Securities & Exchange Commission v. Callahan (193 F. Supp. 3d 177, 2016)

MEMORANDUM OF DECISION & ORDER

SPATT, District Judge.

Presently before the Court are objections to an April 24, 2015 Notice of Determination by the Receiver Steven Weinberg (the “Receiver”) partially denying a claim submitted by William V. Johnson and Diane Johnson on behalf of the Bocagrande Trust (the “Trust” and together with William and Diane Johnson, the “Claimants”) against the Receivership Estate for $4,707,149.23 (the “April 24, 2015 Notice of Determination”).

Also before the Court are two additional motions by the Claimants to (i) amend the March 27, 2012 Preliminary Injunction Order (the “Preliminary Injunction Order”); and (ii) to intervene in this action pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ. P.”) 24.

For the reasons set forth below, the objections to the April 24, 2015 Notice of Determination are denied; the motion to amend the Preliminary Injunction Order is denied; and the motion to intervene is denied.

I. BACKGROUND

This case involves three parallel actions: (i) U.S.A. v. Callahan and Manson, 13-cr-453, a criminal action against Brian Callahan (“Callahan”) and Adam Manson (“Manson”) (the “Criminal Action”); (ii) United States v. The Real Property Located at 272 Old Montauk Highway, 12-cv-1880, a civil forfeiture action initiated by the United States against certain properties associated with Manson and Callahan (the “Forfeiture Action”); and (iii) the present action initiated by the Plaintiff the Securities and Exchange Commission (“SEC”) seeking the disgorgement of alleged ill-gotten gains and civil penalties against Manson, Callahan, and some of the offshore funds that they operated (the “SEC Action”).

Although familiarity with these actions is presumed, the Court finds it necessary to provide an overview of the Criminal Action and the SEC Action, as well as the procedural history relevant to the Claimants’ present motions.

A. As to the Criminal Action

On July 31, 2013, the United States filed a twenty-four count criminal indictment against Callahan and Manson in the Criminal Action for (i) securities fraud; (ii) conspiracy to commit securities fraud; (iii) wire fraud; (iv) conspiracy to commit wire fraud; (v) and aggravated identify theft (the “Indictment”). (See the Indictment, 13-cr-453, Dkt. No. 1, at ¶¶ 46-72.).

According to the Indictment, from June 2005 to February 2012, Callahan managed a number of offshore funds, including, as relevant here, Pangea Offshore High Yield Portfolio, LLC (“Pangea Offshore”) and Pangea Global Opportunities Portfolio, LLC (“Pangea Global”). (See id. at ¶ 2.) Allegedly, in 2005, Callahan organized Pangea Offshore as a Nevis, West Indies limited liability company. (Id. at ¶ 3.) Pan-gea Global was also a Nevis limited liability company and allegedly a wholly owned subsidiary of Pangea Offshore. (Id.)

In 2006, Callahan and Manson purchased the Panoramic View, a cooperative development in Montauk, New York (the “Panoramic View”), by obtaining a $35 million acquisition loan and a $10 million construction loan from an unidentified mortgage bank. (See id. at ¶¶ 10-12.)

Although Callahan allegedly represented to investors in Pangea Offshore and Pangea Global that he was investing their money in mutual funds and other securities, he instead used the investors’ money to pay part of the purchase price of the Panoramic View; to pay several monthly loan payments on the Panoramic View; to pay redemptions to old investors of the Pangea funds; and for his own personal expenses. (See id. at ¶¶ 14-17.)

In addition, among other allegations, the Indictment alleges that Callahan improperly used other investment funds as a Ponzi Scheme by commingling investors’ deposits and taking money from new investors and using that money to pay re-demptions to. existing investors. (Id. at ¶ 21.)

On April 29, 2014, the Court accepted Callahan’s guilty plea to one count of securities fraud and one count of wire fraud. (See 13-cr-453, Dkt. No. 62.)

On May 13, 2014, the Court accepted Manson’s guilty plea to one count of conspiracy to commit securities fraud. (See id. at Dkt. No. 67.)

Manson is presently scheduled to be sentenced on July 29, 2016. Callahan is presently scheduled to be sentenced on September 30, 2016.

B. As to the Instant SEC Action

On March 5, 2012, the Plaintiff the Securities and Exchange Commission (the “SEC”) commenced this action against the Défendants Callahan and two investment funds that he managed, Horizon Global Advisory LTD. (“HGA”) and Horizon Global Advisors LLC (“HGA LLC” and collectively, the “Original Defendants”). The complaint, alleged that from 2005 to 2012, Callahan raised over $74.9 million from twenty-four investors for five offshore funds to ostensibly invest in Hedge Funds. (Compl., Dkt. No. 1, at ¶ 1.) Allegedly, contrary to his representations to those investors, Callahan misused a portion of the investors’ assets to, among other things, pay other investors seeking redemptions and to pay monthly loan payments on the Panoramic View. (See id. at ¶¶1-3.)

The SEC sought injunctive relief, disgorgement, prejudgment interest, and civil monetary penalties based on the Original Defendants alleged violations of Section 17(a) of the Securities Act of 1933 (the “Securities Act”), codified as 15 U.S.C. § 77q(a); Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), codified as 15 U.S.C. § 78j(b); Rule 10b-5 promulgated under the Exchange Act as' 17 C.F.R. § 240.10b-5 (“Rule 10b-5”); and Section 206 of the Investment Advisers Act of 1940 (the “Advisers Act”), codified as 15 U.S.C. § 80b-6. (See id. at ¶¶ 73-84.)

On March 27, 2012, the Court granted the SEC’s motion for a preliminary injunction (i) restraining the Original Defendants from violating the Securities Act, the Exchange Act, Rule 10b-5, and the Advisers Act, see Prelim. Injunction Order, Dkt. No. 22, at pp. 1-4; (ii) directing the Original Defendants to place assets obtained from investors which were located outside- of the United States into the registry of the Court, see id. at p. 4; (in) prohibiting the Original Defendants from soliciting money from potential investors until the resolution of this action and from destroying documents related to the allegations in the complaint, see id. at p. 5; and (iv) as relevant here, placing the assets of HGA and HGA LLC (the “Receivership Defendants”) into a receivership and appointing Weinberg as the Receiver for the estates of the Receivership Defendants, see id. at p. 5, ¶¶ 1-2.

To facilitate the Receivership, the Preliminary Injunction Order froze “all Receivership Assets and all of the funds and other assets of the Defendants presently held by them, for their direct or indirect benefit under their direct or indirect 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 those assets identified in the attached Exhibit A.” (Id. at p. 6, ¶ 3.)

The term, “Receivership Assets,” is defined as “all assets of in the name of the Receivership Defendants.” (Id. at pp. 5-6, at ¶¶ 2-3.) Exhibit A lists assets of additional funds subject to the asset freeze, which are not named as. Defendants in the complaint, including Pangea Offshore and Pangea Global, as well as Westminster Alternative Investments, LLC; Westminster Flagship Global LLC; Westminster Horizon Global Investments, LLC; Westminster Hedged Portfolio, LLC; and Westminster High Yield Portfolio, LLC (collectively, the “Westminster Funds”). (See id. at Ex. A.)

