Free Status Report - District Court of California - California

Case 3:08-cv-00400-DMS-BLM

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EXHIBIT A

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WILLIAM H. LING
Certified PuNic Accountant 3655 Ruffin Road, Suite 320 S an Diego, California 92123 Tel. (858) 467-4770 Fax (858) 467-4779 [email protected]

May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC 7777 Alvarado Road, Suite 712 LaMesa, CA 91941. Case Number 08-CV-0400 DMS (BLM) Securities and Exchange ComInission, Plaintiff, vs. Tuco Trading, LLC and Douglas G. Frederick ("Fredericl~"), Defendants In United States District Court Southern District of California (the. "Court" and the "Case") Dear Mr. Lennon: On March 5 and 6, 2008, the Court issued a Temporary Restraining Order and Supplemental Order (the "TRO") at the request of the United States Securities and Exchange Commission (the "SEC") and appointed Thomas F, Lennon as a Temporary Receiver (the "Receiver") for Tuco Trading, LLC, a Nevada lhnited liability company ("Tuco"), and its subsidiaries, affiliates and other entities for which Tuco is in control. On March 17, 2008, the Court issued a Judgment as to defendants Tuco and Frederick and orders: (1) freezing Tuco's assets; (2) appointing Lemaon as Pent, anent Receiver over Tuco; and (3) prohibiting the destruction of documents (the "Judgment" and the "Receivership"). The Receiver, as a result of the TRO and Judgment, has requested William H. Ling, Certified Public Accountant and his staff ("Ling") conduct a review 0f accounting and other records for the Case and to determine if certain actions alleged in the Case have occurred. Based upon our procedures performed to date regarding accounting and other records provided us by the Receiver for the Case, Ling is reporting to you on the following information:
A. Identified Related Entities and Individual

Tuco, a Nevada limited liability corporation formed on August 14, 2006 and Frederick, the managing Class A member are the defendants in the case. Tuco has purportedly admitted approximately 250 (323 trading accounts were identified as of March 5, 2008) Exhibit Page

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Thomas F. Lemlon, Receiver Tuco Trading, LLC May 28, 2008 Page 2 Class B Members ("Class B Members") since inception. Reference should be made to the SEC filings in the Case for more information regarding Tuco and Frederick.
B. Nature and Backgroundof Tuco,s Business

From inception, Tuco operated as a day trading entity for its various Class B Members. Starting on September 15, 2007, Tuco leased office space at 909 Prospect Street, Suite 224, La Jolla, California from which it conducted its business when the Receivership began. Tuco has also used addresses, among others, of 4535 West Sahara Ave., #200, Las Vegas, Nevada; 1807 Morgan Lake Ct., Brighton, Michigan (Frederick's former Michigan house); and 3333 Michelson Drive, Iawine, California, with branch offices (as discussed in the web site) to conduct trades also purportedly available in Chicago, Illinois and Dallas, Texas. On March 6, 2008, the securities clearing house used by Tuco's primary broker, dealer, GLB Trading, Inc. ("GLB"), Penson Financial Services, Inc. ("Penson"), terminated Tuco's ability to place trade orders on behalf of its Class B Members. This suspension effectively shut down the operations of Tuco. To open an account and trade through Tuco, Class B Members completed a new account package that included the following: 1. 2. 3. A Trader Information Sheet. An AOL Instant Messenger name on the Trader Information Sheet. The following documents to execute: The Confidentiality Agreement and Acknowledgnrtent The Trader Agreement The Counterpart Signature Page to the Operating Agreement The Incidental Fees List The Agreement for Market Display Services 4. A copy of their driver's license. A check payable to "Tuco Trading, LLC" funding their account. According to the new account package, Class B Members were supposed to open an account with at least $10,000, but per Frederick, could open an account with a smaller amount with Frederick's okay.

Exhibit Page

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Thomas F. Lennon, Receiver Tuco Trading, LLC May 28, 2008 Page 3 Upon completion of the new account package and deposit of money to become a Class B Member, Tuco would establish a trading account and ability to trade securities via various trading software. Software systems used by day traders include Lightspeed Trading Platform (principal one used), Sterling (also called Forex), Instaquote, V Trade, F-10 (Falcon Trading System), and Hydra, among others (the "Colmnercial Trading Software"). Three (3) types of Class B Members were admitted into Tuco as follows: 1. Single Members - Single members generally had one trading account. Master Account Members - Master account members generally had multiple trading accounts that Tuco viewed as one combined account balance. Certain traders in certain master accounts may view themselves as independent traders, which Ling did not address in this report. Members with Sub-Accounts - Members with sub-accounts were generally other day trading operators that used a single Tuco Class B Member account to operate their day trading business. Tuco considered the combined balance of the members with sub-accounts as one account balance, even though many subaccounts had negative balances. Tuco has identified the following Class B Members as members with sub-accounts: Lanai, Ltd. ("Lanai") B. C. D. E. F.

T3 ("T3")

Blackhawk Trading ("Blackhawk") Coper Trading Robotic Markets, Inc. JC Trading

Tuco's primary source of income was colmnissions earned frorn Class B Member securities trades and colmnissions earned by Frederick for refel~ng traders to GLB. Coamnissions were generally charged based upon the number of shares traded. Tuco was not the registered securities broker that directly earns the colmnissions. Frederick is the licensed broker who received the COlmrdssions and transferred them to Tuco. Frederick, the Class A managing member, would negotiate various colmnission rates with Class B Members. Per Frederick, cormrfissions could range from $10 per 1,000 shares traded for single members to $0 for one Class B Member with sub-accounts, which was purportedly admitted to generate savings for Tuco due to its large volume of trading by decreasing the rates Tuco was charged by trading platform Lightspeed. Class B Members traded through Tuco because Tuco offered increased leverage, at competitive COlmnission rates. Class B Members were provided access to trade in virtually all types of securities in virtually all United States public markets. Per Exhibit ~ Page ~ ~/03

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Thomas F. Lelmon, Receiver Tuco Trading, LLC May 28, 2008 Page 4 Frederick, 99% of the trade orders placed by Tuco's Class B Members were in equity securities, only in United States public markets. Tuco also permitted option, futures and commodity trades. No foreign market or currency trades were purportedly permitted. Certain Class B Members or sub-account members were foreign residents or have a foreign country affiliation. Certain, although not all, significant Class B Member Traders Equity Positions that have a foreign country affiliation include Lanai, Coper Trading, Blackhawk and Serafin Group. Volume in Tuco Class B Member trading increased drmnatically in approximately November 2007. Several Class B Members with sub-accounts, notably T3 and Lanai, apparently increased their sub-account membership and securities trading drmr~atically. Per Frederick, historical monthly trading prior to November 2007 totaled approximately 400 million shares. Per Frederick, trading for December 2007 and each month thereafter averaged approximately 2 billion shares. Per Frederick, Lanai totaled approximately 1 billion shares per month from December 1, 2007 until trading was halted on March 6, 2008. Tuco Class B Members were expected to maintain positive equity positions. Many Class B Members incurred negative equity positions. Frederick, Tuco's head of trading Mike Kestler ("Kestler") and staff were supposed to monitor trading activity to be sure Class B Members did not incur negative trading balances or violate federal or state securities trading rules and regulations. It is evident by the large number of negative Class B Member trader account balances that close monitoring of trader accounts either did not occur or was ineffective. Certain SEC rules apply to margin security trading, which the SEC has alleged Tuco may have violated as to certain or all Class B Members. Please refer to the SEC filings on the Case for more information regarding Tuco's alleged violations.
C. Books~ Records and Analysis

On March 6, 2008, the Receiver, his legal counsel, Allen Matkins Leck Gamble Mallory & Natsis LLP, 501 West Broadway, 15th Floor, San Diego, California 92101-3177 ("Allen Matkins"), his information and technology consultant, Investigative Teclmologies ("IT"), and Ling met with and imerviewed Frederick. ha addition, tlle Receiver, Allen Matkins, IT and Ling met with the former attorneys for Tuco and Frederick, Michele R. Fron and Audette P. Morales of Keesal, Young & Logan, 400 Oceangate, Long Beach, California 90801-1730. Much of the information included in this report was derived from inte~wiews with Frederick. Tuco and Frederick were not good record keepers and did not document

Exhibit Page .....

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Thomas F. Lennon, Receiver Tuco Trading, LLC May 28, 2008 Page 5 transactions with, among other things, books and records, written agreements, workpapers and legal files that most companies maintain.
InfonTlation requested from Frederick and Tuco to date, which is being analyzed by the Receiver, Allen Matkins, IT and Ling is listed as Extfibit I. The Receiver, Allen Matkinsl IT and Ling have been and are cominuing to analyze the information and records provided by Frederick and Tuco.

