dfrf-enterprises-logoA scheduling conference in the SEC’s Ponzi scheme case against DFRF Enterprises was held on the 29th of September.

At the hearing, the following tentative court dates were scheduled:

  • Initial Disclosures 10/29/15
  • Fact Discovery 5/31/16
  • Expert Disclosure 6/30/16
  • Defendants Expert Disclosures 9/30/16
  • Motion for Summary Judgment due 10/30/16
  • Opposition due 11/21/16

What we can learn from those dates is that the SEC seem pretty confident with their case. A summary judgement would see a Judge rule on the case without the need for a trial.

The initial disclosures to be filed by the 29th of this month would also provide some insight into Daniel Filho’s proposed defense.

Or at least it might have, had the DOJ not filed a Motion to Intervene on October 1st.

The DOJ appear to have been present at the September 29th scheduling hearing, with the clerk’s notes reading ‘Motion to Stay Discovery to be filed.‘

The DOJ are not party to the SEC’s civil case against DFRF Enterprises, but seek to intervene on the grounds of Filho abusing discovery in the civil case to manipulate concurrent criminal proceedings.

In opening their motion, the DOJ lay out the current status of Filho’s criminal proceedings.

Daniel Fernandes Rojo Filho (“Filho”) is the defendant in the related criminal action and has not yet retained counsel in either the criminal action or this action.

Defendants DFRF Enterprises LLC, DFRF Enterprises, LLC, (collectively “DFRF”)1 and Valdes have not retained counsel, have not filed responsive pleadings in the above-captioned action, and are in default.

With no lawyer and already in default, Filho’s defense is off to a great start.

Both the government and the SEC have been investigating DFRF and individuals associated with DFRF in connection with an investment-fraud scheme.

On June 30, 2015, the SEC filed this action. On August 5, 2015, a grand jury returned an indictment against Filho, charging him with three counts of wire fraud.

Due to the complaints filed being similar in nature, the DOJ are asking for ‘a stay of discovery in the civil proceedings‘.

Without a stay, Filho—charged in both actions—could use the civil discovery process in a manner that impairs proper administration of the criminal case.

The DOJ also argue that because the SEC and DOJ’s complaints are ‘founded on many of the same operative facts‘, that

a stay of discovery would create genuine efficiencies. For example, a conviction in the criminal case could have an estoppel effect as to the civil liability of Filho.

Basically if Filho loses his criminal case, then the SEC’s civil case is streamlined into a foregone conclusion.

Longtime readers of BehindMLM will recognize the DOJ’s motion as near-identical to the one filed in the TelexFree civil case.

There the DOJ were granted their requested intervention, with the TelexFree civil case currently on hold till the conclusion of criminal proceedings against its owners.

Not surprisingly, this decision is cited as example in the DOJ’s intervention motion:

As discussed further below, courts in this and other districts have recognized that disparities between civil and criminal discovery justify staying civil proceedings. See, e.g., SEC v. TelexFree, Inc.

The SEC meanwhile have assented to the DOJ’s Motion to Intervene, but take no position on the request a stay be granted.

Given this is pretty much what went down in the TelexFree case, I’m expecting the DOJ’s motion will be granted.

DFRF Enterprises was a lot smaller than TelexFree, so hopefully Filho’s criminal proceedings won’t take as long as the TelexFree ones have.

One final interesting tidbit from the DOJ’s filing was this line:

As noted above, the two actions here are substantively identical, despite the fact that the Indictment only names Filho.

That sentence was marked with a footnote, which read:

The government’s investigation concerning DFRF is ongoing.

Will we see additional indictments against DFRF Enterprises insiders?

Stay tuned…

 

Footnote: Our thanks to Don@ASDUpdates for providing a copy of the DOJ’s October 1st “Motion For Leave To Intervene And For A Stay Of Discovery Pending Resolution Of Parallel Criminal Proceedings”.

 

Update 30th October 2015 – As per orders issued on October 23rd, it appears the SEC’s civil litigation against DFRF Enterprises has now been stayed.