UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

TIMOTHY BARTON, 

CARNEGIE DEVELOPMENT, LLC, 

WALL007, LLC, 

WALL009, LLC, 

WALL010, LLC, 

WALL011, LLC, 

WALL012, LLC, 

WALL016, LLC, 

WALL017, LLC, 

WALL018, LLC, 

WALL019, LLC, 

HAOQIANG FU (A/K/A MICHAEL FU), 

STEPHEN T. WALL, 

C.A. No.: 3:22-cv-2118-X

Jury Trial Demanded

Defendants,

DJD LAND PARTNERS, LLC, and 

LDG001, LLC, 

 Relief Defendants.

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S EXPEDITED MOTION 

FOR APPOINTMENT OF RECEIVER AND BRIEF IN SUPPORT

 

 

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ii

TABLE OF CONTENTS

Page 

TABLE OF CONTENTS ............................................................................................................. ii

TABLE OF AUTHORITIES .................................................................................................. iii-iv 

FEDERAL STATUES ..................................................................................................................v 

I. INTRODUCTION ............................................................................................................1 

II. RECEIVERSHIP DEFENDANTS ...................................................................................2 

III. FACTUAL SUMMARY ..................................................................................................4 

A. The Wall Offerings .....................................................................................................4 

B. The Barton Defendants Defrauded the Investors ........................................................6 

1. Misappropriation of investor funds ..............................................................6 

2. Inflation of property purchase prices ...........................................................8 

3. Worthless guarantee ...................................................................................10 

4. Lulling statements ......................................................................................11 

IV. ARGUMENT AND AUTHORITIES .............................................................................11 

A. Legal Standard for Appointment of Receiver ...........................................................11 

B. Prima Facie Showing of Antifraud Violations ..........................................................14 

C. The Appointment of a Receiver is Warranted ..........................................................18 

V. REQUEST FOR EXPEDITED CONSIDERATION .....................................................20 

VI. REQUEST FOR RELIEF ...............................................................................................20 

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iii

TABLE OF AUTHORITIES

Federal Cases

Aaron v. SEC,

446 U.S. 680 (2d Cir. 1980) ................................................................................................... 15

Bookout v. Atlas Fin. Corp.,

395 F. Supp. 1338 (N.D. Ga. 1974) ........................................................................................ 13

Broad v. Rockwell, Int’l Corp.,

642 F.2d 929 (5th Cir. 1981) (en banc) .................................................................................. 15

Ernst & Ernst v. Hochfelder,

425 U.S. 185 (7th Cir. 1976) .................................................................................................. 15

Esbitt v. Dutch-American Mercantile Corp.,

335 F.2d 141 (2d Cir. 1964) ................................................................................................... 12

SEC v. One or More Unknown Traders in Common Stock of Certain Issuers

2009 WL 3233110 (E.D.N.Y. Oct. 2, 2009) .......................................................................... 14

Lockyer v. Mirant Corp.,

398 F.3d 1098 (9th Cir. 2005) ................................................................................................ 14

SEC v. American Bd. of Trade, Inc.,

830 F.2d 431 (2d Cir. 1987) ................................................................................................... 12

SEC v. AmeriFirst Funding, Inc., 

2007 WL 2192632 (N.D. Tex. July 31, 2007) ............................................................ 11, 12, 13

SEC v. Better Life Club of American, Inc.,

995 F. Supp. 167 (D.D.C. 1998) ............................................................................................. 16

SEC v. Brooks, 

1999 WL 493052 (N.D. Tex. July 12, 1999) .......................................................................... 17

SEC v. Evolution Cap. Advisors, LLC, 

2011 WL 6754070 (S.D. Tex. Dec. 22, 2011) ........................................................................ 13

SEC v. Fehn

97 F.3d 1276 (9th Cir. 1996) .................................................................................................. 15

SEC v. First Fin. Grp. of Texas,

645 F.2d 429 (5th Cir. 1981) ................................................................................ 12, 13, 14, 18

SEC v. Gann,

565 F.3d 932 (5th Cir. 2009) .................................................................................................. 14

SEC v. Glenn W. Turner Enterprises, Inc.,

474 F.2d 476 (9th Cir. 1973) .................................................................................................. 16

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iv

SEC v. Harris, 

2010 WL 11617972 (N.D. Tex. June 24, 2010) ..................................................................... 12

SEC v. Manor Nursing Ctrs., Inc.,

458 F.2d 1082, 1089 (2d Cir. 1972) ........................................................................... 11, 12, 15

SEC v. Seghers,

298 F. App’x 318, 319 (5th Cir. 2008) ....................................................................................14

SEC v. Sethi,

910 F.3d 198 (5th Cir. 2018) .................................................................................................. 15

SEC v. Smart, 

2011 WL 2297659 (D. Utah June 8, 2011) ............................................................................ 16

SEC v. Straub, 

921 F.Supp.2d 244 (S.D.N.Y. 2013) ...................................................................................... 14

SEC v. Tyler, 

2002 WL 32538418 at *7 (N.D. Tex. Feb. 21, 2002) ...................................................... 14, 16 

SEC v. Unifund SAL,

910 F.2d 1028 (2d Cir. 1990) ................................................................................................. 12

SEC v. W.J. Howey Co., 

328 U.S. 293–99 (1946) ......................................................................................................... 16

Smith v. SEC,

653 F.3d 121 (2d Cir. 2011) ................................................................................................... 13

Southland Sec. Corp. v. INSpire Ins. Solution, Inc.,

365 F.3d 353 (5th Cir. 2004) .................................................................................................. 15

TSC Indus., Inc. v. Northway, Inc.,

426 U.S. 438 (7th Cir. 1976) .................................................................................................. 15

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Federal Statutes

Securities Exchange Act of 1934: 

Section 10(b), 

 [15 U.S.C. § 78j(b)] ...........................................................................................................14 

Section 21, 

 [15 U.S.C. § 78u] .............................................................................................................. 12 

Rule 10b-5, 

 [17 C.F.R. § 240.10b-5] .....................................................................................................14 

Securities Act of 1933: 

Section 2(a)(1), 

 [15 U.S.C. § 77b(a)(1)] ......................................................................................................16 

Section 3(a)(10),

 15 U.S.C. § 78c(a)(10) .......................................................................................................16

Section 17(a), 

[15 U.S.C. § 77q(a)] ........................................................................................................ 14

 

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The Securities and Exchange Commission (“SEC”) submits this Expedited Motion for 

Appointment of Receiver and Brief in Support, and respectfully shows the Court as follows: 

I. INTRODUCTION 

Timothy Barton (“Barton”), a Texas-based real estate developer, raised approximately

$26 million from over 100 investors -- most of whom are Chinese nationals -- in unregistered, 

fraudulent securities offerings related to real-estate investments in Texas.

