Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 1 of 12

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1 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 1 of 12 MATTHEW J. CHRISTIAN, ESQ. Nevada Bar No SHLOMO S. SHERMAN, ESQ. Nevada Bar No KOLESAR & LEATHAM 400 South Rampart Boulevard, Suite Las Vegas, Nevada Telephone: (702) Facsimile: (702) mchristian@klnevada.com 6 ssherman@klnevada.com 7 Attorneys for Receiver ROBB EVANS & ASSOCIATES LLC 8 9 UNITED STATES DISTRICT COURT 10 DISTRICT OF NEVADA ' el 11 I FEDERAL TRADE COMMISSION, Case No. 2:11 -cv JCM (RJJ) 12 Plaintiff, MOTION FOR ORDER: C o 0. ' 0 Cr ' pe 1 l MICHAEL BRUCE MONEYMAKER, a/k/a Bruce Moneymaker, Mike Smith, and Michael Bruce Millerd, individually, as an officer and director of the corporate defendants, and also doing business as Fortress Secured; DANIEL DE LA CRUZ, individually, as an officer and director of the corporate defendants, and also doing business as Fortress Secured; BELFORT CAPITAL VENTURES, INC., a corporation; DYNAMIC ONLINE SOLUTIONS, LLC, a limited liability company; HSC LABS, INC., a corporation; RED DUST STUDIOS, INC., a corporation; SEASIDE VENTURES TRUST, individually and as an officer and director of the corporate defendants; and JOHN DOE NO. 1, in his capacity as trustee of SEASIDE VENTURES TRUST, Defendants. (1) APPROVING RECEIVER S FINAL REPORT AND ACCOUNTING; (2) APPROVING RECEIVER S AND PROFESSIONALS FEES AND EXPENSES FROM INCEPTION THROUGH CLOSING; (3) AUTHORIZING ABANDONMENT OF UNADMINISTERED ASSETS AND DESTRUCTION OF RECORDS; (4) DISCHARGING RECEIVER; (5) RELIEVING RECEIVER OF ALL DUTIES AND LIABILITIES; (6) AUTHORIZING THE TURNOVER OF ANY REMAINING FUNDS TO PLAINTIFF; AND ALL RELATED RELIEF; AND (7) GRANTING RELIEF FROM LOCAL RULE 66-5 PERTAINING TO NOTICE TO CREDITORS 26 Robb Evans & Associates LLC (the "Receiver"), pursuant to the Court s Stipulated Order 27 for Injunction and Monetary Judgment entered January 24, 2012, hereby moves the Court for an 28 order: (5818-8) -1-

2 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 2 of 12 - (I) ' (1) approving the Receiver s final report and accounting; (2) approving the Receiver s and professionals fees and expenses from the inception of its appointment through its discharge (3) authorizing the abandonment of any unadministered assets and the destruction of the Receivership Defendants records; (4) discharging the Receiver; (5) relieving the Receiver of all duties and liabilities; (6) authorizing the turnover of any remaining funds to Plaintiff Federal Trade Commission; (7) deeming notice of this Motion to be sufficient under Local Rule of Civil Procedure 66-5(f) upon service of a notice of the filing of this Motion and the Motion on all parties, all known non-consumer creditors of the estate, and all parties in interest concurrently with the filing of this Motion with the Court, but not on the tens of thousands of potential consumer creditors; and (8) all related relief. This Motion is made pursuant to Local Civil Rule 66-5 and is based upon the memorandum of points and authorities set forth below, the Declaration of Kenton Johnson in support hereof (the "Johnson Declaration"), any reply filed in support hereof, all other pleadings and documentary evidence as may be presented to the Court by the Receiver; and any oral argument entertained by the Court in connection with this Motion. DATED this day of May, Br- MATTHEW J. CHRISTIAN, ESQ. Nevada Bar No SHLOMO S. SHERMAN, ESQ. Nevada Bar No South Rampart Boulevard, Suite 400 Las Vegas, Nevada Attorneys for Receiver ROBB EVANS & ASSOCIATES LLC (5818-8) -2-

3 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 3 of 12 1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I 3 INTRODUCTION 4 On March 29, 2011, Robb Evans & Associates LLC (the "Receiver") was appointed ri e Temporary Receiver over Belfort Capital Ventures, Inc., Dynamic Online Solutions, LLC, HSC Labs, Inc., Red Dust Studios, Inc., and their subsidiaries, affiliates, divisions, successors, and assigns, and includes fictitious names under which they do business, including but not limited to Centralized Customer Service, Uniguard, Freedom Subscription, Illustrious Perks, Select Platinum Credit, and Kryptonite Credit, as defined in the Temporary Restraining Order (collectively the "Receivership Defendants"). Pursuant to the Preliminary Injunction Order entered April 15, 2011, the Receiver has been appointed permanent Receiver over the Receivership Defendants. After the entry of the Preliminary Injunction, the parties discussed settlement, resulting in a Stipulated Order for Injunction and Monetary Judgment entered on January 24, 2012 (the "Stipulated Order") that directed the Defendants to turn over certain assets to the Receiver for liquidation and to assist the Receiver as required with selling the assets. Those assets, and the Receiver s efforts with respect thereto, are as follows: A. Vehicles 19 Defendant Michael Bruce Moneymaker (Moneymaker) responded to the Receiver s 20 request to surrender a 2010 Polaris Razor, a 2009 Polaris Phoenix 200, a 2009 Yamaha Raptor , and a 2010 Zieman Customer Trailer F816 by providing a phone number of a mechanic. 22 The mechanic told the Receiver that Moneymaker delivered the Polaris Razor to him for repair 23 after an accident. The 2009 Polaris Phoenix 200 and the 2009 Yamaha Raptor 700 were stored 24 on the 2010 Zieman Customer Trailer with the 2010 Polaris Razor, and all vehicles remained at 25 the mechanic s location. The mechanic stated that his bill for partial repair and storage was 26 approximately $8, Polaris Razor 28 The Receiver determined that the value of the Polaris Razor was approximately $7, (5818-8) -3-

