IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

KELLY CRAWFORD, IN HIS CAPACITY

AS RECEIVER,

Plaintiff, 

v. 

MAGICSTAR ARROW 

ENTERTAINMENT, LLC, MAGICSTAR 

ARROW, INC., AND CARLOS CRUZ, 

Defendants. 

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§ 

§ 

§ 

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§ 

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§ 

CASE NO. 3:22-CV-01935-X 

PLAINTIFF’S RESPONSE TO DEFENDANTS’ MOTION TO DISMISS 

Respectfully submitted, 

SCHEEF & STONE, LLC, 

PETER LEWIS 

State Bar No. 12302100 

peter.lewis@solidcounsel.com

500 North Akard, Suite 2700 

Dallas, Texas 75201 

(214) 706-4200 Telephone 

(214) 706-4242 Facsimile 

BROWN FOX PLLC 

CHARLENE C. KOONCE 

State Bar No. 11672850 

charlene@brownfoxlaw.com

Cortney C. Thomas 

State Bar No. 24075153 

cort@brownfoxlaw.com

8111 Preston Road, Suite 300 

Dallas, Texas 75225 

(214) 327-5000 Telephone 

(214) 327-5001 Facsimile 

ATTORNEYS FOR PLAINTIFF 

KELLY CRAWFORD, IN HIS 

CAPACITY AS RECEIVER 

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TABLE OF CONTENTS 

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

II. BACKGROUND ................................................................................................................ 1

III. ARGUMENTS & AUTHORITIES .................................................................................... 3

A. Summary ................................................................................................................. 3

B. Choice of Law ......................................................................................................... 4

C. Defendants Confuse Ripeness with Evidentiary Considerations ............................ 5

1. A Judgment in the Underlying Lawsuit is Unnecessary to Establish 

Ripeness ...................................................................................................... 6

2. A Judgment Will Provide Evidence of the Receivership Entities’ Fraud ... 8

D. The “Unjust Enrichment/Constructive Trust Claims are Plausible ...................... 10

1. Plausibility Standard ................................................................................. 10

2. The Unjust Enrichment and Constructive Trust Claims are Viable, 

Alternative Claims .................................................................................... 10

E. The Fraudulent Transfer Claims Comply With the Applicable Pleading 

Standards ............................................................................................................... 13

1. Rule 9(b)’s Requirements ......................................................................... 13

2. The Actual Fraud-Fraudulent Transfer Claim, Count I, Satisfies Rule 

9(b) ............................................................................................................ 15

3. Count II, for Constructively Fraudulent Transfers, More than Satisfies 

Twombly .................................................................................................... 17

F. Limitations Does Not Justify Dismissal ............................................................... 19

G. The Receiver’s Claims Against Cruz Are Each Plausible .................................... 21

1. The Complaint Establishes Facial Jurisdiction Over Cruz ....................... 21

2. Defendants’ Challenges to the Money Had and Received Claim Falters 

on Cruz’s Use of the MagicStar Entities as His Alter Ego ....................... 23

IV. MOTION FOR LEAVE TO AMEND .............................................................................. 25

V. CONCLUSION ................................................................................................................. 25

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TABLE OF AUTHORITIES 

Cases

Abbott Labs. v. Gardner, 

387 U.S. 136 (1967) .................................................................................................................... 7 

Abecassis v. Wyatt, 

902 F. Supp. 2d 881 (S.D. Tex. 2012) ...................................................................................... 21 

Amling v. Harrow Indus. LLC, 

943 F.3d 373 (7th Cir. 2019) ...................................................................................................... 7 

Asarco, LLC v. Americas Mining Corp., 

396 B.R. 278 (S.D. Tex. 2008) ................................................................................................. 16 

Ashcroft v. Iqbal,

556 U.S. 662 (2009) .................................................................................................................. 10 

Ass’n of Am. Physicians & Surgeons, Inc. v. Tex. Med. Bd., 

627 F.3d 547 (5th Cir. 2010) .................................................................................................... 22 

Berry v. Indianapolis Life Ins. Co., 

608 F. Supp. 2d 785 (N.D. Tex. 2009) ..................................................................................... 14 

Biliouris v. Sundance Resources, Inc., 

559 F.Supp.2d 733 (N.D. Tex. 2008) ....................................................................................... 17 

Bowlby v. City of Aberdeen, Miss., 

681 F.3d 215 (5th Cir. 2012) .................................................................................................... 10 

Castleberry v. Branscum, 

721 S.W.2d 270 (Tex. 1986) ..................................................................................................... 24 

Colwell v. Dep’t of Health & Human Services, 

558 F.3d 1112 (9th Cir. 2009) .................................................................................................... 6 

Dean v. Davis,

242 U.S. 438 (1917) .................................................................................................................... 9 

Dueling v. Devon Energy Corp., 

623 Fed. Appx. 127 (5th Cir. 2015) .......................................................................................... 25 

ESG Capital Partners, LP v. Stratos, 

828 F.3d 1023 (9th Cir. 2016) .................................................................................................. 11 

Case 3:22-cv-01935-X Document 14 Filed 12/12/22 Page 3 of 34 PageID 217
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Ford Motor Credit Co. v. Chiorazzo, 

529 F. Supp. 2d 535 (D.N.J. 2008) ............................................................................................. 7 

Guidry v. Bank of LaPlace, 

954 F.2d 278 (5th Cir. 1992) .................................................................................................... 14 

Guzman v. Nationstar Mortg. LLC, 

No. 4:17-cv-823-O-BP, 2017 WL 6597959 (N.D. Tex. Dec. 8, 2017), 

report and recommendation adopted, No. 4:17-cv-823-O-BP, 2017 WL 6594199 (N.D. Tex. 

Dec. 26, 2017) ........................................................................................................................... 25 

Harlow v. Friendship Med. Clinic, LLC, 

No. 315CV00160MPMSAA, 2016 WL 9130982 (N.D. Miss. Apr. 28, 2016) ........................ 25 

Heldenfels Am. Intern. Specialty Lines Ins. Co. v. Canal Indem. Co., 

352 F.3d 254 (5th Cir. 2003) .................................................................................................... 11 

Heldenfels Bros., Inc. v. City of Corpus Christi, 

832 S.W.2d 39 (Tex. 1992) ....................................................................................................... 11 

Hines v. Wainwright, 

539 F.2d 433 (5th Cir. 1976) .................................................................................................... 25 

Holcombe v. United States, 

No. SA-18-CV-555-XR, 2021 WL 67217 (W.D. Tex. Jan. 6, 2021) ....................................... 22 

Holden v. Capri Lighting, Inc., 

960 S.W.2d 831 (Tex. App.—Amarillo 1997, no pet.) .............................................................. 4 

In re Enron Corp. Sec., Derivative & ERISA Litig., 

279 F.R.D. 395 (S.D. Tex. 2011) .............................................................................................. 21 

In re Essential Fin. Educ., Inc., 

629 B.R. 401 (Bankr. N.D. Tex. 2021) ..................................................................................... 15 

In re IFS Fin. Corp., 

669 F.3d 255 (5th Cir. 2012) ...................................................................................................... 9 

In re Moriarty, 

No. 12-22878-MLB, 2014 WL 6623005 (Bankr. C.D. Cal. Nov. 20, 2014) ............................ 13 

In re Texas Rangers Baseball Partners, 

498 B.R. 679 (Bankr. N.D. Tex. 2013) ..................................................................................... 15 

In re TFT-LCD (Flat Panel) Antitrust Litig., 

No. C 10-5625 SI, 2011 WL 4345435 (N.D. Cal. Sept. 15, 2011) ........................................... 11 

Case 3:22-cv-01935-X Document 14 Filed 12/12/22 Page 4 of 34 PageID 218
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Janvey v. Alguire, 

846 F. Supp. 2d 662 (N.D. Tex. 2011) .............................................................................. passim 

Janvey v. Brown, 

767 F.3d 430 (5th Cir. 2014) ...................................................................................................... 4 

Janvey v. Democratic Senatorial Campaign Comm., Inc., 

712 F.3d 185 (5th Cir. 2013) ............................................................................................ 6, 7, 20 

Janvey v. Golf Channel, Inc. (Golf Channel III), 

487 S.W.3d 560 (Tex. 2016) ..................................................................................................... 10 

Janvey v. Golf Channel, Inc., 

834 F.3d 570 (5th Cir. 2016) .................................................................................................... 10 

Janvey v. Romero, 

817 F.3d 184 (5th Cir. 2016) .................................................................................................... 20 

Janvey v. Suarez, 

978 F. Supp. 2d 685 (N.D. Tex. 2013) ................................................................................... 5, 8 

Joseph v. Frank (In re Troll Comm’n, LLC), 

285 B.R. 110 (Bankr. D. Delaware 2008) ................................................................................ 17 

Kaye v. Lone Star Fund V (U.S.), L.P., 

453 B.R. 645 (N.D. Tex. 2011) ................................................................................................ 15 

Kim v. Tesoro Ref. & Mktg. Co. LLC, 

No. 217CV06241ABRAOX, 2017 WL 11680958 (C.D. Cal. Dec. 13, 2017) ........................... 8 

