The Securities and Exchange Commission and Commodity Futures Trading Commission brought related actions alleging that defendant Joseph Forte violated multiple securities laws through his operation of a Ponzi scheme wherein he fraudulently obtained approximately $50 million from at least 76 investors. In relation to these claims, and in an effort to preserve any remaining funds, the government sought, and Forte consented to, an order freezing all funds and assets held by Forte and his company. The next month, however, Forte petitioned the District Court for the Eastern District of Pennsylvania to release a portion of the frozen assets so that he could pay a variety of bills. In denying his request, the Court noted that when evaluating requests to release frozen assets, courts commonly look to several factors, all of which weighed strongly against granting Forte’s request.
For example, the funds sought were to be used exclusively for Forte’s personal use, and thus his request was not in the interest of the defrauded investors. In addition, Forte failed to present evidence that the assets he sought to have released were derived from sources other than the fraud. Moreover, Forte failed to establish that his interest in having access to the funds to pay ordinary and necessary living expenses outweighed the government’s interest in preventing the depletion of potentially forfeitable assets.
The Court also noted that many of the expenses that Forte was seeking to pay, such as payments for mortgages on multiple properties and satellite television, could not be considered necessities, thus cutting against the release of the assets. Finally, the Court noted that even with respect to “necessities,” Forte was seeking excessive amounts and had failed to submit documentation supporting the amounts requested. (Securities and Exchange Commission v. Forte, Civ. Nos. 09-63, 09-64, 2009 WL 465600 (E.D. Pa. Feb. 24, 2009))