# Securities and Exchange Commission v. Xia

> District Court, E.D. New York · March 4, 2024

URL: https://www.frixlaw.com/law-library/cases/10311331

## Case

- **Court:** District Court, E.D. New York
- **Decided:** March 4, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10311331

## How later opinions describe it (automated extraction)

- holding that intervention for the purpose of objecting to the Settlement Class “at this late stage would prejudice the existing parties by destroying their Settlement and sending them back to the drawing board”
- holding a motion to intervene to be untimely because the proposed intervenor waited 17 months to seek to intervene since notice of interest
- holding that the proposed intervenor had “a strong interest, as holder of the property and trustee of the proceeds,” in the resolution of the action
- finding motion to intervene timely when filed almost two years after notice of interest because the proposed intervenors filed the motion only after interest became direct

## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------------------------x
SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff, MEMORANDUM & ORDER
21-CV-5350 (PKC) (JAM)
- against -

RICHARD XIA, a/k/a YI XIA; and FLEET
NEW YORK METROPOLITAN REGIONAL
CENTER, LLC, f/k/a FEDERAL NEW YORK
METROPOLITAN REGIONAL CENTER,
LLC,
Defendants,

- and -

JULIA YUE, a/k/a JIQING YUE; XI
VERFENSTEIN; and XINMING YU,

Relief Defendants.
-------------------------------------------------------x
PAMELA K. CHEN, United States District Judge:
In this civil securities fraud action, Plaintiff Securities and Exchange Commission (the
“SEC”) alleges that Defendants Richard Xia (“Xia”) and Fleet New York Metropolitan Regional
Center, LLC (together, “Defendants”) engaged in a decade-long fraudulent scheme that defrauded
at least 450 foreign investors who participated in the EB-5 Immigrant Investor Program out of
more than $229 million, in violation of various federal securities laws, and that unjustly enriched
Relief Defendants Julia Yue (“Relief Defendant Yue”), Xi Verfenstein, and Xinming Yu
(collectively, “Relief Defendants”).1
Presently before the Court is a motion by non-party CTBC Bank Corp. (USA) (“CTBC”)—

1 The Court refers to the SEC, Defendants, and Relief Defendants collectively as the
“Parties.”
one of Xia’s main creditors—to intervene in this SEC enforcement action, pursuant to Federal
Rule of Civil Procedure (“Rule”) 24, for the limited purpose of seeking (1) the release of certain
real property and assets from the asset-freezing preliminary injunction (the “Preliminary
Injunction”) currently in place, and (2) the appointment of a receiver to protect its security
interests. For the reasons stated herein, the Court grants CTBC’s motion.2

BACKGROUND3
I. The Instant Action and the Preliminary Injunction
On September 27, 2021, the SEC commenced this enforcement action alleging various
violations of federal securities law by Defendants. (See generally Compl., Dkt. 1.) The SEC
alleges that, between early 2010 and late 2017, Defendants fraudulently raised more than $229
million by offering and selling limited partnership interests to over 450 foreign nationals who
participated in the EB-5 Immigrant Investor Program administered by the United States
Citizenship and Immigration Services, and then misappropriated those funds for their personal
purposes. (See Am. Compl., Dkt. 98, ¶¶ 1–2, 4, 78–100.) The SEC alleges that Defendants’
actions, which amounted to investor fraud, violated Section 17(a) of the Securities Act of 1933, 15

U.S.C. §§ 77q(a), and Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b)

2 By this Memorandum and Order, the Court solely rules on CTBC’s motion to intervene.
The Court does not rule on the ultimate merits of CTBC’s proposed relief to modify the
Preliminary Injunction and appoint a receiver, for which CTBC intends to file a separate motion
following its intervention. See infra Background Part V.A. The Court will consider CTBC’s
requests for relief once its motion is filed.
3 The procedural history and factual background of this litigation has been detailed
extensively in various opinions by the Court, including the Court’s December 8, 2022
Memorandum and Order issuing the Preliminary Injunction. See, e.g., SEC v. Xia, No. 21-CV-
5350 (PKC) (RER), 2022 WL 17539124, at *1–10 (E.D.N.Y. Dec. 8, 2022), appeal filed, No. 22-
3137 (2d Cir.). Therefore, the Court assumes the Parties’ familiarity with the facts and recites only
the background relevant to CTBC’s motion to intervene.
and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. (Id. ¶¶ 191–96.) The SEC also alleges that as
part of the scheme, Defendants improperly diverted for the benefit of Relief Defendants more than
$30 million of investor funds, which were used to, inter alia, purchase three mansions in New
York4 that are held in the names of Relief Defendants. (See id. ¶¶ 12, 23–26, 197–99.)

Along with its September 27, 2021 Complaint, the SEC moved for an emergency
temporary restraining order (“TRO”), inter alia, freezing Defendants’ and Relief Defendant Yue’s
assets and appointing a Monitor, and for a preliminary injunction continuing the same asset-freeze
throughout the pendency of this action in order to preserve the status quo and ensure that sufficient
assets are available to compensate the defrauded investors. (See Dkts. 2–8; Dkt. 2, at 2; see also
Dkt. 103, at 25.) On the same day, this Court granted the SEC’s motion for a TRO, appointed Mr.
M. Scott Peeler as Monitor (the “Monitorship”), and scheduled a show-cause hearing regarding
the SEC’s pending motion for a preliminary injunction. (See Dkt. 11.) Subsequently, on April 6,
2022, the SEC moved to expand the scope of the existing asset-freeze and its requested preliminary
injunction as to Relief Defendants. (See Dkts. 99–102.) On December 8, 2022, after carefully

considering the evidence on the record and the three-day show-cause hearing (see 2/14/2022,
2/15/2022 & 2/16/2022 Minute Entries), this Court issued the Preliminary Injunction,5 which
covers all of Defendants’ assets and Relief Defendants’ residential properties, for the duration of
two years.6 See Xia, 2022 WL 17539124, at *31; SEC v. Xia, No. 21-CV-5350 (PKC) (RER),
2022 WL 20543271, at *1–2 (E.D.N.Y. Dec. 8, 2022), appeal filed, No. 22-3137 (2d Cir.).

4 These three mansions are located on Kings Point Road in Kings Point, Middle Neck Road
in Sands Point, and Vanderbilt Drive in Sands Point. (Id. ¶ 165.)
5 In light of the Parties’ settlement-in-principle, the Court, at the Parties’ joint request,
extended the Preliminary Injunction for 60 days. (See Dkts. 388, 389; 1/24/2024 Docket Order.)
6 On December 14, 2022, Defendants and Relief Defendant Yue filed an interlocutory
appeal as to the Preliminary Injunction and the Court’s contemporaneously filed Memorandum
II. The Putative Intervenor CTBC and Its Loans to Xia-Controlled Entities
Between April and August 2021, CTBC7—a non-party in this case—extended five loans
totaling $21,035,750 to several entities owned and controlled by Xia. (Mem. of Law in Supp. of
Party in Interest CTBC’s Mot. to Intervene (“CTBC Br.”), Dkt. 238-1, at 3.) These five loans

