Benthos Master Fund, Ltd. v. Etra
| Docket Number | 20-CV-3384 (VEC) |
| Decision Date | 05 July 2023 |
| Parties | BENTHOS MASTER FUND, LTD., Petitioner, v. AARON ETRA, Respondent. |
| Court | U.S. District Court — Southern District of New York |
Benthos Master Fund, Ltd. (“Benthos”) successfully petitioned this Court to confirm an arbitration award of more than $5 million against Aaron Etra (“Etra”), an attorney who released Petitioner's funds from escrow in violation of his contractual and fiduciary duties as the escrow agent for a purported cryptocurrency sale. Although Benthos began seeking discovery from Etra to facilitate its collection of the judgment almost three years ago, Etra has repeatedly failed to produce documents and information about his finances, persistently and flagrantly disregarded court orders enforcing Petitioner's subpoenas, and failed to make any payments toward Petitioner's judgment while spending lavishly on himself.
On December 14, 2022, the Court held Etra in civil contempt and ordered his incarceration (the “Contempt Order”) until he produces all documents that he has previously been ordered to provide, and until he pays Benthos $145,718.49. See Contempt Order, Dkt. 260.[1] The Court also granted Benthos's request to conduct a forensic examination of Etra's electronic devices. Id. at 37.
On March 28, 2023, Etra, in yet another delaying tactic, for the first time in the three years that this proceeding has been pending, asserted his Fifth Amendment privilege with respect to the act of production of all records that he has been ordered to produce and all records and information on his computer and cellphones.[2] See Order, Dkt. 307. On May 5 2023, counsel[3]filed a memorandum in support of Etra's blanket assertion that he has a Fifth Amendment right not to produce any of the documents and information he has been ordered to provide. See Etra Mem., Dkt. 330. The Court construes his motion as one to exclude certain items from the scope of documents he must produce in order to purge his contempt. On June 7, 2023, Etra filed a motion to expand the scope of his counsel's appointment to include the filing of a habeas corpus petition. See Etra Mot Dkt. 335.
For the following reasons, Etra's request to exclude from the scope of the Contempt Order the production of certain documents and information based on his Fifth Amendment privilege is GRANTED in part and DENIED in part, and Etra's request to expand the scope of his counsel's appointment is DENIED.
Benthos is a California investment firm, and Etra is a New York attorney. Pet., Dkt. 1, ¶¶ 1-2. On August 4, 2018 Benthos agreed to pay $5 million for a quantity of Bitcoin. Id. ¶ 5.
Benthos wired $5 million to Etra, who served as the escrow agent for the transaction, pursuant to an escrow agreement. Id. Benthos never received any Bitcoin for its $5 million. Id. ¶ 6. After Etra refused to provide information about the party to whom he had released the funds, Benthos sought preliminary injunctive relief in aid of arbitration from this Court. Id. ¶ 7. Etra eventually returned $400,000 to Benthos and provided some information about the location of the balance of the funds after Judge Batts, the judge then-assigned to that matter threatened to jail him. Id.
On April 30, 2020, Benthos filed a petition in this Court to confirm its $5,254,561.12 arbitration award against Etra.[4] See generally Pet., Dkt. 1. Judge Nathan, who was then assigned to the case, confirmed the award and entered judgment (the “Judgment”) against Etra on August 12, 2020. See Order, Dkt. 14; Judgment, Dkt. 15. On August 26, 2020, the Court allowed Benthos to begin enforcement proceedings. See Order, Dkt. 21.
Pursuant to Federal Rule of Civil Procedure 69(a)(2) and N.Y. C.P.L.R. § 5224(a)(2), Benthos promptly served Etra with a subpoena duces tecum (the “First Document Subpoena”) and a restraining notice with information subpoena (the “First Information Subpoena”). See First Document Subpoena, Dkt. 211-4; First Information Subpoena, Dkt. 211-5. The First Document Subpoena directed Etra to produce fifty-nine categories of documents concerning his finances covering the period from August 1, 2018 through August 27, 2020. See First Document Subpoena ¶ N. The First Information Subpoena directed Etra to respond under oath to thirty-six questions concerning his finances covering the period from August 1, 2018 through August 27, 2020. See First Information Subpoena at 6.
Etra was required to respond or object to Petitioner's subpoenas by September 21, 2020. See First Document Subpoena at 3; First Information Subpoena at 3; Fed.R.Civ.P. 45(d)(2)(B).
