Securities and Exchange Commission v. StraightPath Venture Partners LLC et al

Filing 1

CONSENT ORDER Appointing Receiver. Signed by Judge Lewis A. Kaplan on 6/14/2022. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Complaint)(law)

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1 2:22-mc-00086 Document 1 Filed 06/27/22 Page 1 of 21

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YO

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JUN -1 2022

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SECURITIES AND EXCHANGE CO
Plaintiff,

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-againstSTRAIGHTPATH VENTURE PARTNERS LLC,
et al.,

DOCUMENT
ELECTRONICALLY FILED
DOC#:
DATE "FILED: ( / J4 / 2✓2---

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Defendants.

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[PIUil fl S 511:D] CONSENT ORDER APPOINTING RECEIVER

WHEREAS this matter has come before this Court upon the emergency motion of Plaintiff
Securities and Exchange Commission ("Plaintiff' or the "Commission") to appoint a receiver in the
above-captioned action to protect investors in SP Ventures Fund LLC, SP Ventures Fund 2 LLC,
SP Ventures Fund 3 LLC, SP Ventures Fund 4 LLC, SP Ventures Fund 5 LLC, SP Ventures Fund 6
LLC, SP Ventures Fund 7 LLC, SP Ventures Fund 8 LLC, and SP Ventures Fund LLC 9
(collectively, the "SP Funds"), which are managed by Defendant StraightPath Venture Partners LLC
(the "SP Fund Manager") and which are advised by Defendant StraightPath Management LLC (the
"SP Adviser") (together, SP Funds, the SP Fund Manager, and the SP Adviser are the "Receivership
Entities");

WHEREAS following the Court's entiy of the Order to Show Cause, Temporary
Restraining Order, and Order Freezing Assets and Granting Other Relief (Dkt. No. 16), Defendants
filed a memorandum of law in opposition to the Commission's motion;

WHEREAS the parties have consulted in good faith regarding their disputes concerning
·what Court-ordered measures would be appropriate to protect investors pending the outcome of
this litigation;

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Case 2:22-mc-00086 Document 1 Filed 06/27/22 Page 2 of 21

WHEREAS to resolve these disputes and the issues raised by the Commission's motion, the
parties have agreed, based on their discussions and cQl"respondence, to the following terms
concerning the appointment of a receiver without any waiver of the Defendants' rights to contest all
claims, allegations, and causes of action asserted against them in this action, and without any waiver
of the Individual Defendants' (as defined below) rights to later seek to modify, vacate, or terminate
the receiver's appointment or to challenge the appropriateness of any actions by the receiver;

WHEREAS the Court finds that, based on the record of the proceedings, and for good
cause shown, it accepts the parties' Proposed Consent Order Appointing Receiver for the
appointment of a receiver for the purpose of marshaling and preserving the assets of the
Receivership Entities and the Escrow Punds (as defined in the Stipulated and Consent Order
Imposing Prelinunary Injunction and Other Relief (the "PI Order")) (together, the "Receivership
Assets''), as well as any assets of the Receivership Entities that are (a) held in constructive tiust for
the Receivership Entities as determined by the Court; (b) were fraudulently transferred out of
Receivership Entities as determined by the Comt; and/or (c) may otherwise be includable as assets
specifically covered by this Order (collectively, the ''Recoverable Assets'');

WHEREAS this Court has subject matter jurisdiction over this action, personal jurisdiction
over the Receivership Entities and Defendants Brian K. Martinsen ("Martinsen"), Iviichael A.
Castillero ("Castillero"), Francine A. Lanaia ("Lanaia"), and Eric D. Lachow ("Lachow") (together,
Martinsen, Castillero, Lanaia, and Lachow are the "Individual Defendants"), and venue properly lies
in this District.

ACCORDINGLY, IT IS HEREBY ORDERED THAT:
I.

Marshalling of Receivership Assets

This Court hereby takes exclusive jurisdiction and possession of the assets, of whatever kind
and wherever situated, of the Receivership Entities.

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The Receivership Assets include, without limitation, the financial and transfer agent accounts
listed on Exhibit A. The Receivership Assets and/ or Recoverable Assets also include shares of,
rights to shares of, and/ or forward contracts concerning the shares of private companies that have
the potential for sale or public offering ("Pre-IPO Shares"), including, without limitation, Pre-IPO
Shares of the companies listed on Exhibit B.
Accordingly, all persons and entities with direct or indirect control over any Receivership
Assets and/ or Recoverable Assets other than the Receiver, are hereby restrained and enjoined from
directly or indirectly transferring, setting off, receiving, changing, selling, pledging, assigning,
liquidating or otherwise disposing of or withdrawing such assets. This judicial possession and
restraint shall include, but not be limited to, Receivership Assets and/ or Recoverable Assets that are
on deposit with financial institutions such as banks, brokerage firms, and mutual funds. This judicial
possession and restraint shall also include, but not be limited to, all assets, deposits, interests and
holdings that are directly or indirectly managed by the SP Fund Manager or the SP Adviser.