LeBrun v. CBS Television Studios, Inc., 

68 Cal. App. 5th 199, 283 Cal. Rptr. 3d 260 (2021) ................................................................. 11 

Matter of: Life Partners Holdings, Inc., 

926 F.3d 103 (5th Cir. 2019) .............................................................................................. passim 

Meadows v. Bierschwale,

516 S.W.2d 125 (Tex. 1974) ..................................................................................................... 13 

Mehler Texnologies, Inc. v. Monolithic Constructors, Inc., 

No. CIV.A. 3:09-CV-0655-, 2009 WL 3149383 (N.D. Tex. Sept. 29, 2009) ............................ 8 

Melder v. Morris, 

27 F.3d 1097 (5th Cir.1994) ..................................................................................................... 13 

Monet v. Chase Home Fin., LLC, 

No. C 10-0135 RS, 2010 WL 2486376 (N.D. Cal. June 16, 2010) .......................................... 12 

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Mumblow v. Monroe Broad., Inc., 

401 F.3d 616 (5th Cir. 2005) ...................................................................................................... 5 

New Orleans Pub. Serv., Inc. v. Council of New Orleans,

833 F.2d 583 (5th Cir. 1987) ...................................................................................................... 6 

Paterson v. Weinberger, 

644 F.2d 521 (5th Cir. 1981) .................................................................................................... 22 

Playboy Enters. v. Sanchez-Campuzano, 

519 F. App’x 219 (5th Cir. 2013) ......................................................................................... 4, 13 

Qingdao Tang-Buy Int’l Imp. & Exp. Co., Ltd. v. Preferred Secured Agents, Inc., 

No. 15-CV-00624-LB, 2015 WL 7776331 (N.D. Cal. Dec. 3, 2015) ........................................ 7 

Reg’l Specialty Clinic, P.A. v. S.A. Randle & Associates, P.C., 

625 S.W.3d 895 (Tex. App.—Houston [14th Dist.] 2021, no pet.) .......................................... 11 

Rimade Ltd. v. Hubbard Enterprises, Inc., 

388 F.3d 138 (5th Cir.2004) ..................................................................................................... 23 

Rodriguez v. Tex. Comm’n of Arts, 

992 F. Supp. 876 (N.D. Tex. 1998), aff’d sub nom. Rodriguez v. Tex. Comm’n on the Arts, 199 

F.3d 279 (5th Cir. 2000) ........................................................................................................... 21 

Roman Catholic Archbishop v. Superior Court, 15 Cal. App. 3d 405, 93 Cal. Rptr. 338 (Ct. App. 

1971) ......................................................................................................................................... 23 

Screen Capital Intern. Corp. v. Library Asset Acquisition Co., Ltd., 

510 B.R. 248 (C.D. Cal. 2014) ................................................................................................. 13 

Smith ex rel. Estates of Boston Chicken, Inc. v. Arthur Anderson, LLP, 

175 F. Supp. 2d 1180 (D. Ariz. 2001) ...................................................................................... 18 

Spring St. Partners-IV, L.P. v. Lam, 

730 F.3d 427 (5th Cir. 2013) .................................................................................................... 24 

SSP Partners v. Gladstrong Invs. (USA) Corp., 

275 S.W.3d 444 (Tex. 2008) ..................................................................................................... 24 

Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 

300 S.W.3d 348 (Tex. App.—Dallas 2009, pet. denied) .......................................................... 11 

U.S. Bank Nat. Ass’n v. Verizon Commc’ns Inc., 

817 F. Supp. 2d 934 (N.D. Tex. 2011) ..................................................................................... 14 

U.S. ex rel. Grubbs v. Kanneganti, 

565 F.3d 180 (5th Cir. 2009) .................................................................................................... 14 

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U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 

125 F.3d 899 (5th Cir. 1997) .................................................................................................... 10 

VeroBlue Farms USA, Inc. v. Wulf,

465 F. Supp. 3d 633 (N.D. Tex. 2020) ................................................................................. 9, 21 

Vision Bank v. Jordan, 

No. 3:11-CV-2065-B, 2012 WL 716097 (N.D. Tex. Mar. 5, 2012) ........................................ 14 

Waller v. DB3 Holdings, Inc., 

No. CIV.A.3:07-CV-0491-D, 2008 WL 373155 (N.D. Tex. Feb. 12, 2008) ........................... 12 

Warfield v. Arpe, 

No. CIVA 3:05CV1457 R, 2007 WL 549467 (N.D. Tex. Feb. 22, 2007) ................................ 22 

Warfield v. Byron, 

436 F.3d 551 (5th Cir. 2006) ...................................................................................................... 9 

Rules

FED. R. CIV. P. 9(b) ....................................................................................................................... 17 

Codes

CAL. CIV. CODE § 3439(b)(9)........................................................................................................ 15 

CAL. CIV. CODE § 3439.04 .............................................................................................................. 8 

CAL. CIV. CODE § 3439.04(a)(2) ................................................................................................... 18 

CAL. CIV. CODE § 3439.04(b) ....................................................................................................... 15 

CAL. CIV. CODE § 3439.04(b)(1)................................................................................................... 16 

CAL. CIV. CODE § 3439.04(b)(2)................................................................................................... 16 

CAL. CIV. CODE § 3439.04(b)(3)................................................................................................... 15 

CAL. CIV. CODE § 3439.04(b)(4)................................................................................................... 15 

CAL. CIV. CODE § 3439.04(b)(7)................................................................................................... 15 

CAL. CIV. CODE § 3439.04(b)(8)................................................................................................... 15 

CAL. CIV. CODE § 3439.09 .............................................................................................................. 5 

CAL. CIV. CODE § 3439.09(b) ....................................................................................................... 19 

CAL. CIV. CODE § 3439.10(b) ......................................................................................................... 4 

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CAL. CIV. CODE § 3439.13 .............................................................................................................. 5 

TEX. BUS. & COM. CODE § 24.005(b) ........................................................................................... 15 

TEX. BUS. & COM. CODE § 24.010(a) ............................................................................................. 5 

TEX. BUS. & COM. CODE § 24.012 .................................................................................................. 5 

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KELLY CRAWFORD, in his capacity as Receiver (“Plaintiff”) for TMTE, Inc., a/k/a 

Metals.com, et al. (“Receiver”), files this Response to Defendants’ MagicStar Arrow 

Entertainment, LLC and MagicStar Arrow, Inc. (collectively, the “MagicStar Entities”), and 

Carlos Cruz (together with the MagicStar Entities, “Defendants”) Motion to Dismiss (“Motion”) 

[Dkt. 9], and in support respectfully shows the Court as follows: 

I. INTRODUCTION 

Defendants move to dismiss the Complaint contending certain claims do not satisfy Rules 

8 and 9(b), asserting that claims which are purportedly barred by limitations are somehow 

simultaneously not ripe, that a claimed failure to identify the controlling law—despite reference 

to the specific statute on which the Receiver relied—mandates dismissal, and that the Court lacks 

jurisdiction over Cruz, despite directly contrary statutory authority and pleaded assertions. In 

addition to relying on incorrect assertions of law and ignoring virtually all pleaded factual content, 

(while improperly making inaccurate factual claims outside the Complaint), the Motion disregards 

the framework governing plausibility: the assumption that all properly pleaded factual allegations, 

the only facts the Court can consider in the analysis, are presumed as true. The Motion raises no 

meritorious arguments and should be denied in its entirety. In the alternative and in the event the 

Court deems the Complaint deficient, the Receiver requests leave to amend. 

II. BACKGROUND 

1. In CFTC, et al., v. TMTE, Inc. a/k/a Metals.Com, et al., Civil Action No. 3:20-cv2910-X (the “Underlying Lawsuit”), the CFTC and 30 states filed their Complaint (the 

“Underlying Complaint”) alleging Lucas Thomas Erb a/k/a Lucas Asher a/k/a Luke Asher 

(“Asher”), Simon Batashvili (“Batashvili”), and the entities they controlled (the “Receivership 

Entities”) were engaged in a fraudulent scheme through which they defrauded at least 1,600 

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persons by selling gold and silver bullion at exorbitant prices based on fraudulent statements.1 On 

September 22, 2020 in the Underlying Lawsuit, the Court entered an Emergency Ex Parte Statutory 

Restraining Order (the “Receivership Order”), and appointed Kelly M. Crawford as Receiver of 

the assets of Asher, Batashvili, and the entities they own and control (collectively, the 

“Receivership Defendants”).2 Complaint ¶ 5, and Complaint Exh. A. 

2. On August 31, 2022, the Receiver filed the Original Complaint in this lawsuit, (the 

“Complaint”, Dkt. 1) asserting five causes of action through which he seeks to recover—for the 

benefit of the Receivership Estate—more than $20 million in fraudulent transfers (the “Transfers”) 

by the Receivership Defendants to the MagicStar Entities. Complaint ¶¶ 2, 4. 

