Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-15-04026/USCOURTS-ca10-15-04026-0/pdf.json

Parties Involved:
Gil A. Miller
Appellee
Arthur S. Wulf
Appellant

Document Text:

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

GIL A. MILLER, as Receiver for Impact 

Payment Systems, LLC, and Impact Cash, 

LLC, 

 Plaintiff - Appellee, 

v. 

ARTHUR S. WULF, an individual, 

 Defendant - Appellant. 

No. 15-4026 

(D.C. No. 1:12-CV-00119-DN) 

(D. Utah) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before KELLY, BACHARACH, and MORITZ, Circuit Judges. 

_________________________________ 

 Arthur S. Wulf, an Illinois attorney representing himself, appeals the district 

court’s orders granting the plaintiff’s motion for summary judgment, Miller v. Wulf, 

84 F. Supp. 3d 1266 (D. Utah 2015), and denying his motion for sanctions. We 

affirm. 

 *

 After examining the briefs and appellate record, this panel has determined 

unanimously that oral argument would not materially assist in the determination of 

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore 

ordered submitted without oral argument. This order and judgment is not binding 

precedent, except under the doctrines of law of the case, res judicata, and collateral 

estoppel. It may be cited, however, for its persuasive value consistent with 

Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED 

United States Court of Appeals

Tenth Circuit 

December 2, 2015

Elisabeth A. Shumaker 

Clerk of Court

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I. Background

 In October 2008, Wulf paid $60,000 for 60,000 shares of common stock in 

Impact Payment Systems, LLC and Impact Cash, LLC (Impact). Impact operated as 

a Ponzi scheme since at least 2006. In October 2010, Impact redeemed Wulf’s stock 

by paying him $94,500, gaining Wulf $34,500 in Ponzi winnings. 

The plaintiff, Gil A. Miller, is the court-appointed receiver (Receiver) in a 

civil enforcement action filed by the Securities and Exchange Commission against 

John Scott Clark and Impact, which Clark controlled. See SEC v. Clark, No. 1:11-cv46 (D. Utah). The Receiver filed this action to recover Wulf’s Ponzi winnings as a 

fraudulent transfer. Both parties filed motions for summary judgment. Because Wulf 

failed to comply with a local court rule requiring him to specifically controvert the 

moving party’s numbered statements of facts, see D. Utah Civ. R. 56-1(c), the district 

court deemed admitted the Receiver’s factual statements establishing Impact as a 

Ponzi scheme. The court then concluded Wulf didn’t exchange reasonably 

equivalent value for the amount he received over his original investment and entered 

judgment in the Receiver’s favor for $34,500 plus pre- and post-judgment interest. 

The court also denied Wulf’s summary-judgment motion and his motion for sanctions 

under Fed. R. Civ. P. 11 against the Receiver. Finally, the district court awarded the 

Receiver his fees in defending the sanctions motion. 

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II. Summary Judgment 

 “We review a grant of summary judgment de novo, applying the same standard 

as the district court. Summary judgment is appropriate where the movant shows that 

there is no genuine dispute as to any material fact and the movant is entitled to 

judgment as a matter of law.” BancInsure, Inc. v. FDIC, 796 F.3d 1226, 1233 

(10th Cir. 2015) (citation and internal quotation marks omitted). In conducting our 

review, “we view the factual record in the light most favorable to the non-moving 

party.” Id. And although we generally construe pro se pleadings liberally, we 

decline to do so here because Wulf is a licensed attorney. See Smith v. Plati, 258 

F.3d 1167, 1174 (10th Cir. 2001).

 Wulf disputes the district court’s characterization of Impact as a Ponzi scheme. 

“A Ponzi scheme is a fraudulent investment scheme in which ‘profits’ to investors 

are not created by the success of the underlying business venture but instead are 

derived from the capital contributions of subsequently attracted investors.” Sender v. 

Simon, 84 F.3d 1299, 1301 n.1 (10th Cir. 1996). Wulf doesn’t challenge the district 

court’s ruling deeming the Receiver’s fact statement admitted; thus, Wolf has waived 

any factual challenges. See Davis v. McCollum, 798 F.3d 1317, 1320 (10th Cir. 

2015) (holding appellant waived any potential challenge to district court’s ruling by 

failing to address it in his opening appeal brief). 

In concluding that Impact was a Ponzi scheme, the district court thoroughly 

reviewed and considered the Receiver’s analysis of Impact’s operations and 

accounting records. That analysis revealed that Impact commingled investor funds; 

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used money assigned to one investor to pay to another investor; used new investors’ 

money to pay old investors; didn’t show an operating profit during any year when 

investors received distributions; and during 2006 through 2010, paid out over $52.5 

million, despite sustaining a net loss of nearly $3 million. 

