United States District Court, D. Colorado
OPINION AND ORDER DENYING MOTION TO DISSOLVE AND
REFERRING EMERGENCY MOTION TO MAGISTRATE JUDGE
S. Krieger Senior United States District Judge.
MATTER comes before the Court pursuant to Ms.
Anderson's Motion to Dissolve (# 53) the
preliminary injunction currently pending (#
17), the Securities and Exchange Commission's
(“SEC”) response (# 59), and Ms.
Anderson's reply (# 60); and Ms.
Anderson's Emergency Motion for Release of Funds
(# 66), the SEC's response (#
67), and Ms. Anderson's reply (#
Court assumes the reader's familiarity with the
proceedings to date. In summary, the SEC commenced this
action against Rainbow Partners, an alleged Ponzi scheme
through which its founder, the late Michael Anderson,
defrauded investors and diverted investor funds to the
personal benefit of himself, his (ex-)wife, and certain legal
entities they owned. The SEC asserts various securities fraud
claims against Rainbow Partners, as well as a claim for
equitable disgorgement against the Relief Defendants,
including Carolyn Anderson, Mr. Anderson's ex-wife, and
Seoma Consulting Co. (“Seoma”), an entity Ms.
Anderson controls. At the commencement of this action, the
SEC sought a temporary restraining order that froze certain
assets in the hands of the Relief Defendants, on the grounds
that those assets were traceable to Mr. Anderson's fraud
and that the Relief Defendants had no legitimate claim to
them. The Court granted (# 5) that motion in part,
temporarily freezing $66, 000 in assets in the hands of the
Foundation and $465, 000 in assets in the hands of Ms.
Court scheduled an evidentiary preliminary injunction hearing
to address whether the temporary asset freeze should be
continued. The parties consented (# 29) to the continuation
of the freeze pending that hearing. At a hearing on January
16, 2018 (# 32), the Court determined that, due to some
confusion over who would be acting as the Personal
Representative of Mr. Anderson's estate (and thus, who
was the proper party to appear on behalf of the estate, which
was then a defendant in this action), it was inadvisable to
conduct a preliminary injunction hearing at that time. The
Court directed the parties to resolve the probate dispute and
that they could then request that the Court set a hearing on
the preliminary injunction motion. A few weeks later, the SEC
moved to dismiss (# 38) all claims against Mr. Anderson's
estate. In its Order (# 39) dismissing the claims against the
estate, the Court stated “[t]o the extent any party
believes that a hearing is necessary on any outstanding
matter at this time, that party may move for the setting of a
hearing, identifying the specific issues that the hearing
would encompass . . .” Neither party requested the
setting of a hearing for more than six months, and thus, the
asset freeze remained in place pursuant to the parties'
September 2018, Ms. Anderson filed the instant motion (# 53)
seeking to dissolve the asset freeze, alleging that the SEC
had presented misleading information about the source of the
frozen funds; in actuality, she alleged, the frozen funds
constituted assets that belonged solely to Ms. Anderson and
were acquired long before Mr. Anderson embarked on (much less
profited from) the fraudulent scheme. Ms. Anderson also
argued that, in any event, she had a legitimate claim to the
frozen funds because they reflected payments of certain
domestic relations obligations that Mr. Anderson owed her,
among other things.
recently, Ms. Anderson filed the instant Emergency Motion
(#66) to modify the asset freeze. This motion repeats some of
the same fundamental argument in her prior motion -
e.g. that the SEC misrepresented the evidence in its
motion seeking the asset freeze, particularly related to Ms.
Anderson's independent ownership of the assets in
question - and supplemented it with several additional
arguments presented in more detail. Ms. Anderson also argues
that an emergency release of some portion of the funds is
necessary to allow her to continue to retain the services of
her counsel in this matter.
