United States District Court, D. Colorado
ORDER GRANTING PLAINTIFF'S EMERGENCY MOTION FOR
AN EX PARTE ASSET FREEZE, TEMPORARY RESTRAINING ORDER, ORDER
TO SHOW CAUSE, AND OTHER EMERGENCY RELIEF
Raymond P. Moore United States District Judge.
On
September 12, 2019, Plaintiff United States Securities and
Exchange Commission (the “SEC” or
“Commission”) filed an emergency motion for an
ex parte order: (1) freezing funds and other assets
of Defendants Mediatrix Capital Inc. (“Mediatrix
Capital”), Blue Isle Markets Inc. (“Blue Isle
1”), Blue Isle Markets Ltd. (“Blue Isle
2”), Michael S. Young (“Young”), Michael S.
Stewart (“Stewart”), and Bryant E. Sewall
(“Sewall”) (collectively, the
“Defendants”) and Relief Defendants Mediatrix
Capital Fund Ltd., Island Technologies LLC, Victoria M.
Stewart, Maria C. Young, Hanna Ohonkova Sewall, West Beach
LLC, Salve Regina Trust, TF Alliance, LLC, Casa Conejo LLC,
Hase Haus, LLC, DCC Islands Foundation, Keystone Business
Trust, Weinzel, LLC, The 1989 Foundation, Mediatrix Capital
PR, LLC, Mediatrix Capital, LLC, and Blue Isle Markets Inc.
(Cayman Islands) (collectively, with Michael C. Baker, Walter
C. Young III and Arual LP, the “Relief
Defendants”);[1](2) prohibiting Defendants and Relief
Defendants from the acceptance, deposit, or disbursement of
additional investor funds; (3) prohibiting Defendants from
future violations of Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933 (“Securities Act”) [15
U.S.C. §§ 77e(a), e(c), and q(a)] and Section 10(b)
of the Securities Exchange Act of 1934 (“Exchange
Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17
C.F.R. § 240.10b-5] thereunder, and prohibiting
Mediatrix Capital, Young, Stewart, and Sewall from future
violations of Sections 206(1), 206(2), and 206(4) of the
Investment Advisers Act of 1940 (“Advisers Act”)
[15 U.S.C. §§ 80b-6(1), b-6(2) and b-6(4)] and Rule
206(4)-8 [17 C.F.R. § 275.206(4)-8] thereunder; (4)
requiring Defendants and Relief Defendants to provide an
accounting; (5) directing Defendants and Relief Defendants to
repatriate assets held abroad; (6) prohibiting Defendants and
Relief Defendants from the destruction or alteration of
documents; (7) providing for expedited discovery; (8)
providing for alternative means of service by the SEC; and
(9) setting this matter for a preliminary injunction hearing.
The Court will treat this motion as a request for a
preliminary injunction as well.
The
Court has considered the entire record of this case,
including: (1) the Complaint; (2) Plaintiff's Emergency
Motion for an Ex Parte Asset Freeze, Temporary
Restraining Order, Order to Show Cause, and Other Emergency
Relief; (3) and the Declaration of Jeffrey D. Felder, with
attached exhibits.
Based
on this record, the Court finds:
1. The Court has jurisdiction over the subject matter of this
action and over Defendants and Relief Defendants.
2. The SEC has made a sufficient and proper showing in
support of the relief granted herein, as required by Section
20(b) of the Securities Act [15 U.S.C. § 77t(b)],
Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)],
and Section 209(d) of the Advisers Act [15 U.S.C. §
80b-9(d)] by establishing:
a. For purposes of freezing assets, a likelihood of success
on the merits, or that an inference can be drawn that the
party has violated the federal securities laws; and
b. For purposes of a temporary restraining order, a prima
facie case for each of the violations in the Complaint
and a likelihood that the SEC will prevail at trial on the
merits and that the Defendants, and each of them, directly or
indirectly, have engaged in and, unless restrained and
enjoined by order of this Court, will continue to engage in
acts, practices, and courses of business constituting
violations of Sections 5(a), 5(c), and 17(a) of the
Securities Act; and Section 10(b) of the Exchange Act and
Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and
Mediatrix Capital, Young, Stewart, and Sewall, and each of
them, directly or indirectly, have engaged in and, unless
restrained and enjoined by order of this Court, will continue
to engage in acts, practices, and courses of business
constituting violations of Sections 206(1), 206(2), and
206(4) of the Advisers Act and Rule 206(4)-8 thereunder.
There
is good cause to believe that, unless restrained and enjoined
by order of this Court, the Defendants and Relief Defendants
will dissipate, conceal, or transfer from the jurisdiction of
this Court assets that could be subject to an order directing
disgorgement or the payment of civil money penalties in this
action, and that unless restrained Defendants may solicit
additional funds from investors. Accordingly, an order
freezing the Defendants' and Relief Defendants'
assets, as specified herein, is necessary to preserve the
status quo and to protect this Court's ability
to award equitable relief in the form of disgorgement of
illegal profits from fraud, unregistered securities
offerings, and Advisers Act violations, as well as civil
penalties.