Among the general powers and duties assigned to the Receiver by the Preliminary Injunction Order is the duty “[t]o use reasonable efforts to determine the nature, location and value” of the Receivership Property and Receivership Estates. (Id. at p. 7, at ¶ 7(a).) The Order defines “Receivership Property” and “Receivership Estate” as the “property interests of the Receivership Defendants, including, but not limited to, monies, funds, securities, credits, effects, goods chattels, land, premises, leases, rights and other assets, together with all rents, profits dividends, interest or other income attributable thereto, of whatever kind, which the Receivership Defendants own possess, have a beneficial interest in, or control directly or indirectly.” (Id.)

The Preliminary Injunction also stayed “Ancillary Proceedings” until further order of the Court, which included, “[a]ll civil legal proceedings of any nature ... involving ... any of the Receivership Defendants, including subsidiaries and partnerships; or .A any action taken by [the Receivership Defendants’ past or present officers, directors, managers, agents, or general or limited partners] while acting in such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-party defendant, or otherwise.” (See id. at p. 16, ¶ 32.)

Finally, the Preliminary Injunction Order directed the Receiver to develop a plan for the recovery and liquidation of the Receivership Property. (Id. at p. 20, at ¶¶ 52-53.)

On May '31, 2012, the SEC filed an amended complaint that added as named Defendants five offshore funds allegedly operated by Callahan: Diversified Global Investments (BVI), L.P. (“Diversified”); The Masters Global Fund, L.P. (“Masters”); Fiduciary Select Income Fund, L.P. (“Fiduciary”); Horizon Millennium Investments, L.P. (“Horizon Millennium”); and Pangea Offshore (collectively the “Callahan Funds”). The amended complaint also added as named Defendants Manson; Distinctive Investments, ■ LLC (“Distinctive Investments”); Distinctive Ventures, LLC (“Distinctive Ventures”); and Sheri Manson Callahan as a Relief Defendant. (See Am. Compl., Dkt. No. 28.)

On June 4, 2012, the Court so-ordered a stipulation signed by the SEC and Callahan, in his official capacity as director of the Callahan Funds, placing the assets of the Callahan Funds into the Receivership (the “June 4, 2012 Stipulation”). (See Order, Dkt. No. 33.)

On June 6, 2012, granted a motion by the United States Attorneys’ Office for the Eastern District of New York to stay the SEC Action until the resolution of the Criminal Action. (Order, Dkt. No. 48.) However, under the terms of the Order, the Receiver was permitted to continue to exercise all the authority granted to it under the Preliminary Injunction Order. (See id.)

On March 9, 2013, the Court approved a consent judgment against HGA Ltd., HGA LLC, Diversified, Masters, Fiduciary, Horizon Millennium, and Pangea High Yield, which among other things, directed them to pay disgorgement and ill-gotten gains in an amount to be determined by the SEC. (See Order, Dkt. No. 99, at pp. 4-5.) As a result, the only remaining named Defendants in this case are Callahan, Manson, Distinctive Investments, and Distinctive Ventures. Sheri Manson Callahan remains the Relief Defendant.

' On February 20, 2014, the Court issued an order establishing the deadline and procedures for the filing of claims against the “Receivership Entities,” the Receiver, and the “Receivership Estate” (the “Claims Order”). (See the Claims Order, Dkt. No. 186.) The Claims Order defines the “Receivership Entities” as HGA LTD; HGA LLC; Diversified; Horizon Global Investments; L.P. (“Horizon Global”); Masters; Fiduciary; Pangea Bridge Investment L.P. (“Pangea Bridge”), Horizon Millennium; and Pangea Offshore. (See id. at p. 1.) The Claims Order does not define the term, “Receivership Estate.” (See id.)

The Claims Order defines a “Potential Claim” as:

(a) a right to payment .... against one or more of the Receivership Entities or the Receivership Estate; (b) a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment .... against one or more of the Receivership Entities; (c) a right to a distribution from one or more of the Receivership Entities, including but not limited to a right based on an investment in or through one or more Receivership Entities.

(Id. at p. 2, at ¶ 3.)

Under the Order, the Receiver is required to send a notice of the Claims Order and the relevant procedures to all known Potential Claimants by March 20, 2014; and to publish a notice in several news publications by April 3, 2014. (See id. at p. 4-6, ¶ 3(c).)

The Order requires Potential Claimants to submit to the Receiver by April 21, 2014, a completed Proof of Claim Form accompanied by “all supporting documentation,” see id. at p. 6, ¶ 3(d); if supporting documentation is not available, the Potential Claimant is required to “attach an explanation of why the documentation [was] unavailable,” see id. at p. 9-10, ¶ 3(f)(ii); and “indicate on the Proof of Claim each ... Receivership Entity to which the Potential Claim relates and the Potential Claim amount(s) attributable to each such Receivership Entity, see id. at 10, ¶ 3(f)(iii).

Once a Potential Claimant submits a Proof of Claim form, the Potential Claimant becomes subject to the jurisdiction of this Court, see id. at p. 10, ¶ 3(g), and consents to the evaluation of its claim by the Receiver according to a number of conditions. Specifically,' the Receiver reserves the right to reject any .Proof of Claim that, among other things, omits information or was submitted “without sufficient supporting documents.” (Id. at p. 8, ¶3(f).) In addition, the Claims.Order authorizes the Receiver to “assess the validity, nature and priority of .the Potential Claim,” including “whether the Potential Claim is properly made against the Receivership Estate” and “whether the Potential Claim has- priority over certain other claims.” (Id. at p. 12, ¶ 3(k)(i).) The Claims Order also gives the Receiver the “discretion to recommend adjustment or non-payment of a Potential Claim on equitable or any other applicable grounds, irrespective and regardless if the Receiver had taken any specific discovery for such Potential Claim.” (Id. at p. 13, ¶ 3(k)(iv).)

Further, the Claims Order outlines a process for Potential Claimants to challenge the determinations by the Receiver: (i) the Receiver is required to provide a written Notice of Determination to the Potential Claimant “setting forth the reasons for denying or disallowing the Potential Claim,” see id. at p. 13-14, ¶ 3(m); (ii) if the Potential Claimant disagrees with the Receiver’s decision, then it can serve objections on the Receiver, which have to include a statement of reasons explaining the objections and “copies of any proofs, documents or other writing upon which the Potential Claimant relies,” see id. at p. 14-15, ¶ 3(n); (iii) the Receiver and Potential Claimant are then directed to work in good faith to resolve the Potential Claimant’s objections, see id. at p. 15, ¶ 3(m); and (iv) if the parties are unable to resolve the objections, the Potential Claimant is authorized to serve its objections on the Court, see id. at 15-16, ¶¶ 3(p)-(q).

On March 3, 2014 and March 18, 2014, respectively, the Receiver published notice of the procedures for submitting a Potential Claim under the Claims Order in the New York Times and the Financial Times. (See Nov. 20, 215 Lee Deck, Dkt. No. 349, Exs. C-G.)

