THE BLACKACRE 1031 EXCHANGE SERVICES LLC RECEIVERSHIP
On October 24, 2019, the Circuit Court of the County of Fairfax, Virginia appointed me as the receiver for Blackacre 1031 Exchange Services LLC. (Blackacre 1031). This is incident to a law suit filed by a Blackacre 1031 customer, who alleged that Blackacre 1031 Exchange cannot find the funds it deposited with Blackacre 1031 in December 2018 and Blackacre admits that it cannot find the customer’s money. A second customer has made the same allegation. The Plaintiffs allege that Blackacre 1031 was using one customer’s funds to pay another customer’s distribution in a 1031 exchange or to pay that customer in a failed 1031 exchange. This latter allegation has been denied by Blackacre 1031 and its owner, Robert Levenson and I do not know if the allegations are true. The law suit is Boyar et. al v. Blackacre 1031 Exchange Services, LLC, et al., Case No. CL 2019- 8719, Circuit Court, Fairfax County, VA.
Prior to October 24, when I was appointed, an injunction froze Blackacre’s Escrow account at Capital One Bank. I will be paid from the receivership funds, subject to the court’s approval. On October 24, that freeze was extended to all accounts. There are three accounts at Capital One Bank, one account at AXOS Bank and an account with a small balance at MVB Bank. In June 2019, Mr. Levenson established a series of “subaccounts” at Capital One Bank for each individual at Capital One (except for the plaintiffs in the law suits). As I understand the subaccounts, these are virtual accounts and all money is in a Master/Escrow account. There is a system through which funds in the subaccounts can be moved by the administrator and the bank cannot look at these subaccounts. I have received a statement showing the balances as of November 29/30. When I was appointed, approximately $5,600,000 was in the Capital One account and approximately $2,000,000 was in AXOS. Bear in mind, there are no subaccounts for the persons suing Blackacre and Mr. Levenson and their money must be found.
A receiver is a neutral person appointed by a judge to take charge of the property and business of one of the parties to a lawsuit when there is a dispute regarding the ownership of property, including moneys. Appointment of a receiver must be requested by a petition of a party to the law suit and it will only be authorized if there is a strong showing that the moneys would not be available when a decision is made. As a neutral person, I do not represent the litigants, I do not represent claimants and I am not associated with Blackacre 1031, except as a receiver. I operate in accordance with the court’s orders.
Under the order appointing me, I am to take possession of Blackacre 1031's assets and make a determination of the ownership of funds in Blackacre 1031's bank account or accounts, while the right to the moneys is under dispute. . Until it is determined that everyone’s money is accounted for, the court has denied without prejudice requests by Blackacre 1031 and three other claimants to disburse money. In November some claimants filed motions arguing the receivership was not established in accordance with the statute. They and some others objected to my authorizing the disbursement of any funds. That was rendered moot on December 18 when they and a total of more than 20 parties consented to an order that permits me to disburse up to 80% of funds being held and retain 20% for funding claims that have been lost, if any, and the costs of the receivership. The understanding was anyone submitting a claim must intervene in the law suit and submit to the jurisdiction of the court and the same terms agreed upon on December 18.
Shortly after October 24, pursuant to the Court’s order of October 24, Receiver bank accounts were opened at AXOS Bank and Capital One Bank. It was my intent to gradually bring over to the Receiver account the money in Black acre’s previous accounts, individually, so they are quarantined from whatever caused the problem leading to the Receivership. However, until recently, I was unable to transfer funds to the Receiver account at Capital One due to its security measures. On January 6, I was told that is resolved and I will do that. After December 18, I began to wire funds for settlements out of the old Blackacre accounts, but it has been difficult and resolved only at the highest level of Capital One.
I have received some company records from Blackacre and I started to obtain Blackacre 1031's bank records to trace funds through three banks. It is not only a matter of identifying accounts attributed to you, but I must identify all accounts. I employed a forensic accountant to assess the accounts. I also will receive claims from Blackacre 1031's customer and request that you use the enclosed form.
I will act as swiftly as I am able in a complex matter. I realize that there are time limits and consequences of not meeting time limits connected with a 1031 exchange, however, I cannot promise that I will be able to disburse monies on behalf of everyone within those time limits. There is a process that I must follow before disbursing funds and I need several days’ notice of any scheduled closing or special needs. I intend to schedule disbursements of the 80% in the following priority: persons with imminent dates to complete a 1031 exchange, persons with closings but the closing date is not imminent, persons who will not complete the 1031 exchange and request their money and general creditors of Blackacre. The 20% will not be disbursed until all money is traced and that will be several months.