3. In several detailed factual paragraphs of the Complaint, the Receiver demonstrated 

the Receivership Defendants’ operation of a fraudulent enterprise. Complaint ¶ 18-20. He also 

explained, in detail, Defendants’ role. Complaint ¶ 16. In an exhibit attached to and incorporated 

into the Complaint, the Receiver detailed the date and amount of each transfer, the transferring 

entity, the manner in which each transfer was made, and the transferee/defendant who received 

each transfer. Complaint, Exh. C. And, he alleged Cruz, as the owner and manager of the 

MagicStar Entities, was personally liable for the Transfers. Complaint ¶ 34. 

4. The factual basis for the Defendants’ role as insiders was explained in detail. 

Complaint3 ¶ 34. The Receiver also pleaded extensive facts demonstrating his entitlement to 

tolling based on the discovery rule and fraudulent concealment. Complaint ¶ 35-42. 

1 See Complaint, Dkt. 1, Exh. B; see also Complaint, Exh. A, Underlying Complaint, ¶¶ 1–6. 

2

 The SRO was subsequently extended by Consent Orders. See Underlying Lawsuit, Dkt. Nos. 164 and 165. Pursuant 

to the SRO, the Receiver was vested with authority to recover assets and investigate and initiate claims. 

3

 Throughout the Motion, Defendants assert facts that contradict the allegations in the Complaint. In doing so, the 

Defendants ignore the governing principle for consideration of a Motion to Dismiss; acceptance of the “well-pleaded 

facts as true.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, the Defendants contend that “Mr. Cruz has 

cooperated with the Receiver, even agreeing to be deposed in the Underlying Case on July 13, 2022.” Motion p. 4. 

Cruz was served with a subpoena to testify before the Receiver in the Underlying Case and requested the date of the 

deposition be postponed to accommodate his schedule. Complaint ¶¶ 39, 41. In addition, the Receiver made numerous 

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5. Based on these facts, the Complaint asserted claims for actual and constructive 

fraudulent transfer, money had and received, unjust enrichment/constructive trust, alter ego/veil 

piercing and attorney’s fees. Complaint ¶ 43-64. Pursuant to Federal Rules of Civil Procedure 8(a) 

and 9(b), 12(b)(1), 12(b)(2), and 12(b)(6), Defendants seek dismissal of each claim. 

III. ARGUMENTS & AUTHORITIES 

A. Summary 

As discussed in detail below, Defendants’ Motion fails to present a single argument 

justifying dismissal of any of the Receivers’ claims. Defendants fail to identify any actual, much 

less potential, conflict between Texas and California law, thereby negating any need for the Court 

to apply any law other than Texas’s law. Nonetheless, under California or Texas law the 

Receiver’s claims are plausible. Defendants’ ripeness argument confuses a jurisdictional doctrine 

with evidentiary concerns, and the purported pleading deficiencies alleged with respect to the 

fraudulent transfer claims wholly ignore the Complaint’s factual content, as well as controlling 

authorities that demonstrate the Receiver’s satisfaction of Rules 8 and 9 in pleading his fraudulent 

transfer claims. Given Defendants’ fraudulent concealment, the detailed facts supporting tolling, 

and the inherently factual nature of tolling and the discovery rule, Defendants’ limitations 

argument ignores the well pleaded facts in the Complaint, and is wholly barred by the Defendants’ 

own conduct. Finally, all arguments seeking dismissal of the claims asserted against Cruz 

individually confuse jurisdiction with merits inquiries. The Motion should be denied. 

demands upon the Defendants to produce documents pursuant to the Receivership Order. Instead of cooperating with 

the Receiver as required by the Receivership Order, the Defendants refused to comply with these demands. ¶37. 

Indeed, the Defendants are in violation of the Receivership Order. Moreover, the Defendants contend the Receiver is 

using a contempt motion against the individual defendants in the Underlying Case, Lucas Asher and Simon Batashvili, 

to deprive Cruz of his ownership of a business Asher and Simon started before the receivership called “Portfolio 

Insider.” With respect to the claims against these Defendants, however, the Receiver’s contempt motion only 

spotlights the insider relationship Cruz had with Asher and Simon in serving as a front man for the Portfolio Insider 

business after the receivership. Indeed, Cruz knowingly and actively assisted Asher and Simon in violating the 

Receivership Order. See Underlying Lawsuit, Dkt. 311. 

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B. Choice of Law 

Defendants contend each of the Receiver’s claims are barred by his purported failure to 

identify the controlling law, while “assuming” California law applies. Motion, pp. 7, n. 7; 14-15. 

Defendants’ reliance on Texas and California law intermittently throughout their Motion belies 

any lack of fair notice regarding the controlling law. Motion, p. 15 ; see also Janvey v. Alguire, 

846 F. Supp. 2d 662, 670–71 (N.D. Tex. 2011) (asserting claims “under applicable fraudulent 

transfer law” sufficiently identified controlling law). Defendants also ignore identification of 

California law, “and any other controlling law,” as the basis for the Receiver’s fraudulent transfer 

claims. Complaint ¶¶ 47, 51 (asserting claims pursuant to California’s enactment of the UFTA, as 

well as “any other applicable State’s adoption of the UFTA”); and ¶ 29 (“Payments were made 

from the Receivership Entities’ Beverly Hills office...”); see also CAL. CIV. CODE (“CUFTA”) § 

3439.10(b) (“A claim in the nature of a claim under this chapter is governed by the local law of 

the jurisdiction in which the debtor is located when the transfer is made or the obligation is 

incurred.”). 

In any event, Defendants’ failure to meet their burden of demonstrating a conflict between 

Texas and California law defeats their argument. “[C]hoice of law issues for supplemental state 

law claims, such as the fraudulent transfer claims at issue here, are governed by the forum state in 

which the federal court is sitting.” Janvey v. Brown, 767 F.3d 430, 434 (5th Cir. 2014). As the 

party urging application of non-Texas law, Defendants are required to demonstrate a conflict 

between Texas and any other potentially applicable law. Playboy Enters. v. Sanchez-Campuzano, 

519 F. App’x 219, 225 (5th Cir. 2013); Alguire, 846 F. Supp. 2d at 670–71. Texas courts will 

presume its law is identical to the law of another state, absent a sufficient rationale for application 

of a competing law. Alguire, 846 F. Supp. 2d at 670–71 (citing Holden v. Capri Lighting, Inc., 

960 S.W.2d 831, 833 (Tex. App.—Amarillo 1997, no pet.)). Absent demonstration of a conflict, 

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the choice of law analysis is unnecessary and the court simply applies the forum state’s laws. 

Mumblow v. Monroe Broad., Inc., 401 F.3d 616, 620 (5th Cir. 2005). These rules are particularly 

appropriate in fraudulent transfer cases because Texas adopted “TUFTA with the specific purpose 

that it be applied uniformly with other states’ versions of the Uniform Fraudulent Transfer Act.”4

Alguire, 846 F.Supp.2d at 670 (citing TEX. BUS. & COM. CODE § 24.012 (“This chapter shall be 

applied and construed to effectuate its general purpose to make uniform the law with respect to the 

subject of this chapter among states enacting it.”)); see also CUFTA § 3439.13 (same). 

Although Defendants appear to rely on California law when convenient, they fail to 

identify any potential conflict between Texas law and California law.5 In contrast, the Receiver 

expressly pleaded CUFTA as the governing statute regarding the fraudulent transfer claims, 

Complaint ¶¶ 47, 51, a concession that does not change the Court’s analysis given the lack of any 

conflict between CUFTA and TUFTA. Accordingly, the Court may apply CUFTA to the 

fraudulent transfer claims but should apply Texas law to the remainder. Even if Defendants had 

identified a conflict between Texas and California law, however, the Court need not resolve any 

choice of law issue to determine the Motion wholly lacks merit. 

C. Defendants Confuse Ripeness with Evidentiary Considerations 

Defendants seek dismissal based on an alleged lack of subject matter jurisdiction, 

contending the claims asserted by the Receiver are not ripe because no judgment has been entered 

in the Underlying Lawsuit. Motion p. 5. The argument misinterprets the Receiver’s claims, 

4

 Virtually every state has adopted the Uniform Fraudulent Transfer Act (“UFTA”). Most states’ codification of the 

UFTA are substantially identical and the possibility that a different state’s UFTA may apply has no impact on the 

analysis at this stage. Janvey v. Suarez, 978 F. Supp. 2d 685, 692 (N.D. Tex. 2013) (“[A]ny differences between 

TUFTA and another state’s UFTA are likely to be negligible.”). 

5

 The only immediately obvious “conflict” between CUFTA and TUFTA is the longer limitations period provided by 

CUFTA. Compare TEX. BUS. & COM. CODE § 24.010(a) (four-year period for § 24.005(a)(1) claims with a one-year 

discovery window, four-year statue of repose for § 24.005(a)(2) claims); CUFTA § 3439.09 (four-year limitations 

period for actual and constructive fraud claims, one-year discovery period for actual fraud claims, and seven-year 

statute of repose). 

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misapprehends ripeness, misconstrues the Receiver’s standing to assert the Receivership Entities’ 

claims that will benefit defrauded creditors, and mischaracterizes the effect and necessity of a 

judgment adverse to the Receivership Entities in the Underlying Lawsuit. 

