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Full title: Motion to Approve Document Motion to Approve Stipulation for Judgment on the Official Committee of Unsecured Creditors of Professional Financial Investors Security Funds, Inc.'s Complaint for Declaratory Relief Filed by Debtor Professional Financial Investors, Inc. (Marum, J.) (Entered: 04/29/2021)

Document posted on Apr 28, 2021 in the bankruptcy, 25 pages and 0 tables.

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Security Fund XII, A California Limited Partnership; Professional Investors Security Fund XIII, 9 California Limited Partnership; Professional Investors Security Fund XIV, A California Limited 10 Partnership; Professional Investors Security Fund XV, A California Limited Partnership; 11 Professional Investors Security Fund, Inc. (the “Committee” or “Plaintiffs”), on the one hand, and6 Debtors Professional Financial Investors, Inc. (“PFI”); Professional Investors Security Fund, Inc. 7 (“PISF,” and together with PFI, the “Companies”); Professional Investors Security Fund I, A 8 California Limited Partnership; Professional Investors Security Fund IV, A California Limited 9 Partnership; Professional Investors Security Fund VII, A California Limited Partnership; 10 California Limited Partnership; Professional Investors Security Fund XIV, A California Limited 13 Partnership; Professional Investors Security Fund XV, A California Limited Partnership; 14 Investors Security Fund I, A California Limited Partnership; Professional Investors Security Fund23 IV, A California Limited Partnership; Professional Investors Security Fund VII, A California 24 Limited Partnership; Professional Investors Security Fund IX, A California Limited Partnership; 25 Professional Investors Security Fund XII, A California Limited Partnership;A California Limited Partnership; Professional Investors Security Fund XV, A California Limited 1 Partnership; Professional Investors Security Fund XVII, A California Limited; Professional 2

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Document Contents

1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 2 A Limited Liability Partnership Including Professional Corporations 3 ORI KATZ, Cal. Bar No. 209561 J. BARRETT MARUM, Cal. Bar No. 228628 4 MATT KLINGER, Cal. Bar No. 307362 GIANNA SEGRETTI, Cal. Bar No. 323645 5 Four Embarcadero Center, 17th Floor San Francisco, California 94111-4109 6 Telephone: 415.434.9100 Facsimile: 415.434.3947 7 Email: okatz@sheppardmullin.com bmarum@sheppardmullin.com 8 mklinger@sheppardmullin.com gsegretti@sheppardmullin.com 9 Counsel for the Debtors 10 Richard A. Lapping (SBN: 107496) TRODELLA & LAPPING LLP 11 540 Pacific Avenue San Francisco, CA 94133 12 Telephone: 415.399.1015 Facsimile: 415.651.9004 13 Email: Rich@TrodellaLapping.com 14 Conflicts Counsel for the Debtors and Counsel for Professional Investors 28, LLC and PFI 15 Glenwood, LLC 16 UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION 17 In re Case No. 20-30604 18 PROFESSIONAL FINANCIAL (Jointly Administered) 19 INVESTORS, INC., a California corporation, et al., Chapter 11 20 Debtors. MOTION TO APPROVE STIPULATION 21 FOR JUDGMENT ON THE OFFICIAL COMMITTEE OF UNSECURED 22 CREDITORS OF PROFESSIONAL FINANCIAL INVESTORS, INC. AND 23 PROFESSIONAL INVESTORS SECURITY FUNDS, INC.’S COMPLAINT 24 FOR DECLARATORY RELIEF 25 Judge: Hon. Hannah L. Blumenstiel Date: May 20, 2021 26 Time: 10:00 a.m. Place: Telephonic/Video Appearances Only 27 450 Golden Gate Ave. 16th Fl. Ctrm. 19

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1 TO THE HONORABLE HANNAH L. BLUMENSTIEL, UNITED STATES 2 BANKRUPTCY JUDGE, AND ALL PARTIES IN INTEREST: 3 Debtors Professional Financial Investors, Inc. (“PFI”); Professional Investors Security 4 Fund, Inc. (“PISF,” and together with PFI, the “Companies”); Professional Investors Security 5 Fund I, A California Limited Partnership; Professional Investors Security Fund IV, A California 6 Limited Partnership; Professional Investors Security Fund VII, A California Limited Partnership; 7 Professional Investors Security Fund IX, A California Limited Partnership; Professional Investors8 Security Fund XII, A California Limited Partnership; Professional Investors Security Fund XIII, 9 California Limited Partnership; Professional Investors Security Fund XIV, A California Limited 10 Partnership; Professional Investors Security Fund XV, A California Limited Partnership; 11 Professional Investors Security Fund XVII, A California Limited; Professional Investors Security12 Fund XVIII, A California Limited Partnership; Professional Investors 20, LLC; Professional 13 Investors 21, LLC; Professional Investors 22, LLC; Professional Investors 23, LLC; Professional 14 Investors 24, LLC; Professional Investors 25, LLC; Professional Investors 26, LLC; Professional 15 Investors 27, LLC; Professional Investors 29, LLC; Professional Investors 30, LLC; Professional16 Investors 31, LLC; Professional Investors 32, LLC; Professional Investors 33, LLC; Professional 17 Investors 34, LLC; Professional Investors 35, LLC; Professional Investors 36, LLC; Professional 18 Investors 37, LLC; Professional Investors 38, LLC; Professional Investors 39, LLC; Professional 19 Investors 40, LLC; Professional Investors 41, LLC; Professional Investors 42, LLC; Professional20 Investors 43, LLC; Professional Investors 44, LLC; Professional Investors 45, LLC; Professional 21 Investors 46, LLC; Professional Investors 47, LLC; Professional Investors 48, LLC; and 22 Professional Investors 49, LLC (collectively, the “Debtors”) hereby move (the “Motion”) the 23 Court for the entry of an order authorizing and approving the Stipulation for Entry of Judgment o24 the Official Committee of Unsecured Creditors of Professional Financial Investors, Inc. and 25 Professional Investors Security Funds, Inc.’s Complaint for Declaratory Relief (the 26 27

