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Case 3:17-cv-00155-KAD Document 62-5 Filed 07lt2lL8 Page 1 of 10

UNITED STATES DISTRICT COURTDISTRICT OF CONNECTICUT

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

MARK J. VARACCHI andSENTINEL GROWTH FLINDMANAGEMENT, LLC,

Defendants,and

RADAR ALTERNATIVE FUND LP And

RADAR ALTERNATIVE MASTER FUND SPC,

Relief Defendants

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Civil Action No.3:17-cv-00155-VAB

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æoRDERAPPRoVINGANDAUTHoRIZINGTHERECEIVER'S(I) POOLING OF ASSETS AND LIABILITIES OF RECEIVERSHIP ENTITIES,

(II) ALLOWANCE OF CERTATN CLATMS, (III) PLAN OF DISTRTBUTIONAND û\A RELATED RELIEF

UPON DUE CONSIDERATION of the Receiver's Motion for Entry of an Order

Approving and Authorizing the Receiver's Proposed (i) Pooling Assets and Liabilities of

Receivership Entities (ii) Allowance of Certain Claims, (iii) Plan of Distribution and (iv) Related

Relief (the "Motion"), and for the reasons provide therein, it is hereby ORDERED AND

ADJUDGED as follows:

1. The Motion be and hereby is GRANTED.

2. For all purposes in the administration of this Receivership Proceeding, all assets

and liabilities of the Receivership Entitiesl be and hereby are consolidated into a single

1 Unless otherwise defined, capitalized terms used in this Order shall have meaning ascribed to them inthe Motion.

Case 3:17-cv-00155-KAD Document 69 Filed 10/04/18 Page 1 of 27

kristengould

Text Box

Case 3:L7-cv-00L55-KAD Document 62-5 Filed 07lL2lL8 Page 2 of L0

Receivership Estate, including for payment of administrative costs, for receipt of third-party

recoveries, and for making distribution to holders of Allowed Claims.

3. The Claims Calculation Methodology, as set forth in Section V of the Motion, is

"fair and reasonable" and is therefore APPROVED.

4. The Claims listed in Exhibit A to the Motion are determined and ALLOWED as

Class 4 Claims in the amounts stated in Exhibit A.

5. The proposed treatment of the Remaining Disputed Claims a set forth in Exhibit B

is fair, reasonable, and will not prejudice the holders of the Remaining Disputed Claims and is

therefore APPROVED.

6. The Rising Tide Method of pro rata distribution-as set forth in Exhibit C to the

Motion-is the most equitable distribution method under the facts and circumstances of this case

and is therefore APPROVED.

7. The classification and treatment of Allowed Claims in the proposed Plan of

Distribution is "fair and reasonable" and is therefore APPROVED.

8. The following procedures governing distributions under the Plan of Distribution

are APPROVED:

(i) Delivery of Distributions in General. The Receiver shall make distributions solely

to the holders of Allowed Claims without regard to any Claim or interest asserted

by any third party in such distributions. Distributions shall be made to the holders

of Allowed Claims at the addresses set forth in the Claims asserted by such holders

on their Proofs of Claim submitted to the Receiver.

(ii) Payments. Distributions shall be made to all holders of Allowed Claims by checks

drawn in United States dollars on a United States domestic bank. The Receiver

evaluated many potential methods of making distributions in this case and has


Case 3:17-cv-00155-KAD Document 62-5 Filed O7lL2lLï Page 3 of L0

determined that the issuance of checks is the only reliable manner that will provide

the Receiver with the ability to comply with applicable law.

(iii) Interest on Cloims.Interest shall not accrue or be paid on any Claim, and no holder

of a Claim shall be entitled to interest accruing on any Claim. Interest shall not

accrue or be paid upon any Claim in respect of the period from the date the Receiver

was appointed to the date this Case is closed.

(iv) No De Minimis Distributio¡¿s. The Receiver shall not be required to make a

distribution to the holder of an Allowed Claim if such distribution is an amount of

less than $100. The Receiver has determined that the cost involved in making

distributions in amounts of less than $100 would not be cost effective. Any holder

of an allowed Claim that does not receive a distribution solely because of this

provision will have such distribution reserved until such time as the holder would

receive a distribution in the amount of $ 100 or more.

(v) Claimant'sRepresentations.

a. By accepting any distribution pursuant to the Plan of Distribution, each

Claimant unequivocally and expressly represents that at no time on or

before the date of their most recently received pre-Receivership

distribution, did that Claimant know or suspect any of the following: (i) that

the Receivership Entities constituted a Ponzi scheme, (ii) that Varacchi had

misappropriated property from the Receivership Entities, (iii) that Varacchi

had fraudulently induced new investors to transfer property to one or more

of the Receivership Entities, (iv) that Varacchi has used newly invested

funds to pay for his personal expenses or to repay prior investors in the

Receivership Entities, or (v) that the Receivership Entities, at all relevant


Case 3:L7-cv*001-55-KAD Document 62-5 Filed 07lL2ltÙ Page 4 oI L0

times, were insolvent. (Each of the foregoing and collectively (i)-(v), the

'oRepresentations");

b. lf , at any time, any of the Representations are determined, pursuant to a final

and no longer appealable order by this Court or any other court of competent

jurisdiction, to have been materially false as of the date of this Court's Order

granting the relief requested by this Motion, the Claimant shall be deemed

to have waived any Claim against the Receivership Estate and shall be liable

to the Receivership Estate for any distributions already received from the

Receivership Estate; and

c. Prior to the commencement of any proceeding against a Claimant to obtain

the final order contemplated by this section, the Receiver must provide at

least 7 days' notice to such Claimant (the "Misrepresentation Notice"). The

Misrepresentation Notice shall contain a reasonably detailed description of

the factual and legal basis of the alleged material misrepresentation.