together make CTBC “one of the largest creditors of [Xia].” (Dkt. 152, at 1.) Xia subsequently
used these loans to purchase two8 of the three mansions held in the names of Relief Defendants.
(See Am. Compl., Dkt. 98, ¶¶ 96, 170–71, 173–74, 183; see also Dkt. 259, at 2 n.2.)
Of the five loans, three are mortgage loans9 collectively worth $6,535,750, and as
collateral, CTBC holds perfected, first-priority security interests in eleven residential and
commercial condominium units located in Flushing, New York (the “Secured Units”)10 and an
Assignment of Leases and Rents Agreements (the “ALR Agreements”) from Xia, which includes

and Order issuing the Preliminary Injunction. (See Dkt. 219.) To date, the appeal remains pending.
(See Dkts. 262, 326, 372, 373, 397); see also SEC v. Xia, No. 22-3137, Dkts. 104, 106, 108, 114
(2d Cir.).
7 CTBC is “a California state-chartered, FDIC-insured commercial bank, with branch
offices” nationwide. (See Decl. of Stan Sarwar (“Sarwar Decl.”), Dkt. 238-5, ¶ 3.) It was CTBC’s
Flushing branch office in New York that extended the five loans at issue in this case. (Id. ¶ 4.)
8 These two mansions are the Kings Point Road mansion held under Relief Defendant
Yue’s name and the Vanderbilt Drive mansion held under Relief Defendant Xinming Yu’s name.
(See Am. Compl., Dkt. 98, ¶¶ 167, 183.)
9 On August 12, 2021, CTBC extended these three loans to three separate Xia-controlled
entities: Manekineko Group LLC (“Manekineko”), Shangri-La 9F Inc. (“Shangri-La 9F”), and
Shangri-La Green Inc. (“Shangri-La Green”). (CTBC Br., Dkt. 238-1, at 3; Sarwar Decl., Dkt.
238-5, ¶ 5; see also Manekineko Mortg. Note, Ex. 1, Dkt. 238-6; Shangri-La 9F Am. & Restated
Mortg. Note, Ex. 5, Dkt. 238-10; Shangri-La Green Am. & Restated Mortg. Note, Ex. 9, Dkt. 238-
14.)
10 These Secured Units, located at 140-22 Beech Avenue in Flushing, include units SCA,
SCB, 1A, 1B, 1C, 1D, 1E, 1F, 9C, 9D, and 9F. (CTBC Br., Dkt. 238-1, at 1.)
“a present assignment of all leases and rents generated on the Secured Units.”11 (CTBC Br., Dkt.
238-1, at 3.) While Xia has a license to collect such rents, that license is automatically revoked if
a default occurs. (Id.) As additional collateral, Xia has personally guaranteed these loans.12 (Id.)
The other two CTBC loans are business loans extended to two Xia-controlled entities13 in the

amount of $14.5 million, which are secured by two time certificates of deposits (the “TCDs”) that
Xia provided as loan collateral.14 (Id.) Similarly, CTBC holds “a perfected interest and priority
over the TCDs,”15 and in the event of a default, CTBC is entitled to withdraw the funds under the
TCDs. (Id. at 3–4.)

11 CTBC claims that it perfected its security interests in the Secured Units “by taking
possession of each of the mortgage notes and recording each mortgage and ALR Agreement with
the Office of City Register of the County of Queens” in September 2021. (CTBC Br., Dkt. 238-
1, at 3; see also Sarwar Decl., Dkt. 238-5, ¶¶ 10–12, 18–20, 27–29; Manekineko Mortg. & Sec.
Agreement, Ex. 2, Dkt. 238-7; Manekineko Collateral Assignment of Leases & Rents, Ex. 3, Dkt.
238-8; Shangri-La 9F Gap Mortg. & Consolidation, Modification & Extension Agreement, Ex. 6,
Dkt. 238-11; Shangri-La 9F Collateral Assignment of Leases & Rents, Ex. 7, Dkt. 238-12;
Shangri-La Green Gap Mortg. & Consolidation, Modification & Extension Agreement, Ex. 10,
Dkt. 238-15; Shangri-La Green Collateral Assignment of Leases & Rents, Ex. 11, Dkt. 238-16.)
12 Xia personally executed guaranties for each of the three loans. (See Sarwar Decl., Dkt.
238-5, ¶¶ 13, 21, 30; see also Gen. & Continuing Guar. of Yi Xia A/K/A Richard Xia, Ex. 4, Dkt.
238-9; Gen. & Continuing Guar. of Yi Xia A/K/A Richard Xia, Ex. 8, Dkt. 238-13; Gen. &
Continuing Guar. of Yi Xia A/K/A Richard Xia, Ex. 12, Dkt. 238-17.)
13 On April 9 and August 9, 2021, CTBC extended these two business loans to Eastern
Emerald Group LLC (“Eastern Emerald Group”) and Fleet General Insurance Group, Inc. (“Fleet
General Insurance Group”), respectively. (CTBC Br., Dkt. 238-1, at 3; Sarwar Decl., Dkt. 238-5,
¶¶ 32–33; see also Eastern Emerald Group Bus. Loan Agreement, Ex. 13, Dkt. 238-18; Fleet
General Insurance Group Bus. Loan Agreement, Ex. 16, Dkt. 238-21.)
14 One TCD is under the name of Eastern Emerald Group with a 0.60% Annual Percentage
Yield (“APY”) and a maturity date on April 8, 2022. (See Eastern Emerald Assignment of Deposit
Acct., Ex. 15, Dkt. 238-20, at 1.) The other TCD is under the name of Fleet General Insurance
Group with a 0.55% APY and a maturity date on August 9, 2022. (See Fleet General Insurance
Group Assignment of Deposit Acct., Ex. 18, Dkt. 238-23, at 1.)
15 CTBC claims that its perfected interest and priority over the TCDs is based upon
“[Defendants’] assignment of the TCDs to CTBC, and CTBC’s possession and control of the
same.” (CTBC Br., Dkt. 238-1, at 3–4; Sarwar Decl., Dkt. 238-5, ¶¶ 32–33; see also Eastern
III. Xia’s Default on CTBC’s Loans and the Deteriorating Condition of CTBC’s
Collateral

Since September 2021, Xia-controlled entities and Xia himself, as the personal guarantor,
have failed to service each of the five loans with CTBC, all of which are in default.16 (Id. at 4.)
Specifically, with respect to the three mortgage loans, CTBC alleges that neither Xia-controlled
entity nor Xia has made any payment since CTBC extended these loans. (Id.) Meanwhile, due to
Xia’s mismanagement, the Secured Units that serve as collateral for the loans have accumulated

