balance is due. All interest has been paid for the year

2008, and no interest is due until December 2009. The second encumbrance is a loan for
$142,600 for the construction of the house. Both of these loans matue in December 2009.
The Thomasvile Property currently is not generating any income.

The Thomasvile Property is ready for sale with 45 lots having all utilties, roads, and

other improvements. RE/MAX of Thomasvile had previously listed the property on its
website. The Receiver is presently determining the appropriate method and agents to use to
market this property. Paries interested in marketing or purchasing this property should

contact the Receiver directly.
b. Grady County, Georgia.

The Receiver very recently was made aware of approximately 37.5 acres owned by
Scoop Capital in Grady County, Georgia (the "Grady

Property"). According to Grady County

public

records, the land value ofthe Grady Property in 2008 was $151,125. The Receiver is

currently determining the best course of action to take regarding this land. Paries interested

in marketing or purchasing this property should contact the Receiver directly.

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c. Graham, North Carolina.9
The Receiver has possession ard control of a building located at 841 South

Main

Street,

Graham, North Carolina 27253 (the "Rite-Aid Building"). This building was

purchased for $2,655,000 and is curently being leased to a Rite-Aid Pharacy for $33,073.08
per month under an absolute net lease.lo The Rite-Aid Building has one known encumbrance:

a loan with Wachovia Ban on which there is a remaining balance of approximately
$2,655,000. Parties interested in marketing or purchasing this property should contact the

Receiver directly.
d. Raleigh, North Carolia.

The Receiver has possession and control of a building located at 4905 Waters Edge,
Raleigh, North Carolina 27060 (the "EDS Building"). This building was purchased for

$1,900,000 and is currently being leased to Electronic Data Systems ("EDS"), a technology

services provider, for $29,688.54 per month under a double net lease.ll The EDS Building
has no known encumbrances. Paries interested in marketing or purchasing this property
should contact the Receiver directly.

9 The properties described in this subsection and the following subsections d, e, and f appear

to have been purchased through Scoop Real Estate Fund. However, in light of the commingling of assets among all Receivership Entities, these properties appear to be
appropriately attrbutčd as general assets of the Receivership estate.
10 Under an "absolute net lease," a tenant is required to pay all

operating expenses of the

property, and the landlord receives a net rent.

II Under a "double net lease," the tenant pays all taxes and insurance expenses that arse from and the landlord pays maintenance expenses. the property. The tenant pays rent, the use of

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e. Tupelo, Mississippi.

The Receiver has possession and control of a building located at 2433 West Main
Street, Tupelo, Mississippi 38801 (the "Starbucks Building"). This building was purchased
for $941,000 and is curently being leased to Starbucks (Store #8809) for $5,745.83 per

month under an absolute net lease. The Starbucks Building has no known encumbrances.

Parties interested in marketing or purchasing this property should contact the Receiver
directly.

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i

r
! I I

and Volkswagen, because there was no value to this vehicle and only the continuing

I i

obligation of lease payments, the Receiver surrendered the Maserati to the leasing company
without penalty and without the lessor retaining any claim to Receivership assets.
b. Other Items.

The Receiver has also recovered a myrad of other items that he may be able to sell,

including a variety of furnture, fixtures, computers, and miscellaneous supplies. The
Receiver wil take reasonable efforts to maximize the amount he is able to recover from the
possible sale of all of these items.

The Receivership Entities also have a certificate of deposit ("CD") and a promissory
note. Northern Trust Bank issued the CD for

approximately $15 millon. There is also a loan
December 1, 2011. The Receiver

with Northern Trust for $1.5 milion with a maturity date of

is stil reviewing the nature of

this loan

and its relationship to the CD. The promissory note is

from Quest Energy Management and two individuals to Valhalla Investment Partners in the
amount of $1,100,000. Interest is being paid on this note.
The Receiver also has an investment in a public company, Bonds.com, that includes a

convertible note and equity securities. The Receiver has been in contact with the company

and is working on gainng an understanding of the value of these holdings and possible
methods for liquidation of the same at a future time.
E. Contemplated

Litigation.

1. False Profits Obtained by Some Investors.

The Receiver has determined that some purported investor accounts received monies

in an amount that exceeded their investments. The Receiver intends to seek to recover these

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false profits and redistrbute the fuds more equitably among investors holding legitimate and

allowed claims.

2. Moodys.
From the Receiver's investigation to date, it appears that a significant portion of

activities of certain Hedge Funds were managed and directed by Chrstopher and Neil Moody.

