Stettin v. Rothstein, Emergency Injunction Motion

Case 09-02478-RBR Doc 2 Filed 12/02/09 Page 1 of 30
UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE DIVISION)
In re CASE NO. 09-34791-BKC-RBR

CHAPTER 11
ROTHSTEIN ROSENFELDT ADLER, P.A.,
Debtor.
/
HERBERT STETTIN, not individually but as ADV. NO. 09-02478-BKC-RBR-A

Chapter 11 Trustee of the estate of the Debtor,
Rothstein Rosenfeldt Adler, P.A.,
Plaintiff,
v.
SCOTT WALTER ROTHSTEIN; 29 BAHIA, LLC;

235 GC, LLC; 350 LOP # 2840, LLC; 353BR, LLC;
708 SPANGLER, LLC; 1012 BROWARD, LLC;
1198 DIXIE, LLC; 1299 FEDERAL, LLC; 2133 IP,
LLC; 10630 # 110, LLC; 15158, LLC; AAMG, LLC;
AAMG1, LLC; AAMM HOLDINGS, LLC; ABT
INVESTMENTS, LLC; ADVANCED SOLUTIONS,
LLC; BAHIA PROPERTY MANAGEMENT, LLC;
BOAT ANAGEMENT, LLC; BOSM HOLDINGS,
LLC; BOVA PRIME, LLC; BOVA RESTAURANT
GROUP, LLC; THE BOVA GROUP, LLC; BOVA
SMOKE, LLC; BOVCU, LLC; BOVRI, LLC; CI 07,
LLC; CI 08, LLC; CI 16, LLC; CI 27, LLC; CSU,
LLC; D & D MANAGEMENT & INVESTMENT,
LLC; D & S MANAGEMENT AND INVESTMENT,
LLC; DJB FINANCIAL HOLDINGS, LLC;
DYMMU, LLC; FIFTH COURT FINANCIAL, LLC;
FULL CIRCLE FT. LAUDERDALE, LLC; GHW1,
LLC; IDNLGEAH, LLC; ILK3, LLC; IS
MANAGEMENT, LLC; JUDAH, LLC; NF
SERVICING, LLC; NRI 11, LLC; NRI 15, LLC; NS
HOLDINGS, LLC; BFHI, LLC; PK ADVENTURES,
LLC; PK’S WILD RIDE, LTD; ROTHSTEIN
FAMILY FOUNDATION, INC.; RRA
CONSULTING, INC.; RRA GOAL LINE
MANAGEMENT, LLC; RRA SPORTS &
ENTERTAINMENT, LLC; RSA 11TH ST, LLC; RW
COLLECTIONS, LLC; S&KEA, LLC; SCORH,

LLC; TIPP, LLC; VGS, LLC; THE WALTER
FAMILY, LLC; WALTER INDUSTRIES, LLC;
WPBRS, LLC; REN GROUP, LLC; CCCN, LLC;
TB22N, LLC; TLBN, LLC; UG, LLC; SPAC
INVESTMENTS, LLC; GBPT, LLC; RET GROUP,
LLC; REP GROUP, LLC; REC GROUP, LLC; REV
GROUP, LLC; VGSI, LLC; QT, LLC; WAWW,
LLC; WAWW 2, LLC; WAWW 3, LLC; WAWW 4,
LLC; WAWW 5, LLC; WAWW 6, LLC;
WAWW 7, LLC; WAWW 8, LLC; WAWW 9, LLC;
WAWW 10, LLC; WAWW 11, LLC; WAWW 12,
LLC; WAWW 13, LLC; WAWW 14, LLC; WAWW
15, LLC; WAWW 16, LLC; WAWW 17, LLC;
WAWW 18, LLC; WAWW 19, LLC; WAWW 20,
LLC; WAWW 21, LLC; WAWW 22, LLC; MRISC,
LLC; RES GROUP, LLC; JJ FINANCE
HOLDINGS, LLC; MLC 350, LLC; and JB BOCA
M HOLDINGS, LLC,
Defendants.
/
EMERGENCY MOTION AND SUPPORTING MEMORANDUM OF LAW

OF THE PLAINTIFF, CHAPTER 11 TRUSTEE HERBERT STETTIN, FOR
ENTRY OF PRELIMINARY INJUNCTION AND FOR OTHER RELIEF
AND
REQUEST FOR JUDUCIAL NOTICE
[EMERGENCY HEARING REQUESTED

ON OR BEFORE DECEMBER 4, 2009]
Herbert Stettin, not individually but as Chapter 11 Trustee for the estate of Rothstein
Rosenfeldt Adler P.A. (“RRA” or the “Debtor”), files this Emergency Motion For Entry of a
Preliminary Injunction and for Other Relief and Request for Judicial Notice, pursuant to Rule 65
of the Federal Rules of Civil Procedure, as incorporated into Rule 7065 of the Federal Rules of
Bankruptcy Procedure, Section 105(a) of Title 11 of the United States Code (hereinafter the
“Bankruptcy Code”) and Fed. R. Evid. 201, and says
2
I. PRELIMINARY STATEMENT AND LOCAL RULE 9075-1

