cOR Clearing, LLC v. Calissio Resources Group, Inc. et al Doc 21 filed 05 Oct 15.pdf

8/20/2019 cOR Clearing, LLC v. Calissio Resources Group, Inc. et al Doc 21 filed 05 Oct 15.pdf

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UNITED STATES DISTRICT COURT

DISTRICT OF NEBRASKA

COR CLEARING, LLC, a Delaware limited

liability company,

Plaintiff,

v.

CALISSIO RESOURCES GROUP, INC., a Nevada corporation; ADAM CARTER, anindividual; SIGNATURE STOCK TRANSFER,INC., a Texas corporation; and DOES 1-50.

Defendants.

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)))))))))))

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

BRIEF IN SUPPORT OF EXPEDITED

MOTION FOR ORDER APPOINTING

LIMITED PURPOSE RECEIVER

Plaintiff COR Clearing, LLC (“COR Clearing”) respectfully requests that, on an

expedited basis, this Court appoint a Receiver for defaulted defendant Calissio Resources

Group, Inc. (“Calissio”) for the limited purpose of instructing The Depository Trust & Clearing

Corporation (“DTCC”), which is responsible for processing securities transactions, to make post-

payable adjustments in accordance with its policies and procedures. COR Clearing recommends

that Ronald F. Greenspan, Esq. be appointed as Receiver as soon as practicable. Such an order is

necessary because Calissio and its affiliates have defrauded COR Clearing and its customers and

have absconded with some ill-gotten funds, as evidenced by, among other things, its default in

this case, and an order from the issuer (Calissio) to DTCC to make these post-payable

adjustments is the only way to prevent Calissio from being unjustly enriched at others’ expense.

The order is needed on an expedited basis because Calissio is in default, and the order will be

rendered ineffectual if the Receiver’s instruction is not given within DTCC’s 90-day period in

which its policies provide to adjust these transactions, which period commenced running on or

8:15-cv-00317-LES-FG3 Doc # 21 Filed: 10/05/15 Page 1 of 21 - Page ID # 68


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about August 20, 2015. COR Clearing also proposes to give notice to all potentially affected

parties to ensure full transparency and adequate opportunity to be heard.1

I. INTRODUCTION

Calissio is a shadow company operating in the unregulated gray market of stock trading,

without any supervision by an established stock exchange such as NASDAQ or the NYSE.

Calissio also has no tangible physical presence in the United States. Calissio has operated in this

manner as cover to defraud the market and steal COR Clearing’s and its customers’ money, and

likely other victims of its scheme as well. Most importantly for purposes of this Motion, Calissio

ultimately refused to take the necessary steps to return the funds to their rightful owners, as

illustrated its president’s e-mail to COR Clearing’s CEO upon Calissio’s receipt of this lawsuit

and Calissio’s subsequent default. As a result, normal legal remedies are inadequate to remedy

the harm caused by Calissio.

Fortunately, DTCC, the entity responsible for processing trillions of dollars of securities

transactions in the United States on a daily basis, has in place post-payment adjustment policies

and procedures that can assist COR Clearing and its customers by reversing the wrongful

transaction if so instructed by Calissio or, as requested here, a Receiver on its behalf. According

to the DTC Distributions Service Guide:

DTC has a standing practice to only allocate monies upon receiptfrom the paying agent, trustee and/or issuer. On occasion, aftercrediting participants with a dividend or interest payment, DTCmay have to create a post allocation rate change which may resultin 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 orrate on a CMO/ABS security.

1 See infra Section IV and the [Proposed] Order Requiring Notice to Affected Parties by Appointment of LimitedPurpose Receiver lodged concurrently herewith.



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DTC accommodates paying agent requests to approve these typesof post-payable adjustments where the adjustments are within [90]calendar days from the initial payment date.

Under this policy, if the issuer (Calissio) requests that DTCC make a post-payable adjustment,

DTCC will reverse a transaction to put the parties back in the position they were before it

occurred. In this case, Calissio – a defaulting party that is being unjustly enriched, along with its

affiliates, by the transaction at issue – will not voluntarily instruct DTCC to adjust the dividend

transaction that wrongfully netted Calissio millions of dollars to which it is not entitled and has

not responded to this court in the present action. Therefore, the solution is for a Receiver to be

appointed on behalf of Calissio for the limited purpose of instructing DTCC to make this

adjustment in Calissio’s stead. COR has identified Ronald F. Greenspan, Esq. as having the

appropriate qualifications for this Receivership.