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1 “Stipulation”)1 entered into by and between the Official Committee of Unsecured Creditors of 2 Professional Financial Investors, Inc. and Professional Investors Security Fund, Inc. (the 3 “Committee” or “Plaintiffs”), on the one hand, and the Debtors and non-debtors Professional 4 Investors 28, LLC and PFI Glenwood, LLC (together with the Debtors, “Defendants,” and 5 together with the Plaintiffs, the “Parties”), on the other hand, for entry of a stipulated judgment in6 substantially the form attached as Exhibit A to the Stipulation (the “Stipulated Judgment,” and 7 together with the Stipulation, the “Stipulations”) under section 105 of the Bankruptcy Code2 and 8 Rule 9019 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”), and for a finding 9 that the Stipulated Judgment is reasonable and in the best interest of the creditors of the Debtors’ 10 estates. 11 I. 12 INTRODUCTION 13 Following the death of Ken Casey on May 6, 2020, Mr. Casey’s ex-wife and trustee of Mr14 Casey’s shares of PFI sought review of the Companies’ real estate holdings and debt financing. 15 This review ultimately led to a Company-prompted SEC investigation, resignation of the 16 Companies’ corporate officers, appointment of a Chief Restructuring Officer (“CRO”)3 to overse17 the Companies’ day-to-day operations, and the commencement of the Debtors’ bankruptcy cases. 18 The ongoing review of the Companies’ real estate holdings and debt financing reveals that 19 beginning at least in 2007 Mr. Casey operated a fraudulent scheme in which investors loaned 20 21 22 1 As set forth herein, on April 29, 2021, the Debtors filed the Stipulation with the Court as Docket23 No. [5] (Adv. P. No. 21-03018). A conformed copy of the Stipulation also is appended to this Motion as Exhibit B. 24 2 Unless otherwise indicated, all section references in this Motion shall be to 11 U.S.C. §§ 101, et 25 seq. (the “Bankruptcy Code”). 26 3 On October 9, 2020, the Court entered an order authorizing PFI and PISF to retain and employ Michael Hogan of Armanino LLP as their CRO, effective as of July 26, 2021. See Docket27 No. 202. On March 3, 2021, the Court entered an order authorizing PFI and PISF to retaiand employ Andrew Hinkelman of FTI as their CRO, effective as of January 4, 2021. See

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1 funds to the Companies, which funds Mr. Casey used to service the debt owed to existing 2 investors and to enrich Mr. Casey’s personal funds. 3 On April 13, 2021, the Committee filed its Complaint for Declaratory Relief seeking a 4 declaration that Defendants’ businesses were all part of an overarching Ponzi scheme that began 5 no later than January 1, 2007 (the “Complaint”). 6 After the commencement of the Debtors’ bankruptcy cases, the Debtors retained FTI 7 Consulting (“FTI”) as their financial advisor to analyze the Defendants’ business records and 8 conduct a forensic investigation and accounting of the Defendants’ businesses. Based on the 9 findings of FTI’s forensics team, the Debtors have determined that Mr. Casey orchestrated a 10 fraudulent scheme such that the Defendants’ businesses were all part of an overarching Ponzi 11 scheme. As a result, the Defendants answered the Committee’s Complaint by admitting to all of 12 the substantive allegations set forth therein. Based on the foregoing, the Committee and the 13 Defendants have agreed to enter into the Stipulation, a copy of which is appended to this Motion 14 as Exhibit B, for entry of the Stipulated Judgment and seek Court approval of the Stipulations. 15 This Motion is based on the concurrently filed declaration of David Alfaro (the “Alfaro 16 Declaration”), other relevant pleadings and documents of record, and upon such further oral and 17 documentary evidence as may be presented in connection with this Motion. 18 II. 19 STATEMENT OF FACTS 20 On or about August 15, 1990, Mr. Casey founded PFI and served as its sole officer, 21 director and shareholder until 1998, when he relinquished his corporate positions and placed his 22 shares of PFI in an irrevocable trust for which his ex-wife, Charlene Albanese4, is the current 23 trustee and lifetime income beneficiary. Despite these actions, Mr. Casey maintained complete d24 facto control over PFI until his death on May 6, 2020. On or about November 1, 1983, Mr. Casey25 founded PISF and served as its sole shareholder, officer, and director from that date until his 26 27

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1 death. Mr. Casey’s shares in PISF were held in a revocable trust. Upon Mr. Casey’s death, Ms. 2 Albanese became the trustee and beneficiary of that revocable trust. 3 Over a period of at least fourteen (14) years, Mr. Casey operated a fraudulent scheme in 4 which investors loaned funds to the Companies, which funds Mr. Casey used to service the debt 5 owed to existing investors and to enrich Mr. Casey personally. 6 On June 13, 2020, and July 21, 2020, all of the Companies’ respective officers resigned, 7 and Michael Hogan was appointed as the Companies’ Chief Restructuring Officer.5 8 On July 16, 2020, certain creditors of PISF commenced an involuntary chapter 11 9 bankruptcy action against PISF (Bankruptcy Case No. 20-30579, the “PISF Case”). On July 26, 10 2020, PISF filed a consent to the entry of an order for relief in the PISF Case, and on July 27, 11 2020, the Court entered such order for relief. On July 26, 2020, PFI filed a voluntary petition for 12 relief under chapter 11 of the Bankruptcy Code and thereby commenced its bankruptcy case 13 (Bankruptcy Case No. 20-30604, the “PFI Case”). Thereafter, on December 11, 2020, and 14 February 18, 2021, the Court entered orders for relief under chapter 11 in the involuntary chapter 15 11 proceedings commenced by PFI against thirty-nine affiliates of the Companies, each of which 16 the Plaintiffs name as a debtor and defendant in the Complaint (defined herein). 17 On September 3, 2020, and thereafter as the Companies commenced the chapter 11 18 proceedings of their affiliates, each of the Debtors retained FTI to analyze the Defendants’ 19 business records and conduct a forensic investigation and accounting of the Defendants’ 20 businesses. Based on the findings of FTI’s forensics team, the Debtors have determined that Mr. 21 Casey orchestrated a fraudulent scheme such that the Defendants’ businesses all were part of an 22 overarching Ponzi scheme. 23 On April 13, 2021, the Committee filed its Complaint and commenced that certain 24 adversary proceeding styled, The Official Committee of Unsecured Creditors v. PFI, et al., 25 Adversary Proceeding No. 20-3018 (the “Adversary Proceeding”) to seek a judgment that declare26 that all of the Defendants’ businesses were part of an overarching Ponzi scheme that began no 27

