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Federal Trade Commission v. American Financial Support Services Inc.

United States District Court, C.D. California

December 17, 2019

FEDERAL TRADE COMMISSION, Plaintiff,
v.
AMERICAN FINANCIAL SUPPORT SERVICES INC., et al., Defendants.

          ORDER FOR PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF RECEIVER, AND OTHER EQUITABLE RELIEF

          JAMES V. SELNA, UNITED STATES DISTRICT JUDGE

         WHEREAS on November 4, 2019, Plaintiff Federal Trade Commission (“FTC”) filed its Complaint for Permanent Injunction and Other Equitable Relief (Dkt. 1) pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 53(b), 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. §§ 6101-6108; and

         WHEREAS at the same time, the FTC filed an application pursuant to Fed.R.Civ.P. 65(b) for a temporary restraining order (“TRO”), asset freeze, appointment of a receiver, other equitable relief, and an order to show cause why a preliminary injunction should not issue against Defendants; and

         WHEREAS on November 4, 2019, the Court issued the requested TRO (Dkt. 41) and ordered the Defendants to show cause why a preliminary injunction should not issue; and

         WHEREAS the Court has considered the Complaint, declarations, exhibits, and memoranda submitted in support of the Plaintiff's application for a TRO and request for a preliminary injunction, any oppositions thereto, and the entire record herein;

         IT IS THEREFORE ORDERED AS FOLLOWS:

         FINDINGS OF FACT

         1. This Court has jurisdiction over the subject matter of this case, and there is good cause to believe that it will have jurisdiction over all parties.

         2. Venue lies properly in this Court.

         3. Plaintiff FTC is likely to succeed on the merits of its claims that Defendants American Financial Support Services Inc.; Arete Financial Group, also d/b/a Arete Financial Freedom; Arete Financial Group LLC; CBC Conglomerate LLC, also d/b/a 1file.org; Diamond Choice Inc., also d/b/a Interest Rate Solutions; J&L Enterprise LLC, also d/ba Premier Solutions Servicing; La Casa Bonita Investments, Inc., f/k/a La Casa Bonita Investments LLC, also d/b/a Education Loan Network, also d/b/a Edunet; U.S. Financial Freedom Center, Inc.; Carey G. Howe; Anna C. Howe; Shunmin “Mike” Hsu; Ruddy Palacios a/k/a Ruddy Barahona; Oliver Pomazi; and Jay Singh have engaged in, and are likely to engage in, acts or practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310, and Plaintiff is therefore likely to prevail on the merits of this action.

         4. Plaintiff FTC is likely to succeed on the merits of its claim that Relief Defendant MJ Wealth Solutions, LLC, has received ill-gotten assets or otherwise benefitted from funds that are the proceeds of Defendants' unlawful acts or practices, and that MJ Wealth Solutions has no legitimate claim to the ill-gotten assets in its possession.

         5. Immediate and irreparable harm will likely result from Defendants' ongoing violations of the FTC Act and the TSR unless Defendants are restrained and enjoined by order of this Court.

         6. Immediate and irreparable damage to the Court's ability to grant effective final relief for consumers-including monetary restitution, rescission, disgorgement or refunds-will likely occur from the sale, transfer, destruction, or other disposition or concealment of their assets by Defendants and Relief Defendant MJ Wealth Solutions, and good cause therefore exists for freezing the assets of all Defendants and Relief Defendant MJ Wealth and issuing the ancillary equitable relief contained herein.

         7. Good cause exists for appointing a permanent receiver over the Receivership Entities.

         8. Weighing the equities and considering Plaintiff's likelihood of ultimate success on the merits, a preliminary injunction with an asset freeze, appointment of a permanet receiver, and other equitable relief is in the public interest.

         9. This Court has authority to issue this Order pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b), 57b; Federal Rule of Civil Procedure 65; and the All Writs Act, 28 U.S.C. § 1651.

         10. No security is required of any agency of the United States for issuance of a preliminary injunction. Fed.R.Civ.P. 65(c).

