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Full title: Adversary case 21-03018. 91 (Declaratory judgment) Complaint by The Official Committee of Unsecured Creditors against Professional Financial Investors, Inc., Professional Investors Security Fund, Inc., Professional Investors Security Fund I, A California Limited Partnership, Professional Investors Security Fund IV, A California Limited Partnership, Professional Investors Security Fund VII, A California Limited Partnership, Professional Investors Security Fund IX, A California Limited Partnership, Professional Investors Security Fund XII, A California Limited Partnership, Professional Investors Security Fund XIII, A California Limited Partnership, Professional Investors Security Fund XIV, A California Limited Partnership, Professional Investors Security Fund XV, A California Limited Partnership, Professional Investors Security Fund XVII, A California Limited Partnership, Professional Investors Security Fund XVIII, A California Limited Partnership, Professional Investors 20, LLC, Professional Investors 21, LLC, Professional Investors 22, LLC, Professional Investors 23, LLC, Professional Investors 24, LLC, Professional Investors 25, LLC, Professional Investors 26, LLC, Professional Investors 27, LLC, Professional Investors 28, LLC, Professional Investors 29, LLC, Professional Investors 30, LLC, Professional Investors 31, LLC, Professional Investors 32, LLC, Professional Investors 33, LLC, Professional Investors 34, LLC, Professional Investors 35, LLC, Professional Investors 36, LLC, Professional Investors 37, LLC, Professional Investors 38, LLC, Professional Investors 39, LLC, Professional Investors 40, LLC, Professional Investors 41, LLC, Professional Investors 42, LLC, Professional Investors 43, LLC, Professional Investors 44, LLC, Professional Investors 45, LLC, Professional Investors 46, LLC, Professional Investors 47, LLC, Professional Investors 48, LLC, Professional Investors 49, LLC, PFI Glenwood, LLC. Fee Amount $350. (Attachments: # 1 AP Cover Sheet) (Fiero, John) (Entered: 04/13/2021)

Document posted on Apr 12, 2021 in the bankruptcy, 14 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

Investors Security Fund XII, A California Limited Partnership; Professional Investors 10 Security Fund XIII, A California Limited Partnership; Professional Investors Security 11 Fund XIV, A California Limited Partnership; 12 Defendant Professional Financial Investors, Inc. (“PFI”) is a corporation organized 22 and existing under the laws of the State of California with its principal place of business in Marin 23 The Defendants own various real properties in Northern California (Marin and 24 Sonoma Counties) and also own interests in various other entities that in turn own real property in 25 California. Plaintiff is informed and believes that the Defendants’ books and records indicate 15 they have five main types of investors: (a) lenders to PISF that are purportedly secured by PISF’s 16 interests in the LPs (collectively, the “PISF Straight Lenders”), (b) lenders to PISF that are 17 purportedly secured by deeds of trust on real properties owned by the LPs (collectively, the “PISF 18 DOT Lenders”, (c) lenders to PFI that are purportedly secured by deeds of trust on real properties 19 owned solely by PFI (collectively, the “PFI DOT Lenders,” (d) members of various limited liabilit20 companies for which PFI is the manager, a member, an equity holder, and a property manager 21 (collectively, the “LLC Members”), and (e) tenants in common to properties owned with PFI or the22 LLCs.The finances of the Companies are such that, without accepting new investment or 18 monies from PISF Straight Lenders, neither PISF nor PFI have sufficient cash flow to meet their 19 monthly interest obligations to the existing PISF Straight Lenders or the PISF DOT Lenders, the 20 PFI DOT Lenders, or pay promised quarterly returns to certain LLC members.