II.

Appointment of the Receiver

Until further Order of this Court, M~ lot111, e

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is hereby appointed

to serve without bond as receiver (the "Receiver") for the estate of the Receivership Entities
(collectively, the "Receivership Estate").

III.

Plan Regarding Shortfalls in Pre-IPO Shares

In the event that the Receiver determines that there is cause to believe that any of the
Receivership Entities does not have enough Pre-IPO Shares to cover all outstanding investments,
any of Martinsen, Castillero, or Lanaia (together, the "Named Individuals") may make a proposal to
the Receiver, with notice to the Commission, to use the Escrow Funds to purchase enough Pre-IPO
Shares to cover any such shortfall(s). Any such notice shall include the proposed number of Pre-

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IPO Shares to be purchased, price per share, seller of the shares, and anticipated timing of closing
on the share purchase.

IV.

General Powers and Duties of the Receiver

The Receiver shall have all powers, authorities, rights and privileges heretofore possessed by
the officers, directors, managers and general and limited partners of the Receivership Entities under
applicable state and federal law, by the governing charters, by-laws, articles and/ or agreements in
addition to all powers and authority of a receiver at equity, and all powers conferred upon a receiver
by the provisions of 28 U,S.C. §§ 754,959 and 1692, and Fed. R. Civ. P. 66, except to the extent
noted otherwise below and except that the Receiver shall seek leave of Court prior to initiating any
affirmative litigation against any of the Individual Defendants or their personal assets, including to
bring any affirmative litigation against the personal assets of the Named Individuals ("Individual
Assets"). 1 The trustees, directors, officers, managers, employees, investment advisors, accountants,
attorneys and other agents of the Receivership Entities including, but not limited to, the Named
Individuals, are hereby dismissed and the powers of any general partners, directors and/ or managers
are hereby suspended. Such persons and entities shall have no authoi-ity with respect to the
Receivership Entities' operations or assets, except to the extent as may hereafter be expressly
granted by the Receiver or the Court. The Receiver shall assume and control the operation of the
Receivership Entities and shall pursue and preserve all of their claims.
No person holding or claiming any position of any sort with any of the Receivership Entities
shall possess any authority to act by or on behalf of any of the Receivership Entities.
Subject to the specific provisions in Sections V through XVI, below, the Receiver shall have
the following general powers and duties:

The Individual Assets of the Named Individuals include, without limitation, the accounts
and other property listed on Exhibit C.
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A.

To use reasonable efforts to determine the nature, location, and value of all
Rec~~ver~hip A~sets, Recov~ra?le Assets, a':1d property interests of the Receivership
Entities, mcluding, but not limited to, morues, funds, securities, credits, effects,
goods, chattels, lands, premises, leases, claims, rights, economic interests, and other
assets, together with all rents, profits, dividends, interest or other income attributable
thereto, of whatever kind, which the Receivership Entities own, possess, have a
beneficial interest in, or control directly or indirectly (collectively, "Receivership
Pmperty");

B.

To take custody, control, and possession of all Receivership Property, and records
relevant thereto, from the Receivership Entities and the Individual Defendants;

C.

To sue for and collect, recover, receive, and take into possession from third parties
all Receivership Property and records relevant thereto;

D.

To manage, control, operate, and maintain the Receivership Estate and hold in the
Receiver's possession, custody and control all Receivership Property, pending further
Order of this Court;

E.

To use Receivership Property for the benefit of the Receivership Estate, making
payments and disbursements and incurring expenses as may be necessary or
advisable in the ordinary course of business in discharging the Receiver's duties as
Receiver;

F.

To take any action which, prior to the entry of this Order, could have been taken by
the officers, directors, members, managers, trustees, and agents of the Receivership
Entities;

G.

To engage and employ persons in the Receiver's discretion to assist the Receiver in
carrying out the Receiver's duties and responsibilities hereunder, including, but not
limited to, accountants, attorneys, experts, and others that the Receiver deems
necessary to assist in carrying out the Receiver's duties and responsibilities
hereunder, subject to prior order of the Court and in accordance with the "Billing
Instructions for Receivers in Civil Actions Commenced by the U.S. Securities and
Exchange Commission" (the "Billing Instructions");

H.