1

Barton offered and sold investment loans issued by a series of special-purpose “Wall” 

entities he controls. Barton promised that the Wall entities would use investors’ funds, together 

with funds from the Wall entities themselves, to purchase specific parcels of land at specific 

prices set forth in the offering materials. He also promised investors that they would get their 

principal back in two years along with annual interest payments. 

Instead, Barton misappropriated nearly all the investor funds, misusing them to, among 

other things, purchase properties in the name of other entities he controlled, pay undisclosed fees 

and commissions, pay expenses associated with unrelated real estate development projects, and 

fund his lifestyle. Barton also inflated the land purchase prices in the offering materials, which

enabled him to raise more money from investors, overstated the value of the assets securing the 

investments, and concealed that the Wall entities were not actually contributing any funds 

themselves. 

Among his misappropriations, Barton, acting through various entities he controls, 

misused a significant portion of the investor funds to purchase real property interests, including 

 

1 To implement the scheme, Barton partnered with Defendants Stephen Wall (“Wall”), an experienced Texas home 

builder, and Haoqiang (Michael) Fu (“Fu”), a Chinese businessman. Because the SEC is only seeking a receiver 

over the Barton-controlled entities, this Motion does not directly address Fu’s and Wall’s role in the fraud. At a 

high level, and among other acts, Fu marketed the investments to Chinese investors and misused investor funds to 

pay himself undisclosed fees and commissions, and Wall lent his name to the project and helped to provide the

inflated land prices. 

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several parcels of raw land in Texas. See Declaration of Carol Hahn (“Hahn Dec.”) at ¶¶ 33-26 

& Ex. B.

2

 (App. 14 & 17) The property interests could potentially result in a meaningful 

recovery for investors. However, there is a substantial risk to the value of the property interests 

if a steward is not put in place to protect them. 

For these reasons, the SEC respectfully requests the Court to appoint a receiver over the 

Barton-controlled entities to determine the value of the property interests (and any other assets) 

and to secure, preserve, and potentially monetize that value for the benefit of defrauded 

investors. The evidence provided in support of this Motion provides a basis for inferring that a 

violation of the federal securities laws has occurred, and thus satisfies the SEC’s burden for 

obtaining the requested ancillary relief. As discussed at Section IV.C below, the SEC has 

proposed a receiver candidate for the Court’s consideration. 

On September 20, 2022, the U.S. Attorney’s Office for the Northern District of Texas 

indicted Barton on seven counts of wire fraud, one count of conspiracy to commit wire fraud, 

and one count of securities fraud relating to his misconduct in connection with the investments at 

issue. See USA v. Barton, Case No. 3-22-cr-00352-K (N.D. Tex). 

As demonstrated herein, Barton has been commingling, transferring, dissipating, and 

encumbering investor funds and assets purchased with investor funds. The SEC therefore 

believes time is of the essence, and requests that its motion be considered on an expedited basis. 

II. RECEIVERSHIP DEFENDANTS

The SEC is seeking appointment of a receiver for the purpose of marshaling and 

preserving the assets owned, controlled, or possessed by the following Barton-controlled entities 

(collectively, “Receivership Defendants”): 

 

2 The SEC’s evidence is set forth in its contemporaneously filed appendix in support of this Motion (“App. __”).

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• Defendants Wall007, LLC (“Wall 7”), Wall009, LLC (“Wall 9”), Wall010, LLC 

(“Wall 10”), Wall011, LLC (“Wall 11”), Wall012, LLC (“Wall 12”), Wall016, LLC (“Wall 16”), 

Wall017, LLC (“Wall 17”), Wall018, LLC (“Wall 18”), and Wall019, LLC (“Wall 19”) (each a 

“Wall Entity,” and collectively, “Wall Entities”). The “Wall Entities” are the special-purpose 

entities that offered the investment loans.

3

• Defendant Carnegie Development, LLC (“Carnegie Development”). Barton 

controls Carnegie Development and is its president. Carnegie Development is the managing 

member for each of the Wall Entities, and Barton signed the loan agreements at issue on behalf 

of Carnegie Development. Barton, Carnegie Development, and the Wall Entities are referred to 

herein as the “Barton Defendants.” 

• Relief Defendants DJD Land Partners, LLC (“DJD”) and LDG001, LLC 

(“LDG001”). DJD and LDG001 are additional Barton controlled-entities that improperly 

received interests in real property purchased with investor funds or the proceeds of the sale of 

property purchased with investor funds. 

• Any other entities that Barton directly or indirectly controls, including, but not 

limited to, the following additional Barton-controlled entities that, based on available 

information, received investor funds, real property interests purchased with investor funds, or 

own property interests that were improved with or otherwise have benefited from the use of 

investor funds: BM318 LLC; D4DS LLC; D4FR LLC; D4KL LLC; Enoch Investments LLC;

FHC Acquisition LLC; Goldmark Hospitality LLC; JMJ Acquisitions LLC; JMJ Development 

 3 Barton recently filed voluntary petitions for Chapter 11 for all of the Wall Entities. As discussed in the legal 

section below, pursuant to the government exception to the automatic stay, the SEC is not stayed from proceeding 

with its enforcement action against those entities and they can be included in the receivership. The bankruptcy cases 

are: In re WALL007 LLC, et al., No. 22-41049 (Bankr. E.D. Tex.).

