SEC v. Blackbird Capital Partners, LLC, et al.
Case No. 2:17-cv-01199-TC (D. Utah)

On November 28, 2017, the Commission filed a complaint (the “Complaint”) against Blackbird Capital Partners, LLC (“Blackbird”), and two of its founders, Andrew D. Kelley (“Kelley”) and Paul H. Shumway (“Shumway”) (collectively, the “Defendants”). The Complaint alleged that, from September 2014 through November 2016, Kelley and Shumway solicited investments in Blackbird based on an alleged proprietary trading algorithm which resulted in millions of dollars in investor losses. The Complaint also alleged that Kelley also used some investors' money to make Ponzi-like payments to other investors and to pay business expenses. See Complaint.

Shumway was ordered to pay a total of $355,882.60, in disgorgement, prejudgment interest, and a civil penalty. See Shumway’s Final Judgment. Kelley and Blackbird were ordered to pay, jointly and severally, $9,775,492.89, in disgorgement and prejudgment interest. See Kelley’s Final Judgment and Blackbird’s Final Judgment. The Commission was ordered to hold all funds, together with interest earned thereon (the “Fund”), pending further order of the Court.

The Fund consists of $2,372,259.32 recovered that were previously frozen when the case was filed from financial institutions. The Fund has been deposited in an interest-bearing account at the U.S. Treasury.

On March 3, 2020, the Court entered an order that established a Fair Fund (the “Fair Fund”) for the $2.3 million, along with any accrued interest and earnings thereon, and appointed Miller Kaplan Arase LLP as the Tax Administrator to fulfill the tax obligations of the Fair Fund. See the Court’s Order.

On July 30, 2020, the Court entered an Order and Memorandum Decision that appointed Noel Gittens, a Commission employee, as the Distribution Agent of the Fair Fund and approved the Commission’s Distribution Plan (the “Plan”). See the Plan. The Court also ordered the Commission to file an amended Plan to include an additional investment loss from a harmed investor who filed an objection to the Plan. See the Court’s Order.

The Plan provides that the distribution of the Fair Fund shall be made to investors, previously identified by the Commission, who were harmed by the fraudulent conduct alleged in the Complaint. The Distribution Agent will determine each Eligible Investor’s pro rata share based upon each Eligible Investor’s total Net Losses divided by the Total Net Losses of all Eligible Investors in accordance with the methodology described in therein.

For more information, please contact the Commission:

Office of Distributions
Email: ENFOfficeofDistributions@sec.gov