To take such action as necessa1y and appropriate for the preservation of
Receivership Property or to prevent the dissipation or concealment of Receivership
Property;

I.

The Receiver is authorized, without further Order of the Court, to issue subpoenas
for documents and testimony consistent with the Federal Rules of Civil Procedure;

].

To bring such legal actions basec;l on law or equity in any state, federal, or foreign
court as the Receiver deems necessary or appropriate in discharging the Receiver's
duties as Receiver;

K.

To pursue, resist and defend all suits, actions, claims and demands which may now
be pending or which may be brought by or asserted against the Receivership Estate;

L.

To make necessa1y or required filings in the counties, states, and/ or jlll"isdictions in
which the Receivership Property is located in order to secure these assets;

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M.

To l?ropose a liquidation plan for the Receivership Property to the Court upon
motion;

N.

To propose a distribution plan for the Receivership Property to investors to the
Court upon motion; and

0.

To take such other action as may be approved by this Court.

With respect to any documents or communications containing information that would be
protected by the attorney-client privilege or any other privilege held by any of the Receivership
Entities, the Receiver shall not have the power or authority to waive any such privilege as to
documents or communications that existed before the Receiver's appointment absent leave of the
Court ("Pre-Appointment Privileged Materials"). To waive any privilege over such PreAppointment Privileged Materials, the Receiver must obtain the Court's authorization to do so upon
a motion by the Receiver. Defendants shall have the right to file a response in opposition to any
such motion.
V.

Access to Information

The past and/ or present officers, directors, agents, managers, members, trustees, attorneys,
accountants, and employees of the Receivership Entities, as well as those acting in their place, are
hereby ordered and directed to prese1ve and turn over to the Receiver forthwith all paper and
electronic information of, and/ or relating to, the Receivership Entities and/ or all Receivership
Property; such information shall include but not be limited to books, tecords, documents, accounts,
and all other instruments and papers (collectively, "Books and Records''). Notwithstanding the
foregoing, the Individual Defendants and their counsel shall be under no obligation to provide any
Pre-Appointinent Privileged Materials to the Receiver, and the Receiver shall not be permitted to
receive or review any Pre-Appointment Privileged Materials absent leave of the Court. To the
extent any of the Books and Records contains information protected by any personal attorney-client
privilege of any of the Individual Defendants ("Personal Privileged Materials"), the Individual

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Defendants also shall be under no obligation to provide any Personal Privileged Materials to the
Receiver, and the Receiver shall not be permitted to receive or review any Personal Privileged
Materials absent leave of the Court.
Within fou1teen (14) days of the entry of this Order, the Named Individuals shall provide to
the Receiver and the Commission a sworn statement listing, to the best of their knowledge, (a) all
Receivership Assets, including the bank, securities, or other financial institution accounts holding
such Receivership Assets, (b) all Individual Assets, including the bank, securities, or other financial
institution accounts holding such Individual Assets, and (c) all liabilities of either the Receivership
Entities or the Named Individuals. The sworn statement shall also state that, to the best of the
Named Individuals' lmowledge, all books and records required to be provided to the Receiver by
Section VI, below, have been provided to the Receiver.
All of the Individual Defendants shall cooperate fully with the Receiver in the Receiver's
efforts to carry out the obligations and duties set out above, subject to the Individual Defendants'
constitutional rights as noted below. To that end, the Individual Defendants shall reasonably make
themselves available through counsel or in person with the consent of their counsel to pmvide the
Receiver with information and assist the Receiver in transferring any assets covered by this Order to
the Receiver's control. The Receivership Entities are also required to assist the Receiver in fulfilling
the Receiver's duties and obligations. As such, they must respond promptly and ttuthfully to all
requests for information and documents from the Receiver.
The Receivership Entities' past and/ or present officers, directors, agents, attorneys,
managers, shareholders, employees, accountants, debtors, creditors, managers, general and limited
pattners, and other appropriate persons or entities shall answe1· under oath to the Receiver all
questions which the Receiver may put to them and produce all documents as required by the
Receiver regarding the business of the Receivership Entities, or any other matter relevant to the

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operation or administration of the Receivership Estate or the collection of funds due to the
Receivership Entities or the Individual Defendants. Notwithstanding the foregoing, the Individual
Defendants shall answer under oath or proffer truthful but unsworn information through their
counsel answering all questions which the Receiver may put to them and produce all documents as
required by the Receiver regarding the business of the Receivership Entities, or any other matter
relevant to the operation or administration of the Receivership Estate or the collection of funds due
to the Receivership Entities or the Individual Defendants. In the event that the Receiver deems it
necessary to require the appearance of the aforementioned persons or entities, the Receiver shall
make its discovery requests in accordance with the Federal Rules of Civil Procedure and applicable
Local Civil Rules.
Notwithstanding the foregoing, the Individual Defendants shall rese1ve any rights they may
have to decline to respond to questions or requests by the Receiver under the Fifth or Sixth
Amendment of the United States Constitution, and nothing in this Order shall be construed as a
waiver of their Fifth and SL-xth Amendment rights.
VI.