Emerald Assignment of Deposit Acct., Ex. 15, Dkt. 238-20; Fleet General Insurance Group
Assignment of Deposit Acct., Ex. 18, Dkt. 238-23.)
16 Each of the mortgage notes for the three mortgage loans defines an event of default as
follows:
DEFAULT. Borrower will be in default if any of the following events occur: (a)
Borrower fails to make any payment within fifteen (15) days of the due date thereof;
(b) Borrower breaks any promises Borrower has made to Lender, or fails to perform
promptly at the time and strictly in the manner provided in this Note or any
agreement related to this Note, or in any other agreement or loan Borrower has with
Lender or with other lenders; (c) Any representation or statement made or furnished
to Lender by Borrower or on its behalf is false or misleading in any material respect;
(d) Borrower becomes insolvent, a receiver is appointed for any part of its
properties, makes an assignment for the benefit of creditors, or any proceeding is
commenced either by or against Borrower under any bankruptcy or insolvency
laws; (e) Borrower incurs additional debt that is not first disclosed to or consented
by Lender; (f) Any creditor trying to take any of Borrower’s properties on or in
which Lender has a lien or security interest, including a garnishment of any of
Borrower’s accounts with Lender; (g) Any of the events described in this paragraph
occurs with respect to any guarantor of this Note[.]
(Manekineko Mortg. Note, Ex. 1, Dkt. 238-6, at 3; Shangri-La 9F Am. & Restated Mortg. Note,
Ex. 5, Dkt. 238-10, at 3; Shangri-La Green Am. & Restated Mortg. Note, Ex. 9, Dkt. 238-14, at
3.)
With respect to the two business loans, the loan agreement with Eastern Emerald Group
states that “[d]efault will occur if payment of the Indebtedness in full is not made immediately
upon demand.” (Eastern Emerald Group Bus. Loan Agreement, Ex. 13, Dkt. 238-18, at 3.) The
loan agreement with Fleet General Insurance Group lists multiple situations when an event of
default can occur, including when “Borrower fails to make any payment when due[.]” (Fleet
General Insurance Group Bus. Loan Agreement, Ex. 16, Dkt. 238-21, at 4.)
significant liabilities during the pendency of the current action and, as a result, have significantly
depreciated in value. (Id. at 5–6.) Based on two recently issued appraisal reports, the appraised
value of the Secured Units has dropped from $10,055,000 in 2021 to $7,575,000 in 2022, a
diminution in value of approximately $2.5 million in just one year. (Id. at 5. Compare Appraisal
Rep., Ex. 24, Dkt. 238-29, at ECF17 4 and Appraisal Rep., Ex. 25, Dkt. 238-30, at ECF 4, with

Appraisal Rep., Ex. 26, Dkt. 238-31, at ECF 4 and Appraisal Rep., Ex. 27, Dkt 238-32, at ECF
10.)
Regarding the two business loans, CTBC asserts that Xia made several interest payments
before the Preliminary Injunction was issued but has failed to remit monthly interest payments
since then. (See CTBC Br., Dkt. 238-1, at 4–5.) Because both loans have maturity dates one
calendar year from the loan origination dates, the principal amount of these loans became due on
April 8, 2022 and August 9, 2022, respectively, which Xia has also failed to repay. (Id. at 1–3.)
To date, in addition to interest, various fees and penalties continue to accrue on these two matured
and unpaid loans. (Id. at 2.)

Notably, the eleven Secured Units and the two TCDs that serve as collateral for the five
loans are currently frozen under the Preliminary Injunction. See Xia, 2022 WL 17539124, at *29–
31; Xia, 2022 WL 20543271, at *1–2.
IV. The SEC’s Motion to Appoint a Receiver18

17 Citations to “ECF” refer to the pagination generated by the Court’s CM/ECF docketing
system and not the document’s internal pagination.
18 After the SEC’s receivership motion was filed, the Parties engaged in numerous
settlement negotiations, and have reached a settlement-in-principle. (See, e.g., Dkt. 388.) In light
of these developments, the Court has deferred ruling on the SEC’s receivership motion and now
holds in abeyance its consideration of the motion pending the five-member Commission’s review
and acceptance of the Parties’ settlement. (See infra Background Part VI; Dkt. 389; 1/24/2024
Docket Order.) As a result, the SEC’s receivership motion remains pending before the Court. For
On January 17, 2023, the SEC filed a motion to appoint a receiver for the assets frozen
under the Preliminary Injunction. (See generally Dkts. 235, 237.) Specifically, in light of Xia’s
repeated violations of the TRO and obstruction of the Monitorship, the SEC requests that the Court
terminate the Monitorship, remove Xia “from any position of authority over the frozen assets,”

and place the assets under the authority of a receiver to “ensure that the available assets are
properly marshalled, independently controlled[,] and preserved.” (Dkt. 235-1, at 1, 3.)
Regarding the scope of the proposed receivership, the SEC specifically excludes the eleven
Secured Units that Xia pledged as collateral for CTBC’s mortgage loans (see id. at 7 n.6; see also
Proposed Order Appointing Receiver, Dkt. 235-20, at 29 n.1), because these properties “have
diminished in value such that [they] would likely provide little to no benefit to the investors and,
moreover, would drain assets that could otherwise be used to benefit investors,” (see Dkt. 259, at
1). The SEC also notes that CTBC “intends to move this Court for the appointment of a separate
[r]eceivership that would be limited to those specific units.” (Dkt. 235-1, at 7 n.6.)
V. CTBC’s Present Motion to Intervene

After conferring with the SEC and counsel for Xia, on January 18, 2023—approximately
the same time as the SEC’s receivership motion was filed—CTBC submitted the present motion
to intervene as a matter of right under Rule 24(a)(2), or in the alternative, to intervene permissively
under Rule 24(b). (See CTBC Br., Dkt. 238-1, at 6, 7–13.) CTBC expressly limits the purpose of
its intervention to appointing a separate receiver to manage, and if necessary, commence
foreclosure proceedings on, the Secured Units, and to releasing the two TCDs currently frozen
under the Preliminary Injunction. (Id. at 2; see also Proposed Mem. of Law in Supp. of CTBC’s

more information on the procedural history regarding the Parties’ settlement negotiations and the
current status of the action, see infra Background Part VI.
Mot. to Modify Prelim. Inj. & Appoint a Receiver (“CTBC Proposed Mem.”), Dkt. 238-3, at 2–
3.) CTBC also proposes that any surplus funds from the foreclosures on the Secured Units or from
the TCDs will remain subject to the Preliminary Injunction and be available to the injured investors
and other shareholders in this action. (CTBC Proposed Mem., Dkt. 238-3, at 2, 10, 11.)

A. CTBC’s Position
In support of its motion, CTBC argues that its intervention in this action is “necessary to
prevent further waste and deterioration of the Secured Units” that are currently subject to the
Preliminary Injunction. (CTBC Br., Dkt. 238-1, at 2.) CTBC also notes that if the Court grants
its motion to intervene, it intends to file a separate motion to modify the Preliminary Injunction,
unfreeze the real property and assets that Xia pledged as collateral for the loans, and appoint its
own receiver. (Id. at 2 n.1.)
B. The SEC’s and Defendants’ Positions
The SEC does not contest CTBC’s intervention “for the limited purpose of exercising its
rights as a secured creditor with respect to [the Secured Units.]” (Dkt. 259, at 1.) As such, the
SEC—after consulting with the Monitor—submits that “CTBC should be permitted to intervene

for this limited purpose,” because its intervention will help maximize the assets available for
compensating the injured investors and thus “is in the best interests of the investors.” (Id. at 1–2,
4.) The SEC, however, opposes CTBC’s proposed relief to unfreeze the TCDs if CTBC’s
intervention motion is granted, contending that “[the TCDs’] value can be maintained and CTBC’s
claim can be resolved in the context of the proposed SEC receivership.” (Id. at 2.)
To date, Defendants and Relief Defendants have not responded to CTBC’s motion, and
therefore have taken no position on CTBC’s intervention in this action.
VI. The Relevant Post-CTBC Motion Developments and the Current Status of the Action
Since CTBC’s motion was filed in January 2023, the Parties have engaged in intermittent
settlement negotiations in resolving the matter. (See, e.g., 4/17/2023 Docket Order; 5/12/2023
Minute Entry; Dkts. 324–25; 6/5/2023 Docket Order; Dkt. 337; 8/10/2023 Docket Order; Dkt.