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LLC; JMJAV LLC; JMR100 LLC; Lajolla Construction Management LLC; Mansions 

Apartment Homes at Marine Creek LLC; MO 2999TC, LLC; Orchard Farms Village LLC; 

Villita Towers LLC; and 126 Villita LLC. See Hahn Dec. at ¶ 37 & Ex. C.

4

 (App. 15 & 18) 

III. FACTUAL SUMMARY 

A. The Wall Offerings.

Barton is a Texas-based real estate developer that controls the Barton Defendants, DJD, 

LDG001, and several other related entities. See May 24, 2021 Investigative Testimony of 

Timothy Barton (“Barton Tr.”) at 172:3-173:2; 173:19-174:5; 192:8-193:24; 200:17-22; 236:8-

16 (App. 231-233; 240-243); List of Barton-Controlled Entities. (App. 23-24)

From approximately March 2017 through June 2019, Barton, acting through Carnegie 

Development and the Wall Entities, raised approximately $26 million from over 100 investors in

securities offerings related to real estate investments in Texas. See Hahn Dec. at ¶ 14. (App. 6)

The investments were offered through a series of investment contracts styled as “Agency 

and Loan Agreements” (“Loan Agreements”) that each Wall Entity issued as the offering entity. 

See e.g., Wall 9 Loan Agreement at 1 (App. 25); Wall 12 Loan Agreement at 1. (App. 49) 

Though dealing with separate parcels of land, the Loan Agreements followed a similar 

template and contained similar terms. Each Wall Entity:

• borrowed a fixed amount from individual investors; 

• promised to repay the funds after two years;

• promised to pay interest after the first and second years;

 4 Barton controls multiple other entities that may have also received or benefited from investor funds. Barton’s 

counsel provided the SEC with a list of Barton-controlled entities. See List of Barton-Controlled Entities (App. 23-

24). However, without full access to Barton’s records, and as a result of his extensive comingling and transferring 

of properties and funds, the SEC has been unable confirm all of the entities Barton controls and their assets. Hahn

Dec. at ¶ 37. (App. 15)

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• promised regular progress reports;

• represented that the invested funds would be combined with other investors’ funds 

and funds contributed by the offering entity itself (or, for Wall 7, contributed by Fu 

and Wall);

• the combined funds would be used to acquire a specific parcel of land identified in 

the loan agreement; 

• specified the purchase price of the land; and

• pledged the Wall Entities’ membership interests as collateral to secure the 

investments. 

See e.g., Wall 9 Loan Agreement at 1-7. (App. 25-31) 

Barton developed, authorized, and approved the contents of the Loan Agreements, and he 

signed the Loan Agreements on behalf of Carnegie Development, the managing member of each 

of the Wall Entities. Id. at 8 (App. 32); see also August 27, 2017 Loan Agreement Approval 

Email at 1 (App. 143); July 20, 2021 Investigative Testimony of Haoqiang (Michael) Fu (“Fu 

Tr.”) at 153:9-12. (App. 263). 

Fu, acting directly or through personnel at his company, solicited Chinese investors living 

in China and in one or more U.S. states via emails, social media applications (e.g., “WeChat”), 

internet sites, telephone and VOIP calls, and in-person presentations using the Loan Agreements, 

written investor presentations, and oral pitches. See e.g., Wall 10 Investor Presentation (with 

English translation) (App. 66-109); Wall 12 Investor Presentation (Chinese only) (App. 110-

142); Fu Tr. at 30:1-14; 30:25-31:15; 139:15-24; 153:17-19; 157:14-158:18. (App. 260-265)

Investors invested money to obtain a fixed investment return, and their funds were pooled 

with other investors’ funds (and were also supposed to be pooled with funds from the Wall 

Entities). See, e.g. Wall 9 Loan Agreement at 1-2 (App. 25-26); Hahn Dec. at ¶ 15. (App. 6-7) 

These were entirely passive investments: the investors had no role or say in the 

operations or management of the Wall Entitles or the underlying real-estate projects, and the 

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investors were entirely dependent upon, and expecting to profit solely from, the Barton 

Defendants’ and Wall’s expertise and efforts to manage the real-estate ventures. See, e.g., 

January 25, 2021 Investigative Transcript of Stephen Wall (“Wall Tr.”) at 53:19-54:14 (App. 

271-272); Barton Tr. at 294:3-296:17. (App. 247-249) 

B. The Barton Defendants Defrauded the Investors.

1. Misappropriation of investor funds.

Each of the Loan Agreements represented that all investor funds would be used to buy a 

specific, identified piece of land. For example, the Wall 12 Loan Agreement represented that the 

investor funds: 

shall be used to acquire 172 acres located in Fort Worth ETJ, Parker 

County, State of Texas for residential lot development known as Lyons 

Ranch (“Property”). The Property has a purchase price of $5,250,000 and the 

balance of funds will be provided by Borrower. (emphasis added) 

Wall 12 Loan Agreement at 2 (App. 50); see also March 9, 2022 Investigative Testimony of

investor Hong Chen (“Chen Tr.”) at 36:2-38-1 (App. 285-287); March 15, 2022 Investigative 

Testimony of investor Sun Yun (“Yun Tr.”) at 5:25-6:13; 23:10-24:6; 26:7-25; 30:22-31-7. 

