## Facts

- The SEC brought an enforcement action alleging that entities controlled by R. Allen Stanford operated a large Ponzi scheme.
- The district court appointed Ralph S. Janvey as receiver to marshal and preserve assets for the Stanford receivership estate.
- After prior appellate proceedings required releasing certain frozen investor accounts, the receiver sought a new preliminary injunction freezing assets of numerous former Stanford Group Company employees (including financial advisors).
- The receiver alleged the employees received commissions, bonuses, and other payments traceable to the Ponzi scheme and recoverable as fraudulent transfers under the Texas Uniform Fraudulent Transfer Act (TUFTA).
- Many employees relied on arbitration clauses in agreements with Stanford-related entities and moved to compel arbitration and stay the receiver’s claims.
- The district court granted a preliminary injunction freezing specified assets up to amounts the receiver claimed were subject to recovery, and it did so without first granting the motion to compel arbitration.

## Issues

1. Whether the district court could issue a preliminary asset-freeze injunction before resolving a pending motion to compel arbitration.
2. Whether the court of appeals had interlocutory jurisdiction to review rulings relating to the motion to compel arbitration in an appeal taken from a preliminary injunction.
3. Whether the district court abused its discretion in granting a preliminary injunction freezing employee assets to secure potential TUFTA recoveries.
4. Whether the injunction was overbroad in the property restrained or amounts frozen.
5. Whether TUFTA permitted injunctive relief freezing assets or instead required the receiver to proceed by writ of attachment.
6. Whether the district court clearly erred in finding the Stanford operations functioned as a Ponzi scheme for purposes of the receiver’s TUFTA theory.

## Decision

- The Fifth Circuit held the district court had authority to grant preliminary injunctive relief to preserve assets before deciding arbitration.
- The Fifth Circuit dismissed, for lack of appellate jurisdiction in this interlocutory posture, challenges directed at the district court’s non-final handling of the motion to compel arbitration.
- The Fifth Circuit affirmed the preliminary injunction, holding the district court did not abuse its discretion under the four-factor preliminary-injunction test.
- The Fifth Circuit held the injunction was not overbroad because it was limited to specified sums tied to alleged fraudulent transfers and could be adjusted as the record developed.
- The Fifth Circuit held TUFTA authorized injunctive relief restraining disposition of assets, and the district court was not required to insist on a writ of attachment.
- The Fifth Circuit upheld the district court’s Ponzi-scheme finding under clear-error review, concluding the record supported that Stanford entities operated with classic Ponzi characteristics.

## Legal Principles

- A federal court supervising an equity receivership may issue preliminary injunctive relief to preserve the status quo and protect potentially recoverable assets, even while arbitration is contemplated.
- In an interlocutory appeal taken from a preliminary injunction, appellate jurisdiction extends to injunction-related matters under 28 U.S.C. § 1292(a)(1), but does not necessarily extend to non-final arbitration rulings in the receivership setting.
- Preliminary injunctions require a showing of likelihood of success on the merits, irreparable harm, balance of equities, and consistency with the public interest; asset dissipation that would defeat meaningful recovery can constitute irreparable harm.
- Once an operation is shown to be a Ponzi scheme, transfers made in furtherance of the scheme are treated as presumptively fraudulent for purposes of intent-based fraudulent-transfer theories, strengthening a receiver’s likelihood of success under TUFTA.
- TUFTA authorizes injunctive relief restraining transfer or disposition of assets, and a court may select injunctive relief rather than requiring attachment where equitable administration of the estate so warrants.
- Asset-freeze injunctions are permissible when tailored to estimated amounts of allegedly avoidable transfers and directed at preventing dissipation pending adjudication.

## Conclusion

The Fifth Circuit affirmed a TUFTA-based preliminary injunction freezing former employees’ assets to secure potential fraudulent-transfer recoveries for the Stanford receivership estate, held the injunction properly tailored and supported by a Ponzi-scheme finding, and dismissed the interlocutory arbitration challenge for lack of appellate jurisdiction.


Janvey v. Alguire, 647 F.3d 585 (5th Cir. 2011)