This appointment and instruction should occur swiftly to fall within DTCC’s proscribed

90 day period and provide adequate time for affected parties to be heard by this Court. Without

the appointment of a Receiver and the giving of the instruction within this time period provided

by the DTCC procedures, there is no foreseeable path for remedying Calissio’s unjust

enrichment at the expense of COR Clearing, its customers, and countless others in the

marketplace. Thus, an order appointing this Receiver to instruct DTCC, pursuant to its policies

and procedures, to make the necessary post-payable adjustment is required to undo the damage

wrongfully caused by Calissio.

II. REQUEST FOR EXPEDITED HEARING AND ORDER

COR Clearing respectfully requests that this Motion be heard on as expeditious basis as

possible to avoid irreparable harm. The relief sought here – the appointment of a Receiver to

Calissio to instruct DTCC to reverse improper charges assessed against innocent parties that

resulted in a fraudulent gain by Calissio and its affiliates – needs this Court’s immediate



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attention because of the looming deadline under DTCC’s procedures to receive that instruction,

which is estimated as November 13, 2015 based on the running of 90 days from the payment

date of August 17, 2015. Because of the lead time required to identify a Receiver and have the

Receiver educate him/herself on the subject transaction, COR Clearing respectfully requests that

the notice to affected parties and hearing on this matter be held in accordance with the proposed

order.

To the best of COR Clearing’s knowledge, this Motion will be unopposed because

(1) Calissio is in default and thus barred from appearing in Opposition; and (2) the relief sought

indirectly benefits the remaining defendant, Signature Stock Transfer, the transfer agent. (Dkt.

19; Declaration of David L. Aronoff (“Aronoff Decl.”) ¶ 10.)

III. STATEMENT OF FACTS

A. COR Clearing

COR Clearing is a settlement and clearing firm, which means it has execution and

clearance capabilities for all domestic and foreign securities including multi-currency settlement

and reporting. COR Clearing supports straight through processing of equities, options, mutual

funds and fixed income products complemented by a fully automated back office staffed with

responsive professionals. Its trading technology integrates information and analytics from a

variety of data providers, sophisticated order execution functionality and post-trade processing

applications to ensure timely and accurate trade execution and settlement. (Declaration of Carlos

Salas (“Salas Decl.”) ¶ 7.)

In this capacity, COR Clearing supports independent broker dealers (“IBDs”) who have

customers who want to trade stock on the various markets, including the OTC Markets serving



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corporations such as Calissio.2 COR Clearing facilitates trades supported by the market, which

allows IBD customers to buy and sell stock through their accounts. (Salas Decl. ¶ 8.)

B. DTCC’s Policies and Procedures

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

services to the United States financial markets, including the market in which Calissio’s shares

were sold by COR Clearing’s customers. One of DTCC’s products is performing interim

accounting, which entails debiting and crediting the accounts of member clearing firms (of which

COR Clearing is one) in connection with due bills that accompany certain shares of stock, in the

event that dividends are attached to those shares. Essentially, when a share that has a dividend

“attached” (i.e., coming due) is sold between the record date and the ex-dividend date (see Salas

Decl. ¶ 9 and Dkt. 1, ¶¶ 24-26, 28 for further explanation of this system), DTCC 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.) This occurs even when (1) the

purchaser – in this case the stock issuer, Calissio, and its affiliates – are ineligible to be the

receiver of a dividend, and (2) when the stock is not entitled to receive a dividend because it was

issued after the record date. (Salas Decl. ¶ 17.) As in this case, DTCC’s performance of the

interim accounting allocations may result in funds being initially debited from accounts not

obligated to pay dividends and credited to accounts not entitled to receive dividends, causing

substantial injustice.

Pursuant to its policies and procedures, which include its Distributions Service Guide,

DTCC can make certain adjustments to these transactions:

DTC has a standing practice to only allocate monies upon receiptfrom the paying agent, trustee and/or issuer. On occasion, after

2 Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc.



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crediting participants with a dividend or interest payment, DTCmay have to create a post allocation rate change which may resultin either additional credit or a debt to your account. Reasons tothis 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 typesof post-payable adjustments where the adjustments are within [90]calendar days from the initial payment date.

