[00:00:01] Speaker 02:
May it please the court.

[00:00:02] Speaker 02:
My name is Andy Erickson, and I represent the appellants, Ying Lin and Yun Wang.

[00:00:06] Speaker 02:
I'd like to reserve three minutes of my time for rebuttal.

[00:00:09] Speaker 02:
Watch the clock.

[00:00:10] Speaker 02:
Will do.

[00:00:11] Speaker 02:
The facts of this case are relatively straightforward.

[00:00:14] Speaker 02:
The Wangs are Chinese citizens who hope to immigrate to the United States under the EB-5 Immigrant Investor Program, which is a federal program that provides visas for foreign citizens who invest over $500,000 in qualifying U.S.

[00:00:27] Speaker 02:
businesses.

[00:00:28] Speaker 02:
The Huangs believed that Quartzburg was a qualified business under the EB-5 program.

[00:00:33] Speaker 02:
In 2012, the Huangs deposited $500,000 into an escrow account at U.S.

[00:00:38] Speaker 02:
Bank in the name of Quartzburg.

[00:00:41] Speaker 04:
Let me just interrupt you and ask you a question.

[00:00:43] Speaker 04:
It didn't really

[00:00:46] Speaker 04:
surface from the briefs of my reading of the record, but am I clear that even though the bank did not respect the terms of the escrow, it's not on the hook here?

[00:01:05] Speaker 02:
Not in this case, Your Honor, no.

[00:01:06] Speaker 04:
Other case.

[00:01:07] Speaker 02:
Well, Your Honor,

[00:01:09] Speaker 02:
US Bank wasn't named defendant in the other cases.

[00:01:12] Speaker 02:
And that's the important thing, is the other Kurzberg investors sued Kurzberg and US Bank.

[00:01:17] Speaker 02:
But in this case, no, US Bank was dismissed.

[00:01:21] Speaker 04:
So the answer to my question is, there are litigants out there who have not forgotten about US Bank.

[00:01:28] Speaker 02:
Well, actually, that's an important point, is we don't know who else is out there.

[00:01:31] Speaker 02:
The record doesn't show whether there are other Kurzberg investors.

[00:01:35] Speaker 02:
It's possible that the Wongs are just the last ones that haven't been made whole.

[00:01:38] Speaker 02:
that haven't settled with Courtsburg or US Bank.

[00:01:42] Speaker 02:
And I think that's kind of the important equity point here is we don't know whether there are any other investors or whether this money, whether the Wongs were just the last investor out of this escrow account, and it is their money.

[00:01:55] Speaker 04:
And that wouldn't be a matter of public record?

[00:01:58] Speaker 02:
Well, the number of Courtsburg investors is about 150.

[00:02:03] Speaker 02:
It contributed $81 million, but whether

[00:02:07] Speaker 02:
You'd have to find I guess whether well you would have to find the names of all the quartzbergs investors And I don't think that is a matter of public record So this court should reverse the district court for three reasons The first is that the the Huangs met their burden to prove or to establish that they were entitled to summary judgment and the return of their deposit the second quartzberg failed to meet its burden to show that the Huangs deposit had been released and

[00:02:32] Speaker 02:
from the escrow account and that the Huangs were actually defrauded.

[00:02:36] Speaker 02:
And the third, the common law rule of pro rata distribution does not apply to a situation like the Huangs where their money remained in escrow account all along and they weren't actually defrauded.

[00:02:48] Speaker 02:
So first, the summary judgment standard for the Huangs.

[00:02:51] Speaker 02:
They were required to establish three things.

[00:02:54] Speaker 02:
First, that they deposited money into the escrow account.

[00:02:57] Speaker 02:
Second, that the condition precedent for releasing their money from the escrow account never occurred.

[00:03:02] Speaker 02:
And third, that the escrow agent identified them as the investor responsible who had a claim to that money.

[00:03:09] Speaker 02:
And all three of those facts are not disputed.

[00:03:12] Speaker 02:
Under those set of circumstances, the Huangs were entitled to summary judgment and the return of their deposit.

[00:03:19] Speaker 02:
They were also entitled to rely on the presumption under the law of escrow that the escrow agent was fulfilling its duties as an escrow agent to account for and track each deposit into and out of the escrow account

[00:03:32] Speaker 02:
This court in Marianas explained that courts presume that the trustee has held sacred the trust and escrow agents account for and have fulfilled its duties.

[00:03:43] Speaker 02:
And so I think that on summary judgment, the Wongs were entitled to rely on that fact.

