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United States Commodity Futures Trading Commission v. Lake Shore Asset Management Limited

March 5, 2010


The opinion of the court was delivered by: Blanche M. Manning United States District Judge


Andorra Bank Agricol Rieg. S.A. ("Andbanc") describes itself on its website as "a financial institution able to offer services tailored to the clients and on a global scale." It seeks leave to file a claim approximately eight months after its claims bar date in the amount of $7,535,939.77.*fn1 The receiver opposes the motion, contending that Andbanc's delay is unreasonable. For the following reasons, Andbanc's motion is denied.

I. Background

A. The Claims Verification Procedure

In the January 30, 2009, order outlining procedures governing the submission of claims ("claims procedure order"), the court directed the receiver to provide all investors with notice of the claim verification process, as well as the claims bar date. Specifically, the claims procedure order provides that:

[t]o participate in the claim process investors must provide the Receiver with the information requested in the Notice within forty five (45) days of the date of the Notice. Investors who fail to provide the Receiver with this information within the forty five (45) day time period will be barred from participating in the distribution of the receivership unless they can demonstrate to the Court good cause for the delay, all reasonable diligence in submitting the information at the earliest possible date thereafter, and absence of any prejudice to the receivership estate. January 30, 2009, order at ¶ 4 (Dkt. No. 631).

B. Andbanc's Investment in the Lake Shore Funds

Andbanc is a private banking institution located in the principality of Andorra, which is between France and Spain.*fn2 It submitted an affidavit from Santiago Mora Torres, Andbanc's Chief Investment Officer and Deputy Managing Director. Mr. Mora is responsible for overseeing all of Andbanc's investments, has "20 years' experience at several different financial institutions and hold[s] a degree in business administration from the University of Barcelona (Spain)." Mora Dec. at ¶ 1 (Dkt. No. 730-1).

In 2006, Andbanc began to invest in Lake Shore Alternative Financial Asset Fund Limited II and Lake Shore Alternative Financial Asset Fund Limited III. It invested on its own behalf, and is not an institutional investor. It contends that it ultimately invested $7,535,939.77.

Unfortunately for Andbanc and Lake Shore's other investors around the globe, the Lake Shore funds were not on the up and up, as detailed in numerous orders issued in this civil commodities fraud case starting in August of 2007.*fn3 Andbanc accessed its account statements via the now defunct website, and did not receive any paper statements from any Lake Shore entity. According to Andbanc, it regularly consulted the website to check on its investment until October of 2007, when the website was shut down.

Alarmed by the sudden disappearance of the website -- especially given the amount of its investment -- Andbanc called Lake Shore's offices and learned that all of Lake Shore's funds had been frozen and Lake Shore and its officers were potential targets of a criminal investigation. Shortly afterwards, Andbanc alleges that a representative of the United States Commodities Futures Trading Commission ("CFTC") "contacted Andbanc's legal department with questions in connection with criminal proceedings and an investigation involving the directors of the Lake Shore Funds." Id. at ¶ 7. According to Andbanc, neither the Lake Shore employee nor the CFTC told it about a "receivership action." Id.

Andbanc's concerns about the defunct website -- which was its only portal to records regarding its $7.5M investment -- were allegedly assuaged by learning that Lake Shore's assets were frozen due to a criminal investigation. Relying on unspecified "relevant parallel provisions of Andorran law," Andbanc "presumed that no further action in respect of its Lake Shore Funds accounts was necessary because the accounts had been frozen, an agency of the U.S. Government was in control, and the assets would be distributed to their rightful owners in due course." Id. at ¶¶ 8-9.

C. Notification of the Bar Date Provided by the Receiver

In the meantime, proceedings in the civil case were continuing apace. On March 10, 2009, pursuant to the claims procedure order, the receiver represents that it served Andbanc with two separate notices (one for each of Andbanc's accounts) via FedEx. The receiver has provided the court with copies of the delivery confirmation, which state ...

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