(vi) Release. Any Claimant who receives a payment pursuant to the Plan of Distribution

shall be deemed to have released that portion of the Claim for which payment was

made in accordance with the Plan of Distribution.

(vii) Forfeited Distributionfor Failure to Deliver Required Tqx Documents to Receiver.

In order to receive a distribution, the holder of an Allowed Claim must submit to

the Receiver either a completed W-9 form, if the holder is treated as a United States

entity or citizen by the Internal Revenue Service, or W-8 form, if the holder is

treated as a non-U.S. entity or citizen by the Internal Revenue Service. The holder

of an Allowed Claim that fails to provide either a W-9 or W-8 form (as applicable)

within 180 days of the entry of the Order Approving Plan of Distribution becoming


Case 3:L7-cv-001-55-KAD Document 62-5 Filed 07lt2lL9 Page 5 of 10

final and no longer appealable shall be deemed to have forfeited any distribution to

which they would otherwise be entitled (a "Forfeited Distribution"). For the holders

of Remaining Disputed Claims if ultimately granted an Allowed Claim, unless they

provide beforehand either a completed W-9 or W-8 form (as applicable)

distributions shall be deemed forfeited and constitute a Forfeited Distribution on

the l8l st day subsequent to such Claimant's Claim being deemed allowed by a final

and no longer appealable order.

(viii) Unclqimed and Undeliverable Distributions.

a. 'oUnclaimed Property" shall mean distributions (i) that are returned to the

Receiver as undeliverable and no appropriate forwarding address is

received within 90 days after such attempted distribution by the Receiver is

made to such holder; (ii) for which the check making such distribution is

not negotiated within 180 days of its issuance and no request for re-issuance

is made within such 180 day period, at which time, such distribution shall

be cancelled through a stop payment order or other means; (iii) a Forfeited

Distribution under Section VI. D. (vii); or (iv) otherwise remaining after

the Final Distribution. The Receiver is under no affirmative obligation to

attempt to locate any holder of an Allowed Claim.

b. If the combined total of Unclaimed Property related to allowed Claims totals

(i) $20,000 or more, the Unclaimed Property shall, subject to Section VI.

D. (iv) ("No de Minimis Distributions") and other relief approved by this

Court in this Motion, be redistributed to the other holders of Allowed

Claims in Class 4 untilthe holders of allowed Claims in Class 4 are paid in

full on account of their allowed Claims in Class 4, and, thereafter,


Case 3:17-cv-001-55-KAD Document 62-5 Filed 07ltZlLÙ Page 6 of 10

distributed by the Receiver to other holders of Claims allowed in the order

of priority established by this Court, or (ii) if less than $20,000, the

Unclaimed Property shall be donated to a non-denominational charity to be

selected at a later date; provided that, all Claims in respect of the Unclaimed

Property shall be deemed disallowed, and the holder or successor to such

holder of any Claim so disallowed will be forever barred, expunged,

estopped and enjoined from asserting any such disallowed Claim in any

manner against the Receiver, the Estate, or their respective property,

notwithstanding any federal or state escheat laws to the contrary.

(ix) Interim Distributior¿s. The Receiver, in his discretion, may make subsequent

interim distributions (in addition to the Proposed Interim Distribution) to the

holders of Allowed Claims entitled thereto by filing a "Notice of Interim

Distribution" setting forth (i) the amount to be distributed, (ii) each Claimant's

proposed distribution, (iii) the percentage recovery of each Claimant's recovery of

Capital Contributed under the Rising Tide Method, and (iv) any amounts to be held

in reserve. The Receiver shall further contemporaneously therewith serve by first

class U.S. Mail, postage prepaid, upon all such holders of Allowed Claims a copy

of the Notice of Interim Distribution, to the address provided in their proof of claim.

Such holders of Allowed Claims may, within twenty-one (21) days of the filing of

the Notice of Interim Distribution, object to such proposed interim distribution

solely on the grounds that the proposed distribution conflicts with the Plan of

Distribution or the Claims Procedure Order, if applicable. By way of example only,

without limitation, such holders of Allowed Claims may not object to the

methodology for calculating the Allowed Amount or the classifrcation of Claims


Case 3:1-7-cv-001-55-KAD Document 62-5 Filed O7lt2lL8 Page 7 ot I0

under the Plan of Distribution or the Claims Procedure Order.