CERTIFICATION OF BASIS FOR EMERGENCY HEARING
By this Motion, the Trustee seeks the entry of a preliminary injunction with notice to be
established at a hearing to be scheduled by the Court. In his nine-count Verified Adversary
Complaint for Damages and Other Relief (the “Rothstein Complaint”) filed December 1, 2009,
the Trustee is asserting claims against Scott W. Rothstein (“Rothstein”) and his affiliated alter
ego business entities (collectively referred to herein as the “Rothstein Entities”) seeking, among
other relief, substantive consolidation of Rothstein and the Rothstein Entities with and into the
estate of the Debtor, an alter ego liability determination, for turnover of property of the estate, to
avoid and recover fraudulent transfers from RRA to Rothstein and the Rothstein Entities (the
“Avoidable Transfers” and for the entry of an order granting preliminary and permanent
injunctive relief. [DE # 1].
Specifically, the Adversary Complaint seeks the following relief against Rothstein and
the Rothstein Entities:
● Count I - Action Seeking to Substantively Consolidate Non-Debtor Rothstein and
the Non-Debtor Rothstein Entities with and into the Bankruptcy Estate of the
Debtor.
● Count II – Action to Impose Alter Ego Liability upon Rothstein and the Rothstein
Entities for the Debts and Liabilities of the Debtor, and to Pierce the Corporate
Veil of the Rothstein Entities for the Benefit of the Debtor.
● Count III - Action Requesting the Entry of a Preliminary and Permanent
Injunction against Rothstein and the Rothstein Entities as Alter Egos of the
Debtor.
3
● Count IV - To the Extent the Court Grants the Relief Demanded in Counts I
and/or II Above, Action Seeking Turnover of Property of the Debtor’s
Bankruptcy Estate Pursuant to Section 542 of the Bankruptcy Code, as Well as an
Accounting in Connection therewith.
● Count V - Action to Avoid and Recover Fraudulent Transfers from RRA to
Rothstein and the Rothstein Entities (Defined Herein as the Avoidable Transfers).
● Count VI - Action for Conversion against Rothstein and the Rothstein Entities
● Count VII - Action for Unjust Enrichment against Rothstein and the Rothstein
Entities.
● Count VIII - Action for an Accounting against Rothstein and the Rothstein
Entities.
● Count IX - Action for Breach of Fiduciary Duty against Rothstein.
Rothstein, a disbarred attorney who was arrested by the U.S. government yesterday and
charged with a federal criminal information, caused significant funds to be transferred out of the
Debtor’s financial institution accounts and utilized those funds to acquire contractual rights and
property interests for Rothstein and the Rothstein Entities. After the revelation of Rothstein’s
fraud, Rothstein has failed to protect and preserve his assets and the assets of the Rothstein
Entities or even respond to correspondence from creditors stating their intent to declare a
forfeiture of the contractual rights and property interests of Rothstein and/or the Rothstein
Entities.
An emergency hearing is requested because there is a significant likelihood that the
Debtor’s estate will suffer irreparable harm if the assets of Rothstein and Rothstein Entities are
not protected and preserved by the entry of preliminary injunction. Specifically, an emergency
4
hearing is necessary and appropriate based upon, among other things: (i) the magnitude of
Rothstein’s fraud in terms of the significant number of creditors, substantial dollar amounts,
international scope, and the significant number of yet to be identified individuals who likely
acted in concert with him and who likely continue to have possession, custody or control of
assets belonging to Rothstein and/or the Rothstein Entities; and (ii) the assertion and/or exercise
of rights by creditors who continue to declare forfeitures of contractual rights and property
interests belonging to Rothstein and the Rothstein Entities without a defense being interposed
thereto.
A preliminary injunction would serve to maintain the status quo and preserve this Court’s
ability to award equitable relief and provide for a fair distribution to the Debtor’s creditors. The
Trustee likewise satisfies all of the necessary elements to obtain injunctive relief: (1) given the
substantial, undisputed proof establishing the fraudulent nature of Rothstein’s Ponzi scheme
activities and the use of RRA bank accounts and or the alter ego Rothstein Entities in
perpetrating the scheme, the Trustee has a substantial likelihood of the success on the merits; (2)
because the assets of Rothstein and the Rothstein Entities are comprised of funds transferred to
them from RRA, the bankruptcy estate will suffer substantial harm if an injunction is not
imposed because cash and other assets will continue to be further transferred and/or dissipated;
(3) the harm, if any, to be suffered by Rothstein or the Rothstein Entities will be outweighed by
the substantial harm that will befall the estate if an injunction is not imposed; and (4) the public
interest will best be served if an injunction is imposed to protect, among other things, the estate,
creditors and other parties in interest to the recovery of funds that are the subject of Rothstein’s
fraudulent scheme. The entry of a preliminary injunction is necessary and appropriate to assist
the Trustee in the recovery of property of the estate totaling in excess of $500 million that was
5
wrongfully diverted to Rothstein and Rothstein Entities as part of a fraudulent scheme to hinder,
delay or defraud creditors.
II. FACTS SUPPORTING RELIEF REQUESTED1
A. The Parties, Jurisdiction & Venue
1. RRA was a law firm that was incorporated in the State of Florida on February 7,
2002. RRA maintained a principal office at 401 East Las Olas Boulevard, Suite 1650, Fort
Lauderdale, Florida, with satellite offices in Miami, Boca Raton, West Palm Beach and New
York City.
2. Rothstein is an individual who resides in Broward County, Florida.
3. Until he was permanently disbarred by Order of the Florida Supreme Court dated
November 25, 2009, Rothstein had been a member of the Florida Bar since 1988 and, prior to
November 2, 2009, was RRA’s Chief Executive Officer and fifty percent shareholder.
4. The Rothstein Entities are limited liability companies, limited partnerships, and/or
corporations organized and existing under the laws of the States of Florida, Delaware and New
York and/or other domestic or foreign jurisdictions. The Rothstein Entities were not separate and
distinct legal entities from RRA because their existence was directly attributable to, and entirely
dependent upon, the operations of RRA. At all times material hereto, the Rothstein Entities,
among other things, conducted business from RRA’s offices, were funded with monies provided
by RRA, and utilized RRA’s personnel and office equipment to conduct business.
5. At all times material hereto, Rothstein caused RRA to transfer funds to, between
and/or among RRA, Rothstein and the Rothstein Entities, while RRA, through Rothstein,
1
The facts supporting this Motion are numbered herein as Paragraph Nos. 1-30 in Paragraphs A
and B below with the same paragraph numbers as referenced in the Rothstein Complaint, and are
quoted in their entirety herein.
6
continued to exercise dominion and control of and over such funds, which were thereafter used to
acquire real and personal property of substantial value for Rothstein and the Rothstein Entities.
The precise nature, extent and whereabouts of all of the assets of Rothstein and the Rothstein
Entities are not yet fully known, except that certain valuable assets of Rothstein and the Rothstein
Entities were seized by the U.S. government during November, 2009.
6. On November 2, 2009, Stettin was appointed as RRA’s Receiver. On November
11, 2009, Stettin was appointed as RRA’s Chief Restructuring Officer, and thereafter by Order
dated November 20, 2009, was appointed Chapter 11 Trustee of RRA.
7. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§
157(a), 1334(b), 2201 and 2202.
8. This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), (C), (E),
(H) and (O), and the Trustee consents to the entry of final orders and judgment by the Bankruptcy
Court.
9. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
B. The Common Factual Allegations for Each Count
10. On November 10, 2009 (the “Petition Date”), a group of petitioning creditors filed
an involuntary petition for reorganization under Chapter 11 of Title 11 of the United States Code
... against RRA in the wake of allegations, which have proven to be true, that Rothstein had
perpetrated a massive Ponzi scheme.
11. The involuntary petition was filed after RRA learned that Rothstein utilized
RRA’s business to fraudulently secure investments in fictitious structured settlements and that
Rothstein funneled those investments funds through accounts labeled as “trust accounts” titled in
7
the name of RRA, as well as RRA’s other financial institution accounts, to Rothstein personally
and to the Rothstein Entities.
12. Rothstein represented to prospective investors that certain clients of RRA had
claims which were settled and that the defendants were obligated to pay settlement proceeds to
RRA for the benefit of the clients over an extended period of time.
13. Rothstein further represented that certain clients of RRA were willing to assign
their interests in the periodic payments in exchange for an immediate discounted lump sum
payment.
14. As part of his scheme, Rothstein offered prospective investors the opportunity to
pay discounted lump sum payments to RRA for the purported benefit of its clients in exchange
for assignments by the clients of their interest in the full periodic payments.
15. To accomplish this scheme, Rothstein provided prospective investors with a copy
of a redacted contingency fee agreement between RRA and its client, a copy of a redacted
