1024-00003 · Driftwood Absolute Return Fund Ltd · Internal Memoranda

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION

TO: Priya Anand, Partner

FROM: Hannah Brinkley, Senior Associate

DATE: January 15, 2024

RE: Post-Judgment Enforcement Strategy — Driftwood Absolute Return Fund Ltd. v. Meridian Prime Capital LLC et al., Index No. 654321/2023 (Sup. Ct., N.Y. Cnty., Commercial Division)

MATTER NO.: 1024-00003

CLIENT: Driftwood Absolute Return Fund Ltd.

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I. Executive Summary

On January 10, 2024, the Honorable Eleanor Vasquez, J.S.C., entered judgment in the Supreme Court of the State of New York, County of New York, Commercial Division, in favor of our client, Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"), and against Meridian Prime Capital LLC ("Meridian Prime" or "MPC"), Viktor Andreyevich Zelenko ("Zelenko"), Irene Maria Carvallo ("Carvallo"), and Dmitri Pavlovich Sobchak ("Sobchak"), jointly and severally, in the total amount of $58,900,000. The judgment is composed of the following elements:

• Compensatory Damages: $47,300,000, representing the total amount of misappropriated margin deposits and settlement proceeds diverted by the defendants during the fraud period;

• Prejudgment Interest: $9,460,000, calculated at the statutory rate of 9% per annum under CPLR § 5004 on a weighted-average basis from January 1, 2022 (the approximate date on which diversion of funds commenced) through January 10, 2024 (the date of judgment entry); and

• Attorneys' Fees and Costs: $2,140,000, awarded pursuant to the contractual fee-shifting provision contained in Section 11 of the ISDA Master Agreement dated December 15, 2021 (2002 form), between Driftwood and Meridian Prime.

The judgment was entered as a default judgment against Meridian Prime following that entity's failure to appear through counsel after the withdrawal of Whitmore & Gaines LLP became effective on November 13, 2023, and following the lapse of the court-imposed December 15, 2023 deadline for substitute counsel to appear. As to the individual defendants — Zelenko, Carvallo, and Sobchak — the court granted Driftwood's motion for summary judgment on its fraud and alter ego claims, finding that undisputed evidence established each individual's participation in, and personal liability for, the fraudulent scheme.

The purpose of this memorandum is to provide a comprehensive analysis of available enforcement avenues, identify and prioritize recovery targets, assess the legal mechanisms available under New York law and applicable international frameworks, and recommend a coordinated, multi-pronged enforcement plan designed to maximize recovery on the $58.9 million judgment. This memorandum reflects the current state of our knowledge as of the date hereof, supplemented by the note regarding Zelenko's retention of post-judgment counsel on January 22, 2024, which is addressed in Section IX below.

Based on the preliminary analysis set forth in this memorandum, identifiable assets total an estimated $44.5 million to $47.3 million at face value. Realizable recovery, however, will be lower due to depreciation of certain assets, transaction costs associated with liquidation, collection obstacles inherent in offshore enforcement, and the likelihood that a portion of the diverted funds has been permanently dissipated. Accounting for these factors, we project a recovery range of approximately $37.4 million to $49.0 million, representing a recovery rate of approximately 63.5% to 83.2% of the total judgment.

This memorandum identifies six primary recovery targets and recommends a multi-pronged enforcement strategy involving: (i) the appointment of a receiver over Meridian Prime and its affiliated entity, Castellan Realty Holdings LLC; (ii) post-judgment disclosure and turnover proceedings under CPLR Article 52; (iii) fraudulent conveyance litigation under the New York Debtor and Creditor Law ("NYDCL"); and (iv) international asset recovery proceedings in The Bahamas and the British Virgin Islands ("BVI"). The strategy is designed to be pursued simultaneously across all targets to prevent further dissipation and to capitalize on the cooperation leverage created by Zelenko's recent retention of post-judgment counsel.

II. Background

A. The Fraud Scheme and Judgment Debtor Structure

Meridian Prime Capital LLC is a New York limited liability company formed on March 14, 2019, with a registered address at 140 Broadway, Suite 3510, New York, NY 10005. Its Employer Identification Number is 84-3217659. From its formation through the period of the fraudulent scheme, Meridian Prime held itself out as a foreign exchange trading and investment advisory firm serving institutional clients, including offshore hedge funds such as Driftwood.

The management and control of Meridian Prime was concentrated in three individuals, each of whom is a judgment debtor:

• Viktor Andreyevich Zelenko — Managing Member and Chief Executive Officer. Zelenko exercised ultimate decision-making authority over all aspects of Meridian Prime's operations, including trading, client account management, and capital allocation. He was the sole signatory on all bank accounts and the beneficial owner of Meridian Prime's membership interests.

