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Commodity Futures Trading Commission v. Rust Rare Coin Inc.

United States District Court, D. Montana

October 17, 2019

COMMODITY FUTURES TRADING COMMISSION, and STATE OF UTAH DIVISION OF SECURITIES, through Attorney General, Sean D. Reyes, Plaintiffs,
v.
RUST RARE COIN INC., a Utah corporation, and GAYLEN DEAN RUST, an individual, Defendants; and DENISE GUNDERSON RUST, an individual, JOSHUA DANIEL RUST, an individual, ALEESHA RUST FRANKLIN, an individual, R LEGACY RACING INC, a Utah corporation, R LEGACY ENTERTAINMENT LLC, a Utah limited liability company, and R LEGACY INVESTMENTS LLC, a Utah limited liability company. Relief Defendants.

          Thomas L. Simek, Jennifer J. Chapin Attorneys for Plaintiff COMMODITY FUTURES TRADING COMMISSION

          SEAN D. REYES Utah Attorney General Thomas M. Melton, Robert Wing, Jennifer Korb, Paula Faerber Assistant Attorneys General Attorneys for Plaintiff STATE OF UTAH DIVISION OF SECURITIES

          ORDER APPOINTING RECEIVER AND STAYING LITIGATION

          TENA CAMPBELL, UNITED STATES DISTRICT JUDGE

         WHEREAS this matter has come before this Court upon the unopposed motion of Plaintiffs Commodity Futures Trading Commission ("CFTC" or "Commission") and the State of Utah Division of Securities, through Attorney General Sean D. Reyes ("State of Utah", together with the CFTC, "Plaintiffs") to appoint a receiver in the above-captioned action; and, WHEREAS the Court finds that, based on the record in these proceedings, the appointment of a receiver in this action is necessary and appropriate for the purposes of marshaling and preserving all assets of the Defendants and the Relief Defendants ("Receivership Assets") as well as the assets of any other entities or individuals that: (a) are attributable to funds derived from investors or clients of the Defendants and/or Relief Defendants; (b) are held in constructive trust for the Defendants and/or Relief Defendants; (c) were fraudulently transferred by the Defendants and/or Relief Defendants; and/or (d) may otherwise be includable as assets of the estates of the Defendants and/or Relief Defendants (collectively, the "Recoverable Assets"); and, WHEREAS this Court has subject matter jurisdiction over this action and personal jurisdiction over the Defendants and the Relief Defendants, and venue properly lies in this district.

         NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:

         1. This Court hereby takes exclusive jurisdiction and possession of the assets, of whatever kind and wherever situated, of the following Defendants and Relief Defendants: Rust Rare Coin Inc., Gaylen Dean Rust, R Legacy Racing Inc., R Legacy Entertainment LLC, and R Legacy Investments LLC (collectively, "Receivership Defendants").

         2. Until further Order of this Court, Jonathan O. Hafen, Esq. of Parr Brown Gee & Loveless is hereby appointed to serve without bond as receiver (the "Receiver") for the estates of the Receivership Defendants.

         I. Asset Freeze

         3. Except as otherwise specified herein, all Receivership Assets and Recoverable Assets remain frozen until further order of this Court. Accordingly, all persons and entities with direct or indirect control over any Receivership Assets and/or any Recoverable Assets, other than the Receiver, are hereby restrained and enjoined from directly or indirectly transferring, setting off, receiving, changing, selling, pledging, assigning, liquidating or otherwise disposing of or withdrawing such assets. This freeze shall include, but not be limited to, Receivership Assets and/or Recoverable Assets that are on deposit with financial institutions such as banks, brokerage firms and mutual funds. This freeze shall also include but not be limited to Receivership Assets and/or Recoverable Assets held as personal property, collectibles, metals, and cryptocurrencies.

         II. General Powers and Duties of Receiver

         4. The Receiver shall have all powers, authorities, rights and privileges heretofore possessed by the officers, directors, managers and general and limited partners of the entity Receivership Defendants under applicable state and federal law, by the governing charters, bylaws, articles and/or agreements in addition to all powers and authority of a receiver at equity, and all powers conferred upon a receiver by the provisions of 28 U.S.C. §§ 754, 959 and 1692, and Fed.RCiv.P. 66.

         5. The trustees, directors, officers, managers, employees, investment advisors, accountants, attorneys and other agents of the Receivership Defendants are hereby dismissed and the powers of any general partners, directors and/or managers are hereby suspended. Such persons and entities shall have no authority with respect to the Receivership Defendants' operations or assets, except to the extent as may hereafter be expressly granted by the Receiver. The Receiver shall assume and control the operation of the Receivership Defendants and shall pursue and preserve all of their claims.

         6. No. person holding or claiming any position of any sort with any of the Receivership Defendants shall possess any authority to act by or on behalf of any of the Receivership Defendants, except to the extent as may hereafter be expressly granted by the Receiver.