The district court applied the Ponzi presumption of Utah Code Ann. 

§ 25-6-5(1)(a), which provides: “A transfer made . . . by a debtor is fraudulent as to 

a creditor . . . if the debtor made the transfer . . . with actual intent to hinder, delay, or 

defraud any creditor of the debtor.” Thus, the court ruled that under the statute, 

“once it is established that a debtor acted as a Ponzi scheme, all transfers by that 

entity are presumed fraudulent.” Miller, 84 F. Supp. 3d at 1274. The court also held 

that “a transfer is not voidable against a person who took in good faith and for 

reasonably equivalent value.” Id. (citing Utah Code Ann. § 25-6-9). Relying in part 

on Perkins v. Haines, 661 F.3d 623 (11th Cir. 2011) and Barclay v. Mackenzie 

(In re AFI Holding, Inc.), 525 F.3d 700 (9th Cir. 2008), the district court articulated 

the general rule applicable to a Ponzi scheme that “later transfers up to the amount of 

the investment provided value. But no value is given for payments in excess of 

principal.” Miller, 84 F. Supp. 3d at 1275 (citing Perkins, 661 F.3d at 628-29, and 

In re AFI Holding, 525 F.3d at 708). 

 Wulf seeks to distinguish his situation from all other Impact participants, 

suggesting he made a straightforward stock purchase and later received a dividend 

payment and stock redemption. According to Wulf, as an equity investor, he 

received no transfer of property, no portfolio of payday loans, and no profits or 

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income, and thus he wasn’t required to forfeit his profit. Wulf further argues the 

district court misapplied Perkins and In re AFI Holding because those cases 

distinguished between equity and debt holders and authorized the investors to retain 

their original investments plus all of the gain. He’s mistaken. 

In In re AFI Holding, an investor paid $73,400 for membership in a purported 

limited partnership. He later withdrew from the partnership and received a total 

payment of $89,824, $16,424 of which was “a fictitious gain.” 525 F.3d at 702. The 

Ninth Circuit noted that the investor “was not being paid on account of an equity 

position [but] [i]nstead, he was ending his interest in the so-called partnership, 

creating something more than a simple equity payment in proportion to a capital 

contribution.” Id. at 708-09. Further, the court noted that even if the investor had 

invested in good faith, he was “entitled only to the amount he initially provided to 

AFI.” Id. at 709. 

Similarly, in Perkins, the Eleventh Circuit observed that “no court has 

distinguished between equity investments and debt-based claims when applying the 

general rule to fraudulent transfer actions arising out of a Ponzi scheme.” 661 F.3d 

at 628. The court stated, under “the general rule, later transfers from the [Ponzi 

debtor] up to the amount of the investment satisfied the investor defendants’ 

restitution or fraud claims and provided value to the [Ponzi debtor].” Id. at 629. 

Thus, contrary to Wulf’s assertions, neither case held that a shareholder or 

equity investor in a Ponzi scheme can retain more than his original investment. 

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Wulf next asserts that because the Receiver proffered no evidence of the 

stock’s value, the district court erred in finding that Impact didn’t receive reasonably 

equivalent value for its pay-out to him. The district court concluded Impact didn’t 

receive value because “the stock that was returned was virtually worthless due to the 

insolvency of the Ponzi scheme,” Miller, 84 F. Supp. 3d at 1277. Wulf contends 

Impact wasn’t insolvent because the business was sold for $25 million. But the 

district court’s undisputed findings that Impact was a Ponzi scheme defeat this 

argument. “Ponzi schemes are insolvent by definition.” Klein v. Cornelius, 786 F.3d 

1310, 1320 (10th Cir. 2015); accord Warfield v. Byron, 436 F.3d 551, 558 (5th Cir. 

2006) (stating “a Ponzi scheme . . . is, as a matter of law, insolvent from its 

inception”). And although Wulf asserts that he wasn’t defrauded in his dealings with 

Impact, the Ponzi presumption doesn’t require that an investor be aware of the fraud. 

See Klein, 786 F.3d at 1320-21 (applying Utah Code Ann. § 25-6-5, holding 

“nothing . . . requires that a transferee be aware of the fraud”). 

 Wulf invested in a Ponzi scheme and was entitled to retain only the amount of 

his original investment, not his winnings. Consequently, we affirm the judgment in 

the amount of Wulf’s Ponzi winnings, $34,500. Wulf doesn’t challenge the district 

court’s award of pre- and post-judgment interest on that amount. 

