1 LANCE N. JURICH (SBN 132695) BENJAMIN R. KING …Delaware limited liability company; ... each of...

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211605-10008RECEIVER'S FIRST REPORTLoeb & Loeb

A Limited Liability PartnershipIncluding Professional

Corporations

LANCE N. JURICH (SBN 132695)[email protected] R. KING (SBN 205447)[email protected] & LOEB LLP10100 Santa Monica Blvd., Suite 2200Los Angeles, CA 90067Telephone: 310.282.2000Facsimile: 310.282.2200

Attorneys for THOMAS A.SEAMAN, Temporary Receiver

Thomas Seaman, CFATemporary Receiver3 Park Plaza, Suite 550Irvine, CA 92614Telephone (949) 222-0551Facsimile (949) 222-0661

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

DIGITAL ALTITUDE LLC, aDelaware limited liability company;DIGITAL ALTITUDE LIMITED,United Kingdom company; ASPIREPROCESSING LLC, a Nevada limitedliability company; ASPIREPROCESSING LIMITED, a UnitedKingdom company; ASPIREVENTURES LTD., a United Kingdomcompany; DISC ENTERPRISES INC.,a Nevada corporation; RISE SYSTEMS& ENTERPRISE LLC, a Utah limitedliability company; RISE SYSTEMS &ENTERPRISE LLC, a Nevada limitedliability company; SOARINTERNATIONAL LIMITEDLIABILITY COMPANY, a Utahlimited liability company; THEUPSIDE, LLC, a California limitedliability company; THERMOGRAPHYFOR LIFE, LLC, also d/b/a LIVINGEXCEPTIONALLY, INC., a Texaslimited liability company; MICHAELFORCE, individually and as an officer,

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Case No.: 2:18-cv-00729 JAK-MRW

Assigned to Hon. John A. Kronstadt

RECEIVER’S FIRST REPORTAND INVENTORY

Case 2:18-cv-00729-JAK-MRW Document 93 Filed 03/01/18 of 45 Page ID #:3940

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member and/or manager of DigitalAltitude LLC and Soar InternationalLimited Liability Company; MARYDEE, individually and as an officer,member and/or manager of DigitalAltitude LLC, Digital Altitude Limited,Aspire Processing LLC, RISE Systems& Enterprise LLC, The Upside, LLC,and Thermography for Life, LLC;MORGAN JOHNSON, individually andas an officer, member and/or manager ofDigital Altitude LLC and RISE Systems& Enterprise LLC; ALAN MOORE,individually and as an officer, memberand/or manager of Digital Altitude LLCand Aspire Processing Limited; andSEAN BROWN, individually and as anofficer, member and/or manager ofAspire Processing LLC, DiscEnterprises Inc. and RISE Systems &Enterprise LLC,

Defendants.

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15778692.2

211605-10008I RECEIVER'S FIRST REPORTLoeb & Loeb


Corporations

TABLE OF CONTENTS

Page

I. INTRODUCTION AND PROCEDURAL BACKGROUND........................1

II. RECEIVER TAKEOVER AND INVENTORY.............................................2

A. Frozen Funds.........................................................................................4

B. Merchant Account Payment Processors................................................4

C. Release of Funds to Individual Defendants ..........................................4

D. Personal Property: .................................................................................5

E. Books and Records................................................................................5

F. Defendant Websites ..............................................................................6

G. Cutting Off Sales Contacts With Customers ........................................6

H. Defendant Notification To Consumers Of TRO...................................6

I. Additional Assets ..................................................................................7

III. SUSPENSION OF DEFENDANT BUSINESS OPERATIONS....................7

A. The Receiver Has Suspended Operations As, In TheReceiver’s Business Judgment, The Receiver CurrentlyBelieves That The Business Cannot Be Operated Legally AndProfitably...............................................................................................7

1. Overview Of Digital Altitude Business Model ..........................8

2. Representations To Consumers Of Great IncomeAppear To Be False ..................................................................10

3. Merchant Account Activity ......................................................13

4. Defendant Business Model Not Profitable In The LongTerm..........................................................................................14

5. Cancellation Of APEX Conference In Whistler, Canada.........15

IV. CONSUMER RELATIONS .........................................................................16

A. Creation Of Receivership Website And Notification OfConsumers/Employees/Etc. ................................................................16

V. POTENTIAL MODIFICATIONS TO BUSINESS MODEL TOOPERATE LAWFULLY..............................................................................17

VI. ACCOUNTING.............................................................................................18


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15778692.2

211605-10008II RECEIVER'S FIRST REPORTLoeb & Loeb


Corporations

TABLE OF CONTENTS CONTINUED

Page

VII. EMPLOYMENT OF RECEIVER’S COUNSEL .........................................18

VIII. RECEIVER RECOMMENDATIONS GOING FORWARD.......................19

A. Continued Efforts To Cease Operations .............................................19

B. Receiver’s Accounting Of The Uses Of Consumer Funds.................19

C. Cancellation Of Remaining Obligations.............................................19

D. Formally Abandon Orem, Utah Offices And Personal Property........20


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15778692.2

211605-100081 RECEIVER'S FIRST REPORTLoeb & Loeb


Corporations

Thomas A. Seaman, the Court-appointed Temporary Receiver (“Receiver”)

for defendants Digital Altitude, LLC, Digital Altitude Limited; Aspire Processing

LLC; Aspire Processing Limited; Aspire Ventures Ltd; Disc Enterprises Inc.; RISE

Systems & Enterprise LLC (Utah); RISE Systems & Enterprise LLC (Nevada); Soar

International Limited Liability Company; The Upside, LLC; Thermography for

Life, LLC, d/b/a Living Exceptionally, Inc., and each of their subsidiaries, affiliates,

successors, and assigns (the “Receivership Entities”), respectfully submits this

Receiver’s First Report and Inventory to assist this Court and interested parties with

the status of the Receiver’s activities and preliminary findings.

I. INTRODUCTION AND PROCEDURAL BACKGROUND

Plaintiff Federal Trade Commission (“FTC”) filed the above-captioned

action, under seal, on January 29, 2018. On Thursday, February 1, 2018, this Court

entered its “Ex Parte Temporary Restraining Order With Asset Freeze, Appointment

of Temporary Receiver, and Other Equitable Relief, and Order to Show Cause Why

a Preliminary Injunction Should Not Issue” (the “TRO”). The TRO provided for a

hearing on February 15, 2018 at which this Court was to consider the issue of

whether this Court should issue a preliminary injunction which, among other things,

may include the appointment of Receiver on a permanent basis to continue the

receivership. This Court has since continued that hearing following a stipulation of

the parties to March 5, 2018, at 8:30 a.m.

The TRO reflects this Court’s finding that there was good cause for

appointing Receiver as a temporary receiver over the Receivership Entities, for

purposes of, among other things, taking control of the Defendants’ challenged

business operations, preserving and recovering assets for the benefit of consumers,

preserving records and information for the benefit of all parties in the ongoing

litigation, evaluating the Defendants’ business operations to determine whether the

businesses can be operated legally and profitably going forward (with the power to

suspend business activities and cut off public access to the Defendants’ operations in


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the event that operations cannot satisfy those requirements), and conducting and

reporting to this Court on all aspects of the Receiver’s conduct of his receivership

and the Defendants’ business operations.

As a Court-appointed neutral and an agent of this Court, the Receiver takes

each of his duties and obligations under the TRO very seriously and has worked

diligently since this Court’s appointment to carry out all such duties. The following

summarizes those activities to date as well as the information learned and

conclusions made by the Receiver thus far for the benefit of this Court and all

interested parties. It is important to note that the Receiver was only recently

appointed, and based upon the timeline of events in this case and the business

imperatives of the Receivership Entities described below, he has had to make

significant determinations in this matter on an expedited basis. The Receiver

therefore describes his conclusions below as preliminary in nature because the

Receiver’s evaluation of matter and conduct of his obligations under the TRO are

ongoing. The Receiver will keep this Court apprised of any significant changes in

his conclusions and/or activities in subsequent reports as provided in the TRO.