List of Tables

Document Contents

1 Debra I. Grassgreen (CA Bar No. 169978) John D. Fiero (CA Bar No. 136557) 2 Cia H. Mackle (admitted pro hac vice) Pachulski Stang Ziehl & Jones LLP 3 150 California Street, 15th Floor San Francisco, CA 94111-4500 4 Telephone: 415/263-7000 Facsimile: 415/263-7010 5 E-mail: dgrassgreen@pszjlaw.com jfiero@pszjlaw.com 6 cmackle@pszjlaw.com 7 Counsel for the Plaintiffs, The Official Committee of Unsecured Creditors 8 UNITED STATES BANKRUPTCY COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN FRANCISCO DIVISION 11 In re: Case No. 20-30604 12 PROFESSIONAL FINANCIAL INVESTORS, (Jointly Administered with 13 INC., a California corporation; Case No. 20-30579) PROFESSIONAL INVESTORS SECURITY 14 FUND, INC., a California corporation, Chapter 11 15 Debtors. 16 17 18 19 20 21 22 23 24 25 26 27 28

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1 The Official Committee of Unsecured Creditors, Adv. Pro. No. 21-________ 2 Plaintiffs, COMPLAINT FOR DECLARATORY v. RELIEF 3 4 Professional Financial Investors, Inc.; Professional Investors Security Fund, Inc.; 5 Professional Investors Security Fund I, A California Limited Partnership; Professional 6 Investors Security Fund IV, A California Limited Partnership; Professional Investors Security 7 Fund VII, A California Limited Partnership; 8 Professional Investors Security Fund IX, A California Limited Partnership; Professional 9 Investors Security Fund XII, A California Limited Partnership; Professional Investors 10 Security Fund XIII, A California Limited Partnership; Professional Investors Security 11 Fund XIV, A California Limited Partnership; 12 Professional Investors Security Fund XV, A California Limited Partnership; Professional 13 Investors Security Fund XVII, A California Limited Partnership; Professional Investors 14 Security Fund XVIII, A California Limited Partnership; Professional Investors 20, LLC; 15 Professional Investors 21, LLC; Professional 16 Investors 22, LLC; Professional Investors 23, LLC; Professional Investors 24, LLC; 17 Professional Investors 25, LLC; Professional Investors 26, LLC; Professional Investors 27, 18 LLC; Professional Investors 28, LLC; 19 Professional Investors 29, LLC; Professional Investors 30, LLC; Professional Investors 31, 20 LLC; Professional Investors 32, LLC; Professional Investors 33, LLC; Professional 21 Investors 34, LLC; Professional Investors 35, LLC; Professional Investors 36, LLC; 22 Professional Investors 37, LLC; Professional 23 Investors 38, LLC; Professional Investors 39, LLC; Professional Investors 40, LLC; 24 Professional Investors 41, LLC; Professional Investors 42, LLC; Professional Investors 43, 25 LLC; Professional Investors 44, LLC; Professional Investors 45, LLC; Professional 26 Investors 46, LLC; Professional Investors 47, 27 LLC; Professional Investors 48, LLC; Professional Investors 49, LLC; and PFI 28 Glenwood, LLC

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1 As and for its complaint, plaintiff the Official Committee of Unsecured Creditors of 2 Professional Financial Investors, Inc. and Professional Investors Security Fund, Inc. (the 3 “Committee” or “Plaintiff”) alleges as follows: 4 I. 5 JURISDICTION AND VENUE 6 1. The above-captioned court (the “Court”) has jurisdiction over this adversary 7 proceeding pursuant to 28 U.S.C. § § 147(a) and 1334(a). This adversary proceeding is a core 8 proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (M). 9 2. Every defendant in this adversary proceeding is a chapter 11 debtor in this district o10 an affiliate of a chapter 11 debtor in this district. Accordingly, venue of this adversary proceeding 11 is proper in this district pursuant to 28 U.S.C. § 1409(a). 12 3. This adversary proceeding is commenced pursuant to Rule 7001(1) of the Federal 13 Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), sections 105, 363 and 541 of Title 11 of 14 the United States Code (the “Bankruptcy Code”) and 28 U.S.C. § 2201. 15 II. 16 THE PARTIES 17 4. The Committee was appointed by the Office of the United States Trustee in the 18 above-captioned case on August 19, 2020 (Docket No. 59). The members of the Committee are all19 investors in investment vehicles and debt instruments sponsored by one or more of the defendants 20 named herein. 21 5. Defendant Professional Financial Investors, Inc. (“PFI”) is a corporation organized 22 and existing under the laws of the State of California with its principal place of business in Marin 23 County, California. PFI is a debtor in Court case number 20-30604. 24 6. Defendant Professional Investors Security Fund, Inc. (“PISF”) is a corporation 25 organized and existing under the laws of the State of California with its principal place of business 26 in Marin County, California. PISF is a debtor in Court case number 20-30578. 27 28