On April 21, 2014, the deadline under the Claims Order to file Potential Claims expired. (See id. at Ex. A.)

As of June 30, 2014, the Receiver has received 67 Potential Claims that total $100,016,063.78. (See Receiver’s 2016 First Quarter Report, Dkt. No. 382, at p. 35.) However, as of the First Quarter of 2016, the Receivership has recovered only $7,584,130.91 in assets. (See id. at p. 31.) Thus, -there remains a significant disparity between the amount of the investors’ potential claims, on the one hand, and the amount available in the Receivership Estate to pay those claims, on the other.

C. As to the Trust’s Claim

On April 14, 2014, the Claimants submitted a Proof of Claim Form asserting a Potential Claim against the Receivership Estate for a total amount of $7,613,887. (See Sept. 21, 2015 Weinberg Deck, Ex. A, at p'. 6.) The Potential Claim had two parts; William Johnson asserted a claim individually in the amount of $2,860,000 for his investment in Horizon Millennium; and the Trust asserted a claim in the amount of $4,753,887 for its investments in Pangea Global, Pangea Offshore, and Horizon Millennium. (See id.)

The Receiver requested additional information from the Claimants related to their Potential Claims on June 6, 2014; October 6, 2014; and January 5, 2015. (See id. at Exs. C, D, F.)

The Claimants timely -responded to those requests on July 7, 2014; November 7, 2014; and January 26, 2015, by providing the Receiver with more than 1,700 pages of documents. (See id. at ¶¶ 8, 10, 12.)

On April 24, 2015, the Receiver issued a written Notice of Determination in which it (i) approved in its entirety the individual claim by William Johnson for $2,860,000; and (ii) approved in part the Trust’s $4,707,149.23 claim in the . amount of $1,759,571.24. (See Id. at Ex. F, at pp. 1-2.)

With regard to the latter determination, the Receiver stated that it reduced the Trust’s $4,707,149.23 claim by $2,947,577.99 because (i) the Trust failed to substantiate that it invested $1,595,912.86 of the $4,707,149.23 it claimed in a Receivership Entity; (ii) the Trust received a redemption on its investment in a Receivership Entity in the amount of $1,322,031.23; and (iii) the Receivership Entity in which the Trust invested used $29,633.90 of the Trust’s money to pay for an insurance policy and administrative fees, which, according to the Receiver, is not recoverable under the Claims Order. (See id. at 2.)

Finally, the Receiver found that the $1,322,031.23 redemption that the Trust allegedly received from a Receivership Entity represented 42.49% of its investment in the Receivership Entity. (Id. at 2.) Thus, the Receiver determined that the Trust could not participate in any distribution of the Receivership Estate until all approved claimants recovered at least 42,49% of their total investment. (See id.)

On May 1, 2015, in response to a request from the Claimants, Kelsey Bilodeau, Esq. (“Bilodeau”), an attorney for the Receiver, provided the Claimants with a breakdown of its decision to reduce the Trust’s $4,707,149.23 claim:

Pursuant to the documents Claimants’ provided to the Receiver: (i) the Trust in 2005 and. 2006 invested $1,209,317.61 in Receivership Entity, Pangea Offshore High Yield Portfolio, LLC (“Pangea Offshore”); (ii) the Trust in 2009 transferred $10,302 to Receivership Entity, Horizon Global Advisors LLC; and (iii) the Trust in 2010 invested $106,174.32 in Receivership Entity Horizon Millennium Investments L.P. (“Horizon Millennium”), and invested $1,696,442.44 in Receivership Entity, Pangea Offshore. Accordingly, the documents from the Trust show investments of $3,111,236.36 in Receivership Entities. However, in January of 2007, the Trust redeemed $1,322,031.23 from its investment in Pangea Offshore and subsequently incurred $29,633.90 representing adminisr trative and insurance policy fees, for a total sum of $1,351,695.13. The net difference is $1,759,571.24, the amount approved by the Receiver for the Trust Portion of the Claim (i.e. $3,111,236.36— $1,351,695.13).

(Id. at Ex. G, at p. 2.)

In a May 11, 2015 letter, Joseph Marconi, Esq. (“Marconi”), counsel for the Claimants, responded, “[t]he Receiver’s Notice.of Determination of Claim ... rejected the portion of the Trust’s claim (approximately $2,350,000) that was invested in Pangea Global Opportunities Portfolio, LLC (‘Pangea Global’). We do not understand why the Pangea Global fund was distinguished from those funds that were deemed Receivership Entities.” (Id. at Ex. H, at p. 1.)

In addition, Marconi challenged the Receiver’s description of the Trust’s 2007 sale of its shares in Pangea Offshore as a “redemption” because according to Marconi, the funds that the Trust received from the sale were transferred to the Westminster High Yield fund, which was also allegedly controlled by Callahan. (See id. at p. 3.) As the funds purportedly never left Callahan’s control, Marconi asserted that the transfer of funds from Pangea Offshore to Westminster High Yield was not a “redemption” and therefore, should not have been deducted from the Trust’s claim, against the Receivership Estate. (See id.)

On May 26, 2015, the Claimants served the Receiver with formal objections to the April 24, 2015 Notice of Determination. (See id. at ¶ 18.) However, the Trust reduced the amount of its Potential Claim from $4,707,149.23 to $4,250,790,36 because of “an accounting difference too obscure to resolve in this format in the given time frame.” (Id.; see also id. at Ex. J, p. 4.)

In a July 21, 2015 letter, Bilodeau affirmed the Receiver’s prior Notice of Determination because, among other things, she asserted that: (i) Pangea Global and the Westminster Funds are not “Receivership Entities” and therefore, not a part of the Receivership Estate; (ii) “[the] Claimants[] provide no documentation to show how or why the Receivership Estate is liable for Pangea Global or how or why they believe Pangea. Global’s funds are in the possession of the Receivership Estate”; and (iii) “[t]he Trust received a redemption when funds were redeemed from Receivership Entity Pangea Offshore and returned to First Fidelity Trust Ltd. as the holder of the Trust’s funds.” (Id. at 1-10.) She added, “[t]he fact that such funds were then transferred within the Trust’s portfolio and invested in a non-Receivership Entity does not negate the fact that the Trust received a redemption from Receivership Pangea Offshore of more money than the Trust initially invested' in Pangea Offshore.” (Id. at 10.)

On August 20, 2015, Marcante responded, claiming that (i) Callahan and HGA were responsible for the loss of the Trust's investment in Pangea Global; and (ii) “the alleged 2007 ‘redemption’ wherein Pangea Offshore shares were purportedly exchanged for Westminster Offshore High Yield Portfolio shares, was not a relinquishment of Pangea Offshore shares at all, but a ‘rebranding.’” (Claimants’ Aug. 21, 2015 Addendum, Ex. D, at 3-4.)

