Securities and Exchange Commission v. Nadel et al

Filing 980

MOTION to modify Order Disallowing Claim by Elendow LLC. (Attachments: # 1 Affidavit in Support of Claimant Ellendow, LLC's Motion for Reconsideration of Cliam, # 2 Affidavit in Support of Claimant Elendwo LLC's Motion to Modify Oder Disallowing Claim)(Bleil, Joshua)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

CASE NO: 8:09-cv-87-T-26TBM

ARTHUR NADEL; SCOOP CAPITAL,
LLC; and 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, LLC,
Relief Defendants.
____________________________________/

BURTON W. WIAND, as Receiver for
Valhalla Investment Partners, L.P.;
Viking Fund, LLC; Viking IRA Fund, LLC;
Victory Fund, Ltd., Victory IRA Fund, LTD,
and Scoop Real Estate, L.P.,
Plaintiff,
v.

Related Case No. 8:10-cv-092-17MAP

DANCING $, LLC.,
Defendant.
____________________________________/
DECLARATION OF ERIC WALDMAN IN SUPPORT OF CLAIMANT ELENDOW,
LLC’S MOTION FOR RECONSIDERATION OF CLAIM

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I, Eric Waldman, state under oath the following facts:
1. I am managing member of Claimant Elendow, LLC and the managing member of
defendant Dancing $, LLC in related case Wiand v. Dancing $, LLC in the above-captioned
action. I have personal knowledge of the facts stated herein, and if called as a witness, I could
and would testify competently to them.
2. Dancing $, LLC is a Montana LLC that had 136 members, consisting entirely of family
and friends of mine, each of whom invested various amounts in Dancing $ and received
membership interests proportionate to the amount of their investment. Dancing $ was required
to redeem its limited partnership interest in Scoop Real Estate, L.P. and Valhalla Investment
Partners, L.P. (the “Funds”). After receiving the redemptions from the Funds, Dancing $ made
distributions to the members of Dancing $ in accordance with their membership interests and
Dancing $ closed.
3. Elendow was then created in December 2007 for larger Dancing $ account holders (as
well as a few new members) to reinvest money into previous “successful” alternative investment
vehicles used by Dancing $, primarily leveraged Madoff “feeder funds,” as well as Scoop Real
Estate, L.P. and Valhalla Investment Partners, L.P. As with Dancing $, investors received
membership interests proportional to the amount of money invested. Elendow was formed to
simplify investing (by removing a host of smaller investors) and continue Dancing $ by investing
in a nearly identical portfolio, with, as shown, nearly identical (88.55%) investors.
4. 86.78% of the membership interests in Dancing $ (53 members) used the distributions
from Valhalla and Scoop to purchase membership interests in Elendow, comprising a total of
$92,956.94 of the $107,172.11 in total alleged false profits received from Valhalla and Scoop.
Additionally, the majority of the money wired out of Dancing $’s account as disbursements was
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wired back into Elendow’s account as purchases --often on the same day (or within 24 hours).
5. The balance of the alleged “false profits” of $14,164.17 was distributed to the remaining
83 members of Dancing $.
6. Those members from Dancing $ that invested their distributions from Valhalla and Scoop
into Elendow accounted for 88.55% of the membership interests in Elendow. Through Elendow,
those members originally in Dancing $ invested a total of $619,843.11 back into Scoop and
Valhalla in 2008 (almost seven times as much as they had received through Dancing $) and lost
the entirety of the investment.
7. For example, I am currently in my 60's, and after receiving $5,712 in alleged “false
profits” into my IRA from Dancing $’s redemption of its limited partnership interests in Valhalla
and Scoop, I personally lost over $40,000 from my IRA in Valhalla and Scoop through Elendow.
8. On or about December 11, 2009, Dancing $ received a letter from the Receiver dated
December 4, 2009, stating that Dancing $ had received $107,172.11 in “false profits” from the
funds and demanded that it be repaid. I contacted my attorney, Philip Stillman and provided him
with the letter that I had received.
9. Because of the overlapping memberships in both Dancing $ and Elendow, I prepared an
Excel spreadsheet showing the member, the member’s percentage interest in Dancing $, the