settlement agreement between RRA’s client and the purported defendant, a sale and transfer
agreement, an acknowledgement of assignment/purchase of settlement proceeds agreement, a
guaranty executed by Rothstein both personally and on behalf of RRA, a defense agreement, a
copy of a redacted wire transfer confirmation purporting to evidence the payment of the
settlement proceeds into RRA’s trust account, and correspondence detailing the transaction on
RRA’s letterhead.
16. Rothstein falsified the existence of the client, falsified the existence of the
settlement, falsified the existence of the settlement proceeds, falsified the documents, and
misappropriated the investor funds to himself and to the Rothstein Entities.
8
17. As part of his scheme, Rothstein utilized his position as an attorney and as an
owner and officer of RRA, his relationship with existing clients of RRA and RRA’s financial
institution accounts in order to effectuate the fraudulent sale of fictitious structured settlements.
18. In sum, Rothstein utilized the RRA law firm to perpetrate a fraudulent scheme by
engaging in the sale of non-existent structured settlements.
19. Rothstein used the staff and premises of the RRA law firm as his command center
for his fraudulent scheme to benefit himself and the Rothstein Entities.
20. Indeed, while the scheme was ongoing, RRA rapidly grew from a 7 attorney [law
firm] in 2002, to 70 attorneys and 80 support staff in 2009. Prior to 2005, Rothstein was a virtual
unknown in legal, political, and charitable circles. Subsequent to 2005, Rothstein and RRA
gained the reputation of being a premier law firm with significant political and charitable
connections. Rothstein’s Ponzi scheme provided the monies necessary for RRA’s operations and
growth. Moreover, substantially all funds flowed to and through RRA’s bank accounts to
Rothstein and the Rothstein Entities.
21. Upon information and belief, Rothstein bilked investors out of more than five
hundred million dollars. A recently published article quoted an F.B.I. source as saying the actual
figure could be as high as $1 Billion.
22. RRA filed a Complaint against Rothstein in Broward County Circuit Court on
November 2, 2009, and Stettin was appointed as RRA’s Receiver on November 4, 2009.
23. The Order Appointing Receiver found that Rothstein had relinquished his
authority with respect to the firm’s management by virtue of, inter alia, his failure to appear at the
duly noticed hearings.
9
24. On or about November 4, 2009, federal authorities executed a search warrant and
seized various records from RRA’s offices.
25. On November 9, 2009, the United States filed a Verified Complaint for Forfeiture
In Rem against eight real properties purchased by, with, or on behalf of Rothstein or through the
Rothstein Entities (the “Forfeiture Complaint”), followed by an Amended Verified Complaint for
Forfeiture In Rem filed on November 23, 2009, against various other real properties, vehicles, and
vessels, tangibles, bank accounts, business interests, and contributions (the “Amended Forfeiture
Complaint”).
26. On or about November 9, 2009, federal authorities seized other assets, including
motor vehicles, yachts, watches, jewelry and other personal property titled in the name of
Rothstein and the Rothstein Entities.
27. The Amended Forfeiture Complaint alleges that:
(a) Rothstein operated a Ponzi scheme since approximately 2005 and
acquired the subject properties in connection with such Ponzi scheme;
(b) investor monies generated through the Ponzi scheme were deposited into
RRA’s trust account;
(c) these types of fraudulent investments had been offered by Rothstein to a
variety of persons and entities throughout the United States for at least
four years in a scheme involving hundreds of millions of dollars; and
(d) Rothstein purchased many properties in the names of nominee
corporations including “C1 07 LLC,” “C1 08 LLC,” “C1 16 LLC,” “29
Bahia LLC,” “MLC 350 LLC,” “350 LOP # 2840 LLC,” and “JB Boca M
Holdings LLC,” each of which are named Defendants in this action.
10
28. At all times material hereto, Rothstein formed, operated or otherwise treated RRA
and the Rothstein Entities as his alter egos and as his mere instrumentality in committing the
fraud described hereinabove.
29. For all purposes, Rothstein, the Rothstein Entities, and RRA were single
economic entities and RRA and the Rothstein Entities simply functioned as a façade for Rothstein
as their dominant shareholder.
30. By notice filed November 25, 2009, RRA, by and through the Trustee, consented
to the entry of an Order for Relief under Chapter 11 of the Bankruptcy Code. As such, the
Trustee is the duly authorized fiduciary on behalf of the Debtor.
C. Other Facts Supporting the Relief Requested (the Co-Conspirators)
The recent events surrounding Rothstein and the Debtor have been widely publicized in
local and national media account. As set forth in the Rothstein Complaint, Rothstein utilized the
Debtor and the Debtor’s financial institution accounts to fraudulently secure investments in
fictitious structured settlements. The funds obtained through Rothstein’s Ponzi scheme were
initially deposited into the Debtor’s financial institution accounts, and subsequently transferred
to Rothstein and the Rothstein Entities. Rothstein then utilized those funds to obtain contractual
rights and property interests of substantial value for himself and the Rothstein Entities. It has
been reported that Rothstein allegedly bilked creditors out of more than $1 billion. It is believed
that Rothstein acted in concert with other individuals in perpetrating the fraud and that such other
individuals held contractual rights or property interests as nominees for Rothstein (hereinafter the
“co-conspirators”). The identities of the co-conspirators have not yet been determined. The co-
conspirators continue to maintain possession, custody, and/or control over contractual rights
11
and/or property interests of Rothstein and the Rothstein Entities including, but not limited to, the
ability to transfer, conceal, dissipate, and/or destroy such assets.
Rothstein and the co-conspirators have also failed to take the necessary actions to protect
and preserve the contractual rights and property interests of Rothstein and the Rothstein Entities.
By way of example, on November 2, 2009 Iron Street Management, LLC (hereinafter “Iron
Street”) forwarded a correspondence to WAWW9, LLC (hereinafter “WAWW9”), (a Rothstein
entity and named Defendant in the Rothstein Complaint), notifying WAWW9 of its failure to
make payments owed under a separation agreement and consequent default under an operating
agreement (hereinafter the “Default Notice”). The Default Notice states that WAWW9
membership interests in Iron Street would be forfeited within thirty days if the default is not
cured within such time period. Upon information and belief, Iron Street owns an interest in a
highly valuable health benefits consulting company known as Edify. A copy of the notice will
be presented to the Court at the hearing on this Motion.
Upon information and belief, Rothstein and the co-conspirators have failed to respond to
Iron Street’s correspondence or to otherwise protect and preserve WAWW9’s contractual rights
in Iron Street. Moreover, the Trustee has asserted claims that Rothstein and the Rothstein
Entities are the alter egos of the Debtor, that the corporate veil of the Rothstein Entities should be
pierced, and that the assets and liabilities of Rothstein and the Rothstein Entities should be
consolidated with and into the Debtor’s estate.
D. The Trustee’s Request for Judicial Notice
The Trustee requests the Court take judicial notice pursuant to Rule 201 of the Federal
Rules of Evidence of the dockets, pleadings and all papers filed in two related cases pending in
the United States District Court for the Southern District of Florida. See Universal Foam v. Kohr
12
(In re Kohr), 399 B.R. 284, 287 (Bankr. M.D. Fla. 2008) (Court may take judicial notice of
documents filed in a state court litigation related to the debtor) citing Fed. R. Evid. 201(b) (“A
judicially noticed fact must be one not subject to reasonable dispute in that it is either (1)
generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and
ready determination by resort to sources whose accuracy cannot be reasonably questioned.”)
Accordingly, the Trustee requests that the Court take judicial notice of the following
documents:
● The Verified Complaint for Forfeiture In Rem, Amended Verified Complaint for
Forfeiture In Rem, case docket and all pleadings and papers filed in the case
styled, United States of America v. Various Real Properties Purchased by or with
or on behalf of Scott W. Rothstein, et al. (Case No. 09-CV-61780-
ZLOCH/ROSENBAUM) in the United States District Court for the Southern
District of Florida (the “Forfeiture Case”). A copy of the case docket in the
Forfeiture Case is attached hereto as Exhibit “A,” and a copy of the Amended
Verified Complaint for Forfeiture In Rem is attached hereto as Exhibit “B.”
● The Information, case docket and all pleadings and papers filed in the case styled
United States of America v. Scott W. Rothstein (Case No. 09-CR-60331-JIC-1), in
the United States District Court for the Southern District of Florida (the
“Rothstein Criminal Case”). A copy of the case docket in the Rothstein Criminal
Case is attached hereto as Exhibit “C,” and a copy of the Information filed against
Scott W. Rothstein is attached hereto as Exhibit “D.”
Legal Argument and Citation to Authority
A. Legal Standard for Obtaining a Preliminary Injunction
13
A plaintiff is entitled to preliminary injunctive relief upon showing (1) there is a
substantial likelihood that the moving party will prevail on the merits; (2) the moving party will
