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UNITED STATES DISTRICT COURT

DISTRICT OF NEBRASKA

COR CLEARING, LLC, a Delaware limited liability

company,

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Case No. 8:15-cv-00317-LES-FG3

Plaintiff,

vs.

CALISSSIO RESOURCES, GROUP, INC., a

Nevada corporation; ADAM CARTER, an

individual; SIGNATURE STOCK TRANSFER,

INC., a Texas corporation; and DOES 1-50.

Defendants.

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ALPINE SECURITIES CORPORATION’S

RESPONSE IN SUPPORT OF PLAINTIFF COR CLEARING, LLC’S,

MOTION FOR ORDER APPOINTING LIMITED PURPOSE RECEIVER

8:15-cv-00317-LES-FG3 Doc # 43 Filed: 10/30/15 of 18 - Page ID # 268

Alpine Securities Corporation (“Alpine”) respectfully submits this memorandum of law

in support of Plaintiff COR Clearing, LLC’s (“COR”) Expedited Motion for Order Appointing

Limited Purpose Receiver (the “Motion”) in accordance with the Court’s October 20, 2015

Order.

PRELIMINARY STATEMENT

This case arises out of the botched distribution of a fraudulent dividend and the improper

removal of millions of dollars from innocent parties’ accounts. On June 16, 2015, Calissio

Resources Group, Inc. (“CRGP”), a purported mining company, announced that it would pay a

cash dividend of $0.011 per share (the “Dividend”) to the holders of its common shares that were

issued and outstanding as of the close of business on June 30, 2015 (the “Record Date”).

Critically, as of the Record Date, Alpine did not have a single CRGP share in its account at The

Depository Trust Company (“DTC”). Consequently, when DTC distributed the Dividend and

performed its interim account procedures to ensure that the appropriate parties received the

dividend, Alpine’s account should not have been credited with the dividend nor debited to

account for the sale of CRGP shares in existence as of the Record Date. Unfortunately, that is

not what happened. Despite the fact that Alpine’s DTC account did not have any CRGP shares

entitled to the Dividend, DTC debited nearly one million dollars from its account. When Alpine

and others whose accounts were improperly debited, including COR, requested that DTC resolve

the issue, DTC balked and advised that it would only take instructions concerning an adjustment

of the distribution of the Dividend from CRGP or someone acting on its behalf. Although CRGP

has admitted that the distribution was rife with errors, including the improper debiting of

accounts, it has, unfortunately, since been incommunicado. As a result of CRGP’s inaction and

DTC’s recalcitrance, the circumstances warrant the appointment of a limited receiver for the sole

purpose of directing DTC to unwind the Dividend distribution. Indeed, the immediate


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appointment of a limited receiver is the only remedy available to unwind the defective

distribution of the fraudulent dividend and afford the appropriate relief to the aggrieved parties.

STATEMENT OF FACTS

I. THE RELEVANT PLAYERS

A. Alpine and MacAllan

Alpine is a privately held self-clearing stock brokerage and investment firm located in

Salt Lake City, Utah. See Index of Evidence, Ex. 2 (Declaration of Christopher L. Frankel

(“Frankel Decl.”)) ¶ 2. Alpine is registered as a broker-dealer with the United States Securities

and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory

Authority (“FINRA”). (Frankel Decl. ¶ 2.) As part of its business operations, Alpine clears for

correspondent broker-dealers whose customers trade in securities, including over-the-counter

securities such as those issued by CRGP. (Frankel Decl. ¶ 3.) In connection with such

operations, one of Alpine’s correspondent customers, MacAllan Partners LLC (“MacAllan”),

traded in CRGP common stock. (Frankel Decl. ¶ 3.) MacAllan is a Delaware limited liability

company with principal offices in White Plains, New York. MacAllan specializes in providing

financing to micro-cap issuers such as CRGP. (Frankel Decl. ¶ 3.)