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1 later than January 1, 2007. The Debtors understand that the Complaint is based, at least in part, o2 FTI’s forensic investigation and resulting conclusions, which include, but not are limited to the 3 following: 4 • No later than January 1, 2007, the Defendants’ business records and other 5 available evidence presents attributes commonly seen in Ponzi schemes, and such 6 attributes continued through Casey’s death. 7 • Many Debtors had either negative equity or a disabling lack of liquidity tha8 demanded the use of cash belonging to other related entities. 9 • The “debt service” and investment returns paid to investors could never 10 have been paid without the use of new capital from new investors because the Real 11 Properties were not sufficiently profitable to have done so. 12 • The Debtors’ cash flows were commingled, and this commingling was a 13 prevalent feature of Defendants’ operations. 14 • Mr. Casey and Lewis Wallach removed millions of dollars from the 15 Defendants. 16 As the Debtors received the same information and forensic analysis from FTI that the 17 Committee did, the Defendants answered the Committee’s Complaint by admitting to all of the 18 substantive allegations set forth therein. The Debtors and the Committee have been discussing th19 best, most equitable way to ensure that creditors of the Debtors’ estates and victims of Mr. 20 Casey’s Ponzi scheme recover the maximum amount of their respective claims. 21 As set forth in the Stipulation, the Debtors believe that a judicial finding that at least since 22 January 1, 2007, the Defendants’ businesses were operated as a Ponzi scheme is in the best intere23 of the Debtors’ estates because such finding will be (1) integral to future “netting” and claims 24 allowance in the Debtors’ bankruptcy cases; and (2) the basis of future actions to avoid and 25 recover against persons who received more proceeds from Mr. Casey’s Ponzi scheme than they 26 invested. Based on the foregoing, the Committee and the Defendants have agreed to enter into th27 Stipulation for entry of the Stipulated Judgment and to seek Court approval of the Stipulations.

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1 III. 2 RELIEF REQUESTED 3 By this Motion, the Debtors seek entry of (1) an order, in substantially the form attached 4 hereto as Exhibit A, approving and authorizing the Debtors to enter into the Stipulation and the 5 Stipulated Judgment; and (2) entry of the Stipulated Judgment in the Adversary Proceeding. 6 IV. 7 ARGUMENT 8 The Stipulations are a compromise between the Parties that should be approved under 9 Bankruptcy Rule 9019(a), which sets forth authority for a trustee or debtor in possession to 10 compromise a controversy. Specifically, Bankruptcy Rule 9019(a) states, in relevant part: “On 11 motion by the trustee and after notice and a hearing, the court may approve a compromise or 12 settlement.” Fed. R. Bankr. P. 9019(a). 13 The Ninth Circuit has established the following four-factor test that courts routinely 14 consider when determining whether to approve a settlement or compromise of controversy: 15 In determining the fairness, reasonableness and adequacy of a proposed settlement agreement, the court must consider: (a) The 16 probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the 17 litigation involved, and the expense, inconvenience and delay 18 necessarily attending it; (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises. 19 Martin v. Kane (In re A & C Props.), 784 F.2d 1377, 1381 (9th Cir.), cert. denied sub nom. Marti20 v. Robinson, 479 U.S. 854 (1986), overruled in part on other grounds by In re Wash. Pub. Power 21 Supply Sys. Sec. Litig., 823 F.2d 1349, 1350 (9th Cir. 1987). 22 The decision of whether to approve or reject a proposed compromise is addressed to the 23 sound discretion of the Court and is to be determined by the particular circumstances of each case24 See United States v. Alaska Nat'l Bank of the North (In re Walsh Constr., Inc.), 669 F.2d 1325, 25 1328 (9th Cir. 1982); Woodson v. Fireman’s Fund Ins. Co. (In re Woodson), 839 F.2d 610, 620 26 (9th Cir. 1987); In re A & C Props., supra, at 1381. In deciding whether to approve a settlement 27 court should not substitute its own judgment for the judgment of a trustee or a debtor. See Matter