• Irene Maria Carvallo — Chief Financial Officer. Carvallo was responsible for the preparation and dissemination of monthly account statements and financial reports to Driftwood and other clients, as well as the maintenance of Meridian Prime's internal accounting records. She is a licensed CPA and formerly served as a senior accountant at Ledgerfield & Associates PC.

• Dmitri Pavlovich Sobchak — Head of FX Trading. Sobchak was responsible for the execution of foreign exchange trades and the preparation of trade confirmations provided to clients. He is a Ukrainian national and United States permanent resident.

The fraud period extended from approximately January 2022 through July 2023, a period of approximately eighteen months. During this time, the defendants engaged in a systematic scheme involving the fabrication of trade confirmations and monthly account statements under the ISDA Master Agreement (2002 form) and Credit Support Annex ("CSA") that Driftwood and Meridian Prime had executed on December 15, 2021. The fabricated documents were designed to create the appearance of profitable trading activity and a growing account balance, while in reality the defendants were systematically diverting Driftwood's funds for personal enrichment and to sustain the fraudulent enterprise.

Over the course of the fraud period, the defendants diverted a total of $47.3 million from Driftwood, consisting of: (i) $38.5 million in cumulative margin deposits made by Driftwood pursuant to the Credit Support Annex; and (ii) $8.8 million in legitimate FX settlement proceeds that should have been credited to Driftwood's account but were instead redirected by the defendants. The last fabricated monthly account statement, dated June 30, 2023, reflected a purported account balance of $52.1 million. When Driftwood's COO and CCO, Sandra Hu, conducted an independent verification of the account on July 18, 2023 — prompted by concerns about delays in responding to a routine withdrawal request — she confirmed with Bridgemont Bank NA that the actual balance in Meridian Prime's operating account was only $3.2 million. This discovery of the $48.9 million discrepancy triggered Driftwood's immediate escalation and the filing of this litigation.

B. Kelvantis Forensic Advisors Fund Tracing Summary

On November 20, 2023, Kelvantis Forensic Advisors LLC delivered its preliminary fund tracing report to Calderwood & Harkness (the "Kelvantis Report"). The engagement was led by Natasha Everett, CPA, CFF, engagement partner, at Kelvantis's offices at 101 Hudson Street, Suite 2500, Jersey City, NJ 07302. The Kelvantis Report was based on an analysis of approximately 14,000 transaction records obtained from Bridgemont Bank NA pursuant to the order of attachment, as well as the limited documentary production made by defendants' former counsel, and publicly available records regarding the entities and real properties identified below.

The Kelvantis Report traces the disposition of the $47.3 million diverted from Driftwood as follows:

(1) Offshore Transfers to Stellaris Trading Ltd. — $18,600,000. Approximately $18.6 million was transferred in a series of wire transfers from Meridian Prime's operating account at Bridgemont Bank NA to accounts held at Palmetto International Bank Ltd. (302 Bay Street, Nassau, Bahamas) in the name of Stellaris Trading Ltd., a British Virgin Islands business company bearing Registration No. 2043871. Stellaris Trading was incorporated in the BVI on February 22, 2021, and is controlled by Zelenko. The transfers occurred across seventeen separate wire transactions between February 2022 and June 2023, with individual transfer amounts ranging from $450,000 to $2.8 million.

(2) Transfers to the Zelenko Family Irrevocable Trust — $12,400,000. Approximately $12.4 million was transferred to the Zelenko Family Irrevocable Trust, an irrevocable trust established by Zelenko on April 8, 2021, bearing Tax ID 86-6092411. The trust is held at and administered by Marlowe Asset Management Trust Company of Delaware, located at 1201 North Market Street, Suite 1600, Wilmington, DE 19801. The transfers to the trust occurred in twelve separate transactions between March 2022 and May 2023.

(3) Real Estate Purchases Through Castellan Realty Holdings LLC — $8,000,000. Approximately $8.0 million was transferred to Castellan Realty Holdings LLC, a Delaware limited liability company (EIN: 87-1548203), and used to purchase two New York City properties:

(a) A luxury condominium at 425 East 58th Street, Apartment 32F, New York, NY 10022, purchased in June 2022 for $4,850,000. This property also serves as Zelenko's personal residence.

(b) A commercial property at 17 Wooster Street, Unit 3, New York, NY 10013, purchased in September 2022 for $3,150,000. This property appears to be held as a commercial investment and may generate rental income.

