Settlement, Injunction Against Pending Or Future Suits Against Settling Defendant, 2, 2
In an SEC enforcement action, the court has the equitable power to appoint a receiver for entities through which a Ponzi scheme was operated. The receiver stands in the shoes of the injured corporations and pursues their claims on behalf of all innocent investors in the scheme. In support of the receivership, the court may bar investors from independently suing parties the receiver has received so long as the investors’ individual suits substantially overlap the receiver’s claims against those parties and the litigation bar is necessary to protect the injured corporation’s assets. Here, the appellant’s individual suit sought to hold Chicago Title liable for the same conduct in aiding the Ponzi scheme and the same losses from that scheme as the receiver’s suit against Chicago Title. Also, the bar against individual suits was necessary to protect the injured corporation’s assets since it was a requirement of the receiver’s settlement with Chicago Title. Absent the settlement, the receiver would have had to spend receivership assets prosecuting the suit against Chicago Title. Also, had the appellant won in its litigation against Chicago Title, Chicago Title might have sued the injured corporations for indemnity causing additional expenditures by the receivership estate even if the indemnity suit were ultimately unsuccessful. The appellant here was properly allowed to file a claim in the receivership estate instead of its independent action. It did not do so only because it was one of the “winning” investors which had received more from the Ponzi scheme than it had invested in the scheme and thus would not have been paid on a claim against the receivership estate.