II. RECEIVER TAKEOVER AND INVENTORY

Business Premises: The Receiver initially was informed that Digital Altitude

was operating at an office building in Orem, Utah. When the Receiver went to the

premises on morning of February 5, 2018 he encountered an empty building and

learned from the property manager that Digital Altitude had vacated the premises in

the preceding weeks. After additional investigation it was learned that only a few

people worked at the vacated offices and had apparently moved to a building located

at a residential property in Orem, Utah. The Receiver and his counsel went to the

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newly occupied premises and knocked on the door and were granted entry.1 The

property owner and lessor to Digital Altitude presented to the Receiver a written

month-to-month lease with rent of $2,000 per month, however the lease was not

executed and no security deposit or rent had been paid. The premises were unusual

for office use and had previously been used to breed and house snakes and other

reptiles. The premises had reportedly been the subject of a prior FBI raid arising

from illegal possession of certain snakes and were run down and covered with

graffiti on the interior walls. Approximately a dozen cubicles had been haphazardly

installed. There were approximately six workstations use, however tree people were

conducting sales calls when the Receiver and his counsel entered the location. The

Receiver served the TRO upon, and met with employees, who were reasonably

cooperative. The personnel were requested to submit employee questionnaires

requesting basic identifying information such as their home address, pay

information, what they did in their employment, and an identification of their

computer sign-on credentials, which they did. The employees represented to the

Receiver that were sales people.

Later, the sales manager, Ryan Jaten, arrived and met with the Receiver and

was also served with the TRO. He provided a brief description of his duties and the

Digital Altitude services but did not fill out the employee questionnaire. Shortly

thereafter, we observed chat messages between Shawn Olsen, the on-site manager of

the sales team, and Cathy Flynn, the manager of the support team. Olsen told Flynn

1 The Receiver was not accompanied by armed officers, nor did the FTCstorm into the offices of Digital Altitude, LLC with law enforcement as alleged bydefendants Digital Altitude, LLC, Michael Force, and Mary Dee in their Oppositionto the Preliminary Injunction. [See Docket No. 78, at p. 6.] After the Receiver andhis counsel were granted permission by the property owner to enter the portion ofthe premises used by Digital Altitude, the Receiver politely approached the personsworking on the premises and introductions were made. Only later after the Receivermet all persons working on the property and assessed the situation did the Receiverinvite the FTC’s representatives inside to observe the premises and to assist theReceiver in the preservation of information and other evidence located there. To beclear, contrary to the Defendants’ statement, no law enforcement was invited (nornecessary) to effectuate a takeover of the premises.


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that Jaten said Olsen should request his unpaid commissions and Flynn agreed. No

funds withdrawal requests from sales team members were honored; the Receiver

obtained the funds from i-Payout (the payment processor) and secured them, taking

no further action.

A. Frozen Funds

A number of bank accounts of the Receivership Entities were frozen upon

entry of the TRO, which accounts are listed on the attached Exhibit A. The

Receiver has requested that the parties holding the frozen funds turn them over to

the Receiver. To date, $1,221,001.18 has been turned over. In addition, based on

information gathered from Digital Altitude’s digital books and records, the Receiver

identified additional non-named parties and took actions to freeze their bank

accounts. On February 28, 2018, the Receiver filed his “Notice of Identification of

Nonparties as Receivership Parties pursuant to Temporary Restraining Order.” [See

Docket # 82].

B. Merchant Account Payment Processors

Most of Digital Altitude’s customers paid their fees with a credit card and

Digital Altitude used a very large network of merchant accounts to facilitate the

payment of member fees. The Receiver gave notice to known merchant account

processors of the freeze order in the TRO and has instructed them that charge-backs

cannot be paid from the reserves in these accounts. The Receiver’s investigation

into the existence of additional merchants is ongoing and notice will be given if

additional processors are identified.

C. Release of Funds to Individual Defendants

Four Defendants – Alan Moore, Mary Dee, Michael Force, and Sean Brown –

have petitioned the Receiver to release $5,000 for their personal expenses in

accordance with the TRO. The appropriate substantiation was provided, and the

Receiver directed the respective banks to release $5,000 from the frozen accounts.


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No payments have been made to lower level employees and many of them

have expressed to the Receiver that they are experiencing hardship as a result.

Employees were not being paid as W-2 employees, but rather as 1099 independent

contractors. This likely precludes these employees from collecting unemployment

insurance benefits.

D. Personal Property:

The Receiver took possession of all computers located at the premises but left

behind various cubicles, desks, chairs, monitors, and headsets which are of limited

value, if any (and the expenses of selling the same would likely exceed any proceeds

of any sale). At this time, the Receiver is not aware of any other personal property

used in the conduct of the Receivership Entities.

E. Books and Records

There were no business-related books and records located at the company

premises, and the Receiver has not taken possession of any paper records, aside

from a handful of scripts and papers on coaches desks. The Receivership Entities

are believed to have conducted their enterprise almost entirely in the digital world

using web-based systems. The Receiver allowed the FTC access to conduct a back-

up of the digital books and records that have been identified, with the assistance of

the Receiver’s IT consultants. The employees located at the Orem, Utah worksite as

well as certain of the other Defendants in this matter cooperated in providing their

sign-on credentials to the various web-based systems used to administer the

Receivership Entities. There are many such systems and the Receiver’s

investigation and efforts to control and preserve the digital data are ongoing. The

digital books and records are voluminous and include financial information and

sales materials styled as written course materials. The materials and the actual sales

calls stored in the Skype program which are held in the context of a coaching

session are discussed in further detail below. The Receiver and his staff have

watched and listened to many sessions with coaches. The sales calls clearly indicate


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consumers were subject to high-pressure sales techniques and the only thing they are

coached in is procuring the next level of the program. From these records and calls,

as addressed below, the Receiver has preliminarily determined that he cannot

operate the Receivership Entities in their current form lawfully and profitably, and

thus, in accordance with his responsibilities under the TRO, he has suspended

operations pending the Preliminary Injunction hearing and further investigation.

F. Defendant Websites

Since the Receiver’s takeover, Digital Altitude’s various known websites

have been modified to provide notice of the appointment of a temporary receiver.

Cloud-based software providers have been notified of the TRO, admin passwords

have been changed and certain of the defendants have been granted access to digital

information as requested and appropriate. The digital providers include

Infusionsoft, Google Drive, Gmail, the web-based CRM applications

“my.aspiresystem.co” and “digitalaltitude.co,” i-Payout, Sendgrid, and other

associated services.

G. Cutting Off Sales Contacts With Customers

The Receiver has caused all websites directed to consumers to cease having

the ability to collect fees and payments. Notwithstanding the freeze order, funds

have continued to be remitted to Digital Altitude. Since the time that the Receiver

assumed possession on February 5, 2018 through February 9, 2018, consumers have

paid $266,570. This Court may wish to consider if it is appropriate to return these

post TRO payments to consumers or otherwise hold them for administration in a

future claim process for the benefit of all aggrieved consumers should the FTC

prevail on its claims.

H. Defendant Notification To Consumers Of TRO

In accordance with the TRO, it appears to the Receiver that the Defendants

have complied with the TRO’s requirement that they provide notice to members and

affiliates of the TRO. At this time, the Receiver has no reason to believe otherwise.