4 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 4 of I I I and negotiated with the mechanic to accept ownership of the Polaris Razor in exchange for the $8,049 amount due and release the other vehicles. The Receiver requests the Court to confirm turning over the 2010 Polaris Razor to the mechanic to settle all amounts due Yamaha Raptor 700 The Receiver advertised this vehicle in all-terrain vehicle websites and papers, but received few offers. The Receiver ultimately sold the vehicle for a net recovery of I to the market value Polaris Phoenix 200 $4,050, close The Receiver advertised this vehicle in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the vehicle, and sold it to a vehicle wholesaler for a net recovery of $1, Zieman Customer Trailer F816 The Receiver advertised the trailer in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the trailer, and sold it to a vehicle wholesaler for a net recovery of $1,250. B. Real Property Cassis Circle, Rancho Mirage, California I I This property (the "Rancho Mirage Property") is a five year old, 4 bedroom, 4.5 bathroom, 3,772 square-foot single story, single family residence located near Palm Springs, California. The Desert Heat Trust held title to the Rancho Mirage Property and, after reviewing the Stipulated Order, the trustee transferred title to the Receiver. The house originally sold in 2008 for $1,428,000. The Court approved the sale of the Rancho Mirage Property, and the receivership estate received net sale proceeds of $63,610 after payoff of the first trust deed secured loan, deductions for several delinquent items (including property taxes), and sales commissions Mandalay Beach Road, Oxnard, California This property (the "Oxnard Property") is a three-year old, 3 bedroom, 4 bathroom, 3,539 square-foot, three story, single-family beach-house residence with an ocean view located on the (5818-8)

5 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 5 of 12 I-, sand in Oxnard, California. The Oxnard Property and the improvements are in good condition and are reasonably comparable with other on-market properties in the neighborhood. The land on which the home was built originally sold in 2007 for $2,500,000. On February 7, 2013, the Court approved a termination of the stay imposed by the Receivership Order, pursuant to which the secured lender was permitted to complete its foreclosure of the Oxnard Property in exchange for a payment of $50,000 to the receivership estate. C. Other Non-Cash Assets With a Market Value Greater Than $50,000 Defendant Michael Moneymaker stated he did not have any other non-cash assets with a market value greater than $50,000. The Receiver did not locate any other non-cash assets with a market value greater than $50,000 that belonged to any of the defendants or the Receivership Defendants. D. Evaluation of Two Pre-Receivership Judgments During the course of the receivership, the Receiver learned of two default judgments entered against certain of the Receivership Defendants or against property belonging to such Receivership Defendants. In one case, a former credit card processor in Illinois obtained a judgment for $393,000 in October 2008 against Stored Value Marketing, Inc., Defendant Michael Moneymaker, and Claudia Alvarez, in the State of Illinois. This judgment was then domesticated in the Superior Court for the County of San Diego, California, and created a judgment lien against the Oxnard Property, which was legally titled in Claudia Alvarez s name. The Receiver, with the assistance of its counsel, initially attempted to negotiate a settlement of the judgment lien that would have permitted the Oxnard Property to be marketed and sold with a meaningful return to the receivership estate. However, although the judgment creditor initially agreed to accept a discounted payoff, it subsequently reneged on this agreement. Instead, the Receiver negotiated an agreement with the secured lender on the Oxnard Property pursuant to which the Receiver would obtain relief from the stay injunction to allow the secured lender to complete its nonjudicial foreclosure of the Oxnard Property, thereby extinguishing the junior judgment lien, in (5818-8) -5-

6 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 6 of 12 ' :.- QZ ' exchange for the payment of $50,000 to the receivership estate. The Receiver s counsel assisted in the preparation of the necessary pleadings to effectuate the terms of the agreement. In the second instance, an individual in Michigan obtained a judgment for $59,000 in November 2008 against Fortress Secured, Inc. and others for violating the Michigan Home Solicitation Sales Act. The Receiver s office has completed a nationwide search of the Secretaries of States, including the states of California, Illinois, and Michigan, and has not located any judgment lien on personal assets of any Receivership Defendant filed with any Secretary of State; nor is there any indication that the Michigan judgment has been domesticated in the State of California, or that any judgment lien was created thereby against any real property belonging to any of the Receivership Defendants. E. Report Of Receivership Receipts And Disbursements As discussed above, the receivership estate has been impacted by limited assets, many of which were highly leveraged with very little equity, and one of which was further burdened with a pre-receivership judgment. The financial complications and physical conditions of the real estate assets required substantial activity, discussions, and negotiations while marketing the properties. For example, the Receiver s staff and professionals dedicated extensive time to analyzing and crafting possible options to recover any equity from the Oxnard Property. Additionally, the Defendants formed, operated, and discarded numerous entities as part of the pattern and practice to insulate and disguise themselves from the public and others. The business and accounting records were marginally maintained with numerous co-mingled and cross-entity transactions. There were also many payments to the Defendants, insiders, and affiliated entities originating from numerous entities and accounts. Consequently, in the first four months after its appointment, the receivership estate incurred about $38,000 in expenses for forensic accountants to reconstruct records for the Receiver s first report and to complete and maintain proper accounting records. The receivership estate also provided $41,000 to the Defendants for court-approved legal fees. From the inception of the receivership on March 29, 2011, through December 31, 2011, the receivership estate collected $127,349 from banks, credit card processors and others. Part of (5818-8) S