suffer irreparable injury if the injunction is not granted; (3) the threatened injury to the moving
party outweighs the threatened harm the proposed injunction may cause the opposing party; and,
(4) the injunction, if issued, would not be adverse to the public interest. Johnson v U.S.
Department of Agriculture, 734 F.2d 774, 781 (11th Cir. 1984); McDonald’s Corp. v. Robertson,
147 F. 3d 1301 (11th Cir. 1998). Moreover, pursuant to Fla. Stat. § 726.108 referenced as
“Remedies of creditors” in regard to the avoidance of a fraudulent transfer, “subject to
applicable principles of equity and in accordance with applicable rules of civil procedure ...
[the court may issue] [a]n injunction against further disposition by the debtor or a transferee,
or both, of the asset transferred or of other property...” (emphasis added).
Further, where, such as here, a particular fund or piece of property is at issue (i.e., the
funds of the Debtor that were fraudulently transferred and diverted to Rothstein and the
Rothstein Entities), and where the final equitable relief sought is of the same character as the
preliminary injunction (i.e., to establish an equitable lien/constructive trust against the funds and
assets that are the subject of the Avoidable Transfers to Rothstein and the Rothstein Entities), the
entry of a pre-judgment asset freeze is appropriate to preserve the status quo order in order to
provide security for performance of a future order which may be entered by the court. Indeed, in
cases such as this, even when money damages are sought in conjunction with equitable relief, it
has been held that the entry of a freeze order is appropriate. See S.E.C. v. ETS Payphones, Inc.,
___ F.3d ___, 2005 WL 1039650 (11th Cir. May 5, 2005) citing United States v. Oncology
Assoc's, P.C., 198 F.3d 489, 498 (4th Cir. 1999) (holding that where equitable relief
(disgorgement) and money damages are sought in the same action, an asset freeze is justified as a
14
means of preserving funds for the equitable remedy of disgorgement; inclusion of a claim for
civil penalty damages does not make the remedies sought wholly legal and not equitable); Rosen
v. Cascade Intern., Inc., 21 F.3d 1520 (11th Cir. 1994) (where money damages and the funds
encumbered by the preliminary injunction are worth no more than the amount reasonably in
controversy, the injunction does involve "a fund or property which could [be] the subject of the
provisions of [a] final decree in the cause," rather than "a matter wholly outside the issues in the
suit."); De Beers Consolidated Mines v. United States, 325 U.S. 212, 65 S.Ct. 1130, 89 L.Ed.
1566 (1945) (reversing entry of injunction as to property which in “no circumstances [could] be
dealt with in any final injunction that [might] be entered.”).
B. The Entry of a Preliminary Injunction is Necessary and Appropriate
Applying the above factors and legal authorities to the instant case, the Trustee is entitled
to the entry of an order granting preliminary injunctive relief against Rothstein and the Rothstein
Entities.
(1) The Trustee has a substantial likelihood he will prevail on the merits
In the Rothstein Complaint, the Trustee seeks to substantively consolidate Rothstein and
the Rothstein Entities with and into the estate of the Debtor as the alter egos of the Debtor,
thereby warranting a piercing of the corporate veil of such entities. (See Complaint at Counts I &
II). The Rothstein Complaint also seeks turnover or property of the estate and recovery of the
Avoidable Transfers as fraudulent transfers in accordance with Section 544 of the Bankruptcy
Code and Sections 726.105(1)(a), 726.105(1)(b) and/or 726.106(1) of the Florida Statutes and/or
other applicable law. (See Complaint at Counts IV & V).
a. The Substantive Consolidation and Alter Ego Claims
15
Although the Bankruptcy Code does not specifically authorize bankruptcy courts to
substantive consolidate entities and individuals, the broad equitable power detailed in Section
105(a) of the Bankruptcy Code has been recognized as the basis. See In re Munford, Inc., 115
B.R. 390, 397 (Bankr. N.D. Ga. 1990); In re Tureaud, 45 B.R. 658, 662 (Bankr. N.D. Okla.
1985); In re New Center Hosp., 179 B.R. 848, 853 (Bankr. E.D. Mich. 1994). Substantive
consolidation may be limited to certain classes of claims, specific property, or may be
appropriately conditioned. See In re Continental Vending Machine Corp., 517 F.2d 997, 1001
(2d Cir. 1975); In re Cooper, 147 B.R. 678, 682 (Bankr. D.N.J. 1992); In re Steury, 94 B.R. 553,
557 (Bankr. N.D. Ind. 1988). Courts have also authorized substantive consolidation of debtors
and non-debtors. See Sampsell v. Imperial Paper Corp., 313 U.S. 215 (1941); In re United
Stairs Corp., 176 B.R. 359 (Bankr. D. N.J. 1995); In re Crabtree, 39 B.R. 718 (Bankr. E.D.
Tenn. 1984); In re 1438 Meridian Place N.W., Inc., 15 B.R. 89 (Bankr. D. D.C. 1981).
Practically, substantive consolidation is similar to the state law remedy of piercing the
corporate veil based on a finding that the entities are alter egos. See Cooper, 147 B.R. at 683-84.
Piercing the corporate veil, however, is not a prerequisite to the utilization of the bankruptcy law
remedy of substantive consolidation. Munford, 115 B.R. at 394 citing Tureaud, 59 B.R. at 975-
76; In re Snider, Inc., 18 B.R. 230, 234 (Bankr. D. Mass 1982). The bankruptcy remedy of
substantive consolidation ensures the equitable distribution of property to all creditors, while on
the other hand, piercing the corporate veil is a limited merger for the benefit of a particular
creditor. Cooper, 147 B.R. at 683-84.
Indeed, substantive consolidation of a non-debtor with a debtor has been deemed
appropriate where a non-debtor is an alter ego of the debtor. See Sampsell, 313 U.S. at 218-19.
An entity which is the alter ego of a debtor is not entitled to the safeguards to which a true
16
independent non-debtor would be entitled. See United Stairs, 176 B.R. at 369-70; 1438
Meridian Place, 15 B.R. at 97. Where non-debtor entities are alter egos of the debtor, the
creditors have the right to move for extension and consolidation independent from the right to
force those entities into bankruptcy pursuant to 11 U.S.C. § 303. See United Stairs, 176 B.R. at
370 (“[i]n a case involving alter egos where the non-debtor entities are not entitled to procedural
safeguards and creditors will not be harmed by the lack of these protections, the court need not
address the requirements of Section 303(b) to order substantive consolidation”); see also
Crabtree, 39 B.R. at 721-22; Munford, 115 B.R. at 397.
The court in Munford recognized that the substantive consolidation of a non-debtor’s
assets with those of a debtor is substantially different from the involuntary petition remedy of
Section 303 of the Bankruptcy Code and therefore does not circumvent the requirements of that
provision. See id. The entire purpose of substantive consolidation is to recover assets from a
financially sound affiliated entity in order to facilitate the debtor’s own reorganization or
maximize value of the estate. The non-debtor is not an insolvent entity whose financial affairs
need to be managed by the court. Therefore, substantive consolidation is a remedy separate and
distinct from Section 303 of the Bankruptcy Code. See id. at 397-98.
Under its general equitable powers, a bankruptcy court may substantively consolidate
affiliate corporations within a pending case when the assets and liabilities of different entities are
dealt with as if the assets were held by, and the liabilities were incurred by a single entity.
Tureaud, 45 B.R. at 661 (“[i]t is clear, based on the inability of the Court and the creditors to
reconcile and separate the financial affairs of the debtor and affiliate corporations, that
consolidation will not work an injustice on the secured or unsecured creditors”); In re Creditors
Svc. Corp., 195 B.R. 680, 691 (Bankr. S.D. Ohio 1987) (‘[i]n view of the state of the financial
17
records and the complex relationships, the cost of recovery proceedings in bankruptcy would
substantially reduce or eliminate any possible return to creditors”); In re Baker & Getty Fin.
Svcs., Inc., 78 B.R. 139, 142 (Bankr. N.D. Ohio 1987) (“[t]he extensive and unrestricted
commingling of corporate and personal assets, combined with the inadequate substantiation of
certain transfers, would compromise the accuracy of any segregation of the assets”); New Center
Hosp., 179 B.R. at 855 (equities of the case required substantive consolidation of debtor with
non-debtor entities as a “sufficient indicia of unity and entanglement are present, making the
affairs is either impossible or so costly as to consume the assets of the estate”).
In the Eleventh Circuit, substantive consolidation of non-debtor affiliates is a remedy
permitted under Section 105 of the Bankruptcy Code. See Eastgroup Props. v. Southern Motel
Assoc., Ltd., 935 F.2d 245 (11th Cir. 1991) (adopting the substantive consolidation test
articulated by the District of Columbia Circuit in In re Auto-Train Corp., Inc., 810 F.2d 270
(D.C. Cir. 1997)). Applying a three party analysis, a movant seeking substantive consolidation
must establish the following:
(i) The proponent must show a substantial identity between the entities to be
consolidated;
(ii) The proponent must show that consolidation is necessary to avoid some harm or
to realize some benefit; and
(iii) If a creditor objects and demonstrates that it relied upon the separate credit of one
of the entities and that it will be prejudiced by the consolidation, then the court
may order consolidation only if it determines that the demonstrated benefits of
consolidation “heavily” outweigh the harm.
18
The first component of the test is similar to a state court alter ego analysis and the second
and third components require a balancing of equities or benefits and harms of the substantive