(x) Final Distribution. The Receiver shall make a final distribution to holders of

Allowed Claims entitled thereto in accordance with the procedures contained

herein. Such final distribution shall provide forthe distribution of as much of the

Estate's assets as is possible without causing a disparity inthe pro rqta distribution

to be made on allowed Claims. Any remaining Receivership Assets shall be treated

as Unclaimed Property. Within twenty-one (21) days of making the final

distribution, the Receiver shall file a report with this Court.

(xi) Reserves þr Claims Not Yet Allowed. For the purpose of making interim

distributions, the Receiver shall establish in his discretion and without further order

of this Court reserves for anticipated administrative Claims. The Receiver shall

also establish reserves for all those certain Remaining Disputed Claims. The

reserves shall be sufficient to ensure that if a Remaining Disputed Claim is Allowed

the Receiver shall have funds left to pay such Allowed Claim in the amount

provided for in the Plan of Distribution for such category of Claimant. Upon the

entry of an order that has become frnal and no longer appealable by this Court or

an appellate court of competent jurisdiction and in accordance herewith, such

reserves will be distributed to the holder of the Claim (if the Claim is Allowed),

and/or to the Receivership Estate (to the extent the Claim is Disallowed).

Establishing such reserves will undoubtedly decrease the amount of funds that are

available to be distributed to holders of Allowed Claims on an interim basis. This

is a necessary step in order to provide an interim distribution, however, and as

Claims are determined, the Receiver will be able to release reserves not needed to

provide distributions on account of the Claims for which the reserve was


Case 3:17-cv-00L55-KAD Document 62-5 Filed 07lL2lL8 Page 8 of 1-0

established.

Compliance with Tax Requirements. In connection with the distributions made in

accordance hereto, to the extent applicable, the Receiver shall comply with all tax

withholding and reporting requirements imposed by any governmental unit and all

distributions shall be subject to such withholding and reporting requirements. The

Receiver shall be authorized to take any and all actions that may be necessary or

appropriate to comply with such withholding and reporting requirements.

Compliance with Applicable Law. If an entity is not permitted to receive a

distribution or is required to forfeit any distribution because of any applicable law,

the Receiver requests that he be able to retain such distribution and treat such

distribution as if it were Unclaimed Property unless required to treat such

distribution differently by applicable United States law. This Court finds that the

Receiver will have no personal liability to any holder of a Claim whose distribution

is treated as Unclaimed Property because the Receiver has acted in accordance with

what he believes to be an applicable law.

Binding Effect. The Plan of Distribution shall be binding on the Receiver, the

Receivership Entities, and all holders of Claims against the Receiver, the Receiver's

Counsel, or the Receivership Entities, whether or not such claims have been timely

asserted.

Noncompliance with the Order Approving Plan of Distribution. The Receiver shall

report any parties' noncompliance with the provisions of the Order Approving Plan

of Distribution and may move to enforce compliance by fìling a motion for

contempt.

Preservation of Causes of Action. The Receiver shall retain and may enforce all

(xii)

(xiii)

(xiv)

(xv)

(xvi)


Case 3:L7-cv-00L55-KAD Document 62-5 Filed O7lt2lL8 Page 9 of 10

rights to commence and pursue, as appropriate, any and all causes of action, on

behalf of the Receivership Entities and the Receivership Estate, whether arising

before or after the Receiver's appointment, and the Receiver's rights to commence,

prosecute, or settle such causes of action shall be preserved notwithstanding the

entry of the Order Approving Plan of Distribution. The Receiver may pursue such

causes of action, as appropriate, in accordance with the Receivership Orders and

the best interests of the Receivership Entities. No person may rely on the absence

of a speciflrc reference in the Plan of Distribution to any cause of action against such

person as any indication that the Receiver will not pursue any and all available

causes of action against such person, and, therefore, no preclusíon doctrine,

including the doctrines of res judicata, collateral estoppel, issue preclusion, claim

preclusion, estoppel (udicial, equitable or otherwise), or laches, shall apply to

causes of action upon, after, or as a consequence of the Court's entry of its Order

Approving Plan of Distribution.

(xvii) Receívership Orders Not Superseded. To the extent there is any conflict between

the Plan of Distribution and the Receivership Orders, the Plan of Distribution shall

control only to the extent necessary to effectuate the Distribution scheme set forth

herein.

(xviii) SEC Actions Unaffected by Plan of Distributio¡r. Notwithstanding anything in these

Distribution protocols or any other provision of the Plan of Distribution, nothing in

the Plan of Distribution shall discharge, waive, settle, release or preclude any

current or future legal action or claim that has been or may be brought by the SEC.


Case 3:17-cv-00L55-KAD Document 62-5 Filed O7ll2lLB Page 10 of L0

9. The Asset Freeze Order is hereby MODIFIED to authorize, permit and direct the

Receiver to take any and all actions reasonably necessary and appropriate to establish the Reserve

Account as contemplated by the Motion.

10. Subject to the requirement that the Receiver establish adequate reserves under the

Plan of Distribution, the Receiver is AUTHORIZED to make an initial distribution in the amount

of $3,100,000.