Access to Books, Records, and Accounts

The Receiver is authorized to take immediate possession of all assets, bank accounts, or
other financial accounts, books and records and all other documents or instruments subject to this
Order, with the exception of Pre-Appointment Privileged Materials as discussed above. All persons
and entities having control, custody, or possession of any Receivership Property are hereby directed
to tum such property over to the Receiver.
The Receivership Entities as well as their agents, servants, employees, attorneys, any persons
acting for or on behalf of the Receivership Entities, and any persons receiving notice of this Order
by personal service, facsimile transmission or othenvise, having possession of the property, business,

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books, records, accounts, or Receivership Property and/ or Recoverable Assets are hereby directed
to deliver the same to the Receiver, the Receiver's agents, and/ or the Receiver's employees.
All banks, brokerage firms, financial institutions, and othe1· persons or entities which have
possession, custody, or control of any Receivership Property or any assets or funds held by, in the
name of, or for the benefit of, the Receivership Entities that receive actual notice of this Order by
personal service, facsimile transmission or othe1wise shall:

A.

Not liquidate, transfer, sell, convey, or otherwise transfer any assets, securities, funds,
or accounts in the name of or for the benefit of the Receivership Entities except
upon instmctions from the Receiver;

B.

Not exercise any form of set-off, alleged set-off, lien, or any form of self-help
-..vhatsoever, or refuse to transfer any funds or assets to the Receiver's control
without the permission of this Court;

C.

Within five (5) business days of receipt of that notice, serve on the Receiver and
counsel for the Commission a certified statement setting faith, with respect to each
such account or other asset, the balance in the account or description of the assets as
of the close of business on the date of receipt of the notice; and,

D.

Cooperate expeditiously in providing information and transferring funds, assets, and
accounts to the Receiver or at the direction of the Receiver.

Any other third parties that may have relevant documentation or information concerning
Pre-IPO Shares, such as the companies that issued the Pre-IPO Shares, the transfer agents for those
companies, and the counte1parties with whom the Receivership Entities and/ or the Individual
Defendants contracted in order to acquire Pre-IPO Shares, shall cooperate with the Receiver in
fulfilling the Receiver's duties as set forth in this Order.

VII.

Access to Real and Personal Property

The Receiver is authorized to take immediate possession of the Recoverable Assets and all
personal property of the Receivership Entities, wherever located, including but not limited to
electronically stored information, computers, laptops, hard drives, external storage drives, and any
other such memory, media or electronic storage devices, books, papers, data processing records,
evidence of indebtedness, bank records and accounts, savings records and accounts, brokerage

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records and accounts, certificates of deposit, stocks, bonds, debentures, and other securities and
investments, contracts, mortgages, furniture, office supplies, and equipment. Notwithstanding the
foregoing, Books and Records of the Receivership Entities and Pre-Appointment Privileged
Materials as well as Personal Privileged Materials shall be handled in accordance with the procedure
as set forth in Section V above.
The Receiver is authorized to open all mail directed to or received by or at the offices or
post office boxes of the Receivership Entities, and to inspect all mail opened prior to the entry of
this Order, to determine whether items or information therein fall within the mandates of this
Order.

VIII. Notice to Third Parties
The Receiver shall promptly give notice of the Receiver's appointment to all known officers,
directors, agents, employees, shareholders, creditors, debtors, managers and members of the
Receivership Entities, as the Receiver deems necessary m advisable to effectuate the operation of
the receivership.
All persons and entities owing any obligation, debt, or distribution with respect to
Recoverable Assets or Receivership Assets shall, until further ordered by this Court, pay all such
obligations in accordance with the terms thereof to the Receiver and its receipt for such payments
shall have the same force and effect as if the Receivership Entity had received such payment.

In furtherance of the Receiver's responsibilities in this matter, the Receiver is authorized to
communicate with, and/ or serve tlus Order upon, any person, entity, or government office that he
deems appropriate to inform them of the status of this matter and/ or the financial condition of the
Receivership Estate. All government offices which maintain public files of security interests in real
and personal property shall, consistent with such office's applicable procedures, record this Order
upon the request of the Receiver or the Commission.