Motion to Dissolve Asset Freeze
Anderson's initial motion seeks to dissolve the asset
freeze as it relates to the $465, 000 of her own personal
funds . She presents two primary arguments: (i) that the SEC
falsely claimed that Ms. Anderson's equity in a home she
owned in Vail, Colorado was derived from investor funds,
when, in fact, Ms. Anderson used at least $400, 000 of her
personal funds to initially purchase and improve the home,
giving her a legitimate claim to the funds subject to the
asset freeze; and (ii) Mr. Anderson owed Ms. Anderson several
hundred thousand dollars in unpaid child support, alimony,
rent, and other obligations, giving her a legitimate claim to
the frozen funds.
Court summarily rejects the second argument: that
personal debts owed by Mr. Anderson to Ms. Anderson
give her a legitimate claim to investor funds that
Mr. Anderson improperly transferred to her. The Court
previously identified that defect in the initial asset freeze
order (# 5 at 6) and the SEC raised that same issue in
response to Ms. Anderson's motion. Ms. Anderson's
reply does not address that issue further. Accordingly, the
Court finds that Ms. Anderson has not come forward with any
evidence that suggests that debts owed to her from Mr.
Anderson personally constitute a basis for modifying or
dissolving the asset freeze.
Ms. Anderson's arguments regarding her legitimate claim
to equity in the Vail home, Ms. Anderson repeats and
amplifies those arguments in the more recent Emergency
Motion. For purposes of expediency, it thus suffices to deem
that portion of the Motion to Dissolve to be superseded by
(and incorporated in, if necessary) the Emergency Motion.
Accordingly, the Court denies, without prejudice, the Motion
The Emergency Motion
Anderson's Emergency Motion raises a series of issues:
(i) the asset freeze should be modified to permit Ms.
Anderson to expend at least $137, 000 of the frozen funds to
pay her counsel so that he will continue representing her in
this matter; (ii) that the SEC made certain
misrepresentations of fact in order to secure the asset
freeze; (iii) that the SEC made particular misrepresentations
about Ms. Anderson's acquisition of the Vail home; (iv)
that the SEC purposefully misstated the start date of Mr.
Anderson's misconduct in order to conceal the fact that
Ms. Anderson was actually another investor victim of Mr.
Anderson, rather than a gratuitous transferee of investor
funds; (v) the SEC concealed certain facts about Mr.
Anderson's creation and funding of the Foundation; and
(vi) the SEC mislead the Court about Mr. Anderson's
alleged purchase of a life insurance policy with investor
funds when, in fact, the policy was purchased by Mr. Anderson
in conjunction with marital dissolution proceedings many
aside Ms. Anderson's contentions that the SEC
purposefully misled the Court or otherwise engaged in
unethical conduct, the Emergency Motion can be understood to
contest the facts alleged by the SEC in its application for
the asset freeze and relied upon by the Court in granting
that freeze. In that sense, the Court treats the motion as a
delayed request for an evidentiary hearing on whether or not
the temporary asset freeze should remain in effect pending
further proceedings. Because the Court is unavailable to
conduct that hearing on a sufficiently timely basis, the
Court will refer the matter to the Magistrate Judge to
conduct an evidentiary hearing and make a recommendation to
the Court as to: (i) whether the ex parte asset
freeze initially granted by the Court should be continued as
a preliminary injunction upon notice to Ms. Anderson and the
other Defendants in accordance with Fed.R.Civ.P. 65(a); and
(ii) whether any other requests for relief in Ms.
Anderson's Emergency Motion should be granted. Counsel
shall contact the Magistrate Judge's chambers to schedule
such a hearing or to take whatever other action the
Magistrate Judge deems appropriate to address those issues.
foregoing reasons, Ms. Anderson's Motion to Dissolve
(# 53) is DENIED WITHOUT
PREJUDICE as superseded. Ms. Anderson's
Emergency Motion (# 66) is
REFERRED to the Magistrate Judge for the
purposes of conducting an evidentiary hearing and to issue a
recommendation as to whether the current asset freeze should
be continued in the form of a preliminary injunction and ...