B. CRGP

CRGP is apparently a Nevada corporation with a principal place of business in Las

Vegas, Nevada. CRGP purports to be a mining company, focused on the “on the acquisition and

development of base metal projects in Mexico.” See Declaration of David L. Aronoff in Support

of Plaintiff’s Motion for Appointment of Limited Purpose Receiver (“Aronoff Decl.”) at Ex. B,

Ex. 3 of October 5, 2015 Index of Evidence (Dkt. No. 22.). During the relevant time period,

CRGP’s shares traded over the counter. (Aronoff Decl. at Ex. I, Ex. 7 of October 5, 2015 Index


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of Evidence (Dkt. No. 22.).) As of June 30, 2015, CRGP had approximately $143,460,000

commons shares issued and outstanding. (Frankel Decl. ¶ 7.)

C. DTC

DTC is a post-trade financial services company providing clearing and settlement

services to the United States financial markets, including the processing and clearing of CRGP

shares. Declaration of Carlos Salas in Support of Plaintiff’s Expedited Motion for Appointment

of Limited Purpose Receiver (“Salas Decl.”) ¶ 9, Ex. 11 of October 5, 2015 Index of Evidence

(Dkt. No. 22.). Its parent company, The Depository Trust & Clearing Corporation (“DTCC”), is

also the parent company for several other securities clearing agencies. (Frankel Decl. ¶ 4.)

Following the announcement of a dividend, DTC has the authority to distribute the dividend

across qualifying shares. (Aronoff Decl. Ex. A at 32, Ex. 2 of October 5, 2015 Index of

Evidence (Dkt. No. 22.).) DTC first calculates what shares are entitled to fund for the

announcement and then distributes funds based upon that announcement. (Aronoff Decl. Ex. A

at 32, Ex. 2 of October 5, 2015 Index of Evidence (Dkt. No. 22.).) One of DTC’s products is

performing interim accounting, which entails debiting and crediting the accounts of member

clearing firms (of which Alpine is one) in connection with due bills that accompany certain

shares of stock, in the event that dividends are attached to those shares. (Salas Decl. ¶ 9, Ex. 11

of October 5, 2015 Index of Evidence (Dkt. No. 22.).) Due bills are financial instruments used to

document and identify a stock seller’s obligation to deliver a pending dividend to the stock’s

buyer. (Frankel Decl. ¶ 5.) Essentially, when a share that has a dividend “attached” (i.e., coming

due) is sold between the record date and the ex-dividend date, DTC will debit the account of the

seller of that stock (or, in the present case, the seller’s clearing and settlement firm) and credit the

account of the purchaser. (Salas Decl. ¶ 9, Ex. 11 of October 5, 2015 Index of Evidence (Dkt.

No. 22.).)


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As in this case, DTC’s performance of the interim accounting allocations resulted in funds

being debited from accounts not obligated to pay dividends and credited to accounts not entitled to

receive dividends, causing substantial injustice. (Salas Decl. ¶ 9, 17, Ex. 11 of October 5, 2015

Index of Evidence (Dkt. No. 22.).) In such instances, DTC’s policies and procedures permit it to

make adjustments to these transactions:

DTC has a standing practice to only allocate monies upon receipt from

the paying agent, trustee and/or issuer. On occasion, after crediting

participants with a dividend or interest payment, DTC may have to

create a post allocation rate change which may result in either

additional credit or a debt to your account. Reasons to this include but

are not limited to, an error on the part of DTC, the paying agent, trustee

or issuer or a change in the principal factor or rate on a CMO/ABS

security.

DTC accommodates paying agent requests to approve these types of

post-payable adjustments where the adjustments are within [90]

calendar days from the initial payment date.

(Aronoff Decl. Ex. A at 32, Ex. 2 of October 5, 2015 Index of Evidence (Dkt. No. 22.).)

However, DTC’s apparent “standing practice” is to only make these post-payable adjustments upon

the request of the issuer or a party acting on behalf of the issuer. (Frankel Decl. ¶ 6.)