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1 7. Defendant Professional Investors Security Fund I (“PISF I”) is a limited partnership2 organized and existing under the laws of the State of California with its principal place of business 3 in Marin County, California. PISF I is a debtor in Court case number 20-30908. 4 8. Defendant Professional Investors Security Fund, IV (“PISF IV”) is a limited 5 partnership organized and existing under the laws of the State of California with its principal place 6 of business in Marin County, California. PISF is a debtor in Court case number 20-30909. 7 9. Defendant Professional Investors Security Fund VII (“PISFVII”) is a limited 8 partnership organized and existing under the laws of the State of California with its principal place 9 of business in Marin County, California. PSIFVII is a debtor in Court case number 20-30911. 10 10. Defendant Professional Investors Security Fund IX (“PISFIX”) is a limited 11 partnership organized and existing under the laws of the State of California with its principal place 12 of business in Marin County, California. PSIFIX is a debtor in Court case number 20-30910. 13 11. Defendant Professional Investors Security Fund XII (“PISFXII”) is a limited 14 partnership organized and existing under the laws of the State of California with its principal place 15 of business in Marin County, California. PSIFXII is a debtor in Court case number 20-30912. 16 12. Defendant Professional Investors Security Fund XIII (“PISFXIII”) is a limited 17 partnership organized and existing under the laws of the State of California with its principal place 18 of business in Marin County, California. PSIFXIII is a debtor in Court case number 20-30913. 19 13. Defendant Professional Investors Security Fund XIV (“PISFXIV”) is a limited 20 partnership organized and existing under the laws of the State of California with its principal place 21 of business in Marin County, California. PSIFXIV is a debtor in Court case number 20-30914. 22 14. Defendant Professional Investors Security Fund XV (“PISFXV”) is a limited 23 partnership organized and existing under the laws of the State of California with its principal place 24 of business in Marin County, California. PSIFXV is a debtor in Court case number 20-30915. 25 15. Defendant Professional Investors Security Fund XVII (“PISFXVII”) is a limited 26 partnership organized and existing under the laws of the State of California with its principal place 27 of business in Marin County, California. PSIFXVII is a debtor in Court case number 20-30916. 28

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1 16. Defendant Professional Investors Security Fund XVIII (“PISFXVIII”) is a limited 2 partnership organized and existing under the laws of the State of California with its principal place 3 of business in Marin County, California. PSIFXVIII is a debtor in Court case number 20-30917. 4 17. Defendant Professional Investors 20, LLC (“PI20”) is a limited liability company 5 with its principal place of business in Marin County, California. PI20 is a debtor in Court case 6 number 20-30919. 7 18. Defendant Professional Investors 21, LLC (“PI21”) is a limited liability company 8 with its principal place of business in Marin County, California. PI21 is a debtor in Court case 9 number 20-30920. 10 19. Defendant Professional Investors 22, LLC (“PI22”) is a limited liability company 11 with its principal place of business in Marin County, California. PI22 is a debtor in Court case 12 number 20-30922. 13 20. Defendant Professional Investors 23, LLC (“PI23”) is a limited liability company 14 with its principal place of business in Marin County, California. PI23 is a debtor in Court case 15 number 20-30923. 16 21. Defendant Professional Investors 24, LLC (“PI24”) is a limited liability company 17 with its principal place of business in Marin County, California. PI24 is a debtor in Court case 18 number 20-30924. 19 22. Defendant Professional Investors 25, LLC (“PI25”) is a limited liability company 20 with its principal place of business in Marin County, California. PI25 is a debtor in Court case 21 number 20-30925. 22 23. Defendant Professional Investors 26, LLC (“PI26”) is a limited liability company 23 with its principal place of business in Marin County, California. PI26 is a debtor in Court case 24 number 20-30927. 25 24. Defendant Professional Investors 27, LLC (“PI27”) is a limited liability company 26 with its principal place of business in Marin County, California. PI27 is a debtor in Court case 27 number 20-30928. 28

