United States Securities and Exchange Commission v. Qin

Background

On January 21, 2022, Robert A. Musiala, Jr., of Baker & Hostetler LLP, was appointed receiver in the action. A receiver is a person appointed by a court to manage property or affairs involved in a case. The receiver submitted the Fifth Fee Application for work and expenses incurred from January 1 through March 31, 2022.

The application sought approval of $663,265.80 for BakerHostetler, $322,227.59 for Ankura Consulting Group, and $11,875 for the Law Office of Dennis O. Cohen, PLLC. The receiver and its team submitted invoices describing their work. The Securities and Exchange Commission reviewed and approved the application and invoices.

Missing information

The court found that the fee application and the receiver’s Seventh Status Report did not include all information required by the receiver order. The fee application described the sources of cash on hand but did not state the amount of cash on hand or the amount of unencumbered funds in the estate. It also did not describe all known receivership property, provide approximate or actual valuations, or include a schedule of receipts and disbursements for the relevant quarter and the receivership.

The status report stated that the receiver team was evaluating creditor claims and had paid certain creditor expenses, but it did not list all known creditors, their addresses, or the amounts of their claims.

Court’s analysis

The court explained that a receiver who reasonably and diligently performs the receiver’s duties is entitled to fair compensation for services and expenses. The reasonableness of a receiver’s fees is decided by the court and includes consideration of the hourly rates and the number of hours billed. The court also considers the complexity of the problems, the benefits to the receivership estate, the quality of the work, and the time records.

The court found that the receiver team performed significant, complex, and time-intensive work that benefited the estate. The work included asset analysis and recovery, forensic accounting, data analysis, cryptocurrency-related investigations and custody work, witness interviews, subpoenas, investor communications, and analysis of blockchain transaction data. The court also noted that the receiver and Ankura had discounted their ordinary hourly rates and written off amounts during the application period.

Ruling

The court granted the Fifth Fee Application in part. Because required information was missing from the application and status report, the court held back 10% of the requested payment until the information is provided. It authorized payments of $596,639.22 to BakerHostetler, $290,004.83 to Ankura Consulting Group, and $10,687.5 to the Law Office of Dennis O. Cohen, PLLC.