[00:03:47] Speaker 02:
They were entitled to rely on the fact that the escrow agent identified them as the investor who had a claim to this amount of funds, $500,000.

[00:03:57] Speaker 03:
It was- But doesn't the record show that, in fact, U.S.

[00:04:03] Speaker 03:
Bank erroneously released $77.5 million of the investors' money to Kurzberg before the EB-5 applications were approved?

[00:04:17] Speaker 02:
Yes, Your Honor, certain Kurzberg investors were defrauded.

[00:04:20] Speaker 02:
The question here is, were the Huangs members of that group of investors who were defrauded

[00:04:26] Speaker 02:
And to prove that, you would have to show that the Huang's deposit was actually released from the escrow account.

[00:04:32] Speaker 02:
That was Courtsberg's burden in this case, and the district court correctly determined that

[00:04:38] Speaker 02:
He couldn't tell whose money was leaving, because that hadn't been established.

[00:04:43] Speaker 02:
It hadn't been established in each of the seven written directions whose money was being directed to be released.

[00:04:50] Speaker 02:
And for Kurzberg, it would have been very easy to show one of those written directions, which listed the names of the investors whose money was being released, point to the Huang's name on one of those written directions.

[00:05:02] Speaker 02:
Kurzberg wins.

[00:05:04] Speaker 02:
The fact that they haven't, I think, is very telling, that they haven't met their burden to show

[00:05:08] Speaker 02:
that Kurzberg actually directed the release of the Huang's money from escrow.

[00:05:13] Speaker 02:
So Kurzberg relies on three pieces of evidence to show that actually the Huangs had been defrauded.

[00:05:21] Speaker 02:
But all those evidence shows is that Kurzberg believes that it had defrauded the Huangs.

[00:05:26] Speaker 02:
It doesn't show that they were, in fact, defrauded.

[00:05:29] Speaker 02:
Kurzberg relies on the fact that the Huangs continued to pursue their immigration appeal.

[00:05:34] Speaker 02:
But under the federal law, the guidance policy for EB-5, the Wongs could pursue their immigration appeal even though their money was in escrow, which they believed it was.

[00:05:45] Speaker 02:
The courts also relies on declarations from its own independent monitor and independent manager, and all of those declarations say is that

[00:05:53] Speaker 02:
after reviewing Courtsberg's own internal records, Courtsberg believed that it had actually defrauded the Huangs.

[00:06:00] Speaker 02:
What it shows clearly is an attempted fraud, but that doesn't mean that the Huang's deposit was actually released from US Bank.

[00:06:10] Speaker 02:
And then third, Courtsberg relies on its business records that show Lin was an active investor.

[00:06:16] Speaker 02:
And again, all that shows is that there was an attempted fraud on

[00:06:21] Speaker 02:
on the Hwangs, but it doesn't show that the Hwangs money was actually released from the escrow account.

[00:06:26] Speaker 02:
And that was Kurzberg's burden to get to pro rata distribution.

[00:06:32] Speaker 02:
A good hypothetical, I think, here is that what were the Hwangs required to prove?

[00:06:37] Speaker 02:
They weren't required to disprove any alternative theories as to what might have happened.

[00:06:42] Speaker 02:
They were only required, again, to show that they deposited money, the condition precedent never occurred,

[00:06:48] Speaker 02:
and that US Bank, the escrow agent, identified them as the investor who had responsibility for the money.

[00:06:53] Speaker 02:
If Kurzberg had never shown up in this litigation, surely the Huangs would have been entitled to summary judgment just on those facts alone.

[00:07:01] Speaker 02:
They weren't required to disprove any alternative theories or to show whose money came in and out in any given distribution, as the district court erroneously assumed.

[00:07:12] Speaker 02:
That just wasn't the Huang's burden in this case.

[00:07:16] Speaker 02:
In response to Courtsberg's motion for summary judgment, the Huangs put on evidence from US Bank, the declaration from Fatahunzi at 2ER125, and that declaration, I mean, it was evidence in the Chen versus US Bank case, but it clearly shows that US Bank had a spreadsheet and tracked each investor's deposit into and out of escrow.

[00:07:41] Speaker 02:
What Chen case showed was that US Bank had erroneously released some investors' deposits from the escrow account.

[00:07:51] Speaker 02:
But those names are redacted in our records.

[00:07:54] Speaker 02:
So we don't know whose money was actually leaving the escrow account in any one of those seven distributions.