1 I . As to contested matters, causes of action, or threatened causes of action, nothing in

the Plan of Distribution shall constitute or be construed as an admission of any fact or liability,

stipulation, or waiver, but rather as a statement made in settlement negotiations.

12. The Plan of Distribution shall not be construed to constitute advice on the tax and

other legal effects of the Plan of Distribution as to claims against the Receivership Entities.

13. Except to the extent that federal law is applicable or the Plan of Distribution

provides otherwise, the rights and obligations arising under the Plan of Distribution shall be

governed by, and construed and enforced in accordance with, the laws of the State of Connecticut

without giving effect to its conflicts of law principles that would result in the application of any

other law.

14. The Court retains jurisdiction over the matters set forth in the Plan of Distribution

and enforcement of its provisions.

It iS SO ORDERED

Dated: 2018

I1o'rl *yUNITED STATES DISTRICT JUDGE


kristengould

Text Box

/s/ Kari A. Dooley, USDJ

kristengould

Text Box

Case 3:L7-cv-001-55-KAD Document 62-1 Filed O7ll2lt8 Page 1 of 8

EXHIBIT A


Case 3:17-cv-001-55-KAD Document 62-l- Flled 07lIZlLl Page 2 ot 8

EXHIBIT A

s349,154.24

ProposedAllowed ClaimAmounts49,091.74

$71,800.00

The Receiver identified $60,567 in payments to Mr. Sanfilippo whichwere not included in the submitted proof of Claim. Additionally, the

Receiver identified significant interest payments totaling 590,27 8.7 6

on account of two short term loans (May 2015 and June 2015), as

follows:

5l5ll5 Loan of $900,000o Repaid on 5lllll5: 6-day loano Interest payments :526,219-18o Annual Interest Rate (365 days): 177.2075%

Grounds for Objection

The Receiver recommends that this Claim be allowed in the amountsubmitted on the Proof of Claim, which is consistent with the

Receivership records.

Anchor Associates' Claim was based on unpaid rent for December

2016-August of 2017 and other costs/fees related to Sentinel's pre-

appointment breach of a lease. After reviewing the documentation,the Receiver discovered that Mark Varacchi, at the request of AnchorAssociates, had executed an affidavit of surrender in February 2017.

The Receiver took the position that the affrdavit had effectively re-

conveyed the leasehold back to Anchor Associates, thus terminatingthe lease and Sentinel's obligation to pay rent from February of20l7onward. See Elliot v. Polny, 132 Misc. 2d 236,238, 503 N.Y.S.2d673,674-75 (Civ. Ct. 1986).

Recognizing that litigation of this legal theory would not be costeffective to the Receivership Estate, the Receiver proposed allowingAnchor Associates' Claim in the reduced amount of $71,800.00.Anchor Associates consented to the Receiver's proposed treatment ofits Claim.

$0

s72,267.59

s 150,845.76

DisputedAmount

SubmittedClaim Amount

$49,091.74

s144,067.59

$500,000.00

Abacus Group

AnchorAssociates

AnthonySanfilippo

Claimant


Case 3:l-7-cv-001-55-KAD Document 62-l- Filed 07lI2lLB Page 3 of 8

s100,000.00

s500,000.00

a 618l15 Loan of $ I .5Mo Repaid on 6/16115: 8-day loano Interest Payments = $64,059.58o Annual Interest Rate (365 days): 194.8735%

Given the annual interest rate of the loans and the context in whichthey were paid (specifically, that the investment platform constitutedaPonzi scheme and the loan enabled the Ponzi scheme to continue),these "interest" payments would be avoidable as fraudulentconveyances. See Cullinv. Silverman, No. l4-CV-4248 (IMA),2015U.S. Dist. LEXIS 42935, at *13 (E.D.N.Y. Mar. 31, 2015) (findingloans with annualized interest of 48%o unreasonable and thereforeavoidable under UFTA); see also Daly v. Deptula (In re Carrozzella& Richardson), 286 B.R. 480, 491 (D. Conn. 2002) (applyingConnecticut's Uniform Fraudulent Transfer Act and stressing that theannual interest rates paid to investors, which ranged ftom 8o/o-l5Vo,were reasonable and that [t]his was not the typical 'too-good-to-be-true' investment scheme").

After reviewing the circumstances surrounding these short-term loansand finding no reason to believe Mr. Sanfilippo lacked good-faith inmaking them, the Receiver proposed to treat the 590,278.76 in interestpayments as further redemptions against Mr. Sanfilippo's initial$500,000.00 capital contribution.

Applying the Claims Calculation Method, the Receiver proposed toreduce the Claim to $349,154.24. The Claimant consented to theReceiver's proposed treatment.

The Receiver recommends that this Claim be allowed in the amountsubmitted on the Proof of Claim, which is consistent with the ClaimsCalculation Method and the Receivership records.


s0

$0

$100,000.00

$500,000.00

Brian J.