         DEFINITIONS

         For the purpose of this Order, the following definitions shall apply:

         A. “Asset” means any legal or equitable interest in, right to, or claim to, any property, wherever located and by whomever held.

         B. “Corporate Defendants” means:

(1) American Financial Support Services Inc.;
(2) Arete Financial Group, also d/b/a Arete Financial Freedom;
(3) Arete Financial Group LLC;
(4) CBC Conglomerate LLC, also d/b/a 1file.org;
(5) Diamond Choice Inc., also d/b/a Interest Rate Solutions;
(6) J&L Enterprise LLC, also d/ba Premier Solutions Servicing;
(7) La Casa Bonita Investments, Inc., f/k/a La Casa Bonita Investments LLC, also d/b/a Education Loan Network, also d/b/a Edunet;
(8) U.S. Financial Freedom Center, Inc.;

and each of their subsidiaries, affiliates, successors, and assigns.

         C. “Debt Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, payments, or fees owed by a person to an unsecured creditor or debt collector.

         D. “Defendant(s)” means Corporate Defendants, Individual Defendants, and Relief Defendant, individually, collectively, or in any combination.

         E. “Document” is synonymous in meaning and equal in scope to the usage of “document” and “electronically stored information” in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, sound and video recordings, images, Internet sites, web pages, websites, electronic correspondence, including e-mail and instant messages, contracts, accounting data, advertisements, FTP Logs, Server Access Logs, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, computer records, customer or sales databases and any other electronically stored information, including Documents located on remote servers or cloud computing systems, and other data or data compilations from which information can be obtained directly or, if necessary, after translation into a reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

         F. “ED” means the United States Department of Education.

         G. “Electronic Data Host” means any person or entity in the business of storing, hosting, or otherwise maintaining electronically stored information. This includes, but is not limited to, any entity hosting a website or server, and any entity providing “cloud based” electronic storage.

         H. “Financial Institution” means any bank, savings and loan institution, credit union, or any financial depository of any kind, including, but not limited to, any brokerage house, trustee, broker-dealer, escrow agent, title company, commodity trading company, or precious metal dealer.

         I. “Individual Defendant(s)” means Carey G. Howe, Anna C. Howe, Shunmin “Mike” Hsu, Ruddy Palacios a/k/a Ruddy Barahona, Oliver Pomazi, and Jay Singh, individually, collectively, or in any combination.

         J. “Receiver” means the permanent receiver appointed in Section XI of this Order and any deputy receivers that shall be named by the permanent receiver.

         K. “Receivership Entities” means (1) the Corporate Defendants and (2) any other entity that has conducted any business related to Defendants' marketing and sale of Debt Relief Services, including receipt of Assets derived from any activity that is the subject of the Complaint in this matter, and that the Receiver determines is controlled or owned by any Defendant.

         L. “Relief Defendant” means MJ Wealth Solutions, LLC.

         ORDER

         I. PROHIBITED BUSINESS ACTIVITIES

         IT IS THEREFORE ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, in connection with the advertising, marketing, promoting, or offering for sale of any goods or services, are temporarily restrained and enjoined from:

A. misrepresenting or assisting others in misrepresenting, expressly or by implication, any material fact, including, but not limited to:
1. consumers who purchase Defendants' Debt Relief Services will have their monthly payments reduced to a lower, specific amount or have their loan balances forgiven in whole or in part;
2. most or all of consumers' monthly payments to Defendants will be applied toward consumers' debts;
3. Defendants will assume responsibility for servicing consumers' loans;
4. Defendants are affiliated or work directly with ED or one of ED's authorized loan servicers;
5. any other fact material to consumers concerning any good or service, such as: the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics; and,
B. requesting or receiving payment of a fee or consideration for Debt Relief Services before (a) Defendants have renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer; and (b) the customer has made at least one payment pursuant to that settlement agreement, debt management plan, or other valid contractual agreement between the customer and the creditor.

         II. PROHIBITION ON RELEASE OF ...


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