[00:08:02] Speaker 02:
Presumably, Kurzberg would have those unredacted records, and they would be able to point exactly to where the Huang's money was being released.

[00:08:09] Speaker 02:
what date and what direction the Huangs were defrauded on.

[00:08:12] Speaker 02:
The troubling aspect of the court relying on the rule of equity here is that if the Huangs weren't defrauded, they weren't fraud victims.

[00:08:25] Speaker 02:
And so taking the money from the escrow account and giving it to the defrauder leaves the Huangs without any clear remedy.

[00:08:33] Speaker 02:
What path forward do they have?

[00:08:35] Speaker 02:
Do they have to file a tort claim for fraud against Kurzberg?

[00:08:39] Speaker 02:
in which case the burden shifts to them to prove that the money was actually released from escrow.

[00:08:44] Speaker 02:
Here, the argument is that it was never released from escrow.

[00:08:48] Speaker 02:
And so it puts the Huangs in a very untenable position without a path forward.

[00:08:53] Speaker 02:
How do they get even a pro rata share?

[00:08:55] Speaker 02:
It's not clear.

[00:08:56] Speaker 02:
If Kurzberg considers them victims, but they haven't proved that their money was released from escrow, what are they entitled to?

[00:09:05] Speaker 02:
Are they just left with absolutely nothing here?

[00:09:10] Speaker 02:
The two cases I think that most, that Quartzburg most relies on, State Highway and United States versus Wilson, are

[00:09:17] Speaker 02:
instructive in this case, because in that case, the funds were being held by the federal government or by the court.

[00:09:26] Speaker 02:
And those funds were being distributed to victims pro rata.

[00:09:30] Speaker 02:
The court rejected attempts from other victims to sort of circumvent that pro rata distribution and get money that they claimed they were traced back to them.

[00:09:41] Speaker 02:
And the court rejected those attempts and said, all fraud victims should be treated equally.

[00:09:45] Speaker 02:
You know, we have no problem with that general rule.

[00:09:47] Speaker 02:
It's just the premise of that is that the Huangs are one of the fraud victims that then should be treated equally.

[00:09:53] Speaker 02:
And in this case, until it's established that the money left escrow count that was deposited by the Huangs, you can't conclude that the Huangs are fraud victims like Kurzberg's other investors were.

[00:10:09] Speaker 04:
How do we know that the money that went out of escrow wasn't their money?

[00:10:14] Speaker 02:
So that's Quartzburg's burden to show that it was their money.

[00:10:18] Speaker 02:
It's not the Wang's burden to prove this negative that it wasn't.

[00:10:22] Speaker 02:
And we don't know from, well, there were seven sets of written directions that Quartzburg submitted to US Bank.

[00:10:29] Speaker 02:
And those sets of written directions listed the Quartzburg investors by name.

[00:10:34] Speaker 02:
That's how we would know.

[00:10:36] Speaker 02:
We would know if Quartzburg pointed to the Wang's name on one of those directions.

[00:10:39] Speaker 02:
And at that point,

[00:10:40] Speaker 02:
Yes, the money left.

[00:10:41] Speaker 02:
It was Wong's.

[00:10:42] Speaker 02:
But if the Wong's name wasn't there, then their money never left.

[00:10:46] Speaker 02:
Because how would it have left?

[00:10:47] Speaker 04:
And discovery didn't establish that, didn't touch on those issues?

[00:10:51] Speaker 02:
Well, so most of the discovery, it appears, happened in the Chen case, which was another group.

[00:10:57] Speaker 02:
This case?

[00:10:58] Speaker 02:
Right.

[00:10:58] Speaker 04:
The discovery you conducted.

[00:11:00] Speaker 02:
Well, it looks at the trial court, it was reliant on the evidence that was collected in Chen.

[00:11:08] Speaker 02:
It doesn't appear that there was separate discovery done in this case.

[00:11:11] Speaker 04:
How did you prove up below that the Huang's money didn't go out of escrow?

[00:11:18] Speaker 02:
So again, so the Huang's motion for summary judgment, it wasn't their burden to prove that negative.

[00:11:23] Speaker 02:
It wasn't a burden to prove that it didn't leave.

[00:11:25] Speaker 02:
It was their burden to prove that they deposited money.

[00:11:29] Speaker 02:
Condition precedent never occurred.

[00:11:30] Speaker 02:
Escrow agent identified them as belonging to the funds.

[00:11:33] Speaker 02:
It was Kurzberg's burden to come in and prove that the money had actually been released.