McLaughlin

Carol Ferrante


Case 3:17-cv-001-55-KAD Document 62-l- Flled 07lL2lIÙ Page 4 of 8

s4,887.62

$0

$400,000.00

$300,000.00

$920,000.00

The Receiver recommends that this Claim be allowed in the amountsubmitted on the Proof of Claim, which is consistent with theReceivership records.

The Claimant is a former employee of Sentinel. The basis for hisClaim is recovery for unpaid bonuses promised by Varacchi. Afterreviewing the Claimant's employment agreement, the Receiver

determined that his right to a bonus payment was entirelydiscretionary and that his Claim against the Receivership Estate was

unenforceable and unsupported by the Receivership Records. TheReceiver contacted the Claimant to inform him of these conclusions.

Based on that conversation, the Claimant agreed to withdraw his

Claim.

The Receiver recommends that this Claim be allowed in the amount

submitted on the Proof of Claim, which is consistent with the ClaimsCalculation Method and the Receivership records.

The submitted Proof of Claim stated the total Claim as *$300,000.00

* investment gains/interest". The Receiver contacted the claimant toexplain that the Claims Calculation Method did not allow for Claimsfor gains or interest above the initial capital contribution. The

Claimants consented to the Receiver's proposed treatment of theirClaim.

The Receiver identified $30,000.00 the submitted Claim which was

never received by the Receivership Entities. The Claimant's recordsindicate that it had wired a payment of $250,000.00 to Sideris Capital,

a Steven Simmons' related entity, of which only $220,000.00 was

transferred to Sentinel. Upon information and belief, the $30,000.00was likely fraudulently withheld by Steven Simmons. The Receiverproposed areduced Claim of $920,000.00 and the Claimant consentedto the Receiver's proposed reduction of its Claim.

$30,000.00

s0

$75,000.00

$0

Gains/Interest

s4,887.62

$7s,000.00

$400,000.00

$300,000.00

$950,000.00

CogentCommunications,Inc.

Joseph Conetta

ConstantineGeneralis

Donald Foleyand BarbaraLong

DartleyGrandchildren,LLC


Case 3:17-cv-001-55-KAD Document 62-l- Filed 07lL2lL9 Page 5 of 8

s4,014,992.62

s40,750.00

s5,000,000.00

$0

s2,850,000.00

The Receiver identified 5481,122.66 in payments to the Claimantwhich were not included in the submitted proof of Claim. TheReceiver contacted the Claimant to reconcile the disparity in amountsbetween the submitted Claims and the Receivership records. Uponfurther review, the parties determined that theClaimant had received the $481,122.66 and the Claimant consentedto the Receiver's proposed treatment of its Claim.


submitted on the Proof of Claim, which is consistent with theReceivership records.

Applying the Claims Calculation Method, the Receiver determinedthat $1,606,598.22 of the claimed amount constituted "false profits".The Receiver contacted GRTD, LLC and informed it that its Claimwould be allowed in the reduced amount of $5,000,000.00 whichrepresented its initial capital contribution. The Claimant consented tothe Receiver's proposed treatment of its Claim.

The basis of this Claim is the net profit and loss attributable to theOak Bluffs Capital account for NovemberlDecember 2016.Accordingly, this Claim is based on "false profits". The Receivercontacted the Claimant to inform it that the Receiver would object toany Claim for "false profits" and the Claimant agreed to withdraw itsClaim.

The Receiver identified $90,000.00 in payments to Kristian andYolanda Agogilia which were not included in the submitted proof ofClaim. The Receiver contacted the Claimants to propose a reducedClaim of 52,850,000.00 and the Claimants consented to theReceiver's proposed treatment of their Claim.

s481,122.66

$0

st,606,598.22

$72,710.00

$90,000

s72,710.00

s4,496,205.28

s40,750.00

s6,606,598.22

$2,940,000.00

Flatiron Partners

GreyboxCreative

GRTD, LLC

Oak BluffsCapital, LLC

Kristian andYolanda Agoglia


Case 3:l-7-cv-001-55-KAD Document 62-l- Ftled 07lL2lL9 Page 6 of I

$0

$ r, r 03,663.4s

$115,000.00

The Receiver recommends that this Claim be allowed in the amountsubmitted on the Proof of Claim, which is consistent with the ClaimsCalculation Method and the Receivership Records.

The Receiver's review of the Receivership records identified$141,000.000 in payments to Evridiki Demopoulos ("Demopoulos")and Atlas Construction of New York, Inc. ("Atlas") made by theReceivership Entities for the benefit of Melva Construction Company("Melva").

Atlas had invested $44,000.00 with the Receivership Entities, and

received payments totaling $137,500.00. Consequently, Atlasreceived $93,500.00 in "false proftts" from the Ponzi scheme.

Demopolous, the principal of Atlas, had personally received

$47,500.00 in payments on behalf of Melva.

The Receiver contacted Melva regarding its arrangement with Atlas.Melva's principal confirmed that it had invested together with Atlasand that any payments made to Atlas or Demopolous should be

considered payments to Melva.

Applying the Claims Calculation Method, the Receiver proposed

allowing Melva's Claim in the amount of $115,000.00. Melvaconsented to this proposed treatment of its Claim.