338; 8/30/2023 Docket Order; 9/8/2023 Minute Entry; Dkt. 349; 10/12/2023 Docket Order; Dkt.
351; 10/20/2023 Docket Order; Dkt. 353; 11/3/2023 Docket Order; Dkts. 375–76; 12/1/2023
Docket Order.) On January 23, 2024, Defendants and Relief Defendant Yue delivered to the SEC
“a signed and notarized consent to judgment reflecting the [P]arties’ agreement in principle.” (Dkt.
388, at 1.) In light of the Parties’ settlement-in-principle, the Court, at the Parties’ joint request,
agreed to adjourn the current action, hold in abeyance the Court’s consideration of the SEC’s
pending receivership motion, and extend the Preliminary Injunction for 60 days. (See Dkt. 389;
1/24/2024 Docket Order.) Meanwhile, the SEC will “begin the process of seeking [the five-
member] Commission[’s] approval for the settlement[.]”19 (Dkt. 388, at 1.) If the settlement is
accepted by the Commission, that would “resolve the SEC’s claims in this action against

Defendants and [Relief Defendant] Yue, including monetary and equitable relief.” (Id. at 1.)
DISCUSSION
Rule 24 allows a non-party to intervene in ongoing litigation as of right or by permission
of the court. Fed. R. Civ. P. 24. To intervene, a putative intervenor bears the burden of
demonstrating that it meets the requirements for intervention. See U.S. Postal Serv. v. Brennan,
579 F.2d 188, 191 (2d Cir. 1978). Generally, in considering a motion to intervene, “the court
accepts as true the [putative intervenor’s] well-pleaded, non-conclusory allegations and supporting
material.” Floyd v. City of N.Y., 302 F.R.D. 69, 83 (S.D.N.Y. 2014). Importantly, “[m]otions to

19 The Parties noted that this process typically takes six to eight weeks. (Dkt. 388, at 1.)
intervene are highly fact-specific and tend to resist comparison to prior cases.” Id. “Because ‘prior
decisions are not always reliable guides,’ courts are guided by practical and equitable
considerations in an effort to balance ‘efficiently administrating legal disputes by resolving all
related issues in one lawsuit, on the one hand, and keeping a single lawsuit from becoming

unnecessarily complex, unwieldy or prolonged, on the other hand.’” Id. (quoting United States v.
Pitney Bowes, Inc., 25 F.3d 66, 69 (2d Cir. 1994)). In addition, “an application to intervene cannot
be resolved by reference to the ultimate merits of the claims which the intervenor wishes to assert
following intervention[.]” Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 129 (2d Cir. 2001)
(quoting Oneida Indian Nation v. New York, 732 F.2d 261, 265 (2d Cir. 1984)). For the reasons
set forth below, the Court finds that CTBC has satisfied the Rule 24 requirements to intervene as
of right.20
I. Intervention as of Right—Legal Standard
Rule 24(a) sets forth the standards for intervention as of right, which, as relevant here,
provides that a court “must” permit intervention by anyone who “claims an interest relating to the
property or transaction that is the subject of the action, and is so situated that disposing of the

action may as a practical matter impair or impede the movant’s ability to protect its interest, unless
existing parties adequately represent that interest.” Fed. R. Civ. P. 24(a)(2). In other words, in

20 Because the Court makes this finding, it need not, and does not, decide whether CTBC
has satisfied the standard for permissive intervention under Rule 24(b)(1)(B). See Fed. R. Civ. P.
24(b)(1)(B) (stating that a court may, upon a timely motion, grant permissive intervention when
the putative intervenor “has a claim or defense that shares with the main action a common question
of law or fact”); U.S. Postal Serv., 579 F.2d at 191 (“Permissive intervention is wholly
discretionary with the trial court.”); see also St. John’s Univ. v. Bolton, 450 Fed. App’x 81, 84 (2d
Cir. 2011) (summary order) (“A district court has broad discretion under Rule 24(b) to determine
whether to permit intervention[.]”); Floyd, 302 F.R.D. at 84 (explaining that in exercising its
discretion under Rule 24(b), the district court “may consider the same factors under Rule 24(b)
permissive intervention as with intervention as of right under Rule 24(a).” (citing R Best Produce,
Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 240 (2d Cir. 2006))).
order to establish a right to intervene under Rule 24(a)(2), a putative intervenor must “(1) file a
timely motion; (2) claim an interest relating to the property or transaction that is the subject of the
action; (3) be so situated that without intervention the disposition of the action may impair that
interest; and (4) show that the interest is not already adequately represented by existing parties.”

Butler, Fitzgerald & Potter v. Sequa Corp., 250 F.3d 171, 176 (2d Cir. 2001). “[This] test is a
flexible and discretionary one, and courts generally look at all four factors as a whole rather than
focusing narrowly on any one of the criteria.” Tachiona ex rel. Tachiona v. Mugabe, 186 F. Supp.
2d 383, 394 (S.D.N.Y. 2002) (citing United States v. Hooker Chems. & Plastics Corp., 749 F.2d
968, 983 (2d Cir. 1984)). However, “[f]ailure to meet any one of these requirements suffices for
a denial of [an intervention application].” In re Holocaust Victim Assets Litig., 225 F.3d 191, 197–
98 (2d Cir. 2000).
Importantly, “[i]n applying the Rule, courts must be cognizant that its various components
. . . are not bright lines, but ranges—not all interests are of equal rank, not all impairments are of
the same degree, representation by existing parties may be more or less adequate, and there is no

litmus paper test for timeliness.” Floyd, 302 F.R.D. at 83–84 (alterations in original) (internal
quotation marks omitted) (quoting Hooker Chems. & Plastics Corp., 749 F.2d at 983).
“[A]lthough the Rule does not say so in terms, common sense demands that consideration also be
given to matters that shape a particular action or particular type of action.” Id. at 84.
II. Application
In support of its motion to intervene as of right, CTBC claims, inter alia, that (1) its motion
is timely filed; (2) it has significant interests in the real property and assets at issue in this motion;
(3) its interests will be impaired if its motion is denied; and (4) the existing parties are inadequate
representatives of its interests, given that their goals and interests are not aligned with those of
CTBC. (See CTBC Br., Dkt. 238-1, at 7–12.) Upon balancing all the Rule 24(a)(2) factors and
considering the unique circumstances in this case, the Court finds that there are sufficient grounds
to grant CTBC’s motion to intervene as of right.
A. Timeliness of the Motion
Under Rule 24(a)(2), the threshold inquiry is whether a motion for intervention is timely
and “the decision is one entrusted to the district judge’s sound discretion.” United States v. Yonkers