II. THE REPURCHASE AND ANNOUNCEMENT OF THE FRAUDULENT

DIVIDEND

On June 1, 2015, CRGP publicly announced that it would repurchase up to $1.5 million

of the firm’s common shares. (Aronoff Decl. ¶ 3, Ex. B, Ex. 1 & 3 of October 5, 2015 Index of

Evidence (Dkt. No. 22.).) Shortly thereafter, on June 16, 2015, CRGP announced that it would

pay a cash dividend of $0.011 per common share to the holders of its common shares that were

issued and outstanding as of the close of business on a record date of June 30, 2015 (the “Record

Date”). (Aronoff Decl. ¶ 5, Ex. D, Ex. 1 & 5 of October 5, 2015 Index of Evidence (Dkt. No.

22.).) CRGP estimated that setting this Record Date would result in a total cash dividend amount

of approximately $1.3 million, which contemplates roughly 118 million common CRGP shares


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outstanding. (Frankel Decl. ¶ 8.) 1 CRGP’s announcement specified that the dividend on these

shares would be paid on August 17, 2015. Id. (Aronoff Decl. ¶ 5, Ex. D, Ex. 1 & 5 of October 5,

2015 Index of Evidence (Dkt. No. 22.).)

What Calissio failed to disclose in its multiple press releases, however, was that after

June 30, 2015 (the “record date”), it had issued hundreds of millions of new shares of common

stock in connection with the conversion of convertible debt previously issued by Calissio. (Salas

Decl. ¶ 18, Ex. 11 of October 5, 2015 Index of Evidence (Dkt. No. 22.).) These conversions

increased CRGP’s total number of common shares outstanding. Id. Because these new shares

were not issued and outstanding as of the Record Date, they were not entitled to receive the

dividend. FINRA Rule 11120.

III. THE ERRONEOUS DEBITS & DTC’S REFUSAL TO ACT

Following the announcement of the dividend by CRGP, on August 20 and August 24,

2015, DTC improperly debited Alpine’s account, removing a total of $940,500 to pay the

dividends to certain buyers of the shares of CRGP. (Frankel Decl. ¶ 14.) However, at the time

the debits were made, Alpine held no shares of CRGP common stock that were entitled to the

dividend, thus there was no justification for DTC to debit Alpine’s accounts to fund dividends

for buyers of CRGP shares. (Frankel Decl. ¶ 12.)

As discussed above, DTC has an established procedure for correcting such errors.

(Aronoff Decl. ¶ 2, Ex. A at p. 32, Ex. 1 & 2 of October 5, 2015 Index of Evidence (Dkt. No.

22.).) DTC’s Distributions Guide provides DTC with authority to make corrections by crediting

1 The estimated total cash dividend amount of $1.3 million from CRGP’s announcement results from

118,181,818 common shares on the Record Date multiplied by the announced dividend of $0.011 per

common share. The public filings in OTC Market’s website indicate that as of the Record Date the actual

number of CRGP common shares issued and outstanding may have been approximately 143,460,000.

(Frankel Decl. ¶ 8.)


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or debiting participant accounts as appropriate. (Id.) DTC has advised that it will not take any

action without direction from the issuer or someone standing in its shoes. (Frankel Decl. ¶ 15.)

As a consequence of DTC’s refusal to take action, the appointment of a limited receiver is

necessary to remedy the egregious harm that has befallen Alpine.

IV. CRGP’S FRAUDULENT SCHEME

Following the distribution of the funds by DTC, it became clear that CRGP’s intent all

along was to defraud the market. Essentially, CRGP defrauded the market by discreetly issuing

shares of CRGP stock that were not dividend-eligible and then buying back those shares, in a scheme

to take advantage of DTC’s process of collecting funds from companies like Alpine without

verifying whether all of the shares or the recipients were actually eligible.