The Claimant is a former employee of Sentinel. The basis for thisClaim is recovery for lost salary and COBRA expenses incurred due

to her termination in February 2017. After reviewing the Claimant'semployment agreement, the Receiver determined that her

employment was "at-will" and that her Claim against the

Receivership Estate was unenforceable. The Receiver contacted the

Claimant to inform her of his conclusions. Based on that conversation,

the Claimant agreed to withdraw her Claim.

$0

$141,000.00

s10,720.00

$1,103,663.45

$256,000.00

$10,720.00

Masotti ManagedInvestments,LLCMelvaConstructionCompany/AtlasConstruction ofNew Yorh Inc.

Nevena Vatachka


Case 3:17-cv-00155-KAD Document 62-L Filed 07l12lLB Page 7 of I

993,283.36

s0

$500,000.00

The Receiver's review of the Receivership records identified$162,085.64 in payments to Brian Rabinowitz ("Rabinowitz") madeby the Receivership Entities for the benefit of Terry Gargano("Gargano") and Powerplay Marketing ("Powerplay"). The Receiveralso identihed $4,632.00. in payments to Gargano which were notincluded in the submitted proof of Claim.

Rabinowitz invested $75,000 with Sentinel and received payments

totaling $162,085.64 from Sentinel. Consequently, Mr. Rabinowitzreceived "false profits" from the Sentinel Ponzi scheme in the amount

of $87,084.64.

The Receiver contacted the attomey for Rabinowitz, Gargano, andPowerplay regarding the investment arrangement among them. Theirattorney confirmed that Rabinowitz had invested together withGargano and Powerplay and that any payments made to Gargano orPowerplay should be considered payments on account of a singleinvestment vehicle. Applying the Claims Calculation Method, theReceiver proposed allowing the combined Claim ofRabinowit/GarganoÆowerplay in the amount of $93,283.36 and the

Claimants consented to the Receiver's proposed treatment of theirClaims.

The basis of this Claim is the unpaid manager fees/commissionscalculated based on the "false profits" of the Claimant's managedaccount. Accordingly, this Claim is based on "false profits". TheReceiver contacted the Claimant to inform it that the Receiver wouldobject to any Claim for "false profits". Based on that conversationthe Claimant agreed to withdraw its Claim.

The basis of the objection portion of this Claim is an undocumented80% credit for clearing fees which the Claimant alleged Varacchi had

agreed to pay. The Receiver reviewed the Receivership records butcould not find any documentation supporting the Claim. The Receivercontacted the Claimant to inform him that the Receiver would objectto any Claim undocumented or legally unenforceable Claim, and theClaimant consented to a reduced Claim of $500,000.00 - the amountof its initial capital contribution.

s91,716.64

$33,003.14

$18,603.11

$100,000.00

$85,000.00

$33,003.14

s518,603.1 I

PowerplayMarketinsTerry Gargano

Recovery Fund I,LLC (Claim #l)

Recovery Fund I,LLC (Claim#2)


Case 3:17-cv-00155-KAD Document 62-l- Flled O7lL2lL8 Page 8 of 8

$1,000,000.00

$18.107,902.92

$100,000.00

8151,554.92

s 121,809.50

s32t,915.47

The Receiver recommends that this Claim be allowed in the amountsubmitted on the Proof of Claim, which is consistent with the ClaimsCalculation Method and the Receivership Records.


The Receiver identified $16,690.00 in payments to TAM Industries,

LLC which were not included in the submitted proof of Claim. The

Receiver contacted the Claimant to propose a reduced Claim ofS121,809.50 and the Claimant consented to the Receiver's proposed

treatment of their Claim.


submiued on the Proof of Claim, which is consistent with the ClaimsCalculation Method and the Receivership Records.

Applying the Claims Calculation Method, the Receiver determined

that $2,013,383.88 of the claimed amount were "false profits". TheReceiver contacted the Claimant and informed him that his Claimwould be allowed in the reduced amount of $1,000,000.00 whichrepresented his initial capital contribution. The Claimant consented tothe Receiver's proposed treatment of his Claim.

$0

$0

$16,690.00

$0

$2,013,383.88

$4.903.661.00

$100,000.00

$151,554.92

$138,499.50

s321,915.47

$3,013,383.88

$23,011,653J2

Scott K. Banerjee

Shuhei Sato

TAM Industries,LLC

Thomas MilanaJr.

Todd Deutsch

TOTAL


Case 3:1-7-cv-001-55-KAD Document 62-2 Filed O7lLZlLï Page t of 7

EXHIBIT B


Case 3:17-cv-001-55-KAD Document 62-2 Filed 07f.2i1.8 Page 2 oÍ 7

EXHIBIT B

Proposed Interim Treatment

The Receiver proposes to hold inreserve the full amount to whichAdvanced Entertainment, LLC wouldbe entitled if its submitted Claim wereAllowed in full under the ProposedInterim Distribution until 1) it is

determined whether the $300,000transfer to I27 Holdings, LLC should be

attributed to Advanced Entertainment,LLC, and 2) the Receiver receivesadequate assurances that anydistribution from the ReceivershipEstate on account of AdvancedEntertainment, LLC 's Claim will godirectly to the investors of AdvancedEntertainment, LLC.