Bd. of Educ., 801 F.2d 593, 594–95 (2d Cir. 1986). “A trial court’s broad discretion in assessing
the timeliness . . . is not a subject that easily lends itself to a precise definition.” Butler, 250 F.3d
at 182. Rather, “[a]n application’s timeliness must be evaluated against the totality of the
circumstances before the court.” Farmland Dairies v. Comm’r of N.Y. State Dep’t of Agric. &
Mkts., 847 F.2d 1038, 1044 (2d Cir. 1988) (first citing NAACP v. New York, 413 U.S. 345, 366
(1973), then citing Yonkers Bd. of Educ., 801 F.2d at 595). Specifically, “[t]he timeliness decision
is based on a set of flexible criteria,” Authors Guild v. Google, Inc., No. 05-CV-8136 (DC), 2009
WL 3617732, at *2 (S.D.N.Y. Nov. 4, 2009), which includes, inter alia, “(a) the length of time the
applicant knew or should have known of his interest before making the motion; (b) prejudice to
existing parties resulting from the applicant’s delay; (c) prejudice to applicant if the motion is

denied; and (d) presence of unusual circumstances militating for or against a finding of timeliness.”
United States v. State of N.Y., 820 F.2d 554, 557 (2d Cir. 1987). In particular, “[w]hether a motion
to intervene is ‘timely’ is determined in large part by analyzing whether the parties to the case
would be prejudiced by intervention, and whether the proposed intervenor will be prejudiced by
being kept out of the litigation.” CIFI Latam, S.A. v. Tauch, No. 19-CV-5607 (LTS) (SN), 2020
WL 1164687, at *2 (S.D.N.Y. Mar. 11, 2020).
Applying this flexible standard, the Court finds that these factors weigh in favor of a finding
that CTBC’s motion is timely.
1. Length of Time
In examining the interval between CTBC’s knowledge of its interests and its motion to
intervene, the Court notes that the instant action was initiated in September 2021, but CTBC did
not seek to intervene until almost 16 months later, in January 2023. (Compare Compl., Dkt. 1,
with CTBC Mot. to Intervene, Dkt. 238.) “There is no specific length of time that has been deemed

to be the appropriate time period in which to file a motion to intervene.” Syracuse v. Bureau of
Alcohol, Tobacco, Firearms & Explosives, No. 20-CV-6885 (GHW), 2021 WL 1051625, at *4
(S.D.N.Y. Mar. 19, 2021). Some courts in this Circuit have found requests for intervention filed
over one year after notice of interest to be timely, see, e.g., Werbungs Und Commerz Union Austalt
v. Collectors’ Guild, Ltd., 782 F. Supp. 870, 874 (S.D.N.Y. 1991) (finding motion to intervene
timely when filed almost two years after notice of interest because the proposed intervenors filed
the motion only after interest became direct), while other courts have found similar delays to be
untimely, see, e.g., State of N.Y., 820 F.2d at 557 (denying motion to intervene where 15 months
elapsed after the applicant knew or should have known of the unrepresented interest); SEC v.
Callahan, 2 F. Supp. 3d 427, 438 (E.D.N.Y. 2014) (holding a motion to intervene to be untimely

because the proposed intervenor waited 17 months to seek to intervene since notice of interest).
Here, the record shows that CTBC has been involved, both directly and indirectly, in this
action since the commencement of the lawsuit. As CTBC acknowledges, since September 2021,
it has not only cooperated with the SEC’s investigation in this case and produced documents in
response to the SEC’s non-party subpoenas (see CTBC Br., Dkt. 238-1, at 8; Decl. of John F.
Libby (“Libby Decl.”), Dkt. 238-2, ¶ 3), but also has engaged in discussions with the SEC and the
Monitor seeking a modification of the TRO to take protective measures regarding its collateral, as
well as attempted to participate in a settlement conference between the Parties as a secured
creditor,21 (see Dkt. 152, at 1–2; 6/15/2022 Docket Order). Therefore, the Court finds that CTBC
has been aware of its interests in the litigation since the day the action was filed.
However, CTBC claims that “[i]t was only recently, based upon the [two] reappraisal
reports [that were issued in June and October 2022, respectively], that [it] discovered the

significant diminution of property value [in the Secured Units] and [Defendants’] property tax
delinquencies.” (CTBC Br., Dkt. 238-1, at 8.) Even assuming, arguendo, that it did not otherwise
realize the extent of the impairment of its interests shortly after the action was filed, CTBC should
have known no later than October 2022—when it made this discovery based on the reports—that
its interests might not be adequately represented in this litigation. Yet, CTBC waited
approximately another three months to file its motion to intervene.
Nevertheless, although CTBC waited more than a year to intervene in the action, this delay
does not automatically foreclose its intervention. See Floyd, 302 F.R.D. at 98 (“Although notice
of an applicant’s unrepresented interest is important, it is not dispositive.”) (citing NAACP, 413
U.S. at 365–66). Given that the mere lapse of time is “only one of several factors to be considered

when deciding timeliness,” “it is incorrect to adopt a per se rule focused solely on that factor.” See
State of N.Y., 820 F.2d at 557. “Instead, because timeliness is to be determined on a case by case
basis, the court’s determination will be based upon all of the circumstances of this case.” Pike
Co., Inc. v. Universal Concrete Prods., Inc., 284 F. Supp. 3d 376, 395 (W.D.N.Y. 2018) (internal

21 The record shows that CTBC first entered an appearance, as a non-party, in this matter
on June 14, 2022. (See Dkt. 152.) On the same day, CTBC filed a letter requesting to attend and
participate in the June 28, 2022 Settlement Conference between the Parties as “first-lien holder on
various assets owned by entities controlled by [Xia]” because “CTBC would be beneficial to the
Court as it considers any potential settlement.” (Id. at 1–2.) The Court denied CTBC’s request on
the ground that CTBC is not a party to this case and therefore its “attendance and participation in
the Settlement Conference would not aid the Court and the [P]arties’ discussion.” (6/15/2022
Docket Order.)
quotation marks and brackets omitted). The Court therefore turns to the other factors to determine
whether CTBC’s motion is timely.
2. Prejudice to Existing Parties if Intervention is Allowed
“The second and most important consideration in determining whether a motion to
intervene is timely is whether there is any prejudice to the existing parties resulting from the

delay.” Long Island Trucking, Inc. v. Brooks Pharmacy, 219 F.R.D. 53, 55 (E.D.N.Y. 2003).
“Delay alone . . . is insufficient to establish prejudice[.]” Rsch. Found. for State Univ. of N.Y. v.
Telluric Labs, LLC, No. 21-CV-1898 (JS) (SIL), 2023 WL 8472911, at *8 (E.D.N.Y. Sept. 18,
2023) (citing Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 98 (2d Cir. 1993)), R. & R. adopted, 2023
WL 7919972 (E.D.N.Y. Nov. 16, 2023). “[T]his factor encompasses the basic fairness notion that
intervention should not work a last[-]minute disruption of painstaking work by the parties and the
court.” Application of Akron Beacon J., No. 94-CV-1402 (CSH), 1995 WL 234710, at *7
(S.D.N.Y. Apr. 20, 1995) (internal quotation marks omitted). “Thus, if intervention ‘relates to an
ancillary issue and will not disrupt the resolution of the underlying merits, untimely intervention
is much less likely to prejudice the parties.’” Id. (citation omitted).