(App. 299-305) 

These representations were false. Of the approximately $26.3 million raised, only two 

Wall Entities (Wall 7 and Wall 9) actually purchased the property described in their agreements 

for a total purchase price of approximately $2.6 million. Hahn Dec. at ¶ 17. (App. 7) 

Even in those two limited instances, neither Wall 7 nor Wall 9 used its own investors’ 

funds to purchase its property, and instead used commingled funds from one or more other 

offerings. Id. (App. 7) None of the other Wall Entities acquired the properties described in their 

respective agreements. Id. at ¶ 22. (App. 9) 

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Instead, Barton misappropriated and misused the remaining approximately $23.7 million 

of investor funds to, among other things: 

• pay personal expenses of Barton and his family, including exorbitant credit card 

bills, rent, and to buy a plane; 

• pay Fu undisclosed and unauthorized commissions and fees; 

• make Ponzi payments to earlier investors (as well as other interest payments to 

investors using commingled funds); 

• to make political contributions; 

• acquire properties not related to the offerings in the names of other Barton 

companies; 

• acquire properties identified in a Wall offering but in the name of other Barton 

companies (including LDG001 and DJD) and using funds from a different Wall 

Entity;5 

• pay professional fees (such as engineering, surveying, and land development) for, 

in most cases, properties unrelated to the offerings; and 

• make payments to Wall. 

Hahn Dec. at ¶¶ 22-27 (App. 9-11); see also Barton Tr. at 345:7-14; 346:4-11; 349:1-350:17; 

357:8-24. (App. 250-254) 

Barton controlled the bank accounts for the Wall Entities and Carnegie Development, and 

he had signatory authority over most of the accounts. Hahn Dec. at ¶ 12 (App. 5-6); see also

Barton Tr. at 178:2-12; 181:2-6; 187:12-190:20 (App. 234-239); Fu Tr. at 192:4-18. (App. 266) 

Barton often directed his administrative assistant to make the improper transfers. See Barton Tr. 

at 178:2-12 (App. 234); March 10, 2022 Investigative Testimony of Saskya Bedoya (“Bedoya 

 

5 LDG001 used commingled investor funds to purchase the property that the Wall 18 Loan Agreement stated Wall 

18 was supposed to purchase, and DJD used the proceeds of a partial sale of a property purchased with investor 

funds to purchase the property that the Wall 11 Loan Agreement stated Wall 11 was supposed to purchase. Hahn 

Dec. at ¶¶ 23-24. (App. 9) Upon information and belief, LDG001 and DJD continue to hold these properties 

purchased with investor proceeds. Id. at ¶ 33 and Ex. B (App. 14 & 17). 

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Tr.”) at 129:14-130:20 (App. 277-278); June 27, 2017, November 15, 2017, and January 9, 2019 

Examples of Barton Payment Instruction Emails. (App. 152-155) 

Barton also took out loans on properties acquired with investor funds, and he used the 

loan proceeds (which were also commingled with investor funds) to, among other things, 

purchase other properties, support his businesses, and fund his lifestyle. Hahn Dec. at ¶ 29-30. 

(App. 12-13) 

Despite promising to make annual interest payments and to return investors’ principal, 

the Barton Defendants never returned any of the principal to investors as promised, and failed to 

pay over 80% of the promised interest payments. Hahn Dec. at ¶ 28. (App. 11-12) 

Barton knew how investor funds were required to be used, because he was responsible 

for developing the Loan Agreements, he received copies of Loan Agreements, and he was a 

signatory to the Loan Agreements. Supra at 5. Barton knew the investor funds were being 

misused and misappropriated, because he controlled the bank accounts and caused the funds to 

be transferred and spent for improper purposes. Supra at 7-8. 

2. Inflation of property purchase prices. 

The Loan Agreements represented that the Wall Entity would purchase a specific parcel 

of land with the investor funds, and represented that the offering entity would also contribute 

money to fund the purchase. 

For example, the Wall 9 Loan Agreement had a total offering amount of $2,320,000. It 

represented that the purchase price for the property was $2,900,000, and the offering entity 

would fund the difference between the offering amount and the purchase price: 

[The Loans] shall be used to acquire 100 acres located in Venus, Texas for 

residential lot development known as Venus 100 located on Country Rd 501 and 

West of FM157 in Venus, Texas (“Property”). The Property has a purchase 

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price of $2,900,000 and the balance of funds will be provided by Borrower. 

(emphasis added) 

Wall 9 Loan Agreement at 2. (App. 26)

The representations about the purchase prices were also false. The disclosed purchase 

prices were inflated. At the time of the offerings, the Barton Defendants had already secured, or 

were in the process of negotiating, purchase prices for the properties that were significantly 

lower than the prices set forth in the Loan Agreements. Hahn Dec. at ¶¶ 31-32. (App. 13-14)

For example, Wall 10 issued a Loan Agreement on October 18, 2017 that set a land 

purchase price of $4,400,000. Wall 10 Loan Agreement at 2. (App. 34) However, Barton had 

already executed a contract months earlier to purchase the Wall 10 property for $2,200,000. See 

May 2, 2017 Lost Creek Price Email at 1 (App. 157); Lost Creek Land Sale Contract at 1 and 13

(App. 195 & 207).

6

 

As another example, Wall 11 issued a Loan Agreement on February 7, 2018 that set a 

land purchase price of $2,950,000. See Wall 11 Loan Agreement at 2. (App. 42). Yet, Barton 

had already executed a contract months earlier to purchase the Wall 11 property for $1,577,125. 

See Anastasia Land Sale Contract at 1 and 8 (App. 219 & 226).

Barton knew that the inflated purchase prices were being provided to investors, because 

he and Fu and Wall secretly agreed to inflate the prices. See August 29, 2016 Wall to Barton 

Markup Email at 1 (App. 160); February 28, 2019 Wall to Fu and Barton Markup Email at 1 

(App. 176); November 3, 2016 Fu to Wall Markup Email (forwarded to Barton) at 1-4. (App. 

177-179). Further, as discussed above, he was involved in underlying purchase negotiations (or 

 6 The Wall 9 property purchase price referenced in the previous paragraph was also inflated. The actual purchase 

price was approximately $1,014,900. See Hahn Dec. at ¶ 32. (App. 13)

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received details on the purchase transactions) setting the real prices, and he executed the Loan 

Agreements containing the inflated prices.