7 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 7 of 12 that money collected included a reserve balance of $50,999 from Check Gateway, a credit card processor for a third-party program marketed by Receivership Defendants. The Receiver confirmed that the third-party program transferred the reserve balance to the Defendants to pay for customer service charges, and Check Gateway turned over the remaining reserve balance to the Receiver. Total receivership fees, including forensic accounting fees, amounted to $86,332. The Receiver s legal expenses amounted to $19,347, and Defendants legal fees were an additional $40,839. Thus, total expenses exceeded the total receipts, resulting in a deficit of $23,387 as of I December 31, ci) - t From January 1, 2012 through February 28, 2013 the receivership estate collected $122,725 from selling and liquidating the two real properties and the personal property described above. Marketing costs and other expenses to maintain the assets totaled $12,731. Receivership fees to complete these activities totaled $48,452 and necessitated legal fees and costs in the amount of $20,280. Thus, the receivership estate s total expenses during this period were $85,913, resulting in a surplus of $36,812 for the 14-month period, eliminating the prior period s deficit, and creating a small surplus of $13,425 as of February 28, However, estimated expenses of $15,837 to close the receivership estate - consisting primarily of receivership fees for the preparation of the final report and accounting and any necessary court appearance, the preparation of final tax returns, and final legal expenses, will likely consume the small surplus of $13,425 and create a final deficit of $2,412, which the Receiver will absorb. If the final expenses prove less than the above estimate such that a final surplus is created, the Receiver intends to forward any such remaining surplus to the Plaintiff Federal Trade Commission as directed by the court in the Stipulated Order. F. Request of the Court to Close the Receivership Estate Accordingly, the Receiver requests that the Court: 1. Approve and ratify the activities and requests of the Receiver to the extent not already approved by the Court; including, without limitation, turning over the 2010 Polaris Razor to the mechanic to settle all amounts due; (5818-8) -7-

8 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 8 of I I 2. Approve the fees and expenses of the receivership estate described in the final accounting, including the fees and expenses of the Receiver and its attorneys; 3. Authorize the Receiver to shred all documents of the Receivership Defendants; 4. Discharge the Receiver and its member, officers, employees, agents, attorneys and representatives, relieve all duties, liabilities, and responsibilities in this proceeding, and release the Receiver s Bond; 5. Authorize the Receiver to apply the remaining estate funds to the Receiver s fees and expenses and legal expenses. To the extent that a deficit remains, the Receiver will absorb such deficit; however, to the extent that the Receiver has over-estimated the final fees and expenses and a surplus remains, the Receiver requests authorization from the Court to remit any such surplus to Plaintiff Federal Trade Commission. :.- ui!.. z ' The Receiver has filed concurrently herewith its Final Report and Final Accounting, attached collectively as Exhibit 44 1" to the Johnson Declaration. The fees of the Receiver, its members and staff, are described in the billing records attached to the Johnson Declaration collectively as Exhibit "2"; and the fees and expenses of the Receiver s legal counsel are attached as Exhibit "1" to the Declaration of Shlomo S. Sherman (the "Sherman Declaration") filed concurrently herewith. II LEGAL AUTHORITY A. The Relief Sought Is Appropriate To Allow The Receiver To Wind Up The Estate Forthwith Section VI(B) and (C) of the Stipulated Order provide as follows: B. The Receiver is directed to, within 180 days of the date of this Order, unless good cause is shown to extend the receivership beyond 180 days, file and serve on the parties a final report ("Final Report") and request for fees and expenses. The Final Report shall include the total amount of funds in the receivership estate. Any party may object within 15 days of receipt of the Final Report. Upon submission of the Final Report or upon this Court s Order for final payment, whichever is later, the Receivership shall terminate; and C. The Receiver is directed to transfer, after payment of the Receiver s compensation and expenses, all remaining funds of the (5818-8) -8-