[00:11:38] Speaker 02:
And remind me what Kurzberg said on that point.

[00:11:42] Speaker 02:
Pardon?

[00:11:43] Speaker 02:
Kurzberg's evidence, the three pieces of evidence that they're relying on?

[00:11:46] Speaker 02:
Yeah, they're relying on their own internal records, their declarations from their independent manager and independent monitor.

[00:11:53] Speaker 02:
They're looking at their own internal records.

[00:11:55] Speaker 04:
The independent monitor said the money was co-mingled.

[00:11:58] Speaker 02:
And that's not really disputed that this account, this escrow account, held at $1.81 million of co-mingled funds.

[00:12:07] Speaker 02:
That doesn't mean that it wasn't separately accounted for and tracked.

[00:12:10] Speaker 02:
I mean, the law of escrow is that it's a conditional delivery.

[00:12:14] Speaker 02:
It's not released to Courtsburg.

[00:12:15] Speaker 02:
It never went into Courtsburg's possession until Courtsburg could show that it was actually released.

[00:12:22] Speaker 02:
I'd like to reserve the remaining time.

[00:12:24] Speaker 02:
Thank you.

[00:12:30] Speaker 01:
May I please the court?

[00:12:30] Speaker 01:
I'm Sean Prosser of the Mince Levin Firm.

[00:12:32] Speaker 01:
I represent Courtsberg Gold LP, which is the investment entity that was created to support the EB-5 applications, as well as the Idaho State Regional Center, which is a regional center that's required under the USCIS rules.

[00:12:49] Speaker 01:
I also, who's not a part of this litigation, but also represent the independent manager who was appointed pursuant to the SEC's judgment it obtained against

[00:12:58] Speaker 01:
the defendants that had been running Courtsburg at the time and against other parties.

[00:13:05] Speaker 01:
That final judgment was issued by the District of Idaho.

[00:13:08] Speaker 01:
It's on the excerpts of record 89.

[00:13:11] Speaker 01:
The independent manager is charged with now liquidating and distributing equally to all of the members of Courtsburg, including Ms.

[00:13:21] Speaker 01:
Lynn, who is a member.

[00:13:22] Speaker 01:
And she's a member on the books and records of Courtsburg.

[00:13:25] Speaker 01:
So how does she get money?

[00:13:27] Speaker 01:
She will get money equally.

[00:13:29] Speaker 01:
Just like every other member, once there is a net distribution of whatever remains after liabilities are paid.

[00:13:37] Speaker 00:
I do want to say I'm sympathetic to... I don't know that it matters, but just out of curiosity, do you have an estimate of what the percentage of recovery is going to be?

[00:13:48] Speaker 01:
It's going to be low.

[00:13:50] Speaker 01:
There are mines, there is real estate, there is mining equipment, there are third parties that have been inhibiting the sale and distribution, so there's been litigation.

[00:14:01] Speaker 01:
I think there'll be

[00:14:03] Speaker 01:
a guesstimate low single-digit millions, $2, $3, $4, $5 million that would be distributed.

[00:14:10] Speaker 01:
We don't know exactly.

[00:14:11] Speaker 01:
Part of that is the $500,000 that was released from escrow to Quartzburg.

[00:14:18] Speaker 01:
But I wanted to say, I am sympathetic to the appellants because they were defrauded just like every other member.

[00:14:27] Speaker 01:
So they're in the same circumstance as everybody.

[00:14:30] Speaker 01:
And Judge Parker, to your question earlier, I think you sort of hit the nail on the head.

[00:14:37] Speaker 01:
And Judge Martinez at the district court put this in his order.

[00:14:40] Speaker 01:
There was five years of litigation against US Bank, the Chen matter, the mallard litigation he cited.

[00:14:48] Speaker 01:
There's also the fan litigation that was filed as a class action but then dismissed.

[00:14:54] Speaker 01:
The Mao and the Chen cases, as well as some other individual lawsuits that were filed in state court by members of Courtsburg, those have all settled.

[00:15:03] Speaker 01:
And my understanding is they did receive some compensation from US Bank in that settlement.

[00:15:09] Speaker 01:
I don't know.

[00:15:09] Speaker 01:
It's confidential of how much they got.

[00:15:11] Speaker 01:
I doubt very seriously they got made close to whole.

[00:15:15] Speaker 01:
But there was a remedy.

[00:15:17] Speaker 01:
And for some reason, the Huangs chose not to,

[00:15:21] Speaker 01:
pursue that litigation.