Tuco maintained their books and records via Quicld3ooks, a widely recognized accounting software system (the "QuickBooks Records'.'). Ling was provided access to the QuickBooks Records for the period August 14 to December 31, 2006, as of and for the year ended December 31, 2007, as of February 29 and March 5, 2008, and for the periods January 1 to February 29 and March 5, 2008, respectively. Tuco's books and records do not include all assets, liabilities~ members' equity, revenue and expenses. Further, many items included in the Quiclc_Books Records were not classified to the proper general ledger account. Tuco's failure to maintain books mad records incorporating all accounting information, has limited Ling's ability to analyze Tuco's financial position.
Tuco il~erited (see Item 1 below) and developed a day trader tracking software ("Titans System") to track the Class B Members Day Trader Equity Positions at any given point in time ("Traders Equity Positions"). The Titans System was designed to interface with and record equity trades made via Commercial Trading Software used by Tuco's Class B Members.

Ling, to complete the accounting for Tuco, via various schedulesattached and via correction of entries and entered into the QuickBooks records, from inception to March 5, 2008, the date of the TRO, and to date, has completed the following: The majority of the initial equity and Class B Members of Tuco came from an entity entitled Evolution Capital, LLC ("Evolution"). Evolution was apparently a day trading company. Per Frederick, Evolution was an entity owned by Kestler and Jonathan I~drkland ("I~drkland'') and for which Frederick was a consultant. Per Frederick, on November 1~ 2006, via an oral agreement, Tuco agreed to admit Evolution's day traders as Class B Members of Tuco with a capital contribution equal to their Trading Equity Position on that date. Evolution, via an oral agreement, agreed to contribute to Tuco a portion of two (2) JP Morgan Chase bank accounts and four (4) broker accounts with Penson. The software used by Evolution to track day trader equity was the same software system as the Titans System. The individual Class B Member equity positions recorded by Tuco were the same balances as the ending Evolution equity on October 31, 2006, per the Titans System. Per Frederick, Tuco also assumed two (2) loans of Evolution; a $200,000 loan to Kirkland, which has been fully repaid by Tuco, and a $100,000

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Thomas F. Lennon, Receiver Tuco Trading, LLC May 28, 2008 Page 6 line of credit with Bm~ of America upon which Tuco began making payments after the admission of the Evolution day traders as Class B Members in Tuco. Ling has smr~narized the Evolution net assets over liabilities contributed to Tuco attached as Exhibit II. Ling has also smmnarized tl~e Evolution positive trade equity accounts as compared to net assets over liabilities contributed by Evolution to Tuco on the date of the transfer, attached as Exhibit III. As is illustrated on the schedule, there was an excess of net liabilities over assets to cover positive trader equity of $520,397 on the date of the Evolution takeover by Tuco. In addition, certain items were paid from the Evolution bank accounts after they were. assumed by Tuco that related to Evolution and are not recorded on Tuco's books and records, which are attached as Exhibit IV. Ling is continuing to analyze the information provided by Tuco to record the Evolution transaction.
2,

Banking transactions for all identified Tuco and Evolution bai~ accounts were traced to bank statements with corrections made, as necessary, to the QuickBooks Records. A listing ofbm~ accom~t balances and accounts analyzed and reconciled to the QuickBooks Records is listed as Exhibit V. Copies of Tuco's broker records were obtained for the various broker accounts. A listing of broker account balances and accounts identified and posted to the QuickBooks Records is attached and listed as Exhibit VI. A reconciliation of the commissions paid to Frederick by GLB and, in turn, to Tuco was next completed. The April 2008 reconciliation from GLB has not yet been produced to reconcile commissions due Frederick and, in turn, to Tuco. Certain charges to Tuco and claims for possible future charges by GLB are under investigation by the Receiver. The GLB Trading, Inc. Colmnission Received reconciliation is attached and listed as Exhibit VII. Tuco, in turn, entered into oral agreements with certain licensed brokers who referred business to Tuco splitting certain commissions earned by Tuco. Please refer to the Related Party Transactions section later in this report for a description and smmnary of the commissions identified and paid to David Halperin, Jonathan Bae and Thomas Wilbeck.

o

An analysis of broker account transactions was completed to record all broker account non-trading and trading activity. This analysis included reconciling transfers to and from the broker accounts to Tuco bank accounts, loans made to Tuco by third parties with interest paid directly deposited into m~d repaid out of the broker accounts and various other charges mad credits made to the broker trading accounts, certain of which may have been charged or credited to Class B Members.

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Thomas F. Lem~on, Receiver Tuco Trading, LLC May 28, 2008 Page 7

Ling next determined trading profits and losses that occurred from broker statements. Ling has not validated individual Class B Member trading profits to broker statements, as this would require the matching of billions of shares of equities traded as recorded by the Co~mnercial Trading Software via the Titans System into the Traders Equity Positions. IT has met with the Tuco computer consultants to review the Titans System. Please refer to the Receiver's report for additional infonr~ation on this work. Ling derived Class B Member trading profits and losses for the periods November 1 to December 31, 2006, January 1 to December 31, 2007, and January 1 to May 5, 2008 by taking beginning broker account balances, adding or deducting non-trading activity and adding or subtracting the ending broker account balances for the periods listed. Attached as Exhibits VIII is the Smmnary Analysis of Broker Account Activity and Trading. An analysis of the Class B Members Traders Equity Positions prepared by Tuco's computer consultant from the data accumulated from the Titans System was prepared. The smmnary included members' contribmions and distributions and Class B Members net day trading profits and other charges as tracked by the Titans System (the "Sulmnary Traders Equity Analysis") for the periods November 1 to December 31, 2006, the year ended December 31, 2007, and the period January 1 to May 5, 2008 listed as Exhibit IX. This Summary Trader Equity Analysis is a history of all transactions posted to the Traders Equity Positions from Tuco's inception to date. The summary Equity Traders Analysis includes day trade activity for billions of shares of equities initiated by the Commercial Trading Software and tracked by the Titans System. Ling compared the Class B Member contributions and distributions per the updated QuickBooks cash banldng records to the Sulnmary Traders Equity Analysis (the "QuickBooks to Traders Equity Capital Contribution and Distribution Variance Analysis") and listed variances, which analysis is listed as Exhibit X. Ling is continuing to investigate variances to update the Traders Equity Positions and the Summary Traders Equity Analysis. Ling has prepared a reconciliation of the variances between the Summary Trader Equity Analysis combined profits, and losses as COlnpared to broker activity for the periods ended December 31, 2006, December 31, 2007 and May 5, 2008. Certain credits and charges by Penson, GLB and other third parties are under investigation by the Receiver. These credits and charges have to be taken into account to complete this reconciliation.

Exhibit, Page .......

Case 3:08-cv-00400-DMS-BLM Thomas F. Lennon, Receiver Tuco Trading, LLC May 28, 2008 Page 8

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Ling is continuing to research the variance between the broker statements and the Smrnnary Trader Equity Analysis. Attached as Exlfibit XI is a Variance Analysis of Broker Account Activity to Sumlnary Equity Trader Profit and Loss. Ling completed a reconciliation of the United States Federal Form 1065, U.S. Return of Partnership Income, Domestic Limited Liability Company, tax return which was filed for the period November 1 to December 31, 2006 ("December 31, 2006 Tax Return") to the Smmaaary Traders Equity Analysis for the same period. A Nevada address was used as the filing address. No state tax returns were filed. Ling reconciled the Quicld3ooks member contributions and distributions and Trader Equity PoSitionS to the December 31, 2006 Tax Return and noted variances in amounts and Class B Members reported in the return. Please refer to Exhibit XII attached for these variances. From the various accounting information described above, a Tuco Smrnr~ary Statement of Net Assets over Liabilities was prepared as of December 31, 2006 and 2007, March 5 and May 5, 2008, attached as Exhibit XIII. This Summary Statement of Net Assets over Liabilities includes all identified assets and liabilities on the dates listed as derived fi'om the Tuco records located to date. Next, a listing of Negative Traders Equity Position as of December 31, 2006, December 31, 2007, March 5, 2008 and May 5, 2008 was prepared and is attached as Exhibit XIV. This Exhibit lists individual Class B Members with a negative Traders Equity Position with smmnary totals provided under the three (3) Class B Member account types and was derived from the Summary Equity Trading Analysis as of the dates indicated. Additionally, a summary of Class B Member's Traders Equity Positions was completed as of December 31, 2006, December 3.1, 2007, March 5, 2008 mad May 5, 2008, which is attached as Exhibit XV. This analysis summarizes the number of mad combined outstanding Traders Equity Positions as derived from the Summary Equity Trading Analysis. The analysis also lists the number of Class B Member balances, as defined, under $25,000. Finally, a summary of the mr~ount by which Positive Traders Equity Position exceeds the Summary Statement of Net Assets over Liabilities known as the Shortfall (the "Shortfall") as of December 31, 2006, December 31, 2007, March 5, 2008 and May 5, 2008 was prepared and is attached as Exhibit XVI. The Shortfall analysis illustrates the amount by which Positive Traders Equity Positions, as defined, exceeds Tuco net assets over liabilities on the dates listed. Certain reasons, among others, for Shortfall occurring at Tuco include; traders incun~ng negative Trader Equity Positions due to losses on equity trades; distributions to Class A or B members in excess of capital accounts; and expenses exceeding revenues of Tuco, including payments to related parties. The Shortfall analysis does not take into accomat the costs of the Receiverslfip through May 5, Exhibit Page