9 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 9 of 12 - =.. I receivership estate to the Commission, or its designee or agent, by wire transfer in accordance with directions provided by the Commission. The Receiver submits that its above-described activities and services constitute good cause for the delay in the submission of its Final Report. As described in detail above and in the Receiver s Final Report, the estate assets, consisting of both real and personal property, required fairly lengthy and involved marketing and closing activities. The Rancho Mirage Property required six months of post-appraisal marketing to generate an acceptable offer. After receiving the Court s approval, the sale closed in October of days after the date of the Stipulated Order. The Oxnard Property did not generate any acceptable offers by the end of November of 2012, which was after eight months of post-appraisal marketing and 300 days after the date of the Stipulated Order. The Receiver then reached an agreement with the secured lender on the Oxnard Property pursuant to which the Receiver obtained this Court s approval to release the Oxnard Property from the stay in exchange for a $50,000 payment to the receivership estate This payment was received by the Receiver in mid-february of 2013, about date of the Stipulated Order. 395 days after the The Receiver then completed its research and evaluation of default judgments against certain Receivership Defendants, and prepared the Final Report. The Receiver believes the condition of the real and personal property assets, and the lengthy and involved actions needed to liquidate them, justified the additional days needed to complete its duties and file and serve the Final Report. The Receiver now seeks an order of the Court approving the Receiver s Final Report, approving the Receiver s activities in the case, as well as those of its legal counsel, and discharging the Receiver. Court approval of a receiver s actions and requests for instructions is consistent with federal receivership practice as required by Federal Rules of Civil Procedure, Rule 66. See, 2 Clark on Receivers, (3d ed. 1992) (5818-8)

10 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 10 of 12 1 The Court has wide latitude in supervising the Receiver and may provide for the 2 administration of the receivership as it deems appropriate. 13 Moore s Federal Practice, [4] [a], (Matthew Bender 3d ed. Rev. 2011); Securities and Exchange Commission v. 4 Hardy, 803 F. 2d 1034, 1037 (9th Cir. 1986). 5 The relief sought in this Motion will promote the orderly and prompt wind up of the 6 receivership estate in an expeditious and cost-effective manner. The relief sought is customary 7 and appropriate in closing a receivership estate and discharging the Receiver. The fees and 8 expenses sought by both the Receiver and its counsel are reasonable under the circumstances 9 given the services rendered, and the scope of the case. 10 Accordingly, the Receiver respectfully requests the approval of its final report, its fees - F and its expenses, of its discharge, and of the balance of the relief requested in the Motion. B. Notice of this Motion is Sufficient Under the Circumstances and Should Be Approved ri -... ri o - a 1) Local Rule of Civil Procedure 66-5 provides for service of notice of the hearing on various motions by a Receiver concerning the administration of the estate, requiring that such notice be served on all creditors of the receivership estate. Concurrently with the filing of this Motion, the Receiver will have served a notice of filing of the Motion on the parties hereto along with all known non-consumer creditors of the estate and other parties in interest, to provide them with notice and an opportunity to be heard concerning the Motion. In this case, there are believed to be an extremely large number of potential consumer creditors who may have claims against the Receivership Defendants arising out of the business operations of the Receivership Defendants prior to the Receiver s appointment, although the precise number, identity and location of such consumer creditors have not been determined by the Receiver at this time. It would not be practicable or beneficial to the estate and its creditors for the Receiver to attempt to identify and serve the potential consumer creditors with notice of this and other similar administrative motions, and the expense and burden on the estate of attempting to effectuate such service would drain the estate s resources and cause undue administrative expense. The Receiver will cause a copy of this Motion to be posted on the (5818-8) - 10-

11 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 11 of Receiver s website at where interested parties and creditors may review it in its entirety, exclusive of the voluminous time records, The Receiver will also provide copies of the Motion to any interested party upon receipt of a written request which may be directed to the Receiver as set forth in the Notice of Motion. 5 Based on the foregoing, to the extent that Local Rule of Civil Procedure 66-5 applies to this Motion, the Receiver seeks an order providing that the notice requirement of that rule shall be deemed satisfied if notice of the filing of the Motion is given by serving copies of all motion papers on the parties to the action and by serving copies of the notice of filing of the motion on all known non-consumer creditors and other parties in interest. The Receiver submits that such service provides sufficient notice and an opportunity for hearing to the interested parties and should be approved as adequate. There is ample authority for approval of the scope and method of notice as set forth oc 1. I.) above. This Court, as a court of equity supervising the receivership estate, may make appropriate administrative orders governing the receivership, including limitations on and OC 15 changes in notice and other procedures. See F.R.C.P. 5(a) and (c) (authorizing the court to 16 modify service procedures when numerous defendants are involved in litigation). In addition, V 17 pursuant to Local Rule of Civil Procedure 66-10, a receiver is directed to administer receivership estates "as nearly as may be in accordance with the practice in the administration of estates in Chapter 11 bankruptcy cases." Orders limiting notice when the Bankruptcy Code or Rules would otherwise require notice to all creditors are routinely granted in bankruptcy cases to 21 promote the expeditious and economical administration of bankruptcy estates. See In re First Alliance Mortgage Co., 269 B.R. 428, 442 (C.D. Cal. 2001) (referencing in dicta in the court s recitation of facts the bankruptcy court s order limiting notice issued in that case); 11 U.S.C. section 102(l)(A) (defining the phrase "after notice and a hearing" to mean "after such notice as is appropriate in the particular circumstances, and such opportunity for hearing as is appropriate in the particular circumstances"); 11 U.S.C. section 105(a) and (d) (granting broad equitable powers to the court to issue orders "necessary or appropriate to carry out the provisions" of title 11 including "prescribing such limitations and conditions as the court deems appropriate to (5818-8)