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1 of Carla Leather, Inc., 44 B.R. 457, 465 (Bankr. S.D.N.Y. 1984). In approving a settlement, the 2 Court need not conduct an exhaustive investigation of the claims sought to be compromised. See 3 In re Walsh Constr., Inc., 669 F.2d at 1328. Rather, it is sufficient for the court to find that the 4 settlement was negotiated in good faith and is reasonable, “fair[,] and equitable” based on an 5 “educated estimate of the complexity, expense, and likely duration of such litigation, the possible 6 difficulties of collecting on any judgment which might be obtained, and all other factors relevant 7 to a full and fair assessment of the wisdom of the proposed compromise” Protective Comm. of 8 Indep. Stockholders for TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968); see also 9 A & C Props., 784 F.2d at 1381. In fact, the court’s only responsibility is “to canvass the issues t10 see whether the settlement ‘fall[s] below the lowest point in the range of reasonableness.’” In re 11 W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983) (quoting Newman v. Stein, 464 F.2d 683, 693 12 (2d Cir. 1972); see In re Milden, 111 F.3d 138 (9th Cir. 1997); In re Pac. Gas and Elec. Co., 304 13 B.R. 395, 417 (Bankr. N.D. Cal. 2004). 14 An analysis of the A&C Properties factors in this case, as set forth below and based on the15 facts in the Alfaro Declaration, demonstrates that the Stipulations are fair and equitable, and 16 should be approved. 17 A. The Probability of Success in Litigation 18 Traditionally, a “Ponzi scheme” is defined as “an investment fraud that pays existing 19 investors with funds collected from new investors.” Ponzi Scheme, INVESTOR.GOV, U.S. 20 SECURITIES AND EXCHANGE COMMISSION, https://www.investor.gov/protect-your-21 investments/fraud/types-fraud/ponzi-scheme (last visited April 28, 2021). 22 Ponzi scheme organizers often promise high returns with little or no risk. Instead, they use money from new investors to pay earlier 23 investors and may steal some of the money for themselves. With little … earnings, Ponzi schemes require a constant flow of new 24 money to survive. When it becomes hard to recruit new investors, or 25 when large numbers of existing investors cash out, these schemes tend to collapse. 26 Id. 27 The Ninth Circuit defines Ponzi schemes as “[a] fraudulent arrangement in which an entit

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1 …alleged business venture, thereby cultivating an illusion that a legitimate profit-making busines2 opportunity exists and inducing further investment.” Wyle v. C.H. Rider & Family (In re United 3 Energy Corp.), 944 F.2d 589, 590 n.1 (9th Circ. 1991). Notwithstanding that, often, Ponzi 4 schemes are not based on legitimate business ventures, “[a]t bottom, the label Ponzi scheme 5 applies to any sort of inherently fraudulent arrangement under which the debtor-transferor must 6 utilize after-acquired investment funds to pay off previous investors in order to forestall disclosur7 of the fraud.” Gowan v. Amaranth Advisers L.L.C. (In re Dreier L.L.P.), 08-15051 (SMB), Adv. 8 Proc. No. 10-03493 (SMB), Adv. Proc. No. 10-05547 (SMB), 2014 WL 47774, at *9 (Bankr. 9 S.D.N.Y. Jan. 2, 2014) (internal quotations omitted) (In Dreier LLP, the underlying business 10 venture was the legitimate law practice of which the perpetrator of the fraudulent arrangement wa11 the sole equity partner.). Further, the Ninth Circuit has held that, “[d]istributing funds to earlier 12 investors from the receipt of monies from later investors is the hallmark of Ponzi schemes.” 13 Hayes v. Palm Seedlings Partners-A (In re Agric. Rsch. & Tech. Grp., Inc.), 916 F.2d 528, 536 14 (9th Cir. 1990); see also Forman v. Salzano (In re Norvergence, Inc.), 405 B.R. 709, 730 (Bankr. 15 D.N.J. 2009); Auza v. United Dev., Inc. (In re United Dev., Inc.), 319 F. App’x 685, 687 (9th Cir. 16 2009) (affirming the bankruptcy court’s finding that the debtor operated a Ponzi scheme where th17 debtor “made payments to lenders from money obtained from later lenders, rather than from 18 business profits.”); even assuming [the fraudster] did not promise or represent high rates of return19 this does not mean that he was not running a Ponzi scheme.Armstrong v. Collins, No. 01 Civ. 20 2437(PAC), 02 Civ. 2796(PAC), 02 Civ. 3520(PAC), 2010 WL 1141158, at *23 (S.D.N.Y. Mar. 21 24, 2010) (citing Forman v. Salzano (In re Norvergence, Inc.), 405 B.R. 709, 730 (Bankr. D.N.J. 22 2009)) (noting that “even assuming [the fraudster] did not promise or represent high rates of 23 return, this does not mean that he was not running a Ponzi scheme…a clever twist on the Ponzi 24 concept will not remove a fraudulent scheme from the definition of Ponzi.”). 25 Here, the investigation into the Debtors’ books and records identified many of the 26 attributes of a typical Ponzi scheme and the Defendants here have therefore answered the 27 Complaint admitting to all of the substantive allegations set forth therein. The Stipulations are th

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1 analyzed by a team of forensic accountants that the Debtors employed for the express purpose of 2 unraveling and determining the extent and nature of the fraud Mr. Casey and his associates 3 perpetrated on the Debtors’ investors. As the Defendants do not have any credible basis for 4 denying the allegations set forth in the Complaint, the Defendants will not succeed in the 5 Adversary Proceeding. The Stipulations, however, provide the Debtors with some amount of 6 control over the language of the Stipulated Judgment. 7 Moreover, the Debtors have a fiduciary duty to their creditors to pursue their best interests8 and neither the interests of the Defendants’ nor the creditors of the Debtors’ estates will be served9 by any result other than the declaratory relief that the Committee seeks by the Complaint. The 10 Debtors believe then, in their business judgment, that Court approval of the Stipulations is not 11 only more beneficial to their estates, but necessary as the Defendants cannot in good faith litigate 12 the Adversary Proceeding. 13 B. The Difficulties, if Any, to Be Encountered in Collection 14 The Debtors are defendants in the Adversary Proceeding and have admitted all of the 15 substantive allegations set forth in the Complaint. As defendants, the Debtors would never collec16 on the pending litigation, nor is the Committee seeking monetary damages by the Complaint. 17 Thus, this factor of the A&C Properties test is inapplicable. Nevertheless, entry of the Stipulated 18 Judgment is the first step that the Debtors and the Committee must take toward reconciling and 19 “netting” claims filed against the Debtors in their respective bankruptcy cases and avoiding and 20 recovering monies from persons who received more proceeds from Mr. Casey’s Ponzi scheme 21 than they invested for redistribution to all of the Debtors’ creditors on the terms set forth in the 22 Amended Chapter 11 Plan of Reorganization of Professional Financial Investors, Inc., and its 23 Affiliated Debtors Proposed by the Debtors and Official Committee of Unsecured Creditors and 24 Supported by the Ad Hoc LLC Members Committee and the Ad Hoc DOT Noteholders 25 Committee Filed by Debtor Professional Financial Investors, Inc. filed with the Court on April 9,26 2021, as Docket No. 554. 27