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The Receiver is authorized to instruct the United States Postmaster to hold and/ or reroute
mail which is related, directly or indirectly, to the business, operations or activities of any of the
Receivership Entities (the "Receiver's Mail"), including all mail addressed to, or for the benefit of,
the Receivership Entities. The Postmaster shall not comply with, and shall immediately report to
the Receiver, any change of address or other inst1uction given by anyone other than the Receiver
concerning the Receiver's Mail. The Receivership Entities shall not open any of the Receiver's Mail
and shall immediately turn over such mail, regardless of when received, to tl1e Receiver. All personal
mail of any Individual Defendants, and/ or any mail appearing to contain privileged information,
and/ or any mail not falling within the mandate of the Receiver, shall be released to the named
addressee by the Receiver. The foregoing instructions shall apply to any proprietor, whether
individual or entity, of any private mail box, depository, business or service, or mail courier or
delivery service, hired, rented or used by the Receivership Entities. The Receivership Entities shall
not open a new mailbox, or take any steps or make any arrangements to receive mail in
contravention of this Order, whether through the U.S. mail, a private mail depository or courier
service.
Subject to payment for services provided, any entity furnishing water, electric, telephone,
sewage, garbage, or trash removal services to the Receivership Entities shall maintain such service
and transfer any such accounts to the Receiver unless instmcted to the contraty by the Receiver.

IX.

Injunction Against Interference with Receiver

The Receivership Entities, the Individual Defendants, and all persons receiving notice of this
Order by personal service, facsinille, or otherwise, are, subject to tl1e tenns of this Order, hereby
restrained and enjoined from directly or indirectly taking any action or causing any action to be
taken, without the express written agreement of the Receiver, which would:
A.

Interfere with the Receiver's efforts to take control, possession, or management of
any Receivership Property; such prohibited actions include, but are not limited to,
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using self-help or executing or issuing or causing the execution or issuance of any
court attachment, subpoena, replevin, execution, or other process for the purpose of
impounding or taking possession of or interfering with or creating or enforcing a lien
upon any Receivership Property;
B.

Hinder, obstruct or othe1wise interfere with the Receiver in the performance of the
Receiver's duties; such prohibited actions include but are not limited to, concealing,
destroying or altering records or information;

C.

Dissipate or othe1wise diminish the value of any Receivership Property; such
prohibited actions include but are not limited to, releasing claims or disposing,
transferring, exchanging, assigning or in any way conveying any Receivership
Property, enforcing judgments, assessments or claims against any Receivership
Property or any Receivership Entity, attempting to modify, cancel, terminate, call,
extinguish, revoke, or accelerate the due date of any lease, loan, mortgage,
indebtedness, security agreement or other agreement executed by any Receivership
Entity or which othe1wise affects any Receivership Property; or,

D.

Interfere with or harass the Receiver, or interfere in any manner with the exclusive
jurisdiction of this Court over the Receivership Estate.

The Receiver shall promptly notify the Comt and the Commission's counsel of any failure or
apparent failure of any person or entity to comply in any way with the terms of this Order.
X.

Stay of Litigation

As set faith in detail below, the following proceedings, e..'<cluding the instant proceeding and
all police or regulato1y actions and actions of the Commission related to the above-captioned
enforcement action, are stayed until further Order of this Court:
All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other
actions of any nature involving: (a) the Receiver, in his or her capacity as Receiver; (b) any
Receivership Propc1'ty, wherever located; (c) any of the Receivership Entities including
subsidiaries and affiliates; or (d) any of the Receivership Entities' past or present officers,
directors, managers, agents, or members sued for, or in connection with, any action taken by
them while acting in such capacity of any nature, whether as plaintiff, defendant, third-party
plaintiff, third-party defendant, or otherwise (such proceedings are hereinafter referred to as
"Ancillaty Proceedings").
The parties to any and all Ancillary Proceedings are enjoined from commencing or
continuing any such legal proceeding, or from taking any action, in connection with any such
proceeding, including, but not limited to, the issuance or employment of process.

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All Ancillary Proceedings are stayed in their entirety, and all Courts having any jurisdiction
thereof are enjoined from taking or permitting any action until further Order of this Court.
Further, as to a cause of action accrued or accming in favor of one or more of the Receivership
Entities against a third person or party, any applicable statute of limitation is tolled during the period
in which this injunction against commencement of legal proceedings is in effect as to that cause of
action.
The action Advi.ro1y Management Ltd. v. StraightPath VeJ1ture Partners I.LC, Civ. No.

153453/2021 (N.Y. Sup. Ct.), is an Ancillary Proceeding.
The parties to any current or prospective Ancillary Proceedings may seek relief from the
provisions of this Section from the Court, after first notifying the Receiver, the Commission
counsel, and the Individual Defendants' counsel of their intent to do so on three (3) business days
notice so that they may provide their respective positions on the application.