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I. Additional Assets

The Receiver continues to investigate the location and amount of reserves

held by merchant account processers. The Receiver is also informed that Beau

Reed, a joint venture sales partner is holding approximately $105,000 of frozen

funds that he has transferred to his attorney’s client trust account. The Receiver is

also informed that Digital Altitude made a clerical error and overpaid $500,000 to

John Souza in connection with a purported recently settled contractual dispute. Mr.

Souza was apparently to have been paid $600,000, but received $1,100,000. The

Receiver is in the process of obtaining turnover of the excess funds to the

receivership.

III. SUSPENSION OF DEFENDANT BUSINESS OPERATIONS

A. The Receiver Has Suspended Operations As, In The Receiver’s

Business Judgment, The Receiver Currently Believes That The

Business Cannot Be Operated Legally And Profitably

The TRO requires that the Receiver suspend operations if the Receiver

determines in his business judgment that the business cannot be operated lawfully

and profitably. [See Docket # 34, at Section XII.S] For the business to operate

lawfully, it cannot mislead consumers. The primary enticement and benefit offered

to consumers in exchange for them doing business with the Receivership Entities is

the representation that they may make $100,000 or more in 90 days. For the

Receiver to operate the business lawfully, this statement must be true and not

misleading. For several reasons, as discussed in further detail below, the Receiver

has determined on a preliminary basis that this statement is misleading and false for

the vast majority of consumers. In addition, once consumers are enticed to do

business with Digital Altitude, it appears that the entire structure of Digital Altitude

is to disguise sales activities designed to pull greater and greater amounts of funds

from consumers under the guise of “coaching,” and the “coaches” performing this

coaching do not in fact have expertise or significant experience in the subject areas


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at issue but are instead aggressive highly skilled sales people working from scripts.

In the Receiver’s judgment, the entire “coaching” model is misleading to consumers

as they would be disappointed to learn that their “coaches” are not highly successful

businessmen coaching consumers from real experience as suggested by the

Defendants’ marketing. The Receiver has also conducted a review of the financial

situation of the business and has determined, for reasons discussed in further detail

below, that the business operated in a lawful manner may not be operated profitably.

In fact, there is evidence to suggest the business was operating unprofitably even in

its apparently unlawful form.

1. Overview Of Digital Altitude Business Model

Receiver believes that consumers are induced into purchasing the purported

educational materials with the prospect of earning six-figure income in 90 days or

less. The Receiver has carefully reviewed the 18-step program and materials that

consumers are sold, video presentations by Michael Force that accompany the 18-

step program, and has watched recordings of Skype calls involving purported

“coaching” sessions. Based on the six-figure income enticement and other

misleading representations, consumers sign up for the first level of Digital Altitude

products known as the “Aspire” program. Consumers can be either become a

“Walker,” “Hiker,” or “Climber” and by paying $37, $67 or $127 on a monthly

basis, respectively. This opens to the consumers access to the 18-step educational

materials. Each step contains a two or three page handout followed by five or so

very easy questions that almost exactly mimic the materials. The materials only

take a few moments to read and are of little or no educational value. The title of the

first step is “How to Build a 6 figure digital business in 90 days or less.” Consumers

also view a video by Michael Force with each step, which are also of no educational

value. One simply informs consumers that they can receive their commission

payments by ACH, check, or wire in 24 hours to 7 days and that payments are made

on the 5th and 25th of each month. There are only two questions for study following


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the lesson: What method would you like your payment and when are payments

made. In the videos Mr. Force is confident, charismatic and speaks softly in a

positive and encouraging manner. His presentations provide general advice of an

anecdotal nature, rich in cliché, but with no real educational content; only the

benefits of selling high ticket “top tier’ products, with little effort. The presentations

also tout his career as a marine and family man as well as his personal success and

his lavish lifestyle including family trips all around the world. As consumers move

through the steps, they obtain access to a one-on-one session with a “coach.” The

coaches are excellent sales people but do not appear to have any training as mentors,

coaches or business training professionals. They are, by their own admission, sales

people. The “coaching” session seems to be merely an avenue to entice consumers

to purchase the next level which allows them access to the next steps and,

importantly, a higher commission in the event they bring other consumers into the

program. At step six, coaches do a “hard sell” to get the consumer to market Digital

Altitude’s program to others (rather than pursue their own businesses) in exchange

for half of the commission that the consumer coach would earn because the

“coaches are doing all the selling for you’ to quote Mr. Force in his video that

accompanies step six. Consumers start out with the expectation that they will be

educated toward making six-figure incomes in 90 days, but instead they are

subjected to high-pressure sales techniques that coerce them into spending more and

more money. They are told that, if they do not have the money for increasingly high

contributions to Digital Altitude, they should borrow it. All of the materials the

Receiver has seen thus far have led him to conclude that the education program is

merely a sales technique for recruiting consumers to promote Digital Altitude as a

product, when in fact there is no real product (i.e., true coaching/business expertise),

only the prospect of making commissions from other unwitting consumers after they

themselves purchased the expensive products.


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2. Representations To Consumers Of Great Income Appear To

Be False

The Receiver has reviewed Digital Altitude’s accounting of the amounts

collected from consumers and the commissions they received. In total, from

information available to the Receiver thus far, it appears that consumers have paid

approximately $60,000,000, of which approximately $27,000,000 was paid back to

consumers, in commissions, to “coaches” and joint sales partners as discussed in

further detail below.

Consumers pay the following amounts for Digital Altitude’s step program.

Each level allows the consumer access to more steps and a higher commission for

customers they recruit.

Level:Aspire Walker, Hiker, or Climber $37, 67, or $127Base $597Rise $1,997Ascend $9,997Peak $19,997Apex $29,997

Customers cannot immediately buy the top APEX level, and thus earn the

highest commission rate, until they have purchased all the prior levels. The coaches

and Mr. Force liken this to going to graduate school before getting a high school

diploma. Thus, a consumer that is sold the entire program has paid over $60,000

with the expectation of making six figures in 90 days. Over its life, Digital Altitude

collected approximately $60,000,000 from 185,000 consumers, 40,000 of those

consumers paid $1 each. Of the balance of 145,000 customers who paid $37 or

more, 144,167 received no commissions, and 837, or .6%, received commissions.

Of these 837 who received commissions, 363 made more in commissions than they

paid in member fees and the average gain was $71,162. The remaining 474 lost

money with an average loss of $15,345. In the aggregate, the 837 consumers who

collected commissions made an average of $22,172 each.


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There were 10,478 consumers who paid in more than $1,000. 676 of these

consumers, or 6.4%, received commissions. 211 made an average profit of $84,585,

with no consumers making more than $100,000,2 while 465 consumers lost an

average of $15,639.

Of the customers who received commissions, 64 became APEX members.

Only one paying APEX member made more than $100,000, one made less than

$100,000, and the remaining 62 members only recouped approximately $5,400 each

on average. Therefore, these 62 APEX members lost an average of approximately

$55,600. The one member that did make more than $100,000 took ten and a half

months do so, not 90 days as advertised.

The average earnings metrics above are overstated because they include

significant payments to “coaches” and joint sales partners, which skew the average

upward. Even with these overstated averages, with the exception of one consumer,

consumers simply did not make six figure incomes.

Other than APEX members, there were other people that made more than

$100,000. One of the largest groups of commission recipients were the Digital

Altitude “coaches.” Internal documents as well as exports from the cloud-based

sales and commission tracking software indicate that 85 coaches were paid a

combined total of $8,838,985; more than $100,000 on average, with a low of $619

and a high $794,649. There were also 35 joint venturers that received very high

commissions without paying the APEX and prior level member fees either through

having their levels waived or reduced through a joint-venture arrangement. These

joint venturers brought additional high-pressure sales talent to the enterprise and had

established infrastructure to generate traffic and sales. From internal documents, it

appears that there were approximately 33 of these arrangements and the

commissions paid out to this group was $12,127,763 which is an average of

2 The average approaches $100,000 which is caused entirely by commissionspaid to coaches and joint venture sales partners, as discussed in further detail below.