In the present case, CTBC contends that the existing parties will suffer no prejudice
because CTBC’s intervention “will in no way impact the disposition of this case” as CTBC “seeks
discrete relief unrelated to that of the SEC.” (CTBC Br., Dkt. 238-1, at 9.) The Court agrees and
finds that the prejudice that would result from CTBC’s intervention in this case as to the Parties is
negligible, if not non-existent.
First, CTBC’s intervention will not disrupt the resolution of the action, as it will not derail
the agreement already reached between the Parties. As noted earlier, the Parties have reached a
settlement-in-principle for which the SEC will begin the process of seeking the five-member
Commission’s review and approval. (See Dkt. 388, at 1.) While courts in this Circuit have denied
motions to intervene where the intervening party seeks to challenge a settlement agreement
reached between the original parties, see, e.g., Pitney Bowes, 25 F.3d at 72 (affirming a denial of
a motion to intervene, where the proposed intervenor opposed the proposed consent decree, on the
ground that intervention would delay the agreed-upon cleanup effort and require parties “to begin

negotiations again from scratch”), here, CTBC does not intend to seek to reopen, renegotiate, or
oppose the Parties’ settlement if permitted to intervene.22 Rather, CTBC seeks to intervene only
for the limited purpose of exercising its rights as a secured creditor to preserve the value of its
collateral that is currently subject to the Preliminary Injunction—a “discrete and ancillary issue”
that will not “wast[e] the fruits of [the Parties’] lengthy negotiations that [have] culminated in
agreement.” Application of Akron Beacon J., 1995 WL 234710, at *7; Pitney Bowes, 25 F.3d at
72; see also Sackman v. Liggett Grp., Inc., 167 F.R.D. 6, 10, 20 (E.D.N.Y. 1996) (finding that
plaintiffs would not be prejudiced by the intervention because it was for the limited purpose of
challenging a discovery order); cf. In re Holocaust Victim Assets Litig., 225 F.3d at 194, 199
(holding that intervention for the purpose of objecting to the Settlement Class “at this late stage

would prejudice the existing parties by destroying their Settlement and sending them back to the
drawing board”).
Furthermore, CTBC’s intervention at this stage will not unduly complicate or delay the
proceedings. First, the current action was stayed intermittently between May and October 2023 to
accommodate the Parties’ continued settlement negotiations and now is stayed pending the five-
member Commission’s review and approval of the settlement. (See, e.g., 5/12/2023 Minute Entry;
5/31/2023 Docket Order; 6/5/2023 Docket Order; 8/10/2023 Docket Order; 8/30/2023 Docket

22 In fact, the Parties reached the settlement-in-principle more than one year later after
CTBC’s motion was filed. (Compare CTBC Mot. to Intervene, Dkt. 238, with Dkt. 388.)
Order; 10/12/2023 Docket Order; 10/20/2023 Docket Order; 1/24/2024 Docket Order.) Therefore,
CTBC’s intervention will not delay the course of the instant litigation, and the Parties will suffer
no prejudice as a result of the timing of CTBC’s intervention. See Commack Self-Serv. Kosher
Meats, Inc. v. Rubin, 170 F.R.D. 93, 100 (E.D.N.Y. 1996) (“All discovery has been stayed pending

a decision on the State’s motions for abstention and to dismiss the complaint, and there is no
prejudice as a result of the timing of [the intervention] application.”). In addition, because of the
numerous stays, the Court has not yet made any decision on the merits of the SEC’s receivership
motion, which the Court has deferred ruling on due to the Parties’ settlement negotiations and their
recently reached agreement-in-principle. (See, e.g., 10/3/2023 Docket Order; 12/1/2023 Docket
Order; 1/24/2024 Docket Order.) Following CTBC’s intervention, the Court could, if necessary,
consider CTBC’s anticipated motion to modify the Preliminary Injunction and appoint a receiver
in tandem with the SEC’s receivership motion. As such, CTBC’s intervention will not complicate
the adjudication of the pending motions. Moreover, as explained above, CTBC has already been
involved in this litigation both directly and indirectly since the commencement of the case. (See

Libby Decl., Dkt. 238-2, ¶ 3; Dkt. 152, at 1–2; 6/15/2022 Docket Order). Given CTBC’s
involvement throughout the course of this litigation, the Court finds that its intervention is unlikely
to necessitate repetitive discovery or undue delay. See Dorchester Fin. Holdings Corp. v. Banco
BRJ, S.A., No. 11-CV-1529 (KMW), 2016 WL 845333, at *2 (S.D.N.Y. Mar. 2, 2016) (finding no
prejudice when intervention “should necessitate minimal discovery or additional briefing” and will
not delay adjudication of the pending motions while waiting for any briefing). Even if additional
discovery or briefing is required, any prejudice can be minimized through attentive case
management. See Int’l Design Concepts, LLC v. Saks Inc., 486 F. Supp. 2d 229, 235 (S.D.N.Y
2007). In sum, given these procedural considerations, CTBC’s intervention will not “interfere
with the [Court’s] orderly process[.]” LaRouche v. FBI, 677 F.2d 256, 257 (2d Cir. 1982).
Lastly, “[a]ny prejudice to the [P]arties is further belied by the absence of objections to
[CTBC’s] motion.” See Republic of the Phil. v. Abaya, 312 F.R.D. 119, 123 (S.D.N.Y. 2015); see

also Mortg. Lenders Network, Inc. v. Rosenblum, 218 F.R.D. 381, 384 (E.D.N.Y. 2003) (“With
respect to prejudice to existing parties, it is significant that there has been no opposition to [the]
motion to intervene.”); Stutts v. De Dietrich Grp., No. 03-CV-4058 (ILG) (MDG), 2005 WL
3158038, at *1 (E.D.N.Y. Nov. 28, 2005) (finding no prejudice where the motion to intervene was
unopposed).
Because granting CTBC’s intervention will not disrupt the Parties’ settlement or unduly
complicate or delay the proceedings, the Court finds that CTBC’s intervention will not result in
any prejudice of substance to the existing parties, and therefore this second factor weighs in favor
of finding CTBC’s motion timely.
3. Prejudice to CTBC if Intervention is Denied
More importantly, the third factor—the extent to which CTBC will be prejudiced if

intervention is denied—strongly militates in favor of permitting intervention. As discussed more
fully below, CTBC will be severely prejudiced if its motion is denied, at a minimum because of
the continued impairment of its interests in the Secured Units—all of which have diminished, and
continue to diminish, in value since this action began—and the inadequate representation of
CTBC’s interests by the existing parties. See infra Discussion Parts II.C–D.
4. Unusual Circumstances
Apart from the aspects addressed above, this case presents unusual circumstances that
support a finding of timeliness. Here, denying CTBC’s intervention will not only prejudice CTBC,
but will also burden the proposed SEC receivership, if granted, and harm the interests of the injured
investors. As noted above, the Secured Units and TCDs that serve as CTBC’s loan collateral have
accumulated significant liabilities during the pendency of this action, and in particular, the Secured
Units have depreciated and continue to depreciate in value, which in turn will drain the proposed
SEC receivership and reduce the funds available for compensating the investors. Therefore, as the