consolidation. New Center Hosp., 179 B.R. at 854. The Second Circuit also adopted a two-part
test for substantive consolidation in Union Sav. Bank v. Augie/Restivo Baking Co., Ltd., (In re
Augie/Restivo Banking Co., Ltd.) 860 F.2d 515, 518 (2d Cir. 1988) to determine:
(i) Whether creditors dealt with the entities as a single economic unit and did not rely
on their separate identity in extending credit; or
(ii) Whether the affairs of the debtors are so entangled that consolidation will benefit
all creditors. Treatment of the entities by creditors, or alternatively, the
complexity of the interrelationship of the entities.
Both the Eleventh and the Second Circuits have adopted a seven-part objective inquiry
into the inter-relationship of the debtor and non-debtor entities set forth in In re Vecco Constr., 4
B.R. 407 (Bankr. E.D. Va. 1980). The seven factors are:
(i) presence of absence of consolidated business or financial records;
(ii) unity of interest and ownership between the debtors;
(iii) the existence of parent and intercorporate guarantees on loans;
(iv) degree of difficulty in segregating and ascertaining separate assets and liabilities;
(v) existence of transfers of assets without observance of corporate or other legal
formalities;
(vi) commingling of assets and business functions; and
(vii) the profitability of consolidation at a single physical location.
19
When applying the above authorities to the allegations contained in the Complaint, it is
clear that the Complaint sufficiently pleads the elements of the claim for substantive
consolidation.
b. The Fraudulent Transfer and Turnover Claims
Pursuant to 11 U.S.C. § 544(b), the Trustee may avoid any transfer of an interest of the
Debtor in property to Rothstein and the Rothstein Entities or any obligation incurred by the
Debtor that is voidable under applicable law by a creditor holding an unsecured claim. Pursuant
to 11 U.S.C. § 550, to the extent that a transfer is avoided under Section 544(b) of the
Bankruptcy Code, then the Trustee may recover the property transferred or the value of the
property from the initial transferee or any immediate or mediate transferee. In addition, pursuant
to Section 542 of the Bankruptcy Code, the Trustee has the ability to obtain turnover of property
of the estate as broadly defined under Section 541 of the Bankruptcy Code.
The Trustee alleges that the funds that are the subject of Avoidable Transfers to Rothstein
and the Rothstein Entities constituted transfers of an interest in property of the Debtor within
four (4) years prior to the Petition Date (the time limitation as permitted under Chapter 726 of
the Florida Statutes), and that the Debtor made the Avoidable Transfers to the Rothstein and the
Rothstein Entities with the actual intent to hinder, delay or defraud creditors of the Debtor in
violation of Chapter 726 and Section 548 of the Bankruptcy Code.
The Eleventh Circuit has recognized that direct proof of actual fraud is often very
difficult to establish. See, e.g., Dionne v. Keating (In re XYZ Options, Inc.), 154 F.3d 1262, 1271
(11th Cir. 1998). Recognizing that direct evidence of fraud does not always exist, courts also
allow fraudulent intent to be proven through circumstantial evidence and the surrounding
20
circumstances of the transactions, including the “badges of fraud.” Id. at 1271-72. These badges
include:
(1) The transfer was to an insider;
(2) The debtor retained possession or control of the property transferred after the
transfer;
(3) The transfer was disclosed or concealed;
(4) Before the transfer was made the debtor had been sued or threatened with suit;
(5) The transfer was of substantially all of the debtor’s assets;
(6) The debtor absconded;
(7) The debtor removed or concealed assets;
(8) The value of the consideration received by the debtor was not reasonably
equivalent to the value of the asset transferred;
(9) The debtor was insolvent or became insolvent shortly after the transfer was made;
(10) The transfer occurred shortly before or shortly after a substantial debt was
incurred; and
(11) The debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.
Id.
In addition, the first indication that a debtor is experiencing financial difficulties is a
delay in paying its normal creditors and vendors as their debts come due. A dishonest debtor,
seeing financial trouble on the horizon as reflected in its inability to pay normal and ordinary
debts as they come due, may begin to make fraudulent conveyances. Thus, a twelfth badge of
fraud to be considered in determining the intent of a debtor is whether the debtor is paying its
normal and ordinary debts as they come due when the alleged fraudulent conveyances occur. In
re Model Imperial, Inc., 250 B.R. 776 (Bankr. S.D. Fla. 2000) (Judge Hyman).
21
The Eleventh Circuit found that when using the badges of fraud to determine the
existence of actual fraudulent intent, courts should consider the totality of the circumstances.
Citing In re Sherman, 67 F.3d 1348 (8th Cir. 1995), the court in XYZ Options stated that
“[a]lthough the presence of one specific ‘badge’ will not be sufficient to establish fraudulent
intent, the ‘confluence of several can constitute conclusive evidence of an actual intent to
defraud.’” XYZ Options, 154 F.3d at 1271 n.17; see also General Trading Inc. v. Yale Materials
Handling Corp., 119 F.3d 1485, 1498 (11th Cir. 1997); Harman v. First American Bank of
Maryland (In re Jeffrey Bigelow Design Group, Inc.), 956 F.2d 479, 483-84 (4th Cir. 1992)
(“While each fact does not have to demonstrate actual fraud, the facts taken together must lead to
the conclusion that actual fraud existed”); In re Young, 235 B.R. 666, 669 (Bankr. M.D. Fla.
1999) (“While a single badge of fraud may create a suspicion but not the requisite fraud to set
aside a conveyance, several considered together may afford a basis to infer fraud”).
According to the Fourth Circuit, a determination of actual fraudulent intent must include
a “subjective evaluation of the debtor’s motive.” Harman, 956 F.2d at 484 (discussing also that
“an objective determination has bearing on whether constructive fraudulent intent exists, but is
not conclusive for actual fraudulent intent”); see also Thompson v. Jonovich (In re Food & Fibre
Protection, Ltd.), 168 B.R. 408, 418 (Bankr. D. Ariz. 1994) (stating that § 548(a)(1) sets out a
subjective test for actual fraudulent intent).
In the instant case, several badges of fraud exist in connection with the Avoidable
Transfers to Rothstein and the Rothstein Entities, (i) the Avoidable Transfers were to an insider
of the Debtor and his affiliated owned and/or controlled alter ego business entities, the Rothstein
Entities; (ii) the Debtor did not receive reasonably equivalent value from Rothstein or the
Rothstein Entities in exchange for the Avoidable Transfers; (iii) the Debtor was insolvent at the
22
time of the Avoidable Transfers or became insolvent as a result thereof; (iv) the Debtor knew or
should have known that it was going to incur debts beyond its ability to pay at the time of the
Avoidable Transfers; (viii) by and through Rothstein, the Debtor was part of a massive Ponzi
scheme at the time of the Avoidable Transfers; and (ix) the Debtor, by and through Rothstein,
concealed the Avoidable Transfers by informing scammed investors that the investments were
subject to purported confidentiality agreements.
Moreover, the Defendants bear the burden of proving good faith defense to avoid the
Avoidable Transfers under 11 U.S.C. § 550(b)(1) which, based upon the facts of record, they
cannot do based upon their involvement in the Ponzi scheme at issue. See, e.g., In re M & L
Business Machine Co., 84 F.3d 1330, 1338 (10th Cir. 1996); In re Agricultural Research &
Tech. Group, 916 F.2d 528, 535 (9th Cir. 1990); In re Nordic Village, Inc., 915 F.2d 1049, 1055
(6th Cir. 1990), rev'd on other grounds, 503 U.S. 30, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992).
Good faith is not defined in the Bankruptcy Code. Accordingly, courts generally evaluate good
faith defenses on a case-by-case basis. See, e.g., In re Sherman, 67 F.3d 1348, 1355 (8th Cir.
1995). To determine whether a transferee acts in good faith for purposes of § 548(c), courts
look to what the transferee objectively "knew or should have known," such that a transferee does
not act in good faith when it has sufficient knowledge to place it on inquiry notice of the
voidability of the transfer. Id.; see also M & L Business Machine, 84 F.3d at 1335-36 (quoting
Collier on Bankruptcy and stating that "the presence of any circumstance placing the transferee
on inquiry as to the financial condition of the transferor may be a contributing factor in depriving
the former of any claim to good faith unless investigation actually disclosed no reason to suspect
financial embarrassment"); Agricultural Research, 916 F.2d at 535-36 (stating that "courts look
23
to what the transferee objectively 'knew or should have known' in questions of good faith, rather
than examining what the transferee actually knew from a subjective standpoint").
Courts also look at whether the transaction "carries the earmarks of an arms-length
bargain." Sherman, 67 F.3d at 1355; see also In re Colonial Realty Co., 210 B.R. 921, 923
(Bankr. D. Conn. 1997) (finding that good faith requires an arm's length transaction as well as:
(i) an honest belief in the propriety of the activities in question; (ii) no intent to take
unconscionable advantage of others; and (iii) no intent to or knowledge of the fact that the
activities will hinder, delay or defraud others).
Fundamental to the concept of good faith is that a transferee may not remain willfully
ignorant of facts which would cause it be on notice of a debtor's fraudulent purpose:
Good faith is to be measured objectively, rather than subjectively.