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$346,507. While these joint venturers were paid commissions well in excess of

$100,000 on average, they are not representative of average consumers being

solicited to purchase Digital Altitude’s programs by the prospect of making more

than six figures in 90 days because they did not purchase the qualifying levels of

membership as outlined in the training materials. In addition to the favorable

commission terms, these joint venturers seldom paid more than the $17 monthly

affiliate fees. As stated previously, the averages set forth above are overstated

because they include significant payments to “coaches” and joint sales partners,

which skew the average upward. Isolating commissions paid to consumers clearly

confirms that consumers did not profit from Digital Altitude purchases. More

specifically, commissions paid to consumers, coaches and joint venturers can be

summarized as follows:

Consumers $6,035,219

Coaches $8,838,985

Joint venturers $12,127,763

In aggregate, consumers paid $9,222,563 in members fees in order to “earn”

$6,035,219 in commissions. Consumers lost money and did not build a six-figure

online business.

One of the reasons customers do not make the advertised results are

misrepresentations of the conversion rates of “clicks” to leads, and of leads to sales

at numerous points in the early training. Customers are told in Step 2 that one of

the secrets to success with Digital Altitude is to create traffic by getting “clicks,”

and having those clicks convert to “leads,” which might ultimately convert into

sales. Customers are sold “Traffic Packages” for clicks at costs ranging from

$1,250 for 1,000 clicks, to $11,250 for 15,000 clicks. From internal tracking

spreadsheets, the click-to-lead ratio was calculated to be 11.7% despite

representations in the training materials suggesting a click-to-lead ratio of 35-40%.

As for the conversion of leads to sales, these too are exaggerated. Sales materials


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on the “my.aspiresystem.co” provide a table of expected results which reflects a 5%

lead-to-sale conversion ratio. It appears from the company records that the actual

rate is closer to 1.8%.

3. Merchant Account Activity

The volume of chargeback activity by consumers was high. Because of the

large volume of chargeback activity as well as frequent refund requests, merchant

account service providers required larger fees and retained reserves from Digital

Altitude. The Receiver learned that Digital Altitude was on the MATCH (Member

Alert to Control High-Risk) watch list which is used by credit card companies to

screen potential merchants before giving them a merchant account. The higher fees

and reserves hurt the profitability of the enterprise and resulted in liquidity shortages

to fund payment of commissions and operating expenses.

The Defendants went to great lengths to maintain the flow of funds through

the merchant accounts. When Michael Force could no longer qualify for new

merchant accounts, Mary Dee began applying for new merchant accounts and

misrepresented her role as an owner and a managing director on merchant account

applications, when neither was the case. Digital Altitude then began soliciting third

parties to open new merchant accounts to collect credit card payments from Digital

Altitude customers to disguise Digital Altitude as the ultimate recipient, including

Mary Dee’s friends and family who were enticed to open accounts in exchange for a

fee of $250 to $750 per month. The Receiver continues to investigate merchant

accounts in the names of third parties for purposes of freezing them and taking

possession of the cash reserves. The number of accounts being used is not yet

known.

Digital Altitude also used a network or resellers who facilitated consumer

credit card charges to Digital Altitude. In some cases, sales managers, coaches, and

affiliates would allow Digital Altitude to run charges through their accounts and

forward the funds to Digital Altitude, sometimes less commissions that were due.


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Consumers would therefore see charges from unrecognized payees on their credit

for fees that they were paying for Digital Altitude member fees.

Many consumers were highly vulnerable and did not have the money to pay

the member fees. Coaches exploited these vulnerabilities and encouraged

consumers to raise money any way they could, including encouraging consumers to

borrow on a credit card, borrow from a bank, use retirement accounts, sell assets, or

borrow from family. In one situation, a coach suggested that the consumer sell

blood plasma and get a tattoo for advertising revenue. Digital Altitude also factored

accounts receivable and referred consumers to a finance company, ABF, that would

pay the member’s fee to Digital Altitude and collect installment payments via ACH

withdrawals from the consumer’s bank account. In a representative transaction, a

consumer would make 12 monthly payments of $270 totaling $3,240, for the $2,197

member fee, thus paying another $1,043 in fees and interest to the financier.

In summary, the Receiver does not believe Digital Altitude can be operated

lawfully in its current configuration due to:

• Misrepresentations of expected income and profits;

• Misrepresentation of lead conversion ratios;

• Misleading merchant account processors; and

• Encouraging consumers with false enticements to become

indebted to pay Digital Altitudes fees.

4. Defendant Business Model Not Profitable In The Long Term

In addition to not being able to operate lawfully, the business cannot be

operated profitably on a going-forward basis even in its current form. The

commissions associated with the sales of the enterprise comprise up to 60% of its

revenue. That leaves 40% for the cost of the operating the business, including credit

card fees, percentage-of-revenue based salaries, the cost of operating the

infrastructure to support the sales process and distributions to Michael Force as

owner of the enterprise. Combined with the withholding of revenue in the form of


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reserves held by the merchant account processors, liquidity was tight. There are

frequent complaints by consumers in the company records of late payment of

commissions and refunds. Vendors also appear to have been delayed in payments

owed. One preliminary request of the Receiver included a request for payment of

expenses and a distribution of approximately $137,000 to Michael Force for unpaid

pay and owner’s distributions (which the Receiver did not allow). There are several

emails between senior staff regarding liquidity difficulties. The Receiver believes

that, in addition to not being able to operate the business lawfully, it is not currently

operating profitably and offers even less prospect of doing so if modifications to

eliminate the unlawful elements of the business are made.

5. Cancellation Of APEX Conference In Whistler, Canada

Events and conferences were a part of Digital Altitudes purported business

training process. Since its inception in late 2015, there were three Aspire events,

one Ascend event, one Peak event and no APEX events. APEX members, that had

purchased all the preceding levels and thus had spent at least $60,000, were entitled

to attend a weeklong event. This was an added benefit of being an APEX member

(the highest level). The first APEX event was scheduled for February 18, 2018

through February 24, 2018 in Whistler, British Columbia, Canada. In connection

with his decision to suspend operations, the Receiver cancelled the event. The

APEX event was to occur at the high-end Fairmont Chateau Whistler Hotel. The

cost of the event exceeded $600,000. The attendee list was 110 people, of which 32

were APEX members that had paid the nearly $30,000 APEX member fee. The list

of attendees can be broken into the following categories.

APEX Members who paid the APEX fee 32

Coaches 6

Unknown 2

Guests of APEX members and coaches 35

Digital Altitude staff 12


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Digital Altitude management team 9

Outside speakers 7

Children and nanny 7

The scheduled outside speakers’ topics included crypto-currencies, personal

finance, sales strategies and techniques, musical and spirituality, and motivational

topics. There were many recreational events on hand including tubing, skiing and

snowboarding, including rentals and lessons, dog sledding, snowmobile riding, and

numerous meals, receptions and entertainment.

Given the Receiver’s preliminary decision to suspend operations, the

Receiver believed in his judgment that it would be best to avoid any portion of the

expense of the event that was still avoidable, and the Receiver cancelled the APEX

event. Further, in the Receiver’s view, the APEX event was not divorced from the

unlawful portions of the business as it served as an enticement and reward that was

used to entice consumers to pay additional fees to “level up” to status as an APEX

member. In view of the suspension of business operations in their current state, and

the uncertainty of recasting the business into a model that can operate lawfully and

profitably, the Receiver also recommends cancellation of other upcoming events of

Digital Altitude which are scheduled to occur in March and October in the event that

the Preliminary Injunction in this matter is granted.