Grounds for Objection

Advanced Entertainment, LLC was one of the entitiescontrolled by Joseph Meli ("Meli") and used inconnection with Meli's multimillion dollar Ponzischeme involving purported resales of tickets to popularconcerts and Broadway shows. See Securities andExchange Commissionv. Joseph Meli, et al., No. l7-CV-6s2 (S.D.N.Y.)

Meli was arrested in January 2017 and later pleadedguilty to securities fraud. See United States v. Steven

Simmons and Joseph Meli,No. L7-CR-I27 (S.D.N.Y.)In connection with his plea, Meli admitted to raisingmillions of dollars from investors including byproviding some investors with fake agreements

containing fraudulent signatures that claimed to showMeli's company had agreements with various productionand management companies to purchase large blocks oftickets.

On April 3, 2018, the District Court for the SouthernDistrict of New York sentenced Meli to 78 months'imprisonment followed by three years of supervisedrelease and ordered him to pay forfeiture in the amountof $104,765,565. On June2l,2018, the Court entered an

order providing that Meli shall pay restitution of856,037,924-28to the victims of his Ponzi scheme.

DisputedAmount

$300,000

SubmittedClaimAmount$3,550,000

Claimant

AdvancedEntertainment,LLC


Case 3:l-7-cv-001-55-KAD Document 62-2 Flled 071121L8 Page 3 of 7

It is undisputed that Meli caused AdvancedEntertainment, LLC, to make a number of transfers tothe Receivership Entities in the aggregate amount of$3,550,000.

However, the Receiver has identified a $300,000transfer from the Receivership Entities to 127 Holdings,LLC, another Meli Ponzi scheme entity, which may be

fairly attributable to Advanced Entertainment LLC'sClaim.

Based upon Meli's apparent participation in the Ponzischeme involving the Receivership Entities and, at thevery least, his lack of good faith in connection with histransactions with the Receivership Entities, groundsexist to object to this Claim.

Notwithstanding, in furtherance of the equitablepurposes of this Receivership Proceedings, the Receiverhas sought to establish a mechanism to ensure that thevictims of Meli's Ponzi scheme would receive anydistributions made by the Receiver in this proceeding, as

a condition to the Allowance of this Claim.

The Receiver has been coordinating with the SEC, theOffrce of the United States Attomey for the SouthernDistrict of New York, and Meli's afforneys to make thispossible. Any such arrangement and Allowance of thisClaim will be subject to this Court's approval.


Case 3:L7-cv-00155-KAD Document 62-2 Ftled 07112118 Page 4 of 7

The Receiver has included SarroffsClaim in the Proposed InterimDistribution solely for the purpose ofcalculating the Rising Tide Method.

Based upon the Rising Tide Method ofdetermining distribution amounts(assuming this Court approves itsapplication), Sarroff, as a "net winner,"would not be entitled to any distributionfrom the Receivership Estate.

Therefore, it is not necessary to reserveany amount to avoid prejudice toSarroff. The Receiver anticipates that he

will file a formal objection to SanoffsClaim after the resolution of the SarroffAction.

The Receiver has included ICBC'sClaim in the Proposed InterimDistribution solely for the purpose ofcalculating the Rising Tide Method.

The Receiver proposes to reserve

$34,730 (the amount sufficient to payICBC as a Class 3 secured Claimant)until such time that its Claim is allowedfollowing the Receiver's formalobjection pursuant to the ClaimsProcedure Order.

The Receiver has initiated litigation against Sarroff torecover all transfers he received. Such action iscaptioned Jed Horwitt Esq., Receiver v. Alan Sarrof etal., (Civil Action No. : 3 : I 7-cv-0 1 902-VAB, the "SarroffAction") and presently pending before this Court. TheSarroff Action has been referred to Judge Richardson fora settlement conference to be held on July 30,2018.

Until the Sarroff Action is finally adjudicated, theReceiver submits that no action should be taken withrespect to this Claim. Additionally, Claimant A.L.Sarroff Management, LLC (Sanoff) was a "net-winner"under the Ponzi scheme in the amount of $767,409.00.

The Receiver is investigating (i) potential claims of theReceivership Estate that may be used to set off theamount claimed by ICBC, and (ii) the secured status ofICBC's Claim.

$1,200,000

s34,730

$1,200,000

s34,730

A.L. SarroffManagement,LLC

IndustrialBank of ChinaFinancialServices(rcBC)


Case 3:17-cv-00155-KAD Document 62-2 Filed 07lL2lLB Page 5 of 7

The Receiver proposes to hold inreserve the full amount to which theClaimant would be entitled assumingonly the payments the Claimant actuallyreceived are credited against her initialcapiøl contribution.

In the event that the Receiver is unableto reach a compromise with theClaimant, the Receiver anticipates filinga formal objection to the Claim pursuantto the Claims Procedure Order.