XI.

Managing Assets

The Receiver shall establish one or more custodial accounts at a federally insured bank to
receive and hold all cash equivalent Receivership Property (the "Receivership Funds") including,
without limitation, the accounts described in Section VIII of the PI Order.
The Individual Defendants may formulate and propose to the Receiver plans for the
liquidation and/ or distribution to investors of any of the Receivership Estate, Receivership Assets,
Recoverable Assets and/ or Receivership Property.
If appropriate, the Receiver shall formulate and propose to the Court, on motion, plans for
the liquidation and/ or distribution to investors of any of the Receivership Estate, Receivership
Assets, Recoverable Assets and/ or Receivership Property.
The Receiver may use the Escrow Funds for any approp11ate pmpose, including purchasing
Pre-IPO Shares to rectify any share shortfalls, provided that the Receiver obtains Court approval for

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such use of the Escrow Funds through a motion to this Court. However, as set forth in Section
VIII of the PI Order, the Receiver shall not use more than $1,150,000 of the Escrow Funds for fees
and expenses associated with the operation of the receivership (such as, for example, fees to
compensate the Receiver and persons and entities retained to assist the Receiver). Any portion of
the Escrow Funds remaining at the end of the receivership shall be placed in a separate interestbearing escrow account on terms agreed upon by the parties to this Action (the "Remaining Escrow
Funds"), or ordered by the Court, in order to satisfy any judgment against the Named Individuals in
this Action. If no judgment is entered against the Named Individuals, the escrow agent may
disburse the Remaining Escrow Funds to the Named Individuals.
Notwithstanding the foregoing, the Receiver may, without further Order of this Court,
transfer, compromise, or otherwise dispose of any Receivership Property, other than the Escrow
Funds, in the ordinary course of business, on terms and in the manner the Receiver deems most
beneficial to the Receivership Estate, and with due regard to the realization of the true and proper
value of such Receivership Property, but in no event shall the Receiver make any payments or
transfers of Receivership Property or Receivership Funds of a value in excess of $10,000.00 without
prior Order of the Court.
Upon further Order of this Court, pursuant to such procedures as may be required by this
Court and additional authority such as 28 U.S.C. §§ 2001 and 2004, the Receiver will be autho1ized
to sell, and transfer clear title to, all real property in the Receivership Estate.
The Receiver is autho1ized to take all actions to manage, maintain, and/ or wind-down
business operations of the Receivership Estate, including making legally required payments to
creditors, employees, and agents of the Receivership Estate and communicating with vendors,
investors, governmental and regulatory authorities, and others, as appropriate.

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To the extent appropriate, the Receiver shall take all necessary steps to enable the
Receivership Funds to obtain and maintain the status of a taxable "Settlement Fund," within the
meaning of Section 468B of the Internal Revenue Code and of the regulations, when applicable
whether proposed, temporary or final, or pronouncements thereunder, including the filing of the
elections and statements contemplated by those provisions. The Receive1· shall be designated the
administrator of the Settlement Fund, pursuant to Treas. Reg. § 1.468B-2(k)(3)(i), and shall satisfy
the administrative requirements imposed by Treas. Reg. § 1.468B-2, including but not limited to (a)
obtaining a taxpayer identification number, (b) timely filing applicable federal, state, and local tax
returns and paying taxes reported thereon, and (c) satisfying any information, reporting or
withholding requirements imposed on distributions from the Settlement Fund. The Receiver shall
cause the Settlement Fund to pay taxes in a manner consistent with treatment of the Settlement
Fund as a "Qualified Settlement Fund." The Receivership Entities and the Individual Defendants
shall cooperate with the Receiver in fulfilling the Settlement Funds' obligations under Treas. Reg.

§ 1.468B-2, subject to the Individual Defendants' constitutional rights as set forth above.
XII.

Investigate and Prosecute Claims

Subject to the requirement, in Sections IV and X above, that leave of this Court is required
to resume or commence certain litigation, the Receiver is authorized, empowered, and directed to
investigate, prosecute, defend, intervene in or otherwise participate in, compromise, and/ or adjust
actions in any state, federal or foreign court or proceeding of any kind as may in the Receiver's
discretion, and in consultation with the Commission's counsel, be advisable or proper to recover
and/ or conserve Receivership Property.
Subject to the Receiver's obligation to expend Receivership Funds in a reasonable and costeffective manner, the Receiver is authorized, empowered, and directed to investigate the manner in
which the financial and business affairs of the Receivership Entities were conducted and (after

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obtaining leave of this Court) to institute such actions and legal proceedings, for the benefit and on
behalf of the Receivership Estate, as the Receiver deems necessary and appropriate; the Receiver
may seek, among othet legal and equitable relief, the imposition of constructive tmsts, disgorgement
of profits, asset turnover, avoidance of fraudulent transfers, rescission and restitution, collection of
debts, and such othet relief from this Court as may be necessary to enforce this Order. Where
appropriate, the Receiver should provide prior notice to Counsel for the Commission before
commencing such investigations and/or actions.
The Receiver has a continuing duty to ensure that there are no conflicts of interest between
the Receiver, the Receiver's Retained Personnel (as that term is defined below), and the Receivership
Estate and/ or Receivership Property.