IV. CONSUMER RELATIONS

A. Creation Of Receivership Website And Notification Of

Consumers/Employees/Etc.

To foster communication with interested parties, the Receiver established the

website www.digitalaltitudereceiver.com. Interested parties may sign up to receive

emails when the website is updated.

Testimonials. After his appointment, consumers sent 38 unsolicited

testimonials to the Receiver. The Receiver has reviewed the books and records and

has prepared a summary of the amounts paid by and to the testimonial consumers


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which is attached as Exhibit B. Seven of the testimonials made a profit from their

Digital Altitude purchases, including the one consumer that made more than

$100,000. An individual making $378,740 as a joint venturer provided a

testimonial. Nineteen of the testimonials were from consumers who had not

received any commissions. Twelve of the testimonial consumers who overall lost

money nevertheless indicated that they had received some commissions. The

Receiver has since learned that positive testimonials were solicited by Jesse Singh, a

joint venturer on February 9, 2018 and Chris Ogle a coach, on February 19, 2018.

Complaints and refund requests. Approximately 300 consumers have

requested refunds through the receivership website www.digitalaltitudereceiver.com

or in emails directly to the Receiver. Many of the refund requests were pending at

the time of entry of the TRO. Many of the complaints and refund requests are

emotionally charged. There are numerous consumers complaining of hardship,

many of a very dire nature, over financial losses arising from going into debt either

with term loans and credit cards to pay for the member fees. Many consumers say

that they were misled because they were told by coaches money would be coming in

to pay the debt. Others are from consumers that have not received commissions that

they claim they earned.

V. POTENTIAL MODIFICATIONS TO BUSINESS MODEL TO

OPERATE LAWFULLY

The Digital Altitude business model would need to be reformed in order to

operate lawfully. Scripts and sales materials would need to remove

misrepresentations of expected earnings. Coaches that are really low-level

salespersons would need to be replaced with true experienced business coaches, and

the company would need to develop actual business educational materials, free of

hard sales tactics. The educational materials would need to be revised to be relevant

and useful for businesses unrelated to selling Digital Altitude’s membership tier.


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VI. ACCOUNTING

Exhibit C provides an accounting of receipts and disbursements of the

receivership estate. To date, the Receiver has collected $1,221,001.18, and made no

disbursements and is holding cash in the amount of $1,221,001.18.

VII. EMPLOYMENT OF RECEIVER’S COUNSEL

Pursuant to Section XII(E) of the TRO, the Receiver was authorized to

“[c]hoose, engage, and employ attorneys, accountants, appraisers, and other

independent contractors and technical specialists, as the Receiver deems advisable

or necessary in the performance of duties and responsibilities under the authority

granted by this Order.”

The Receiver is not an attorney, and thus found it necessary to engage the law

firm of Loeb & Loeb LLP (“Loeb”) to assist him in this complex and potentially

contentious matter in accordance with the TRO.

In particular, as in past matters, the Receiver finds it necessary and beneficial

to the receivership estate to involve counsel in takeover of defendant business

operations, giving of formal receivership notices, interaction with parties in

establishing receiver control of defendant business operations, and in reporting to

this Court about the Receiver’s conduct, activities and conclusions. Later in this

matter, counsel may be needed to assist the Receiver, among other things, with

ongoing reporting obligations, potential actions to recover any assets of the

receivership that are not turned over to the receiver voluntarily, as well as any

claims process the Receiver may institute.

Loeb has long maintained a practice in the representation of receivers in all

types of matters. The Receiver has retained Loeb in the past – including in

connection with other matters in which he was appointed by the FTC, and the

Receiver believes that Loeb’s past representations in similar matters positions the

firm to efficiently and effectively represent the Receiver in this matter.


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Attached as Exhibit D are copies of the bios for the two principal attorneys

that will be responsible for the day-to-day representation of Receiver as needed in

this matter – Lance N. Jurich, Esq. and Benjamin R. King, Esq. In addition, where

appropriate, Loeb has indicated that it will utilize the services of associates,

paralegal and staff to minimize legal costs to the receivership estate.

In agreeing to represent Receiver in this matter, Loeb has agreed to significant

reductions of its standard hourly rates for Mssrs. Jurich and King. Mr. Jurich’s

standard rate of $875/hr. has been discounted to $695/hr., and Mr. King’s standard

rate of $750/hr. has been discounted to $595/hr., subject to standard future increases

the firm may make to these rates beginning in January 2019. The payment by

Receiver of any and all of Loeb’s fees remains subject to approval by this Court and

Loeb will make appropriate interim and final applications to this Court for recovery

of its fees.

VIII. RECEIVER RECOMMENDATIONS GOING FORWARD

A. Continued Efforts To Cease Operations

Pending any new information or determination of this Court, for the reasons

stated above, the Receiver recommends maintaining the suspension of operations.

B. Receiver’s Accounting Of The Uses Of Consumer Funds

In keeping with Section XII.K of the TRO, the Receiver is obligated to

conduct and prepare an accounting of the Receivership Entities assets and financial

condition and file the same with this Court. In addition, the Receiver recommends

conducting a more detailed accounting to identify the sources and uses of consumer

funds for the purpose of marshaling and identifying assets, identifying third parties

claims for damages and consideration of legal actions to recover fraudulent

transfers, forming a basis for consumer redress, and to identify all consumer losses.

C. Cancellation Of Remaining Obligations

As stated above, the Receiver recommends cancelling the two remaining

scheduled Digital Altitude conference events scheduled for March and October.


EXHIBIT A


Institution TypeTotal Corporate Funds

Frozen Chase Bank Bank $ 1,119,154.98 Affintas Merchant Services Processor ? Allied Wallet Payment 285,327.63$ Bank of America Depository $ 11,300.24 Bright Market / FastSpring Payment $ 5,000.00 CitiBank, N.A. Bank $ 126.00 CPFS MC Account $ 55,000.00 EVO International Payment $ 168,421.15

First National Bank of Omaha Acquring Bank $ 65,382.16 GLG Accounting Retainer $ 2,026.00 I-payout $ 90,545.96 Merrick Bank Acquiring Bank $ 70,550.96 Pacific Mercantile Bank Bank $ 2,001.40 PayPal Payment $ 44,416.71 Wells Fargo Bank Bank $ 227,475.00 WePay, Inc. Payment $ 33,962.40

Total 2,180,690.59$

Digital Altitude Receivership

RECEIVER'S FIRST REPORT EXHIBIT A


EXHIBIT B


Digital AltitudeTestimonials Sent to the Receiver

Customer NameInvestment

DateAmount Invested

Commissions Earned

Net Amount Gain(Loss)