By overstating the purchase prices, Barton could use the inflated prices to raise more 

funds from investors in each offering. The inflated purchase prices also created the false 

appearance that the investments were safer than they were. The Loan Agreements pledged the

Wall Entities’ membership interests to secure the investment. See, e.g. Wall 9 Loan Agreement 

at 6. (App. 30) Barton was leading investors to believe that the Wall Entities were obtaining 

properties at the higher prices that could be sold to pay back investors via their share of the 

membership interests if necessary, when in fact the properties, and thus the Wall Entities, had far 

lower values. 

The representations about the contributions of the Wall Entities’ funds were also false. 

Neither the Wall Entities nor any of the other Defendants contributed funds towards the purchase 

of the properties. Hahn Dec. at ¶ 31. (App. 13) The inflation of the purchase prices was used to 

mask this misrepresentation. Indeed, in the two instances where the Wall Entities actually 

purchased their specified properties, no developer contribution was necessary to pay the balance 

of the difference between the offering amount and the purchase price, because the actual 

purchase price was lower than the offering amount. Hahn Dec. at ¶¶ 17, 32. (App. 7 & 13-14)

3. Worthless guarantee. 

The Loan Agreements for many of the offerings also included a purported corporate 

guarantee by one of Barton’s other entities, JMJ Holdings, for “up to the principal loan amount 

in the event of default.” See, e.g., Wall 10 Loan Agreement at 6 (App. 38); Wall 12 Loan 

Agreement at 6. (App. 54) 

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Barton approved the guarantees after learning that certain Chinese investors considered 

them to be an important consideration for their investment decision. See January 23, 2019 

Barton Guarantee Email at 1. (App. 181) Barton also executed a balance sheet purportedly 

showing that JMJ Holdings had total assets of more than $100 million. See, e.g., Wall 10 

Investor Presentation at 27 (App. 92); Wall 12 Investor Presentation at 19 (App. 128); Chen Tr. 

at 48:16-49:24. (App. 288-289) 

The purported guarantees were simply more deception. In reality, JMJ Holdings is a 

dormant company that has never done any business or had any assets. Barton Tr. at 252:22-

253:18; 254:1-24. (App. 244-246)

4. Lulling statements 

The Loan Agreements required the Wall Entities to provide investors with quarterly 

progress reports about the status of the relevant real estate development. One of Barton’s other 

controlled entities, JMJ Development, acting on behalf of the Wall Entities, sent investors 

progress reports that misrepresented the actual status of the projects.

For example, a fourth quarter 2019 update sent to investors stated that “all of [the Wall 

Entities] appear to be tracking with the initial ... development plans.” 2019 Q4 Lender Update 

at 2 (App. 184); see also Yun Tr. at 33:7-16; 34:20-35:7; 36:4-14. (App. 306-309) Yet, most of 

the properties were never actually acquired by a Wall Entity, much less developed as planned. 

IV. ARGUMENT AND AUTHORITIES

A. Legal Standard for Appointment of Receiver.

Federal courts have broad equitable powers to fashion appropriate ancillary remedies 

necessary to grant full relief. See SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1103-4 (2d 

Cir. 1972); SEC v. AmeriFirst Funding, Inc., No. 3:07-CV-1188-D, 2007 WL 2192632, at *3 

Case 3:22-cv-02118-X Document 6 Filed 09/26/22 Page 16 of 27 PageID 110
12

(N.D. Tex. July 31, 2007). Exchange Act Section 21(d)(5) provides: “[i]n any action or 

proceeding brought or instituted by the Commission under any provision of the securities laws, 

the Commission may seek, and any federal court may grant, any equitable relief that may be 

appropriate or necessary for the benefit of investors.” 15 U.S.C. § 78u(d)(5).

The SEC’s burden for ancillary relief is lower than what it must prove to obtain a 

temporary restraining order. See SEC v. Harris, No. 3:09-CV-1809-B, 2010 WL 11617972, at 

*3 (N.D. Tex. June 24, 2010) (“The Commission's burden is lower with regards to an asset 

freeze, receivership and other ancillary relief than with a traditional injunction.”); SEC v. 

Unifund SAL, 910 F.2d 1028, 1041 (2d. Cir. 1990) (“[A]n ancillary remedy may be granted, even 

in circumstances where the elements to support a traditional SEC injunction have not been 

established[.]”). The SEC establishes that ancillary relief is warranted by providing a basis for 

inferring a violation of the federal securities laws. See, e.g., Harris, 2010 WL 11617972, at *3. 

The appointment of a receiver is a well-established form of ancillary relief in SEC 

enforcement actions. SEC v. First Fin. Grp. of Texas, 645 F.2d 429, 438 (5th Cir. 1981) (“The 

appointment of a receiver is a well-established equitable remedy available to the SEC in its civil 

enforcement proceedings for injunctive relief.”); AmeriFirst Funding, 2007 WL 2192632, at *3. 

Courts will appoint a receiver to, among other protective actions, protect injured investors 

from further despoliation of their property or rights; preserve the status quo while transactions 

are being unraveled in order to determine an accurate picture of the fraudulent conduct; and/or 

marshal and prevent the dissipation of a defendant’s assets pending further action by the court. 

First Fin. Grp., 645 F.2d at 438; SEC v. American Bd. of Trade, Inc., 830 F.2d 431, 436 (2d Cir. 

1987); Esbitt v. Dutch-American Mercantile Corp., 335 F.2d 141, 143 (2d Cir. 1964).

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The Court may appoint a receiver on a prima facie showing of fraud and 

mismanagement. See First Fin. Grp., 645 F.2d at 438; see also SEC v. Evolution Cap. Advisors, 

LLC, No. H-11-2945, 2011 WL 6754070, at *5 (S.D. Tex. Dec. 22, 2011) (“In fact, upon a 

showing of fraud and mismanagement, appointment of a receiver ‘becomes a necessary 

implementation of injunctive relief.’”) (citing First Financial Group); Amerifirst Funding, 2007 

WL 2192632, at *3 (same).