(Aronoff Decl. ¶ 2, Ex. A at p. 32.) However, DTCC will only make these post-payable

adjustments upon request of the issuer or a party acting on behalf of the issuer.

C. Defendants’ Fraudulent Scheme

On September 30, 2010, Calissio issued a large number of shares to be issued at a cost

basis of $.01. On June 1, 2015, Calissio “announce[d] that its Board of Directors has authorized

a share repurchase program of up to $1.5 million of the Company’s outstanding common

shares.” (Aronoff Decl. ¶ 3, Ex. B.) Under this “stock repurchase program, [Calissio was]

authorized to repurchase, from time-to-time, shares of its outstanding common stock in the open

market.” ( Id.) Between then and August 21, 2015, Calissio announced that it had purportedly

repurchased “158,865,114 shares for [a] total of USD$588,448.00.” (Aronoff Decl. ¶ 4, Ex. C.)

At the same time, Calissio had scheduled a dividend payment for August 17, 2015, in which

Calissio announced a cash dividend of $0.011 per common share of the Company, “to be paid to

the holders of the issued and outstanding Common Shares as of the close of business on June 30,

2015.” (Aronoff Decl. ¶ 5, Ex. D, emphasis added.) Those shareholders – not Calissio or any of

its affiliates who purchased shares after June 30 – who owned the stocks as of August 19, 2015

were the ones entitled to this dividend. (Salas Decl. ¶ 17; Dkt. 1, ¶ 24.)

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



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

Decl. ¶ 18.) These new shares – which should have been ineligible for the dividend due to the

timing of when they were issued – totaled approximately four times the number of shares

outstanding as of the record date of June 30th. ( Id.) Because the new shares (which totaled

approximately 80% of all Calissio shares available) were issued after the record date, they in fact

were not eligible for the dividends attached to the previous shares. (Salas Decl. ¶ 17.)

Even though only roughly 20% of the available Calissio shares were eligible for the

dividend, DTCC paid dividends on all shares on its system, even if they were not actually

eligible for such dividends. (Salas Decl. ¶ 10.) This resulted in two massive errors that took

money belonging to others out of their accounts and into the accounts of Calissio and other

parties who were not entitled to it. First, DTCC paid dividends on the 80% of shares that were

not dividend eligible because they were issued after the record date of June 30th. Second, as it

admitted in a press release, Calissio itself re-purchased over 158 million shares before the ex-

dividend date and wrongfully took ownership of the dividend funds attached to shares it

repurchased. (Aronoff Decl. ¶ 4, Ex. C.) And the number of additional shares purchased by

affiliates of Calissio is unknown to COR Clearing at this time. Essentially, Calissio defrauded

the market by discreetly issuing shares of Calissio stock that were not dividend-eligible and then

buying back those shares, knowing that DTCC’s normal course of action is to collect from

companies like COR Clearing and pay to Calissio and its affiliates, as the current holders of the

shares, dividends on all shares in its system without verifying whether all of the shares or the

recipients were actually eligible.

Between July 29, 2015, and August 19, 2015, Nobilis Consulting LLC (“Nobilis”),

through its broker J.H. Darbie & Co. (“Darbie”)—an IBD who settles trades through COR



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Clearing—obtained over 327 million shares of stock in Calissio through a conversion of debt to

equity. (Salas Decl. ¶ 11.) All 327 million of these shares were issued after the record date of

June 30th, and therefore Nobilis was not entitled to receive a dividend on any of these shares, as

none was owed to it. ( Id.) Darbie, on behalf of Nobilis, sold more than 277 million of these

shares on the open market, and therefore some of these directly or indirectly back to Calissio as a

result of Calissio’s repurchase program.3 Because Nobilis determined that no dividend rights

attached to its shares, Nobilis sold its shares to the open market and therefore in large part back

to Calissio for only $700,000. ( Id. at ¶ 12.) Calissio also perpetrated this fraud against another

customer of Darbie’s with a COR Clearing account, Beaufort Capital Partners (“Beaufort”). ( Id.)