(4) Cash Withdrawals and Personal Expenditures — $5,100,000. Approximately $5.1 million was withdrawn in cash or spent on personal expenditures by the defendants, including luxury goods, travel, vehicles, and other consumer spending. This category represents the most difficult funds to trace and recover, as cash withdrawals are largely untraceable and consumer purchases depreciate rapidly. The Kelvantis Report identifies specific categories of expenditure, including approximately $1.2 million in identified luxury vehicle purchases (a 2022 Porsche 911 Turbo S and a 2023 Mercedes-Benz S-Class AMG, both registered to Zelenko) and approximately $680,000 in identified jewelry purchases from Cartier and Harry Winston.

(5) Retained in Meridian Prime Operating Accounts — $3,200,000. Approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA as of July 2023 when the fraud was discovered. This amount has since increased to approximately $8.7 million due to the attachment order's capture of incoming wire activity and the restraint of additional funds identified through discovery.

Total traced funds: $18,600,000 + $12,400,000 + $8,000,000 + $5,100,000 + $3,200,000 = $47,300,000.

The Kelvantis Report notes that additional forensic analysis may reveal further asset repositories not yet identified, particularly in light of the incomplete and evasive discovery responses provided by the defendants prior to the withdrawal of their counsel.

C. Procedural Posture

The procedural history of this action is relevant to understanding the current posture of the case and the legal foundation for enforcement proceedings.

Pre-Judgment Litigation. Driftwood commenced this action by filing a verified complaint on August 7, 2023, asserting claims for fraud, fraudulent conveyance, breach of contract (under the ISDA Master Agreement), conversion, unjust enrichment, and alter ego/veil-piercing against all defendants. Simultaneously, Driftwood moved ex parte for a temporary restraining order and order of attachment pursuant to CPLR §§ 6201 and 6210, supported by the affidavit of Sandra Hu and documentary evidence of the fraudulent scheme. On August 8, 2023, the Honorable Eleanor Vasquez, J.S.C., granted the TRO and issued an order of attachment in the amount of $50 million, restraining the assets of all defendants and directing the Sheriff of New York County to levy upon any property of the defendants found within the county.

On August 14, 2023, Whitmore & Gaines LLP appeared on behalf of all defendants. The firm was led by Jonathan Whitmore, senior partner, with Chloe Redmond serving as associate of record. Their offices are located at 60 East 42nd Street, 20th Floor, New York, NY 10165. On August 22, 2023, following a contested hearing at which the defendants appeared through counsel, the court converted the TRO into a preliminary injunction and confirmed the order of attachment, finding that Driftwood had demonstrated a likelihood of success on the merits, a risk of irreparable harm, and a substantial basis for the attachment under CPLR § 6201(3) (defendant with intent to defraud creditors).

Defendants filed an answer on September 5, 2023, generally denying liability and asserting affirmative defenses including failure to mitigate, consent, and ratification. On October 6, 2023, in response to Driftwood's document demands, defendants produced approximately 1,200 pages of documents through Whitmore & Gaines. Calderwood & Harkness's review of the production revealed significant gaps and, critically, evidence that several of the produced documents — including purported trade confirmations and internal accounting records — were themselves fabricated or altered, compounding the fraud underlying the action.

On October 20, 2023, Calderwood & Harkness filed a motion to compel full production of documents and for sanctions under 22 NYCRR § 130-1.1 based on the discovery misconduct. Before the motion could be heard, Whitmore & Gaines moved to withdraw as counsel for all defendants on October 30, 2023, citing non-payment of fees and an irreparable breakdown in the attorney-client relationship. The court granted the motion to withdraw effective November 13, 2023, and set a deadline of December 15, 2023 for new counsel to appear on behalf of Meridian Prime (which, as a limited liability company, cannot appear pro se) and the individual defendants.

Entry of Judgment. The December 15, 2023 deadline lapsed without any appearance by substitute counsel on behalf of any defendant. On December 4, 2023, anticipating the defendants' failure to retain new counsel, Driftwood had filed a motion for default judgment against Meridian Prime and for summary judgment against the individual defendants on the fraud and alter ego claims. The summary judgment motion was supported by the Kelvantis Report, the affidavit of Sandra Hu, deposition testimony excerpts from third-party witnesses at Bridgemont Bank NA, and the documentary evidence obtained through discovery and the attachment proceedings. On January 10, 2024, Justice Vasquez granted both motions and entered judgment in the total amount of $58,900,000 as set forth above.

Post-Judgment Developments. On January 22, 2024, Kessler Brandt & Roe LLP entered an appearance for Viktor Zelenko individually in connection with anticipated post-judgment proceedings. The appearance was filed by Aaron Kessler, partner, of Kessler Brandt & Roe's offices at 900 Third Avenue, Suite 1700, New York, NY 10022. This development, which occurred after the date of this memorandum's initial analysis but before its finalization, is significant and is addressed in detail in Section IX below regarding cooperation leverage. No counsel has appeared for Carvallo or Sobchak, and Meridian Prime remains unrepresented.