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1 25. Defendant Professional Investors 28, LLC (“PI28”) is a limited liability company 2 with its principal place of business in Marin County, California. 3 26. Defendant Professional Investors 29, LLC (“PI29”) is a limited liability company 4 with its principal place of business in Marin County, California. PI29 is a debtor in Court case 5 number 20-30929. 6 27. Defendant Professional Investors 30, LLC (“PI30”) is a limited liability company 7 with its principal place of business in Marin County, California. PI30 is a debtor in Court case 8 number 20-30930. 9 28. Defendant Professional Investors 31, LLC (“PI31”) is a limited liability company 10 with its principal place of business in Marin County, California. 11 29. Defendant Professional Investors 32, LLC (“PI32”) is a limited liability company 12 with its principal place of business in Marin County, California. PI32 is a debtor in Court case 13 number 20-30934. 14 30. Defendant Professional Investors 33, LLC (“PI33”) is a limited liability company 15 with its principal place of business in Marin County, California. PI33 is a debtor in Court case 16 number 20-30935. 17 31. Defendant Professional Investors 34, LLC (“PI34”) is a limited liability company 18 with its principal place of business in Marin County, California. PI34 is a debtor in Court case 19 number 20-30936. 20 32. Defendant Professional Investors 35, LLC (“PI35”) is a limited liability company 21 with its principal place of business in Marin County, California. PI35 is a debtor in Court case 22 number 20-30937. 23 33. Defendant Professional Investors 36, LLC (“PI36”) is a limited liability company 24 with its principal place of business in Marin County, California. PI36 is a debtor in Court case 25 number 20-30938. 26 34. Defendant Professional Investors 37, LLC (“PI37”) is a limited liability company 27 with its principal place of business in Marin County, California. PI37 is a debtor in Court case 28 number 20-30939.

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1 35. Defendant Professional Investors 38, LLC (“PI38”) is a limited liability company 2 with its principal place of business in Marin County, California. 3 36. Defendant Professional Investors 39, LLC (“PI39”) is a limited liability company 4 with its principal place of business in Marin County, California. 5 37. Defendant Professional Investors 40, LLC (“PI40”) is a limited liability company 6 with its principal place of business in Marin County, California. PI40 is a debtor in Court case 7 number 20-30940. 8 38. Defendant Professional Investors 41, LLC (“PI41”) is a limited liability company 9 with its principal place of business in Marin County, California. PI41 is a debtor in Court case 10 number 20-30941. 11 39. Defendant Professional Investors 42, LLC (“PI42”) is a limited liability company 12 with its principal place of business in Marin County, California. 13 40. Defendant Professional Investors 43, LLC (“PI43”) is a limited liability company 14 with its principal place of business in Marin County, California. 15 41. Defendant Professional Investors 44, LLC (“PI44”) is a limited liability company 16 with its principal place of business in Marin County, California. 17 42. Defendant Professional Investors 45, LLC (“PI45”) is a limited liability company 18 with its principal place of business in Marin County, California. 19 43. Defendant Professional Investors 46, LLC (“PI46”) is a limited liability company 20 with its principal place of business in Marin County, California. PI46 is a debtor in Court case 21 number 20-30942. 22 44. Defendant Professional Investors 47, LLC (“PI47”) is a limited liability company 23 with its principal place of business in Marin County, California. 24 45. Defendant Professional Investors 48, LLC (“PI48”) is a limited liability company 25 with its principal place of business in Marin County, California. 26 46. Defendant Professional Investors 49, LLC (“PI49”) is a limited liability company 27 with its principal place of business in Marin County, California. 28