amount invested, the amount distributed, the percentage ownership of that member (if any) in
Elendow and the amount invested in Elendow (and lost, as no distributions were received by
Elendow). I agreed to provide those spreadsheets to the Receiver’s attorney, Michael Lamont
and provided them to him directly at some time in late February 2010. Copies of the
spreadsheets are attached to the Stillman Declaration as Exhibit 2.
10. At some time during summer of 2010, I apparently was mailed a notice from the Receiver
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regarding the need to file a Proof of Claim with the Receiver regarding Elendow prior to
September 2, 2010. However, during that time I was attempting to start a new business, as I had
lost virtually all of my savings in the Madoff and Nadel schemes, manufacturing “smoothies”
and attempting to market the product to health food stores, such as Whole Foods. This required
me to be away from home most of each month, travelling around the West Coast and meeting
with potential customers. In addition, because I was traveling also traveling outside the country
during that time, I did not actually see the notice from the Receiver until September 27, 2010,
when I returned home.
11. I immediately contacted my attorney, Mr. Stillman about it by email and then spoke on
the telephone. Because Mr. Stillman had been dealing with Mr. Lamont and Dancing $, Mr.
Lamont knew the relationship between Dancing $ and Elendow, knew that I managed both
companies, and finally knew that Mr. Stillman was my attorney, I had thought that Mr. Stillman
was receiving all of the notices regarding Elendow as well as Dancing $. I therefore expected
that Mr. Stillman had filed whatever paperwork for Elendow that had been required.
12. However, I discovered on September 27, 2010 that Mr. Stillman had not received any
notices regarding Elendow and that he therefore had not filed any claim form with the Receiver.
I therefore immediately completed the claim form and sent it to the Receiver.
13. In or about March 2011, I received a letter from the Receiver asking for further
information concerning why the claim form was returned to the Receiver late. At some point
after receiving that letter, I spoke with Mr. Stillman and Mr. Stillman said that he would check
into the situation and handle the explanation. From speaking with him in August 2011, I
understood that he had both spoken with someone at the Receiver’s law firm in charge of claims
and had written a letter regarding the reason for the late claim.
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14. I heard nothing further from the Receiver until December 2011, when I received a letter
from the Receiver dated December 9, 2011. That letter gave Elendow a claim number, and
stated that the claim was allowed.
15. In particular, the letter sent to Elendow stated that:
My recommended determination of your claim will include an Allowed Amount.
The Allowed Amount is the amount to which I have determined the relevant
claim is entitled.
A copy of the December 9, 2011 Letter is attached to the Stillman Decl. as Exhibit 5. Although
the letter referenced a Motion, nothing indicated to me that the Elendow claim was anything but
allowed. I had no reason to assume otherwise and saw no reason to ask Mr. Stillman about it, as
it was an allowed claim. Therefore, there was nothing contained in the letter that would indicate
to me that I needed to review a “motion.”
16. In fact, to the contrary, a little over a month later, on January 26, 2012, I received a letter
from the Department of Justice, stating that Elendow was entitled to $350,000 as “restitution”
from the Nadel scheme. I assumed that $350,000 was the actual amount of the allowed claim by
the Receiver, since I had no reason to expect that Elendow would be made whole, i.e., receive its
full amount of losses back. A copy of the DOJ Letter is attached to the Stillman Decl. as Exhibit
6. Coupled with the assignment of a claim number by the Receiver, and the reference to the fact
that Elendow was entitled to an “Allowed Amount,” I reasonably believed that the amount
represented the allowed claim for Elendow. I therefore never asked Mr. Stillman about the issue.
17. A mediation with the Receiver was scheduled for October 19, 2012, and shortly before
the mediation, Mr. Stillman discovered that the Elendow claim had been denied and informed