D. Current Status of Asset Freeze

The existing preliminary injunction (converted from the August 8, 2023 TRO) and order of attachment remain in full force and effect. The injunction restrains: (a) all Meridian Prime accounts at Bridgemont Bank NA; and (b) the assets of the individual defendants generally, including real and personal property, bank accounts, and securities.

The known frozen assets at Bridgemont Bank NA currently total approximately $8.7 million, representing a combination of the original $3.2 million confirmed in the accounts as of July 2023, plus additional amounts captured by the attachment order from incoming wire activity and transfers identified through subsequent discovery. These funds have been frozen since August 8, 2023, and Bridgemont has confirmed its compliance with the restraining notices served pursuant to the attachment order.

It is important to note, however, that the preliminary injunction and order of attachment may not extend to all of the asset repositories identified in the Kelvantis Report. Specifically, we need to confirm whether the existing restraining notices were served on, and acknowledged by: (i) Marlowe Asset Management Trust Company of Delaware (as trustee of the Zelenko Family Irrevocable Trust); (ii) Palmetto International Bank Ltd. in The Bahamas (though international service raises separate enforceability concerns); and (iii) any cryptocurrency exchanges or custodians that may hold assets of the defendants. To the extent the existing restraining orders do not clearly cover these targets, supplemental restraining notices under CPLR § 5222 should be issued immediately as part of the enforcement strategy outlined in Section X below.

III. Recovery Target 1: Meridian Prime Accounts at Bridgemont Bank NA

A. Description of Assets

Bridgemont Bank NA is a national banking association with its principal office at 383 Madison Avenue, New York, NY 10179. Meridian Prime maintained its primary operating account and one or more client accounts at Bridgemont throughout the fraud period. These accounts were used to receive Driftwood's margin deposits and settlement proceeds, and served as the conduit through which the defendants routed the diverted funds to the various repositories identified in the Kelvantis Report.

The estimated current combined balance across all Meridian Prime accounts at Bridgemont is approximately $8,700,000. This figure is based on the original $3.2 million confirmed by Bridgemont as of July 2023, augmented by additional amounts identified through subsequent discovery, incoming wire activity captured by the attachment order (including certain periodic payments and receivables due to Meridian Prime from counterparties that were redirected into the frozen accounts), and accrued interest on the frozen balances. These funds have been continuously frozen since the August 8, 2023 TRO/attachment order, and Bridgemont has confirmed its compliance with the restraining notices on multiple occasions.

This recovery target represents the most liquid and readily accessible source of funds among the identified targets.

B. Recommended Enforcement Mechanism

The primary enforcement vehicle for recovering the Bridgemont funds is a turnover proceeding under CPLR § 5225(b), which authorizes a special proceeding against a person in possession of money or property in which the judgment debtor has an interest, or who owes a debt to the judgment debtor. Bridgemont, as the depository bank holding funds in accounts titled to Meridian Prime, is squarely within the scope of Section 5225(b). The proceeding requires service of a notice of petition and petition on Bridgemont, and the court may issue a turnover order directing Bridgemont to deliver the funds to Driftwood (or to the Sheriff) in satisfaction of the judgment.

Alternatively, if Bridgemont asserts any competing claims to the funds — for example, bank fees, set-off rights, or interpleader concerns related to other account holders or claimants — we may proceed under CPLR § 5227, which provides for a turnover order against a third party that owes a debt to the judgment debtor and permits the court to adjudicate competing claims in the same proceeding.

As a preliminary step, we should serve an information subpoena on Bridgemont under CPLR § 5224 to obtain: (i) the complete account history for all accounts in the name of Meridian Prime Capital LLC, including transaction records, wire transfer details (originator and beneficiary information, reference numbers, and routing instructions), account statements, and opening documentation; (ii) identification of all account holders, authorized signatories, and persons with power of attorney or other authority over the accounts; and (iii) records of any liens, security interests, or claims asserted by Bridgemont or third parties against the accounts.

Anticipated Timeline: Given that the funds are already frozen, Bridgemont is a domestic national bank subject to CPLR jurisdiction, and there is no apparent basis for any substantial competing claim, turnover should be achievable within approximately 60 to 90 days from the date of filing, assuming Bridgemont does not interpose any material objection.

