This article was originally published by Law360.com.
Law360, New York (August 11, 2009, 2:03 PM EDT) — Plaintiffs representing a class of investors who claim they were victimized in a Ponzi scheme related to foreign currency trading have reached a settlement with MRT Holdings LLC for the entry of a final judgment of $50 million.
In a motion filed Monday in the U.S. District Court for the Southern District of Florida, the plaintiffs said the class representatives had reached a settlement under which the defendants have agreed to the final judgment’s entry; cooperation to help locate the missing money, including turning over business records; and the opening of supplemental proceedings to allow for suit against third parties who received millions of dollars “believed to be fraudulently transferred.”
The settlement obtains the judgment as well as the defendants’ cooperation in locating the missing money, the motion said. Cooperating parties will obtain a credit of 20 cents of each dollar collected against the final judgment.
The class comprises all purchasers who bought investment contracts with MRT LLC or MRT Holdings LLC between March 1, 2006, and Oct 5, 2007. It could contain 600 to 1,200 members, according to the plaintiffs.
And if the ultimate accounting shows less than $50 million invested in the scheme, the plaintiffs will ask the court to reduce the judgment to the lesser amount, the motion said.
Estimates range from $15 million to $50 million, according to Jeffrey Sonn of Sonn & Erez PLC, which represents the plaintiffs. He said the defendants’ records would help plaintiffs locate third parties that may have received the fraudulent transfers and bring suit against them to recover the money.
“It’s the best thing we could hope for,” he said.
Plaintiffs’ counsel will request a contingency fee of 25 percent of the final judgment collected, plus costs up to $2,000 with interest, the motion said.
In a notice of the proposed settlement attached to Monday’s motion, the plaintiffs emphasized that the final judgment was the first step toward trying to find and seize assets.
“There is no guarantee of payment; assets may or may not ever be located,” the notice said.
The alleged scheme involved MRT soliciting at least $50 million in investments for the stated purpose of trading foreign currency futures offshore with Swiss banks, and promising (and in some cases paying) interest rates ranging from around 12 percent annually to as high as over 11 percent per month, the plaintiffs said in their 2007 complaint.
Those investments constitute investment contracts, and thus qualify as securities, but no registration statement was ever filed in connection with the investment contracts offered and sold by the defendants, the complaint said.
The defendants issued materials and made statements to investors saying that NRT’s Forex trading activities were profitable, while in fact MRT was operating as a Ponzi scheme and incurring huge losses, said the plaintiffs, who added that MRT depends on selling new investment contracts to meet financial obligations like interest payments and capital refunds to current investors.
In March 2008 the court pared down the roster of defendants in the case, dismissing the action against MRT LLC without prejudice for failure to effect service, but also entered default against MRT Holdings and two individuals.
In the Monday motion, the plaintiffs asked that default be entered against MRT LLC because they discovered it had been served in 2008.
An attorney for MRT Holdings was not immediately available for comment.
The defendants are represented in this matter by Inger M. Garcia-Armstrong. Individual defendant Zeina Smidi is representing herself.
Sonn & Erez PLC is serving as class counsel.
The case is Katz et al. v. MRT Holdings LLC et al., case number 07-61438, in the U.S. District Court for the Southern District of Florida.
–Additional reporting by Ben James