An evidentiary hearing is not required on the SEC’s request to appoint a receiver where 

the record discloses sufficient facts to warrant such an appointment. See Bookout v. Atlas Fin. 

Corp., 395 F. Supp. 1338, 1342 (N.D. Ga. 1974), aff’d, 514 F.2d 757 (5th Cir. 1975). 

Ancillary relief may also be properly directed to non-defendant parties who hold assets

on a defendant’s behalf. See, e.g., Smith v. SEC, 653 F.3d 121, 128 (2d Cir. 2011) (“The plenary 

powers of a federal court to order an asset freeze are not limited to assets held solely by an 

alleged wrongdoer, who is sued as a defendant in an enforcement action. Rather, ‘[f]ederal 

courts may order equitable relief against a person who is not accused of wrongdoing in a 

securities enforcement action where that person: (1) has received ill-gotten gains; and (2) does 

not have a legitimate claim to those funds.’”) (citation omitted).

In addition, the SEC is not stayed from proceeding with an enforcement action against 

the Wall Entities that are currently in bankruptcy, or any of the other subject entities who may

subsequently file for bankruptcy. Section 364(b)(2) of the Bankruptcy Code allows the SEC to 

initiate or continue an enforcement action against a debtor in bankruptcy. 11 U.S.C. § 362(b)(4). 

This governmental exception to the automatic stay further allows the SEC to take action 

to obtain possession or control of bankruptcy estate property, including the appointment of a 

receiver. First Fin. Grp., 645 F.2d at 439 (upholding the appointment of a receiver to take 

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control of the debtor’s assets to safeguard the estate from dismemberment and dissipation of 

assets); see also SEC v. Tyler, No. 3:02-CV-0282, 2002 WL 32538418 at *7 (N.D. Tex. Feb. 21, 

2002) (same).7

 Accordingly, while the SEC is stayed from enforcing a money judgment against 

estate property as a collection measure, seeking a receiver and corporate manager to take control 

and possession of estate property properly falls within the scope of Section 362(b)(4).

B. Prima Facie Showing of Antifraud Violations. 

The Commission alleges that the Barton Defendants violated the antifraud provisions of 

the Securities Act and the Exchange Act. Section 17(a) of the Securities Act [15 U.S.C. § 

77q(a)] prohibits fraud in the offer or sale of a security, and Section 10(b) of the Exchange Act 

[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] prohibit fraud in 

connection with the purchase or sale of any security. 

To establish a violation under these sections, the Commission must prove by a 

preponderance of the evidence: (1) that in connection with the purchase, offer, or sale of any 

security; (2) the Barton Defendants made a material misrepresentation or omission of material 

fact, or employed a fraudulent device; (3) with the requisite mental state. See generally, SEC v. 

Gann, 565 F.3d 932, 936 (5th Cir. 2009); SEC v. Seghers, 298 F. App’x 319, 327-28 (5th Cir. 

2008).8

 7 This Court has jurisdiction to determine whether the automatic applies to a motion for receivership. First Fin. 

Grp., 645 F.2d at 439 (the district court has the jurisdiction to determine whether the SEC’s civil enforcement action 

comes within the § 362(b)(4) exception to the automatic stay); Lockyer v. Mirant Corp., 398 F.3d 1098, 1107 (9th 

Cir. 2005) (“We therefore hold, in accordance with established law, that a district court has jurisdiction to decide 

whether the automatic stay applies to a proceeding pending before it, over which it would otherwise have 

jurisdiction.”).

8

 Both statutes require that securities be offered or sold through the use of interstate communications, commerce, or 

the mails. The Loan Agreements were offered and sold using wires, emails, phone calls, and internet applications. 

Supra at 5; Hahn Dec. at ¶ 15 (App. 6); see also SEC v. Straub, 921 F.Supp.2d 244, 262 (S.D.N.Y. 2013) (“[I]t is 

undisputed that the use of the internet is an ‘instrumentality of interstate commerce”); SEC v. One or More Unknown 

Traders in Common Stock of Certain Issuers, No. 08CV1402, 2009 WL 3233110, at *4 (E.D.N.Y. Oct. 2, 2009) 

(holding that wire transfers were instrumentalities of interstate commerce).

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Liability arises not only from affirmative representations but also from failures to 

disclose material information. See SEC v. Fehn 97 F.3d 1276, 1290 n.12 (9th Cir. 1996) (the 

antifraud provisions impose a “duty to disclose material facts that are necessary to make 

disclosed statements, whether mandatory or volunteered, not misleading.”). 

Establishing a violation of Section 17(a)(1) of the Securities Act and Section 10(b) of the 

Exchange Act and Rule 10b-5 requires proof of scienter. See Aaron v. SEC, 446 U.S. 680, 695-

97 (1980). Scienter is “a mental state embracing intent to deceive, manipulate, or defraud.” 

Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976). To prove scienter, the SEC need 

only show the defendant acted with “severe recklessness.” SEC v. Sethi, 910 F.3d 198, 206 (5th 

Cir. 2018) (citing Broad v. Rockwell, Int’l Corp., 642 F.2d 929, 961 (5th Cir. 1981) (en banc).9 

Negligence is sufficient to show a violation of Sections 17(a)(2) and (3) of the Securities Act. 

See Aaron, 446 U.S. at 701-02. 

To establish violations of Sections 17(a) and 10(b) and Rule 10b-5 based on 

misrepresentations or omissions, the facts at issue must be material. TSC Indus., Inc. v. 

Northway, Inc., 426 U.S. 438, 449 (1976). A misstatement or omission is material if there is a 

substantial likelihood that a reasonable investor would consider it important in making an 

investment decision. Id; SEC v. Seghers, 298 F. App’x 318, 328 (5th Cir. 2008). 