I will post updates on the web page. Use that. The more calls I get the greater can be the delay in moving forward on the receivership and disbursement of money.
If you have legal questions, I cannot give you legal advice, because I am neutral. I strongly suggest that you consult with an attorney.
John P. McGeehan
Prior to October 24, when I was appointed, an injunction froze Blackacre’s Escrow account at Capital One Bank. I will be paid from the receivership funds, subject to the court’s approval. On October 24, that freeze was extended to all accounts. There are three accounts at Capital One Bank, one account at AXOS Bank and an account with a small balance at MVB Bank. In June 2019, Mr. Levenson established a series of “subaccounts” at Capital One Bank for each individual at Capital One (except for the plaintiffs in the law suits). As I understand the subaccounts, these are virtual accounts and all money is in a Master/Escrow account. There is a system through which funds in the subaccounts can be moved by the administrator and the bank cannot look at these subaccounts. I have received a statement showing the balances as of November 29/30. When I was appointed, approximately $5,600,000 was in the Capital One account and approximately $2,000,000 was in AXOS. Bear in mind, there are no subaccounts for the persons suing Blackacre and Mr. Levenson and their money must be found.
A receiver is a neutral person appointed by a judge to take charge of the property and business of one of the parties to a lawsuit when there is a dispute regarding the ownership of property, including moneys. Appointment of a receiver must be requested by a petition of a party to the law suit and it will only be authorized if there is a strong showing that the moneys would not be available when a decision is made. As a neutral person, I do not represent the litigants, I do not represent claimants and I am not associated with Blackacre 1031, except as a receiver. I operate in accordance with the court’s orders.
Under the order appointing me, I am to take possession of Blackacre 1031's assets and make a determination of the ownership of funds in Blackacre 1031's bank account or accounts, while the right to the moneys is under dispute. . Until it is determined that everyone’s money is accounted for, the court has denied without prejudice requests by Blackacre 1031 and three other claimants to disburse money. In November some claimants filed motions arguing the receivership was not established in accordance with the statute. They and some others objected to my authorizing the disbursement of any funds. That was rendered moot on December 18 when they and a total of more than 20 parties consented to an order that permits me to disburse up to 80% of funds being held and retain 20% for funding claims that have been lost, if any, and the costs of the receivership. The understanding was anyone submitting a claim must intervene in the law suit and submit to the jurisdiction of the court and the same terms agreed upon on December 18.
Shortly after October 24, pursuant to the Court’s order of October 24, Receiver bank accounts were opened at AXOS Bank and Capital One Bank. It was my intent to gradually bring over to the Receiver account the money in Black acre’s previous accounts, individually, so they are quarantined from whatever caused the problem leading to the Receivership. However, until recently, I was unable to transfer funds to the Receiver account at Capital One due to its security measures. On January 6, I was told that is resolved and I will do that. After December 18, I began to wire funds for settlements out of the old Blackacre accounts, but it has been difficult and resolved only at the highest level of Capital One.
I have received some company records from Blackacre and I started to obtain Blackacre 1031's bank records to trace funds through three banks. It is not only a matter of identifying accounts attributed to you, but I must identify all accounts. I employed a forensic accountant to assess the accounts. I also will receive claims from Blackacre 1031's customer and request that you use the enclosed form.
I will act as swiftly as I am able in a complex matter. I realize that there are time limits and consequences of not meeting time limits connected with a 1031 exchange, however, I cannot promise that I will be able to disburse monies on behalf of everyone within those time limits. There is a process that I must follow before disbursing funds and I need several days’ notice of any scheduled closing or special needs. I intend to schedule disbursements of the 80% in the following priority: persons with imminent dates to complete a 1031 exchange, persons with closings but the closing date is not imminent, persons who will not complete the 1031 exchange and request their money and general creditors of Blackacre. The 20% will not be disbursed until all money is traced and that will be several months.
I will post updates on the web page. Use that. The more calls I get the greater can be the delay in moving forward on the receivership and disbursement of money.
If you have legal questions, I cannot give you legal advice, because I am neutral. I strongly suggest that you consult with an attorney.
John P. McGeehan
BLACKACRE 1031RECEIVERSHIP INFORMATION PAGES
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Click to view current developments in the proceedings which may effect the interests of parties to the litigation. Updates are regularly posted by John P. McGeehan.
Click to view PDF copies of orders issued by the court in regards to the receivership. The links allow for viewing or downloading copies of the orders.
Click to complete an online claim submission form. The form may be completed and submitted to McGeehan Pascal directly from the page. Instructions are included with the form.
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