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Thomas F. Lem~on, Receiver Tuco Trading, LLC May 28, 2008 Page 9 2008. This Shortfall will likely increase until the date of completion of the Tuco Receivership as interest earned on monies on deposit will not equal Tuco Receiversl~p expenses. Ling intends to submit a complete set of QuiclcBooks accounting records to the Court from the inception of Tuco to date upon completion of the Receivership. Related Par ,ty Transactions: The Receiver, Allen Matldns and Ling have identified certain related parties for which schedules of payments to or from them as identified to date are listedin schedules attached as follows: Douglas Frederick. Frederick (per Frederick) is the single Class A managing member of Tuco. Frederick (per Frederick) was a consultant to Evolution, Frederick was the licensed broker representative with GLB for Tuco. Frederick was a day trader at Tuco. A payment was made by Tuco on behalf of Frederick to enable Frederick to sell a house in Michigan (per Frederick). Frederick received periodic payments or other compensation from Tuco. Tuco paid Frederick's living expenses. A smmnary ofTuco trm~sactions with or on behalf of Frederick is attached as Exhibit XVII. Mike Kestler. Kestler was a managing member of Evolution (per Frederick). Kestler was the initial managing member of Tuco as indicated in the December 31, 2006 Tax Return. Kestler was a "silent partner" in Tuco, a description used by Frederick. Kestler was the head of trading for Tuco for which he received periodic payments or other compensation. Per Frederick, Kestler is a personal guarantor for the Evolution Bm~k of America credit line originally totaling $100,000, upon which Tuco has been making payments. Further, Kestler, via an entity under his control known as Black Cat, LLC ("Black Cat") received an advance totaling $25,000 that remains unpaid as of the date of this report. Kestler also day traded while with Tuco for which he had a net negative Trader's Equity Position totaling $36,933 and $54,715 on March 5 and May 5, 2008, respectively. Please refer to Exhibit XVIII for a list of Tuco identified transactions with Kestler. Jonathan I~drldand. Kirkland was. a managing member of Evolution (per Frederick). I~drkland was owed $200,000 by Evolution, which debt Tuco assumed and paid. Kirkland was a "silent partner" in Tuco, a description used by Frederick. Kirkland received periodic payments or other compensation from Tuco. Kirkland was a day trader in Tuco. I~drkland (per Frederick) is the principal of Blackhawk, a Class B Member with Sub-Accounts in Tuco that has a negative capital account balance of $266,081 as of March 5 and May 5, 2008. Per Exhibit Page .........

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Thomas F. Lermon, Receiver Tuco Trading, LLC May 28, 2008 Page 10 Frederick, Kirkland relocated to China sometillle after the Evolution takeover by Tuco. A SUlmllary of Tuco transactions with Kirkland is attached as Exhibit XIX. GLB Trading, Inc. GLB was the primary broker-dealer used by Frederick for Tuco. GLB paid commissions to Frederick who, in turn, paid the commissions to Tuco. GLB deducted various fees and charges from the Frederiak comrnissions which are under investigation by the Receiver. A schedule suxrnriarizing commission received by Frederick mad paid to Tuco is attached as Exhibit VII. Other transactions GLB had with Tuco are attached as Exhibit XX, including amounts GLB deducted from Tuco (Frederick) co~rnnissions earned.
o

Robert A. Lechman. Robert A. Lechman ("Lechman") is the president of GLB. Lechman was also the owner or a principal in Back Office Lending, an entity that made loans to Tuco to increase margin leverage in the Pe.nson broker accoums ("Back Office Lending"). Tuco made an interest free loan to Lechman totaling $250,000, upon which a balance remains totaling $100,000. Tuco transactions with Lechman and Back Office Lending are attached as Exhibit XXI. Frank McDonald, New Caledonia and Worldwide Trader Capital, Inc. Frank McDonald, who also operates as New Caledonia and Worldwide Trader Capital, Inc. ("McDonald") provided short-term loans to Tuco upon which interest was charged and paid by Tuco, which monies were deposited into the Penson broker accounts to provide increased leverage for margined trading. McDonald also provided a loan to a Class B Member, Accelerated Assets, for which, per Frederick, McDonald would be repaid in a share of the trading profits of Accelerated Assets. McDonald also had a day trading account at Tuco operated under the name of Schiller. Apparently a broker dealer account was opened by Tuco/McDonald at an entity titled Southwest Securities ("Southwest"), to whom Tuco/McDonald made loans/capital contributions totaling $4,614,740. Tuco/McDonald earned trading profits totaling $421,129 based upon deposits made to and returned from Southwest, per Frederiak and an analysis of certain broker account transfer activity from March to December 2007. The Receiver has requested but has not been provided copies of broker dealer statements by McDonald as of the date of this report to verify transactions. Frederick explained that Tuco in effect became a subtrader under McDonald's account at Southwest until such time as the Titans System could track Lightspeed transactions at Penson. The Receiver, Allen Matkins and Ling will continue their investigation. A surmnary of Tuco transactions with McDonald is attached as Exhibits XXII. Lisa Hyatt. Lisa Hyatt ("Hyatt") rented office space from Tuco via an oral agreement. Per Frederick, Hyatt was also going to invest in Tuco as a Class A Member for which money was received and later returned. Per Frederick, Hyatt owned a company called Kayo Financial ("Kayo")and was also exploring

Exhibit Page

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Thomas F. Lennon, Receiver. Tuco Trading, LLC May 28, 2008 Page 11 purchasing another day trading or securities finn by the name of ETC Clearing for which Tuco advanced money to Hyatt via Kayo that was repaid to Tuco. Per Frederick, Ocean View Capital, an entity owned by Hyatt mad Kestler, is leasing the vacated Tuco office space from the landlord. A smrmaary of Tuco transactions with Hyatt and Kayo is attached as Exhibit XXIII. Dave Halperin, CT Corporation, CT, LLC mad Marquis Jet. Dave Halperin; who operates as CT Corporation mad CT, LLC ("Halperin") was an individual who was the owner of or had an apparent relationship with a Class B Member, CT, LLC: Halperin is apparently a licensed broker with GLB, per Frederick. Tuco mad Halperin have entered into an oral agreement to split certain commissions earned by Tuco. Per Frederick, Halperin set the coimnission structure for his cliems referred to Tuco. Per Frederick, Tuco received $1.50 per 1,000 shares traded of commissions received by Tuco, with tlie balance due Halperin for the following accounts: 2. 3. 4. 5. 6. 7. 8. 9. 10. Robert W. Murphy CT Trade, LLC (personal account) CT Trade, LLC 3 (personal account) Ashit Jol~ Alan Hoes Michael Halperin Keith McHugh Eric Leopold Master Account Orange Diviner Master Account Bill Raffo

Halperin was issued checks by Tuco classified as co~mnissions in the amount of $652,522. A smmnary of Tuco transactions with Halperin is attached as Exhibit Brad Phillips. Brad Phillips ("Phillips"), per Frederick, is the stepbrother of K.irldand. Phillips at one time worked for Tuco. Per Frederick, Phillips improperly and intentionally made an entry to record $100,000 more to a Class B Member Blacldaawk's Traders.Equity Position, which $100,000 difference the Company never recovered. Blackhawkis the entity controlled by his stepbrother Kirkland. Frederick believes that Phillips is currently located in China. A sulmnary of Tuco transactions with Phillips are attached as Exhibit XXV. 10. Jonathan Bae. Jonathan Bae ("Bae") is a Tuco Class B Member. Per Frederick, Bae was also an authorized trader for several other accounts under his master account with Tuco. In October 2007, Bae was trading a signaificant position in two (2) Chinese internet stocks which trades resulted in large losses. Phillips was

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Thomas F. Lennon, Receiver Tuco Trading, LLC May 28, 2008 Page 12 managing risk for Tuco at the time and did not contact Bae to advise him to immediately get out of Bae's position. Per Frederick, it took several days to work Bae out of these stocks and he lost almost $800,000. Bae's Class B Member Negative Traders Equity Position as of March 5 and May 5, 2008 is $879,255. A smmr~ary of Tuco transactions with Bae are attached as Exhibit XXVI. 11. Thomas Wilbeck and Woncey, Inc. Thomas Wilbeck, who also operates as Woncey, Inc. ("Wilbeck") is apparently a licensed broker with GLB, per Frederick. Wilbeck and Tuco, via an oral agreement, have agreed to equally share certain commission income on certain accounts referred to Tuco by Wilbeck, principally Serafin Group, a master account. Wilbeck was issued cormnission checks by Tuco in the amount of $213,636. A summary of Tuco transactions with Wilbeck is attached as Exhibit XXVII.

