On February 20, 2020, the Securities and Exchange Commission (SEC) filed a civil enforcement action in the United States District Court for the Middle District of Florida against defendants Kinetic Investment Group, LLC and Michael Scott Williams (collectively, defendants). In their Complaint, the SEC alleged that the defendants conducted a fraudulent and unregistered securities offering that raised approximately $39 million from several dozen investors located in Florida and Puerto Rico. As set forth further in the Complaint, the SEC also accused Williams of misappropriating at least $6.3 million through undisclosed loans to himself and entities he controlled.  In addition to the defendants, the Complaint also names six relief defendants that received proceeds of the alleged fraud without any legitimate entitlement to the funds: Kinetic Funds I, LLC; KCL Services, LLC d/b/a Lendacy, Scipio, LLC; LF42, LLC; El Morro Financial Group, LLC; and KIH, Inc. f/k/a Kinetic International, LLC.

The SEC sought various forms of relief against the defendants including an asset freeze and the appointment of a receiver to assist in marshalling assets on behalf of creditors, including injured investors. Defendants opposed this relief.

On March 6, 2020, the Court held a hearing on the SEC’s motions and that same day entered an Order appointing Mark Kornfeld as Receiver over Kinetic Investment Group and all Relief Defendants.  Mr. Kornfeld is an attorney with the Buchanan Ingersoll & Rooney PC law firm and his bio is available here. In the Order Appointing Receiver, the Court directed the Receiver to (i) administer and manage the business affairs, funds, assets, and any other property of the defendants and relief defendants; (ii) marshal and safeguard the assets of the defendants and relief defendants; (iii) investigate the manner in which the affairs of the defendants and relief defendants were conducted and institute such legal proceedings for the benefit of the defendants and relief defendants and their investors and creditors as the Receiver deems necessary; and (iv) take whatever actions are necessary for the protection of the investors. The Receiver intends to fulfill his duties and responsibilities as efficiently and effectively as possible.  The District Court overseeing this Receivership has broad powers and wide discretion to determine the appropriate relief.

The Court subsequently approved the Receiver’s motions to retain various professionals to assist him in his duties, including the Quarles & Brady LLP law firm to serve as his counsel.  Jordan Maglich will be serving as Mr. Kornfeld’s lead counsel.