On August 21, 2015, the Claimants filed objections to the April 24, 2015 Notice of Determination in this Court. They asserted two principal objections: (i) the Receiver erred by not recognizing the Trust’s investments in Pangea Global and the Westminster Funds; and (ii) the Receiver erred in finding that the Trust received a redemption in the amount of $1,322,031.23 from its investment in Pangea Offshore. (Claimants’ Aug. 21, 2015 Objections, Dkt. No. 319, at p. 12.)

On September 14, 2015, the Claimants filed a motion to amend the Preliminary Injunction Order so as to place Pangea Global and the. Westminster Funds into the Receivership. (Claimants’ Sept. 14, 2015 Mot. to Amend, Dkt. No. 322.)

On September 21, 2015, the Receiver filed a response to the Claimants’ objections. (See Rec.’s Sept. 21, 2015 Opp’n Mem. of Law, Dkt. No. 325.) .

On September 25, 2015, and September 28, 2015, respectively, the SEC and the Receiver filed separate responses in opposition to the Claimants’ motion to amend the Preliminary Injunction Order, asserting, among other things, that the Claimants’ motion should be denied as procedurally improper because the Claimants are not parties to the SEC Action and had not moved to intervene in this Action. (See SEC’s Sept, 25, 2015 Opp’n Mem. of Law, Dkt. No. 328; Sept. 28, 2015 Rec.’s Opp’n Mem. of Law, Dkt. No. 331.)

In response, on October 23, 2015, the Claimants filed a motion pursuant to Fed. R. Civ. P. 24 to intervene in the SEC Action. (See Claimants’ Oct. 23, 2015 Mot. to Intervene, Dkt. No. 337.)

On November 3, 2015 and November 20, 2015, respectively, the SEC and the Receiver filed separate memoranda in opposition to the Claimants’ motion to intervene in the SEC Action. (See SEC’s Nov. 3, 2015 Opp’n Mem. of Law, Dkt. No. 341; Rec.’s Nov. 20, 2015 Opp’n Mem. of Law, Dkt. No. 349.)

In turn, the Court will address (i) the Claimants’ Objections; (ii) the Claimants’ Motion to Amend the Preliminary Injunction Order; and (iii) the Claimants’ Motion to Intervene.

II. DISCUSSION

A. As to the Claimants’ Objections

As noted the Claimants object to the April 24, 2015 Notice of Determination on the grounds that the Receiver (i) failed to recognize its investment in Pangea Global as a claim against the Receivership Estate; and (ii) mischaracterized the January transfer of Funds in. the Trust’s portfolio from Pangea Offshore to Westminster High Yield as a “redemption.” (Aug. 21, 2015 Claimants’ Objections, Dkt. No. 319, at p. 12.)

The Court will briefly address the relevant legal standards and then resolve each objection below.

1. The Legal Standard

“District courts possess broad power to remedy violations of federal securities laws.” Eberhard v. Marcu, 530 F.3d 122, 131 (2d Cir.2008). In particular, “[a]s an exercise of its equity powers, the court may order wrongdoers to disgorge their fraudulently obtained profits. ... Once the profits have been disgorged, it remains within the court’s discretion to determine how and to whom the money will be distributed, and the district court’s distribution plan will not be disturbed on appeal unless that discretion has been abused.” S.E.C. v. Fischbach Corp., 133 F.3d 170, 175 (2d Cir.1997).

Although not specifically provided for in the Securities Act or the Exchange Act, the Second Circuit has held that district courts have the power to appoint receivers at the SEC’s request to “ ‘restore to a defrauded entity or defrauded persons that which was fraudulently diverted from its or their custody and control."' S.E.C. v. Malek, 397 Fed.Appx. 711, 713 (2d Cir.2010) (Summary Order) (quoting SEC v. Shiv, 379 F.Supp.2d 609, 618 (S.D.N.Y.2005)).

Here, as has already been discussed, the Court issued the Preliminary Injunction Order appointing the Receiver “[t]o use reasonable efforts to determine the nature, location and value” of the Receivership Property and the Receivership Estate, and to develop a plan for the recovery and liquidation of Receivership Property. (Preliminary Injunction Order, Dkt. No. 22, p. 7, ¶ 7(a); id. at p. 20, ¶¶ 52-53.) In addition, the Court issued the Claims Order, which setup an abbreviated procedure through which Potential Claimants could assert Potential Claims against the Receivership Entities and the Receivership Estate; the Receiver could determine the validity and amount of those Potential Claims; and Potential Claimants could file objections in this Court to the Notice of Determinations issued by the Receiver. (See the Claims Order, Dkt. No. 186.)

As this Court has already noted in prior decisions in this Action, a Receiver’s role is analogous to the role of a court-appointed master, and therefore, the Court reviews the factual findings and legal conclusions of the Receiver under a de novo standard of review. See S.E.C. v. Callahan, 103 F.Supp.3d 296, 302 (E.D.N.Y.2015) (Spatt, J) (“As the Court finds that the Court-appointed Receiver in this case to be analogous to a Court-appointed master, the Court will apply a de novo standard to its review of the Notice of Determination.”); see also Paone v. Microsoft Corp., 771 F.Supp.2d 224, 229 (E.D.N.Y.2011) (“[T]he Court reviews the Special Master’s recommendations de novo.”).

De Novo means without deference. See Zervos v. Verizon New York, Inc., 252 F.3d 163, 168 (2d Cir.2001) (“[O]ur review is independent and plenary; as the Latin term suggests, we look at the matter anew, as though it had come to the courts for the first time.”).

2. As to Pangea Global

As noted, the Claimants submitted a claim on behalf of the Trust for $4,753,887. (See Sept. 21, 2015 Weinberg Decl., Ex. F, at p. 1.) However, the Receiver found that the Trust only provided evidence that $3,11,236.37 of the Trust’s funds were invested in the Receivership Entities, and therefore, the Receiver reduced the Trust’s Potential Claim by $1,595,912.86. (See id. at p. 2.)

The Claimants challenge the Trust’s determination, asserting that the Receiver erroneously failed to recognize the Trust’s $2,359,173.60 investment in Pangea Global. (Aug. 21, 2015 Claimants’ Objections, Dkt. No. 319, at p. 12.)

In support, the Claimants make a number of arguments spread out across hundreds of pages of briefing, including: (i) the Trust has a valid claims against the Receivership Estate because Pangea Global was included on Exhibit A to the Preliminary Injunction Order, see Aug. 21, 2015 Objections, Dkt. No. 319, at 13-16; (ii) the Trust has a valid claim against the Receivership Estate because the money it invested in Pangea Global was under the control of Callahan and commingled with the accounts of other Receivership Entities, see the Claimants’ Oct. 23, 2015 Mem. of Law, Dkt. No. 338, at 7; (iii) even if there is not a clear paper trail tying Pangea Global to the Ponzi Scheme at issue in this case, it is improper and inequitable to impose a “tracing” requirement on investors who invested money in a Ponzi" scheme, see Claimants’ Oct. 15, 2015 Reply Mem. of Law, Dkt. No. 336, at 10-11; and (iv) the Receivership Estate would be unjustly enriched if it does not compensate the Claimants for the loss of the Trust’s investment in Pangea Global, see id. at 20.