First, the Receiver’s claims do not rely on assumptions. Motion, p. 6 (“All of Plaintiffs 

claims are predicated on the assumption that the Receivership Entities were, in fact, defrauding 

their customers/investors when the entities improperly made payments to MagicStar Entities.”). 

Instead, the claims are predicated on specific factual allegations, which, in turn, rest on evidence, 

including the evidence on which the Court premised entry of a Preliminary Injunction against the 

Receivership Entities. Complaint ¶ 5, and Complaint, Exh. B. Nor does the purported absence in 

this case of the “allegedly defrauded people”—the defrauded investors—for whose benefit the 

Receiver asserts his claims,6 have any bearing whatsoever on the plausibility or ripeness of the 

Receiver’s claims. See Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185, 

191 (5th Cir. 2013) (Receiver possesses standing to assert “the claims of a receivership entity 

against third-party recipients of the entity’s assets that have been fraudulently transferred” by the 

entities in receivership). 

1. A Judgment in the Underlying Lawsuit is Unnecessary to Establish Ripeness

Ripeness turns on the existence of concrete legal issues presented in the context of an 

actual, rather than a hypothetical, controversy. Colwell v. Dep’t of Health & Human Services, 558 

F.3d 1112, 1123 (9th Cir. 2009) (ripeness within “the meaning of Article III . . . requires . . . 

“concrete legal issues, presented in actual cases, not abstractions.”) (internal quotation omitted)); 

New Orleans Pub. Serv., Inc. v. Council of New Orleans, 833 F.2d 583, 586–87 (5th Cir. 1987). 

Two primary considerations inform ripeness: “the fitness of the issues for judicial decision,” and 

6 Motion, p. 6, n. 6. 

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“the hardship to the parties of withholding court consideration.” Abbott Labs. v. Gardner, 387 

U.S. 136, 149 (1967). Neither consideration suggests a lack of ripeness here. 

The Receiver’s claims—the Receivership Entities’ claims for the benefit of their defrauded 

creditors, including the defrauded investors7—are not hypothetical and therefore unfit for a judicial 

decision because a judgment has yet to be issued in the Underlying Lawsuit. 

“A ‘claim’ need not be reduced to judgment before one is a ‘creditor’ under 

California’s UTFA, as the defendants maintain, or before one can sue for fraudulent 

transfer. The relevant statutes show the defendants’ error. A ‘creditor’ is one ‘who 

has a claim.’ § 3439.01(c). A ‘claim,’ in turn, ‘means a right to payment, whether 

or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, 

matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.’ 

§ 3439.01(b) (emphasis added). The plaintiff’s fraudulent-transfer claims are not 

unripe because its underlying claim against PSA has not been reduced to 

judgment.” 

Qingdao Tang-Buy Int’l Imp. & Exp. Co., Ltd. v. Preferred Secured Agents, Inc., No. 15-CV00624-LB, 2015 WL 7776331, at *4 (N.D. Cal. Dec. 3, 2015); Ford Motor Credit Co. v. 

Chiorazzo, 529 F. Supp. 2d 535, 540 (D.N.J. 2008) (denying motion to dismiss fraudulent transfer 

claim premised on ripeness challenge where creditor’s claim against debtor not yet been reduced 

to judgment, because “[d]etermining whether a particular transfer is fraudulent only requires a 

court to answer two questions: whether the debtor has placed some asset beyond the reach of its 

creditor which would have been available to it at some point in time but for the conveyance; and 

whether the debtor has transferred property with an intent to defraud, delay, or hinder the 

creditor”); see also Amling v. Harrow Indus. LLC, 943 F.3d 373, 378 (7th Cir. 2019) (Finding 

ripeness to determine which defendant was obligated to pay injured plaintiff’s damages, if any, 

premised on asset-purchase agreement, despite uncertainty of liability for underlying plaintiff’s 

injuries). 

7 Democratic Senatorial Campaign Comm., Inc., 712 F.3d at 191. 

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In contrast, the authorities on which Defendants rely found ripeness lacking where some 

contingency necessary to the claim at issue had not yet occurred. For instance, in Kim the Court 

concluded a requested declaration that certain restrictive covenants in a deed were unenforceable 

was not ripe where the plaintiff did not contend it was currently violating the covenants and the 

defendant had not threatened to enforce them. Kim v. Tesoro Ref. & Mktg. Co. LLC, No. 

217CV06241ABRAOX, 2017 WL 11680958, at *2 (C.D. Cal. Dec. 13, 2017). Similarly, in 

Mehler Texnologies, a court dismissed a counterclaim for future damages premised on a defective 

product used in construction. Mehler Texnologies, Inc. v. Monolithic Constructors, Inc., No. 

CIV.A. 3:09-CV-0655-, 2009 WL 3149383, at *1 (N.D. Tex. Sept. 29, 2009). The Court 

concluded the future damages were “contingent on future events-presumably damage to the domes 

for which the Dothan church may seek compensation from Monolithic-which may not occur as 

anticipated, or may not occur at all.” Id. at *2. Here, the Receivership Defendants have already 

suffered the loss of the funds fraudulently transferred to Defendants, in an amount not less than 

$20M. Complaint ¶ 2. Neither the intent, value, or indeed insolvency at the time of the transfers 

depends on the occurrence of any contingency, as suggested by the authorities Defendants cite. 

Those issues are instead evidentiary matters. Thus, the Receiver’s claims are neither contingent 

nor hypothetical. 

2. A Judgment Will Provide Evidence of the Receivership Entities’ Fraud

The fraudulent intent with which the Receivership Entities made the subject Transfers is 

an element of the Receiver’s first claim, for a fraudulent transfer made with fraudulent intent.8

Defendants’ conduct and intent play no role in that analysis. Suarez, 978 F. Supp. 2d at 700 

8

 The elements of actual fraudulent transfer, Count 1, whether considered under CUFTA or TUFTA, are a transfer 

made by a debtor (also referenced as “the transferor”—here the Receivership Defendants) made “[w]ith actual intent 

to hinder, delay, or defraud any creditor of the debtor.” CUFTA § 3439.04; see also Matter of: Life Partners Holdings, 

Inc., 926 F.3d 103, 117–19 (5th Cir. 2019) (discussing the same language in TUFTA § 24.005(a)(1)). 

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(“[I]ndeed, the defendant’s conduct is simply not an element of the Receiver’s claim”). Thus, a 

judgment against the Receivership Entities for fraud in selling the investments at issue would also 

inform their fraudulent intent in making the Transfers to Defendants. See In re IFS Fin. Corp., 

669 F.3d 255, 265 (5th Cir. 2012) (“evidence that a company operated as a fraudulent enterprise 

at the time of the transfer . . . may be sufficient to establish actual intent”); see also Dean v. Davis,

242 U.S. 438, 444–45 (1917) (knowingly making a transfer that constitutes a fraudulent act 

suffices to demonstrate actual intent to defraud creditors). But as alleged in the Complaint, 

numerous other facts demonstrate the Receivership Entities’ fraudulent intent. Complaint ¶ 21, 

24-26, 30, 32, 33, 34, 45. 

With respect to the constructive fraud claim, actual fraudulent intent plays no role. Matter 

of: Life Partners Holdings, Inc., 926 F.3d 103, 120 (5thCir. 2019); see also VeroBlue Farms USA, 

Inc. v. Wulf, 465 F. Supp. 3d 633, 652 (N.D. Tex. 2020) (constructive fraudulent transfer claims 

include no fraudulent intent element and are not governed by Rule 9(b)). That claim instead 

depends on evidence that the Receivership Defendants were insolvent when they made the 

transfers and did not receive reasonably equivalent value from the MagicStar Entities in exchange. 

Id. Although a judgment in the Underlying Lawsuit may speak to insolvency, a declaration from 

an expert accountant will provide the same evidence. See Warfield v. Byron, 436 F.3d 551, 559 

(5th Cir. 2006) (Declaration of Receiver, an accountant, regarding his review and analysis of 

thousands of bank transactions sufficed to demonstrate the existence of a Ponzi scheme, which 

was insolvent from inception); see also Janvey v. Alguire, 647 F.3d 585, 597–98 (5th Cir. 2011) 

(accountant’s expert declaration demonstrated “clear, numerical support” for existence of 

fraudulently operated Ponzi scheme). Similarly, whether the Defendants exchanged reasonably 

equivalent value in these transactions will turn on factors including whether the they “(1) fully 

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performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration 

that had objective value at the time of the transaction, and (3) made the exchange in the ordinary 

course of the transferee's business.” Janvey v. Golf Channel, Inc., 834 F.3d 570, 572 (5th Cir. 

2016) (quoting Janvey v. Golf Channel, Inc. (Golf Channel III), 487 S.W.3d 560 (Tex. 2016)). 

These factors, again, are evidentiary concerns that can be demonstrated multiple ways, including, 

but not limited to a judgment in the Underlying Lawsuit. Such a judgment, however, is 

unnecessary to ripeness or recovery. 