XIII.

Bankruptcy Filings

The Receiver may, upon no less than fourteen (14) days notice to the Commission and the
Individual Defendants, seek authorization of this Collit to file voluntary petitions for relief under
Title 11 of the United States Code (the "Bankruptcy Code") for the Receivership Entities. If a
Receivership Entity is placed in bankruptcy proceedings, the Receiver may become, and may be
empowered to operate each of the Receivership Estates as, a debtor in possession. In such a
situation, the Receiver shall have all of the powers and duties as provided a debtor in possession
under the Bankruptcy Code to tl1e exclusion of any other person or entity, subject to the limitations
of this Order and the PI Order. Pursuant to Section IV above, the Receiver is vested with
management authority for all Receivership Entities and may therefore file and manage a Chapter 11
petition.
The provisions of Section X above bar any person or entity, other than the Receiver, from
placing any of the Receivership Entities in bankruptcy proceedings.

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XIV.

Liability of Receiver

Until further Order of this Court, the Receiver shall not be required to post bond or give an
undertaking of any type in connection with the Receiver's fiduciary obligations in this matter.
The Receiver and the Receiver's agents, acting within scope of such agency ("Retained
Personnel"), are entitled to rely on all outstanding rnles of law and Orders of this Court and shall
not be liable to anyone for tl1eir own good faith compliance with any order, tule, law, judgment, or
decree. In no event shall the Receiver or Retained Personnel be liable to anyone for their good faith
compliance with their duties and responsibilities as Receiver or Retained Personnel nor shall the
Receiver or Retained Personnel be liable to anyone for any actions taken or omitted by them except
upon a finding by this Court that they acted or failed to act as a result of malfeasance, bad faith,
gross negligence, or in reckless disregard of their duties.
This Court shall retain jurisdiction over any action filed against the Receiver or Retained
Personnel based upon acts or omissions committed in their representative capacities.

In the event the Receiver decides to resign, the Receiver shall :first give written notice to the
Commission's counsel of record and the Court of its intention, and the resignation shall not be
effective until the Court appoints a successor. The Receiver shall then follow such insttuctions as
the Court may provide.

xv.

Recommendations and Reports

The Receiver is authorized, empowered, and directed to develop a plan for the fair,
reasonable, and efficient recove1y and liquidation of all remaining, recovered, and recoverable
Receivership Property. If appropriate, the Receiver is also authorized and empowered to develop a
plan for the fair, reasonable, and efficient distribution of the Receivership Property to investors in
any of the SP Funds. The Receiver shall seek Court approval by motion for any such liquidation or
distribution plan.

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Within thirty (30) days after the ent1y of this Order, the Receiver shall file and serve a full
report and accounting of both Receivetship Assets and Individual Assets (the "Fil-st Status Repott"),
reflecting (to the best of the Receiver's knowledge as of the period covered by the report) the
existence, value, and location of all Receivership Assets and Individual Assets, and of the extent of
liabilities, both those claimed to exist by othets and those the Receiver believes to be legal
obligations of the Receivership Estate. To the extent necessary, and in compliance with the Local
Civil Rules in this District and/ or the Court's individual rules, the Receiver may file portions of the
First Status Report under seal. For good cause shown, the Receiver may seek leave of Court to
extend the date by which to file the First Status Report.
Within thirty (30) days after the end of each calendar quarter, the Receiver shall file and
serve a full report and accounting of each Receivership Estate (the "Quarterly Status Report"),
reflecting (to the best of the Receiver's knowledge as of the period covered by the report) the
existence, value, and location of all Receivership Property, and of the extent of liabilities, both those
claimed to exist by others and those the Receiver believes to be legal obligations of the Receivership
Estate.
The Quartedy Status Report shall contain the following:
A.

A summary of the operations of the Receiver;

B.

The amount of cash on hand, the amount and nature of accrued adminisu-ative
expenses, and the amount of unencumbered funds in the Receivership Estate;

C.

