United States Securities and Exchange Commission v. Collector's Coffee Inc.
- Victor Marrero
- 1:19-cv-04355
- U.S. District Court · Southern District of New York
- 2
In SEC v. Collector’s Coffee, Magistrate Judge Gorenstein released 15 storage units from an asset freeze but denied Kontilai’s request that the SEC pay accrued storage charges.
The SEC, Mykalai Kontilai, and the assets stored in the 15 identified storage units were affected. The units were released from the asset freeze, while Kontilai remained responsible for the outstanding storage charges.
What happened
In United States Securities and Exchange Commission v. Collector’s Coffee, Inc., et al., the SEC asked to modify an asset freeze so that 15 storage units would no longer be covered. The parties agreed that the units should be released.
Mykalai Kontilai also asked the SEC to pay the outstanding storage-unit balance. The court found that Kontilai had not identified legal authority for that request and concluded that fairness principles did not support making the SEC pay. The court noted that Kontilai had agreed to preserve the assets at his own expense and that payments stopped in April 2022 through his insurance company.
Magistrate Judge Gabriel W. Gorenstein granted the request to release the 15 storage units and denied Kontilai’s request for the SEC to pay the outstanding charges. The order excluded the specifically identified units from the asset freeze.
The detailed version
- United States Securities and Exchange Commission v. Collector's Coffee Inc. · No. 1:19-cv-04355
- Victor Marrero
- June 22, 2023
Background
The court considered the parties’ letters concerning the SEC’s request to modify an existing asset freeze. An asset freeze is a court order preventing specified property or funds from being transferred or otherwise dealt with. The freeze had been issued in connection with the SEC’s request for a preliminary injunction, which is a temporary court order intended to preserve the situation while a case proceeds.
The SEC sought to exclude 15 storage units from the freeze. The parties agreed that those units should be released. The assets were held in SmartStop units 1108, 1183, 1243, 2106, 2116, 2140, 2210, 2212, 2214, 2216, 2217, 2218, 2254, 2278, and 2291.
Kontilai’s Payment Request
Mykalai Kontilai asked the court to require the SEC to pay the outstanding balance for the storage units. Kontilai cited no statutory or case-law authority for that request.
The court explained that issues concerning the asset freeze had to be considered under principles of equity, meaning fairness-based principles used by courts when applying or modifying certain remedies. The court found no equitable basis to order the SEC to pay. Kontilai had agreed to the order making him responsible for preserving the assets and had chosen to store them at his own expense. The unpaid charges arose after Kontilai, through his insurance company, stopped paying the storage company’s charges in April 2022.
The court further stated that Kontilai could have sought an earlier modification of the freeze, requested access to frozen funds to pay future charges, or asked to have the property released so he could take possession of it. Instead, he did not act while the charges accumulated. The court concluded that there was no unfairness in denying his request.
Ruling
Magistrate Judge Gabriel W. Gorenstein granted the request to modify the asset freeze and excluded the 15 listed storage units from it. The court denied Kontilai’s request that the SEC pay the outstanding storage charges. This order addressed the asset-freeze modification and payment request; the opinion does not decide the underlying claims in the SEC’s case.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.