         7. Subject to the specific provisions in Sections III through XIV, below, the Receiver shall have the following general powers and duties:

A. To use reasonable efforts to determine the nature, location and value of all property interests of the Receivership Defendants, including, but not limited to, monies, funds, securities, credits, effects, goods, chattels, lands, premises, leases, claims, 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 ("Receivership Property" or, collectively, the "Receivership Estates");
B. To take custody, control and possession of all Receivership Property and records relevant thereto from the Receivership Defendants; to sue for and collect, recover, receive and take into possession from third parties all Receivership Property and records relevant thereto;
C. To manage, control, operate and maintain the Receivership Estates and hold in his possession, custody and control all Receivership Property, pending further Order of this Court;
D. To use Receivership Property for the benefit of the Receivership Estates, making payments and disbursements and incurring expenses as may be necessary or advisable in the ordinary course of business in discharging his duties as Receiver;
E. To take any action which, prior to the entry of this Order, could have been taken by the officers, directors, partners, managers, trustees and agents of the Receivership Defendants;
F. To engage and employ persons in his discretion to assist him in carrying out his duties and responsibilities hereunder, including, but not limited to, . accountants, attorneys, securities traders, registered representatives, financial or business advisers, liquidating agents, real estate agents, forensic experts, brokers, traders or auctioneers;
G. To take such action as necessary and appropriate for the preservation of Receivership Property or to prevent the dissipation or concealment of Receivership Property;
H. The Receiver is authorized to issue subpoenas for documents and testimony consistent with the Federal Rules of Civil Procedure;
I. To bring such legal actions based on law or equity in any state, federal, or foreign court as the Receiver deems necessary or appropriate in discharging his duties as Receiver;
J. To pursue, resist and defend all suits, actions, claims and demands which may now be pending or which may be brought by or asserted against the Receivership Estates; and,
K. To take such other action as may be approved by this Court.
L. The Receivership Property and Receivership Estate shall not include, at this time, the personal residence of Gaylen and Denise Rust and the property on which it sits. The personal residence and associate real estate are, however, subject to the asset freeze identified above. Within twenty-one (21) days after the appointment of the Receiver, Defendant shall identify all property which Defendant claims is exempt under applicable Utah law. If the parties are unable to resolve the exempt property issue, the parties may seek resolution of the issue with the Court.

         III. Access to Information

         8. Absent a valid assertion of their respective rights against self-incrimination under the Fifth Amendment, the individual Receivership Defendants and the past and/or present officers, directors, agents, managers, general and limited partners, trustees, attorneys, accountants and employees of the entity Receivership Defendants, as well as those acting in their place, are hereby ordered and directed to preserve and turn over to the Receiver forthwith all paper and electronic information of, and/or relating to, the Receivership Defendants and/or all Receivership Property; such information shall include but not be limited to books, records, documents, accounts and all other instruments and papers.

         9. Absent a valid assertion of their respective rights against self-incrimination under the Fifth Amendment, within twenty-one (21) days of the entry of this Order, the Receivership Defendants shall file with the Court and serve upon the Receiver and Plaintiffs a sworn statement, listing: (a) the identity, location and estimated value of all Receivership Property; (b) all employees (and job titles thereof), other personnel, attorneys, accountants and any other agents or contractors of the Receivership Defendants; and, (c) the names, addresses and amounts of claims of all known creditors of the Receivership Defendants.

         10. Absent a valid assertion of their respective rights against self-incrimination under the Fifth Amendment, within thirty (30) days of the entry of this Order, the Receivership Defendants shall file with the Court and serve upon the Receiver and the Commission a sworn statement and accounting, with complete documentation, covering the period from January 1, 2008 to the present:

A. Identifying every account at every bank, brokerage or other financial institution: (a) over which Receivership Defendants have signatory authority; and (b) opened by, in the name of, or for the benefit of, or used by, the Receivership Defendants;
B. Identifying all credit, bank, charge, debit or other deferred payment card issued to or used by each Receivership Defendant, including but not limited to the issuing institution, the card or account number(s), all persons or entities to which a card was issued and/or with authority to use a card, the balance of each account and/or card as of the most recent billing statement, and all statements for the last twelve months;
C. Of all assets received by any of them from any person or entity, including the value, location, and disposition of any assets so received; and
D. Of all funds received by the Receivership Defendants, and each of them, in any way related, directly or indirectly, to the conduct alleged in Plaintiffs' Complaint. The submission must clearly identify, among other things, all investors, the securities they purchased, the date and amount of their investments, and the current location of such funds.

         11. Absent a valid assertion of their respective rights against self-incrimination under the Fifth Amendment, within thirty (30) days of the entry of this Order, the Receivership Defendants shall provide to the Receiver and Plaintiffs copies of the Receivership Defendants' federal income tax returns for 2008 through 2017 with all relevant and necessary underlying documentation.

         12. Absent a valid assertion of their respective rights against self-incrimination under the Fifth Amendment, the individual Receivership Defendants and the entity Receivership Defendants' past and/or present officers, directors, agents, attorneys, managers, shareholders, employees, accountants, debtors, creditors, managers and general and limited partners, and other appropriate persons or entities shall answer under oath to the Receiver all questions which the Receiver may put to them and produce all documents as required by the Receiver regarding the business of the Receivership Defendants, or any other matter relevant to the operation or administration of the receivership or the collection of funds due to the Receivership Defendants. In the event that the Receiver deems it necessary to require the appearance of the aforementioned persons or entities, the Receiver shall make its discovery requests in accordance with the Federal Rules of Civil Procedure.

         13. To issue subpoenas to compel testimony of persons or production of records, consistent with the Federal Rules of Civil Procedure and applicable Local Rules, except for the provisions of Fed.R.Civ.P. 26(d)(1), concerning any ...


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