D. The “Unjust Enrichment/Constructive Trust Claims are Plausible 

1. Plausibility Standard

Rule 12(b)(6) governs challenges premised on the sufficiency of pleadings required by 

Rule 8 or Rule 9. U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 

(5th Cir. 1997). In such an analysis, the Court accepts all “well-pleaded facts as true . . . views 

them in the light most favorable to the plaintiff,” and determines whether, based on those facts 

assumed as true, the challenged claim is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 

(2009); Bowlby v. City of Aberdeen, Miss., 681 F.3d 215, 219 (5th Cir. 2012). Rule 8 sets a low 

bar for facial plausibility, which exists “when the pleaded factual content allows the court to draw 

the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. 

at 678. “[T]he plausibility standard is not akin to a ‘probability requirement,’ but asks only for 

more than a sheer possibility that a defendant has acted unlawfully.” Id.

2. The Unjust Enrichment and Constructive Trust Claims are Viable, 

Alternative Claims 

Using circular logic and a hypothetical assertion that the Receiver’s unjust enrichment and 

constructive trust claims will fail if his fraudulent transfer claims fail and are unavailable if those 

claims succeed, Defendants assert the claim lacks plausibility. The assertion confuses plausibility 

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with election of remedies. And again, although Defendants rely on California authorities, they fail 

to identify any conflict between Texas and California law.9 The claims are plausible under either. 

While numerous intermediate Texas appellate courts have concluded unjust enrichment 

provides a theory of recovery rather than a claim, others disagree relying on a Texas Supreme 

Court case. Reg’l Specialty Clinic, P.A. v. S.A. Randle & Associates, P.C., 625 S.W.3d 895, 904 

(Tex. App.—Houston [14th Dist.] 2021, no pet.) (citing Heldenfels Bros., Inc. v. City of Corpus 

Christi, 832 S.W.2d 39, 41 (Tex. 1992)); see also Tex. Integrated Conveyor Sys., Inc. v. Innovative 

Conveyor Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App.—Dallas 2009, pet. denied). This Court 

must follow the Texas Supreme Court rather than any intermediate court. Heldenfels Am. Intern. 

Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 260 (5th Cir. 2003) (“To determine 

state law, federal courts sitting in diversity look to the final decisions of the state’s highest court.”); 

see also Alguire, 846 F. Supp. 2d at 674 (Denying motion to dismiss claim for “unjust enrichment” 

because “[r]egardless of whether Texas law allows an ‘unjust enrichment’ claim or requires 

pleading a claim for money had and received, the Receiver states claims under either applicable 

law.”). 

A plausible unjust enrichment claim exists when “the person sought to be charged has 

wrongfully secured a benefit or has passively received one which it would be unconscionable to 

retain.” Tex. Integrated Conveyor Sys., Inc., 300 S.W.3d at 367. Similarly, a claim for money had 

9

 California recognizes unjust enrichment as a stand-alone claim as well as a remedy. “While California case law 

appears unsettled on the availability of such a cause of action, this Circuit has construed the common law to allow an 

unjust enrichment cause of action through quasi-contract.” ESG Capital Partners, LP v. Stratos, 828 F.3d 1023, 1038 

(9th Cir. 2016) (“To allege unjust enrichment as an independent cause of action, a plaintiff must show that the 

defendant received and unjustly retained a benefit at the plaintiff's expense.”); In re TFT-LCD (Flat Panel) Antitrust 

Litig., No. C 10-5625 SI, 2011 WL 4345435, at *4 (N.D. Cal. Sept. 15, 2011) (denying motion to dismiss unjust 

enrichment claim, where plaintiff “invoked valid theory of recovery . . . regardless of the precise label assigned to the 

cause of action.”); see also LeBrun v. CBS Television Studios, Inc., 68 Cal. App. 5th 199, 212, 283 Cal. Rptr. 3d 260, 

271 (2021) (dismissing unjust enrichment claim, not because the theory was invalid, but because “Plaintiffs’ inability 

to maintain that cause of action [for fraud] was not due to the absence of law to support it but rather to their failure to 

timely assert it. In such a case, “justice” does not require the application of the unjust enrichment doctrine.”).

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and received, which may be an alternative label for an unjust enrichment claim, see Alguire, 846 

F. Supp. 2d at 674, is plausible where the defendant received funds that “in equity, justice, and 

law” belong to another. Id. Neither claim requires fraud on Defendants’ part, but instead requires 

only the Receiver’s greater entitlement, standing in the shoes of the Receivership Defendants’ 

creditors, to the funds received by Defendants. Id. As in other receivership cases, the low pleading 

standard applicable to these claims is satisfied by allegations that 1) that the defendants “kept their 

fraudulent scheme going” by “lur[ing] new investors” when the investor’s funds were diverted for 

the fraudulent entities’ own illicit purposes; and 2) that proceeds paid to the MagicStar Defendants 

“came not from revenue generated by legitimate business activities, but from monies contributed 

by defrauded investors.” Id. 

This Court should also conclude, based on the detailed allegations found sufficient in Life 

Partners that the similar allegations here demonstrating the Receivership Defendants’ efforts to 

defraud their creditors and use funds obtained from those creditors to pay the MagicStar Entities, 

render the Receiver’s claims equally as plausible. See Complaint ¶¶ 1, 4; see Alguire, 846 F. Supp. 

2d at 674; see also Waller v. DB3 Holdings, Inc., No. CIV.A.3:07-CV-0491-D, 2008 WL 373155, 

at *6 (N.D. Tex. Feb. 12, 2008) (denying motion to dismiss unjust enrichment claim where 

defendants’ retention of funds would “amount to the taking of undue advantage”). No other 

allegations are necessary or relevant. The Court should deny Defendants’ motion to dismiss the 

unjust enrichment and money had and received claims. 

The same is true to the extent the claim seeks recovery premised on a constructive trust. 

See Monet v. Chase Home Fin., LLC, No. C 10-0135 RS, 2010 WL 2486376, at *3 (N.D. Cal. June 

16, 2010) (“Finally, a plaintiff may seek restitution in equity, ordinarily in the form of 

a constructive trust or an equitable lien, where money or property identified as belonging in good 

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conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's 

possession.”) (internal quotation omitted); Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex. 

1974) (constructive trust is an equitable device used to remedy a wrong). The Receiver’s unjust 

enrichment and constructive trust claim is viable and plausibly pleaded. 

E. The Fraudulent Transfer Claims Comply With the Applicable Pleading Standards 

By largely ignoring the factual allegations incorporated into each claim, Defendants 

contend the Receiver’s fraudulent transfer claims are “impermissibly formulaic and conclusory.” 

Motion, p. 10 (quoting select portions of ¶ 45 of the Complaint, while ignoring all preceding factual 

assertions incorporated into the claim). When considering the extensive pleaded factual support 

and applying the correct pleading standard to each, Defendants’ 12(b)(6) fails.

1. Rule 9(b)’s Requirements 

The Fifth Circuit has not determined whether Rule 9(b) applies to fraudulent transfer 

claims,10 and this Court similarly need not address that question because the only claim potentially 

subject to the Rule satisfies it. 

In contrast to Rule 8, Rule 9(b), which governs allegations of fraud, requires the “who, 

what, when, where, and why as to the fraudulent conduct.” Life Partners, 926 F.3d at 117; Melder 

v. Morris, 27 F.3d 1097, 1100 n. 5 (5th Cir.1994) (describing Rule 9(b)’s requirements as the 

“essentials of the first paragraph of any newspaper story.”). Still, satisfying Rule 9 requires only 

“simple, concise, and direct” allegations of the “circumstances constituting fraud.” U.S. ex rel. 

10 Even if California law governs the substance of the Receiver’s claims, as a matter of procedure, Fifth Circuit law 

controls the adequacy of the Receiver’s pleadings. Playboy Enterprises, Inc. v. Sanchez-Campuzano, 561 Fed. Appx. 

306, 309 (5th Cir. 2013). Nonetheless, the Ninth Circuit does not impose Rule 9(b) requirements on fraudulent transfer 

claims dependent on constructive fraud. Screen Capital Intern. Corp. v. Library Asset Acquisition Co., Ltd., 510 B.R. 

248, 257 (C.D. Cal. 2014) (“However, Rule 9(b)’s heightened pleading standards are not generally applied to claims 

of avoidance and recovery of constructively fraudulent transfers, as they do not require proof of fraud.”); In re 

Moriarty, No. 12-22878-MLB, 2014 WL 6623005, at *10 (Bankr. C.D. Cal. Nov. 20, 2014) (“Rule 9(b) is inapplicable 

because constructive fraud claims “are not based on actual fraud but instead rely on the debtor’s financial condition 

and the sufficiency of the consideration provided by the transferee.”). 

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Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009). Indeed, “[t]he amount of particularity 

required for pleading fraud differs from case to case.” Berry v. Indianapolis Life Ins. Co., 608 F. 