Dave Prosser 3/14/2016 $5,645 $384,385 378,740.00$ Sarah Gallo 11/19/2016 $59,414 $276,481 217,067.00$ Ola Abitogun 3/11/2016 $527 $95,461 94,934.00$ Ellen Marshall 6/12/2016 $60,339 $119,000 58,661.00$ Daniel Colosi 6/3/2016 $54,000 $96,456 42,456.00$ Jade Scarfone 6/17/2016 $31,941 $71,958 40,017.00$ Julia Boerner 12/7/2016 $14,756 $29,745 14,989.00$ Frankie Persistency 9/20/2017 $1,196 $0 (1,196.00)$ Nicole Johnson 2/13/2017 $3,714 $2,376 (1,338.00)$ Dajana Zelic 7/10/2017 $2,931 $1,189 (1,741.51)$ Alessandra Cirillo 10/29/2017 $2,615 $781 (1,834.43)$ Daniela Damjanoska 1/10/2018 $2,137 (2,137.00)$ Niki Kreisingerova 6/28/2017 $3,309 $1,160 (2,149.00)$ Paula Schmitz 12/10/2017 $2,196 $0 (2,196.00)$ Marley McLeod 7/21/2017 $2,336 $0 (2,336.00)$ Ryan Bogos 12/6/2017 $2,347 $0 (2,347.00)$ Cameron McDonnell 9/20/2017 $2,456 $0 (2,456.00)$ Bianca Vogelaar 10/8/2017 $2,727 $0 (2,727.00)$ Jason Moxey 9/15/2017 $2,729 $0 (2,729.00)$ Celia Dias 7/8/2017 $3,103 $0 (3,103.00)$ Saif Al Azawl 4/9/2016 $4,835 $571 (4,264.00)$ Rachel Boreas 9/12/2017 $5,421 $0 (5,421.00)$ Krystle Theunissen 7/31/2017 $6,825 $0 (6,825.00)$ Diana Chen 5/3/2017 $24,000 $14,301 (9,699.00)$ Elienne Demmers- van Brussel 10/6/2017 $12,000 $1,800 (10,200.00)$ Kelsey Pietropaolo 9/27/2016 $15,092 $2,993 (12,099.00)$ Holly Winsor 6/10/2017 $13,642 $1,435 (12,207.00)$ Roos Klaring 11/19/2017 $12,825 $0 (12,825.00)$ Karina Alvarez 11/14/2017 $12,878 $0 (12,878.00)$ Maartje Hensen 12/7/2017 $13,404 $0 (13,404.00)$ Janice Delphin 8/28/2016 $15,546 $0 (15,546.00)$ Teresa Messmer 10/13/2017 $24,813 $0 (24,813.00)$ Noreen Corcoran 7/30/2017 $28,631 $0 (28,631.00)$ Simon Desbiens 9/30/2017 $33,857 $0 (33,857.00)$ Martin Andre 6/20/2017 $58,443 $11,422 (47,021.00)$ Chris and Lori Brindamour 4/12/2016 $63,558 $2,920 (60,637.82)$ Amy Moody 8/29/2017 $63,114 $564 (62,549.58)$ Linda Doman 10/21/2017 $65,415 $0 (65,415.00)$

RECEIVER'S FIRST REPORT EXHIBIT B


EXHIBIT C


Feb 23, 18

ASSETSCurrent Assets

Checking/SavingsWells Fargo Operating 4499 1,221,001.18

Total Checking/Savings 1,221,001.18

Total Current Assets 1,221,001.18

TOTAL ASSETS 1,221,001.18

LIABILITIES & EQUITYEquity

Net Income 1,221,001.18

Total Equity 1,221,001.18

TOTAL LIABILITIES & EQUITY 1,221,001.18

2:13 PM Digital Altitude LLC in Receivership

03/01/18 Balance SheetAccrual Basis All Transactions

Page 1RECEIVER'S FIRST REPORT EXHIBIT C PAGE 1


Feb 23, 18

Ordinary Income/ExpenseIncome

Turnover/Seizure 1,221,001.18

Total Income 1,221,001.18

Net Ordinary Income 1,221,001.18

Net Income 1,221,001.18


03/01/18 Profit & LossAccrual Basis All Transactions

Page 1RECEIVER'S FIRST REPORT EXHIBIT C PAGE 2


Type Date Num Name Memo Split Debit Credit Balance

Wells Fargo Operating 4499Deposit 2/23/2018 Deposit -SPLIT- 1,130,455.22 1,130,455.22Deposit 2/23/2018 Deposit Turnover/Seiz... 90,545.96 1,221,001.18

Total Wells Fargo Operating 4499 1,221,001.18 0.00 1,221,001.18

Accumulated Depreciation

Total Accumulated Depreciation 0.00

Furniture and Equipment

Total Furniture and Equipment 0.00

Payroll Liabilities

Total Payroll Liabilities 0.00

Opening Balance Equity

Total Opening Balance Equity 0.00

Retained Earnings

Total Retained Earnings 0.00

Turnover/SeizureDeposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 279.67 -279.67Deposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 10,482.09 -10,761.76Deposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 79.50 -10,841.26Deposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 424.78 -11,266.04Deposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 18.20 -11,284.24Deposit 2/23/2018 1020... Bank of America Digital Altitud... Wells Fargo O... 16.00 -11,300.24Deposit 2/23/2018 4556... Chase Bank Thermograp... Wells Fargo O... 40,346.59 -51,646.83Deposit 2/23/2018 4556... Chase Bank Thermograp... Wells Fargo O... 49,737.26 -101,384.09Deposit 2/23/2018 4556... Chase Bank Rise System... Wells Fargo O... 49.12 -101,433.21Deposit 2/23/2018 4556... Chase Bank Disc Enterpri... Wells Fargo O... 1,495.72 -102,928.93Deposit 2/23/2018 4556... Chase Bank Digital Altitud... Wells Fargo O... 935.57 -103,864.50Deposit 2/23/2018 4556... Chase Bank Digital Altitud... Wells Fargo O... 3,414.69 -107,279.19Deposit 2/23/2018 4556... Chase Bank Digital Altitud... Wells Fargo O... 133,539.48 -240,818.67Deposit 2/23/2018 4556... Chase Bank Digital Altitud... Wells Fargo O... 579,964.70 -820,783.37Deposit 2/23/2018 4556... Chase Bank Digital Altitud... Wells Fargo O... 309,671.85 -1,130,455.22Deposit 2/23/2018 86105 International Payout Sy... Digital Altitude Wells Fargo O... 90,545.96 -1,221,001.18

Total Turnover/Seizure 0.00 1,221,001.18 -1,221,001.18

Advertising and Promotion

Total Advertising and Promotion 0.00

Automobile Expense

Total Automobile Expense 0.00

Bank Service Charges

Total Bank Service Charges 0.00

Computer and Internet Expenses

Total Computer and Internet Expenses 0.00

Depreciation Expense

Total Depreciation Expense 0.00

Insurance Expense

Total Insurance Expense 0.00

Interest Expense

Total Interest Expense 0.00

Meals and Entertainment

Total Meals and Entertainment 0.00

Office Supplies

Total Office Supplies 0.00

Payroll Expenses

Total Payroll Expenses 0.00

Professional Fees

Total Professional Fees 0.00

Rent Expense

Total Rent Expense 0.00

Repairs and Maintenance

Total Repairs and Maintenance 0.00


03/01/18 General LedgerAccrual Basis All Transactions

Page 1

RECEIVER'S FIRST REPORT EXHIBIT C PAGE 3


Type Date Num Name Memo Split Debit Credit Balance

Telephone Expense

Total Telephone Expense 0.00

Travel Expense

Total Travel Expense 0.00

Utilities

Total Utilities 0.00

Ask My Accountant

Total Ask My Accountant 0.00

No accnt

Total no accnt 0.00

TOTAL 1,221,001.18 1,221,001.18 0.00


03/01/18 General LedgerAccrual Basis All Transactions

Page 2

RECEIVER'S FIRST REPORT EXHIBIT C PAGE 4


EXHIBIT D


1

These materials may constitute "Attorney Advertising" under the New York Rules of Professional Conduct and under the law of other jurisdictions

Lance Jurich

Co-Chair, Bankruptcy, Restructuring and Creditors'

Rights

10100 Santa Monica Boulevard<br/>Suite 2200 Los Angeles, California 90067

Direct 310.282.2211

[email protected]

Lance Jurich, a partner in Loeb & Loeb’s Bankruptcy, Restructuring and Creditors’ Rights Practice Group in its Los Angeles office, serves as a trusted advisor to many clients. He is a commercial litigator who specializes in business bankruptcies, restructurings and the enforcement of creditors’ rights. Mr. Jurich has broad experience representing financial institutions and handles complex matters for these clients. He also represents fiduciaries, including receivers, assignees for the benefit of creditors, and trustees in all types of forums.