On August 20 and 21, 2015, DTCC debited COR Clearing for over $3.3 million in

respect of these erroneous due bills assessed on the shares sold by Nobilis and another $690,000

for erroneous due bills assessed on Beaufort’s shares—significantly more than the amount

Nobilis or Beaufort received for their shares. (Salas Decl. ¶ 13.) DTCC made this debit against

its member firm COR Clearing, who custodies the customer accounts entering the trades on

behalf of Darbie for both Nobilis and Beaufort. ( Id.) However, because no dividends were ever

to be received in relation to these shares by these former shareholders, the debit was improperly

assessed.

To reverse the harm caused by the assessment of the dividend by adjusting the collection

to only eligible shares and eligible recipients, COR Clearing estimates that the request to adjust

this debit should be tendered by the Receiver no later than November 13, 2015 to comply with

DTCC’s published rules. (Salas Decl. ¶ 6.)

3 COR Clearing notes that certain other entities, who were not involved in Calissio’s fraudulent scheme, also purchased some of these shares and thus innocently received dividends to which they are not entitled. Some of theDTCC member firms who will be noticed pursuant to the procedures listed in Section IV are holding this money fortheir customers, pending the outcome of this Motion.



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D. Calissio’s Admission that the Dividends Were Paid in Error and It Was Not

Entitled to the Dividends It Received from DTCC

On August 25, 2015, having been alerted that Nobilis, Darbie, and COR Clearing were

aware of the dividend scheme, Defendant Carter, Calissio’s president, sent a number of e-mails

to these impacted parties, admitting that no dividend payments had been received and thus did

not need to be returned by Nobilis, and asserting that DTCC’s collection of the money from

COR Clearing was a mistake. For instance, on August 25, he told Michael Yarmish of Darbie

and a representative of Nobilis:

As you are aware there has been a huge glitch/error on how thedividend was supposed to be paid out. We are currently inconversations with DTCC and will be resolving this issue over thenext couple of days. There is absolutely no reason for closing yourclients [sic] account as they are not at fault here. Once again thiswas a problem created by FINRA and not your client NobilisConsulting LLC.

(Salas Decl. ¶ 14, Ex. E.) Later that day, he then told Carlos Salas, CEO of COR Clearing, much

the same thing:

As you are aware there has been a huge glitch/error on how the

dividend was supposed to be paid out. We are currently inconversations with DTCC and will be resolving this issue over thenext couple of days.

(Salas Decl. ¶ 15, Ex. F.) After more pressing by Mr. Salas, Carter delayed by purportedly

reporting, “Unfortunately we can’t make any decisions until DTCC gives us a concrete answer

on how this problem that they created can be resolved.” ( Id.)

Then, on August 28, 2015, Carter told Jason Bogutski, president of Defendant Signature

Stock Resources (“Signature”), “[w]e sent both wires to COR yesterday (Nobilis/Beaufort) but

now with this lawsuit our lawyers have advised us not to proceed and we requested an immediate

stop on both transfers.” (Aronoff Decl. ¶ 6, Ex. G.) He then attached purported proof that the

wires, in the amount of approximately $3 million, had been initially sent to Nobilis. ( Id.)



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In retrospect, these assurances that Calissio would properly unwind the erroneous

transaction were likely false, and that Carter made false statements to buy himself time to leave

the country. Tellingly, on August 28, Carter told Bogutski that he was “in a remote location at

our mining property in Mexico,” and then later told Mr. Salas,

You should have been more patient and waited for funds to be

sent out as I discussed with your people. Instead, you

carelessly jumped the gun and filed a lawsuit against Calissio.

There will be no funds to COR. Our legal counsel has advised

us not to send you any further wires. Good luck with the

lawsuit.

(Salas Decl. ¶ 16, Ex. H.) Carter then cut off all contact with everyone, including Signature, and

disappeared; the purported counsel he referred to has never been identified or surfaced. (Aronoff

Decl. ¶ 9.) Indeed, it appears that the purported wire transfer that Carter “cancelled” may have

been a fake.

D. Calissio’s Shadow Existence

Since the filing of the Complaint, it has been revealed that Calissio is essentially a ghost

corporation, and that during its known existence it only disappeared further into the unregulated

markets more each day. Indeed, it appears that it is a fly-by-night operation set up for the sole

purpose of defrauding the marketplace, and Adam Carter, the purported president, may not even

exist.