[00:15:23] Speaker 01:
And I will say at the district court level, they were represented by counsel.

[00:15:29] Speaker 01:
So Mr. Erickson is appointed as pro bono counsel.

[00:15:32] Speaker 01:
But in the actual underlying matter, they had counsel from the Harris-Bricken firm, which also was counsel for other members in the lawsuits against US Bank.

[00:15:41] Speaker 01:
They chose not to seek any discovery in that case, in the Interpleter case.

[00:15:47] Speaker 01:
So they haven't been able to substantiate or explain some of the things that they try to rely upon.

[00:15:55] Speaker 04:
Well, Mr. Erickson has told us that

[00:16:03] Speaker 04:
he believes that his client's money is still in the escrow account and that the burden is on you and not him to establish that it came out and he told us you have not done that.

[00:16:19] Speaker 04:
What do you say?

[00:16:20] Speaker 01:
I say I disagree and and I wanted to sort of start with the headline on that point they both on the briefing and today they're attempting to lead the panel down the wrong path.

[00:16:33] Speaker 01:
What Kurzberg had to do, they do not need to establish that anyone's money was fraudulently released.

[00:16:40] Speaker 01:
We know it's in the order.

[00:16:41] Speaker 01:
We know that almost all of the money was released.

[00:16:44] Speaker 01:
So all the law about escrow and what should have happened sort of goes out the window, because the reality is, on the instructions from Kurzberg, the defendants in the SEC case that were running it at the time, US Bank released $77.5 million.

[00:17:00] Speaker 01:
Out of a total of?

[00:17:03] Speaker 01:
78.

[00:17:05] Speaker 01:
So there were some refunds to people early on, but roughly $500,000 remained after all of the distributions and some refunds.

[00:17:13] Speaker 03:
And just to be clear, so none of these people were able to obtain the EB-5 visa because the courts were

[00:17:30] Speaker 03:
project itself was an ineligible project under immigration law.

[00:17:36] Speaker 01:
That's exactly right, Judge Wardlaw.

[00:17:38] Speaker 01:
Every one of the 150 or so investors did not get visa approval.

[00:17:43] Speaker 01:
So the preconditions to release from the escrow never happened for anybody.

[00:17:48] Speaker 01:
They're in the exact same position as the appellants.

[00:17:50] Speaker 04:
This was a massive fraud on behalf of... That was the SEC's allegation.

[00:17:54] Speaker 01:
The case was settled on a neither commit, neither admit or deny basis, but the complaint underlined the final judgment that's in the record and the complaint is public.

[00:18:01] Speaker 01:
And then once the money came in.

[00:18:10] Speaker 01:
Once it was released to Courtsburg, some of it went to working capital to buy assets, but some of it was misappropriated and misused.

[00:18:19] Speaker 01:
That's the fraud that applies.

[00:18:22] Speaker 01:
So the law is on the cases that we've cited in our brief, where you have a commingled account and counsel agreed there's no dispute that the account was commingled.

[00:18:30] Speaker 01:
It all went into the same fund.

[00:18:33] Speaker 01:
And the district court at oral argument agreed that Judge Martinez said, was it aggregated?

[00:18:40] Speaker 01:
And he said, all the money went into a single account.

[00:18:44] Speaker 01:
So once you have a commingled account, and then you have a common fraud where all the victims are the subject of that fraud.

[00:18:50] Speaker 04:
I could have been, and I'll question him a bit further on when he comes up for his rebuttal argument, that I believe I heard Mr. Erickson to say that the records

[00:19:04] Speaker 04:
of the bank separately, of the escrow, separately list the Wang's contributions.

[00:19:14] Speaker 01:
Contributions, correct.

[00:19:16] Speaker 01:
So I'll skip to that point.

[00:19:21] Speaker 01:
Not contributions, but deposits.

[00:19:23] Speaker 01:
There is a declaration by a woman who is an analyst at the U.S.

[00:19:29] Speaker 01:
Bank, she did in the other cases, not in this case, that showed how they tracked the money coming in.

[00:19:35] Speaker 01:
because they needed to match the paperwork to a depositor.

[00:19:39] Speaker 01:
But that part of the declaration that they rely upon, this is what Judge Martinez found in his order.

[00:19:44] Speaker 01:
It does not say that they identify the specific investor as each money is released.

[00:19:50] Speaker 01:
There is no evidence in the record of US Bank having that.

[00:19:54] Speaker 01:
They didn't seek discovery.

