Unreported / Non-Citable
Background
The CFTC and more than thirty states or state agencies sued TMTE, Inc. and related entities and individuals, alleging a scheme that induced at least 1,600 people to buy gold and silver bullion at fraudulent prices. The complaint alleged that the defendants preyed on people between 60 and 90 years old and received more than $140 million in retirement savings and more than $45 million through cash accounts.
The court entered an ex parte statutory restraining order, appointed a receiver, and froze the defendants’ assets. The individual defendants, Lucas Asher and Simon Batashvili, later consented to a preliminary injunction that continued the freeze without an attorney-fee carve-out. They subsequently asked the court to permit them to use untainted frozen assets and income from future lawful employment to retain counsel.
The Court’s Holding
The court denied the motion to modify the preliminary injunction without prejudice because the individual defendants had not identified which assets held by the receiver were untainted. Although the court concluded that some allowance should be available for reasonable attorney’s fees, it could not authorize the release of frozen funds without determining whether those funds were unrelated to the alleged misconduct.
The court directed the receiver to give the individual defendants access to records needed to identify any untainted assets. They may renew their request after reviewing those records and showing that assets unrelated to the CFTC’s investigation are available. If that process yields no funds, they may seek access to income from future employment outside prohibited fields. The court also allowed counsel’s limited appearance, rejected the receiver’s waiver argument, and denied the requested hearing as moot.
Key Takeaways
- A defendant seeking frozen assets for attorney’s fees bears the burden of showing that counsel cannot be retained with new or exempt assets.
- Consent to an asset-freeze injunction did not waive the individual defendants’ ability to seek a later equitable modification.
- The defendants may renew their motion after identifying untainted assets or, if none are available, may seek to use income from permitted future employment.
Why It Matters
The decision balances preserving assets for possible victim restitution against allowing defendants who have not yet been found liable a meaningful opportunity to retain counsel. It also shows that a request for an attorney-fee carve-out must identify a legitimate source of funds rather than merely asserting that some frozen assets are untainted.
For receivers and enforcement defendants, the order provides a practical process: the receiver must permit access to records needed to trace assets, while the defendants must establish that particular funds are unrelated to the alleged wrongdoing before those funds may be released.