An itemization by SP Fund series of the number of Pre-IPO Shares purchased by
each SP Fund series;

D.

An itemization by SP Fund series of the number of investment interests in Pre~IPO
Shares sold to investors by each SP Fund series, the SP Fund Manager, or the SP
Adviser;

E.

An invento1y of the Pre-IPO Shares held by the Receivership Entities;

F.

A schedule of all the Receiver's receipts and disbursements (attached as Exhibit A to
the Quarterly Status Report), with one column for the quarterly pe1-iod covered and a
second column for the entire duration of the receivership;

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G.

A description of all known Receivership Property, including approximate or actual
valuations, anticipated or proposed dispositions, and reasons for retaining assets
where no disposition is intended;

H.

A description of liquidated and unliquidated claims held by the Receivership Estate,
including the need for forensic and/ or investigatory resources; approximate
valuations of claims; and anticipated or prnposed methods of enforcing such claims
(including likelihood of success in: (i) reducing the claims to judgment; and, (ii)
collecting such judgments);

I.

A list of all known creditors with their addresses and the amounts of their claims;

J.

The status of any creditor claims process or proceeding, after such process or
proceeding have been commenced; and

K.

The Receiver's recommendations for a continuation or discontinuation of the
receivership and the reasons for the recommendations.

To the extent necessa1-y, and in compliance with the Local Civil Rules in this District and/ or
the Comt's individual rules, the Receiver may file portions of the Quarterly Status Report under seal.
On the request of the Commission, the Receiver shall provide the Commission with any
documentation that the Commission deems necessary to meet its reporting requirements, that is
mandated by statute or Congress, or that is otherwise necessa1-y to further the Commission's
m1ss1on.

XVI.

Fees, ExpensesJ and Accountings

Subject to the provisions in Section XI above and immediately below, the Receiver need not
obtain Court approval prior to the disbursement of Receivership Funds for expenses in the ordina1-y
course of the administration and operation of the receivership. Further, prior Court approval is not
required for payments of applicable federal, state, or local taxes.
Subject to the following provision, the Receiver is authorized to solicit persons and entities
to assist the Receiver in carrying out the duties and responsibilities described in this Order (i.e.,
Retained Personnel). The Receiver shall not engage any Retained Personnel without first obtaining
an Order of the Court authorizing such engagement.

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The Receiver and Retained Personnel are entitled to reasonable compensation and expense
reimbursement from the Receivership Estates as described in the Billing Instructions agreed to by
the Receiver. Such compensation shall require the prior approval of the Court.
Within forty-five (45) days after the end of each calendar qua1ter, the Receiver and Retained
Personnel shall apply to the Court for compensation and expense reimbursement from the
Receivership Estates (the "Qua1terly Fee Applications''). At least thirty (30) days prior to filing each
Quarterly Fee Application with the Court, the Receiver will serve upon counsel for the
Commission a complete copy of the proposed Application, together with all exhibits and relevant
billing information in a format to be provided by the Commission.
All Quarterly Fee Applications will be interim and will be subject to cost benefit and final
reviews at the close of the receivership. At the close of the receivership, the Receiver will file a final
fee application, describing in detail the costs and benefits associated with all litigation and other
actions pursued by tl1e Receiver during the course of the receivership.
Quarterly Fee Applications may be subject to a holdback in the amount of 20% of the
amount of fees and expenses for each application filed with the Comt in the Commission staff's
discretion or such other percentage holdback as the Court may order on its own motion or on the
request of the Commission or the Individual Defendants. The total amounts held back during the
course of the receivership will be paid out at the discretion of the Court as part of the final fee
application submitted at the close of the receivership.
Each Quarterly Fee Application shall:

A.

Comply with the terms of the Billing Instructions agreed to by the Receiver; and,

B.

Contain representations (in addition to the Certification required by the Billing
Instructions) that: (i) the fees and expenses included therein were incurred in the best
interests of the Receivership Estate; and, (ii) with the exception of the Billing
Instructions, the Receiver has not entered into any agreement, written or oral,
express, or implied, with any person or entity concerning the amount of
compensation paid or to be paid from the Receivership Estate, or any sharing
thereof.

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At the close of the Receivership, the Receiver shall submit a Final Accounting, in a format to
be provided by the Commission's staff, as well as the Receiver's final application for compensation
and expense reimbursement.

XVII. Defendants' Rights to Object
Nothing herein shall be construed to prevent the Individual Defendants from filing or
opposing any motions concerning the receivership or any actions or omissions by the Receiver.

SO ORDERED.
Dated:

J ()

lt..L

"t, 2022

1

New York, New York

Hon. Lewis A. Kaplan
United States District Judge

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