[00:19:55] Speaker 01:
They didn't oppose US Bank.

[00:19:56] Speaker 01:
They didn't ask that question.

[00:19:58] Speaker 01:
They didn't try to get more documents.

[00:20:00] Speaker 01:
So there's no evidence that exactly

[00:20:04] Speaker 01:
the appellant's money was sent out.

[00:20:07] Speaker 01:
Essentially, there were seven directions in the record.

[00:20:10] Speaker 01:
There were probably other written directions in the record.

[00:20:13] Speaker 01:
Those written directions, if you would look at physically documents, almost all the investor names are redacted.

[00:20:20] Speaker 01:
And when we came on board, after the SEC judgment required us to be appointed, we dug through warehouses of books and records and everything, and it was in shambles.

[00:20:31] Speaker 01:
So we don't have all of the records

[00:20:33] Speaker 01:
of showing all the communications with US Bank.

[00:20:36] Speaker 01:
What we have essentially were the documents that US Bank produced in the litigation against them by the other members.

[00:20:43] Speaker 01:
Those documents are redacted to not show any of the investors who were not parties to that litigation.

[00:20:49] Speaker 01:
So we don't know whose names are on those lists.

[00:20:52] Speaker 01:
But ultimately, it doesn't matter.

[00:20:54] Speaker 01:
The law is, once the money is deposited into a single commingled account, and we've established through the monitor's declaration, and deference should be given to the monitor's independent opinion and expertise, once you establish that, then the pro rata distribution, the equality is equity line of cases, applies.

[00:21:21] Speaker 01:
This is not required.

[00:21:23] Speaker 01:
We don't need to prove that the appellant's money was released, but there is significant evidence on the record that the appellant referred to in his briefing that if anything could give the panel comfort that in fact her money was released.

[00:21:38] Speaker 01:
And I'll just really quickly summarize a couple of them.

[00:21:41] Speaker 01:
At SER 405 and 47, Ms.

[00:21:45] Speaker 01:
Lin is listed as a, quote, active investor as of March 2015.

[00:21:53] Speaker 01:
On that same document, there are some names where it's written, it's typed in, in escrow.

[00:21:58] Speaker 01:
So these people still have their money in escrow.

[00:22:01] Speaker 01:
Appellants are not listed there.

[00:22:03] Speaker 01:
Other names are there.

[00:22:05] Speaker 01:
There's an additional document at ER-27 and ER-20 that identifies two parties in orange.

[00:22:12] Speaker 01:
And there's a code in the color-coded document, and it says, in orange, quote, investor funds still in escrow at US Bank, end quote.

[00:22:24] Speaker 01:
The appellants are not listed there.

[00:22:25] Speaker 01:
Other members were listed there.

[00:22:27] Speaker 01:
So the contemporaneous records that we have access to do indicate that Ms.

[00:22:33] Speaker 01:
Lin was a active investor and her money had been released.

[00:22:39] Speaker 03:
Council, can you explain to me what this US Bank ER 320 with the appendix of 322, what that document is?

[00:22:50] Speaker 03:
It does appear that

[00:22:52] Speaker 03:
Wong's name is on that document, but I'm not, I'm unsure as to what point in time this is referring to.

[00:23:06] Speaker 01:
Yeah, that is the receipt from the Immigration Office.

[00:23:10] Speaker 01:
Oh, I'm sorry, I was looking at 220, 320.

[00:23:13] Speaker 03:
It's the letter from Dorsey, always ahead, August 7, 2020.

[00:23:19] Speaker 01:
That so they they rely upon.

[00:23:21] Speaker 01:
This is a cover letter from Dorsey and Whitney that represented U.S.

[00:23:24] Speaker 01:
Bank in connection with the other shareholder litigation.

[00:23:27] Speaker 01:
And that is the cover letter that was sent to Mr. Huang.

[00:23:31] Speaker 01:
But as far as we can tell from this it wasn't sent to the actual investor Ms.

[00:23:35] Speaker 01:
Lin.

[00:23:35] Speaker 01:
But that was the cover letter notifying them of the existence of the money in the account.

[00:23:42] Speaker 01:
And they're going to initiate an interpleader case.

[00:23:45] Speaker 01:
So there is a list with names and numbers beside them.

[00:23:48] Speaker 01:
But we don't have any understanding or explanation as to why those are listed, how this lawyer determined it.

[00:23:57] Speaker 01:
It's an unauthenticated non-business record.

[00:24:00] Speaker 01:
It's not a US bank business record.