III. Motion for Sanctions 

 Wulf moved for sanctions against the Receiver, claiming he violated 

Fed. R. Civ. P. 11(b) by needlessly increasing the cost of litigation, refusing to settle, 

and misrepresenting pertinent case holdings. He has abandoned on appeal the third 

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claim, except to argue on the merits that his own interpretation of the cases is correct. 

The district court denied the motion and granted the Receiver his attorney fees 

incurred in defending the motion. We review the district court’s ruling for an abuse 

of discretion. Roth v. Green, 466 F.3d 1179, 1187 (10th Cir. 2006). 

 Wulf complains that the Receiver expended over $60,000 in pursuing a 

judgment against him for $34,500. The district court addressed the two specific fee 

expenditures Wulf identified as needlessly increasing litigation costs and held both 

were reasonable under the circumstances. Addressing the overall fees, the district 

court concluded that Wulf failed to show that they were “unreasonable, self-imposed, 

and avoidable.” Aplt. App. at 177. The court also rejected Wulf’s claim that 

sanctions were appropriate simply because the Receiver expended $60,000 to attempt 

to collect $34,500. 

 On appeal, Wulf argues the Receiver lacked professionalism and “wasted legal 

fees and time[] for no bona fide legal purpose,” Aplt. Opening Br. at 26, and the 

district judge was biased against him.1

 These conclusory arguments are insufficient 

to invoke appellate review and we don’t address them. See Habecker v. Town of 

Estes Park, 518 F.3d 1217, 1223 n.6 (10th Cir. 2008). 

 1

 Despite his judicial bias claim, Wulf didn’t file a motion seeking recusal. 

So normally we would “employ[] a plain error standard to decide whether the 

impartiality of the district court was so suspect as to require a new trial.” United 

States v. Nickl, 427 F.3d 1286, 1297-98 (10th Cir. 2005) (footnote omitted). But 

Wulf hasn’t even attempted to show plain error, so we won’t address this claim. 

See Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1130-31 (10th Cir. 2011). 

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Wulf also contends the Receiver acted improperly by refusing to accept his 

settlement offer. In general, the Receiver offered to settle with those Impact 

investors who provided financial documentation demonstrating an inability to return 

all of their winnings from the Ponzi scheme. Wulf concedes he didn’t provide any 

financial documentation. Nevertheless, he asserts the Receiver refused to settle in 

bad faith due to personal animosity toward him; he was the only one to actively 

challenge the Receiver’s “actions, failures and misdeeds,” in the main Ponzi/Impact 

litigation, Aplt. Opening Br. at 6; and the Receiver refused to recognize that as an 

Impact stockholder his situation differed from all other Impact investors. 

The district court held the Receiver’s decision to treat Wulf like other 

investors and refuse to settle absent submission of financial documentation didn’t 

violate Rule 11. Wulf fails to provide authority or develop argument suggesting the 

district court abused its discretion. We agree with the district court that attorney fees 

of $60,000 to obtain a judgment for $34,500 are not per se unreasonable. 

Next, Wulf challenges the district court’s award to the Receiver of attorney 

fees incurred in defending Wolf’s motion for sanctions. Wolf contends (1) “there 

was no legal basis for entering sanctions against [him] under any of the standards of 

Rule 11,” Aplt. Opening Br. at 26; (2) he was sanctioned for disputing the Receiver’s 

interpretation of two relevant cases, Aplt. Reply Br. at 24; and (3) the district judge 

determined that he was not a competent attorney, id. 

Wulf’s first argument is a conclusory statement unworthy of appellate review, 

see Palma-Salazar v. Davis, 677 F.3d 1031, 1037 (10th Cir. 2012) (declining to 

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address conclusory statements (collecting cases)), and his remaining two assertions 

misstate the district court’s order. Accordingly, Wulf hasn’t shown the district court 

abused its discretion in denying his motion for sanctions and awarding the Receiver 

attorney fees. 

 Finally, Wulf complains that the terms of Impact’s sale improperly gave tax 

advantages to the buyer. But he hasn’t explained how any such ruling adversely 

affected him. Cf. Ind v. Colo. Dep’t of Corr., 801 F.3d 1209, 1213 (10th Cir. 2015) 

(stating jurisdictional question of standing requires plaintiff to demonstrate, among 

other things, an injury in fact). Therefore, we won’t address this argument. 

 We affirm the district court’s judgment. 

Entered for the Court 

Nancy L. Moritz 

Circuit Judge 

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