Consequently, a transferee may not put on "blinders" prior to
entering into transactions with the debtor and claim the benefit of §
548(c), where circumstances would place the transferee on inquiry
notice of the debtor's fraudulent purpose or insolvency.
In re Cannon, 230 B.R. 546, 592 (Bankr. W.D. Tenn. 1999).
A similar analysis of both the nature of the transaction and the transferee's lack of
knowledge of facts which would cause a reasonable person to make further investigation is
applied in the context of § 550(b)(1) defenses. See, e.g., In re Southmark Corp., 217 B.R. 499,
507 (Bankr. N.D. Tex. 1997), rev'd in part on other grounds, 242 B.R. 330 (N.D. Tex. 1999); In
re Consolidated Capital Equities Corp., 175 B.R. 629, 637-38 (Bankr. N.D. Tex. 1994); In re
Richmond Produce Co., 151 B.R. 1012, 1021-22 (Bankr. N.D. Cal. 1993). The mere failure to
make inquiry in the face of unusual circumstances also is sufficient to preclude a good faith
defense. See Cannon, 230 B.R. at 592 (stating further that "[c]ourts have generally held that it is
not necessary to show that the transferee had actual fraudulent, though fraudulent intent on the
24
part of the transferee would clearly establish lack of good faith"); see also In re M & L Business
Machine Co., 84 F.3d 1330, 1335-36 (10th Cir. 1996). Finally, as held in Model Imperial by
Judge Hyman, supra, the providing of reasonably equivalent value does not standing alone
negate a finding of actual intent. In re Model Imperial, Inc., 250 B.R. at 793-94. Thus, even if
the Defendants were able to offer material and undisputed proof that reasonably equivalent value
was given for the Avoidable Transfers, if the Court finds that the Debtor acted with actual intent
to hinder, delay or defraud, such transfers must still be avoided.
When the above law is applied to the undisputed material facts of the instant case, given
the relationship between the Defendants and the Debtor described above and the other facts and
circumstances surrounding the Avoidable Transfers, the Defendants will not be able to establish
at trial or on summary judgment that they were “good faith” recipients of the Avoidable
Transfers.
(2) The Trustee will suffer irreparable injury if the injunction is not granted
Given the nature of the property of estate at issue under Section 541 of the Bankruptcy
Code – funds fraudulently transferred to Rothstein and the Rothstein Entities – it is imperative
that the Trustee undertake immediate efforts to prevent the further transfer or disposition of such
assets. The failure of the status quo to be maintained pending the conclusion of this proceeding
will result in irreparable injury to the estate if an injunction is not entered. Only through the
imposition of a freeze order can the Trustee ensure that the estate’s property interest in the
diverted funds will be protected. Moreover, given the pending U.S. criminal and civil actions,
unless immediate action is undertaken to protect the status quo, the estate runs the risk of further
transfers or dissipation of the funds.
(3) The threatened injury to bankruptcy estate outweighs the threatened harm the
proposed injunction may cause Rothstein and the Rothstein Entities
25
Given, among other things, the substantial sums of cash that are the subject of the
Avoidable Transfers, the threatened injury to the Trustee outweighs any threatened harm the
injunction may do to Rothstein and the Rothstein Entities. Rothstein and the Rothstein Entities
have little if any legitimate business operations and, as admitted in testimony, are no more than
transferees of substantial sums received from RRA as part of the Ponzi scheme. Given the
legitimate interests of creditors and other parties in interest that the Trustee is duty-bound to
protect, the harm to the estate far outweighs any purported harm, to Rothstein and the Rothstein
Entities.
(4) The injunction, if issued, would not be adverse to the public interest
Finally, the granting of the preliminary injunction will not be adverse to the public
interest. Indeed, the interests of creditors and other parties in interest to this case will be
protected, as will the integrity of the bankruptcy system itself, if an injunction is granted. To rule
otherwise will permit wrongdoers to benefit from their inequitable conduct thereby thwarting the
legitimate interests of the estate, its creditors and other parties in interest.
C. To the Extent an Injunction is Not Issue or as Otherwise May be Necessary or