Supp. 2d 785, 796 (N.D. Tex. 2009); Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir. 1992) 

(“What constitutes ‘particularity’ will necessarily differ with the facts of each case and hence the 

Fifth Circuit has never articulated the requirements of Rule 9(b) in great detail.”). Where “detailed 

and particularized allegations” show “motive and opportunity to commit alleged actual fraudulent 

transfers” the allegations permit the court to draw a reasonable inference of the debtor’s fraudulent 

intent as required by either Rule 8 or 9(b).11 U.S. Bank Nat. Ass’n v. Verizon Commc’ns Inc., 817 

F. Supp. 2d 934, 942 (N.D. Tex. 2011); see also Vision Bank v. Jordan, No. 3:11-CV-2065-B, 

2012 WL 716097, at *3 (N.D. Tex. Mar. 5, 2012) (Denying motion to dismiss fraudulent transfer 

claims where “Plaintiff’s Amended Complaint details the nature of the transfer, the parcels of land 

involved, the value of the land, and the reasons indicating why such a transfer may be fraudulent 

under the statute.”). 

The Fifth Circuit has expressly concluded that factual allegations correlating to several 

badges of fraud and the “details of the allegedly fraudulent transfers—including the transferor, 

transferees, amounts, and time period . . . [and] pages of allegations detailing the underlying 

fraudulent scheme” satisfy the Rule. Life Partners, 926 F.3d at 119. Defendants ignore Life 

Partners and the Fifth Circuit’s interpretation of the Rule 9(b) standard in the context of the same 

claims and similar allegations to those at issue here. This Court should decline Defendants’ implicit 

invitation to do the same. 

11 Under either rule, exhibits are deemed part of the complaint and appropriately considered in the 12(b)(6) analysis. 

Life Partners, 926 F.3d at 117. In contrast, extraneous facts, including those Defendants implicitly rely upon, for 

instance the Receiver’s assertion that Cruz facilitated the Receivership Defendants’ contempt, Motion, p. 3-4, an 

assertion underlying a pending motion for contempt, play no part in the Court’s plausibility analysis. 

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2. The Actual Fraud-Fraudulent Transfer Claim, Count I, Satisfies Rule 9(b) 

In Life Partners, without deciding which standard governed, the Fifth Circuit held that 

allegations nearly identical to those challenged by Defendants satisfied Rule 9(b), as well as the 

lower Rule 8 standard. Life Partners, 926 F.3d at 117. Factual allegations corresponding to the 

“badges of fraud”12 provided circumstantial evidence of the intent to defraud, while the 

“newspaper article” items were supplied by an exhibit. Life Partners, 926 F.3d at 119; see also In 

re Texas Rangers Baseball Partners, 498 B.R. 679, 712 (Bankr. N.D. Tex. 2013) (Denying motion 

to dismiss actual fraudulent transfer claim based on three badges of fraud); Kaye v. Lone Star Fund 

V (U.S.), L.P., 453 B.R. 645, 672-73 (N.D. Tex. 2011) (Relying on pleadings demonstrating three 

badges of fraud to deny motion to dismiss). 

The Receiver’s factual allegations track the allegations deemed sufficient in Life Partners. 

Specifically, the Receiver pleaded factual support for no less than seven enumerated badges of 

fraud: 

 The Transfers were not made for reasonably equivalent value; Complaint ¶ 4, 25-27, 

45(a); CUFTA § 3439.04(b)(8); 

 The Transfers were concealed; Complaint ¶ 25, 45(b) (fabricated invoices); CUFTA § 

3439.04(b)(3); 

 Other assets were concealed; Complaint ¶ 34(c); CUFTA § 3439.04(b)(7); 

 The Transfers were made while the transferors were insolvent; Complaint ¶ 8, 30-32; 

CUFTA § 3439(b)(9); 

 All transfers made by Barrick Capital were made after the transferors had been sued or 

the subject of regulatory discipline. Complaint ¶ 21; CUFTA § 3439.04(b)(4); 

12 Both CUFTA and TUFTA list non-exclusive “badges of fraud,” the existence of which provide circumstantial 

evidence of the transferor’s fraudulent intent. Compare CUFTA § 3439.04(b) with TUFTA § 24.005(b) ; see also In 

re Essential Fin. Educ., Inc., 629 B.R. 401, 430 (Bankr. N.D. Tex. 2021) (“badges of fraud” represent “commonly 

considered circumstantial evidence bearing on actual fraud.”). In attacking Count I, the fraudulent transfer claim 

premised on actual fraudulent intent, Defendants appear to “essentially” have focused solely on the allegations pleaded 

specifically for that claim, while ignoring all preceding factual allegations incorporated by reference. Motion, p. 9. 

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 The Transfers were made to an insider. Complaint ¶ 2, 16, 22, 34, 61-63; CUFTA § 

3439.04(b)(1); 

 Upon information and belief, Batashvili and Asher retained control of or access to the 

Transfers. Complaint ¶ 34e-f, 45j; CUFTA § 3439.04(b)(2). 

Because the badges of fraud are not exhaustive, additional contentions regarding the 

Receivership Defendants’ “sharp dealings” and fraudulent purpose, Complaint ¶¶ 1, 2, 7, 18, and 

33, are also relevant to satisfaction of the pleading standard regarding the Receivership Entities 

fraudulent intent. See Asarco, LLC v. Americas Mining Corp., 396 B.R. 278, 371 (S.D. Tex. 2008) 

(“It is not necessary that all or any one of these badges of fraud support a finding of fraudulent 

intent”); see also Comment (5) to UFTA, reprinted in 7A, pt. II, Unif. Laws Ann... 303 (1999) 

(“Proof of the existence of any one or more of the factors enumerated in subsection (b) may be 

relevant evidence as to the debtor’s actual intent . . .”) (emphasis added). 

Like the allegations deemed sufficient in Life Partners, an exhibit to the Complaint also 

included additional detail specific to Defendants regarding the amounts and dates of the transfers 

each received, the manner in which each transfer was made, and the specific transferor 

(transferring entity). See Complaint Ex. C. Those detailed lists are not free-floating allegations 

lacking context and specificity. Instead, Defendants’ role in growing the pool of defrauded 

Investors, who are the Receivership Defendants’ creditors, is explained in detail. Complaint ¶¶ 1, 

28-30. 

Additionally, the Receiver incorporated by reference the allegations supporting the Court’s 

findings in the Receivership Order. Complaint, ¶ 5. In granting the relief requested by the States 

and the CFTC, the Court concluded, among other things, that good cause existed to believe that 

“[the Receivership] Defendants have engaged in, are engaging in, or are about to engage in a 

scheme to defraud investors...” Complaint, Exh. A, ¶ 7. The Court’s conclusion regarding that 

same intent provides plausible detail regarding the Receivership Entities’ fraudulent intent in 

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making transfers to grow and further their operations to the detriment of their creditors. Finally, 

Defendants provide absolutely no support for their contention that specific facts regarding the 

disposition of diverted funds or the specific shell entities used by the Receivership Defendants in 

concealing assets, Motion p. 10, is ever required to satisfy Rule 9 plausibility. As in Life Partners, 

the Receiver’s allegations in support of his actual fraudulent transfer more than satisfy Rule 9(b). 

3. Count II, for Constructively Fraudulent Transfers, More than Satisfies 

Twombly 

In citing Twombly and arguing an absence of “fair notice” rather than insufficient 

specificity, Defendants implicitly concede Rule 8 rather than Rule 9 governs Count II, for 

constructively fraudulent Transfers. Motion, pp. 10-11; see also VeroBlue Farms USA, Inc., 465 

F. Supp. 3d at 652 (constructive fraudulent transfer claims include no fraudulent intent element 

and are not governed by Rule 9(b)). 

Like their arguments regarding Count I, Defendants’ contention that the claim rests on 

“formulaic recitations,” Motion p. 10, wholly ignores the detailed factual allegations included in 

the Complaint, as well as the very low standard imposed by Rule 8. For instance, in contending 

there is a supposed lack of detail regarding insolvency, Defendants presume more detail is 

necessary but provide no authority for that contention. Even if Rule 9(b) applied—and it does 

not—the presumption is inaccurate because facts supporting intent, which is implied through 

insolvency, “may be averred generally” and require no intricate details. FED. R. CIV. P. 9(b); 

Biliouris v. Sundance Resources, Inc., 559 F.Supp.2d 733, 736 (N.D. Tex. 2008) (Finding pleading 

alleging specifics regarding transfer at issue “while company was insolvent” sufficed pursuant to 

Rule 9 to “withstand Defendants’ motion to dismiss”); see also Joseph v. Frank (In re Troll 

Comm’n, LLC), 285 B.R. 110, 124 (Bankr. D. Delaware 2008) (Pleadings, taken as true at the 

motion to dismiss stage, which “alleged the debtor had a negative net worth and was unable to 

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meet maturing obligations” found sufficient to allege insolvency); Smith ex rel. Estates of Boston 

Chicken, Inc. v. Arthur Anderson, LLP, 175 F. Supp. 2d 1180, 1201-02 (D. Ariz. 2001) (Finding 

Trustee’s actual fraud claim complied with Rule 9, where the Complaint “(1) identified the 

transfers at issue; (2) identified the relevant parties; (3) alleged Boston Chicken received less than 

the reasonably equivalent value in exchange for the transfers; and (4) alleged that Boston Chicken 

was insolvent on the date the transfers were made.”). 