Further, it has now come to light that as of August 31, 2015, CRGP never funded the new

shares and it now appears that CRGP never had any intention of funding these additional shares.

(Frankel Decl. ¶ 11.) Rather, it seems that it was CRGP’s plan to defraud the market and flee

with the funds, just as it has done. As of this filing, Alpine has found it impossible to reach

CRGP, its website no longer appears active, and as pled in Cor’s Motion, there is reason to

believe that CRGP’s president, Adam Carter (“Carter”), does not actually exist.

ARGUMENT

I. THE COURT SHOULD APPOINT A LIMITED PURPOSE RECEIVER TO

REVERSE THE DISTRIBUTION OF THE FRAUDULENT DIVIDEND AND

THE ERRONEOUS REMOVAL OF FUNDS FROM ALPINE’S ACCOUNT

The appointment of a Receiver “lies within the sound discretion of the district court

‘where necessary to protect the public interest and where it is obvious . . . that those who have

inflicted serious detriment in the past must be ousted.’” U.S. Commodity Futures Trading

Comm’n v. Yellowstone Partners, Inc., 2014 LEXIS 19912, at *7-8 (E.D.N.C. Feb. 18, 2014)

(quoting SEC v. Bowler, 427 F.2d 190, 198 (4th Cir. 1970)). In evaluating the appointment of a


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receiver, courts in the Eighth Circuit consider several factors, including, (1) the validity of the

claim by the party seeking appointment, (2) the probability that fraudulent conduct has occurred

or will occur to frustrate that claim, (3) the likelihood that appointing the receiver will do more

good than harm; (4) the inadequacy of legal remedies and the lack of a less drastic equitable

remedy; and (5) the imminent danger that property will be concealed, lost, or diminished in

value. Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316-317 (8th Cir. 1993);

see also United States SEC v. Marlon Quan, 2012 U.S. Dist. LEXIS 59582, at *17, 19 (D. Minn.

Apr. 30, 2012) (granting appointment of receiver where less drastic measures failed to provide

assurance that investor funds would be protected).

In the case at bar, the relevant factors weigh heavily in favor of the appointment of a

receiver. First, the validity of Alpine’s claim is not subject to reasonable dispute. Indeed, the

available evidence establishes that the distribution of the dividend was fundamentally flawed and

that DTC erroneously removed nearly one million dollars from Alpine’s account. Second, there

are strong indicia that CRGP is little more than a fraud. The evidence of record establishes that

after taking advantage of DTC’s flawed execution of the distribution, CRGP and its president,

Carter, made false and misleading statements to various market participants and committed to

resolving DTC’s defective execution of the distribution, only to vanish into thin air. Third, the

appointment of a receiver will do far more good than harm. A receiver will ensure that any

distribution of funds is conducted in an equitable manner and the improperly transferred funds

are returned to the appropriate DTC accounts. While some market participants may suffer a loss

as a result of the reversal of the dividend, such market participants are not entitled to retain funds

they were never legally entitled to in the first instance. Finally, Alpine has no other available

remedy to secure the reversal of the dividend and the time to do so is running out. DTC has


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made clear that it will only reverse the distribution at the direction of CRGP or someone acting

on CRGP’s behalf. What is more, the expiration of the period within which DTC will unwind

the distribution is rapidly approaching. A limited receiver should be appointed at the Court’s

earliest convenience.

A. DTC Erroneously Transferred Funds From Alpine’s Account to

Shareholders Not Entitled to Receive the Dividend

Alpine has a clear and unmistakably valid claim seeking the return of the funds DTC

erroneously transferred from Alpine’s account and distributed to other DTC members who were

not entitled to receive them. ABM Janitorial Servs. v. Pami Ryan Town Ctr. LLC, 2009 U.S.