SEC acknowledges, permitting CTBC to intervene will in fact serve, rather than hinder, the interest
of the injured investors, as it will limit the further decrease in assets and funds available for
distribution to benefit the investors. (Dkt. 259, at 4.) Furthermore, any protective measures taken
by CTBC regarding its collateral following its intervention will not further reduce the funds
available for distribution to investors, because CTBC only wishes to pursue its rights in and to the
collateral under its loan agreements with Xia, and if this collateral is not sufficient, CTBC will not
seek to collect other assets under the Preliminary Injunction. (Id. at 3–4.) CTBC will also bear
any cost arising from its actions. (Id. at 3.) Rather than reducing the funds available to investors,
if the Court were to grant CTBC’s request to initiate foreclosure proceedings on the Secured Units
and unfreeze the two TCDs following CTBC’s intervention,23 any excess funds from the

foreclosures or the TCDs will remain frozen under the Preliminary Injunction and be available to
repay the defrauded investors. (CTBC Proposed Mem., Dkt. 238-3, at 2, 10, 11.)
Thus, based on various “practical and equitable considerations,” Floyd, 302 F.R.D. at 83,
allowing CTBC to intervene in this action appears to the Court to be the best way to serve the
interests of all the parties.
* * *

23 To the extent that the SEC contests CTBC’s proposed relief to unfreeze the TCDs, the
Court does not address that issue for the purpose of considering the present motion, and will decide
later whether the TCDs should be released from the Preliminary Injunction after CTBC’s
anticipated motion on the issue is filed following its intervention.
Therefore, notwithstanding CTBC’s delay in seeking to intervene in this action, having
considered each of the relevant factors discussed above and the totality of the circumstances of the
case—including the lack of prejudice to the existing parties, the substantial prejudice to CTBC if
intervention is denied, and the fact that CTBC’s intervention will serve the investors’ interest—

the Court concludes that the timeliness factor weighs in favor of CTBC’s intervention at this stage.
B. Interest Relating to the Property or Transaction in the Action
As stated above, the second factor in determining whether a motion to intervene as of right
should be granted is whether the proposed intervenor can claim “an interest relating to the property
or transaction that is the subject of the action.” Fed. R. Civ. P. 24(a)(2). Under Rule 24(a)(2), this
interest must be “direct, substantial, and legally protectable.” Brennan, 260 F.3d at 129 (quoting
Wash. Elec. Coop., Inc. v. Mass. Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990)). “An
interest that is remote from the subject matter of the proceeding, or that is contingent upon the
occurrence of a sequence of events before it becomes colorable, will not satisfy the [R]ule.” Wash.
Elec., 922 F.2d at 97.
Here, the Court finds that CTBC has demonstrated an undeniable interest in this action. As

the record shows, CTBC holds perfected, first-priority security interests in the Secured Units and
TCDs that serve as collateral for the loans CTBC made to the Xia entities that are presently frozen
under the Preliminary Injunction. (See CTBC Br., Dkt. 238-1, at 3–4); see also supra Background
Part II. As such, CTBC unquestionably has a “direct, substantial, and legally protectable” interest
here in ensuring that its first-position liens on these assets are respected. See Lawsky v. Condor
Cap. Corp., No. 14-CV-2863 (CM), 2014 WL 2109923, at *6–7 (S.D.N.Y. May 13, 2014) (holding
that the proposed intervenors, who were secured lenders, had sufficient interest in the litigation).
Given this interest, CTBC has a strong stake in the outcome of this action. “If the [SEC] is
successful in prosecuting this case, or in reaching settlement with [Defendants], the funds held
[under the Preliminary Injunction] will be set aside to compensate [investors] for their injuries.
[Therefore, the] resolution of this litigation will affect [CTBC’s] property rights to the funds owed
them by [Defendants].” See FTC v. First Cap. Consumer Membership Servs., Inc., 206 F.R.D.
358, 363 (W.D.N.Y. 2001); see also U.S. v. Lauer, 242 F.R.D. 184, 187 (D. Conn. 2007) (holding

that the proposed intervenor had “a strong interest, as holder of the property and trustee of the
proceeds,” in the resolution of the action).
Because CTBC has established a cognizable interest in the instant action and the Parties do
not contest CTBC’s interest, the Court finds that CTBC has satisfied the second requirement.
C. Impairment of Interests by Disposition of the Action
The third element of the intervention-as-of-right standard concerns whether the putative
intervenor can demonstrate that, absent intervention, the disposition of the action may, as a
practical matter, impair or impede its interests. Pitney Bowes, 25 F.3d at 69–70. Specifically,
“[i]mpair refers to a diminution in strength, value, quality, or quantity.” First Cap. Consumer
Membership Servs., Inc., 206 F.R.D. at 363 (emphasis omitted).
CTBC argues that its interests in the Secured Units and TCDs are at stake in the instant

action and would be further impaired by a denial of intervention. (CTBC Br., Dkt. 238-1, at 11.)
The Court agrees. As noted above, each of the five loans that CTBC extended are already in
default. (Id. at 4; Sarwar Decl., Dkt. 238-5, ¶¶ 35–45.) As of early 2023, the total amount that
remains outstanding under the three mortgage loans is $7,478,221.64 (including unpaid principal
of $6,535,750, interest payments of $347,892.51, late charges of $22,701, and default interest
payments of $571,878.13), and $16,055,249.10 under the two business loans (including unpaid
principal of $14,500,000, total interest payments of $299,277.75, late charges of $6,957.46, and
default interest payments of $1,249,013.89). (Sarwar Decl., Dkt. 238-5, ¶¶ 39, 44.) However, due
to the Preliminary Injunction, CTBC is unable to exercise its right under the ALR Agreements to
“collect any and all deposits, rents, revenues, or other income generated from each of the Secured
Units”24 or to withdraw the funds assigned to it under the TCDs after the default has occurred.
(See CTBC Br., Dkt. 238-1, at 2, 11.) As such, CTBC’s interests will be substantially impaired if
its motion to intervene is denied. Cf. Callahan, 2 F. Supp. 3d at 433, 438 (denying a secured

lender’s motion to intervene because it was being timely paid on its loans despite an asset freeze
was imposed in the action).
Meanwhile, the condition of the Secured Units has deteriorated due to Xia’s
mismanagement, and as a result, the value of the properties has significantly depreciated during
the pendency of the litigation. The record reveals that Xia has failed to timely renew the insurance
coverage or pay the outstanding property taxes due on the units;25 tenants in several commercial
units have vacated prior to their lease expiration dates;26 and certain units are listed for rent well-
below market rates27 and are being marketed for sale in violation of the loan terms.28 (Sarwar