Summary of Preliminary Findings

Tuco's approximate net assets over liabilities as of December 31, 2006, December 31, 2007, March 5, 2008 and May 5, 2008 as compared to positive Traders Equity Positions results in a Shortfall of $1,507,881, $1,553,396, $2,990,805 and $3,026,373 as of those respective dates (see Exhibit XVI). As of March 5, 2008, approximately 323 investors in the United States mad several foreign counties have approximately $10,601,001 invested in Class B Tuco Membership Units. Tuco allowed approximately six (6) identified members to have subaccounts or submembers. Approximately 1691 subaccounts have been identified. Approximately 267 of the 282 Class B Tuco members have trader equity positions, as defined, of less than $25,000. Approximately 1362 of the 1691 submember accounts (T3, a major Member with Subaccounts, has ma unknown number of subaccounts or submembers with balances under $25,000) have trader equity positions, as defined, of less than $25,000. The number of investors mad amounts invested has not been confirmed to Tuco files and records, but are based upon Tuco's Trader Equity Positions (see Exhibit XV C). Tuco did not maintain accurate accounting books mad records. Bank balances per Tuco's QuickBooks records have differences from banking records. Broker trading account balances are not recorded on Tuco's Quicld3ooks records. Tuco's books mad records could not be relied upon for accurate financial information. Tuco's Titans System Traders Equity Positions for tracking Class B Member securities trades does not agree with security positions as of November 1, 2006, December 31, 2006, December 31, 2007 and March 5 and May 5, 2008. The software was designed to track initial Class B l~ember contributions plus or

Exhibit Page

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Page !:3 mm s,ClassN:Me~ber Profits aadJosses:fi'om ~tradmg, and oflier s.eeUri~ms :traasaetions; less:disMbutions.

VafibfiS paym~rti~ ~.x~re', made"to=teiated pattie s. wIaen;.Tgc o: .did not:have net as.setS over liabilities ~at exceeded Traders::Eq~Jity Pbsition~. Ple~e. CNit~et us.to: discuSg, and review:flais"report.witli you; Very:~mly yours,:

Exhibit~ Page

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THOMAS F. LENNON, RECEIVER TUCO TRADING, LLC LIST OF EXHIBITS REPORT DATED MAY 28, 2008

Sumlnary of Documents Requested II. III.
IV.

Evolution Capital, LLC Net Assets over Liabilities as of November 1, 2006 Comparison of Evolution Capital, LLC Net Assets over Liabilities to Estilnated Positive Class B Member Traders Equity as of November 1, 2006 Evolution Banking Transactions Not Related to Tuco for the Period November 1 to December 31, 2006 Summary of Tuco and Evolution Bank Accounts as of May 5 and March 5, 2008, December 31, 2007 and December 31, 2006 Smr~nary of Tuco and Evolution Broker Trading Accounts as of May 5 and March 5, 2008, December 31, 2007 and December 31, 2006 Smmnary of GLB Trading, Inc. CommissiOn Received Smrnnary Analysis of Broker Account Activity Smmnary Trading Equity Analysis A. For the Period Noveinber 1 to December 31, 2006 B. For the Period January 1 to December 31, 2007 C. For the Period January 1 to May 5, 2008

go

VI.
VIii' VIII. IX.

No

Smmnary of Variances Between Traders Equity Positions and QuickBooks A. For the Period November 1 to December 31, 2006 B. For the Period January 1 to December 31, 2007 C. For the Period January 1 to May 5, 2008

XI.

Variance Analysis of Brokers Account Activity to Summary Traders Equity Trader Profit and Loss Comparison of Period Ended December 31, 2006 Tuco Federal Tax Return to QuickBooks Records Surmnary Statement of Net Assets over Liabilities as of December 31; 2006, December 31, 2007, March 5~ 2008 and May 5, 2008 Smmnary of Negative Trading Equity Positions Exhibit Page_ //-/- O 7~/~._))'''

XII.

XIII.

XIV.

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 16 of 56

TUCO TRADING, LLC LIST OF EXHIBITS REPORT DATED MAY 28, 2008 A. B. C. D.
XV.

As of December 31, 2006 As of December 31, 2007 ¯ As of March 5, 2008 As of May 5, 2008

Surmnary of Class B Members Trader Equity Positions A. B. C. D. As of December 31, 2006 As of December 31, 2007 As of March 5, 2008 As of May 5, 2.008

XVI.

Comparison of Tuco Net Assets over Liabilities to Positive Traders Equity Positions as of December 31, 2006, December 31, 2007, March 5, 2008 and May 5, 2008, Shortfall Analysis Surmnary of Related Party Activity- Douglas Frederick

XVlI.

XVIII. Sun-nnary of Related Party Activity - Mike Kestler XIX. XX. XXI. XXII. Summary of Related Party Activity - Jonathan Kdrkland Summary of Related Party Activity- GLB Trading, Inc. Summary of Related Party Activity - Robert A. Lechman Smrnnary of Related Party Activity - Frank McDonald

XXIII. Sulrnnary of Related Party Activity- Lisa Hyatt XXIV. Sumlnary of Related Party Activity - David Halperin XXV. Smmnary of Related Party Activity - Brad Phillips

XXVI. Summary of Related Party Activity - Jonathan Bae XXVII. Smmnary of Related Party Activity - Thomas Wilbeck

2

Exhibit, Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 17 of 56

Thomas F. Lennon, Receiver Tuco Trading, LLC Summary of Documents Requested Document or Item Requested Bank statements from inception, August 2006, to date.
o

Exhibit I May 28, 2008

Books and records (Quicld3ooks records) (i.e., General Ledger) a. b. c. 2006 2007 2008

QuickBooks financial statements (Balance Sheet and Profit, Loss Statement). a. b. c. d. As of and period ended December 31, 2006 As of and year ended December 31, 2007 As of and period ended February 29, 2008 As of and period ended March 5, 2008 (n/a - Quick Books online)

Disc of all Quicld3ooks.files.
o

Partnership tax returus a. b. 2006 2007, if completed or in draft form

Monthly statements from broker-dealers or clearing house showing fees earned and charges made. Copy of executed Tuco operating agreement.
o

Copy of all executed member "Class B" subscription agreements of Tuco. Detail of Class B member investments. List of Class B members of Tuco.

10. Listing of bank accounts of Tuco. 11. List of other investments such as securities, etc. of Tuco
12.

Tuco lending agreement(s).
Page 1 of 4

Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 18 of 56

Thomas F. Lennon, Receiver Tueo Trading, LLC Summary of Documents Requested
Document or Item Requested

Exhibit I May 28, 2008

13.
14. 15.

Tuco web site. Ability to access on-line, restricted for viewing and printing only. Copies and summary of any Tuco litigation. If none, please state. Copies of any Tuco guarantees, if any. Copies of any guarantees made by individuals or others on behalf of Tuco. Copies of Tuco Errors & Omissions insurance, if any. If none, so state. Copies of Tuco property insurance policies. Promotional materials (brochures, etc.) of Tuco. Listing of all personal property owned by Tuco in the following offices: a. b. c. d. Chicago Dallas La Jolla Others

16. 17. 18. 19.
20.

21. 22. 23.

Minutes ofmelnbers or directors meetings of Tuco. Payroll records including W-2's, W-3's and 941's and DE 3's for 2007 and 2006. Form 1099's and 1096's for 2007 and 2006. Tuco Offering Circular, if any Tuco Use of Proceeds Disclosure, if any Tuco written or reference to electro~zic promotional materials to recruit new members Access to Tuco, GLB Trading, h~c. ("GLB") and Penson Financial Services, h~c. ("Penson") imemal and externalrecords that list trading positions for members as of:
Page 2 of 4

24. 25 26.

27.

Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 19 of 56

Thomas F. Lennon, Receiver Tuco Trading, LLC Summary of Documents Requested Document or Item Requested

Exhibit I May 28, 2008

December 31, 2006 December 31, 2007 February 29, 2008 March 5, 2008 28. Copy of written agreement between GLB Trading and Tuco, if any. If any agreement is oral, a written description of the terms. Copy of written agreement between Penson Financial and Tuco, if any. If any agreement is oral, a written description of the terms. A copy of any written side agreements between Tuco, GLB, Penson or members of Penson, if any: If any agreement is oral, a written description of the terms. A written list of members who allow sub accounts. A list of sub account holders for each member allowing sub account holders, if available, or any records providing access to this information. A copy of any securities licenses held by Tuco, if any, or a statement that none are held. ~ A copy of any securities licenses held by Douglas G. Frederick, or any other employee or agent of Tuco, if any,., or a statement that none are held. A copy of any California or other state, federal or may otl~er country, professional licenses held by Tuco or Douglas G. Frederick, if any, or a statement that none are held. /u~ explanation and reference to documentation provided as to how h~ternal Revenue Service reporting requirements for "Gross Proceeds from Securities" are met by Tuco, GLB or Penson to members for their trading activities in 2006 and 2007. A copy of the agreement contributing the Evolution assets to Tuco on November 1, 2006.

29.

30.

31.

32.

33.

34.

35.

36.

Page 3 of 4

Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 20 of 56

Thomas F. Lennon, Receiver Tuco Trading, LLC Summary of Documents Requested Document or Item Requested 37.

Exhibit I May 28, 2008

A smmnary of the GLB Trading, Inc. cornmission revenue earned and paid to Fredericks on behalf of Tuco, including disputed NYFIX and margin interest charges. Copies of or access to all supporting detail for all Chase balxk accounts (cancelled checks, deposit tickets, wiring instructions, etc.) of Tuco from inception or opening of bank accounts to date. A report or reports from Tuco that smrnnari-ze activity for all of the back office trader equity positions listing investments, withdrawals, and trading activity, incltiding dividends, interest or other amounts credited or charged to the accounts such as transaction fees. An accurate listing of accounts payable as Mm'ch 6 m~d March 17, 2008, the dates of the Temporm-y and Permanent Receivership.

38.

39.

40.

Page 4 of 4

Exhibit Page_._.j~

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 21 of 56

Exhibit II May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Evolution Capital, LLC Net Assets over Liabilities As of November 1, 2006

ASSETS: Cash and cash equivalents Broker trading accounts (1) Accounts receivable - broker COlmnissions Total current assets Property and equipment Other assets Total assets LIABILITIES: Accounts payable and accrued expenses Accounts Payable - GLB commission Line of credit - Bank of Alnerica Note Payable - Jonathan I'~drkland Loan payalole - McDonald Loan payable - Back Office Lending Total liabilities

132,866 2,881,212

3,014,078

3,014,078

105,891 100,000 200,000 650,000 295,000 !,350,891

Net Assets over Liabilities

...... 1,663,187

(1) The Receiver, Allen Matkins, IT and Ling will continue to investigate the liquidation and

distribution of certain Evolution members not transferring to Tuco and other items relating to Evolution. This may result in changes in the opening Penson account balances transferred to Tuco by Evolution. Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 22 of 56

Exhibit III May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Comparison of Evolution Capital, LLC Net Assets Over Liabilities To Estimated Positive Class B Members Trader Equity Positions, As Defined As of Novemer 1, 2006

Estimated net assets over liabilities Estimated positive Evolution Capital, LLC (1) trader equity position, as defined Estimated Evolution Capital, LLC equity position Shortfall

1,663,187

2,183,584

(520,397)

(1)

Estimated positive Class B Members trader equity positions, as defined, group all positive equity single member accounts, master accounts and all members who allow sub-accounts. Negative equity single accounts, master accounts or members who allow sub-accounts total approximately $191,910.

Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 23 of 56

Exhibit IV May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Evolution Capital, LLC Bank Activity Banking Transactions Not Related to Tuco For the Period November 1 to December 31, 2006

Deposits 10/10/06 Deposit 10/17/06 Deposit 11/02/06 Deposit

3,110.17 100,000.00 4,640.24 107,750.41

Disbursements 10/31/06 Checks Paid 10/31/06 Wire Transfers 10/31/06 Fees

(71,227.86) (134,227.12)

(57,00)
(205,511.98)

Net Activity

(97,761.57) (1)

Note: (1) The net activity listed above was the net disbursements over receipts not related to Tuco in the Evolution balxk accounts contributed to Tuco.

Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 24 of 56

o

o o o

o o

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 25 of 56

oo0

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 26 of 56

Thomas F. Lennon, Receiver Tuco Trading, LLC Summary of GLB Trading, Inc. Commissions Received As of March 5, 2008 Total Commissions Billed Per GLB Statements (1) 2006 October (105,891.48) November 142,323.88 9,145.99 December 45,578.39 2007 8,638.31 Jmauary 40,357.38 February 79,398.75 March (19,437.69) April (39,518.27) May (235,570.63) June (260,374.10) July August (90,742.44) 139,667.08 September 1,218,431.50 October 2,137,620.33 November December .2,039,475.41 5,017,945.63 2008 2,648,185.09 January February 1,043,934.38 265,269.68 March 0.00 April (2) 3,957,389.15 sUb-total Net Cormrfissions Billed Add: Evolution October 2006 amount charged Net Commissions Earned $ 9,020,913.17

Exhibit VII May 28, 2008

105,891.48 9,126,804.65

Note: (1) The Receiver is continuing his investigation of charges made by GLB against Tuco (Frederick) net cormnissions listed above. Net charges against the COlrnrfissions from Tuco's inception to date total over $4,700,000. (See Exhibit XX) (2) The co~mnissions earned statements fi'om GLB Trading, Inc. for April 2008 have not been received by Tuco. Exhibit Page

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 27 of 56

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 28 of 56 Exhibit IX A May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/200~ BegEquity Profit/Loss Contributions Withdrawals 0.00 817.97 10,000.00 (5,743.74) (450.37) 0.00 (1,282.27) 0.00 4,308.03 4,308.03 0.00 (38.06) 6.50 5,000.00 0.00 (4,975.19) 0.00 4,043.90 4,073.91 (30.00) 0.00 (1,384.20) 17,587.32 (7,315.75) 309.07 0.00 0.00 (65.53) 0.00 (11,!20.47) 68,846.64 29,239.10 39,734.17 15,000.00 0.00 (459.88) 5,000.00 9,867.40 (!0.00) 726.25 615.03 1,500.00 1,535.33 (2,410.96) 5,447.58 (2,853.48) (643.44) 4,100.00 4,099.68 4,099.67 0.00 (4,014.83) (7,052.65) (11,308.30) 5,001.04 9,000.00 15,200.00 11,472.51 7,000.00 24,759.46 16,502.05 10,706.18 8,000.00 0.00 0.00 (806.97) 7,318.64 5,246.14 (170.22) 12/31/2006 EndEquity 10,817.97 (6,194.11) (1,282.27) 0.00 (38.06) 5,006.50 (4,975.19)

Account Name 721222 &be Krieser 233065 Adam Lewensky 721008 Adam Melsek 721342 Atif Haque 721218 Barbela Igor 721228 Beatrice Pitocco 233159 Ben Berrens 721304 Ben Ganger 233477 Blake Jackson 233420 Bo O'Connor 721533 Bob Byrne 721221 Boldirev Ivan 721377 Brad Niles . 233273 Brandon Fritz 721538 Brenton Woolworth 721007 Bruce Montegani 233163 Bryan Chin 721344 Chris Horning 721502 Chris Loretta 233521 Christine Jothen 233560 Christopher Weight 233282Dan Gibby 233357 Dan Raeihle 233487 Dane Baron 721142 Daniel Lane 721364 Daniel Vargas . 721242 David Allan KinKade 721566 David Kinkade 721227 David Readon 233112 Debby Hyatt 721572 Donal Nolan 721509 Donald Callahan 233200 DTA Trading (Dustin Luger). 721267 Edward Bluestien ' 721555 Eric Grosser 233236 Eric Scheldt 233152 Estep Ins. 233113 =erdinand Ledesma 721125iFidel Coronado 721531 Frank Rose 721452 Gary Kiebzak 721213 Gvaramanze Vadim 233217 Heath Sims 721322 Herb Schwarz 721217 HG Trading LLC 721437 Jaime Ramirez 233454 James P Stoessel 233015 Jarrod Vrazel 233025 Jason Norine 721173 Joel Griffith 233096 John Emery

0.01
(1,384.20) 10,271.57 309.07 (65.53) (11,120.47) 15,126.63 4, 540.12 9,857.40 1,341.28 (2,375.63) 2,594.10 3,456.55 (4,014.83) (18,360.95) 10,273.55 9,448.77 8,000.00 6,511.67 5,075.92

,

0.00 0.00
8,165.02 0.00 13,878.03 28,236.74 (1,215.50) (230.00) (1,074.30) 14,746.18 (51.82) 0.00 (4,107.52) 10,534.19