The Receiver disputes all of these arguments, asserting, among other things, that (i) Pangea Global is not a Receivership Entity and therefore, it has no claim against the Receivership Estate, see Rec.’s Sept. 21 2015 Opp’n Mem. of Law, Dkt. No. 325, at 14-15; (ii) the Claimants have provided no evidence substantiating their contentions that Pangea Global was under the control of Callahan or that its accounts were co-mingled with the accounts of other investors in the Ponzi Scheme, see id. at 15-16; (iii) there is no evidence showing that Pangea Global was 100% owned by Pangea Offshore and even if there were, it would not render Pangea Offshore liable to the investors of Pangea Global, see id.; and (iv) the Receivership Estate was not enriched by at the Claimants’’ expense, see Rec.’s Oct. 26, 2015 Sur-Reply, Dkt. No. 339-1, at 13-14.) The Court agrees.

The Claimants’ first contention that Pangea Global is a. “Receivership Entity” and a part of the “Receivership Estate” because it is listed on Exhibit A to the Preliminary Injunction Order is based on what the Court finds to be a flawed reading of the Preliminary Injunction Order and the subsequent Orders of this Court.

Under the terms of the Preliminary Injunction Order, the Court placed into its exclusive jurisdiction only those assets of the “Receivership Defendants.” (See Prelim. Injunction Order, Dkt. No. 22, at p. 5, ¶ 1.) The Order defines “Receivership Defendants” as HGA and HGA LLC, and defines the “Receivership Assets” as “all assets titled in the name of the Receivership Defendants.” (See id.) Subsequently on June 4, 2012, Callahan and the SEC agreed to a stipulation which added the assets of five additional funds to the Receivership: Diversified; Masters; Fiduciary; Horizon Millennium; and Pangea Offshore. (See Order, Dkt. No. 33, at p. 3.) Pangea Global is not on this list, and is therefore, not a “Receivership Defendant” and its assets are not “Receivership Assets.”

The entities listed on Exhibit A to the Preliminary Injunction Order are separate and apart from the “Receivership Entities,” the “Receivership Defendants,” and the “Receivership Assets.”

Specifically, the Preliminary Injunction has several functions. First, it places into the, Receivership all Receivership Assets and Receivership Property. (See Prelim. Injunction Order, Dkt. No. 22, at p. 3, ¶¶ 6, 7.) Second, it appoints a Receiver to determine the value of the Receivership Property; to take custody and possession of the Receivership Property; and to develop a plan for the fair, "reasonable, and efficient liquidation of the Receivership Property. (See id. at ¶¶ 7, 52-56.)

As an adjunct to this second function, the Preliminary Injunction Order restrains all entities with indirect or direct control over the “Receivership Assets” and an additional category of “funds and other assets” held by Callahan, 'HGA, and HGA LTD, which are listed on Exhibit A to the Preliminary Injunction Order, from liquidating those assets until further direction of the Court. (Id. at p. 6, ¶ 3)

The assets listed on Exhibit A are therefore, subject to an asset freeze, so that they are not liquidated while the Receiver performs its investigatory function and determines whether any of those assets are in fact Receivership Assets or Receivership Property. See S.E.C. v. Veros Partners, Inc., No. 1:15-CV-00659, 2015 WL 5821694, at *5 n. 1 (S.D.Ind. Oct. 5, 2015) (“The purpose of an asset freeze, accomplished through the Preliminary Injunction here, is ‘to preserve the status quo by preventing dissipation and diversion of assets.”’) (quoting U.S. S.E.C. v. Infinity Grp. Co., 212 F.3d 180, 197 (3d Cir.2000)); S.E.C. v. AmeriFirst Funding, Inc., No. CIV A 307-CV-1188-D, 2007 WL 2192632, at *3 (N.D.Tex. July 31, 2007) (“The court is also empowered to freeze defendants’ assets to preserve the status quo and prevent dissipation of ill-gotten gains so that they remain available to fund subsequent disgorgement orders and civil penalties.”).

Indeed, that is precisely what happened in this case. On March 22, 2012, the Court issued the Preliminary Injunction Order, which placed only the assets of HGA and HGA .LLC into the Receivership, and froze the assets of a broader array of funds listed on Exhibit A over which Callahan, HGA, and HGA LLC purportedly exercised actual or apparent investment authority. (gee Prelim. Injunction Order, Dkt. No. 22, at p. 3, ¶ 3.) Exhibit A lists twenty funds, including Pangea Global, whose assets are subject to the asset freeze. (See id. at Ex. A.)

Subsequently, on June 4, 2012, Callahan and the SEC entered into a stipulation to place the assets of five of the twenty funds listed on Exhibit A—Diversified; Masters; Fiduciary; Horizon Millennium; and Pangea Offshore—into the Receivership. (See June 4, 2012 Order, Dkt. No. 33.) There would have been no need for this stipulation had every fund listed on Exhibit A been a part of the Receivership. The fact that the parties entered into such a stipulation provides clear evidence that they did not intend for the.funds listed.on Exhibit A to automatically be a part of the Receivership, as the Claimants contend.

The Claimants next contend that even if Pangea Global is not a “Receivership Entity,” the Claimants still have a claim against the “Receivership Estate” because of its alleged close ties with Receivership Entity Pangea Offshore. (See Claimants’ Oct. 15, 2015 Mem. of Law, Dkt. No. 336, at 12-13.) They further argue that it would be inequitable for the Court to require a claimant to “trace, specific payments into the forfeited assets of the short list of Receivership Entities.” (Id. at 14.)

In response, the Receiver asserts that the Claimants have provided no evidence that the money invested in Pangea Global was eo-mingled or placed into the same account as the money invested in the Receivership Entities. (See Reefs Nov. 16, 2015 Supp. Response, Dkt. No. 348, at 10.) In addition, they assert that there is nothing inequitable about requiring the Claimants to show that the Trust invested in the same accounts as the Receivership Entities. (See id. at 7-9.) Again, the Court agrees.

Requiring the Claimants to show that Callahan placed the money they invested in Pangea Global into the same account as the co-mingied funds of the Receivership Entities is not a “tracing” requirement, as the Claimants contend.

The Court uses this example to illustrate the concept of “tracing”: a party invests .money with a trustee, and the trustee improperly takes a portion of the money and places it into his personal account. If the party can trace his assets in the trustee’s personal account, then the law of trusts permits that party to place a constructive trust or equitable lien on the assets that remain in the investment account and the traceable assets that were placed.into the trustee’s personal account. Thus, the concept of “tracing” permits an investor to recover his investment in a fraudulent enterprise according to the amount of money that he can “trace” into the accounts or assets of the wrongdoer. See United States v. Durham, 86 F.3d 70, 72 (5th Cir.1996) (“Typically, when a party can trace its assets, that party is entitled to seek a constructive trust or equitable lien on its portion of those funds that remain.”); United States v. Benitez, 779 F.2d 135, 140 (2d Cir.1985) (“It is hornbook law that before a constructive trust may be imposed, a claimant to a wrongdoer’s property must trace his own property into a product in the hands of the wrongdoer.”); Restatement (First) of Restitution § 211, cmnt. 1 (1937) (“.If a wrongdoer deposits in a single account in a bank money belonging to another and money belonging to himself, and subsequently makes withdrawals from the bank account, the claimant is entitled to an equitable lien for the amount of his money both upon the part withdrawn and its product if it can be traced and upon the balance of the account or if the balance is withdrawn upon its product if it can be traced.”).