Dist. LEXIS 83415, at *6 (N.D. Iowa Sept. 11, 2009) (appointing receiver, in part, because

plaintiffs had stated valid potential claim); Am. Express Travel Related Servs. Co. v. Forest Lake

Ford, Inc., 2008 U.S. Dist. LEXIS 5136, at *7 (D. Minn. Jan. 24, 2008) (same). The dividend

was fraught with error and must be reversed.

1. The Record Date and Ex-Dividend Date Govern Entitlement to

Dividends

The determination of whether a shareholder is entitled to a cash dividend rests on an

examination of two critical dates: (1) the record date and (2) the ex-dividend date. See

Karathansis v. THCR/LP Corp., 2007 U.S. Dist. LEXIS 30772, at *12 (D.N.J. Apr. 25, 2007)

(“under the [Uniform Practice Code], the proper recipient of a distribution is determined by

reference to two dates, the ‘record date’ and the ‘ex-dividend date.’”). It is well established in

the capital markets that the record date is the date by which a beneficial owner must be a holder

of record on an issuer’s shareholder list to be entitled to a dividend. Id. (record date means the

“date fixed by . . . issuer for the purpose of determining the holders of equity securities . . .

entitled to receive dividends . . . or any other distribution”). Pursuant to FINRA Rule 11140, the

ex-dividend date is typically two business days before the record date. However, in certain


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situations, FINRA can set the ex-dividend date for a later date. For example, FINRA Rule

11140(b)(2) provides that the ex-dividend date is the first business day after the payable date

“[i]n respect to cash dividends . . . which are 25% or greater of the value of the subject

security[.]” FINRA Rule 11140(b)(2); see also, e.g., Ruei-Chan v. Merrill Lynch Pierce, Fenner

& Smith, Inc. (In re New York Stock Exch.), 2004 U.S. Dist. LEXIS 18594 (S.D.N.Y. Sept. 7,

2004) (interpreting rule).

Of critical importance here, if a security that is entitled to the dividend based on the

record date is sold before the ex-dividend date, the buyer is entitled to receive the dividend.

Karathansis, 2007 U.S. Dist. LEXIS 30772 at *12(“a holder of a security after the record date

but before the ex-date, which would normally be entitled to receive the dividend, would lose that

right to the buyer”). If, however, the security is sold after the ex-dividend date, the seller of the

security gets the dividend.2 To facilitate the settlement of this type of obligation, broker-dealers

generally attach “due bills” to such sales to ensure the seller covers the amount of a dividend

credited to them by the issuer (because the seller was the holder of record on the record date) that

should be delivered ultimately to the buyer. (Salas Decl. ¶ 13.)

2. Alpine Did Not Have Any CRGP Shares In Its DTC Account On the

Record Date

CRGP announced a cash dividend of $0.011 per share to be paid on August 17, 2015 with

a record date of June 30, 2015. (Aronoff Decl. ¶ 5, Ex. D, Ex. 1 & 5 of October 5, 2015 Index of

Evidence (Dkt. No. 22.).) In particular, CRGP stated that it would make a “cash dividend of

USD$0.011 per common share of [CRGP] to be paid to the holders of the issued and outstanding

Common Shares as of the close of business on June 30, 2015.” (Id.) Pursuant to FINRA Rule

2 See generally SEC Office of Investor Education and Advocacy, Ex-Dividend Dates: When Are You

Entitled to Dividends (October 23, 2014), http://www.sec.gov/answers/dividen.htm


http://www.sec.gov/answers/dividen.htm

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11140(b)(2), FINRA set an ex-dividend date of August 19, 2015. (Frankel Decl. ¶ 10.)

Consequently, only shareholders that held shares of CRGP on June 30, 2015, i.e., the Record

Date, were entitled to receipt of the dividend provided they still held those shares on August 19,

2015. FINRA Rule 11140. In the event holders of CRGP shares on June 30, 2015, sold their

shares before August 19, 2015, the purchaser would have been entitled to receipt of the dividend.

Id.

