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Investment company won't get funds intended for Mutual Benefits fraud victims, federal magistrate judge rules

FLORIDA RECORD

Saturday, November 23, 2024

Investment company won't get funds intended for Mutual Benefits fraud victims, federal magistrate judge rules

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MIAMI — An investment management company that bought up policies from victim investors in a $1 billion fraud scheme revealed by the U.S. Securities and Exchange Commission in 2004 will not receive money from a fund set up for victims, a federal magistrate judge ruled earlier this month.

In his six-page order issued Dec. 11, U.S. Magistrate Judge Jonathan Goodman, on the bench in Florida's Southern District, Miami Division, denied Acheron Capital, Ltd.'s motion for limited relief from final distribution and for discharge of receiver. Acheron argued that the final distribution order that excluded the company violated the agreement Acheron had with the receiver, according to Judge Goodman's order.

The distribution is part of what remains of the May 2004 SEC shutdown of Mutual Benefits Corporation to halt an alleged scheme that defrauded 29,000 investors worldwide. In August 2014, the head of Mutual Benefits Corporation was sentenced to 20 years in prison and ordered to forfeit $15 million for his part in the scheme.


U.S. Magistrate Judge Jonathan Goodman | sdfla.blogspot.com

As the SEC's action meandered through well more than a decade of litigation, a receiver was appointed and investors were given a choice between maintaining their interests in mutual benefits or authorizing sale of their investments. Acheron, as an investment manager and purchaser of forfeit interests in the litigation, acquired about 60 percent of investors' "keep policies" that had been held in trust, according to the background portion of Judge Goodman's order.

This past August, the receiver filed a motion for final distribution and for discharge, asking, among other things, that more than $2 million be distributed for fees and to benefit victim investors for the next two years. The receiver's motion specifically stated that a fee holiday would not apply to Acheron because it had not been a victim investor.

Goodman granted the receiver's motion in September.

Last month, Acheron asked the court for relief from the receiver's final distribution order, asking that it be included among the investors to benefit from the fund.

"Both the receiver and the trustee filed responses in opposition to Acheron's motion, arguing generally that Acheron is not entitled to hare in the criminal restitution funds, or benefits derived therefrom, because it is not a victim of the Mutual Benefits Corporation fraud," the order said.

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