The evidence set forth in support of the SEC’s motion more than makes a prima facie 

showing of the Barton Defendants’ violations of these fraud-based claims:

First, the Barton Defendants offered and sold securities. Section 2(a)(1) of the Securities 

Act and Section 3(a)(10) of the Exchange Act define “security” to include, among other 

 

9 A company’s scienter can be imputed from individuals who control it. See Manor Nursing Ctrs., Inc., 458 F.2d 

at 1089, n.3; Southland Sec. Corp. v. INSpire Ins. Solution, Inc., 365 F.3d 353, 366 (5th Cir. 2004). 

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instruments, any “investment contract” or “note.” 15 U.S.C. § 77b(a)(1); 15 U.S.C. § 78c(a)(10).

The Loan Agreements are “investment contracts.”10 The investors invested money that 

was pooled in a common enterprise with the expectation of investment returns based and 

dependent solely on the efforts of the promoters. Supra at 5-6; see also SEC v. Better Life Club 

of American, Inc., 995 F. Supp. 167, 173-174 (D.D.C. 1998), aff’d 203 F.3d 54 (D.C. Cir. 1999)

(holding loan agreements in which investors contributed funds to common enterprise with 

expectation of receiving profits based solely on the efforts of the promoters were securities, and 

finding it “hard to imagine a more perfect example” of an “investment contract”).

The Loan Agreements are also securities, because they are “notes.” “The Supreme Court 

has held that the definition of ‘note’ may ‘be viewed as a relatively broad term that encompasses 

instruments with widely varying characteristics,’ and as with the term ‘security,’ the definition of 

‘note’ looks to the economic reality and surrounding circumstances of a transaction.” Tyler, 

2002 WL 32538418 at *7 (internal citation omitted). Here, the Loan Agreements evidence a 

promise to pay a financial return on set terms and are notes in economic substance. See Tyler, 

2002 WL 32538418 at *7 (holding letters outlining maturity date and annual rate of return for 

viaticals investment were both notes and investment contracts); SEC v. Smart, Civ. No. 2:09-CV00224, 2011 WL 2297659, at 12-14 (D. Utah June 8, 2011) (note agreements that pooled 

investor funds and promised fixed returns were securities as either investment contracts or 

notes). The subscription agreements provided to several investors also represented the 

investment was a note. See, e.g., Wall 19 Subscription Agreement at 1 (“I hereby subscribe to 

the Note (promissory note) as co-lender.”) (App. 57).

 10 An investment contract exists where: (1) individuals are led to invest money; (2) in a common enterprise; and (3) 

with the expectation that they would earn a profit solely through the efforts of the promoter or of someone other than 

themselves. SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946). Courts do not take the word “solely” literally. 

See, e.g., SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476 (9th Cir. 1973).

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Second, the Barton Defendants made material misstatements and omissions and engaged 

in deceptive acts in connection with the offer, purchase, and sale of the securities:

• The Barton Defendants falsely told investors the Wall Entities would use their money 

to purchase a specific parcel of land, but then misappropriated the money and spent it 

on a litany of improper purposes. A reasonable investor would consider the fact that 

their investment would not be used for the represented investment purpose important

in deciding whether to invest. SEC v. Brooks, No. 3:99-cv-1326-D, 1999 WL 493052 

at *2 (N.D. Tex. July 12, 1999) (misrepresentations about use of investor funds are 

material); see also Chen Tr. at 36:2-38-1 (App. 285-287); Yun Tr. at 23:10-24:6; 

26:7-25. (App. 301-303)

• The Barton Defendants misstated the land purchase prices. A reasonable investor 

would consider the fact that the promoter was intentionally inflating the value of the 

collateral securing their investments important in deciding whether to invest.

• The Barton Defendants falsely told the investors that the Wall Entities would be 

contributing funds towards the land purchases. A reasonable investor would consider 

the fact that promoter was lying about putting its own money into a venture side-byside with the investors important in deciding whether to invest. See e.g., Chen Tr. at

63:5-64:21; 65:8-12. (App. 290-292).

• The Barton Defendants claimed to certain investors that their investments were fully 

guaranteed by one of Barton’s other companies, but omitted that the guaranteeing 

company had no assets. A reasonable investor would consider the fact that he or she

was receiving a worthless guarantee important in deciding whether to invest.

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Third, Barton acted with scienter. Barton knew how investor funds were required to be 

used, because he was responsible for developing the Loan Agreements and he was a signatory to 

the Loan Agreements. Barton knew the investor funds were being misused, because he 

controlled the bank accounts and caused the funds to be transferred and spent for improper 

purposes. Barton also knew the inflated purchase prices were being provided to investors, 

because he agreed to the scheme with Fu and Wall, he was involved in underlying purchase 

negotiations setting the actual prices, and he executed the Loan Agreements containing the 

inflated prices. Finally, Barton knew that the company he was using to guarantee the 

investments had no assets.11

C. The Appointment of a Receiver is Warranted.

“The district court’s exercise of its equity power in this respect is particularly necessary 

in instances in which the corporate defendant, through its management, has defrauded members 

of the investing public; in such cases, it is likely that, in the absence of the appointment of a 

receiver to maintain the status quo, the corporate assets will be subject to diversion and waste to 

the detriment of those who were induced to invest in the corporate scheme and for whose benefit, 

in some measure, the SEC injunctive action was brought.” First Fin. Grp. of Texas, 645 F.2d at 

438 (citations and footnotes omitted).

A receivership is warranted here given the Barton Defendants’ fraud and the resulting 

harm to investors. Barton mismanaged and misused substantially all of the investor proceeds. 

Appointing a receiver for the all of the entities, including those currently in bankruptcy, will 

provide for uniformity in administration of all entities by a single fiduciary who is subject to the

 11 The evidence of scienter here is overwhelming. However, the SEC’s antifraud claims under Section 17(a)(2) 

and (3) of the Securities Act only require a showing of negligence. There is no question that Barton did not exercise 

reasonable care in his use of investor funds and in making the other misstatements and omissions. 

