Following dismissal of claims against the remaining top Traffic Monsoon net-winner, clawback litigation filed by the Receiver has been closed.

Maurizio Longo of Italy was the last of eleven Traffic Monsoon net-winners sued in 2019.

The Receiver served Longo in August 2019 but took no further action. This promoted the court to finally issue an order directing the Receiver to show cause in October 2023.

As per the order, the Receiver was to explain to the court why Longo shouldn’t be dismissed as a defendant.

The Receiver’s response to the order revealed… complications.

The Receiver responded that after filing the complaint, he had learned that Maurizio Longo was likely an identity stolen by Fabiano Santos, which Santos used to deposit and withdraw funds from the Ponzi scheme.

The Receiver had also learned that the summons served on Longo for this case was used by Italian authorities to prosecute

Santos for stealing Longo’s identity. The Receiver decided not to prosecute the claim against Longo due to the identity theft prosecution against Santos.

Santos went on to be convicted of identity theft in late 2023. Upon learning this, the Receiver sought permission to file an amended complaint substituting Longo out for Santos.

Here’s what the court thought of that;

The court finds that essentially beginning a new litigation from square one against Santos, who is apparently incarcerated in an Italian prison, will not likely result in a monetary recovery before the Receiver is ready to distribute funds to victims.

Because litigating an action against Santos at this late date is unlikely to serve the purpose of this action, the court finds the motion to amend the complaint to be untimely.

Second, given that the Receiver did not prosecute the case against Longo after he failed to respond to the August 2019 summons, it appears that Receiver strongly suspected early on in this litigation that Santos had used Longo’s name to collect net winnings from the Ponzi scheme.

The Receiver could not wait years for the outcome of an Italian criminal prosecution before moving to add Santos to the litigation.

Accordingly, the court denies leave to amend the complaint because of undue delay in seeking leave to amend.

The Receiver’s case against Longo, who doesn’t exist, was ordered dismissed on September 30th, 2024.

With proceedings against the last Traffic Monsoon net-winner resolved, the court ordered the Receiver’s clawback case closed.

For reference, pertaining to the other ten sued Traffic Monsoon net-winners:

  1. Ernie Ganz copped a $520,822 default judgment in 2021
  2. David Barker copped a $540,824 default judgment in 2021
  3. Sharon James copped a $303,691 default judgment in 2021
  4. Javediqbal Naeeem copped a $353,593 default judgment in 2021
  5. Adil Khan copped a $389,370 default judgment in 2021
  6. Limited By Invitation copped a $310,704 default judgment in 2021
  7. Mohammed Yasin copped a $419,176 default judgment in 2021
  8. Imtiaz Aslam copped a $6.9 million default judgment in 2023
  9. Vincent Boutin settled with the Traffic Monsoon Receiver for an undisclosed sum in 2023
  10. Piotr Chajkowski settled with the Traffic Monsoon Receiver for $1.02 million earlier this year

In a September 30th filed Status Report, the Traffic Monsoon Receiver also provided an updated on the long-awaited first victim distribution.

The Receiver’s Motion to approve the proposed Plan of Distribution was heard by the Court on April 23, 2024.

At that time, the Court indicated it would authorize the Receiver to open the Distribution Portal to gather information from holders of Allowed Claims, and would approve certain distribution procedures, but would not yet authorize the Receiver to make distributions on Allowed Claims.

One key reason for not authorizing distributions was that, absent specific approval from the Internal Revenue Service (“IRS”), the Receiver’s tax professionals had advised him that he would need to withhold up to 30% of the distributions to certain foreign holders of Allowed Claims.

Thus, instead of withholding funds from an initial distribution, the Court determined it would be better for the Receiver first to seek a private letter ruling from the IRS to allow distributions without having to withhold funds for tax purposes.

Shortly after the Reporting Period, on July 23, 2024, the Court entered its Order Regarding Receiver’s Motion for Approval of Proposed Plan of Distribution, which, among other things, authorized the Receiver to proceed with opening the Distribution Portal and to seek a private letter ruling from the IRS regarding the tax withholding issues.

The Receiver has now filed the private letter ruling with the IRS and is awaiting a determination.

No idea how long the IRS takes to make determinations on private letter rulings but, currently, that’s the only thing holding up Traffic Monsoon distribution payments.