Alpine’s books and records reflect that as of the Record Date there were no shares of

CRGP common stock in its DTC account. (Frankel Decl. ¶ 12.) Admittedly, certain CRGP

shares were credited to Alpine’s account prior to June 30. Id. Specifically, on June 19, 2015,

MacAllan Partners (“MacAllan”), which is a customer of Alpine, deposited 5.6 million common

shares of CRGP into Alpine’s DTC account. Id. However, MacAllan subsequently sold all of

those shares. Id. As a result, on June 29, 2015, the day before the Record Date, all of the CRGP

shares were delivered out of Alpine’s account to meet settlement obligations. Id. Consequently,

as of the Record Date, Alpine did not have a single share in its account entitled to receive the

dividend. Id.

Additionally, after June 30, but before the ex-dividend date of August 19, 2015, CRGP

issued new shares. (Salas Decl. ¶ 17, Ex. 11 of October 5, 2015 Index of Evidence (Dkt. No.

22.).) These new shares were not issued and outstanding as of the Record Date and, therefore,

were not entitled to receive the $0.011 dividend. Between July 6 and August 13, 2015,

MacAllan deposited approximately 85.5 million of these new CRGP shares into Alpine’s DTC

account. (Frankel Decl. ¶ 13.) MacAllan also sold all of these shares before the ex-dividend

date. Id. As the shares were not entitled to a dividend, these sales should not have traded with

due bills requiring the seller (MacAllan) to pay the dividend to the buyers and therefore should


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not have been subject to DTC’s Interim Accounting process. (Frankel Decl.¶ 13.) Nonetheless,

on August 20 and 24, DTC debited Alpine’s account as part of its Interim Accounting process to

settle CRGP due bills in amounts of $610,500 and $330,000 respectively, totaling $940,500.

(Frankel Decl. ¶ 14.) This $940,500 debit amount matches the due bill amount that would have

been owed if such shares were entitled to the dividend.3 Id. Importantly, they were not and the

seller, MacAllan, has not received any dividend payments from CRGP. See (Frankel Decl. ¶

13.) The transfer of funds out of Alpine’s account to satisfy purported due bills on shares issued

after the record date was simply wrong and must be reversed.

B. There Are Strong Indicia That CRGP Is A Fraud

Courts have consistently held that proof of fraud is unnecessary to establish the need for a

receiver. Aviation Supply Corp., 999 F.2d 317 (holding proof of fraud unnecessary); ABM

Janitorial Servs., 2009 U.S. Dist. LEXIS 83415, at *6 (appointing receiver despite the fact that

“there is little to no probability that fraudulent conduct has occurred); Chase Manhattan Bank, N.

A. v. Turabo Shopping Center, Inc., 683 F.2d 25, 27 (1st Cir. 1982) (affirming appointment of

receiver where defendant had engaged in “unfair and arguably fraudulent conduct). Nonetheless,

the record in these proceedings strongly indicates that CRGP is little more than a fraud. As

described at length by COR, CRGP intentionally flooded the market with non-dividend-eligible

shares in such a way that it triggered DTC’s flawed interim accounting procedures and received

millions of dollars in improper dividends collected from unsuspecting sellers and their brokerage

firms. (Salas Decl. ¶¶ 10, 17-18.) Then, once CRGP’s fraud was discovered, it lied to COR and

others, purporting that the inappropriate collection of dividends was due to a “glitch” and providing a

fake wire transfer that it later “cancelled.” (Salas Decl. ¶¶ 15-16, Ex. F & H, Ex. 11, 13 & 14 of

3 The 85.5 million shares of CRGP multiplied by $0.011 equals $940,500. (Frankel Decl. ¶ 13.)


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October 5, 2015 Index of Evidence (Dkt. No. 22.); Aronoff Decl. ¶ 6, Ex. G, Ex. 1 & 6 of October

5, 2015 Index of Evidence (Dkt. No. 22.).) CRGP’s president, Defendant Carter, then disappeared,

cutting off contact. (Aronoff Decl. ¶ 9, Ex. 1 of October 5, 2015 Index of Evidence (Dkt. No.