C. Potential Obstacles

The obstacles to recovery from the Bridgemont accounts are expected to be minimal. Bridgemont is a cooperating third party and has demonstrated compliance with the existing attachment order. However, the following potential issues should be noted:

• Bank Fees and Lien Claims. Bridgemont may assert a banker's lien or claim for reimbursement of account maintenance fees, legal compliance costs, or other charges incurred in connection with administering the frozen accounts. Any such claim is likely to be de minimis relative to the account balances and can be resolved through negotiation or addressed in the turnover order.

• Competing Creditors and Regulatory Claims. It is possible that other creditors of Meridian Prime or the individual defendants may have filed competing levies, restraining notices, or other claims against the accounts. We should conduct a diligence inquiry with Bridgemont to determine whether any such competing claims exist. Additionally, regulatory bodies — including, potentially, the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, or the New York Attorney General's office — may take an interest in the Meridian Prime matter. While no regulatory action has been filed to date, we should monitor for any such development.

• Client Account Segregation Issues. If any portion of the frozen funds is held in accounts designated as client accounts (as opposed to Meridian Prime's proprietary operating account), Bridgemont or a third party may argue that such funds belong to other clients of Meridian Prime rather than to Meridian Prime itself. Our information subpoena should specifically address the characterization and titling of each account.

D. Estimated Recovery

$8,700,000.

This represents the full amount currently frozen at Bridgemont and should be recoverable in its entirety, subject to de minimis reductions for bank charges and potential competing claims.

IV. Recovery Target 2: Zelenko Family Irrevocable Trust at Marlowe Asset Management Trust Company of Delaware

A. Description of Assets

The Zelenko Family Irrevocable Trust was established by Viktor Zelenko as settlor on April 8, 2021, and bears Tax ID 86-6092411. The trust is administered by the Marlowe Asset Management Trust Company of Delaware, located at 1201 North Market Street, Suite 1600, Wilmington, DE 19801. The trust instrument has not been produced in discovery; accordingly, we do not yet have complete information regarding the trust's terms, beneficiary designations, distribution standards, or the trustee's powers and limitations.

During the fraud period, approximately $12.4 million was transferred from Meridian Prime and/or Zelenko-controlled accounts to the Zelenko Family Irrevocable Trust in twelve separate transactions between March 2022 and May 2023. As of the date on which the preliminary injunction and restraining notices were served, the trust held assets with an estimated value of approximately $6,200,000, consisting of a combination of publicly traded securities and cash. The remaining balance of approximately $6.2 million of the original $12.4 million had apparently been disbursed to trust beneficiaries, transferred to other accounts, or otherwise depleted prior to the entry of the freeze.

The trust is a critical enforcement target because it represents a substantial concentration of traceable funds that were deposited using the proceeds of the defendants' fraud.

B. Legal Theories

We recommend pursuing recovery of the trust assets under multiple overlapping legal theories, any one of which is independently sufficient to support a turnover order or judgment against the trust:

Fraudulent Conveyance Under NYDCL §§ 273–276. The transfers from Meridian Prime and Zelenko to the trust are voidable as fraudulent conveyances under the New York Debtor and Creditor Law. Multiple provisions of the NYDCL apply:

• NYDCL § 273 (Conveyance by Insolvent): A conveyance made by a person who is insolvent is fraudulent as to creditors without regard to actual intent. During the fraud period, Meridian Prime was at all times insolvent — its liabilities to Driftwood and other creditors far exceeded its assets, particularly when the fabricated account balances are corrected to reflect actual values. The transfers to the trust were made while Meridian Prime was insolvent and without fair consideration.

• NYDCL § 274 (Conveyance Without Fair Consideration): A conveyance made without fair consideration by a person who is engaged in a business or transaction for which the remaining property is unreasonably small capital is fraudulent as to creditors. The diversion of $12.4 million to the trust left Meridian Prime with unreasonably small capital to conduct its purported trading operations and satisfy its obligations to Driftwood.

• NYDCL § 275 (Conveyance by a Person About to Incur Debts): A conveyance made without fair consideration by a person who intends or believes that he will incur debts beyond his ability to pay as they mature is fraudulent as to both present and future creditors. Zelenko knew at the time of the transfers that Meridian Prime would be unable to satisfy Driftwood's claims when the fraud was ultimately discovered.

• NYDCL § 276 (Conveyance with Actual Intent to Defraud): A conveyance made with actual intent to hinder, delay, or defraud present or future creditors is fraudulent regardless of other circumstances. The classic "badges of fraud" under Section 276 are abundantly present here: (i) the transfers were made to an insider (Zelenko's own irrevocable trust); (ii) the transfers were made without fair consideration; (iii) the transfers were made while Zelenko and Meridian Prime were engaged in an ongoing fraud; (iv) the transfers were made in a manner designed to conceal ownership (through a trust structure); and (v) the transferor retained control and benefit over the transferred assets (as a trust beneficiary).

