Northern California Record

Sunday, January 26, 2020

Court orders for final distribution plan in case between SEC, Felix Investments


By Gabriel Neves | Dec 28, 2018


SAN FRANCISCO – A federal judge has ordered for a final distribution plan to be submitted by next month in a case filed by the U.S. Securities and Exchange Commission against Felix Investments.

U.S. District Judge Edward Chen, on the bench of the U.S. District Court for the Northern District of California, issued a 12-page order on Dec. 20 that ordered the submission of a final distribution plan.

The SEC and the receiver had submitted one plan for proposal, called the joint plan in the order, and another was proposed by SRA funds investor group, called the investor plan.

In his ruling, Chen told the SEC and the receiver to submit a final distribution plan within 30 days of the decision for approval, stating it should be "incorporating the distribution scheme outlined in Sections E, F, and G of the investor plan and the receivership governance structure outlined in the joint plan."

In June 2017, SEC and the receiver filed their first joint distribution plans, which consisted of a liquidation of securities before an initial public offer (IPO) held by SRA funds, which also filed a distribution plan with a distribution in cash for the fund's investors and creditors.

As stated in the order, "the investor group consists of 134 individuals and entities who purchased and continue to own interests in one or more of the seven SRA funds at issue in this litigation," representing 75 percent of the shares.

The order also stated that "the court did not approve either of the proposed plans, instead ordering the parties to meet and confer regarding a number of issues relating to the receivership and the distribution of assets."

Both the SEC and the receiver filed a joint distribution plan in March, but the plan was denied due to the claims' process that was not complete.

A schedule for the meetings was set in August, but the parties went to a deadlock after two meet-and-confer sessions.

In October, a hearing was held on the proposed plans.

"During the hearing, the SEC alerted the court that not only was the equity acquisition corporation (EAC) still in possession of certain shares that belonged to the receivership, but had also asserted claims against the receivership for a 'purported guarantee by SRA Management of the two New York state court confessions of judgment (totaling $1.5 million) that Silverback Management LLC provided to two purchasers of Badgeville Inc. pre-IPO shares through the Silverback Funds,'” the order said.

U.S. District Court for the Northern District of California case number 3:16-cv-01386-EMC

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U.S. Securities and Exchange CommissionU.S. District Court for the Northern District of California

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