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1 47. Defendant PFI Glenwood, LLC (“PFI Glenwood”) is a limited liability company 2 with its principal place of business in Marin County, California. 3 48. In this Complaint, PFI, PISF, PISF I, PISF IV, PISFVII, PISFIX, PISFXII, PISFIX, 4 PISFXII, PISFXIII, PISFXIV, PISFXV, PISFXVII, PISFXVIII, PI20, PI21, PI22, PI23, PI24, PI255 PI26, PI27, PI28, PI29, PI30, PI31, PI32, PI33, PI34, PI35, PI36, PI37, PI38, PI39, PI40, PI41, 6 PI42, PI43, PI44, PI45, PI46, PI47, PI48, PI49 and PFI Glenwood will be collectively referred to a7 the “Defendants.” 8 III. 9 GENERAL ALLEGATIONS 10 BACKGROUND 11 Defendants’ Capital Structure 12 49. PFI was founded by Ken Casey (“Casey”) on or about August 15, 1990. Casey 13 served as its sole officer, director and shareholder until 1998, when he relinquished his corporate 14 positions and placed his shares of PFI in an irrevocable trust after pleading guilty in federal court t15 one count of conspiracy to defraud the federal government, five counts of tax evasion, forty-one 16 counts of bank fraud and five counts of filing false income tax returns. On information and belief, 17 Casey was at that time sentenced to 18 months in prison and three years of probation. As a result o18 such prior fraud, Casey lost his standing as a Certified Public Accountant. Despite these actions, 19 Plaintiff is informed and believes that Casey maintained complete de facto control over PFI until 20 his death on May 6, 2020. 21 50. Casey founded PISF on or about November 1, 1983 and served as its sole 22 shareholder, officer, and director from that date until his death. 23 51. The Defendants own various real properties in Northern California (Marin and 24 Sonoma Counties) and also own interests in various other entities that in turn own real property in 25 California. PFI serves as the property manager for all of these real properties as well as the 26 operational arm that manages and accounts for Defendants’ activities. 27 // 28 //

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1 Defendants’ Assets and Liabilities 2 52. Plaintiff is informed and believes, and on that basis alleges that the Debtors currentl3 own a direct or indirect interest in approximately 71 properties in California. Plaintiff is further 4 informed and believes that the 71 properties fall within the following direct or indirect ownership 5 interest categories: 6 (a) Limited Partnerships (“LPs”). Between 1983 and 1995, Casey formed 18 LPs to 7 acquire individual properties. In doing so, Casey obtained mortgage debt from banks 8 and raised additional capital from investors to fund the LPs. The Debtors currently 9 maintain 10 of these LPs (the other 8 were liquidated). The majority of the LP equity10 investors were bought out or, in more recent years, converted their interests into othe11 forms of investments offered by the Debtors (e.g., Deed of Trust holders, commonly 12 referred to as “DOTs” and/or “DOT Holders”). 13 (b) PFI Owned Properties. Between 2003 and 2019, PFI acquired 31 properties. The 14 properties acquired were financed through traditional bank mortgage debt, funding 15 from DOT Holders, and Tenancy in Common agreements (commonly referred to as 16 “TICs” and/or “TIC Holders”). Current DOT Holders include investors who 17 exchanged and/or transferred all or a portion of their prior investments into newly 18 acquired properties.1 These cashless Rollovers required the Debtors to source new 19 cash equal to the designated transfer amounts in order to fund the acquisition of each20 subject property. The primary means by which the Debtors raised new money appear21 to have been through PISF Notes—the proceeds of which typically flowed through 22 commingled PFI/PISF corporate accounts to the escrow accounts. 23 (c) Limited Liability Companies (“LLCs”). Between 2013 and 2020, Casey formed 30 24 LLCs to acquire individual properties. Although there were variations in percentages25 the LLCs were generally structured in a manner that granted a 30% ownership 26 interest to PFI. The properties acquired were generally financed through traditional 27 28 1

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1 bank mortgage debt, sale of membership interests in the LLCs, and TIC Holders. Th2 funding of the LLC properties also included Investment Rollovers. 3 Defendant PFI serves as the property manager for all 71 LP, PFI Owned, and LLC properties in 4 which it continues to hold a direct or indirect interest. 5 53. Plaintiff is informed and believes that most of the Real Properties are subject to a 6 first lien deed of trust in favor of traditional third-party bank lender in many cases. In addition, 7 some of the Real Properties were purported to be encumbered by deeds of trust in favor of investor8 in one of the Defendants (these purported deeds of trust are fractionalized deeds of trust). Plaintiff 9 is informed and believes, and on that basis alleges, that as of July 2020, the aggregate outstanding 10 debt secured by first and second lien deeds of trust totaled more than $400 million. In addition, 11 Plaintiff is informed and believes that PISF owes more than $275 million of principal and estimate12 accrued and unpaid interest to investors whose investments were purportedly secured by PISF’s 13 interest in the LPs. 14 54. Plaintiff is informed and believes that the Defendants’ books and records indicate 15 they have five main types of investors: (a) lenders to PISF that are purportedly secured by PISF’s 16 interests in the LPs (collectively, the “PISF Straight Lenders”), (b) lenders to PISF that are 17 purportedly secured by deeds of trust on real properties owned by the LPs (collectively, the “PISF 18 DOT Lenders”, (c) lenders to PFI that are purportedly secured by deeds of trust on real properties 19 owned solely by PFI (collectively, the “PFI DOT Lenders,” (d) members of various limited liabilit20 companies for which PFI is the manager, a member, an equity holder, and a property manager 21 (collectively, the “LLC Members”), and (e) tenants in common to properties owned with PFI or the22 LLCs. 23 Fraud Example: Operations of PISF 24 55. Plaintiff is informed and believes that the initial discovery of financial irregularities 25 after Casey’s death related to the loans made by the PISF Straight Lenders, which appear to have a 26 current total outstanding principal balance of approximately $237 million. However, additional 27 review has made it clear that virtually every other PFI-related investment vehicle was also 28 impacted. One element of Defendants’ scheme involved having PISF Straight Lenders loan money