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1 C. The Complexity of the Litigation Involved and the Expense, Inconvenience and Dela2 Necessarily Attending It 3 This factor of the A&C Properties test is inapplicable to the facts at hand. Litigation of th4 Adversary Proceeding is not complex because the Defendants must admit all of the substantive 5 allegations set forth in the Complaint. Rather than forcing the Parties to go through the procedura6 motions attendant to entry of a judgment in favor of the Committee, the Parties have agreed to 7 enter into the Stipulation for entry of the Stipulated Judgment. 8 D. The Paramount Interest of the Creditors 9 The interests of creditors are best served if the Court approves the Stipulations. Entry of 10 the Stipulated Judgment will allow the Debtors’ estates to “net” claims allowed in the Debtors’ 11 bankruptcy cases against the investments those claimants already have recovered and to avoid an12 recover monies from persons who received more proceeds from Mr. Casey’s Ponzi scheme than 13 they invested. Thus, on balance and in light of the results of FTI’s forensic accounting and 14 investigation, the Debtors are not giving up actual value by entering into the Stipulations but, in 15 fact, stand to gain significant value from the entry of the Stipulated Judgment. The anticipated 16 outcomes of the Court’s approval of the Stipulations will benefit and protect the interests of the 17 Debtors’ estates and their creditors without requiring the Debtors to sacrifice any rights or claims 18 they actually have. 19 Based on the fourth factor of the A&C Properties test, the Stipulations are fair and 20 equitable and in the best interest of the Debtors’ estates and their creditors. 21 / / / 22 / / / 23 / / / 24 / / / 25 / / / 26 / / / 27 / / /

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1 V. 2 CONCLUSION 3 For the foregoing reasons, the Debtors respectfully request entry of an order authorizing 4 the Debtors to enter into the Stipulations and approving them, and providing such other and 5 further relief as is just and proper. 6 Dated: April 29, 2021 7 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 8 9 By /s/ J. Barrett Marum J. BARRETT MARUM 10 11 Attorneys for Debtors 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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1 Exhibit A 2 Proposed Order 3 4 5 UNITED STATES BANKRUPTCY COURT 6 NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION 7 8 In re Case No. 20-30604 9 PROFESSIONAL FINANCIAL (Jointly Administered) INVESTORS, INC., a California corporation, 10 et al., Chapter 11 11 Debtors. Adv No. 21-3018 12 [PROPOSED] ORDER GRANTING MOTION TO APPROVE STIPULATION 13 TO SEEK ENTRY OF STIPULATED JUDGMENT ON THE OFFICIAL 14 COMMITTEE OF UNSECURED CREDITORS OF PROFESSIONAL 15 FINANCIAL INVESTORS, INC. AND PROFESSIONAL INVESTORS 16 SECURITY FUNDS, INC.’S COMPLAINT FOR DECLARATORY RELIEF 17 18 Judge: Hon. Hannah L. Blumenstiel Date: May 10, 2021 19 Time: 10:00 a.m. Place: Telephonic/Video Appearances Only 20 450 Golden Gate Ave. 16th Fl. Ctrm. 19 21 San Francisco, CA 94102 22 23 The Motion to Approve Stipulation to Seek Entry of Stipulated Judgment on the Official 24 Committee of Unsecured Creditors of Professional Financial Investors, Inc. and Professional 25 Investors Security Funds, Inc.’s Complaint for Declaratory Relief (the “Motion”)6 filed by the 26 27 6 Capitalized terms not otherwise defined herein shall have the same meaning ascribed to them in

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1 Debtors on April 29, 2021, as Docket No. [5] came before the Court for consideration. Based 2 upon the Court’s review of the Motion, the Stipulation, and the Alfaro Declaration filed in suppor3 of the Motion, notice given of the Motion, and all other pleadings and evidence of record in the 4 above-captioned jointly administered chapter 11 bankruptcy cases, 5 IT IS HEREBY ORDERED that: 6 1. The Motion is GRANTED. 7 2. The Stipulation is APPROVED, and the Debtors are authorized to enter into the 8 Stipulation and the Stipulated Judgment. 9 3. This Court finds that entry of the Stipulated Judgment is reasonable and in the best10 interest of the creditors of the Debtors’ estates. 11 4. Upon the entry of this Order, the Defendants shall submit to the Court the 12 Stipulated Judgment for entry on the docket of the Adversary Proceeding. 13 * * * END OF [PROPOSED] ORDER * * * 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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1 Exhibit B 2 Stipulation 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 2 A Limited Liability Partnership Including Professional Corporations 3 ORI KATZ, Cal. Bar No. 209561 J. BARRETT MARUM, Cal. Bar No. 228628 4 MATT KLINGER, Cal. Bar No. 307362 GIANNA SEGRETTI, Cal. Bar No. 323645 5 Four Embarcadero Center, 17th Floor San Francisco, California 94111-4109 6 Telephone: 415.434.9100 Facsimile: 415.434.3947 7 Email: okatz@sheppardmullin.com bmarum@sheppardmullin.com 8 mklinger@sheppardmullin.com gsegretti@sheppardmullin.com 9 Counsel for the Debtors 10 Richard A. Lapping (SBN: 107496) TRODELLA & LAPPING LLP 11 540 Pacific Avenue San Francisco, CA 94133 12 Telephone: 415.399.1015 Facsimile: 415.651.9004 13 Email: Rich@TrodellaLapping.com 14 Conflicts Counsel for Debtors and Counsel for Professional Investors 28, LLC and PFI 15 Glenwood, LLC 16 UNITED STATES BANKRUPTCY COURT 17 NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION 18 In re Case No. 20-30604 19 PROFESSIONAL FINANCIAL (Jointly Administered) 20 INVESTORS, INC., a California corporation, et al., Chapter 11 21 Debtors. Adv No. 21-03018 22 STIPULATION FOR ENTRY OF 23 THE OFFICIAL COMMITTEE OF JUDGMENT ON THE OFFICIAL UNSECURED CREDITORS, COMMITTEE OF UNSECURED 24 CREDITORS OF PROFESSIONAL Plaintiffs, FINANCIAL INVESTORS, INC. AND 25 PROFESSIONAL INVESTORS v. SECURITY FUNDS, INC.’S COMPLAINT 26 FOR DECLARATORY RELIEF PROFESSIONAL FINANCIAL 27 INVESTORS, INC.; PROFESSIONAL INVESTORS SECURITY FUNDS, INC.; The Hon. Hannah L. Blumenstiel