Appropriated, the Trustee Should be Appointed Monitor
To the extent an injunction is not issued or as otherwise may be necessary or appropriate,
the Trustee requests that he be appointed monitor of the business and financial affairs of
Rothstein and the Rothstein Entities. Under 11 U.S.C. § 105, a court may authorize a bankruptcy
trustee to periodically monitor the business affairs of a defendant accused of wrongfully
withholding estate property while an adversary case is pending seeking turnover of such
property. In re Raymark Industries, Inc., 228 B.R. 524 (Bankr. D. Conn. 1999) (holding that in
adversary proceeding brought by Chapter 11 trustee for recovery of damages and turnover of
26
assets, trustee was temporarily authorized to monitor corporate defendants' operations by
inspecting their books and records and reviewing their actual and projected cash disbursements).
The standards that should be applied in determining whether the monitoring of the Non-Debtor
Affiliates is appropriate should be the same as those that govern the appointment of receivers
under Florida law. Under Florida law, receivers will be appointed when the appointment is
necessary to prevent fraud or to save the property from injury or threatened loss or destruction.
Apalachicola Northern R. Co. v. Sommers, 85 So. 361 (Fla. 1920). It has also been held that the
appointment of a receiver is appropriate where a party is guilty of waste, misuse of assets, or
misconduct in the management of an entity. Allen v. Allen, 150 So. 237 (Fla. 1933). Receivers
may also be appointed where the property involved is susceptible to deterioration and a receiver
is necessary for preservation of the property. Electro Mechanical Products, Inc. v. Borona, 324
So.2d 638 (Fla. 3d DCA 1976). Each of these factors should be equally applied in authorizing
the Trustee to monitor the business and financial affairs of Rothstein and the Rothstein Entities.
IV. CONCLUSION
For the reasons set forth above, the Trustee requests the entry of a preliminary injunction
against Rothstein and the Rothstein Entities: (i) imposing a preliminary and a permanent
injunction against Rothstein, the Rothstein Entities, and Rothstein Entities’ members, managers,
partners, joint venturers, officers, directors, agents, attorneys, employees, shareholders, and
affiliates, past or present, and all others in custody, possession or control of funds, documents, or
other property of the Debtor, Rothstein, and the Rothstein Entities and the proceeds or products
thereof (the “Enjoined Parties”), from, among other things, (a) taking any action, directly or
indirectly, to transfer, conceal, dissipate, destroy, encumber, hypothecate, abandon or otherwise
dispose of any and all income, revenue, funds, contracts, licenses, contract rights, real property,
27
tangible and intangible personal property and any other legal or equitable asset or property right
(the “Assets”) of, or received, directly or indirectly, from the Debtor, Rothstein, and/or the
Rothstein Entities without the written consent of the Trustee; (b) restraining and enjoining the
Enjoined Parties from authorizing, causing, effectuating or acquiescing in such acts which might
have the effect of impairing the value of the assets of the Debtor, Rothstein, and/or the Rothstein
Entities; (c) transferring or withdrawing balances on deposit in financial institution accounts of
the Debtor, Rothstein, the Rothstein Entities, and/or any of their affiliates; and (d) enjoining any
and all actions seeking a receivership or commencing an involuntary bankruptcy proceeding
against Rothstein and the Rothstein Entities; and (ii) for such other relief the Court may deem
appropriate. In addition, and to the extent necessary or appropriate, the Trustee requests that he
be appointed monitor of the business and financial affairs of Rothstein and the Rothstein Entities.
WHEREFORE, the Trustee requests the relief herein and for any other relief the Court
deems appropriate.
28
Dated this 2nd day of December, 2009.
WE HEREBY CERTIFY that we are admitted to the Bar of the

