Benthos Master Fund, Ltd. v. Etra

Background

Benthos Master Fund, Ltd. petitioned to confirm an arbitration award for more than $5 million arising from what Benthos described as a fraudulent purported Bitcoin sale. On August 12, 2020, the court confirmed the award and entered judgment against Aaron Etra. Etra appealed, but the appeal was dismissed.

Benthos later sought to enforce the judgment through discovery. Its first request to hold Etra in conditional civil contempt for failing to comply with discovery requests was denied without prejudice. After the matter was referred to Magistrate Judge Parker for settlement and general pretrial issues, Benthos filed another motion to hold Etra in civil contempt for failing to produce documents required by court orders. Etra opposed that motion.

Report and Recommendation

After an evidentiary hearing, Judge Parker issued a Report and Recommendation. It included a certification of facts under 28 U.S.C. § 636(e) and recommended that Benthos’s motion be granted in part and denied in part. The recommendation addressed Etra’s failure to provide documents concerning his financial accounts and assets. It also suggested referring the alleged underlying fraud to the United States Attorney’s Office for investigation.

Neither party objected to the recommendation, even though the parties had been warned that failing to object would waive objections and prevent appellate review. Etra also did not request the additional hearing offered by the Court. Judge Caproni reviewed the recommendation for clear error and independently reviewed the evidence relating to the certified facts. She found no clear error and concluded that her review of the evidence was consistent with Judge Parker’s factual findings.

Ruling

Judge Caproni adopted the Report and Recommendation in part. Benthos’s motion was granted in part and denied in part. The request for conditional incarceration was denied without prejudice. The court stated that further noncompliance could change its view about whether incarceration was appropriate.

Etra was ordered to provide, by June 20, 2022:

- Monthly statements for specified M&T, HSBC, Uni-Credit, European, and other bank accounts, including statements for accounts receiving Social Security payments if separate from the identified M&T account; - Statements for specified HSBC credit and debit accounts and a JP Morgan brokerage account; - Closing statements for several identified bank accounts; - Tax returns and communications with the Internal Revenue Service or the New York State Department of Taxation and Finance from August 1, 2018, through the present; - Proof of funds received from closed bank accounts from August 2020 through the present; and - An executed Internal Revenue Service Form 2848 allowing Benthos to obtain Etra’s tax returns directly.

Etra also had to provide a notarized affidavit stating either that he had no other open personal, business, or custodial accounts and no other stocks, bonds, real estate, cryptocurrency, or other financial assets, or identifying all other open accounts and current assets. If he failed to produce the listed documents by June 20, a $50-per-day fine would begin on June 21 and continue until full compliance.

The court did not treat Judge Parker’s suggestion of a referral to the United States Attorney’s Office as part of the ruling on Benthos’s motion because Benthos had not requested that referral. The court noted that Benthos could still file a complaint with the appropriate authorities, and that the court might do so as well.

Because neither party objected after receiving adequate warning, the court held that appellate review was precluded. Judge Caproni certified that any appeal would not be taken in good faith and denied permission to proceed without paying filing fees for purposes of an appeal. The clerk was directed to terminate the pending motion and mail the order to Etra, who was litigating without a lawyer.