Defendants’ reliance on CUFTA § 3439.02(b) to contend the assertion of insolvency 

cannot depend, even in part, on the “debt” created by the Investors’ claims, Motion p. 12, likewise 

ignores the statute as well as the pleaded allegations. First, the Receiver does not rely on a 

presumption of insolvency, as created by § 3439.02(b), and thus any bona fide dispute as to the 

Receivership Entities’ debt to the Investors has no relevance. He provided specific factual 

assertions demonstrating insolvency. Complaint ¶¶ 4, 8, 31. Moreover, while the individual 

Receivership Defendants below, Asher and Batashvili, may dispute their liability, the Receivership 

Entities have not disputed anything. Instead, they consented to the Preliminary Injunction entered 

in the Underlying Lawsuit. [Dkt. 164], and thus to date, no “bona fide dispute” as to the 

Receivership Entities’ debt to the Investors exists. Further, the Complaint alleges both definitions 

of insolvency recognized under § 3439.04(a)(2): a debtor who “(A) [w]as engaged or was about 

to engage in a business or a transaction for which the remaining assets of the debtor were 

unreasonably small in relation to the business or transaction . . . [or] (B) [i]ntended to incur, or 

believed or reasonably should have believed that the debtor would incur, debts beyond the 

debtor's ability to pay as they became due.” Complaint ¶ 50; citing CUFTA § 3439.04(a)(2). Thus, 

the Receivership Entities’ (the debtors’) fraudulent sales continually created debts beyond the 

Entities’ ability to pay as they came due, and also demonstrate the Entities’ intent to create debts 

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beyond their ability to pay. See Complaint ¶ 8. Regardless how the Court views the insolvency 

allegations, they suffice for plausibility of Count II. 

Similarly, Defendants’ argument regarding the Receiver’s purported failure to plead certain 

facts “as to this claim,” Motion p. 11 suggests Defendants misunderstand the import of 

incorporating factual allegations by reference as occurred in paragraph 53: (“The Receiver alleges 

and hereby incorporates by reference each allegation made in the foregoing paragraphs as if each 

were separately set forth herein). In so doing, Count II expressly relied on the preceding factual 

allegations: 

 “[T]he Investors defrauded by the Receivership Entities are the principal creditors of 

the Receivership Entities,” Complaint ¶ 4; 

 “To date, the Receiver has identified less than $15 million in Receivership Assets, 

while no less than $65 million in total creditor claims have been asserted in the 

Underlying Lawsuit.” Complaint ¶ 31; 

 “At all relevant times, the Receivership Entities were insolvent.” Complaint ¶ 32. 

In sum, both fraudulent transfer claims are plausible and the Court should deny 

Defendants’ motion to dismiss them. 

F. Limitations Does Not Justify Dismissal 

In an argument devoid of any analysis related to fraudulent concealment or the burden 

incident in discovering the fraudulent nature of the Transfers, as well as the entirety of the tolling 

and concealment facts alleged, [Complaint ¶¶ 35-42] Defendants contend the four-year limitations 

period, divorced from the statutes’ discovery window, mandates dismissal of any transfer made 

before August 31, 2018 as untimely. 

If the Court does not delay accrual based on the Court’s own stay or Defendants’ 

concealment, the Receiver agrees transfers made more than four years before the lawsuit was filed 

are not recoverable as constructively fraudulent transfers because CUFTA (like TUFTA) does not 

include a tolling provision for that claim. CUFTA § 3439.09(b). But that limitations period hardly 

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speaks to the viability of the alternative claim regarding Transfers made with actual fraudulent 

intent for which a one-year discovery period applies.13 With respect to the discovery period, 

Defendants argue only that the Receiver could and should have discovered the Transfers within 

one year from the date of his appointment, and that in pleading awareness of the transfers by May 

18, 2021, the Receiver essentially concedes his claims are untimely. Motion p. 14. 

Defendants’ limitations argument, which lacks any supporting legal authority, fails on 

multiple fronts. First, discovery of the claim turns on the Receiver’s discovery, not any discovery 

by the Receivership Entities or imputation of knowledge from such entities to the Receiver. 

Democratic Senatorial Campaign Comm., Inc., 712 F.3d at 192 (rejecting contention that time to 

recover fraudulent transfers began running at the time the receivership entities made them rather 

from the date the receiver could discover them). Second, the Receiver was required to discover 

the fraudulent nature of the Transfers before his claim accrued, rather than the mere occurrence of 

the Transfers. Id. at 194-195 (“[A] claim under section 24.005(a)(1) of TUFTA has been held to 

accrue only when the claimant discovers or reasonably could have discovered the fraudulent nature 

of the conveyance.”). Thus, his discovery that the Transfers were made in no way creates a 

limitations bar, particularly in light of the Receiver’s further contention that he requested and did 

not receive evidence regarding the legitimacy of the charges purportedly underlying the Transfers. 

Complaint ¶ 36-42. Further, the Receiver’s diligence in discovering his claims, including their 

fraudulent nature, is a question of fact, wholly inappropriate for resolution on a motion to dismiss. 

Id; see also Janvey v. Romero, 817 F.3d 184, 189 (5th Cir. 2016) (“When a plaintiff discovered or 

could reasonably have discovered a transfer is generally a question of fact for the fact-finder.”). 

13 “Under paragraph (1) of subdivision (a) of Section 3439.04, not later than four years after the transfer was made or 

the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably 

have been discovered by the claimant. CUFTA § 3439.09(a). 

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Lastly, but not insignificantly, Defendants’ fraudulent concealment bars their reliance on 

limitations. See Abecassis v. Wyatt, 902 F. Supp. 2d 881, 898 (S.D. Tex. 2012) (denying summary 

judgment on fact question regarding when limitations period began to run, in light of defendants’ 

fraudulent concealment). 

G. The Receiver’s Claims Against Cruz Are Each Plausible 

1. The Complaint Establishes Facial Jurisdiction Over Cruz 

Defendants contend that simply because they challenge the merits of certain of the 

Receiver’s claims against Cruz, the Court also lacks personal jurisdiction over him. The argument 

ignores every applicable legal principle, as well as the unjust enrichment and fraudulent transfer 

claims, which are also asserted against Cruz.14

Although somewhat unclear, in contending the Receiver’s allegations against Cruz fail to 

establish a prima facie case of personal jurisdiction over him, Defendants raise a facial attack to 

jurisdiction, i.e., an argument premised on the sufficiency of the jurisdictional allegations rather 

than the existence of the jurisdictional facts. See In re Enron Corp. Sec., Derivative & ERISA 

Litig., 279 F.R.D. 395, 403 (S.D. Tex. 2011) (“A motion to dismiss for lack of subject matter 

jurisdiction under Rule 12(b)(1) is characterized as either a “facial” attack, i.e., the allegations in 

the complaint are insufficient to invoke federal jurisdiction, or as a “factual” attack, i.e., the facts 

in the complaint supporting subject matter jurisdiction are questioned.”).15 In a facial attack, “if 

the defense merely files a Rule 12(b)(1) motion, the trial court is required merely to look to the 

14 As the MagicStar Entities’ owner, and as alleged in paragraph 34(f), Cruz, as a subsequent transferee, received and 

used the Transferees. He is, accordingly, liable pursuant to CUFTA § 3439.08 as a subsequent transferee. 

15 The absence of evidence supporting Defendants’ arguments and their acceptance of the truth of the Receiver’s 

jurisdictional allegations, Motion pp. 12-14, also suggests a facial rather than factual jurisdictional challenge. See

VeroBlue Farms USA, Inc., 465 F. Supp. 3d at 651 (“The Founders submitted no evidence to controvert VeroBlue’s 

allegations of jurisdiction, and so the Court construes the argument as a facial rather than factual attack.”); but see 

Rodriguez v. Tex. Comm’n of Arts, 992 F. Supp. 876, 878–79 (N.D. Tex. 1998), aff’d sub nom. Rodriguez v. Tex. 

Comm’n on the Arts, 199 F.3d 279 (5th Cir. 2000) (“[I]f the defendant had challenged the facts that formed the basis 

for the plaintiff’s claim of subject matter jurisdiction, the attack would be factual”) (Cummings, J.). 

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sufficiency of the allegations in the complaint because they are presumed to be true. If those 

jurisdictional allegations are sufficient the complaint stands.” Paterson v. Weinberger, 644 F.2d 

521, 523 (5th Cir. 1981); see also Ass’n of Am. Physicians & Surgeons, Inc. v. Tex. Med. Bd., 627 

F.3d 547, 553 (5th Cir. 2010) (accepting material allegations in the complaint as true when subject 

matter jurisdiction was challenged on the basis of the pleadings). When issues of fact underly 

subject matter jurisdiction as well as the merits of a claim, a trial court should assume jurisdiction 

and proceed to the merits under a Rule 12(b)(6) or Rule 56 standard. Holcombe v. United States, 

No. SA-18-CV-555-XR, 2021 WL 67217, at *20–21 (W.D. Tex. Jan. 6, 2021). 