22.).)

Further, as addressed by COR, CRGP has deceived the market by asserting that it is an

actual, viable company in the United States, while in reality its purported office space, officers, and

directors do not even exist (at least not in the form put forth by CRGP), and it now only claims to

exist in the unregulated gray market. (Aronoff Decl. ¶¶ 5, 6, 9, Ex. 1 of October 5, 2015 Index of

Evidence (Dkt. No. 22.).) CRGP appears to be nothing more than a shadow corporation, the sole

purpose of which was to defraud the marketplace, including Alpine. Id. Such indicia of fraud clearly

support the appointment of a receiver. Chase Manhattan Bank, N. A., 683 F.2d 27.

C. The Appointment of A Receiver Will Do Far More Good Than Harm

In evaluating whether to appoint a receiver, courts consider whether the appointment will

do more harm than good. Marlon Quan, 2012 U.S. Dist. LEXIS 59582, at *19 (approving

appointment of receiver where there was a “strong likelihood” that receiver would do more good

than harm by ensuring neutrality in distribution of funds); Jackson v. N'Genuity Enters. Co.,

2011 U.S. Dist. LEXIS 113511, at *89 (N.D. Ill. Oct. 3, 2011) (appointing receiver despite

defendants’ argument that appointment of receiver would jeopardize functioning of defendant’s

business). Here, appointing a receiver for the limited purpose of instructing DTC to unwind the

distribution of the dividend will do far more good than harm. A receiver will ensure that any

distribution of funds is conducted in an equitable manner and the improperly transferred funds

are returned to the appropriate account. Indeed, the only way to reverse the harm done to

CRGP’s victims is to appoint a receiver to request DTC to unwind the fraudulent dividend. The


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appointment of a receiver will thus protect the public and any participants in the marketplace

who were harmed by CRGP’s fraudulent actions.

While some market participants may suffer a loss as a result of the reversal of the

dividend, such market participants are not entitled to retain funds they were never legally entitled

to in the first instance. See e.g., Donell v. Kowell, 533 F.3d 762, 770 (9th Cir. 2008) (holding

that investors in a fraud scheme, even if innocent of any fraud themselves, should not be

permitted to enjoy an advantage over other investors who were not so lucky).

D. Alpine Has No Other Available Legal Remedy

In evaluating whether appointment of a receiver is appropriate, courts consider the

availability of an adequate legal remedy available. JP Morgan Chase Bank, N.A. v. Heritage

Nursing Care, Inc., 2007 U.S. Dist. LEXIS 65904, at *29 (N.D. Ill. Sept. 6, 2007) (granting

motion for appointment of receiver because defendants failed to identify legal remedy that would

ensure preservation of funds at issue); Stonebridge Bank v. NITA Props., LLC, 2011 U.S. Dist.

LEXIS 59078, at *7 (D.N.J. June 1, 2011) (granting appointment of a receiver where other

available legal remedy was unlikely to fully compensate plaintiff for losses).

Here, there is no other legal remedy available to Alpine (or any other DTCC member

firm for the matter). First, with regard to DTC, Alpine has explored a myriad of options, each of

which has been rejected by DTC. For instance, Alpine proposed proceeding under DTC’s

internal procedures which permit an aggrieved party to be heard by a panel of other member

firms. (Frankel Decl. ¶ 15.) DTC’s counsel flatly rejected this proposal. 4 Thereafter, DTC

made clear its position that it bears no responsibility for the botched distribution and that

aggrieved parties such as Alpine should resolve the issue with the DTC member firms that

4 Despite DTC’s informal rejection of this avenue of redress, Alpine submitted a hearing request on October

22, 2015. (Frankel Decl. ¶ 16.)


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received Alpine’s funds. Id. However, in what can only be described as the proverbial “Catch-

22,” DTC refused to voluntarily provide Alpine with the names of the relevant DTC member

firms. Id.