First, addresses attributed to Calissio in Las Vegas have turned out to be false and/or non-

existent. (Declaration of Leonard Hirschhorn (“Hirschhorn Decl.”) ¶¶ 2-3.) Second, even the

directors and executives listed for Calissio appear to be either entirely made up or, at the very

least, residents of countries other than the United States. (Declaration of Thomas Pikor (“Pikor

Decl.”) ¶¶ 3-8.) Calissio also has no real estate holdings in the United States. (Pikor Decl. ¶ 10.)



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Calissio also keeps shifting its identity and receding further from the regulated markets.

Calissio was formerly called Amarium Technologies, an entity against which an investor

obtained a judgment for $2.25 million in 2008. (Pikor Decl. ¶ 9.) This demonstrates that once

Calissio got caught in its scheming, it changed identities again to more easily defraud more

victims.

Along with changing its identity, Calissio announced that it “will become a privately held

company and its shares will no longer be listed on the OTC Markets.” (Aronoff Decl. ¶ 7, Ex. I.)

This means that Calissio had now completely changed to a system that avoids any regulatory

scrutiny that previously existed through the OTC markets, and it will now wholly operate on the

gray market, which consists of distribution channels which are legal but are unofficial and/or

unauthorized.

Significantly, Calissio’s website, www.calissioresources.com, no longer contains any

information. And, relevant to this case, Calissio never made any appearance in this case or

responded to the allegations against it, leading to an entry of default. (Dkt. 19.)

Importantly, Jason Bogutski, president of Signature—transfer agent for Calissio—also

informed counsel for COR Clearing that he had never met Adam Carter before and that he could

no longer reach Carter once Carter stopped corresponding with COR Clearing. (Aronoff Decl.

¶ 9.)

Based on the above results of COR Clearing’s thorough investigation, it is clear that

Calissio is at most a ghost corporation in the United States. Consequently, it can be reasonably

assumed that Calissio’s ill-gotten funds from COR Clearing and its customers are now out of the

United States and thus out of the reach of COR Clearing and this Court, all as a part of

Defendants’ fraudulent scheme.


http://www.calissioresources.com/http://www.calissioresources.com/http://www.calissioresources.com/http://www.calissioresources.com/


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III. PROCEDURAL BACKGROUND

COR Clearing filed its Complaint against Defendants on August 26, 2015. (Dkt. 1.) On

August 27, 2015, COR Clearing personally served the Complaint on Calissio, through its

registered agent. (Dkt. 11.) As Calissio is a ghost corporation, it did not respond to the

Complaint or enter any sort of appearance in this case within the 21-day window prescribed by

the Federal Rules. Consequently, COR Clearing moved for a Clerk’s Entry of Default against

Calissio, which was granted on September 25, 2015. (Dkt. 18-19.) Not coincidentally, this

occurred after Calissio had been served with this lawsuit. (Dkt. 11.)

IV. NOTICE TO AFFECTED PARTIES

In the interest of providing full and fair notice and opportunity to be heard to all parties,

namely the Calissio shareholders, that may be affected by the appointment of the Receiver and

the subsequent post-payable adjustments by DTCC, COR Clearing, with the endorsement and

full cooperation of DTCC, proposes a process by which all parties who may be affected are

given notice of the appointment of the Receiver and given a chance to be heard before this Court

enters the order appointing the Receiver.

Counsel for COR Clearing has engaged in discussions with counsel for DTCC about the

best method to remedy Calissio’s fraud by way of the requested Receiver. (Aronoff Decl. ¶ 11.)

The parties agreed that the method fairest to all parties potentially affected by the Receiver’s

request to DTCC for post-payable adjustments is to give them an opportunity to be heard by this

Court before the Receiver is appointed. ( Id.) This method is especially useful for those DTCC

member firms whose clients innocently received some of COR Clearing’s money through

Calissio’s scheme, and who are currently awaiting instructions as to what to do with these funds.

To carry this out, DTCC has, in response to a subpoena, provided COR Clearing with a list

of all DTC member firms who were credited and/or debited with dividends/allocations for



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the CRGP shares in the relevant time period (“Affected Parties”), protected by a

confidentiality agreement. (Aronoff Decl. ¶ 12.)

COR Clearing thus proposes the following procedure: (1) this Court first issues an order

that COR Clearing issue notice to the Affected Parties of the plan to appoint a Receiver, to which

the Affected Parties may file a response within seven (7) court days; COR Clearing is then given

seven (7) court days to reply to any such response; and the Court may conduct a hearing not

more than 10 days after that for all Affected Parties and COR Clearing to be heard; and (2) after

this period, the Court may issue the order appointing the Receiver.

