Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00226/USCOURTS-casd-3_15-cv-00226-3/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

Case No. 15-cv-0226-BAS-DHB

ORDER DENYING MOTION TO 

SELL PERSONAL ASSETS AND 

TO ESCROW PROCEEDS

v.

TOTAL WEALTH 

MANAGEMENT, INC. and JACOB 

KEITH COOPER,

Defendants.

This case involves a receivership resulting from an SEC enforcement action 

against Defendants Jacob Keith Cooper, Total Wealth Management, Inc., and 

related entities. Presently before the Court is Defendant Cooper’s motion to sell 

personal assets and to escrow the proceeds. (ECF No. 80 (“Def.’s Mot.”)) Cooper 

seeks to sell a condominium and a boat to reduce his monthly expenses, and 

proposes to deposit any profits from the sale with the Receiver. The Receiver and 

the SEC have opposed, and Cooper has replied. (ECF Nos. 84, 85, 91.) For the 

reasons set forth below, Cooper’s motion is denied.

ANALYSIS

“[A] district court’s power to supervise an equity receivership and to 

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determine the appropriate action to be taken in the administration of the 

receivership is extremely broad.” SEC v. Capital Consultants, LLC, 397 F.3d 733, 

738 (9th Cir. 2005) (quoting SEC v. Hardy, 803 F.2d 1034, 1037 (9th Cir. 1986)). 

Here, Cooper asks this Court to exercise its discretion to allow him to sell two 

assets—a condominium and a boat (the “Property”)—and deposit the net proceeds 

in escrow with the Court-appointed Receiver. Cooper emphasizes that the freeze 

orders currently in place have subjected him to a double bind: while the orders 

prohibit him from disposing of any real or personal property, they also cut-off the 

income he needs to make payments associated with the Property. As a result, 

Cooper explains, “he must pay over $4,000.00 each month to maintain the debt and 

other payments on the Condo and Boat.” (Def.’s Mot. 6:26–27.) On the basis of this 

financial hardship, Cooper contends there is good cause for the Court to lift or 

modify the freeze order to allow him to sell the Property.1(See Def.’s Mot. 6:20–

28.)

For several reasons, the Court finds Cooper’s argument unpersuasive and his 

sale proposal fatally flawed. First, the Court agrees with the Receiver that the sale 

proposal does not guarantee maximum return to the estate. Although Cooper 

provides estimated valuations of the Property (based primarily on internet research), 

these valuations are uncertain and, in any event, do not bind Cooper in any way. 

That is, even as Cooper emphasizes that any profit would be turned over to the 

Receiver, the proposal itself does not actually obligate Cooper to sell the Property 

at a profit. The sale is primarily intended to benefit Cooper, not to enhance the 

 

1 The Court notes that Cooper frames his motion around the three-factor test the Ninth Circuit 

considers in deciding whether to lift a receivership stay. This standard is inapposite. The cases 

cited by Cooper make clear that the standard he invokes applies to stays of legal proceedings, not 

to motions to lift or modify a freeze order. See, e.g., SEC v. Universal Financial, 760 F.2d 1034, 

1038 (9th Cir. 1985) (per curiam) (affirming district court’s refusal to lift a previously-ordered 

stay of all legal proceedings by third parties against any of the defendants, the Receivership, or 

receivership property). In any event, even if the Court were to apply Cooper’s framework to the 

instant motion, the outcome would be the same.

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Receivership assets. As Cooper has not demonstrated that lifting the freeze is in the 

interest of the investors, he is not entitled to modify the freeze order. See, e.g., SEC 

v. Credit Bancorp Ltd., No. 99 Civ. 11395, 2010 WL 768944, at *4 (S.D.N.Y. Mar 

8, 2010) (“To succeed on a motion to modify [a] freeze to permit payment of 

attorneys’ fees and other expenses, [a] defendant ‘must establish that such a 

modification is in the interest of defrauded investors.’”) (citations omitted).

Second, and relatedly, the Court agrees with the SEC that under this 

arrangement there is nothing to prevent Cooper from selling the Property to his 

associates at below market value and then profiting from the property at a later date. 

(ECF No. 85, 3:26–28.) Indeed, instead of proposing an independent agent for 

selling the condo, Cooper apparently has a specific listing agent in mind, which 

raises the specter of collusion. Given that fraud allegations are at the heart of this 

case (see ECF No. 1), the Court declines to take the risk of allowing Cooper 

complete discretion to conduct the sale of the Property as he sees fit.

Finally, Cooper has not demonstrated that investor funds were not used to 

purchase, or make payments on, the Property he now wishes to sell. Such 

confirmation is relevant to the sale proposal because the nature of the source funds 

directly implicates the Receiver’s charge to preserve receivership assets. Cf. SEC v. 

Private Equity Mgmt. Grp., Inc., No. CV 09–2901 PSG (Ex), 2009 WL 2058247 

(C.D. Cal. July 9, 2009) (defendant in receivership proceeding seeking to release 

frozen assets must demonstrate that the assets are untainted by the alleged fraud). 

With this issue still in dispute, the Court is wary of facilitating a potential 

dissipation of receivership assets. See, e.g., SEC v. Schooler, 902 F. Supp. 2d 1341, 

1360 (S.D. Cal. 2012) (“The point of an asset freeze is to prevent their dissipation 

and waste so they will be available for disgorgement.”) (citations omitted).

CONCLUSION AND ORDER

“[A] primary purpose of equity receiverships is to promote orderly and 

efficient administration of the estate by the district court for the benefit of 

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creditors.” Hardy, 803 F.2d at 1038. Here, although there is a theoretical possibility 

that Cooper’s proposed sale would benefit investors, the Court finds the proposal 

vests too much discretion with Cooper to conduct the sale on his own terms with no 

assurance of benefit to the estate. Sale of the Property may make Cooper’s life 

easier, but in the absence of safeguards, such convenience is insufficient to justify 

approval of this proposal. Accordingly, Cooper’s Motion to Sell Personal Assets 

and to Escrow Proceeds is DENIED. (ECF No. 80.)

IT IS SO ORDERED.

DATED: January 30, 2017

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