Here, without demonstrating pleaded allegations unworthy of the presumption of truth, to 

assert the absence of jurisdiction Defendants contend the Receiver’s alter ego and money had and 

received claims against Cruz fail and Cruz thus does not possess Receivership Assets so 

jurisdiction against him cannot exist pursuant to 28 U.S.C. § 754 and 1692 (the “Jurisdictional 

Statutes”). If this argument had merit, a court would be divested of jurisdiction over any Defendant 

who eventually succeeded on the merits of a claim. Jurisdiction does not work in this hindsight 

manner. 

The Receiver pleaded compliance with the Jurisdictional Statues. Complaint ¶ 14, 15. 

Those statutes accordingly confer personal jurisdiction over Cruz, and “the Complaint [against 

Cruz] stands.” Id.; see also Alguire, 846 F. Supp. 2d at 669 (“By allowing a receiver and district 

court to exercise jurisdiction over purported receivership estate property, section 754 serves as a 

stepping stone on [a court’s] way to exercising in personam jurisdiction over those persons having 

custody or control over the property at issue.”) (internal quotation omitted); Warfield v. Arpe, No. 

CIVA 3:05CV1457 R, 2007 WL 549467, at *11 (N.D. Tex. Feb. 22, 2007) (“Section 1692 operates 

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as a nationwide service of process statute that may be used to acquire personal jurisdiction over 

defendants in possession of receivership assets.”). 

2. Defendants’ Challenges to the Money Had and Received Claim Falters on 

Cruz’s Use of the MagicStar Entities as His Alter Ego 

In another cart-before-the-horse argument, Defendants contend the Receiver’s Money Had 

and Received claim, Count IV, fails because the Receiver does not allege Cruz received any of the 

funds at issue. Motion p. 18. But that contention ignores the Receiver’s alter ego/veil 

piercing/single enterprise claim, Count V, by which he contends Cruz is individually liable for all 

transfers made to MagicStar Defendant entities. Complaint ¶¶ 22; 25, including n. 7, 60-63. It 

also ignores the likelihood that Cruz, as the MagicStar Entities’ owner, “had and received,” at least 

indirectly or as a subsequent transferee, the Transfers which the Receiver seeks to recover.16

Defendants first contend the three theories are not synonymous, a contention that supports 

the plausibility of the claim based on the breadth of potential application, rather than the inverse. 

See Rimade Ltd. v. Hubbard Enterprises, Inc., 388 F.3d 138, 143 (5th Cir.2004) (“[T]hree broad 

categories [exist] in which a court may pierce the corporate veil: (1) the corporation is the alter 

ego of its owners and/or shareholders; (2) the corporation is used for illegal purposes; and (3) the 

corporation is used as a sham to perpetrate a fraud.”).17 Defendants ignore veil piercing as the basis 

for Cruz’s personal liability and potential receipt of all funds transferred to the MagicStar entities, 

a claim that exists “when the corporate form has been used as part of a basically unfair device to 

16 And as noted above, even absent the alter ego claim, the argument ignores Cruz’s liability as a subsequent transferee 

and thus the propriety of his inclusion in this matter with respect to the fraudulent transfer claims, as well as a proper 

Defendant for the money had and received claim. 

17 Defendants again cite both California and Texas law but fail to identify any conflict between the two regarding veil 

piercing. Motion, p. 18. And while Texas and California may treat alter ego and single enterprise liability differently, 

the potential inapplicability of those theories does not negate the viability of veil piercing. See also Roman Catholic 

Archbishop v. Superior Court, 15 Cal. App. 3d 405, 412, 93 Cal. Rptr. 338, 342 (Ct. App. 1971) (“A corporate identity 

may be disregarded—the ‘corporate veil’ pierced—where an abuse of the corporate privilege justifies holding the 

equitable ownership of a corporation liable for the actions of the corporation.”). 

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achieve an inequitable result.” SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444, 

454 (Tex. 2008). The theory applies if constructive fraud is alleged, “meaning ‘the breach of some 

legal or equitable duty which, irrespective of moral guilt, the law declares fraudulent because of 

its tendency to deceive others, to violate confidence, or to injure public interests.’” Spring St. 

Partners-IV, L.P. v. Lam, 730 F.3d 427, 443 (5th Cir. 2013) (quoting Castleberry v. Branscum, 

721 S.W.2d 270, 273 (Tex. 1986)). “[N]either fraud nor an intent to defraud need be shown,” but 

only that “recognizing the separate corporate existence would bring about an inequitable 

result.” Spring Street Partners, 730 F.3d at 443. The Complaint demonstrates the use of the 

MagicStar Entities to deceive creditors, as well as the broader standard. 

 Cruz owned and controlled both MagicStar entities, Complaint ¶ 22; 

 Cruz used the MagicStar entities in furtherance of the fraud committed by the 

Receivership Entities, Complaint ¶ 2; 

 The MagicStar entities fabricated invoices purportedly justifying more than 

$20,000,000 paid to them over the course of just three years, Complaint ¶¶ 24-25; 

 Cruz claims funds received by the MagicStar entities were used for services provided 

by Google, Facebook and other internet sites, but Receivership Entity records reflect 

direct payments for those services, Complaint ¶ 24; 

 The MagicStar entities purportedly provided services to the Receivership Entities that 

despite employees of the Receivership Entities who could and claimed they were, 

providing the same services, Complaint, ¶ 24; 

 The Receivership Entities made transfers to the MagicStar Defendants to place funds 

beyond the reach of creditors, Complaint ¶ 2, 62; 

 The funds transferred to the MagicStar Defendants were used by Cruz to fund the 

operation of an entity created and operated to circumvent the Receivership Order, 

Complaint ¶ 2, 34(g); 

 Recoveries from the Receivership Defendants alone are far less than the Investors 

losses, Complaint ¶ 4, and thus recovery from the MagicStar Defendants, including 

Cruz, is necessary to avoid an inequitable result; Complaint ¶ 4. 

These facts and the broader context of the Receiver’s veil piercing/alter ego claim satisfy 

Rule 8 and require denial of Defendants’ Motion to Dismiss the claim. 

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IV. MOTION FOR LEAVE TO AMEND 

In the alternative and in the event the Court concludes any of the Receiver’s claims are 

inadequately pleaded, he requests leave to amend. Rule 15 requires granting leave freely when 

justice so requires. Dueling v. Devon Energy Corp., 623 Fed. Appx. 127, 130 (5th Cir. 2015); 

Harlow v. Friendship Med. Clinic, LLC, No. 315CV00160MPMSAA, 2016 WL 9130982, at *4 

(N.D. Miss. Apr. 28, 2016). Courts in the Fifth Circuit “generally allow plaintiffs at least one 

opportunity to amend following a Rule 12 dismissal on the pleadings. See Guzman v. Nationstar 

Mortg. LLC, No. 4:17-cv-823-O-BP, 2017 WL 6597959, at *2 (N.D. Tex. Dec. 8, 2017), report 

and recommendation adopted, No. 4:17-cv-823-O-BP, 2017 WL 6594199 (N.D. Tex. Dec. 26, 

2017) (gathering cases and also citing Hines v. Wainwright, 539 F.2d 433, 434 (5th Cir. 1976) as 

an example of the Fifth Circuit vacating and remanding a Rule 12(c) dismissal with instructions to 

the district court to dismiss without, instead of with, prejudice). No prejudice exists here with 

respect to any amendment, and thus in the event one is necessary, the Court should allow such an 

amendment. 

V. CONCLUSION 

As explained above, none of the many arguments raised in Defendants’ Motion warrants 

dismissal of any of the Receiver’s claims. 

WHEREFORE, PREMISES CONSIDERED, the Receiver requests that the Court deny 

Defendants’ Motion. In the alternative, in the event the Court concludes any claim lacks 

plausibility as pleaded, the Receiver requests leave to amend. 

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Respectfully submitted, 

BROWN FOX PLLC 

By: /s/ Charlene C. Koonce 

CHARLENE C. KOONCE 

State Bar No. 11672850 

charlene@brownfoxlaw.com

Cortney C. Thomas 

State Bar No. 24075153 

cort@brownfoxlaw.com

8111 Preston Road, Suite 300 

Dallas, Texas 75225 

(214) 327-5000 Telephone 

(214) 327-5001 Facsimile 

SCHEEF & STONE, LLC, 

PETER LEWIS 

State Bar No. 12302100 

peter.lewis@solidcounsel.com

500 North Akard, Suite 2700 

Dallas, Texas 75201 

(214) 706-4200 Telephone 

(214) 706-4242 Facsimile 

ATTORNEYS FOR PLAINTIFF 

KELLY CRAWFORD, IN HIS 

CAPACITY AS RECEIVER 

CERTIFICATE OF SERVICE 

Pursuant to Fed. R. Civ. P. 5(d)(1)(B), as amended, no certificate of service is necessary, 

because this document is being filed with the Court’s electronic-filing system. 

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