For the reasons below, the appointment of a Receiver is necessary to ensure that Calissio

and others are not unjustly enriched. The notice procedures set out in this section will ensure

that all Affected Parties are assured a fair and adequate opportunity to be heard.

V. ARGUMENT

A. Summary of Argument

As explained above, Calissio exists only as a shadow corporation, with no real physical

presence in the United States. Fortunately for COR Clearing and the public, DTCC has a

procedure in place to reverse Calissio’s fraud through its interim accounting and post-payable

adjustment rules. As DTCC has made clear, in its Distributions Service Guide, Calissio’s

fraudulent dividend transaction can be adjusted by DTCC in a way that can return the dividends

to the parties from which they were improperly taken, including COR Clearing, and away from

Calissio and other entities that received dividends to which they were not entitled. (Aronoff

Decl. ¶ 2, Ex. A, p. 32.)

But, because DTCC can only make this post-payable adjustment when requested by the

issuer, i.e., Calissio, or a party acting on the issuer’s behalf, COR Clearing cannot make use of

this policy on its own, as Calissio will certainly not emerge and voluntarily request that DTCC



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make an adjustment that will lead to the return of its ill-gotten dividends. The appointment of a

Receiver is the only remedy available to COR Clearing. For this reasons, COR Clearing asks

this Court to issue the order appointing a Receiver for the limited purpose of instructing DTCC,

in Calissio’s stead, to make these post-payable adjustments in accordance with DTCC’s policies

and procedures. This is necessary to protect COR Clearing and the public at large who were

impacted by Calissio’s wrongful retention of dividends which it was patently ineligible to

receive.

B. The Court is Empowered to Appoint Receivers in Situations Such As the One

Presented Here

Under the applicable authorities, the appointment of a Receiver is more than warranted

here. In diversity cases, such as this one, the appointment of Receivers is governed by federal

law, specifically Federal Rule of Civil Procedure 66. Aviation Supply Corp. v. R.S.B.I.

Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993) (“The appointment of a receiver in a diversity

case is a procedural matter governed by federal law and federal equitable principles.”); see also

Canada Life Assurance Co. v. LaPeter , 563 F.3d 837, 842 (9th Cir. 2009). “[A] district court has

within its equity power the authority to appoint receivers and to administer receiverships.”

Gilchrist v. Gen. Elec. Capital Corp., 262 F.3d 295, 302 (4th Cir. 2001).

Courts in this circuit apply the following framework in determining whether appointment

of a Receiver is warranted:

Although there is no precise formula for determining when areceiver may be appointed, factors typically warrantingappointment are a valid claim by the party seeking theappointment; the probability that fraudulent conduct has occurredor will occur to frustrate that claim; imminent danger that propertywill be concealed, lost, or diminished in value; inadequacy of legalremedies; lack of a less drastic equitable remedy; and likelihoodthat appointing the receiver will do more good than harm.

Aviation Supply Corp., 999 F.2d at 316-17.



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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., No. 5:10-CV-85-FL, 2014 WL 619478, at *3 (E.D.N.C. Feb. 18,

2014) (quoting SEC v. Bowler , 427 F.2d 190, 198 (4th Cir. 1970)); cf. Warfield v. Alaniz, 453 F.

Supp. 2d 1118, 1132 (D. Ariz. 2006) (in context of SEC enforcement action, “The purpose of the

appointment of a receiver is to prevent further violations of federal securities laws and to protect

the public.”) (citing SEC v. Wencke, 577 F.2d 619, 623 (9th Cir. 1978)). Much like recent cases

where a Receiver has been appointed to take over an alleged Ponzi scheme, a Receiver is

necessary here to protect the public and any participants in the marketplace who were harmed by

the fraudulent company’s actions. See, e.g., Janvey v. Brown, 767 F.3d 430, 433 (5th Cir. 2014)

(discussing district court’s appointment of a Receiver over entities involved in a Ponzi scheme);

Wiand v. Morgan, 919 F. Supp. 2d 1342, 1347 (M.D. Fla. 2013) (referring to appointment of

Receiver appointed to deal “with the aftermath of a massive Ponzi scheme”).