Although the trust was established on April 8, 2021 — prior to the December 15, 2021 execution of the ISDA Master Agreement — the trust was funded primarily during the fraud period (January 2022 through July 2023). The relevant inquiry under the NYDCL focuses on the timing of the conveyances (i.e., the funding transfers), not the creation of the trust vehicle itself. The fact that the trust pre-dates the ISDA Agreement is immaterial, as the fraudulent transfers occurred well after the commencement of both the contractual relationship and the fraud scheme.

Alter Ego / Veil-Piercing. Justice Vasquez's summary judgment decision already pierced the corporate veil of Meridian Prime Capital LLC as to Zelenko personally, finding that Zelenko exercised complete domination and control over Meridian Prime and used it as a personal instrumentality to perpetrate fraud. We submit that the same analysis supports piercing the trust structure as well. The Zelenko Family Irrevocable Trust was used by Zelenko as a vehicle for shielding assets that are directly traceable to his fraud. Zelenko was both the settlor and a beneficiary of the trust, and the trust served no independent purpose other than to park misappropriated funds beyond the reach of creditors. Under New York law, courts regularly look through trust structures to reach assets that have been fraudulently transferred, particularly where the settlor retains a beneficial interest.

CPLR § 5227 Turnover Order. Independent of the fraudulent conveyance theories, CPLR § 5227 authorizes a court to order any person who owes a debt to the judgment debtor, or who is in possession of property in which the judgment debtor has an interest, to deliver such property to the judgment creditor. If we can establish that the trust holds property in which Zelenko (as a judgment debtor) retains an interest — whether as a beneficiary, as a person with power to direct distributions, or by virtue of the trust being a sham — then a turnover order under Section 5227 directed at Marlowe Asset Management Trust Company is appropriate.

C. Recommended Enforcement Steps

We recommend the following enforcement steps with respect to the Zelenko Family Irrevocable Trust:

1. Information Subpoena. Serve an information subpoena under CPLR § 5224 on Marlowe Asset Management Trust Company of Delaware to obtain complete documentation regarding the trust, including: the trust instrument and all amendments thereto; all account statements from inception; all transaction records reflecting deposits, withdrawals, transfers, and distributions; the identity of all beneficiaries and any persons with powers of appointment or direction; all correspondence between Zelenko and the trustee; and the trustee's internal notes and memoranda regarding the administration of the trust.

2. Fraudulent Conveyance Action. File a fraudulent conveyance action under NYDCL §§ 273–276 against the Zelenko Family Irrevocable Trust and Marlowe Asset Management Trust Company of Delaware, in its capacity as trustee. The action should seek: (a) a declaration that the transfers to the trust are void as to Driftwood; (b) an order directing the trustee to turn over the trust assets to Driftwood; and (c) a money judgment against the trust to the extent the trust assets are insufficient to satisfy the full amount of the fraudulent transfers.

3. CPLR § 5227 Turnover Motion. Simultaneously with the fraudulent conveyance action, file a turnover motion under CPLR § 5227 directed at Marlowe Asset Management Trust Company, compelling the trustee to turn over trust assets as property in which the judgment debtor Zelenko holds an interest.

4. Continued Freeze. Seek an order from the court confirming that the existing preliminary injunction and restraining notices extend to the trust assets, or, if necessary, obtain a supplemental restraining order specifically directed at the trust. Ensure that Marlowe Asset Management Trust Company is on notice and has acknowledged the restraint.

D. Potential Obstacles

Several obstacles may complicate enforcement against the trust, though none are insurmountable:

• Trustee Resistance. Marlowe Asset Management Trust Company, as an institutional trustee, may assert fiduciary duties to the trust beneficiaries and resist turnover absent a direct court order. This is a legitimate institutional posture and is expected; it does not reflect any hostility toward our position, but it means that we cannot expect voluntary turnover and will need to litigate the matter to judgment or obtain a consent order.

• Choice of Law Issues. The trust was created in Delaware and is administered by a Delaware trust company. Delaware trust law, which is generally more protective of irrevocable trusts and has a well-developed body of asset-protection trust jurisprudence, may create additional complexity. The defendants may argue that Delaware law governs the enforceability of claims against the trust. However, because the underlying fraud and the judgment were both obtained in New York, and the diverted funds originated from New York accounts, we have strong arguments that New York law governs the fraudulent conveyance claims. Additionally, even under Delaware law, fraudulent conveyance claims remain available under the Delaware Uniform Fraudulent Transfer Act (6 Del. C. §§ 1301–1311).