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1 to PISF based upon assurances that their loaned funds would be used to make improvements to 2 properties owned by PISF, pay off existing investors in PISF, purchase new real properties to be 3 held by PISF, and to fund a reserve to cover PISF’s debt service on investors’ loans. While the 4 loans made by PISF Straight Lenders are ostensibly secured by PISF’s interests in the LPs, the 5 investigation into the Companies’ finances indicates this collateral is mostly exhausted and likely 6 has been for some years. It is also unclear if any of these security interests were ever perfected. 7 The properties owned by the LPs are subject to mortgages and deeds of trust that, based on current 8 estimated values for those properties, leave little or no equity in the individual LPs. 9 56. Plaintiff is informed and believes that a substantial amount of the funds invested by 10 the PISF Straight Lenders appear to have been used to (i) make interest payments to pre-existing 11 PISF Straight Lenders, (ii) make interest payments to the PISF DOT Lenders, (iii) make interest 12 payments to the PFI DOT Lenders, (iv) convert PISF Straight Lenders’ principal and accrued 13 interest into membership interests in PFI-managed limited liability companies, (v) fund intra-14 company transactions with PFI that were effectively booked as payables and receivables, (vi) make15 intra-company loans to LLCs for improvements and interest payments to members, and (vii) enrich16 Ken Casey and potentially others. 17 57. The finances of the Companies are such that, without accepting new investment or 18 monies from PISF Straight Lenders, neither PISF nor PFI have sufficient cash flow to meet their 19 monthly interest obligations to the existing PISF Straight Lenders or the PISF DOT Lenders, the 20 PFI DOT Lenders, or pay promised quarterly returns to certain LLC members. This is just one 21 example of the grand fraud perpetrated by the Debtors’ prior managers and executives. 22 Additionally, the Committee is informed and believes that investment monies from DOT Holders 23 and LLC members were similarly allocated without regard to the investment promises made and 24 undertaken by the Debtors such that the entire operation was a Ponzi scheme beginning no later 25 than January 1, 2007. 26 Indictment of Lewis Wallach and His Admissions of Guilt 27 58. Lewis Wallach (“Wallach”) is the former CEO of PFI. On September 29, 2020, 28 Wallach was indicted in a criminal information in connection with his activities involving the