24 According to CTBC, in light of Xia’s default on the mortgage loans, it “exercised its
right under each of the [ALR Agreements] and wrote to each of the tenants directing them to pay
to CTBC all past due and future rent payments under the lease.” (Sarwar Decl., Dkt. 238-5, ¶ 54;
see also Rent Direction Letter, Ex. 21, Dkt. 238-26.) However, CTBC has not received any
response or rent from the tenants. (Sarwar Decl., Dkt. 238-5, ¶ 54.)
25 As of October 18, 2022, property taxes have not been paid on all but one unit, which has
resulted in $20,791.63 of property taxes currently being due. (Sarwar Decl., Dkt. 238-5, ¶¶ 68–
69.)
26 According to CTBC, at the time of loan origination, “all of the . . . units were occupied
by tenants paying market rents, with leases expiring between 2022 and 2025.” (Sarwar Decl., Dkt.
238-5, ¶ 46.) Currently, however, only one tenant occupies any of the commercial units, and at
least five units have become vacant since the mortgages were executed. (Id. ¶ 48.)
27 Specifically, as of the time when the present motion was filed, two units were “listed for
rent online for a combined rental rate of $4500/month, representing a 46% decrease from the prior
rental rate of $8400/month.” (Sarwar Decl., Dkt. 238-5, ¶ 56; see also Rental Listing, Ex. 23, Dkt.
238-28, at ECF 2.)
28 As of the time when the present motion was filed, Unit 9C was listed for sale at the price
of $1,060,000, which violates the terms under the Shangri-La 9F Gap Mortgage and Consolidation,
Decl., Dkt. 238-5, ¶¶ 46, 48, 55–56, 65, 68–69.) Xia, however, has failed to provide “CTBC with
any notice—let alone written notice—regarding the status of” the units. (Id. ¶ 48.) Due to Xia’s
mismanagement and CTBC’s incapability to take protective measures, the Secured Units have
significantly depreciated in value. The most recent appraisal reports reflect a stark decline in

property value of approximately $2.5 million, from $10,055,000 in 2021 to $7,575,000 in 2022.
(Id. ¶¶ 58–60. Compare Appraisal Rep., Ex. 24, Dkt. 238-29, at ECF 4 and Appraisal Rep., Ex.
25, Dkt. 238-30, at ECF 4, with Appraisal Rep., Ex. 26, Dkt. 238-31, at ECF 4 and Appraisal Rep.,
Ex. 27, Dkt. 238-32, at ECF 10.) In turn, this substantial diminution in appraisal value “has
resulted in higher [loan-to-value] ratios . . . under each of the [m]ortgages,” approximately from
75% to 85%, which means that “CTBC’s loans are no longer adequately secured by the real-
property collateral.” (Sarwar Decl., Dkt. 238-5, ¶¶ 59, 62–63.) However, the property value is
expected to continue to drop while interest, penalties, late charges, and risks of potential tax
foreclosures are accumulating. (See CTBC Br., Dkt. 238-1, at 11.)
Despite the deteriorating condition of its collateral, as a non-party, CTBC’s ability to

participate in this litigation and protect its interests from further dissipation is limited. Therefore,
CTBC stands to suffer a practical impairment of its interests and clear prejudice if intervention is
not granted. This fact is sufficient to satisfy this third factor.
D. Lack of Adequate Representation of Interests by the Parties
Importantly, CTBC’s interests are not adequately represented by either Xia or the SEC.
Under Rule 24(a)(2), the putative intervenor’s burden of demonstrating “inadequacy of
representation is generally speaking ‘minimal[.]’” Butler, 250 F.3d at 179 (quoting Trbovich v.

Modification, and Extension Agreement. (See Sarwar Decl., Dkt. 238-5, ¶ 55; see also Sale
Listing, Ex. 22, Dkt. 238-27, at ECF 2; Shangri-La 9F Gap Mortg. & Consolidation, Modification
& Extension Agreement, Ex. 6, Dkt. 238-11.)
United Mine Workers of Am., 404 U.S. 528, 538 n.10 (1972)). “The requirement of [Rule 24(a)(2)]
is satisfied if the applicant shows that representation of his interest ‘may be’ inadequate[.]”
Trbovich, 404 U.S. at 538 n.10.
Here, critical to the resolution of the instant motion, no party in this case has an incentive

to ensure that CTBC’s interests are adequately protected. CTBC’s primary interests lie in
safeguarding its rights to protect its collateral presently subject to the asset freeze. Xia, however,
has little incentive in protecting CTBC’s interests. Because Xia has assigned to CTBC all leases
and rents generated on the Secured Units and the funds under the TCDs, he has minimal, if any,
interest in preserving the value of the real property and the assets. See Mortg. Lenders Network,
218 F.R.D. at 384 (finding that the putative intervenor would be prejudiced by the denial of its
motion because the plaintiff had minimal interest in pursuing any recovery regarding the loans at
issue); Long Island Trucking, 219 F.R.D. at 56 (same). In fact, as discussed earlier, Xia’s
continuing mismanagement of the Secured Units has significantly impaired CTBC’s interests. See
supra Discussion Part II.C.

Furthermore, the SEC’s interests in this action are not coextensive with those of CTBC
either. While their interests converge to some extent, the SEC’s primary focus is on “enforcing
the securities laws, protecting the public from frauds, and ensuring that [the injured investors] as
a whole recover their due.” SEC v. Credit Bancorp., Ltd., 194 F.R.D. 457, 467 (S.D.N.Y. 2000).
For purposes of the instant motion, in particular, the SEC’s interests “deviate in an important and
predictable way.” Lawsky, 2014 WL 2109923, at *10. Here, the SEC is “committed to preserving
as many assets as reasonably possible to ensure the investors are made whole” (Dkt. 259, at 5);
however, significant liabilities have accrued and continue to accrue on CTBC’s collateral. Thus,
the SEC does not have an incentive to advance the interests of CTBC—one secured creditor—at
the expense of all injured investors, or might even “take positions hostile to those of [CTBC].”
Credit Bancorp., Ltd., 194 F.R.D. at 467. In fact, the SEC has specifically carved out the Secured
Units from the SEC’s proposed receivership because the Secured Units—which now “have little
to no value”29—would drain the SEC receivership assets that could otherwise be available to

compensate the investors. (Dkt. 259, at 1–2.) If the Court were to grant the SEC’s proposed
receivership but deny CTBC’s intervention, an SEC receiver would assume full control of
Defendants’ assets other than CTBC’s collateral. In that event, CTBC’s interests would not be
represented at all and thus remain entirely unprotected.
As a result, the Court concludes that CTBC has made a sufficient showing that its interests
would not be adequately represented by the existing parties in this lawsuit.
* * *
In sum, considering the facts of this case—the timing of CTBC’s motion, CTBC’s priority
creditor status and substantial interests in the action, the fact that CTBC’s interests have diminished
and continue to diminish, and the lack of adequate representation of CTBC’s interests by the
Parties—the Court finds that CTBC has satisfied the criteria for intervention as of right under Rule
24(a)(2).
CONCLUSION
For the foregoing reasons, CTBC’s motion to intervene is granted. Furthermore, given the
Court’s delay in ruling on this motion and what appears to be the escalating deterioration of

CTBC’s collateral, the Court will expedite consideration of CTBC’s anticipated motion to release
the Secured Units and TCDs from the Preliminary Injunction and for the appointment of a receiver

29 This is because the appraised value of the Secured Units ($7,575,000) is only a little
more than the outstanding balance for the mortgage loans ($7,478,221.64). (See Dkt. 259, at 6.)
to protect CTBC’s security interests. CTBC shall file its motion by April 3, 2024; the Parties shall
respond by May 3, 2024; and any reply shall be filed by May 17, 2024.

SO ORDERED.
/s/ Pamela K. Chen
Pamela K. Chen
United States District Judge
Dated: March 4, 2024
Brooklyn, New York

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10311331. Public record. Not legal advice.