Mr. Jurich’s depth of experience includes bankruptcy and creditors’ rights; real estate disputes; Ponzi scheme litigation; preference and fraudulent transfer litigation; partnership disputes; Chapter 11 plan issues; 363 purchases of assets; interest rate disputes; valuation disputes; assignments for the benefit of creditors (“ABC’s”); lender liability cases; prejudgment remedies; guarantor litigation; receiverships; and bankruptcy appellate litigation.

Mr. Jurich’s practice covers a broad spectrum of complex insolvency issues for clients in diverse industries, including real estate, entertainment, healthcare, hotel and gaming, agricultural, and oil and gas. He represents domestic and international banks, insurance companies, indenture trustees, hedge funds, private equity groups, distressed debt investors, trade creditors, strategic purchasers of assets in bankruptcies, entertainment companies, real estate developers, receivers/court fiduciaries, hospitals/healthcare providers, and agricultural lenders and agribusinesses.

Practice Areas

Bankruptcy, Restructuring and Creditors' Rights

Litigation

Finance

Representative Experience

Acting as bankruptcy co-counsel to C&J Energy Services Ltd. in a voluntary reorganization under

Chapter 11 of the U.S. Bankruptcy Code. C&J, a leading provider of well construction and oilfield

services in the U.S. and Canada, filed for Chapter 11 on July 20, 2016 in the U.S. Bankruptcy

Court in Houston. The reorganization will implement the previously announced Restructuring


LANCE JURICH

PARTNER

2

Support Agreement that C&J executed with its lenders, substantially deleveraging the company’s

balance sheet and allowing for the elimination of approximately $1.4 billion in existing debt.

Represented a cutting edge video e-sports platform operator, as debtor, in a high-speed Chapter

11 bankruptcy case. Loeb handled all aspects of the company's reorganization, including

negotiating a DIP credit facility and guiding the debtor through confirmation of its plan of

reorganization. The plan -- which was confirmed just approximately four months after the

bankruptcy filing -- successfully wiped away all of the company's existing equity and recapitalized

the company through a re-issuance of new stock to its creditors. Additionally, the plan also

facilitated a consolidation with online gaming community Victorious Gaming and granted equity to

Fuel Technologies, a global creative agency helping develop the gaming platform.

Representing a pooled EB-5 lending vehicle (a New Commercial Enterprise) in connection with a

restructuring of over $500 million of debt on a high-profile commercial real estate project. It is

believed to be the largest restructuring of EB-5 indebtedness to date. Investment located in

Targeted Investment Area.

Represented off-shore Chinese investor in purchase and enforcement of promissory note

secured by California real estate (mixed use hotel and shopping center). Represented client in

connection with bankruptcy litigation against borrower and obtained multi-million judgment

against guarantor. After prevailing at every level, our client obtained ownership of hotel and

shopping center through foreclosure.

Representing several creditors and financial institutions in Chapter 11 bankruptcy of Relativity

Media and its affiliates.

Represented largest creditor in Las Vegas bankruptcy of the Hooters Hotel and Casino. Lender

purchased hotel in 363 sale.

Represented syndicate of lenders in opposition to debtor’s cramdown plan on a 300-unit,

extended-stay hotel in Nevada. Defeated debtor’s plan after a two-day confirmation trial.

Represented financial institution in its appeal of a bankruptcy court order. Obtained complete

reversal of the bankruptcy court order by the district court. The case was appealed to the Ninth

Circuit.

Represented artist/songwriter in overturning bankruptcy court confirmation order. Bankruptcy

Appellate Panel and the Ninth Circuit reversed the order confirming the Chapter 11 bankruptcy

plan.


LANCE JURICH

PARTNER

3

Represented secured lender in pre-bankruptcy restructuring and subsequent foreclosure of

90,000-acre mine in the Holbrook Basin of Arizona (purportedly one of the largest foreclosures in

Arizona history).

Represented unsecured creditors’ committee in connection with a joint plan submitted with

debtor. Joint plan was confirmed.

Represented institutional lender in litigation regarding enforceability of early pre-payment penalty

charge challenged by borrower. Borrower ultimately dismissed all challenges to applicable

contract clause.

Represented insurance company and special servicer in defending a fraudulent transfer action

brought by bankruptcy court trustee to recover multi-million dollar transfers made to the lender

and the loan servicer.

Represented chairman of creditors’ committee and his family in connection with fraudulent

transfer claims brought by the bankruptcy trustee in connection with Ponzi scheme.

Represented a Chinese company in the Delaware bankruptcy auction of the special effects and

production house Digital Domain. Successfully negotiated the purchase of a desirable film project

out of the bankruptcy.

Represented senior entertainment lender in enforcement and collection efforts against foreign film

distributors.

Represented hedge fund in the workout of a distressed debt secured by, among other things, the

rights to “Star Trek (The Tour).” Handled the foreclosure and workout of the secured loan.

In the Franchise Pictures bankruptcy, represented several creditors, including Gaga

Communications, one of Japan’s largest film distributors.

Represented institutional lender in the exercise of its rights under a defaulted credit facility by

foreclosing on a film library, and negotiated and closed the immediate resale of the library for $50

million. Also, he has represented numerous entertainment lenders and foreclosed on more than

1,000 film and television properties.

Represented several entertainment payroll companies in connection with their claims.

Represented secured creditor in connection with its multi-million dollar secured real estate claim.

Represented secured lender in bankruptcy filed by developer in connection with secured claim

and sale of iconic condominium project located near “L.A. Live” in downtown Los Angeles.


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Represented the secured lender in a successful Chapter 11 restructuring of a prominent

motorsports park. Formulated a prearranged plan to effectuate the sale, which was confirmed

within four months of the bankruptcy filing.

Represented crop lender and packaging claimants in agricultural bankruptcies and out-of-court

restructurings.

Represented secured lender in connection with out-of-court restructuring of a Northern California

winery.

Represented creditors and hospitals in connection with numerous bankruptcies.

Represented major investment banks in connection with repurchase agreements, warehouse

financings and investments in numerous mortgage companies, including Ownit Mortgage

Solutions, American Home Mortgage, Mortgage Lenders Network, Aegis Mortgage Corporation,

First Magnus Financial and ResMAE Mortgage Corporation.

Obtain writs of attachment and take other prejudgment enforcement actions in connection with

the enforcement of credit facilities and guarantees.

Obtained the appointment of receivers in over 300 real estate matters to oversee and manage

commercial properties, including shopping centers, health clubs, office buildings, and

condominium projects.

Represented court-appointed receivers in FTC and SEC matters.