However, Ponzi schemes present problems for courts in imposing a “tracing” requirement-on wronged investors because in a Ponzi scheme, the defendant co-mingles the funds of new investors with the funds of old investors and then wrongfully withdraws funds from the joint account, usually to pay fictitious returns to older investors. The Second Circuit has described the nature of a Ponzi scheme as follows:

A ponzi scheme is a scheme whereby a corporation operates and continues to operate at a loss. The corporation gives the appearance of being profitable by obtaining new investors and using those investments to pay for the high premiums promised to earlier investors. The effect of such a scheme is to put the corporation farther and farther into debt by incurring more and more liability and to give the corporation the false appearance of profitability in order to obtain new investors.

Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1088 n. 3 (2d Cir.1995) (quoting In re Huff (McHale v. Huff), 109 B.R. 506, 512 (S.D.Fla.1989)).

The defendant in a Ponzi scheme co-mingles the money of investors into one account so that it is nearly impossible for defrauded investors to “trace” where their misappropriated money ended up. To deal with this problem, courts have considered two options: (i)' permitting claimants to recover from the money left in the joint account based on the order in which they deposited their funds into the joint account, a premise based on the “legal fiction” that the defendant withdrew money from the account in the order in which investors deposited the funds into the account, see Restatement (First) of Restitution § 211 cmt. a (1937); or (ii) permitting claimants to recover on a pro rata basis based on the proportion of their investments in the co-mingled account at the time of the improper withdrawals by the defendant, irrespective of what order the investors deposited money into the account, see Restatement (First) of Restitution § 213 (1937).

Courts and the Restatement favor the latter pro rata option as the more equitable distribution plan in Ponzi schemes because “[i]n such a scheme, whether at any given moment a particular customer’s assets are traceable is ‘a result of the merely fortuitous fact that the defrauders spent the money of the other victims first.’ ” S.E.C. v. Credit Bancorp, Ltd., 290 F.3d 80, 89 (2d Cir.2002); see also id. (“Courts have favored pro rata distribution of assets where, as here, the funds of the defrauded victims were commingled and where victims were similarly situated with respect to their relationship to the defrauders.”); United States v. Durham, 86 F.3d 70, 73 (5th Cir.1996) (“When tracing is impossible, a claimant has merely a personal claim against the wrongdoer and the funds are distributed ratably.”); Restatement (First) of Restitution § 213(b) (1937) (“Where a person wrongfully mingles money of two or more persons and with the mingled mass acquires property, each of the persons is entitled to share in the property so acquired in such proportion as his money bore to the whole amount of the fund.”).

According to the allegations in the amended complaint, this case involves a classic Ponzi scheme whereby Callahan directed investors in the Receivership—namely, HGA LLC; HGA Ltd.; Diversified; Masters; Fiduciary; Horizon Millennium; and Pangea Offshore—to wire their funds to a Bermuda client funds accounts and then wrongfully withdrew portions of those funds to pay redemptions to investors in other Callahan Funds, and by misappropriating the money for his own personal benefit. (See Am. Compl. at ¶¶ 50-53.)

In recognition of the fact that it will be difficult for investors whose money was deposited by Callahan into the Bermuda client funds account to trace where and how their money was used in Callahan’s Ponzi scheme, the Court has approved a claims process along the lines of the pro rata distribution plans discussed above. Specifically, a Potential Claim is defined by the Claims Order with reference to an individual’s investment “in or through one of the Receivership Entities,” and not based on when the investor’s funds were deposited in the joint-account, or whether the funds can be tied to the specific fraudulent acts of Callahan. (See Claims Order, Dkt. No. 186, at 2, ¶ 3.) Thus, the Claims Order does not impose a “back door tracing requirement,” as the Claimants contend; but rather, is based on a claimants’ investment in one or more of the Receivership Entities. (See the Claimants’ Oct. 15, 2015 Reply Mem. of Law at 14.)

As discussed earlier, Pangea Global is not a Receivership Entity. However, the Claimants contend that they should still be able to recover from the Receivership Estate based on their investment in Pangea Global because the funds of Pangea Global were co-mingled with the funds of the Receivership Entities. (See the Claimants’ Oct. 23, 2015 Mem. of Law, Dkt. No. 338, at 7-8.) However, the Court does not find any of the evidence submitted by the Claimants, to support their contention, which the Court notes 'is haphazardly organized across 700 pages of confusingly labelled exhibits.

First, the Claimants point to an allegation in the amended complaint:

In March 2010, Callahan received a $990,000 Fiduciary subscription from an investor and then Callahan misused a portion of this money to make a redemption to an investor in another one- of Callahan’s funds, Pangea Global Opportunities Portfolio, LP. On March 24, 2010, after the investor wired $990,000 into a Fiduciary account at a bank in the BVI, Callahan transferred $895,000 to the Escrow Account. From the Escrow Account, Callahan transferred $892,000 to two other funds, Pangea High Yield ($640,000) and Diversified ($52,000), and to Distinctive Ventures ($200,000). On March 25, 2010, Callahan wired $440,000 from the Pangea High Yield account to a different investor in Callahan’s fund, Pangea Global Opportunities Portfolio, LP, to redeem his investment.

(Am. Compl., Dkt. No. 28, at ¶ 59) (emphasis added). Based on this allegation, as well as bank records provided by the SEC purportedly substantiating this transaction, the Claimants claim that “money invested with Pangea Global was part of the Callahan Enterprise.” (See the Claimants’ Oct. 23, 2015 Mem. of Law, Dkt. No. 338, at 7-8.)

However, this allegation involves a transfer of money from Pangea High Yield to Pangea Global Opportunities, LP, and not Pangea Global Opportunities Portfolio, LLC, which is the entity that the Trust invested in. In other words, this allegation appears to refer to a different entity than the entity that the Trust invested in.

Furthermore, even if Pangea Global Opportunities, LP was synonymous with Pan-gea Global Opportunities Portfolio, LLC, this allegation states only that a Receivership Entity, Pangea Offshore, transferred money to Pangea Global Opportunities LP, a non-Receivership Entity, as a redemption. This allegation says nothing about whether the funds of Pangea Global Opportunities LP were co-mingled with the funds of Pangea Offshore or any other Receivership Entity, which is a prerequisite to having a claim against the Receivership Estate.

Second, the Claimants also rely on allegations in the Indictment in the Criminal Action stating that Pangea Offshore, which is a Receivership Entity, owned 100% of Pangea Global; and that Callahan directly managed both funds. (See the Indictment, 13-cr-453, Dkt. No. 1, at ¶¶ 2-3.).