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1 FUND I, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 2 FUND IV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 3 FUND VII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 4 FUND IX, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 5 FUND XII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 6 FUND XIII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 7 FUND XIV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 8 FUND XV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 9 FUND XVII, A California Limited Partnership; PROFESSIONAL INVESTORS 10 SECURITY FUND XVIII, A California Limited Partnership; PROFESSIONAL 11 INVESTORS 20, LLC; PROFESSIONAL INVESTORS 21, LLC; PROFESSIONAL 12 INVESTORS 22, LLC; PROFESSIONAL INVESTORS 23, LLC; PROFESSIONAL 13 INVESTORS 24, LLC; PROFESSIONAL INVESTORS 25, LLC; PROFESSIONAL 14 INVESTORS 26, LLC; PROFESSIONAL INVESTORS 27, LLC; PROFESSIONAL 15 INVESTORS 28, LLC; PROFESSIONAL INVESTORS 29, LLC; PROFESSIONAL 16 INVESTORS 30, LLC; PROFESSIONAL INVESTORS 31, LLC; PROFESSIONAL 17 INVESTORS 32, LLC; PROFESSIONAL INVESTORS 33, LLC; PROFESSIONAL 18 INVESTORS 34, LLC; PROFESSIONAL INVESTORS 35, LLC; PROFESSIONAL 19 INVESTORS 36, LLC; PROFESSIONAL INVESTORS 37, LLC; PROFESSIONAL 20 INVESTORS 38, LLC; PROFESSIONAL INVESTORS 39, LLC; PROFESSIONAL 21 INVESTORS 40, LLC; PROFESSIONAL INVESTORS 41, LLC; PROFESSIONAL 22 INVESTORS 42, LLC; PROFESSIONAL INVESTORS 43, LLC; PROFESSIONAL 23 INVESTORS 44, LLC; PROFESSIONAL INVESTORS 45, LLC; PROFESSIONAL 24 INVESTORS 46, LLC; PROFESSIONAL INVESTORS 47, LLC; PROFESSIONAL 25 INVESTORS 48, LLC; PROFESSIONAL INVESTORS 49, LLC; and PFI 26 GLENWOOD, LLC 27 Defendants.

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1 This Stipulation for Entry of Judgment on the Official Committee of Unsecured Creditors 2 of Professional Financial Investors, Inc. and Professional Investors Security Funds, Inc.’s 3 Complaint for Declaratory Relief (the “Stipulation”) is entered into by and between Plaintiffs 4 Official Committee of Unsecured Creditors of Professional Financial Investors, Inc. and 5 Professional Investors Security Fund, Inc. (the “Committee” or “Plaintiffs”), on the one hand, and6 Debtors Professional Financial Investors, Inc. (“PFI”); Professional Investors Security Fund, Inc. 7 (“PISF,” and together with PFI, the “Companies”); Professional Investors Security Fund I, A 8 California Limited Partnership; Professional Investors Security Fund IV, A California Limited 9 Partnership; Professional Investors Security Fund VII, A California Limited Partnership; 10 Professional Investors Security Fund IX, A California Limited Partnership; Professional Investors11 Security Fund XII, A California Limited Partnership; Professional Investors Security Fund XIII, 12 California Limited Partnership; Professional Investors Security Fund XIV, A California Limited 13 Partnership; Professional Investors Security Fund XV, A California Limited Partnership; 14 Professional Investors Security Fund XVII, A California Limited; Professional Investors Security15 Fund XVIII, A California Limited Partnership; Professional Investors 20, LLC; Professional 16 Investors 21, LLC; Professional Investors 22, LLC; Professional Investors 23, LLC; Professional 17 Investors 24, LLC; Professional Investors 25, LLC; Professional Investors 26, LLC; Professional 18 Investors 27, LLC; Professional Investors 29, LLC; Professional Investors 30, LLC; Professional19 Investors 31, LLC; Professional Investors 32, LLC; Professional Investors 33, LLC; Professional 20 Investors 34, LLC; Professional Investors 35, LLC; Professional Investors 36, LLC; Professional 21 Investors 37, LLC; Professional Investors 38, LLC; Professional Investors 39, LLC; Professional 22 Investors 40, LLC; Professional Investors 41, LLC; Professional Investors 42, LLC; Professional23 Investors 43, LLC; Professional Investors 44, LLC; Professional Investors 45, LLC; Professional 24 Investors 46, LLC; Professional Investors 47, LLC; Professional Investors 48, LLC; and 25 Professional Investors 49, LLC (collectively, the “Debtors”) and non-debtors Professional 26 Investors 28, LLC and PFI Glenwood, LLC (together with the Debtors, “Defendants”), on the 27 other hand, by and through their respective undersigned counsel. The Plaintiffs and Defendants