12.51 (144.50)
(2,954.29) (2,479.66)

12.51
24,855.50 5,210.73 7,520.34 14,596.53 21,691.33

25,000.00 10,000.00 6,000.00 22,000.00 26,872.70 2,000.00 9,000.00 10,000.00 2,000.00

(5,281.50)
23,543.07 (25,657.20) 14,816,86 (193.18) 13,356.09 0.00 676.77 (146.00) (5,628.41) (294.27) 0.00 (11,159.14) (3,083.15) (781.41)

52,088.48 9,531.61 24,238.78

(o.oo)

0.00
(3,402.89) 15,254.89

0.00 5,000.00
5,557.84 (44,252.82) (3,468.99) 3,914.79 62.32 Page 1 of 4

100,000.00

50,000.00 5,637.04

11.85
0.00 3,468.99 (1,968.67) 0.00

5,055.25 732.52 12,863.49 (51.S2) 10,676.77 (4,253.52) 6,905.78 (294.27) (3,402.89) 4,095.75 46,916.85 4,218.59 (67.35) (44,252.82)

0.00
1,946.12 62.32

0.00

Exhibit. Pa_qe ,~ 7 0-/~/0~

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 29 of 56 Exhibit IX A May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC

Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/2006 BegEquity Profit/Loss Contributions Withdrawals (4,669.43) 0.00 62,000.00 25,600.69 50,000.00 42,552.19 9,757.52 (4,307.40) 10,000.00 0.00 (258.02) 7,000.00 5,977.03 (758.27) 6,000.00 0.00 (1,185.49)' 3,500.00 (4,332.76) 1,410.42 3,900.00 4,497.50 4,497.48 (1,280.26) 0.00 (1,137.77) 107.19 385.00 (624.07) 0.00 (659.18) 10,000.00 201.93 (5,610.00) 0.00 (4,952.58) 5,000.00 204,118.87 13,724.69 16,861.50 29.42 (2,608,33) 6,132.12 75,000.00 141,653.72 54,831.37 15,000.00 37,128.10 37,128.10 7,092.53 28,992.50 (7,442.06) 23,236.96 (2,084.73) 17,500.00 20,436.94 0.00 (3,360.17) 4,552.27 4,907.03 (354.76) (1,692.49) 3,000.00 (644.15) 1,155.68 (375.74) 52,000.00 30,283.51 4,156.27 15,795.40 (20,610.01) 14,800.00 6,191.16 0.00 6,191.15 200.00 27.60 (11.38) 1,000.00 2,002.84 (7,286.42) 0.00 (2,537.78) 3,500.00 5,000.00 20,949.05 (8,288.32) 25,000.00 32 665.68 (42,364.07) (1,187.44) 7,606.80 (6,419.35) 0.00 (6,900.54) 9,982.00 0.00 (354.83) 2,000.00 0.00 (1,222.50) (207.34) (3,780.23) 10,000.00 0.00 (189.89) 74,977.05 77,367.37 (17,324.22) 64,000.00 0.00 (283.82) 547.94 2,251.31 (4,143.75) 350.00 (529.51) (172.93) 22,000.00 0.00 (20,065.44) 0.00 (9,198.84) 10,900.00 (7,791.59) 10,000.00 10,761.01 0.00 166.57 166.58 (5,549.77) 0.00 (127.53) 1,500.00 (273.95) 25,000.00 0.00 (2,738.80) 2,000.00 (37.03) (5,345.09) 0.00 670.10 Page 2 of 4 12/31/2006 EndEquity (4,669.43) 56,152.88 5,450.12 9,741.98 4,218.76 (1,185.49) (6,422.34) 2,619.72 (1,137.77) (131.88) (659.18) 4,591.93 47.42 217,843.56 16,890.92 3,523.79 121,485.09 22,092.53 21,550.44 12,615.25 (3,360.17)

Account

Name

233190 John Pavidis 233444 John Streng 721101 John Tolpa 721216 Jon Bischmann 233393 Jon Jutstrom 233124 Jonathan Kirkland 233536 Joseph C. Machado 721056 Kent Evans 233048 Kent Morgan 721033 Kevin Ciccarelli 233432 Kevin Gawle 233361 Laurence Alexander Fleet 721571 Like Sha 233360 LimitUp Holdings Ltd 233573 Lisa Hyatt 721283 Lynda Nolan 721116 Mabas, INC 233568 Marc Zangari 721491 Marcos Connell 233514 Mark Grossbard 233411iMark Rosalbo 721535 Matt Kumar 721381 Matt Thomas .233340 Matthew Jim Cunningham 721396 Michael Feintuch 721151 Michael Halperin 233087 Michael J Carr 233339 MichaelJ. Hayes 233548 MichaelJohnson 233529 Michael Wright 233389 Mike Kestler 721375 Mike Landers 721577 Mike Parady 233061 Nicolas Anderson 721272 Olexander Bandurchenko 233006 Pamela Ombres 721440 Paul Przelski 721219 Pavloskly Nikita 233331 Penny Peppier 721215 Petrova Valeria 721450 Phil Kennedy 233012 Phillip Johnson 721229 Prime Directive Investment Fund LP 233041 Priydarshan Shelgikar 721462 Ramo Chendu 233142Rees Gould 233239 Richard Matenaer 233313 Richard W Ennis 721422 Rob Murphy 2 - Rodney Martin 233505 Robert Bosler 233577 Robert Desualniers

(o.00)

663.36 779.94 86,439.78 9,985.39

(o.01)

216.22 (6,283.58) (2,537.78) 11,160.73 15,301.61

0.01
(6,900.54) 9,627.17 570.16 6,219.77 (189.89) 49,066.10 (283.82) (1,344.50 (352.44) 1,934.56 (9,198.84) 2,069.42

0.01
(5,549.77) 1,098.52 22,261.20 (3,382.121 670.10

Exhibit Page ,~.~' d'-/~/,~

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 30 of 56

Exhibit IX A May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/2006 BegEquity Profit/Loss Contributions Withdrawals 10,000.00 0.00 817.97 (5,743.74) (450.37) 0.00 (1,282.27) 0.00 4,308.03 4,308.03 0.00 (38.06) 6.50 5,000.00 0.00 0.00 (4,975.19) 4,043.90 (30.00) 4,073.91 0.00 (1,384.20) 17,587.32 (L315.75) 0.00 309.07 0.00 (65.53) 0.00 (11,120.47) 15,000.00 ¯ 68,846.64 29,239.10 39,734.17 5,000.00 0.00 (459.88) (10.00) 9,867.40 726.25 615.03 1,500.00 1,535.33 (2,410.96) (2,853.48) 5,447.58 4,100.00 4,099.68 4,099.67 (643.44) 0.00 (4,014.83) (7,052.65) (11,308.30) 9,000.00 15,200.00 5,001.04 11,472.51 24,759.46 10,706.18 7,000.00 16,502.05 0.00 8,000.00 0.00 7,318.64 (806.97) (170.22) 5,246.14 12.51 0.00 25,000.00 0.00 (144.50) (2,954.29) 8,165.02 10,000.00 0.00 (2,479.66) 6,000.00 (5,281.50) 13,878.03 52,088.48 23,543.07 22,000.00 28,236.74 26,872.70 (1,215.50) (25,657.20) 9,531.61 14,816.86 (230.00) (193.18) 2,000.00 (1,074.30) 9,000.00 24,238.78 14,746.18 13;356.09 0.00 (51.82) 676.77 10,000.00 0.00 (4,107.52) (146.00) (5,628.41) 2,000.00 10,534.19 (294.27) 0.00 0.00 (3,402.89) (11,1 59.14) 15,254.89 100,000.00 50,000.00 0.00 (3,083.15) 5,000.00 (781.41) Page 1 of 4 12/31/2006 EndEquity 10,817.97 (6,194.11 ) (1,282.27) 0.00 (38.06) 5,006,50 (4,975.19) 0.01 (1,384.2O) 10,271.57 309.07 (65.53) (11,12O.47) 15,126.63 4,540.12 9,857.40 1,341.28 (2,375.63) 2,594.10 3,456.55 (4,014.83) (18,360.95) 10,273.55 9,448.77 8,000.00 6,511.67 5,075.92 12.51 24,855.50 5,210.73 7,520.34 14,596.53 21,691.33

Name

Abe Krieser Adam Lewensky Adam Melsek Atif Haque Barbela Igor Beatrice Pitocco Ben Berrens Ben Ganger Blake Jackson Bo O'Connor Bob Byrne Boldirev Ivan Brad Niles Brandon Fritz Brenton Woolworth Bruce Montegani [Bryan Chin Chris Horning Chris Loretta Christine Jothen Christopher Weight Dan Gibby Dan Raeihle Dane Baron Daniel Lane Daniel Vargas David Allan KihKade David Kinkade David Readon Debby Hyatt Donal Nolan Donald Callahan DTA Trading (Dustin Luger) Edward Bluestien Eric Grosser Eric Scheldt Estep Ins. Ferdinand Ledesma Fidel Coronado Frank Rose Gary Kiebzak Gvaramanze Vadim Heath Sims Herb Schwarz HG Trading LLC Jaime Ramirez

(0.oo)

5,055.25 732.52 12,863.49 (51.82) 10,676.77 (4,253.52) 6,905.78 (294.27) (3,402.89) 4,095.75 46,916.85 4,218.59 ....