Even assuming the truth of these allegations, the facts that Pangea Global was 100% owned by Pangea Offshore and that Callahan directly managed both funds do not suggest that Callahan co-mingled the funds in the same Bermuda client accounts. Without such evidence, there is no reason for the Court to permit the Claimants to recover from the-Receivership Estate, which consists of assets solely tied to the funds of Receivership Entities.

Third, the- Claimants attach a copy of an alleged account statement prepared by Patrick Cherry (“Cherry”), the Claimants’ financial advisor, showing that as of 2010, the Claimants’ investments in Pangea Offshore, Horizon Millennium, and Pangea Global were held in the same HSBC Bermuda account. (See July 3, 2014 William Johnson Deck, Dkt. No. 320-6, at Ex. F-l.) However, as the Receiver correctly notes, this document was prepared by the Trust’s financial advisor, not by an administrator of the Receivership, First Fidelity, or the Trust. (See id. at ¶ 7.) In a declaration filed with the Court, Johnson describes the spreadsheet as a list “of what we believe are the proper amount and dates for my contribution to the Fidelity Offshore through the Trust.” (Id. at ¶ 5.) In addition, the spreadsheet does not list the Bermuda account number or any other identifying information showing that the funds included in this account were part .of the Receivership Estate or co-mingled together.

Based on such sparse evidence, the Court finds that the Receiver correctly determined that this account statement failed to provide sufficient supporting documentation showing that the Claimants’ investment in Pangea Global was co-mingled with the Receivership Entities.

Finally, the Claimants cite to a series of emails and assignment agreements purportedly establishing that Callahan, HGA, and HGA LLC controlled the Trust’s investment portfolio. (See the Claimants’ Oct. 23, 2016 Mem. of Law, Dkt. No. 338, at 7-8; see also Dkt. Nos 319-4; 320-6.) However, none of these- agreements or emails make reference to the Receivership Entities, let alone establishes that Callahan placed the funds of Pangea Global into the same accounts as the Receivership Entities.

In sum, the Claimants have failed to show that their investment in Pangea Global was co-mingled in the same investment accounts that held the funds of the Receivership Entities, which are the subject of the Ponzi scheme at issue in the amended complaint and whose assets make up the Receivership Estate. Accordingly, the Court agrees with the Receiver that the Claimants have failed to establish that they should recover a pro rata share of the Receivership Estate based on their investment in Pangea Global, See S.E.C. v. Byers, 637 F.Supp.2d 166, 177 (S.D.N.Y.2009) (“The. Second Circuit in Credit Ban-corp set forth two factors that must be satisfied to approve a pro rata distribution. First, investors’ funds must have been commingled. Second, the victims must be similarly situated ‘with respect to their relationship to the defrauders.’) (quoting Credit Bancorp, 290 F.3d at 88-89).

For similar reasons, the Court is not persuaded by the Claimants’ argument that the Receivership Estate would be unjustly enriched by failing to permit the Claimants to recover against the Receivership Estate based on the - Trust’s investments in Pangea Global. (See Claimants’ Oct. 16, 2015 Mem. of Law, Dkt. No. 336, at 20.).

This argument is based on the faulty premise' that the funds of Pangea Global were co-mingled with the funds of the Receivership Entities. However, as noted above, there is no evidence the funds of Pangea Global are part of the Receivership Estate or are being used to compensate investors of the Receivership Entities. Accordingly, the Court finds the Claimants unjust enrichment argument to be without merit.

For these reasons, the Court overrules the objections by the. Claimants that the Receiver erred by failing to recognize their alleged $2,359,173.60 investment in Pangea Global.

3. As to the Redemption

As noted, in the April 24, 2015 Notice of Determination, the Receiver found that the Claimants had submittéd sufficient documentation showing that the Trust invested $3,111,236.37 in Pangea Offshore. (See Sept. 21, 2015 Weinberg Decl., Ex. F, Dkt. No. 320-6, at p. 3; see id. at Ex. J, Dkt. No. 320-10, at p. 10-11.) However, the Receiver found that the Trust had received a redemption in the amount of $1,322,031.23. (See id. at Ex. F, Dkt. No. 320-6, at p. 3.) As such, the Receiver reduced the Claimants’ claim from $3,111,236.37 to $1,789,205.14. (See id.) It also found that because the $1,322,031.23 redemption represented 42.49% of the Trust’s total investment in Pangea Offshore, the Trust would be not be permitted to participate in any distribution of the Receivership Estate until all the approved claimants had recovered at least 42.49% of their total investment. (See id.)

The Claimants’ objections raise two issues: (i) whether the Receiver erred in ruling that the apparent transfer of the Trust’s investment from Pangea Offshore to Westminster High Yield was a redemption; and (ii) whether the Receiver correctly barred the Claimants from recovering on the approved portion of their claim until all the other approved claimants had recovered at least 42.49% of their total investment. The Court will address each issue below.

a. As to the Sale of Pangea Offshore

As will be described in more detail below, some courts reduce the claims of investors who withdraw money from a Ponzi scheme on the theory that “[ijnvestors who have made withdrawals .will, tend, to be better off when the Ponzi scheme collapses than investors who have made no withdrawals because the former lose less than they would have lost had they not drawn down their investment.” S.E.C. v. Huber, 702 F.3d 903, 907 (7th Cir.2012).

However, the situation becomes more complicated when the investor withdraws his money from the Ponzi scheme and then reinvests that money back into the Ponzi scheme. In such a situation, the positive effect on the investor of withdrawing his money from the scheme is erased because he re-invested the money he took out back into the scheme and therefore, ended up losing the same amount of money that he Would have lost had he decided not take his money out in the first instance. For this reason, some courts have refused to reduce an investor’s claim against the receivership estate if the investor withdrew money from the scheme and then reinvested it or rolled it back into the scheme. See id. at 907; see also Byers, 637 F.Supp.2d at 183 (“Ignoring the rolled-over amount, as the objectors propose, would further penalize those investors who chose to roll over their investments rather than receive them in cash. Such a result would be inequitable.”),

Here, the Claimants argue that the Trust, at the direction of Callahan, reinvested the. $1,322,031.23 it received from the sale of its Pangea Offshore shares into Westminster High Yield, a fund that they claim was controlled by Callahan and was co-mingled with the funds of other Receivership. Entities. (See Claimants’ Aug. 21, 2015 Objections, Dkt. No. 319, at 22-23.) As a result, the Claimants assert they never received the benefit of the $1,322,031.23 but rather lost that money at the hands of Callahan. (See id.)

In response, the Receiver asserts that Westminster High Yield is not a Receivership Entity and there is no evidence that its funds were co-mingled with the funds of the other Receivership Entities. (See Rec.’s Sept. 21, 2015 Mem. of Law, Dkt No. 324, at 16-21.) Thus, the Receiver disputes that the Claimants reinvested the $1,322,031.23 back into the Ponzi scheme. (See id.) The Court agrees.

