Notable Litigation – November 2023

Notable litigation filed during November 2023 includes: (1) BB & MB WDF, LLC v. Seare, et al.; (2) Day v. Heppner, et al.; (3) Scura v. Heppner, et al.; and (4) Commodity Futures Trading Comm'n v. Young, et al.

BB & MB WDF, LLC v. Seare, Civ. No. 230908671 (Utah District Court).

Two Utah LLCs filed suit against schemer defendants in the Third Judicial District Court in Salt Lake County, Utah, for losses arising from an alleged Ponzi scheme that plaintiffs had invested in under the guise of a private equity firm, Black Oak Capital Management II, LLC, which managed several investment funds. The complaint alleges that defendants pressured plaintiffs into signing releases without receiving the requisite accounting information, closing a transaction that allowed defendants to "receive millions of dollars in proceeds" without plaintiffs' awareness of the self-enrichment. Plaintiffs allege that they never received the accounting information they were promised if they signed the releases and suffered "substantial losses." Plaintiffs seek recovery under theories of breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duties and aiding and abetting, dissociation and removal, violation of Utah's Uniform Securities Act §§ 61-1-1 et seq., and account and constructive trust.

Day v. Heppner, Civ. No. DC-23-18671 (Tex. District Court); Scura v. Heppner, Civ No. DC-23-18673 (Tex. District Court).

Plaintiffs filed suit against the schemers in the 160th Judicial District Court in Dallas County for losses arising from an alleged Ponzi scheme carried out by defendants' company, GWG Holdings, Inc., after Plaintiffs purchased the company's L-Bonds. The complaint alleges that defendants "diverted hundreds of millions of dollars in GWG investor funds for their own gain," rendering GWG unable to make payments to investors and thereby leaving the company bankrupt and its investors without the payment they are owed. Plaintiffs seek recovery under theories of offeror or seller liability: untruth or omission under the Texas Government Code § 4008.052(a), common law fraud, unjust enrichment, and civil conspiracy to defraud. Plaintiff Scura filed a similar lawsuit against the schemers in the 134th Judicial District Court in Dallas County, alleging he suffered substantial loss after purchasing Preferred Stock in GWG Holdings, Inc. only to learn later that GWG is a Ponzi scheme. Plaintiff Scura seeks recovery under the same theories of liability as plaintiffs Day and Monahan.

Commodity Futures Trading Comm'n v. Young, Civ No. 1:23-cv-15624 (N.D. Ill.).

The Commodity Futures Trading Commission ("CFTC") filed suit against Coby Young and his company, Young Emerging Strategies, LLC, in the United States District Court for the Northern District of Illinois, Eastern Division for losses arising from an alleged Ponzi scheme where Young's company solicited investments from individuals by misrepresenting or materially omitting information about how the company would invest their funds. The complaint alleges that the company invited individuals to classes purported to teach them how to trade then would solicit investments from the attendees by marketing themselves as skilled traders during the classes despite the fact that the Illinois Secretary of State Securities Department had forbidden Young from trading securities or engaging in securities transactions due to Young's history of defrauding investors. Young's company also did not register with the CFTC. The CFTC seeks recovery under theories of violations of several provisions of the Commodity Exchange Act and CFTC Regulations.

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Joanna E. Johnston
McGuireWoods LLP
201 North Tryon Street
Suite 3000
North Carolina
Charlotte
NC 28202-2146
UNITED STATES

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