Jan. 7, 2022
Re Proposed Plan of Distribution in the matter of Laurence I Balter d/b/a Oracle Investment research I am Brian J. Barbata, “Client A” referenced in the Commission’s Order of May 26, 2017 and have reviewed the Proposed Plan of Distribution and its Exhibit A, “Plan of Allocation. I have several objections to the Proposed Plan (“Plan”): 1. The Plan, in Section II, misstates my interest in the disgorgement from Mr. Balter. In fact, it does not identify my interest at all, except as part of the Oracle Fund. As “Client A”, I was much more than that, which is why there is no "Client B”. Para 6 describes Mr. Balter as “a former registered investment advisor to the Oracle Mutual Fund”, which appears to be the focus of the Plan. Although investors in Oracle appear to have been treated unfairly by Mr. Balter, they pale by comparison to his treatment of my accounts outside of and prior to the establishment of Oracle. 2. The fees I was fraudulently charged by Mr. Balter, were, by his own admission, falsely based on a claim that I had told him to charge me “whatever he thought was fair”. This claim was debunked during the litigation, by the SEC attorneys and my own testimony. Some of the losses I incurred by his anti-fiduciary and illegal managing of profit and loss allocations was, in his view, his “fees”. Some of the gains in his own account, and some of the losses in my accounts were, as he stated, his "fee". This is a matter of record, and are a large part of the fees fraudulently taken by Mr. Balter while mismanaging my account. The Commission needs to sort out what part of his mismanagement and misrepresentations were losses that represent fees paid by me, and which were actual fair investment losses I would have incurred in trades without his fraudulent reallocations. Some of this is explained in the Plan of Allocation, although not clearly related to the particular and complex calculation of “fees” in my case. 3. The Plan refers to “harm” (paras 1 & 2), a term not defined, then jumps to “losses” (para 3), a term defined later as “Recognized Loss”. It is not clear what the term “loss” actually applies to, and it continues to be used throughout the Plan. Is an investment loss in the Oracle Fund a “Recognized Loss”? SEC attorneys in this case, when I voluntarily met with them in San Francisco (I live in Hawaii), made it clear that the SEC does not recover investment losses for clients in a settlement, only the disgorgement of fees. Yet, the Plan refers to “losses” and the Notice of the Plan refers to “losses due to the misconduct of the Respondent”. In my case, as “Client A”, I suffered about $4 million in investment losses, some of which was shifted to the "fees" taken by Mr. Balter through his post-trade allocation of profits to his account and losses to mine. These amounts were exhaustively analyzed by SEC forensic accounting experts. 4. The losses of the Oracle Fund, in which I was one of many investors, cannot be counted as Recognized Losses to be recovered by the investors as part of a disgorgement of fraudulent fees in the Plan of Distribution. I am not familiar with the details of the Oracle claim, however, I believe those fees charged by Mr. Balter to Oracle investors were not fraudulent, and I have seen nothing in the SEC’s litigation record to support the finding that Oracle fees were fraudulent. As I recall, the complaint against Mr. Balter as it relates to Oracle was that he misrepresented the investment strategy of the fund and departed from the original strategy without informing investors. It is therefore my opinion that the former Oracle investors are owed nothing, neither the fees (which were appropriate), nor their investment losses (as the SEC has stated). 5. After waiting four years, the Plan and Plan of Allocation provide very little to comment on, because they are only general, and almost “boilerplate”. I was expecting to see the actual proposed allocations of dollars, not a general treatise on the subject of distribution. How can a claimant file an objection when the amounts and the reasoning is not shown? When they finally are, will there be the opportunity for further comment or appeal? It would appear this is the last opportunity to do that, basically in the blind, before it goes to the Fund Administrator. The Fund Administrator will not be able to rewrite the conclusions of the SEC as to Recognized Losses, so complaining to the Fund Administrator after the Plan Notice will be pointless. In section 34, the Plan refers to a “Fair Fund” website for this distribution at https://www.balteroracledistribution.com, however, it is blank. 6. Also not available are the fees charged against the Fund, which will result in a net distribution amount. This administrative process has gone on for many years, and the settlement has passed through many hands, inside and outside the SEC. During that time, claimants were not advised of its status, how much various parties are being paid, or how they are selected. In addition, there have been delays and extensions, and claimants have had no updates on the process. My information has only come from chasing down e-mail addresses, beginning years ago with the original SEC attorneys. I did not know until about a year ago that the distribution process had not even started until the last payment was made by Mr. Balter, or that he had been given a payment plan. This is unacceptable for claimants who have been defrauded. We should not have to wind through the legal and administrative complexities of an SEC settlement to figure out where our money is going, when we might see a check, or how the Fund is being distributed. 7. Section IV states that the Tax Administrator will determine tax liability and pay it from the Fair Fund. There is no information due us from the Tax Administrator on how these taxes will be determined (other than references to tax law), or why claimants are not responsible to pay their own taxes based on their own tax situations. I believe the Tax Administrator should issue a notice (like a 1099 or other form) to let each claimant know that the monies received are subject to taxes. Each claimant can then submit that information with their own return. 8. Para 43 establishes a Reserve, on an undisclosed basis. When this Reserve is established, how long must it exist before it is determined unnecessary? Forever? There should be a date after which this Reserve is distributed to Payees, not to the US Treasury. 9. After waiting 4+ years to get to this point, the Plan still requires many things to take place, which will undoubtedly take many more months. On top of that, once the Plan is approved (para 45), the Fund Administrator has 6 more months to compile Payee information and send it back to the Commission. Then (para 52) the Commission staff has to review and accept it. Only after that is complete, will the staff “seek” an Order from the Commission to mail us a check. And when those checks finally arrive, para 55 tells us we will then see some the information on how they were derived. Para 55 also says each Payee will be advised of his.her responsibility to pay taxes on it, however, as noted above, Section IV states that the Tax administrator will determine and pay those taxes. Which is it? 10. There should be an additional opportunity to comment before moneys are distributed, but after claimants receive an accounting. This should be embodied in the Plan Notice, which should not be distributed until the above comments are reconciled. The accounting should include the exact way the distribution amounts were determined. The amounts should be strictly limited to the disgorgement of fees, except to the extent that losses and gains not specifically called “fees” were, as described above, actually fees. All expenses of the Fund should be part of the accounting, in detail. The claimants deserve no less from the SEC. Brian Barbata