3. There is good cause to believe that an immediate
accounting is necessary to identify the location of
additional assets subject to an asset freeze.
4. There is good cause to believe that, unless restrained and
enjoined by order of this Court, Defendants and Relief
Defendants may alter or destroy documents relevant to this
action.
5. There is good cause to believe that expedited discovery
and alternative means of service are warranted.
6. There is good cause to believe that an order directing
Defendants and Relief Defendants to repatriate assets to the
United States is warranted.
7. Pursuant to Fed.R.Civ.P. 65(b), this Court specifically
finds that there is a likelihood of irreparable injury to
investors unless this order is issued ex parte. This
Court finds that the SEC has made a prima facie showing that
Defendants have engaged in deceptive conduct in order to
defraud investors, made false and misleading statements to
investors and omitted material facts in connection with the
purchase or sale or the offer or sale of securities.
8. Based on these and other facts alleged by the SEC, there
is good cause to believe that Defendants and Relief
Defendants will dispose of, dissipate, or remove investor
funds and assets from the jurisdiction of the Court. Such
dissipation of investor funds and assets would constitute
irreparable harm to investors. To avoid this irreparable
harm, it is appropriate for the Court to issue this Order
ex parte so that prompt service on appropriate
financial institutions and persons acting in concert with or
directing the activities of Defendants and Relief Defendants
can be made, thus preventing the dissipation of investor
funds.
Now,
therefore, I.
IT
IS HEREBY ORDERED that, pending the determination of
the SEC's request for a preliminary injunction and the
implementation of the asset freeze requested therein:
A. The
assets, funds, or other property held by or under the direct
or indirect control of Defendants or Relief Defendants,
whether held in any of their names or for their direct or
indirect beneficial interests, wherever located, up to the
amount of $251, 074, 084 are frozen, including but not
limited to the accounts listed below in Schedule
A to this Order and the assets listed in
Schedule B to this order.
B.
Defendants and Relief Defendants, and their officers,
directors, successor corporations, subsidiaries, affiliates,
agents, servants, employees, attorneys-in-fact, and those
persons in active concert or participation with them who
receive actual notice of this order by personal service or
otherwise, and each of them, shall hold and retain within
their control, and otherwise prevent any disposition,
transfer, pledge, encumbrance, assignment, dissipation,
concealment, or other disposal whatsoever of any of their
funds or other assets or things of value presently held by
them, under their control or over which they exercise actual
or apparent investment or other authority, in whatever form
such assets may presently exist and wherever located,
including but not limited to the accounts and assets listed
in Schedules A and B, as defined above, up
to the amounts identified in paragraph I.A.
C. Any
bank, financial or brokerage institution, storage facility,
or other person or entity holding any funds, securities or
other assets of Defendants or Relief Defendants, up to the
amounts identified in paragraph I.A, held in the name of, for
the benefit of, or under the control of Defendants or Relief
Defendants; or their officers, directors, successor
corporations, subsidiaries, affiliates, agents, servants,
employees, attorneys-in-fact, and those persons in active
concert or participation with them, and each of them, shall
hold and retain within their control and prohibit the
withdrawal, removal, transfer or other disposal of any such
funds or other assets, including but not limited to assets
held listed in Schedules A and B, as defined
above.
D. No.
person or entity, including Defendants or Relief Defendants,
or any creditor or claimant against the Defendants or Relief
Defendants, or any person acting on behalf of such creditor
or claimant, shall take any action to interfere with the
asset freeze, including, but not limited to, the filing of
any lawsuits, liens, or encumbrances, or bankruptcy cases to
impact the property and assets subject to this order;
provided, however, that any party or non-party may seek leave
from this order upon a proper showing.
E. The
SEC may file Notices of Lis Pendens, or any similar
document that has the effect of clouding title, on all pieces
of real property in which Defendants or Relief Defendants
have an interest. Should the Defendant or Relief Defendants
wish to sell any piece of real property in which they have an
interest, they shall give counsel for the SEC notice of the
proposed sale and seek and obtain an order of the Court
permitting the sale prior to the sale. Defendants and Relief
Defendants shall fully account for any proceeds received from
the sale of such property to the Court and counsel for the
SEC, and the proceeds of such sales shall be frozen pursuant
to the provisions of this Order; and Defendants and Relief
Defendants are hereby prohibited from further encumbering
their interests in any real or personal property by means of
pledging it for collateral for any purpose or by allowing it
to secure any obligation. This order applies, but is not
limited, to the following properties:
• 5406 South Cottonwood Court, Greenwood Village,
Colorado 80121;
• 8082 East Arroyo Hondo Road, Scottsdale, Arizona
85266;
• 1201 Lloyds Road, Little Elm, Texas 75068;
• 330 Dorado Beach East, Dorado, Puerto Rico 00646;
• 319 Dorado Beach East, Dorado, Puerto Rico 00646;
• Mira Mar Villas, #15 Garden Drive, Paradise Island,
...