Exhibit

/L~r

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 31 of 56

Exhibit IX A May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/2006 . BegEquity Profit/Loss Contributions Withdrawals 11.85 5,637.04 5,557.84 0.00 (44,252.82) 3,468.99 (3,468.99) 3,914.79 (1,968.67) 62.32 62.32 0.00 0.00 (4,669.43) 50,000.00 62,000.00 42,552.19 25,600.69 (4,307.40) 9,757.52 10,000.00 0.00 (258.02) 6,000.00 7,000.00 5,977.03 (758.27) 0.00 (1,185.49) I 3,500.00 (4,332.76) 1,41 O.42 4,497.50 (1,280.26) 3,900.00 4,497.48 0.00 (1,137.77) 385.00 107.19 (624.07) 0.00 (659.18) 10,000.00 201.93 (5,610.00) 5,000.00 0.00 (4,952.58) 13,724.69 204,118.87 29.42 16,861.50 6,132.12 (2,608.33) 75,000.00 54,831.37 141,653.72 15,000.00 37,128.10 37,128.10 7,092.53 (7,442.06) 28,992.50 17,500.00 23,236.96 20,436.94 (2,084.73) 0.00 (3,360.17) 4,552.27 4,907.03 (354.76) 3,000.00 (644.15) (1,692.49) (375.74) 1,1 55.68 52,000.00 30,283.51 4,156.27 14,800.00 15,795.40 (20,610.01) 6,191.16 6,191.1 5 0.00 27.60 (11.38) 200.00 1,000.00 2,002.84 (7,286.42) 0.00 (2,537.78) (8,288.32) 3,500.00 5,000.00 20,949.05 25,000.00 32,665.68 (42,364.07) (1,187.44) 7,606.80 (6,419.35) 0.00 (6,900.54) 0.00 (354.83) 9,982100 0.00 (1,222.50) 2,000.00 (207.34) I 10,000.00 (3,780.23) 0.00 (189.89) 77,367.37 (17,324.22) 64,000.00 74,977.05 0.00 (283.82) 547.94 2,251.31 (4,143.75) Page 2 of 4 12/31/2006 EndEquity (67.35) (44,252.82)

Name James P St0essel Jarrod Vrazel Jason Norine Joel Griffith John Emery John Pavidis John Streng John Tolpa Jon Bischmann Jon Jutstrom Jonathan Kirkland Joseph C. Machado Kent Evans Kent Morgan Kevin Ciccarelli Kevin Gawle Laurence Alexander Fleet Like Sha LimitUp Holdings Ltd Lisa Hyatt Lynda Nolan Mabas, INC Marc Zangari Marcos Connell Mark Grossbard Mark Rosalbo Matt Kumar Matt Thomas Matthew Jim Cunningham Michael Feintuch 'Michael Halperin Michael J Carr Michael J. Hayes MichaelJohnson Vlichael Wright Mike Kestler Mike Landers Mike Parady Nicolas Anderson Olexander Bandurchenko Pamela Ombres Paul Przelski Pavloskly Nikita Penny Peppier Petrova Valeria Phil Kennedy

0.00
1,946.12 0.00 (4,669.43) 56,152.88 5,450.12 9,741.98 4,218.76 (1,185.49) (6,422.34) 2, 619.72 (1,137.77) (131.88) (659.18) 4,591.93 47.42 217,843.56 16,890.92 3,523.79 121,485.09 22,092.53 21,550.44 12,615.25 (3,360.17)

(o.oo)

663.36 779.94 86,439.78 9,985.39

(0.01)

216.22 (6,283.58) (2,537.78) 11,160.73 15,301.61

0.01
(6,900.54) 9,627.17 570.16 6,219.77 (189.89} 49,066.10 (283.82} (1,344.501

Exhibit # Page --~O ~/O~

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 32 of 56

Exhibit IX A May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/2006 BegEquity Profit/Loss Contributions Withdrawals 350.00 (529.51) (172.93) 0.00 (20,065.44) 22,000.00 0.00 (9,198.84) 10,000.00 10,900.00 10,761.01 (7,791.59) 166.57 0.00 166.58 0.00 (5,549.77) (127.53) 1,500.00 ¯ (273.95) 25,000.00 0.00 (2,738.80) 2,000.00 (5,345.09) (37.03) 0.00 670.10 7,392.13 (2,282.48) 0.00 (239.28) 5,000.00 9,300.00 4,749.45 3,423.20 4,000.00 7,231.86 (10,430.13) 0.00 (6,939.46) 25,000.00 15,000.00 0.00 (4,265.68) 25,000.00 13,759.19 (13,617.96) 1,842.54 (9,090.34) 10,932.88 23,121.03 10,000.00 13,495.15 (374.13) 4,700.00 13,014.15 12,137.36 4,775.64 0.00 (897.16) 5,000.00 7,217.23 (1,133.05) 24,709.69 (366.21) 62.13 (1,720.60) 5,500.00 18,500.00 11,497.96 (858.96) (1,634.61) (44.50) 40,000.00 200,000.00 102,748.09 116,679.99 75,989.91 0.00 75,989.91 0.00 (199.21) 0.00 (384.14) 14,914.03 21,607.32 (13,452.56) 712.68 0.00 (5,889.84) 9,970.00 0.00 (881.40) (1,985.73) (2,437.10) 0.00 2,888.33 (2,888.32) 1,476.02 (1,539.14) 0.00 (341.35) 342.21 (7,265.28) 0.00 (182.67) 9,760.27 430.53 0.00 10,000.00 0.00 0.00 27,551.87 18,590.65 (893.18) (7,769.98) 799,302.77 936,859.89 12/31/2006 EndEquity (352.44) 1,934.56 (9,198.84) 2,069.42

Name

Phillip Johnson Prime Directive Investment Fund LP Priydarshan Shelgikar ¯ Ramo Chendu Rees Gould Richard Matenaer Richard W Ennis Rob Murphy 2 - Rodney Martin Robert Bosler Robert Desualniers Robert Greene Robert Kim Robert Norine Robert Scalese Robert W Murphy Roman Walter Samuel Grossman Sanjay Singh Scott Hertweck Scott Littlefield Scott Moll Scott Radzik Scott Seggerman Sean Ahern Sean Fritz Sean McLaughlin Sean Quinn Shannon Mann Shlenova Eugene Shturman Sergey Steven Girden Steven Patterson ,Strelcov Dmitriy Todd Combre Tomas Vargas Trent Fechter Trimorush Sasha Tuco Risk Account Valkoni Petr Victor Salamone Wes Micak William J Tobias William Ryan Mitchell

0.01
(5,549.77) 1,098.52 22,261.20 (3,382.12) 670.10 5,109.65 4,760.72 (1,127.35) 801.73 18,060.54 10,734.32 25,141.23 0.00

(0.01)

8,598.85 4,102.84 6,084.18 24,343.48 (1,658.47) (2,361.00) (1,679.11) 59,428.08

0.00
(199.21) (384.14) (6,759.27) 3,367.48 (881.40) (4,422.83)

0.01
(63.12) (341.35) (6,923.07) (182.67) 10,190.80

10,000.00
27,551.87 17,697.47 1,040,084.46

SUB-TOTAL SINGLE MEMBERS 1,185,411.56

Page 3 of 4

Exhibit

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 33 of 56

Exhibit IX A May 28, 2008 Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet November 1, 2006 - December 31, 2006
10/31/2006 BegEquity (1 O,428.72) (9,396.04) (306.31) (25,387.65) (45,518.73) 0.00 Profit/Loss (1,277.77) (232.55) 0.00 (7,667.37) (9,177.69) Contributions Withdrawals 12,212.83 9,628.58 306.31 106,000.00 128,147.72 12/31/2006 EndEquity 506.34 68,147.72 68,147.72

Name Ken Ancell 2 Ken Ancell 3 Ken Ancell 4 Kenneth Ancell KEN ANCELL TOTALS Manny Ramirez Manny Ramirez MANNY RAMIREZ TOTALS

(O.Ol) (o.oo)