• Spendthrift Provisions. The trust instrument may contain spendthrift or anti-alienation clauses purporting to prohibit creditors from reaching trust assets. However, it is well established under both New York and Delaware law that spendthrift provisions cannot shield assets that were fraudulently transferred to the trust. See, e.g., Dillon v. Dillon, 2020 WL 1234567 (Del. Ch. 2020); In re Huber, 493 B.R. 798 (Bankr. W.D. Wash. 2013) (applying general principle that self-settled trust assets are reachable by creditors of the settlor). Moreover, the Restatement (Third) of Trusts § 58(2) provides that a creditor of the settlor may reach the trust assets to the extent that the trust property is attributable to the settlor's contributions, regardless of spendthrift protections.

• Depleted Assets. Approximately $6.2 million of the original $12.4 million transferred to the trust has already been disbursed or otherwise depleted. Depending on the nature of those disbursements — whether to beneficiaries, reinvested, or transferred to other accounts — there may be additional tracing opportunities to recover a portion of the depleted amounts from downstream recipients. This issue should be explored through the information subpoena.

E. Estimated Recovery

$6,200,000 (full amount of remaining trust assets). Additional recovery may be possible to the extent forensic analysis reveals traceable disbursements to identifiable recipients, but this is not included in the current estimate.

V. Recovery Target 3: Stellaris Trading Ltd. Accounts at Palmetto International Bank Ltd. (Offshore)

A. Description of Assets

Stellaris Trading Ltd. is a British Virgin Islands business company bearing Registration No. 2043871, incorporated on February 22, 2021. It is controlled by Viktor Zelenko. Stellaris has no apparent business purpose other than to serve as a vehicle for receiving and holding funds diverted from Meridian Prime and Driftwood.

Stellaris maintains one or more accounts at Palmetto International Bank Ltd., located at 302 Bay Street, Nassau, Commonwealth of The Bahamas. Kelvantis's forensic tracing identified seventeen wire transfers totaling $18,600,000 from Meridian Prime's accounts at Bridgemont Bank NA to the Stellaris accounts at Palmetto, occurring between February 2022 and June 2023. Individual transfer amounts ranged from $450,000 to $2.8 million.

The current balance in the Stellaris accounts at Palmetto is unknown. It is possible that significant funds remain in the accounts, given the relatively short period between the last identified transfer (June 2023) and the entry of the attachment order (August 2023). However, there is also a risk that Zelenko may have further dissipated funds from these accounts through additional transfers, cash withdrawals, or conversion to other assets (potentially including cryptocurrency). Confirming the current account balances is a top priority.

This recovery target represents the single largest concentration of potentially recoverable assets and, if successfully pursued, could substantially close the gap between the judgment amount and our total recovery.

B. Recommended Enforcement Mechanism

Enforcement against offshore accounts requires a multi-jurisdictional approach. We recommend the following mechanisms:

Hague Convention Letter Rogatory / International Judicial Assistance. The Commonwealth of The Bahamas is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965), which provides a framework for service of process and judicial assistance. We recommend applying to the New York Supreme Court for a letter rogatory directed to the courts of The Bahamas, requesting: (i) service of the New York judgment and enforcement orders on Palmetto International Bank Ltd.; (ii) production of documents and records relating to the Stellaris accounts, including current balances, transaction histories, and account opening documentation; and (iii) recognition and enforcement of the New York judgment in The Bahamas, or, alternatively, the issuance of an independent freezing order (Mareva injunction) by the Bahamian courts restraining the Stellaris accounts pending enforcement proceedings.

The Bahamas has a common-law legal system derived from English law and recognizes foreign judgments under principles of comity. While The Bahamas does not have a statutory framework for enforcement of foreign judgments comparable to the Uniform Foreign Money-Judgments Recognition Act in the United States, Bahamian courts regularly enforce foreign judgments on comity grounds, particularly where the foreign court had jurisdiction over the judgment debtor, the judgment was not obtained by fraud or in violation of natural justice, and the judgment is not contrary to Bahamian public policy. Our New York judgment satisfies all of these requirements.

BVI Proceedings Against Stellaris Trading Ltd. Because Stellaris is a BVI business company, the BVI courts have jurisdiction over the entity and its assets worldwide. We recommend considering parallel proceedings in the BVI, including: (i) an application to the BVI Commercial Court for disclosure orders compelling Stellaris's registered agent to produce the company's register of members, register of directors, register of charges, and all corporate records; (ii) an application for the appointment of a liquidator or receiver over Stellaris, empowered to take control of the company's assets (including the Palmetto accounts) and realize them for the benefit of creditors; and (iii) recognition of the New York judgment in the BVI under the Reciprocal Enforcement of Judgments Act, 1922 (Cap. 65) or common-law principles of comity.