The Receiver “stands in the shoes” of the entity for which it was appointed. See Javitch

v. First Union Securities, Inc., 315 F.3d 619, 625 (6th Cir. 2003); Weiss v. Weinberger , No. 2:04-

CV-463, 2005 WL 1432190, at *3 (N.D. Ind. June 9, 2005) (“[T]he receiver is stepping in the

shoes of the absentee owner.”). In Weiss, the defendant “disappeared and abandoned his

practice,” and at the time of the case “his whereabouts [were] unknown.” 2005 WL 1432190, at

*1. As a result, a state court granted an emergency petition for the appointment of a Receiver.

Id.



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C. Appointment of Receiver Warranted in this Case

Under this framework discussed above, the Court should exercise its sound discretion and

appoint a Receiver. A Receiver empowered to instruct DTCC is necessary to protect not only

COR Clearing and its customers, but all parties who were defrauded by Calissio’s scheme and its

wrongful retention of dividends for which it was ineligible. Each of the elements considered by

courts in this circuit have been met and fall in favor of appointing a Receiver, and thus the Court

should grant this Motion.

1. COR Clearing Has a Valid Claim

First, it cannot be disputed that Calissio failed to respond to service of this lawsuit, and

that the Clerk of this Court has already entered default in this action against Calissio. For that

reason alone, COR Clearing is already entitled to a judgment in its favor on its claims against

Calissio and the allegations against it are deemed admitted. Fed. R. Civ. P. 8(b)(6) (a defaulting

party is deemed to admit factual allegations of the plaintiff’s complaint, “other than [those]

relating to the amount of damages”).

Even if that were not the case, the evidence before the Court in support of this Motion

demonstrates that COR Clearing has a valid claim here that Calissio engaged in fraud by

flooding the market with dividend-ineligible shares, leading to harm to COR Clearing and its

customers. The evidence is undisputable that as a result of Calissio discreetly issuing shares of

its stock that it knew were not dividend-eligible, buyers of these shares collected dividends on

the shares to which they were not entitled, and Calissio has refused to return these dividends.

Customers of COR Clearing obtained millions of shares of Calissio’s stock that were issued after

the record date, and therefore never received a dividend on any of the shares. These customers

then sold millions of shares on the open market (some or all of these directly or indirectly back to



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Calissio as a result of the purchase program) for lower value, under the correct belief that

dividends were not attached to these shares. (Salas Decl. ¶¶ 17-18.)

2. Calissio Has Engaged in Fraudulent Conduct

As the evidence presented demonstrates, Calissio has clearly engaged in fraudulent

conduct, from its scheme to defraud the marketplace to perhaps the very existence of the

company. Calissio intentionally flooded the market with non-dividend-eligible shares in such a

way that it triggered DTCC’s 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 Calissio’s fraud was discovered, it further lied to COR Clearing 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;

Aronoff Decl. ¶ 6, Ex. G.) Calissio’s president, Defendant Carter, then disappeared, cutting off

contact. (Aronoff Decl. ¶ 9.)

Additionally, Calissio has deceived everyone 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 Calissio), and it now only claims to exist in

the unregulated gray market. (See generally Hirschhorn & Pikor Decls.) Calissio is nothing

more than a shadow corporation, the sole purpose of which was to defraud the marketplace,

including both COR Clearing and DTCC. The fact that Calissio has no actual ties to the United

States frustrates COR Clearing’s ability to retrieve the funds COR believes to have been

unlawfully collected by Calissio. However, DTCC has the ability to reverse the transactions at

issue, upon receipt of a request from Calissio, or a Receiver standing in Calissio’s shoes.



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3. Immediate Danger Exists that the Funds Are Being Concealed

Calissio is undisputedly concealing the funds. Carter (or whoever is operating under the

name Adam Carter) is in Mexico and has impliedly told COR Clearing to “pound sand”: “Good

luck with the lawsuit.” (Salas Decl.¶ 16, Ex. H.) This statement, combined with the fact that

COR Clearing has yet to locate any Calissio assets in the United States (see generally Hirschhorn

& Pikor Decls), makes it clear that Calissio is concealing the ill-gotten funds gained through its

scheme. While proof of fraud is not required to support a district court’s discretionary decision

to appoint a Receiver, Receivers are appropriate to address the secreting of assets outside the

country. See Citronelle-Mobile Gathering, Inc. v. Watkins, 934 F.2d 1180, 1184 (11th Cir. 1991)

(transfers to related entities and funneling money out of the country). Here, a Receiver’s

instruction to reverse the erroneous dividend transaction is the most immediate and justified

manner of reaching Calissio’s pocket, especially with the risk that Calissio now operates

somewhere outside of the country where this Court and COR Clearing cannot reach them. (See

generally Hirschhorn & Pikor Decls.)