12 Case 2:11-cv JCM-CWH Document 119 Filed 05/22/13 Page 12 of 12 lf.. I OA I 19 I 20 I I ensure the case is handled expeditiously and economically"); and Fed. R. Bankr. P. 2002(m) (authorizing the court to enter "orders designating the matters in respect to which, the entity to whom, and the form and manner in which notices shall be sent except as otherwise provided by these rules") Accordingly, the Receiver respectfully requests that the Court approve the limited form of notice described above. III CONCLUSION For the foregoing reasons, it is respectfully requested that the Court issue an order for relief as requested in the Motion. DATED this 22 day of May, KOLESAR & By \- MATTHEW J. CINSQ. Nevada Bar No SHLOMO S. SHERMAN, ESQ. Nevada Bar No South Rampart Boulevard, Suite 400 Las Vegas, Nevada Attorneys for Receiver ROBB EVANS & ASSOCIATES, LLC (5818-8)

13 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 1 of 8 MATTHEW J. CHRISTIAN, ESQ. Nevada Bar No SHLOMO S. SHERMAN, ESQ. Nevada Bar No KOLESAR & LEATHAM 400 South Rampart Boulevard, Suite 400 Las Vegas, Nevada Telephone: (702) Facsimile: (702) mchristian@klnevada.com 6 ssherman@klenavda.com 7 Attorneys for Receiver ROBB EVANS & ASSOCIATES, LLC 8 -r UNITED STATES DISTRICT COURT DISTRICT OF NEVADA FEDERAL TRADE COMMISSION, Case No. 2:11-cv JCM (RJJ) :.- - ri vs. Plaintiff, MICHAEL BRUCE MONEYMAKER, alk/a Bruce Moneymaker, Mike Smith, and Michael Bruce Millerd, individually, as an officer and director of the corporate defendants, and also doing business as Fortress Secured; DANIEL DE LA CRUZ, individually, as an officer and director of the corporate defendants, and also doing business as Fortress Secured; BELFORT CAPITAL VENTURES, INC., a corporation; DYNAMIC ONLINE SOLUTIONS, LLC, a limited liability company; HSC LABS, INC., a corporation; RED DUST STUDIOS, INC., a corporation; SEASIDE VENTURES TRUST, individually and as an officer and director of the corporate defendants; and JOHN DOE NO. 1, IN HIS CAPACITY AS TRUSTEE OF SEASIDE VENTURES TRUST, Defendants. DECLARATION OF KENTON JOHNSON IN SUPPORT OF MOTION FOR ORDER: (1) APPROVING RECEIVER S FINAL REPORT AND ACCOUNTING; (2) APPROVING RECEIVER S AND PROFESSIONALS FEES AND EXPENSES FROM INCEPTION THROUGH CLOSING; (3) AUTHORIZING ABANDONMENT OF UNADMINISTERED ASSETS AND DESTRUCTION OF RECORDS; (4) DISCHARGING RECEIVER; (5) RELIEVING RECEIVER OF ALL DUTIES AND LIABILITIES; (6) AUTHORIZING THE TURNOVER OF ANY REMAINING FUNDS TO PLAINTIFF; AND ALL RELATED RELIEF; AND 24 (7) GRANTING RELIEF FROM LOCAL 25 RULE 66-5 PERTAINING TO NOTICE TO CREDITORS I, KENTON JOHNSON, hereby declare and state as follows: 28 I am a member of Robb Evans & Associates LLC, appointed as Receiver in this (5818-8)

14 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 2 of 8 case. I am one of the deputies to the Receiver responsible for the day-to-day supervision of the receivership estate. If called upon to testify as to the facts set forth in this declaration, I could and would testify competently thereto, as the facts are true and either within my personal knowledge or based upon knowledge of such facts that I have gained from the books and records of the receivership proceeding, including the books and records of the Receivership Defendants, as defined below. 2. This Declaration is filed in support of the Receiver s motion for an order approving its final report and accounting, for its discharge, and for related relief (the "Motion") 3. On March 29, 2011, the Receiver was appointed Temporary Receiver over Belfort r* Capital Ventures, Inc., Dynamic Online Solutions, LLC, JIISC Labs, Inc., Red Dust Studios, Inc., and their subsidiaries, affiliates, divisions, successors, and assigns, and includes fictitious names under which they do business, including but not limited to Centralized Customer Service, Uniguard, Freedom Subscription, illustrious Perks, Select Platinum Credit, and Kryptonite _z Credit, as defined in the Temporary Restraining Order (collectively the "Receivership Defendants"). Pursuant to the Preliminary Injunction Order entered April 15, 2011, the Receiver has been appointed permanent Receiver over the Receivership Defendants. 4. I am one of the deputies to the Receiver responsible for the administration of the receivership estate, including the investigation of assets and potential assets of the receivership estate, review of the books and records of the receivership estate and the analysis of receivership I assets. 5. After the entry of the Preliminary Injunction, the parties discussed settlement, resulting in a Stipulated Order for Injunction and Monetary Judgment entered on January 24, 2012 (the "Stipulated Order") that directed the Defendants to turn over certain assets to the Receiver for liquidation and to assist the Receiver as required with selling the assets. Those assets, and the Receiver s efforts with respect thereto, are as follows: Vehicles 6. Defendant Michael Bruce Moneymaker (Moneymaker) responded to the Receiver s request to surrender a 2010 Polaris Razor, a 2009 Polaris Phoenix 200, a (5818-8) -2-

