United States District Court, W.D. North Carolina, Charlotte Division
JOSEPH W. GRIER, III, in his capacity as the court-appointed Receiver for James H. Mason, The JHM Forex Only Pool (f/k/a The JHM Forex Only Pool, LP) and Forex Trading At Home, Plaintiff,
STEPHEN H. GALLAGHER and LYNN J. GALLAGHER, both individually and in their capacity as Trustees of The Gallagher Family Trust, Defendants.
GRAHAM C. MULLEN, District Judge.
THIS MATTER came before the Court upon the Plaintiff's Motion for Prejudgment Attachment, Temporary Restraining Order and Preliminary Injunction (Doc. No. 4) filed on September 17, 2014 by Joseph W. Grier, III, as receiver for James H. Mason ("Mason"), The JHM Forex Only Pool (f/k/a The JHM Forex Only Pool, LP), Forex Trading At Home and related/affiliated entities (collectively, the "Receivership Entities") and the plaintiff herein ("Plaintiff"), through counsel (the "Motion"). Through the Motion, Plaintiff seeks prejudgment attachment and a temporary restraining order (and, ultimately, a preliminary injunction) restraining and enjoining Stephen H. Gallagher and Lynn J. Gallagher, both individually and in their capacity as Trustees of The Gallagher Family Trust ("Defendants") and Defendants' agents, servants, employees, family members, friends and any and all persons acting in aid of or conjunction with Defendants from spending, transferring, encumbering, distributing, dissipating or otherwise disposing of assets traceable to the Receivership Entities, including, without limitation, freezing any deposit accounts held by Defendants to which funds traceable to the Receivership Entities may have been deposited until such time as Plaintiff can conduct an accounting thereof. The Court, having reviewed the Motion and the record in this case, finds and concludes as follows:
1. This action is ancillary to the U.S. Commodity Futures Trading Commission's civil enforcement action current pending before the Court as case number 3:13-CV-196, in which Plaintiff serves as the duly-appointed receiver for the Receivership Entities.
2. Also on March 27, 2013, this Court entered a Statutory Restraining Order in the CFTC Action (the "Restraining Order") appointing Plaintiff as temporary receiver for the Receivership Entities. On May 22, 2013, this Court entered an Order of Preliminary Injunction in the CFTC Action (the "Preliminary Injunction") appointing Plaintiff as receiver for the Receivership Entities.
3. On April 5, 2013, a criminal complaint was filed against Mason charging Mason with criminal fraud based on the same facts and circumstances alleged in the CFTC Complaint. Mason pled guilty to these charges on June 27, 2014.
4. Upon reviewing the books and records for the Receivership Entities, Plaintiff has determined that Mason operated a Ponzi Scheme under the guise of an off-exchange foreign currency trading venture through the Receivership Entities, which have been insolvent at all times relevant to this action.
5. According to Plaintiff's allegations: Defendants deposited a total of $86, 150.00 with the Receivership Entities and withdrew $362, 150.00, resulting in $276, 000.00 of net winnings from Mason's Ponzi Scheme; and $231, 000.00 of Defendants' net winnings were used to purchase certain real property located at 1835 Canyon Court, Allen, Texas XXXXX-XXXX and being more specifically described as "Lot 18, Block M of Twin Creeks Phase 6A, an addition to the City of Allen, Collin County, Texas, according to the Amended Plat thereof recorded in Volume Q, Page 203, Map Records, Collin County, Texas" (the "Real Property").
6. Counsel for Plaintiff submitted an affidavit representing that:
a. Plaintiff's counsel has been communicating with Defendants and Defendants' attorney in an effort to resolve Plaintiff's claims against Defendants;
b. Defendants have taken the position that they have little to no assets upon which Plaintiff could levy in the event a judgment is entered in Plaintiff's favor;
c. Defendants' counsel assured Plaintiff's counsel that Defendants would not transfer their interest in the Real Property;
d. Defendants executed a Tolling Agreement promising to preserve the status quo between Defendants and Plaintiff;
e. After negotiations stalled and within weeks of Plaintiff's indication to Defendants that litigation would be necessary, Defendants, as trustees of the Gallagher Family Trust, transferred the Real Property to Defendants, in their individual capacity, for no apparent consideration; and
f. Defendants then borrowed money against the Real Property, executed a deed of trust on the Real Property securing the new loan and began spending the ...