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1 RECITALS 2 A. On or about August 15, 1990, Ken Casey founded PFI and served as its sole 3 officer, director and shareholder until 1998, when he relinquished his corporate positions and 4 placed his shares of PFI in an irrevocable trust for which his ex-wife, Charlene Albanese (“Ms. 5 Albanese”)1, is the current trustee and lifetime income beneficiary. Despite these actions, Mr. 6 Casey maintained complete de facto control over PFI until his death on May 6, 2020. 7 B. On or about November 1, 1983, Mr. Casey founded PISF and served as its sole 8 shareholder, officer, and director from that date until his death. Mr. Casey’s shares in PISF were 9 held in a revocable trust. Upon Mr. Casey’s death, Ms. Albanese became the trustee and 10 beneficiary of that revocable trust. 11 C. Over a period of at least fourteen (14) years, Mr. Casey operated a fraudulent 12 scheme in which investors loaned funds to the Companies, which funds Mr. Casey used to service13 the debt owed to existing investors and to personally enrich Mr. Casey himself. 14 D. On June 13, 2020, and July 21, 2020, all of the Companies’ respective officers 15 resigned, and Michael Hogan was appointed as the Companies’ Chief Restructuring Officer. 16 E. On July 16, 2020, certain creditors of PISF commenced an involuntary chapter 11 17 bankruptcy action against PISF (Bankruptcy Case No. 20-30579, the “PISF Case”). On July 26, 18 2020, PISF filed a consent to the entry of an order for relief in the PISF Case, and on July 27, 19 2020, the Court entered such order for relief. 20 F. On July 26, 2020, PFI filed a voluntary petition for relief under chapter 11 of the 21 Bankruptcy Code and thereby commenced its bankruptcy case (Bankruptcy Case No. 20-30604, 22 the “PFI Case”). 23 G. Thereafter, on December 11, 2020, and February 18, 2021, the Court entered order24 for relief under chapter 11 in the involuntary chapter 11 proceedings commenced by PFI against 25 thirty-nine affiliates of the Companies, each of which the Plaintiffs name as a debtor and 26 defendant in the Complaint (defined herein). 27

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1 H. On April 13, 2021, the Plaintiffs filed their Complaint for Declaratory Relief 2 seeking a declaration that Defendants’ businesses were all part of an overarching Ponzi scheme 3 that began no later than January 1, 2007 (the “Complaint”). The filing of the Complaint 4 commenced that certain adversary proceeding styled, The Official Committee of Unsecured 5 Creditors v. PFI, et al., Adversary Proceeding No. 20-3018 (the “Adversary Proceeding”). 6 I. On April 27, 2021, the Defendants answered the Complaint and admitted all of the7 substantive allegations and contentions stated by the Plaintiffs in the Complaint (the “Answer”). 8 J. The Defendants agree with the Plaintiffs that a formal judicial finding that at least 9 since January 1, 2007, the Defendants’ businesses were operated as a Ponzi scheme will be 10 integral to future “netting” and claims allowance in the Debtors’ bankruptcy cases. 11 K. The Defendants also agree with the Plaintiffs that a formal judicial finding that 12 prior to June 13, 2020, and at least since January 1, 2007, the Defendants’ businesses were 13 operated as a Ponzi scheme will be the basis of future actions to avoid and recover against person14 who received more proceeds from Mr. Casey’s Ponzi scheme than they invested. 15 L. In the interest of judicial economy and in light of the Answer, the Parties have 16 agreed to the entry of a stipulated judgment in substantially the form attached hereto as Exhibit A17 (the “Stipulated Judgment”), subject to Court approval. 18 STIPULATION 19 NOW THEREFORE, the Parties agree to enter into this Stipulation, subject to Court 20 approval and effective as of the date of entry of an order approving this Stipulation pursuant to 21 agreement of the Parties: 22 1. On or before April 29, 2021, the Debtors will seek Court approval of this 23 Stipulation and the proposed Stipulated Judgment (collectively, the “Stipulations”) by filing with 24 the Court a motion to approve the Stipulations under Rule 9019 of the Federal Rules of 25 Bankruptcy Procedure (the “Motion”). 26 2. Upon the entry of an order approval of the Motion, the Debtors will submit (a) an 27 order (x) granting the Motion; and (y) approving this Stipulation for entry on the bankruptcy

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1 docket of lead debtor in possession PFI; and (b) the Stipulated Judgment for entry on the 2 Adversary Proceeding docket. 3 3. This Stipulation may be executed in two or more counterparts, each of which shall 4 be deemed an original, but all of which together shall constitute one and the some instrument. 5 4. The Plaintiffs’ and Defendants’ respective counsel of record in this Adversary 6 Proceeding represent that each is fully authorized to execute and enter into this Stipulated 7 Judgment on behalf of the respective parties each and represents and acknowledges that each has 8 authority to bind the parties to this Adversary Proceeding. 9 Dated: April 29, 2021 10 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 11 12 By /s/ J. Barrett Marum J. BARRETT MARUM 13 14 Attorneys for Debtors 15 Dated: April 29, 2021 16 TRODELLA & LAPPING LLP 17 18 By /s/ Richard A. Lapping 19 RICHARD A. LAPPING 20 Conflicts Counsel for Debtors and Counsel for 21 Professional Investors 28, LLC and PFI Glenwood, LLC 22 Dated: April 29, 2021 23 PACHULSKI STANG ZIEHL & JONES LLP 24 25 By /s/ John D. Fiero 26 JOHN D. FIERO 27 Attorneys for Plaintiffs

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1 Exhibit A 2 [Proposed Stipulated Judgment] 3 4 5 6 UNITED STATES BANKRUPTCY COURT 7 NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION 8 9 In re Case No. 20-30604 10 PROFESSIONAL FINANCIAL (Jointly Administered) INVESTORS, INC., a California corporation, 11 et al., Chapter 11 12 Debtors. Adv No. 21-03018 13 [PROPOSED] STIPULATED JUDGMENT THE OFFICIAL COMMITTEE OF ON THE OFFICIAL COMMITTEE OF 14 UNSECURED CREDITORS, UNSECURED CREDITORS OF PROFESSIONAL FINANCIAL 15 Plaintiffs, INVESTORS, INC. AND PROFESSIONAL INVESTORS SECURITY FUNDS, INC.’S 16 v. COMPLAINT FOR DECLARATORY RELIEF 17 PROFESSIONAL FINANCIAL INVESTORS, INC.; PROFESSIONAL 18 INVESTORS SECURITY FUNDS, INC.; The Hon. Hannah L. Blumenstiel PROFESSIONAL INVESTORS SECURITY 19 FUND I, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 20 FUND IV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 21 FUND VII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 22 FUND IX, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 23 FUND XII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 24 FUND XIII, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 25 FUND XIV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 26 FUND XV, A California Limited Partnership; PROFESSIONAL INVESTORS SECURITY 27 FUND XVII, A California Limited Partnership; PROFESSIONAL INVESTORS