The Receiver identified $2,568,950 in payments madefor the benefit of the Claimant to Mind the GapConsulting, a Steven Simmons controlled entity, whichwere not included in the submitted proof of claim. TheClaimant provided documentation to demonstrate thatthe Claimant had received only $662,000 of the$2,568,950 transferred to Mind the Gap and that theremaining $1,906,950 had been fraudulently withheldby Steven Simmons. The Claimant also provided theReceiver with evidence that Varacchi had representedhimself as COO of Mind the Gap's investment managerSideris Capital (another entity controlled by SteveSimmons) and conspired with Simmons to defraud theClaimant and other investors. The Claimant argued thattransfers made by Sentinel to Mind the Gap should notdiminish the Claimant's Claim because Varacchi madesuch transfers to his co-conspirator with knowledge thatSimmons was defrauding the Claimant.

The Receiver's investigation has - to a significant extent- corroborated the Claimant's assertions.

The Receiver discovered that Varacchi had madeapproximately $37,000 in payments to Mind the Gapprior to Mind the Gap holding the Claimant'sinvestment. Varacchi stated that he would regularly loanmoney to Simmons through Mind the Gap both beforeand during the time the Claimant had invested with Mindthe Gap.

Also, the Receiver uncovered that $700,000 of theClaimant's investment had been directly transferredfrom Mind the Gap to Varacchi's personal checkingaccount in August of 2014, shortly after the Claimantmade her investment with Mind the Gap.

$ 1,906,950$4,038,000Neila Fortino


Case 3:l-7-cv-001-55-KAD Document 62-2 Flled 07lLZlLl Page 6 of 7

The Receiver has included the

QuadranlOrso Claim (withoutdeducting the $300,000 kick-back or the$351,901 loaned) in the ProposedInterim Distribution solely for thepurpose of calculating its distribution inthe event it is Allowed pursuant to theClaims Procedure Order.

Even without deducting the $300,000kick-back or the $351,901 loaned, the

QuadranlOrso Claim received pre-Receivership distributions amount to88.8% of its capital contributed.

Since the Proposed Interim Distributionrises the tide of recovery to only 20.1%o,

it is unnecessary to reserve any amountfor the QuadranlOrso Claim as itsrecovery (again, without deducting the$300.000 kick-back or the $351.901

Finally, in late 2015, Simmons admitted to Varacchi thatSimmons had caused Mind the Gap to incur signihcanttax liability by taking funds from the Claimant.

The Receiver's investigation also uncovered evidencethat the Claimant may have had inquiry notice ofVaracchi's scheme as early as July 14,2016.

The Receiver believes that the parties may reach acompromise regarding the Allowed Amount of theClaimant's Claim, but that such compromise is unlikelyto be finalized in the short-term.

The Receiver's investigation of Quadrant Plus, LP's("Quadrant") submitted Claim revealed numerousgrounds for objection.

All payments from the Receivership Entities on accountof Quadrant's investment were made to Orso CapitalManagement ("Orso") - Quadrant's investment manager- or else to Opus Fund Services USA, LLC ("Opus"),

Quadrant's fund administrator. This paymentarrangement complicated calculation of Quadrant'sClaim. Ultimately, the Receiver determined that theentities should be treated as a single Claimant. However,this determination complicates matters fuither for tworeasons.

First, prior to Sentinel receiving any investment from

Quadrant, Varacchi caused Sentinel to become a 30%o

owner of Orso and transferred over $300,000 in Sentinelfunds to Orso in exchange for Orso bringing Quadrant'sinvestment to the Sentinel platform. This transactionwas in the nature of a kick-back or commission of the

$465,430s465,430QuadrantPlus, LPlOrsoCapitalManagement


Case 3:1-7-cv-001-55-KAD Document 62-2 Filed 07lt2lL9 Page 7 of 7

loaned) begins only once the Receiverhas distributed 521,824,546.81 inReceivership Assets.

The Receiver anticipates filing a formalobjection to the QuadranlOrso Claim inthe event that such Claim would becomeentitled to a distribution under theRising Tide method without deductingthe $300,000 kick-back or the $351,901loaned.

kind which typicallyjustifies disallowance of a Claim inSEC receiverships. Since the Receiver considers thetransfers to the QuadranlOrso/Opus entities on a

consolidated basis, the Receiver believes these transfersshould reduce the total Claim.

Further complicating the matter, Orso's manager -Andrew Lydon - received an additional $351,901 in"loans" from Varacchi/Sentinel during the course of thePonzi scheme. These transfers were made to Orso - notto Lydon individually. Upon information and belief, theloans were made and used to keep Orso operational.Again, since the Receiver considers the transfers to the

Quadranlorso/Opus entities on a consolidated basis, theReceiver believes these transfers should reduce the totalClaim.

Once all the transfers are accounted for the

QuadranlOrso/Opus entities appear to be net-winners inthe amount of $125,893.

$3,907.110s9.288"160TOTAL


Case 3:17-cv-00L55-KAD Document 62-3 Filed O7lt2lt8 Page L oÍ 2

EXHIBIT C


Case 3:17-cv-001-55-KAD Document 62-3 Filed OT|IZ|LB Page 2 ot 2

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