The Receiver believes that the Moodys had fiduciary responsibilty with respect to the
management of these Funds. From the documentation reviewed to date, the Moodys have

received milions of dollars as a result of their efforts and paricipation in Nadel's activities.
The Receiver wil institute appropriate efforts regarding the Moodys to recover this money or
assets that were acquired with this money.
3. Other Litigation.
The Receiver previously has been

contacted by the law firm of Johnson, Pope, Bokor,

Ruppel & Burns, LLP ("Johnson Pope") regarding the institUtion of a class action against
Holland & Knight, the law firm that prepared the private

placement memoranda used to solicit
behalf of Michael

investors into the Nadel scheme. On March 20, 2009, Johnson Pope on

Sullivan and others similarly situated, instituted a class action suit against Holland & Knight,
Michael Sullvan v. Holland & Knight LLP, Case No. 09-cv-0531-EAJ (M.D. Fla.). Should

Johnson Pope be successful in this litigation it is likely that the claims process created for the

Receivership estate for distrbutions to investors with legitimate and allowed claims wil be
used to distribute any proceeds.

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t
i I i i i

F. Investigating Receivership Affairs, and Recovering Receivership Funds.

I i i i

The Receiver has retained the services of PDR Certified Public Accountants ("PDR"),
forensic accountants, to assist in investigating and analyzing the flow of funds both in and out

t

I

of the Receivership Entities, and to assist in locating additional funds, if any. The Receiver
has also retained the services of Riverside

Financial Group ("Riverside"), financial analysts to

assist in investigating and analyzing all of the trading activity. In conjunction with the

Receiver, PDR and Riverside are further attempting to identify additional individuals and/or

entities who may be in possession of Receivership funds. PDR wil also assist in determining
the amount of each investor's loss.
VI. The Next Sixty Days

The Receiver has received only a portion of the documents he has subpoenaed from
third parties. It will be necessary to obtain and review all such documents in order to

complete an understanding of the flow of fuds though the Receivership Entities, to identify
any additional sources of recovery, and to prepare an accounting. The Receiver is working

dilgently on this task, but without knowing the volume of documents he expects to receive, it
is diffcult to estimate the time needed for completion.
During this process, the Receiver is also compiling and analyzing individual investor

accounts. This is a necessary task to assess and administer investor claims. The Receiver wil
likely ask all investors to send him copies of all documentation related to their investments in

the Hedge Funds. He will review and analyze all documents relating to each investment to
determine the amounts owed, if. any, to each investor. The Receiver does llot expect to

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Case 8:09-cv-00087 -RAL- TBM Document 103-2

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commence the claims process until late 2009 or early 2010. The Receiver wil provide a more
definitive time estimate as his analysis progresses.

The Receiver is also reviewing information to determine if any third parties may have

liability either to the Receivership estate or investors. In this regard it should be anticipated
that the Receiver wil bring actions in the future.

The Receiver wil continue to attempt to locate additional funds and other assets and,
if appropriate, wil institute proceedings to recover assets on behalf of the Receivership

Entities. In an effort to more

fully understand the conduct at issue and in an attempt to locate

more assets, the Receiver wil continue to conduct intervews and/or depositions of paries
and third

paries with knowledge.

The Receiver wil also continue the operations of all ongoing businesses of the
Receivership Entities to maintain and, if possible, enhance their value. The Receiver wil
continue to market properties for sale and entertain offers for purchase.
VII. Conclusion

Creditors and investors in the Receivership Entities are encouraged to periodically
check the informational website (http://www.nadelreceivership.comD for curent information

concernng this Receivership. The Receiver and his counsel have received an enormous

amount of emails and telephone inquiries and have had to expend significant resources to
address them. To minimize those expenses, creditors and investors are strongly encouraged to
consult the Receiver's website before contacting the Receiver or his counseL. However, the

Receiver continues to encourage individuals or attorneys representing investors who may
have information that may be helpful in securing further assets for the Receivership estate or

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Case 8:09-cv-00087 -RAL- TBM Document 103-2 Filed 04/03/2009 Page 38 of 40

identifyng other potential paries who may have liability to either the Receivership estate or

investors directly to either email ksalo(ffowlerwhite.com.orcallKathySalo.at 813-2287411.

Dated this 3rd day of April, 2009.

Respectfully submitted,

s/ Burton W. Wiand Buron W. Wiand, Receiver

FOWLER WHITE BOGGS P.A. 501 E. Kennedy Blvd., Suite 1700 Tampa, Florida 33602
Phone: [phone]

Fax: [phone]
4063303lv2

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Standardized Fund Accounting Report

for Consolidated Receivership Entities - Cash Basis
Reportig Period 01/21/09 to 02/28/09

Fund Accounting (See Instructions):

Detail
Line 1 Beginning Balance (As of

Subtotal

Grand Total
1,113,413.05

01/21/09):

Increases in Fund Balance:

Line2
Line 3

Line4
Line 5

Business I