[00:24:02] Speaker 01:
And I think the most important thing of this cover letter is, at the end of the second English paragraph, U.S.

[00:24:11] Speaker 01:
bank takes no position on the rightful allocation of these funds and remains neutral to the competing claims.

[00:24:18] Speaker 01:
That's why they initiated the interpleader case.

[00:24:20] Speaker 01:
They're not taking a position.

[00:24:23] Speaker 01:
They chose not to depose US Bank or the lawyer to get an understanding of why would 500,000 be listed next to Mr. Huang.

[00:24:32] Speaker 01:
We actually just don't know the answer to that question.

[00:24:34] Speaker 01:
The reality is all the money went into a commingled account.

[00:24:38] Speaker 01:
Almost all the money was distributed improperly without the approvals for every investor.

[00:24:46] Speaker 01:
And every investor is subject to the exact same fraud that the SEC alleged.

[00:24:51] Speaker 04:
Has the US attorney showed up in this matter?

[00:24:54] Speaker 01:
It's interesting, there were investigations, US attorney investigations.

[00:24:59] Speaker 01:
This mostly was out of the district of Idaho, Boise.

[00:25:02] Speaker 01:
There's a sort of a parallel sister entity called Black Hawk Gold that has a similar judgment.

[00:25:08] Speaker 01:
So there are SEC action.

[00:25:10] Speaker 01:
There was some criminal investigation, but there were no actions taken.

[00:25:18] Speaker 01:
I will say on the other company, the sort of the first phase, which was Blackhawk, all those members did get their approvals.

[00:25:26] Speaker 01:
So there was problems with the way the money was used, but they actually were able to get their visa approvals.

[00:25:31] Speaker 01:
So I think it seemed like it started with good intentions but fell apart.

[00:25:35] Speaker 01:
But no one in Courtsburg received the approval.

[00:25:37] Speaker 01:
Just like the appellants those other four hundred and forty nine people did not obtain their visas And like I said, we're we're sympathetic to this situation But the reality and the law is that we have a fraud and you have commingled account Accounts, whatever is left.

[00:25:53] Speaker 01:
It is a pro rata distribution Equality equality is equity.

[00:25:58] Speaker 01:
Thank you very much Thank you counsel

[00:26:12] Speaker 02:
Your Honor, equality is equity amongst similarly situated fraud victims, for sure, when the commingled account is in the custody and control of the defrauder.

[00:26:23] Speaker 02:
But there's a step in this case that makes it different, and that is that US Bank was the escrow agent.

[00:26:29] Speaker 02:
So the Huang's money was never under the custody and control of Kurzberg unless it was released from US Bank.

[00:26:36] Speaker 02:
There was no fraud.

[00:26:37] Speaker 02:
The money was where it was supposed to be.

[00:26:39] Speaker 02:
And counsel admits that there was $500,000 left in the escrow account.

[00:26:44] Speaker 02:
One of Kurzberg's investors was not defrauded.

[00:26:47] Speaker 02:
So it's not.

[00:26:49] Speaker 02:
The Huang's burden to show that they weren't defrauded, it's Quartzburg's burden to come in with evidence to show that they were.

[00:26:55] Speaker 02:
And going back to the U.S.

[00:26:57] Speaker 02:
bank declaration, it says very clearly that it counted and tracked for each deposit into and out of escrow.

[00:27:05] Speaker 02:
It says, for each written direction, I would compare the list of names in the written direction

[00:27:10] Speaker 02:
to the names on my internal spreadsheet that I prepared and kept of Kurzberg investor names to confirm that those funds had not yet been dispersed.

[00:27:19] Speaker 02:
So that only makes sense if US Bank was doing its job as the escrow agent, keeping track of which investors' funds had been released to Kurzberg.

[00:27:27] Speaker 02:
Sure, discovery could have been conducted by Quartzburg to find the Huang's name on the list, but it was Quartzburg's burden to do that discovery.

[00:27:36] Speaker 02:
Taking a step back, again, the Huangs were named by US Bank in the cover letter and in the complaint.

[00:27:42] Speaker 02:
The escrow agent names the depositor, and the Huangs are entitled to rely on that.

[00:27:48] Speaker 02:
If you take money and put it into a bank in escrow, and the bank says to you, OK, we're interpleading this funds, what is your burden?

[00:27:57] Speaker 02:
Is your burden to really do discovery to find out if it truly was your money?

[00:28:01] Speaker 02:
Or can you rely on the escrow agent's word that this is your money and we're interpleading it?