15 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 3 of 8 1 Yamaha Raptor 700, and a 2010 Zieman Customer Trailer F816 by providing a phone number of 2 a mechanic. The mechanic told the Receiver that Moneymaker delivered the Polaris Razor to 3 him for repair after an accident. The 2009 Polaris Phoenix 200 and the 2009 Yamaha Raptor were stored on the 2010 Zieman Customer Trailer with the 2010 Polaris Razor, and all vehicles 5 remained at the mechanic s location. The mechanic stated that his bill for partial repair and 6 storage was approximately $8, Polaris Razor F: 7. The Receiver determined that the value of the Polaris Razor was approximately 9 $7,500 and negotiated with the mechanic to accept ownership of the Polaris Razor in exchange 10 for the $8,049 amount due and release the other vehicles. The Receiver requests the Court to 11 confirm turning over the 2010 Polaris Razor to the mechanic to settle all amounts due. - FF Yamaha Raptor The Receiver advertised this vehicle in all-terrain vehicle web - sites and papers, but Q I received few offers. The Receiver ultimately sold the vehicle for a net recovery of to the market value. $4,050, close Polaris Phoenix 200 t The Receiver advertised this vehicle in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the vehicle, and sold I it to a vehicle wholesaler for a net recovery of $1, Zieman Customer Trailer F The Receiver advertised the trailer in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the trailer, and sold it I to a vehicle wholesaler for a net recovery of $1,250. Real Property 39 Cassis Circle, Rancho Mirage, California 11. This property (the "Rancho Mirage Property") is a five year old, 4 bedroom, 4.5 bathroom, 3,772 square-foot single story, single family residence located near Palm Springs, California. The Desert Heat Trust held title to the Rancho Mirage Property and, after reviewing (5818-8) -3-

16 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 4 of 8 1 the Stipulated Order, the trustee transferred title to the Receiver. The house originally sold in for $1,428, The Court approved the sale of the Rancho Mirage Property, and the receivership 4 I estate received net sale proceeds of $63,610 after payoff of the first trust deed secured loan, 5 I deductions for several delinquent items (including property taxes), and sales commissions Mandalay Beach Road, Oxnard, California This property (the "Oxnard Property") is a three-year old, 3 bedroom, 4 bathroom, 8 3,539 square-foot, three story, single-family beach-house residence with an ocean view located 9 on the sand in Oxnard, California. The Oxnard Property and the improvements are in good 10 condition and are reasonably comparable with other on-market properties in the neighborhood. The land on which the home was built originally sold in 2007 for $2,500,000. U 14. On February 7, 2013, the Court approved a termination of the stay imposed by the 13 Receivership Order, pursuant to which the secured lender was permitted to complete its 14 foreclosure of the Oxnard Property in exchange for a payment of $50,000 to the receivership CI) 15 estate. 16 Other Non-Cash Assets With a Market Value Greater Than $50, Defendant Michael Moneymaker stated he did not have any other non-cash assets 18 with a market value greater than $50,000. The Receiver did not locate any other non-cash assets 19 with a market value greater than $50,000 that belonged to any of the defendants or the 20 I Receivership Defendants. 21 Evaluation of Two Pre-Receivership Judgments During the course of the receivership, the Receiver learned of two default 231 judgments entered against certain of the Receivership Defendants or against property belonging 24 to such Receivership Defendants In one case, a former credit card processor in Illinois obtained a judgment for 26 $393,000 in October 2008 against Stored Value Marketing, Inc., Defendant Michael 27 Moneymaker, and Claudia Alvarez, in the State of Illinois. This judgment was then 28 domesticated in the Superior Court for the County of San Diego, California, and created a (5818-8) A

17 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 5 of I Qe judgment lien against the Oxnard Property, which was legally titled in Claudia Alvarez s name. The Receiver, with the assistance of its counsel, initially attempted to negotiate a settlement of the judgment lien that would have permitted the Oxnard Property to be marketed and sold with a meaningful return to the receivership estate. However, although the judgment creditor initially agreed to accept a discounted payoff, it subsequently reneged on this agreement. Instead, the Receiver negotiated an agreement with the secured lender on the Oxnard Property pursuant to which the Receiver would obtain relief from the stay injunction to allow the secured lender to complete its non-judicial foreclosure of the Oxnard Property, thereby extinguishing the junior judgment lien, in exchange for the payment of $50,000 to the receivership estate. The Receiver s counsel assisted in the preparation of the necessary pleadings to effectuate the terms of the agreement. 18. In the second instance, an individual in Michigan obtained a judgment for $59,000 in November 2008 against Fortress Secured, Inc. and others for violating the Michigan Home Solicitation Sales Act. The Receiver s office has completed a nationwide search of the Secretaries of States, including the states of California, Illinois, and Michigan, and has not located any judgment lien on personal assets of any Receivership Defendant filed with any Secretary of State; nor is there any indication that the Michigan judgment has been domesticated in the State of California, or that any judgment lien was created thereby against any real property belonging to any of the Receivership Defendants. Report Of Receivership Receipts And Disbursements 19. As discussed above, the receivership estate has been impacted by limited assets, many of which were highly leveraged with very little equity, and one of which was further burdened with a pre-receivership judgment. The financial complications and physical conditions of the real estate assets required substantial activity, discussions, and negotiations while marketing the properties. For example, the Receiver s staff and professionals dedicated extensive time to analyzing and crafting possible options to recover any equity from the Oxnard Property. 20. Additionally, the Receiver learned that Defendants formed, operated, and (5818-8) -5-