Second, with regard to CRGP, as COR has amply demonstrated, as a result of CRGP’s

concealment of funds and refusal to participate in these legal proceedings, any available legal

remedy against CRGP would be inadequate. Aviation Supply Corp., 999 F.2d 317 (finding that

defendants’ refusal to answer questions or participate in legal proceedings made all legal

remedies unavailable). For example, a default judgment awarding Alpine the $940,500 taken

from it and its customers through CRGP’s fraud, would be inadequate, as no funds or other

assets of CRGP’s currently exist that are reachable by an order of this Court. Thus, a money

judgment in favor of Alpine would do nothing to return Alpine and its customers to the position

they were in before CRGP’s fraud, and it will have no practical effect on CRGP or Carter.

The only available remedy is to have DTC make post-payable adjustments in accordance

with its policies and procedures. That adjustment will only happen upon an instruction by the issuer

– here CRGP itself – or someone standing in its shoes. Since CRGP (through Carter) is not going to

voluntarily come out of the woodwork and reverse its fraudulent dividend collection that netted it

millions of dollars from Alpine’s customers and others, the only possible remedy is for a receiver to

instruct DTC to make this adjustment. Accordingly, the appointment of a receiver to direct DTC

to reverse the dividend is the only relief available to ensure that Alpine is made whole.

E. Alpine’s Funds Are in Immediate Danger of Being Lost

Courts have consistently appointed receivers where a party’s funds are in immediate

danger of being lost. ABM Janitorial Servs., 2009 U.S. Dist. LEXIS 83415, at *7 (appointing

receiver where there was an imminent danger that property would diminish in value without

management of receiver); Marolax Handels-Und Verwaltungsgesellschaft MBH v. 898 5th Ave.


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S. Corp., 2008 U.S. Dist. LEXIS 109089, at *8 (M.D. Fla. Dec. 17, 2008) (granting motion to

appoint receiver where “Defendant’s actions, if allowed to continue unchecked, will diminish the

value of the property, put the property at risk of loss, and demonstrate a clear attempt by the

Defendant to hide the income [] from the Plaintiff”).

Here, Alpine’s funds are in immediate danger of being lost. As set forth above, the

appointment of a receiver here is the only remedy available to Alpine and the other aggrieved

parties. Indeed, DTC has made clear that it will only unwind the distribution if directed to by

CRGP or someone acting on its behalf as expressly contemplated in its Service Guide. (Aronoff

Decl. Ex. A at 32, Ex. 2 of October 5, 2015 Index of Evidence (Dkt. No. 22.); Frankel Decl. ¶

15) However, the Service Guide provides that DTC will not make an adjustment if requested

after 90 days following the payment date, i.e., September 13, 2015. (Aronoff Decl. Ex. A at 32,

Ex. 2 of October 5, 2015 Index of Evidence (Dkt. No. 22.).) Accordingly, time is running out. If

a receiver is not appointed for the limited purpose of directing DTC to unwind the distribution,

Alpine (and its customers) will be left without recourse.

CONCLUSION

For the reasons set forth herein, and in the COR Motion, Alpine respectfully requests that

the Court appoint a limited receiver for the purpose of instructing DTC to unwind the dividend.


16

Respectfully submitted,

Dated: October 30, 2015 By: s/ _Michael T. Hilgers_________

Michael T. Hilgers (#24483)

Carrie S. Dolton (#24221)

GOBER HILGERS PLLC 14301 FNB Parkway, Suite 100

Omaha, NE 68154

Telephone: 402.218.2106

Facsimile: 877.437.5755

[email protected]

[email protected]

ATTORNEYS FOR ALPINE

SECURITIES CORPORATION


17

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on this 30rd day of October 2015, a true and correct

copy of the foregoing was filed via the Court’s CM/ECF System, and was served on all counsel of

record.

_s/ Michael T. Hilgers_______________


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