[00:28:06] Speaker 02:
And so you file a motion.

[00:28:08] Speaker 02:
You file a claim.

[00:28:09] Speaker 02:
summary judgment, you show that you deposited the money, you show that the condition precedent under the escrow agreement never occurred, and the escrow agent identified you as the depositor, that's all.

[00:28:19] Speaker 02:
You would prevail on summary judgment.

[00:28:22] Speaker 04:
Yeah, but wouldn't, you know, 50, 75, 100 other depositors in this escrow account be able to make the precise same argument that you're making for your client?

[00:28:38] Speaker 02:
Well, no, Your Honor, the Chen plaintiffs claim that they were defrauded.

[00:28:41] Speaker 02:
They claim that their money was released and that they were actually defrauded.

[00:28:45] Speaker 02:
Why weren't the Huangs part of those lawsuits?

[00:28:48] Speaker 02:
It's possible that they realized that they weren't on any of the written directions and that they weren't defrauded.

[00:28:54] Speaker 02:
And so they couldn't make out a tort claim against Courtsburg for fraud because their money was where it was supposed to be all along.

[00:29:00] Speaker 04:
Are you saying that the record shows

[00:29:04] Speaker 04:
The documents in the record establish that your client's money is still at U.S.

[00:29:10] Speaker 04:
Bank.

[00:29:12] Speaker 02:
I see that I'm out of time.

[00:29:12] Speaker 02:
Could I answer this question?

[00:29:14] Speaker 02:
So the U.S.

[00:29:15] Speaker 02:
Bank interpled the funds, so the escrow account presumably has none left.

[00:29:19] Speaker 02:
But the Huangs are entitled to rely on the escrow agent's identification of them in the interpleader complaint and the cover letter as having that money belongs to them.

[00:29:30] Speaker 02:
And remind me, the cover letter said what?

[00:29:33] Speaker 02:
The cover letters to Huangs identified them as the depositor responsible for $500,000 that they're interpleading.

[00:29:42] Speaker 03:
So counsel, what it says is that

[00:29:48] Speaker 03:
You've been identified as one of the parties because you were a Kortzberg investor who deposited some funds at issue, attaches a chart identifying the amounts deposited that remain in escrow and the individual who deposited the funds.

[00:30:09] Speaker 03:
So then the appendix says Wong Young, 500,000, but it also lists number of other people

[00:30:19] Speaker 03:
with other sums that are greater than 501.

[00:30:24] Speaker 03:
But it says the total is 501.

[00:30:28] Speaker 03:
Can you explain that?

[00:30:31] Speaker 02:
I'm also out of time, and I briefly answer your question.

[00:30:35] Speaker 02:
It's difficult to see what the other investors contributed, the change below 500,000.

[00:30:42] Speaker 02:
But I think the important part is that identifying from US bank

[00:30:45] Speaker 02:
the escrow agent that kept records and identified the Huangs as being responsible for that 500,000.

[00:30:52] Speaker 02:
That's the important part.

[00:30:53] Speaker 02:
I'm not sure what the other investors may have contributed.

[00:30:56] Speaker 03:
Why don't we know exactly what this is?

[00:31:02] Speaker 03:
This exhibit three or excerpt three, two, two, the cover, the cover letter.

[00:31:08] Speaker 03:
No, not the cover letter, but the appendix, because it,

[00:31:12] Speaker 03:
On its face, it doesn't make sense that you list all these deposits that are far greater than the amount of $501,000.

[00:31:24] Speaker 03:
So there has to be some explanation about what these numbers mean.

[00:31:31] Speaker 02:
That would be a good question for US Bank and it would be a good question for a party contesting the Huang's claim to the funds to raise in discovery.

[00:31:40] Speaker 02:
But again, it's not the burden for the Wongs to explore who else has a claim to money.

[00:31:45] Speaker 02:
They only have to show up in court and reclaim the money that the escrow agent identified as belonging to them.

[00:31:51] Speaker 00:
Thank you.

[00:31:51] Speaker 00:
Are there no further questions?

[00:31:55] Speaker 00:
One minute or?

[00:31:58] Speaker 00:
No.

[00:31:59] Speaker 00:
Thank you.

[00:31:59] Speaker 00:
Mr. Erickson, you were appearing pro bono, and the court appreciates your service.

[00:32:03] Speaker 00:
We thank both parties, both counsel, for their helpful arguments, and the case is submitted.

[00:32:08] Speaker ?:
Thank you very much.