18 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 6 of 8 : an discarded numerous entities as part of an apparent pattern and practice to insulate and disguise themselves from the public and others. The business and accounting records were marginally maintained with numerous co-mingled and cross-entity transactions. There also appeared to be many payments to the Defendants, insiders, and affiliated entities originating from numerous entities and accounts. 21. Consequently, in the first four months after its appointment, the receivership estate incurred about $38,000 in expenses for forensic accountants to reconstruct records for the Receiver s first report and to complete and maintain proper accounting records. The receivership estate also provided $41,000 to the Defendants for court-approved legal fees. 22. From the inception of the receivership on March 29, 2011, through December 31, 2011, the receivership estate collected $127,349 from banks, credit card processors and others. Part of that money collected included a reserve balance of $50,999 from Check Gateway, a credit card processor for a third-party program marketed by Receivership Defendants. The Receiver confirmed that the third-party program transferred the reserve balance to the Defendants to pay for customer service charges, and Check Gateway turned over the remaining reserve balance to the Receiver. 23. Total receivership fees, including forensic accounting fees, amounted to $86,332. The Receiver s legal expenses amounted to $19,347, and Defendants legal fees were an additional $40,839. Thus, total expenses exceeded the total receipts, resulting in a deficit of I $23,387 as of December 31, From January 1, 2012 through February 28, 2013 the receivership estate collected $122,725 from selling and liquidating the two real properties and the personal property described above. Marketing costs and other expenses to maintain the assets totaled $12,731. Receivership fees to complete these activities totaled $48,452 and necessitated legal fees and costs in the amount of $20,280. Thus, the receivership estate s total expenses during this period were $85,913, resulting in a surplus of $36,812 for the 14-month period, eliminating the prior period s deficit, and creating a small surplus of $13,425 as of February 28, However, estimated expenses of $15,837 to close the receivership estate (5818-8) - 6 -

19 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 7 of 8 1 I consisting primarily of receivership fees for the preparation of the final report and accounting 2 and any necessary court appearance, the preparation of final tax returns, and final legal expenses, 3 will likely consume the small surplus of $13,425 and create a final deficit of $2,412, which the 4 Receiver will absorb. If the final expenses prove less than the above estimate such that a final 5 surplus is created, the Receiver intends to forward any such remaining surplus to the Plaintiff 6 Federal Trade Commission as directed by the court in the Stipulated Order The Receiver s Final Report and Final Accounting are attached hereto as 8 I composite Exhibit 4" The fees of the Receiver, its members and staff, are described in the billing 10 records attached hereto as composite Exhibit "2" As a member of Robb Evans & Associates LLC, I am familiar with the methods.- 12 and procedures used by the Receiver and its staff and employees to record the time spent 13 rendering services to receivership estates over which thc Receiver has been appointed. The Q.. cmd records attached hereto as and/or contained within Exhibits 1 and 2 are regularly prepared by the members, staff and employees of the Receiver at or about the time of the services rendered and 16 each of whom has a business duty to accurately record the information regarding their services I 19 I set forth in these records. The records are reviewed by the Receiver s accounting staff and summarized in the Receivership Administrative Expenses and Fund Balance, attached hereto as Exhibit Based upon my experience with Robb Evans & Associates LLC, I believe the 21 Receiver s methods and procedures for recording and accounting for time and services for the 22 receivership estates over which Robb Evans & Associates LLC have been appointed are reliable 23 and accurate There are numerous potential interested parties and creditors of the receivership 25 estate. There were thousands of consumers who did business with one or more of the 26 Receivership Entities. There are also numerous potential non-consumer creditors of the 27 Receivership Defendants. Although it is unclear if all of the consumers are creditors of the 28 estate, they are potential creditors in the estate, and under Local Rule 66-5 may be considered (5818-8) -7-

20 Case 2:11-cv JCM-CWH Document 120 Filed 05/22/13 Page 8 of 8 1 "interested parties" who should be served with notice of the hearing on this Motion. If the 2 Receiver is required to give notice to all of these persons, such a requirement would be 3 burdensome, time-consuming and expensive for the receivership estate, forcing the estate to 4 incur substantial photocopying and postage costs. The Receiver will cause a copy of this Motion 5 to be posted on the Receiver s website at where 6 interested parties and creditors may review it in its entirety, exclusive of the voluminous time 7 records, The Receiver will also provide copies of the Motion to any interested party upon receipt 8 of a written request which may be directed to the Receiver as set forth in the Notice of Motion I declare under penalty of perjury that the foregoing is true and correct under the 10 laws of the State of Nevada. o. ; Executed this 10 day of May, 2013, in Sun Valley, California. /L O AA ZkM (Ll)J KENTON(HNSON ri i (5818-8) -8-

