Belsome v. Rex Venture Group, LLC (Stay of Litigation)

The District Court reviewed a petition to lift a stay of litigation using the factors set forth in S.E.C. v. Wencke, 742 F.2d 1230, 1231 (9th Cir. 1984): (1) whether allowing the stay to remain in place preserves the status quo, or whether the moving party will suffer substantial injury if not allowed to proceed; (2) the time in the course of the receivership at which the motion to lift stay occurs; and (3) the merit of the moving party’s underlying claims. In addressing the first factor, the court noted that the only injury to Plaintiffs would be by preventing the Plaintiffs from jumping ahead of the rest of the net losers of the Ponzi scheme in the claims process. The Court also rejected the Plaintiffs’ argument that their action would be more efficient than the Receivership pursuing similar claims via clawback actions, stressing that this argument is “contrary to the entire thrust of the equitable Receivership that the Court has put in place” and would “open the floodgates to a multiplicity of competing actions,” the costs of which would ultimately be borne by the victims of the scheme.