me. I provided Mr. Stillman with the letters that I had received, and Mr. Stillman reviewed the
Receiver’s Motion, which listed Elendow’s claim as “allowed” in the amount of “none” in
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Exhibit G of the Motion, buried more than 100 pages back in the four part document. [DE 675-7]
18. I find it particularly ironic that in the Receiver objected to treating Dancing $’s gains and
Elendow’s undisputed losses as related in order to refuse to offset any alleged “false profits’ to
Dancing $ with the significant losses suffered by Elendow, while at the same time, claiming that
the relatedness of the two companies was a ground to deny Elendow’s claim. I am no lawyer,
but to me, that just smacks of gross unfairness. To me, as a victim of Nadel’s scheme, it seems
only proper that either the Receiver treats both entities separately, thereby allowing Elendow’s
$700,000 claim, or he doesn’t. It is the epitome of inequity to allow the Receiver to treat the
entities in the most convenient way for his claims.
19. Elendow’s legitimate claim has now been denied, despite (1) having received a receipt of
Elendow’s $700,000 claim from the Receiver, (2) receiving a letter from the Receiver assigning
Elendow a claim number and representing that Elendow had an "Allowed Claim" and (3)
receiving a letter from U.S. Department of Justice ordering restitution of $350,000 to Elendow
shortly thereafter; all of which led me to believe that Elendow’s claim was allowed in this case.
20. Moreover, although I provided documentation to the Receiver's attorneys at the very
inception of this case showing the relationship between Dancing $ and Elendow, my attorney in
this case regularly dealt with the Receiver's attorneys and although Dancing $ had pled offset as
a result of the Elendow losses as an affirmative defense of offset, the Receiver's attorneys never
contacted Mr. Stillman about the Elendow claim at all, and simply sent what I can only call a
misleading and lulling letter indicating that Elendow had an "Allowed Claim," which I now
discover is an "Allowed Claim" in the amount of $0. As a legitimate victim whose only
knowledge of the Funds was through communications with Christopher Moody, I had no
knowledge that the Funds were a Ponzi scheme and lost my own and my family and friends’
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money in the Funds through Elendow. It is a gross miscarriage of justice to allow a judgment
against Dancing $ while denying Elendow’s legitimate claim and prohibiting it from getting any
of its funds returned, while others similarly situated are reaping the benefits of the Receiver’s
hard work in recovering assets. The Court should not forget that $700,000 of Elendow’s money
went to obtain those assets, and even if equity dictated that the Dancing $ judgment should be
offset by the distributions from the Receiver to Elendow, at least that would provide some small
compensation for our real and bona fide losses.
I declare under the penalty of perjury under the laws of the State of Florida and the
United States that the foregoing is true and correct. Signed this 28th day of February, 2013 at
Bozeman, Montana.

Eric Waldman

CERTIFICATE OF SERVICE

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_____

I hereby certify that on March 1, 2013, I electronically filed the foregoing document with
the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served
this day on all counsel of record or pro se parties identified on the attached Service List in the
manner specified, either via transmission of Notices of Electronic Filing generated by CM/ECF
or in some other authorized manner for those counsel or parties who are not authorized to receive
electronically Notices of Electronic Filing.
Respectfully submitted, this 1st day of March, 2013.
/s/ Joshua Bleil
By:_____________________
Joshua Bleil
Florida Bar No. 11759
[e-mail]
THE TICKTIN LAW GROUP, P.A.
600 West Hillsboro Boulevard
Suite 220
Deerfield Beach, FL 33441-1610
[phone]
Fax [phone]

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SERVICE LIST
Burton W. Wiand, et al. v. Dancing $, LLC
Case No.: 8:10-cv-092-17MAP
United States District Court/Middle District of Florida
Michael S. Lamont, Esquire
Wiand, Guerra, King, P.L.
[e-mail]
Counsel for Plaintiff/Receiver
BURTON W. WIAND
Served via CM/ECF
21.

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