On May 21, 2009, the United States District Court for the Southern District of Texas, Houston Division, signed an order appointing a Receiver for all the assets and records (the “Receivership Estate”) of PrivateFX Global One Ltd., SA, 36 Holdings, Ltd., Robert D. Watson and Daniel J. Petroski, ("Defendants") and of all entities they own or control. The Order Appointing Receiver ("Receivership Order"), directs the Receiver to, among other things, take control and possession of and to operate the Receivership Estate, and to perform all acts necessary to conserve, hold, manage and preserve the value of the Receivership Estate.  Receivership Order also restrains and enjoins, without prior approval of the Court, creditors and all other persons from proceeding against the Receiver, any of the defendants, the Receivership Estate, or any agent, officer or employee related to the Receivership Estate for any of the following:

• any act to obtain possession of the Receivership Estate assets;
• any act to create, perfect, or enforce any lien against the property of the Receiver, or the Receivership Estate;
• any act to collect, assess, or recover a claim against the Receiver or that would attach to or encumber the Receivership Estate; or
• the set off of any debt owed by the Receivership Estate or secured by the Receivership Estate assets based on any claim against the Receiver or the Receivership Estate.

On May 21, 2009, the Court also signed a Temporary Restraining Order (“TRO”) that temporarily enjoined Defendants from committing certain violations of law. The order containing the TRO also contains Orders Appointing Receiver, Freezing Assets, Requiring an Accounting of Funds and Documents, and Requiring Preservation of Documents ("Freeze Order").  This Order, among other things, requires Defendants to provide the Receiver and the Securities and Exchange Commission with a prompt full accounting of all Receivership Estate assets.  To the extent such assets and documents are outside the territory of the United States, Defendants are ordered to transfer such assets held by them, for their benefit, or under their control, to the United States.

Status Conference

On May 29, 2009, Judge Lake held a status conference at 2:30 p.m. at the United States Courthouse for the Southern District of Texas (Houston Division).  The Status Conference was conducted in the court room and was open to the public. The Court ordered the parties to submit a status report within 30 days and every 30 days thereafter.  The Judge also indicated that he may be required to disqualify himself pursuant to Canon 3C(1) of the Code of Conduct for United States Judges because the impartiality of the Court might reasonably be questioned.  The Court provided that the Parties may remit the potential disqualification pursuant to Canon 3D.  If the parties wish to remit the potential disqualification, they shall submit a written remittance of disqualification by June 5, 2009.   Click to see the Minute Order entered by the Court.

Joint Remittal Of Disqualification

During the status conference held on May 29, 2009, Judge Lake indicated that he may be required to disqualify himself pursuant to Canon 3C(1) of the Code of Conduct for United States Judges because the impartiality of the Court might reasonably be questioned.  After disclosing to the parties the basis of the possible disqualification during the status hearing, the Court stated that the parties could choose to remit the disqualification, pursuant to Canon 3D, on or by June 5, 2009.

On June 4, 2009, the Parties filed a joint remittal of disqualification. All the parties have agreed to waive the potential disqualification and agree that the Honorable Sim Lake, United States District Court Judge, should not be disqualified  based on the grounds stated during the May 29, 2009 status conference.  Click to see the Joint Remittal Of Disqualification.

Preliminary Injuction Orders Entered As To Watson, Petroski, PrivateFX Global One Ltd, SA and 36 Holdings Ltd

On May 29, 2009, the Court entered Orders of Preliminary Injunction as to all Defendants filed by the SEC.  On June 4, 2009, the Court entered Orders of Preliminary Injunction filed by the CFTC as to all Defendants. 

The Orders enjoin Defendants from violation of securities laws, making payments, incurring additional liabilities, or disposing of any assets pending provision of sufficient proof to the Court of sufficient funds or assets to satisfy all claims alleged in the Complaint.  The Orders restrain all financial institutions notified of the Order from completing any transaction or disbursing any funds except in accordance with the Order Appointing Receiver.  Moreover, Defendants are restrained from accepting or depositing additional investor funds prior to a resolution of this case on the merits.  Defendants are restrained from destroying, altering or concealing the books and records owned by Defendants or related to the transactions alleged in the Complaint.  Defendants are further Ordered to make certain disclosures, including:  (1)  list of entities through which defendants traded; and (2)  list of entities that solicited, accepted, or received funds on behalf of Defendants. 

In addition, the Order Granting Plaintiff's Ex Parte Emergency Motion for Statutory Restraining Order, Appointment of Receiver, Expedited Discovery, Preliminary Injunction and Other Equitable Relief previously ordered by the Court will remain in full force and effect until further order of the Court.  Click the "Court Filings" tab to view the Preliminary Injunction Orders.