Consumer Financial Protection Bureau v. Stratfs, LLC (f/k/a Strategic Financial Solutions, LLC)
1:24-cv-00040
| W.D.N.Y. | Jul 1, 2025Background
- Plaintiffs (CFPB, et al.) challenged a series of entities for their roles in an alleged illegal debt-relief scheme, with strategic asset transfers and control by certain individuals (notably Blust and Christo).
- The court previously issued a temporary restraining order and then a preliminary injunction, creating a receivership and freezing assets tied to entities under defendants’ control.
- The Receiver identified additional entities (including Fidelis Legal Support Services, The Bush Lake Trust, Two Square Enterprises, Veteris Capital, and BOC Group) as new receivership defendants after tracing multimillion-dollar transfers among defendant-affiliated businesses, particularly after the entry of the TRO.
- These entities moved to challenge their inclusion in the receivership and sought a stay pending appeal.
- After evidentiary hearings, the court denied the challenges, finding these entities were either affiliates, successors, or controlled by key defendants, and the transfers appeared designed to frustrate asset recovery.
- Movants sought a stay of the receivership orders pending appeal; the Second Circuit previously affirmed the district court’s preliminary injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appellate jurisdiction over receivership expansion orders | Orders are not appealable interlocutory orders under § 1292(a) and not subject to piecemeal appeals. | Orders are appealable because they extend preliminary injunctions or appoint receivers. | Orders designating additional receivership defendants are not appealable; appeal will likely be dismissed for lack of jurisdiction. |
| Authority to designate new receivership defendants absent their consent | Receivership expansion was authorized by the PI and necessary for asset preservation; no new consent needed from non-parties. | Only parties who consented to magistrate jurisdiction are bound; movants never gave such consent. | Court had authority to include new, non-party entities in receivership without their express consent, under the PI terms. |
| Application of Rule 65(d) (Injunction rules) to receivership expansion | Receivership orders are not the equivalent of injunctions; Rule 65 does not apply. | Expansion is functionally an injunction, so Rule 65’s notice and specificity requirements apply. | Orders were not the equivalent of injunctions; Rule 65(d) does not apply to such receivership orders. |
| Entitlement to stay pending appeal | No likelihood of success, no irreparable harm to movants, public interest in preserving assets. | Inclusion in receivership causes irreparable business harm, and stay is needed to prevent injury. | Stay denied; movants failed to show likelihood of success, irreparable harm, or that the balance of equities/public interest favors stay. |
Key Cases Cited
- Roell v. Withrow, 538 U.S. 580 (2003) (magistrate jurisdiction can rest on implied consent, especially when parties act as if the magistrate has authority)
- Liberty Synergistics, Inc. v. Microflo, Ltd., 718 F.3d 138 (2d Cir. 2013) (finality required for appellate jurisdiction—interlocutory orders are limited)
- SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082 (2d Cir. 1972) (receivership to preserve status quo and prevent asset dissipation)
- Highland Ave. & B.R. Co. v. Columbian Equip. Co., 168 U.S. 627 (1898) (receivership orders and injunctions are independent and not interchangeable under appeal statutes)
- Netsphere, Inc. v. Baron, 799 F.3d 327 (5th Cir. 2015) (orders entered in the normal course of a receivership are not immediately appealable)