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A lawyer and an affiliated entity failed May 30 to persuade the full Ninth Circuit to review a panel’s ruling that they must return funds stemming from a client’s $65 million global investment scam ( SEC v. Messina , 9th Cir., No. 15-55325, 5/30/17 ).
The panel decision affirmed that relief defendants can’t stop a district court from ordering them to return the proceeds of someone else’s misconduct just by claiming entitlement to the money, a question of first impression in the U.S. Court of Appeals for the Ninth Circuit. Relief defendants are parties to a lawsuit who aren’t accused of wrongdoing, but received illegally obtained property they don’t have a legitimate claim to.
Agreeing with the lower court, the panel held that a $5 million “loan” transfer that Florida attorney Vincent J. Messina and International Market Ventures received was a sham.
In 2014, the Securities and Exchange Commission sued Phil Ming Xu for running a $65 million pyramid scheme that falsely promised fast gains to thousands of foreign investors. It named Messina, Xu’s lawyer, and IMV, an entity run by Messina’s nephew, as relief defendants.
Messina and IMV moved to dismiss the claims against them, arguing that the $5 million was a loan. The district court ruled that Messina and IMV had no legitimate claim to the funds and the Ninth Circuit affirmed. It said there was enough evidence to find that Messina and IMV received ill-gotten gains.
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