U.S. District Court for the Southern District of Florida and that we
are in compliance with the additional qualifications to practice in this
Court set forth in Local Rule 2090-1(A).
GENOVESE JOBLOVE & BATTISTA, P.A.

Special Counsel to the Trustee
Bank of America Tower at International Place
100 S.E. 2nd Street, Suite 4400
Miami, Florida 33131
Telephone: (305) 349-2300
Telecopier: (305) 349-2310
By: /s/ David C. Cimo

David C. Cimo, Esq.
Florida Bar No. 775400
John H. Genovese, Esq.
Paul J. Battista, Esq.
Florida Bar. No. 884162
Theresa Van Vliet, Esq.
Robert F. Elgidely, Esq.
29
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was served via email
and hand delivery (where denoted with an asterisk) to the below listed parties this 2nd day of
December, 2009.
By: /s/ David C. Cimo.

David C. Cimo, Esq.
Marc S. Nurik, Esq.*
Law Offices of Marc S. Nurik
1 East Broward Boulevard, Suite 700
Fort Lauderdale, Florida 33301
Email: marc@nuriklaw.com
Michael D. Seese, Esq.*

Hinshaw & Culbertson LLP
1 East Broward Boulevard, Suite 1010
Fort Lauderdale, Florida 33301
Email: mseese@hinshawlaw.com
Steven Schneiderman, Esq.

Office of the U.S. Trustee
51 Southwest First Avenue, Room 1204
Miami, Florida 33130
Email: Steven.D.Schneiderman@usdoj.gov
30
Case 09-02478-RBR Doc 2-1 Filed 12/02/09 Page 1 of 78

Stettin v. Rothstein, Emergency Injunction Motion

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Stettin v. Rothstein, Emergency Injunction Motion

Uploaded by

Copyright:

Available Formats

Case 09-02478-RBR Doc 2 Filed 12/02/09 Page 1 of 30

UNITED STATES BANKRUPTCY COURT

In re CASE NO. 09-34791-BKC-RBR

HERBERT STETTIN, not individually but as ADV. NO. 09-02478-BKC-RBR-A

SCOTT WALTER ROTHSTEIN; 29 BAHIA, LLC;

COLLECTIONS, LLC; S&KEA, LLC; SCORH,

EMERGENCY MOTION AND SUPPORTING MEMORANDUM OF LAW

REQUEST FOR JUDUCIAL NOTICE

[EMERGENCY HEARING REQUESTED

“Bankruptcy Code”) and Fed. R. Evid. 201, and says

I. PRELIMINARY STATEMENT AND LOCAL RULE 9075-1

established at a hearing to be scheduled by the Court. In his nine-count Verified Adversary

injunctive relief. [DE # 1].

the Rothstein Entities:

● Count I - Action Seeking to Substantively Consolidate Non-Debtor Rothstein and

Veil of the Rothstein Entities for the Benefit of the Debtor.

● Count III - Action Requesting the Entry of a Preliminary and Permanent

and/or II Above, Action Seeking Turnover of Property of the Debtor’s

Bankruptcy Estate Pursuant to Section 542 of the Bankruptcy Code, as Well as an

Accounting in Connection therewith.

● Count V - Action to Avoid and Recover Fraudulent Transfers from RRA to

● Count IX - Action for Breach of Fiduciary Duty against Rothstein.

An emergency hearing is requested because there is a significant likelihood that the

delay or defraud creditors.

II. FACTS SUPPORTING RELIEF REQUESTED1

A. The Parties, Jurisdiction & Venue

2. Rothstein is an individual who resides in Broward County, Florida.

Entities were seized by the U.S. government during November, 2009.

6. On November 2, 2009, Stettin was appointed as RRA’s Receiver. On November

dated November 20, 2009, was appointed Chapter 11 Trustee of RRA.

157(a), 1334(b), 2201 and 2202.

8. This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), (C), (E),

9. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

B. The Common Factual Allegations for Each Count

perpetrated a massive Ponzi scheme.

and to the Rothstein Entities.

agreement, an acknowledgement of assignment/purchase of settlement proceeds agreement, a

misappropriated the investor funds to himself and to the Rothstein Entities.

engaging in the sale of non-existent structured settlements.

Rothstein and the Rothstein Entities.

figure could be as high as $1 Billion.

duly noticed hearings.

seized various records from RRA’s offices.

Rothstein and the Rothstein Entities.

27. The Amended Forfeiture Complaint alleges that:

(a) Rothstein operated a Ponzi scheme since approximately 2005 and

acquired the subject properties in connection with such Ponzi scheme;

RRA’s trust account;

(c) these types of fraudulent investments had been offered by Rothstein to a

four years in a scheme involving hundreds of millions of dollars; and

(d) Rothstein purchased many properties in the names of nominee

corporations including “C1 07 LLC,” “C1 08 LLC,” “C1 16 LLC,” “29

Holdings LLC,” each of which are named Defendants in this action.

fraud described hereinabove.

as their dominant shareholder.

Trustee is the duly authorized fiduciary on behalf of the Debtor.

C. Other Facts Supporting the Relief Requested (the Co-Conspirators)

ability to transfer, conceal, dissipate, and/or destroy such assets.

Street”) forwarded a correspondence to WAWW9, LLC (hereinafter “WAWW9”), (a Rothstein

be presented to the Court at the hearing on this Motion.

consolidated with and into the Debtor’s estate.

D. The Trustee’s Request for Judicial Notice

ready determination by resort to sources whose accuracy cannot be reasonably questioned.”)

styled, United States of America v. Various Real Properties Purchased by or with