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1 Limited Partnership; PROFESSIONAL INVESTORS 20, LLC; PROFESSIONAL 2 INVESTORS 21, LLC; PROFESSIONAL INVESTORS 22, LLC; PROFESSIONAL 3 INVESTORS 23, LLC; PROFESSIONAL INVESTORS 24, LLC; PROFESSIONAL 4 INVESTORS 25, LLC; PROFESSIONAL INVESTORS 26, LLC; PROFESSIONAL 5 INVESTORS 27, LLC; PROFESSIONAL INVESTORS 28, LLC; PROFESSIONAL 6 INVESTORS 29, LLC; PROFESSIONAL INVESTORS 30, LLC; PROFESSIONAL 7 INVESTORS 31, LLC; PROFESSIONAL INVESTORS 32, LLC; PROFESSIONAL 8 INVESTORS 33, LLC; PROFESSIONAL INVESTORS 34, LLC; PROFESSIONAL 9 INVESTORS 35, LLC; PROFESSIONAL INVESTORS 36, LLC; PROFESSIONAL 10 INVESTORS 37, LLC; PROFESSIONAL INVESTORS 38, LLC; PROFESSIONAL 11 INVESTORS 39, LLC; PROFESSIONAL INVESTORS 40, LLC; PROFESSIONAL 12 INVESTORS 41, LLC; PROFESSIONAL INVESTORS 42, LLC; PROFESSIONAL 13 INVESTORS 43, LLC; PROFESSIONAL INVESTORS 44, LLC; PROFESSIONAL 14 INVESTORS 45, LLC; PROFESSIONAL INVESTORS 46, LLC; PROFESSIONAL 15 INVESTORS 47, LLC; PROFESSIONAL INVESTORS 48, LLC; PROFESSIONAL 16 INVESTORS 49, LLC; and PFI GLENWOOD, LLC 17 Defendants. 18 19 Plaintiffs Official Committee of Unsecured Creditors of Professional Financial Investors, 20 Inc. and Professional Investors Security Fund, Inc. (the “Committee” or “Plaintiffs”) and Debtors 21 Professional Financial Investors, Inc.; Professional Investors Security Fund, Inc.; Professional 22 Investors Security Fund I, A California Limited Partnership; Professional Investors Security Fund23 IV, A California Limited Partnership; Professional Investors Security Fund VII, A California 24 Limited Partnership; Professional Investors Security Fund IX, A California Limited Partnership; 25 Professional Investors Security Fund XII, A California Limited Partnership; Professional Investor26 Security Fund XIII, A California Limited Partnership; Professional Investors Security Fund XIV, 27 A California Limited Partnership; Professional Investors Security Fund XV, A California Limited

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1 Partnership; Professional Investors Security Fund XVII, A California Limited; Professional 2 Investors Security Fund XVIII, A California Limited Partnership; Professional Investors 20, LLC3 Professional Investors 21, LLC; Professional Investors 22, LLC; Professional Investors 23, LLC; 4 Professional Investors 24, LLC; Professional Investors 25, LLC; Professional Investors 26, LLC; 5 Professional Investors 27, LLC; Professional Investors 29, LLC; Professional Investors 30, LLC; 6 Professional Investors 31, LLC; Professional Investors 32, LLC; Professional Investors 33, LLC; 7 Professional Investors 34, LLC; Professional Investors 35, LLC; Professional Investors 36, LLC; 8 Professional Investors 37, LLC; Professional Investors 38, LLC; Professional Investors 39, LLC; 9 Professional Investors 40, LLC; Professional Investors 41, LLC; Professional Investors 42, LLC;10 Professional Investors 43, LLC; Professional Investors 44, LLC; Professional Investors 45, LLC; 11 Professional Investors 46, LLC; Professional Investors 47, LLC; Professional Investors 48, LLC; 12 and Professional Investors 49, LLC (collectively, the “Debtors”) and non-debtors Professional 13 Investors 28, LLC and PFI Glenwood, LLC (together with the Debtors, “Defendants”) agree to 14 entry of this “Stipulated Judgment” granting Plaintiffs’ Complaint for Declaratory Relief (the 15 “Complaint”) as set forth herein. 16 I. 17 CONCLUSIONS OF LAW 18 1. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. 19 §§ 147(a) and 1334(a). 20 2. Venue in the Northern District of California is proper under 28 U.S.C. § 1409(a). 21 3. By filing the Complaint, the Plaintiffs commenced an adversary proceeding (the 22 “Adversary Proceeding”) that is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) and (M23 4. This Adversary Proceeding relates to the Debtors’ bankruptcy jointly administered24 chapter 11 bankruptcy cases pending in this Court and styled, In re Professional Financial 25 Investors, Inc. et al., Case No. 20-30604 (the “Bankruptcy Case”). 26 5. The members of the Committee hold general unsecured claims against the Debtors27 as a result of their respective investments in investment vehicles or debt instruments sponsored by

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1 II. 2 JUDGMENT 3 Judgment is hereby entered in favor of the Plaintiffs and against the Defendants, 4 determining that the Defendants’ businesses were all part of an overarching Ponzi scheme that 5 began no later than January 1, 2007. 6 * * * END OF JUDGMENT * * * 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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