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1 Defendants, and that information included one count of wire fraud, in violation of 18 U.S.C. § 2 1343, and one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. On 3 December 16, 2020, Wallach presented a plea agreement to the Hon. Maxine M. Chesney, U.S. 4 District Judge in which he pleaded guilty on both counts. 5 59. According to his plea agreement, Wallach admitted that he was hired by Casey and 6 that he was later named president and CEO of PFI. Wallach admitted that PFI and PISF investors 7 were told that the investors’ regular interest and distribution payments would be paid from income 8 on the residential and commercial properties owned and managed by PFI. In fact, as Wallach has 9 now admitted, he knew that PFI was not profitable and that income from the properties was not 10 sufficient to pay both interest and distributions. In fact, both Wallach and Casey knew that PFI and11 PISF had to raise new investments to pay existing investors. 12 60. Wallach admitted that he lied to investors, including falsely telling investors that PF13 had significant reserves to allow it to survive and expand during the economic downturn caused by14 the COVID 19 pandemic. He admitted that he conspired with Casey to mislead investors and 15 solicit investor funds using false statements. 16 61. Wallach also admitted that he engaged in a years-long scheme to embezzle funds 17 from PFI and PISF in which he took more than $26 million from 2015 until June 2020, including 18 money he used for large investments, the purchase of real estate, and payment of personal expense19 62. Under the plea agreement entered by Wallach and the United States Attorney’s 20 Office, Wallach agreed to the entry of an order by the court requiring him to pay restitution of no 21 less than $26.7 million. Pursuant to the agreement, Wallach also agreed to continue to cooperate i22 the criminal investigation and to assist prosecutors with identifying, securing, and transferring any 23 assets derived from or related to the charged offense. 24 Further Confirmation of the Defendants’ Fraudulent Business Operations From FTI 25 63. Plaintiff is informed and believes that, since at least January 1, 2007, Casey and 26 Wallach operated a fraudulent scheme in which investors believed they were loaning funds to or 27 investing in equity of the Defendants. However, in fact, a significant portion of those funds were 28 used to service the debt owed to existing investors and to personally enrich Casey and Wallach.

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1 64. The fraudulent scheme involving the Defendants only came to light upon Casey’s 2 death. Several months later, the vast majority of the Defendants entered bankruptcy (with only a 3 tiny fraction of the entities not being debtors as this Complaint is being filed). 4 65. On September 3, 2020, the debtors then in bankruptcy retained FTI Consulting 5 (“FTI”) as their financial advisor. Since that time, an FTI forensics team has worked day and night6 to gather data, organize it, analyze it, and present its findings to the Debtors, the Committee, and 7 others. Based on its communications with FTI, Plaintiff is informed and believes that FTI will offe8 the following expert opinions at any trial in this matter, among others: 9  No later than January 1, 2007, the Defendants’ business records and other available 10 evidence presents attributes commonly seen in Ponzi schemes, and such attributes 11 continued through Casey’s death. 12  Many Debtors had either negative equity or a disabling lack of liquidity that demanded 13 the use of cash belonging to other related entities. 14  The “debt service” and investment returns paid to investors could never have been paid 15 without the use of new capital from new investors because the Real Properties were not 16 sufficiently profitable to have done so. 17  The Debtors’ cash flows were commingled, and this commingling was a prevalent featur18 of Defendants’ operations. 19  Casey and Wallach removed millions of dollars from the Defendants. 20 IV. 21 CLAIMS FOR RELIEF 22 FIRST CLAIM: DECLARATORY RELIEF AGAINST ALL DEFENDANTS 23 66. Plaintiff adopts and incorporates each of the allegations and contentions found in 24 paragraphs 1-65, above, as if they were set forth here in full. 25 67. An actual controversy and dispute exists between Plaintiff and Defendants regardin26 the nature of the Defendants’ liabilities to all investors. Plaintiff contends that all of Defendants’ 27 businesses were operated as a Ponzi scheme since at least January 1, 2007. Defendants are awaitin28 the outcome of a final forensic report from FTI to verify the foregoing.

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1 68. A formal judicial Ponzi finding from this Court will benefit the Debtors because it 2 will be integral to future “netting” and claims allowance in the bankruptcy cases. It will also be on3 of the cornerstones of future clawback actions against persons who got more out of the Ponzi 4 scheme than they put in. Similarly, a formal judicial Ponzi finding will benefit all investors, as the 5 finding will assist investors with their federal income tax filings. 6 WHEREFORE, Plaintiffs pray for judgment against Defendants as follows: 7 1. A declaration that the Defendants’ businesses were all part of an overarching Ponzi 8 scheme that began no later than January 1, 2007; 9 2. For costs of suit incurred herein; and 10 3. Such other and further relief as the Court may deem just and proper. 11 Dated: April 13, 2021 PACHULSKI STANG ZIEHL & JONES LLP 12 By: /s/ John D. Fiero 13 Debra I. Grassgreen John D. Fiero 14 Cia Mackle 15 Counsel for the Official Committee of Unsecured Creditors 16 17 18 19 20 21 22 23 24 25 26 27 28

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