4,797.26 5,303.58

0.00
0.00

(lO.OO) (lO.OO)
(20.00) 0,00 0.00

(lO.OO)

(lO.OO)

(20.00)

PAl Master Account Pisces Asset, Inc. Account 1 PISCES ASSET INC.TOTALS

0.00 24,838.49 24,838.49

0.00 (9,550.41) (9,550.41)

491.80 491.80

0.00

491.80 15,288.08 15,779.88

1,164,731.32

(26,518.08) 927,942.29 1,005,007.61 1,061,147.92

COPER BLACKHAWK LANAI LTD. TOTAL WITH SUB-MEMBERS

46,149.16 (5,295.40) 786,087.94 826,941.70 1,991,673.02

35,113.95 (1,357.33) 930,634.68 964,391.30 937,873.22

6,000.00 0.00 0.00 6,000.00

48,409.63 0.00 1,362,814.09 1,411,223.72

38,853.48 (6,652.73) 353,908.53 386,109.28

933,942.29 2,416,231.33 1,447,257.20

Page 4 of 4

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 34 of 56 Exhibit IX B May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet January 1, 2007 - December 31, 2007
1/01/2007 BegEquity 0.00 0.00 (44,252.82) (6,923.07) 0.00 0.00 Profit/Loss Contributions Withdrawals (22,992.99) 20,030.60 (107.88) 2,131.95

Name Tuco 2007 Losses Doug Frederick Sterling Jarrod Vrazel Tuco Risk Account Lightspeed Violations TEST DAS Account LTSPD Test 1 Doug Frederick Doug Frederick Adam Lewensky Blake Jackson Ryan Hoffman TOTAL TUCO HOUSE ACCOUNTS Serafin Group Acct Michael Serafin Igor Vomn 12 Dmitry Kulikov 2 Igor Voron 2 Dmirtry Kulikov Igor Voron Alexandr Mozin 1 Alexandr Mozin 2 Alexandr Mozin 3 Alexandr Mozin 4 Dmitry 3 Igor Vomn 3 Mike Serafin Viewtrade 1 Alex Mrozin 5 Alex Mrozin 6 TOTAL SERAFIN GROUP PAl Master Account Pisces Asset, Inc. Account 1

0.00
(24.36) (1,136.45) 15,799.48 14,037.63

0.00
0.00 0.00 (6,194.11) (1,384.20)

(lO.OO)
0.00

0.00
(58,754.20)

(2,007.22) 25,720.76 (105,732.72) 36,877.47 59,832.83 56,749.36 (3,592.95) 330,166.98 21,781.88 213,013.37 682.56 108,189.60 104,115.95 (791.10) 4,988.01 1,249.70 (25.60) (121.03) 827,384.31 35,610.15 (17,444.42) (2,687.18) (26.00) (26.00) (26.00)

0.00 150,000.00

0.00 656,565.67

12/31/2007 EndEquity (22,992.99) 20,030.60 (44,360.70) (4,791.12) 0.00 (24.36) (1,136.45) 15,799.48 14,037.63 (6,204.11) (1,384.20) (2,007.22) (33,033.44) (612,298.39) 36,877.47 59,832.83 56,749.36 (3,592.95) 330,166.98 21,781.88 213,013.37 682.56 108,189.60 104,115.95 (791.10)

0.00
0.00 0.00

0.00
0.00 0.00 0.00 0.00

0.00 0.00 0.00
0.00

0.00 0.00 0.00
0.00

4,988.01
1,249.70 (25.60) (121.03) 320,818.64 22,972.57

0.00
491.80 15,288.08

150,000.00
48,671.60 10,000.00

656,565.67 61,800.98 7,843.66

(0.o0)
(2,687.18) (26.00) (26.00) (26.00)

PAl
PAl2 PAl3 PAl4 PA 15PA TOTAL PISCES ASSETS INC Master Accelerated Assets Account Patrick Nilles Thomas Nilles Chad Sternke Bryant McFarlane Patrick Nilles 2 TOTAL MASTER ACCELERATED

0.00
0.00

0.00 0.00
0.00

(lO.OO)

(10.00)
0.00

0.00
15,779.88 0.00 0.00 0.00

(69.11) 15,321.44 (7,952.61) 218,518.78 149,924.28 30,903.75 54,592.79 41,500.45 487,487.44

69.11 58,740.71 87,871.07 195,000.00 15,000.00 10,000.00 10,000.00 163,518.78 481,389.85

69,644.64 150,000.00 413,518.78 10,890.97 4,662.74 27,948.92 607,021.41

20,197.39 (70,081.54)

(o.oo)
154,033.31 36,241.01 36,643.87 205,019.23 361,855.88

0.00
0.00 0.00

0.00

Page 1 of 10

Exhibit

,-, _ "~_~.~ '~._/z_/# 5 .....

/3F

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 35 of 56 Exhibit IX B May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet January 1, 2007 - December 31, 2007
1/01/2007 BegEquity

Name

Profit/Loss
(1,726.70) 375.02 401.31 2,377.03 1,426.66

Contributions Withdrawals

WB Capital Master Account WB Capital Master Account 2 WB Capital Master Account 3 WB Capital Master Account 4 TOTAL WB CAPITAL Priydarshan Shelgikar i Priydarshan Shelgikar TOTAL P SHELGIKAR

0.00
0.00 0.00 0.00

0.00
(9,198.84)

0.00 9,198.84 16,500.00 25,698.84

0.00

12/31/2007 EndEqui~ (1,726.70) 375.02 401.31 2,377.03 1,426.66 0.00 6,586.24 6,586.24 33,682.57 19,151.32 52,833.89 6,087.17 347,838.30 2.58 353,928.05 30,029.96

0.00
(714.92) (714.92) 33,682.57 226,307.76 259,990.33 421,499.63 97,838.30 (5,982.81) 513,355.12 5,029.96 (1.01) 3,715.39 8,744.34 (98,812.21) (131,325.57) (721,078.77) (345,536.03) (19,932.30) (13,608.27) 577.18 (97,490.62) (100,038.73)

0.00
(9,198.84)

9,198.84 9,198.84

0.00 LimitUp Holdings Ltd 2 LimitUp Holdings Ltd 217,8#3.56 TOTAL LIMIT UP HOLDINGS 217,843.56
CT TRADE LLC CT TRADE LLC 3 Michael Halperin TOTAL CT TRADE Eric Leopold Eric Leopold 2 Eric Leopold 3 TOTAL ERIC LEOPOLD Vitcom Investments LTD NY Advisory Group Bae, Persaud) Dale Spina Jonathan Hee Bae Chong Lee Minsook Lee Gennadiylskhakov Lyudmila Babayeva Rafael Khasasov Kwang Ho Hwang Nirupa Raj Darren Singer Vadiya Khaimov TOTAL JONATHAN HEE BAE Orange Diviner Pavlov Sergey Potapov Evgeny Romanov Alexandr Mishin Maxim Chernov Evgeny Apeav Rafael Ivin Alexey Lyssenko Alexandr Zlobin Sergey

0.00 175,000.00 250,000.00 425,000.00 25,000.00 25,000.00 199,970.00 75,000.00

425,000.00 425,000.00 590,412.46 4,000.00 594,412.46

0.00
0.00 9,985.39 9,985.39 0.00 0.00 0.00 0.00

(1.01)
0.00 3,715.39 33,744.34 101,157.79 (56,325.571 (647,078.771 (152,536.03) 30,067.70 36,391.73 499.18 (47,490.62 (38.73) (19.00) (74,411.50 31,792.76 (777,991.06 38,425.26 (628.52} (5,171.02} 444.39 156.75 (403.05]

0.00 0.00
0.00

100,000.00
228,000.00 50,000.00 50,000.00 100,000.00 100,000.00 45,000.00 50,000.00 997,970.00 50,000.00

0.00
0.00

26,000.00 35,000.00 78.00 50,000.00

0.00 0.00
0.00 0.00 0.00 0.00

(19.00)

0.00
0.00 0.00 0.00 0.00 0.00

(119,411.50) (18,207.24) (1,664,883.06) (11,574.74) (628.52) (5,171.02) 444.39 156.75 (403.05)

111,078.00

0.00 0.00
0.00 0.00 0.00

(85.58)

(85.581

0.00

(1,117.78) (978.25) (313.21)

(1,117.781 (978.251 (313.21;

Page 2 of 10

=.xhibit
Paoe ~ 4/-- ~-~

Case 3:08-cv-00400-DMS-BLM

Document 33-2

Filed 06/02/2008

Page 36 of 56 Exhibit IX B May 28, 2008

Thomas F. Lennon, Receiver Tuco Trading, LLC Tuco Account Equity Worksheet January 1, 2007 - December 31, 2007
1/01/2007
Name

12/31