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supervision and jurisdiction of this Court. Further, a receiver is critical here to determine how 

and whether the bankruptcy cases should proceed, the most cost effective way of utilizing the 

bankruptcy cases, and how best to maximize asset recovery for all defrauded investors. 

Consequently, appointment of a receiver over the entities, including those in Chapter 11, is 

necessary to protect investors. 

As noted above, Barton, acting through various entities that he directly or indirectly 

controls, misused a significant portion of the investor funds to purchase real property interests, 

including several parcels of raw land. Barton, who has now been indicted on multiple felony 

counts, has previously encumbered and transferred assets. There is a substantial risk that the 

values of the real property assets will not be maximized or worse, will be further degraded, if a 

receiver is not put in place immediately to steward the assets. 

The receivership will seek to efficiently and expeditiously gather, manage, and 

potentially liquidate receivership assets for the benefit of harmed investors. In the immediate 

term, the receivership would focus on determining the value of the real property interests and any 

other assets, determining what (if anything) can be done to secure and preserve that value, and 

taking steps to protect documents, data, technology, and other sources of information. 

Thereafter, the receivership would focus on monetizing any value in the real property interests or 

other identified assets. 

 Longer term, the receivership will also focus on: (1) tracing of funds; (2) asset recovery; 

and (3) evaluation and prosecution of potential litigation. Generally, claims may exist against 

persons or entities that directly or indirectly received property or other assets from a 

Receivership Defendant. Claims may also exist against persons or entities that directly or 

indirectly were involved in the solicitation of funds which were paid to Receivership Defendants. 

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The SEC has vetted candidates to make a recommendation to the Court, identifying 

receiver candidates who: (i) possess skill and experience in this area; (ii) agree to standard billing 

and reporting requirements; (iii) agree to reduce professional fees; (iv) have personnel poised for 

immediate action; and (v) have cleared conflicts. 

In that regard, submitted herewith is a biography for David Wallace (Trigild, Inc.) for the 

Court’s consideration. (App. 312). Wallace presents significant benefits as a receivership 

candidate for this matter. First, Wallace has agreed to obtain the title work and broker’s opinions 

of value for the properties at no cost to the receivership. These are expected to be the primary 

costs incurred to determine the value of the properties. Second, Mr. Wallace’s firm believes it 

will be able to obtain discounted brokerage fees on the sale of the properties. This could also 

result in a significant cost savings if the receivership moves to the monetization stage. Third, 

Mr. Wallace and his firm have extensive experience valuing and selling real estate assets and 

handling receiverships involving real estate issues. 

V. REQUEST FOR EXPEDITED CONSIDERATION

Time is of the essence to protect the assets at issue, and the SEC therefore respectfully 

requests that its motion be considered on an expedited basis. 

VI. REQUEST FOR RELIEF

 For the foregoing reasons, the SEC respectfully requests that the Court grant the SEC’s 

motion, enter the proposed order appointing a receiver, and grant the SEC such other or further 

relief as this Court may deem just, proper, and equitable. 

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Dated: September 26, 2022 Respectfully submitted,

/s/ Keefe M. Bernstein___________ 

Keefe M. Bernstein

Texas Bar No. 24006839 

David B. Reece

Texas Bar No. 24002810 

James E. Etri

Texas Bar No. 24002061 

Securities and Exchange Commission

801 Cherry Street, Suite 1900 

Fort Worth, Texas 76102 

(817) 900-2607 (KMB phone) 

(817) 978-4927 (facsimile) 

bernsteink@sec.gov

Counsel for Plaintiff 

Securities and Exchange Commission 

 

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CERTIFICATE OF CONFERENCE

I affirm that on September 25, 2022, I conferred with Khudabuksh Walji, Defendant 

Barton’s counsel during the SEC’s pre-suit investigation, and then Richard Roper, Defendant 

Barton’s criminal counsel, about the relief requested in this Motion. Barton is currently 

incarcerated, and no counsel has appeared yet on behalf of any defendants in this case. 

However, based on these discussions it is my understanding that the Barton Defendants and 

Relief Defendants are currently opposed to the relief sought in this Motion. 

/s/ Keefe M. Bernstein

Keefe M. Bernstein

CERTIFICATE OF SERVICE

I affirm that on September 26, 2022, I caused the foregoing to be electronically filed with 

the Clerk of the Court for the Northern District of Texas, Dallas Division, by using the CM/ECF 

system which will send a notice of electronic filing to all CM/ECF participants. 

I further certify that on the same day I caused the foregoing to be served via email (with 

the appendix via electronic file sharing) to the following. 

Khudabuksh K. Walji, Esq. 

Law Office of K. Walji, P.C. 

The Atrium Building

10701 Corporate Drive, Suite 350 

Stafford, Texas 77477 

281-401-9672 

k.walji@waljilaw.com

Counsel for the Timothy Barton during the 

SEC’s investigation 

Richard B. Roper 

Holland and Knight 

One Arts Plaza

1722 Routh Street, Suite 1500 

Dallas, Texas 75201 

214-969-1210 

richard.roper@hklaw.com

Criminal counsel for Timothy Barton 

Eric Chartan

Bryan Cave Leighton Paisneer LLP 

JP Morgan Chase Tower 

2200 Ross Avenue, Suite 3300 

Dallas, Texas 75201 

214-721-8106

eric.chartan@bclplaw.com

Counsel for Haoqiang (a/k/a Michael) Fu

during the SEC’s investigation 

Michael P. Heiskell

Johnson Vaughn & Heiskell 

5601 Bridge Street, Suite 220 

Fort Worth, Texas 76112 

817-457-2999 

mheiskell@johnson-vaughn-heiskell.com

Counsel for Steven Wall during the SEC’s 

investigation 

/s/ Keefe M. Bernstein

Keefe M. Bernstein

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