Beginning in 2005 and 2006, the Trust invested its money in three life insurance policies held by Fidelity Insurance Company Ltd. (“Fidelity”), which ostensibly took that money and invested it in several funds, some of which were Receivership Entities. (See July 3, 2014 William Johnson Deck, Dkt. No. 320-6, at ¶ 2.) Specifically, the Receiver found that in 2005 and 2006, the Trust invested $1,209,317.61 in Pangea Offshore, a Receivership Entity; (ii) in 2009, the Trust transferred $10,302 to Receivership Entity, HGA LLC; and (iii) in 2010, the Trust invested $195,174.32 in Receivership Entity Horizon Millennium, and $1,696,442.44 in Receivership Entity Pangea Offshore. (See Sept. 21 2015 Weinberg Deck, Ex. J, at 3-4.) This amounted to a total investment of $3,111,236.37 in Receivership Entities. (See id.)

However, the Receiver found that in January 2007, the Trust redeemed $1,322,031.23 from its-investment in Pan-gea Offshore and incurred $29,633.90 in administrative fees. (Id. at 3.) Thus, the Receiver reduced the Trust’s claim by á total of $1,351,696.13. (Id. at 4.)

The account statements provided by Fidelity, during the period January 1, 2007 to March 31, 2007, appear to show that the Trust engaged in several transactions that liquidated its shares in Pangea Offshore and for which the Trust received a total $1,322,031.23. (See Sept. 21, 2015 Weinberg Deck, Ex. L.) The statements categorize these transactions as “redemptions” and “sales.” (See id.)

The same account statements show that the Trust did appear to purchase a roughly equivalent number of shares in Westminster High Yield, as the Plaintiffs contend. (See id.) However, like Pangea Global, Westminster High Yield is not a Receivership Entity.

The Claimants attempt to avoid this fact by arguing that Westminster High Yield was essentially a shell entity of Pangea Offshore. In support, they primarily rely on a March 29, 2007 letter from Ernest J. Dean, Jr. (“Dean”), the President of Westminster Hope & Turnberry (“WH&T”), to Rick Loria (“Loria”), the Trust’s financial advisor, in which Dean states:

This letter is a follow up to our conversation last quarter regarding an administrative change being made that effect your client’s policy invested in Pangea Offshore High Yield Portfolio, LLC. One of your client’s insurance policy holdings under LLC SA 1621119/SA 427/SA 429 has been ré-branded from Pangea Offshore High Yield Portfolio, LLC to Westminster Offshore High Yield Portfolio, LLC. The purpose of this change is greater administrative efficiency and to provide cost savings over the current structure_Fidelity Insurance Company transferred all holdings in Pangea Offshore High Yield Portfolio on January 1, 2007 to Westminster High Yield Portfolio, LLC. Westminster High Yield Portfolio, LLC is 100% invested in Pan-gea Offshore High Yield Portfolio.

(Aug. 20, 2015 Johnson Deck, Dkt. No. 320-5, Ex. C) (emphasis added).

The Claimants contend that because WH&T rebranded the Trust’s investment in Pangea Offshore as an investment in Westminster High Yield, it should not be classified as a redemption or a withdrawal from Receivership Entity Pangea Offshore. (See Claimants’ Nov. 16, 2015 Reply Mem. of Law, Dkt. No. 23, at 22-23.)

However, as the Receiver correctly notes, the Claimants provide no account statements or documents evidencing the assertion made by Dean that he took 100% of the Claimants’ investment in Westminster High Yield and re-invested it in Pan-gea Offshore. Further even if Dean did take the Claimants’ money in Westminster High Yield and reinvest it back into Pan-gea Offshore, the Trust’s claim would be against Westminster High Yield, not Pan-gea Offshore.

Indeed, on December 17, 2012, Laura Johnson, on behalf of the Trust, initiated a claim in the Circuit Court of Cook County against Keithley Lake (“Lake”) and other individuals who allegedly had control over the Trust’s accounts at Fidelity and decided to invest the Trust’s money in Westminster High Yield (the “Cook County Complaint”). (See July 3, 2015 William Johnson Deck, Ex. C.) According to the Cook County Complaint, Laura Johnson is the sole trastee of the Trust, and the Claimants William and Diane Johnson are the sole and equal beneficiaries of the Trust.

As relevant here, the Cook County Complaint alleges that:

Under Lake’s supervision, money wired to the Fidelity Join Venture by set-tlors/grantors/investors, including Plaintiffs ... would be routinely directed into the general trust bank account [First Fidelity Trust LTD (“First Fidelity”)]. The funds were then supposed to be transferred from that account per the wishes and instructions of the various account settlor/grantors/investors to invest in funds offered by [WH&T]. [WH&T] was then responsible for allocating the funds .... Lake oversaw the disbursement of funds from the [WH&T] client accounts to the various investments, purportedly per the wishes and instructions of the various set-tlor/grantors/investors.

(Id. at ¶ 43.)

These allegations suggest that WH&T and Lake, not Callahan or a Receivership entity, had primary control over the Trust’s investment in the Westminster entities. Thus, while the Claimants may have a claim against Lake and WH&T, based on the record before it, it does not appear that they have a potential claim against a Receivership Entity or the Receivership Estate.

The Claimants also rely on a December 31, 2010 assignment agreement in which WH&T and Fidelity agreed to transfer the Trust’s investment portfolios to Caste Re. (See Aug. 20, 2015 Johnson Decl, Dkt. No. 320-5, Ex. D.) However, the agreement specified that Castle Re would accept the Trust’s shares in Horizon Millennium, Pangea Global, and Pangea Offshore but would not accept the Trust’s shares in the Westminster Entities, including Westminster High Yield. (Id. at p. 1.)

Although not entirely clear, it appears that the Claimants contend that this assignment agreement shows that in 2010, the Trust still had Pangea Offshore shares and therefore, they contend that the Trust could not have liquidated its shares in Pangea Offshore and received a redemption, as the Receiver asserts. (See the Claimants’ Nov. 21, 2015 Reply Mem. of Law, Dkt. No. 348, at. 24-25.) Again, the Court disagrees.

The fact that WH&T or First Fidelity may have invested money on behalf of the Trust in a Receivership Entity does not mean that the Trust has a claim against the Receivership Estate. Rather, as noted, their claim would appear to be against WH&T or First Fidelity, which allegedly made the decisions to invest the Trust’s money in the Receivership Entities. Furthermore, the fact -that the Trust’s invest-merits in Westminster High Yield and Pan-gea Offshore are referred to separately in this agreement directly undermines the Claimants’ contention that Westminster High Yield was merely a shell entity of Pangea Offshore. Had that been the case, Castle Re would have accepted the assignment of the shares in both entities as one and the same. The fact that Castle Re chose not to do so and that the agreement refers to the entities separately suggests that the entities are in fact independent of one another.

For these reasons, the Court finds that Claimants have failed to show that the $1,822,031.23 that was credited to their investment account as a redemption was reinvested back into a Receivership Entity or through one of the Receivership Entities. Accordingly, the Court affirms the Receiver’s determination that the Trust received $1,322,031.23 from the sale of its Pangea Offshore shares.

b. As to the Receiver’s