4.

Legal Remedies Are Inadequate and the Remedy Sought Is the Only

One Available

As a result of Calissio’s concealment of the funds, any legal remedy, namely a default

judgment awarding COR Clearing the $3.7 million taken from it and its customers through

Calissio’s fraud, would be inadequate, as no funds or other assets of Calissio’s currently exist

that are reachable by an order of this Court. Thus, a money judgment in favor of COR Clearing

would do nothing to return COR Clearing and its customers to the position they were in before

Calissio’s fraud, and it will have no practical effect on Calissio or Carter.

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

accordance with its policies and procedures. (Aronoff Decl. ¶ 2, Ex. A at p. 32.) That



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adjustment will only happen upon an instruction by the issuer – here Calissio itself – or someone

standing in its shoes. ( Id .) Since Calissio (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 COR Clearing’s customers and others, the only possible remedy is for a Receiver to instruct

DTCC to make this adjustment.

5. Appointing the Receiver Will Do More Good than Harm

Appointing a Receiver will obviously do more good than harm. Here, the Receiver can

ensure that the funds wrongfully taken from COR Clearing’s customers and all other victims of

Calissio’s fraud are returned, and ensure that Calissio does not engage in any further fraudulent

conduct that further exposes Calissio to risk of lawsuits. Indeed, the only way to reverse the

harm done to Calissio’s victims is to appoint a Receiver to request DTCC to make post-payable

adjustments. The appointment of a Receiver will thus protect the public and any participants in

the marketplace who were harmed by Calissio’s fraudulent actions.

Second, no harm will come from the limited appointment because Calissio has effectively

abandoned its US operations. The appointment of the Receiver will not impact any ongoing

operations – a normal concern in a proposed receivership – because there are none.

VI. IDENTIFICATION OF SUGGESTED RECEIVER

For the position of the limited purpose Receiver that COR Clearing requests with this

Motion, COR Clearing suggests Ronald F. Greenspan, Esq., Senior Managing Director –

Corporate Finance of FTI Consulting, Inc. He is an internationally respected finance and

business reorganization professional with 25 years of diverse, hands-on experience. (Aronoff

Decl. ¶ 8, Ex. J.) Given his extensive experience in consulting, litigation, and bankruptcy

matters, Mr. Greenspan is a prudent choice for the role of Receiver in this case. ( Id.)



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VII. CONCLUSION

Accordingly, for the reasons above, the Court should grant COR Clearing’s Motion for

Order Appointing Limited Purpose Receiver and appoint as receiver Ronald F. Greenspan, Esq.

for the limited purpose of instructing DTCC to make post-payable adjustments in accordance

with DTCC’s policies and procedures.

Dated: October 5, 2015 By: s/ David L. Aronoff Michael T. Hilgers (#24483)[email protected] S. Dolton (#24221)[email protected] HILGERS PLLC14301 FNB Parkway, Suite 100Omaha, NE 68154Telephone: (402) 218-2106Facsimile: (877) 437-5755

David L. Aronoff* [email protected] S. Rostamian*[email protected] G. Smith*

[email protected] & STRAWN LLP333 S. Grand Avenue, 38th FloorLos Angeles, CA 90071-1543Telephone: (213) 615-1700Facsimile: (213) 615-1750* admitted pro hac vice

Attorneys for Plaintiff COR Clearing, LLC



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CERTIFICATE OF SERVICE

I hereby certify that on October 5, 2015, a true and exact copy of the foregoing wasserved on Defendant Calissio Resources Group, Inc. via U.S. Mail, postage pre-paid:

Clark Agency, LLC5915 Edmond Ste 125Las Vegas, NV 89118

s/ David L. Aronoff

David L. Aronoff


Documents

cOR Clearing, LLC v. Calissio Resources Group, Inc. et al Doc 21 filed 05 Oct 15.pdf