Distinctions

Named "Southern California Super Lawyer" in Bankruptcy & Creditor/Debtor Rights by Thomson

Reuters (2005-2018)

Highest "AV Preeminent (5 out of 5)" Professional Rating, Martindale-Hubbell Law Directory

Named "Best Lawyer" in Bankruptcy and Creditor Debtor Rights (2016-2018), The Best Lawyers

in America, published by Woodward White, Inc

Affiliations

Member, Special Assets Management Association (SAMA)

Member, California Bankruptcy Forum

Editor, California Bankruptcy Journal (2005-present)


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Advisory Planning Board, Annual Southwest Bankruptcy Conference, Las Vegas American

Bankruptcy Institute; Advisory Planning Board, Annual “Bankruptcy Battleground West,” Los

Angeles

Publications

Co-author, No Free Pass on Transfer Liability; Good Faith Defense Alive and Well: The Pros and

Cons of Gredd v. Bear, Stearns Securities Corp. for Prime Brokers, California Bankruptcy

Journal, Vol. 29, No. 4, (2008)

Co-author, Deepening Insolvency: A Doctrine in Decline?, California Bankruptcy Journal, Vol. 29,

No. 2 (2007)

Media Mentions

How Rich Chinese Use Visa Fixers to Move to the U.S., Bloomberg Businessweek (September

14, 2017)

Hooters Casino Hotel Lender to Bid $60M at Auction, Law360 (February 6, 2012)

Principal Creditor Will Bid $60 Million for Hooters Hotel, Las Vegas Review-Journal (January 18,

2012)

New Yorker Films Closes, Video Business (February 23, 2009)

Events

Speaker, The Brewing Storm of EB-5 Defaults: Navigating the Workouts of EB-5 Loans (February

14, 2017)

Speaker, UCLA Entertainment Symposium (March 11-12, 2016)

Speaker, Loeb & Loeb IP/Entertainment Law Conference (September 17, 2015)

Speaker, 4th Annual SAMA Conference, Ojai, California (May 2014)

Speaker, American Bankruptcy Institute Bankruptcy Battleground West Conference (March 4,

2011)

Education Boston University School of Law, J.D., 1987 Arizona State University, B.S., 1984

Bar Admissions California, 1987


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Court Admissions California State Supreme Court, 1987 U.S. District Court for the Central District of California, 1988 U.S. District Court for the Eastern District of California, 1999 U.S. District Court for the Southern District of California, 2005 U.S. District Court for the Northern District of California, 2005 U.S. Court of Appeals, Ninth Circuit, 2005


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These materials may constitute "Attorney Advertising" under the New York Rules of Professional Conduct and under the law of other jurisdictions

Benjamin King

Partner

10100 Santa Monica Boulevard<br/>Suite 2200 Los Angeles, California 90067

Direct 310.282.2279

[email protected]

Benjamin King is a commercial litigator and creditors’ rights attorney who has particular expertise in protecting creditors’ interests through the use of prejudgment remedies such as attachment, receiverships, and injunctive remedies. Mr. King has represented national financial institutions, a number of California lenders, and receivers in, among other matters, actions involving the exercise of loan remedies, workouts of troubled loans, and actions for foreclosure upon loan collateral. Mr. King has litigated matters on behalf of creditors in both pre-bankruptcy and bankruptcy contexts, including lender liability actions, real-estate loan disputes, contract disputes, judicial foreclosures, receivership actions, fraudulent conveyance matters, adversary proceedings (including preference actions), non-dischargeability actions, and a variety of business tort disputes.

In addition to his representation of lenders, other creditors and receivers, Mr. King has represented firm clients in a variety of litigation matters including, among other things, class actions, unfair trade practices disputes, FTC actions, Lanham Act claims, copyright disputes, and publicity rights lawsuits. Mr. King has developed particular expertise assisting firm clients in ensuring that their websites are accessible to disabled persons in compliance with the requirements of the Americans with Disabilities Act.

Mr. King's pro bono efforts include work for Children's Rights, a national organization that utilizes class action lawsuits and other methods to affect positive change for abused and neglected children and to bring much needed reform to state foster care systems.

Practice Areas

Bankruptcy, Restructuring and Creditors' Rights

Litigation

Consumer Action and Regulatory Defense

Representative Experience

Obtained ex parte prejudgment writ of attachment on behalf of firm client in excess of $17 million

in a contested matter based upon allegations of breach of contract and fraud.

Obtained ex parte appointment of a receiver in Contra Costa County over real property in

connection with defaulted loan in excess of $180 million.


BENJAMIN KING

PARTNER

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Obtain writs of attachment and take other prejudgment enforcement actions in connection with

the enforcement of credit facilities and guarantees.

Represented a receiver appointed by the Federal Trade Commission in a complex fraud action to

completely take over a corporation alleged to have committed widespread fraud on the public

Represented a receiver in contempt proceedings against building owners and related parties

following alleged non-compliance with receivership order

Obtained prejudgment writ of attachment and judgment against guarantor in connection with two

real estate development loans exceeding $28 million.

Obtain the appointment of receivers to oversee and manage numerous commercial properties,

including shopping centers, health clubs, office buildings, and condominium projects.

Obtained prejudgment writ of attachment against guarantor of condominium redevelopment loan

in excess of $2.7 million.

Represented lender in workout of $7.2 million real property loan involving intended shopping

center development in Shasta County, California.

Distinctions

Named "Southern California Super Lawyer" in Bankruptcy & Creditor/Debtor Rights by Thomson

Reuters (2017-2018)

Chair of the Los Angeles County Bar Association's Remedies Section, 2013-2014

Significant jury trial experience, including certification through the Los Angeles County Bar

Association’s Trial Advocacy Project

Member, Los Angeles County Bar Association, California Receiver's Forum, Los Angeles

Bankruptcy Forum, Litigation Section of State Bar of California

Rising Star, Southern California Super Lawyers, Los Angeles magazine (2006 and 2007)

Events

Speaker, IMN’s 4th Annual Bank & Financial Institutions Special Assets Executive Conference on

Real Estate Workouts (September 9-10, 2013)

Speaker, Turnaround Management Association Western Regional Conference (July 11-13, 2012)

Co-Producer and Moderator, The New Rules of the Road in Commercial Real Estate, California

Bankruptcy Forum's 22nd Annual Insolvency Conference, Monterey, California (May 21-23, 2010)


BENJAMIN KING

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Education University of Southern California, Gould School of Law, J.D., 1999, Staff Member, Executive Senior Editor, Southern California Law Review James Holbrook Award for Excellence in Service to the Law Review (1998) University of Southern California, B.A., 1991, magna cum laude

Bar Admissions California, 1999

Court Admissions California State Courts, 1999 U.S. District Court for the Eastern District of California, 2000 U.S. District Court for the Northern District of California, 2000 U.S. District Court for the Central District of California, 2000 U.S. District Court for the Southern District of California, 2000


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Corporations

SERVICE LIST

Andrew B. Gordon, Esq.Gordon Law Group, Ltd.400 Central Ave., Suite 340Northfield, IL 60093

Digital Altitude Ltd.Third Floor, 207 Regent StreetLondon, W1B 3HHUnited Kingdom

Aspire Processing LLCAttn: Sean Brown701 S. Carson St., Suite 200Carson City, NV 89701

Aspire Processing LimitedAttn: Mohammed Abdul Alim818 Seven Sisters Road,London, N15 5NUUnited Kingdom

RISE Systems & Enterprise LLCAttn: URS Agents, LLC4625 W. Nevso Dr., Suite 2 & 3Las Vegas, NV 89130

Soar International LLCAttn: Sean Kingi Brown6021 W. Foothill DriveHighland, UT 84003

Thermography for Life, LLCdba Living Exceptionally, Inc.Attn: Chantra Stewart9212 Rowland DriveFort Worth, TX 76108

Sean Kingi Brown6021 W. Foothill DriveHighland, UT 84003

RISE Systems & Enterprise LLC (Utah)Attn: Sean Brown6021 W. Foothill DriveHighland, UT 84003

Morgan Johnson634 Wood Smoke DriveHouston, TX 77013

Morgan Johnson550 Stafford Run Rd., Apt. 903Stafford, TX 77477

Aspire Ventures Ltd.Attn: Mohammed Abdul Alim818 Seven Sisters Road,London, N15 5NUUnited Kingdom

Disc Enterprises Inc.Attn: Jashin Howell2228 N. AvocaMesa, AZ 85207

The Upside, LLCAttn: Ria Joseph32964 Renoir Rd.Winchester, CA 92596


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