21 Case 2:11-cv JCM-CWH Document Filed 05/22/13 Page 1 of 23 EXHIBIT 1 EXHIBIT 1

22 Case 2:11-cv JCM-CWH Document Filed 05/22/13 Page 2 of 23 ROBB EVANS & ASSOCIATES LLC Receiver of Belfort Capital Ventures, Inc. et al. FINAL REPORT OF RECEIVER S ACTIVITIES AND REQUEST FOR APPROVAL OF FINAL REPORT & ACCOUNTING February 28, 2013 This is the Final Report and Accounting to the Court. The Receiver has completed its duties required by the Orders issued by this Court. This report describes the activities of the Receiver from April 12, 2011 through February 28, The Receiver completed its report of initial activities in the Report of Temporary Receiver s Activities March 29, 2011 through April 11, The Receiver has now sold or resolved all assets that were directed to be sold in the Stipulated Order for Injunction and Monetary Judgment entered January 24, 2012 (Stipulated Order). Summary of Activities After the Preliminary Injunction was entered on April 15, 2011, the parties began to discuss a settlement. The discussions lead to an agreement which was approved by the parties and this Court. The Court issued a Stipulated Order that directed the Defendants to turn over certain assets to the Receiver for liquidation and to assist the Receiver as required with selling the assets. The assets include the following real and personal property items. All-Terrain Vehicles Defendant Michael Bruce Moneymaker (Moneymaker) responded to the Receiver s request to surrender a 2010 Polaris Razor, a 2009 Polaris Phoenix 200, a 2009 Yamaha Raptor 700, and a 2010 Zieman Customer Trailer F816 by providing a phone number of a mechanic. The mechanic told the Receiver that Moneymaker delivered the Polaris Razor to him for repair after an accident. The 2009 Polaris Phoenix 200 and the 2009 Yamaha Raptor 700 were stored on the 2010 Zieman Customer Trailer with the 2010 Polaris Razor, and all vehicles remained at the mechanic s location. The mechanic stated that his bill for partial repair and storage was approximately $8,049. Reference to the Receiver in this report means the Receiver, the Receiver s Deputies, its staff, and its counsel. Page 1 of 1

23 Case 2:11-cv JCM-CWH Document Filed 05/22/13 Page 3 of Polaris Razor The Receiver determined that the value of the Polaris Razor was approximately $7,500 and negotiated with the mechanic to accept ownership of the Polaris Razor in exchange for the $8,049 amount due and release the other vehicles. The Receiver requests the Court to confirm turning over the 2010 Polaris Razor to the mechanic to settle all amounts due Yamaha Raptor 700 The Receiver advertised this vehicle in all-terrain vehicle websites and papers, but received few offers. The Receiver ultimately sold the vehicle for a net recovery of $4,050, close to the market value Polaris Phoenix 200 The Receiver advertised this vehicle in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the vehicle, and sold it to a vehicle wholesaler for a net recovery of $1, Zieman Customer Trailer F816 The Receiver advertised the trailer in all-terrain vehicle websites and papers, but received no offers. The Receiver determined there was no retail interest in the trailer, and sold it to a vehicle wholesaler for a net recovery of $1, Cassis Circle, Rancho Mirage, California Subject property is a five year old, 4 BR 4.5 BA, 3,772 square-foot single story, single family residence located near Palm Springs, California. The Desert Heat Trust held title to the property and, after reviewing the Stipulated Order, the Trustee transferred title to the Receiver. The house originally sold in 2008 for $1,428,000. Under Tab 1 are the full details of the appraisal process and the marketing activities and results for the property that were completed by the Receiver s real estate broker. The attachment includes the complete details of the eventual sale of the property for $899,000. The receivership estate received net sale proceeds of $63,610 after payoff of the first trust deed secured loan, deductions for several delinquent items including property taxes, and sales commissions. 761 Mandalay Beach Road, Oxnard, California The subject property is a three-year old, 313R, 4BA, 3,539 square-foot three story, single family beach house residence with an ocean view located on the sand in Page 2 of 2

24 Case 2:11-cv JCM-CWH Document Filed 05/22/13 Page 4 of 23 Oxnard, California. The property and the improvement are in good condition and are reasonably comparable with other on-market properties in the neighborhood. The land on which the home was built originally sold in 2007 for $2,500,000. Under Tab 1 are the full details of the appraisal process and the marketing activities and results for the property that were completed by the Receiver s real estate broker and the Receiver. The attachment includes the complete details of the eventual release of the property from the Stay of Action in exchange for a payment of $50,000. Any Other Non-Cash Asset With a Market Value Greater Than $50,000 Defendant Michael Moneymaker stated he did not have any other non-cash assets with a market value greater than $50,000. The Receiver did not locate any other non-cash assets with a market value greater than $50,000 that belonged to any of the defendants. Evaluation of Two Pre-Receivership Judgments The Receiver learned of two default judgments entered against receivership defendants. A former credit card processor in Illinois obtained a judgment for $393,000 in October 2008 against Stored Value Marketing, Inc., which was entered in the Superior Court, County of San Diego. When the lender completed a non-judicial foreclosure of the Oxnard property, the junior judgment lien against the property was extinguished. An individual in Michigan obtained a judgment for $59,000 in November 2008 against Fortress Secured, Inc. and others for violating the Michigan Home Solicitation Sales Act. There is no record that the Michigan judgment has been entered in the Superior Court of California. The Receiver s office has completed a nationwide search of the Secretaries of States, including the states of California, Illinois, and Michigan, and has not located any Judgment Lien of personal assets filed with any Secretary of State. Report of Receivership Receipts and Disbursements As this report discussed above, the receivership estate has been impacted by limited assets, many of which were highly leveraged with very little equity, and were further burdened with pre-receivership judgments. The financial complications and physical conditions of the real estate assets required substantial activity, discussions, and negotiations while marketing the properties. The Receiver s staff dedicated extensive time to analyzing and crafting possible options to recover any equity from the Mandalay Beach Road property. Page 3 of 3