Etra did not object to either subpoena, repeatedly requested extensions to respond, and eventually produced a limited number of documents and some information to Benthos in September 2020. See R&R, Dkt. 95, at 3; Popofsky Decl., Dkt. 24, ¶¶ 6-12; Etra Mem., Dkt. 28, ¶¶ 4-9. Judge Nathan, concluding that it was “clear” that Etra had not adequately responded to the subpoenas, see Order, Dkt. 33, repeatedly ordered him to comply with Petitioner's requests, see Orders, Dkts. 39, 54, 59.
Although the parties appeared to have reached a settlement on April 1, 2021, it was short lived: Etra failed to make any payment, thereby voiding the settlement. See R&R, Dkt. 95, at 6.
Magistrate Judge Parker recommended granting a subsequently-filed motion to hold Etra in contempt,[5] see id. at 34, and on May 16, 2022, the Court adopted Judge Parker's recommendation, see Order, Dkt. 108. Judge Parker also suggested that the Court refer this matter to the U.S. Attorney's Office for the Southern District of New York for investigation regarding Etra's theft of $5 million and failure to produce information regarding the location of the bulk of those funds. See R&R, Dkt. 95, at 34. The Undersigned did not adopt that suggestion but reserved the right to file a complaint with the U.S. Attorney's Office or other appropriate authorities. See Order, Dkt. 108, at 6. The Court has since suggested to the U.S. Attorney's Office that it might wish to investigate the matter.[6]
After Etra was granted another extension to comply with Petitioner's subpoenas, see Order, Dkt. 113, and after he insisted on yet another extension, see Dkt. 114, the Court scheduled a hearing regarding whether he should be held in contempt, and ordered Etra to appear with the documents he had been ordered to produce, see Order, Dkt. 116.
Etra sent certain tax documents to Petitioner's counsel, see Dkts. 119-21, 125, but did not fully satisfy the Court's orders by the date of the hearing, which he failed to attend, see Order, Dkt. 126.
On July 7, 2022, the Court ordered Etra to show cause before the Court on July 13, 2022, why a warrant for his arrest should not be issued so that he could be imprisoned as a coercive sanction until he complied fully with the Court's orders. Id.
On July 10 and 11, 2022, Etra produced some of the information and documents that he had been ordered to produce, see Dkts. 127, 129, but failed and refused to provide other subpoenaed information and documents, see Dkt. 130. Etra falsely represented, though not under oath, that he had “no other savings, money market, certificates of deposit, investments, retirement accounts, safety deposit boxes or financial assets” beyond the accounts associated with the records he had provided to Petitioner's counsel. See Dkt. 129 at 98.[7]
The parties appeared before the Court on July 13, 2022. See Order, Dkt. 132. The Court found Etra in civil contempt for failing to produce documents as ordered and remanded him into the custody of U.S. Marshals. Id. at 1. Later that day, the Court ordered Etra released from custody subject to his commitment to comply with a document production schedule. Id.
On July 14, 2022, Etra was ordered to produce escrow agreements and monthly bank account statements and to file sworn statements certifying that the documents had been produced as required by July 15 and July 19, 2022. Id. at 2-5.
On July 25, 2022, Benthos informed the Court of Etra's remaining deficiencies and violations of its restraining notice, which requires Etra to use any income, other than certain exempt payments such as social security benefits, to satisfy Petitioner's judgment. See Dkt. 136. The Court ordered Etra to show cause at the next status conference why he should not be held in civil contempt and remanded in light of his continued violation of court orders. See Order, Dkt. 137, at 13. The Court also required Benthos to submit a spreadsheet reflecting the items Etra had been ordered to produce pursuant to the Court's July 14, 2022 Order, the items Benthos had received, and the items Benthos had not received but believes exist (the “July 2022 Spreadsheet”). Id.
In its July 2022 Spreadsheet, Benthos represented that: Etra had produced almost no escrow agreements even though bank statements Etra had produced reflected “dozens of transactions” in his attorney escrow accounts; Etra had failed to produce monthly bank statements for a slew of accounts; none of the bank statements produced by Etra reflected receipt of social security payments in the months prior to them being deposited into a belatedly-disclosed account at Piermont Bank; and Etra had not produced documents substantiating many account closures. See July 2022 Spreadsheet, Dkt. 140-1.
In response, Etra stated, though again not under oath, that his purportedly privileged escrow arrangements expired after twelve months and that “no documents are retained.” Dkt. 141 at 3. He also stated that he diligently submitted the bank records that he possessed, was still trying to find certain financial records, and attached additional bank statements he identified as missing after...
To continue reading
Request your trial