Correspondent Banking — CPLR § 5225(b) / § 5227. The wire transfers from Bridgemont to Palmetto were almost certainly routed through one or more U.S. correspondent banks in New York. To the extent Palmetto International Bank Ltd. maintains correspondent banking relationships in New York — which is typical for Bahamian banks processing U.S. dollar transactions — we can serve restraining notices and pursue turnover motions under CPLR §§ 5225(b) and 5227 against those correspondent banks. This strategy may permit us to intercept any funds held in Palmetto's correspondent accounts or to exert pressure on Palmetto to cooperate with our enforcement efforts. We should obtain the wire transfer routing details from Bridgemont through our information subpoena to identify the correspondent banks involved.

Information Subpoena on U.S. Correspondent Banks. Independently of the turnover strategy, we should serve information subpoenas under CPLR § 5224 on any U.S. correspondent bank through which the wire transfers to Palmetto were routed. These subpoenas will help establish the full chain of custody for the transferred funds and may reveal additional intermediary accounts or asset repositories.

C. Potential Obstacles

The Stellaris/Palmetto recovery target presents the most significant enforcement challenges among all of the identified targets:

• International Enforcement Complexity. Cross-border asset recovery inherently involves greater complexity, cost, and delay than domestic enforcement. We will need to engage local counsel in both The Bahamas and the BVI, navigate unfamiliar procedural rules, and coordinate proceedings across multiple jurisdictions.

• Bahamian Banking Secrecy. The Bahamas has historically maintained strong banking secrecy protections, which may create initial resistance from Palmetto International Bank to disclosing account information absent a Bahamian court order. However, it is important to note that Bahamian banking secrecy laws contain well-established exceptions for fraud and criminal activity. Section 10 of the Banks and Trust Companies Regulation Act, 2000, permits disclosure of confidential information pursuant to a court order in cases involving fraud, and the Bahamian courts have consistently upheld this exception. We expect that the egregious nature of the fraud underlying our judgment will support the issuance of disclosure orders.

• Cost and Timeline. We estimate that the letter rogatory process will take approximately 3 to 6 months from initiation to completion. Legal fees for Bahamian local counsel are estimated at $30,000 to $75,000, depending on the complexity of the proceedings and any opposition. BVI proceedings, if pursued, will involve additional fees of $25,000 to $50,000.

• Risk of Further Dissipation. Perhaps the most significant risk is that Zelenko may have further dissipated the Stellaris funds since the August 2023 attachment order. The attachment order was served on Bridgemont Bank NA and restrained Meridian Prime's domestic accounts, but it may not have effectively reached the Stellaris accounts at Palmetto absent international service and recognition. We must move swiftly to obtain an independent Bahamian freezing order to prevent any further dissipation.

• Zelenko's Non-Cooperation. If Zelenko refuses to cooperate in identifying the current status of the Stellaris accounts, we will be dependent on the Bahamian and BVI legal processes for discovery and enforcement. This underscores the importance of the cooperation leverage strategy discussed in Section IX below.

D. Estimated Recovery

Potentially up to $18,600,000 if the full amount of the original transfers remains in the Stellaris accounts. However, given the risk of dissipation and the uncertainties inherent in international enforcement, we assign a conservative estimated recovery range of $14,000,000 to $18,000,000. This range may be refined significantly once we obtain current account balance information through Bahamian discovery or Zelenko's cooperation.

VI. Recovery Target 4: Real Property Held Through Castellan Realty Holdings LLC

A. Description of Assets

Castellan Realty Holdings LLC is a Delaware limited liability company bearing EIN 87-1548203. Its registered address is c/o Viktor Zelenko, 425 East 58th Street, Apartment 32F, New York, NY 10022. Like Stellaris Trading and the Zelenko Family Irrevocable Trust, Castellan Realty appears to be a Zelenko-controlled entity with no independent business purpose other than holding assets purchased with funds diverted from Driftwood.

Castellan Realty holds title to two New York City properties:

Property 1: 425 East 58th Street, Apartment 32F, New York, NY 10022. This is a luxury condominium unit in the Sutton Place neighborhood of Manhattan, purchased by Castellan Realty in June 2022 for $4,850,000. The property also serves as Viktor Zelenko's primary personal residence. Based on comparable sales data and current market conditions, the property's current fair market value is estimated at approximately $4,500,000 to $5,200,000.

Property 2: 17 Wooster Street, Unit 3, New York, NY 10013. This is a commercial condominium unit in the SoHo neighborhood of Manhattan, purchased by Castellan Realty in September 2022 for $3,150,000. The property appears to be held as a commercial investment and may be generating rental income. Based on comparable sales data, the current fair market value is estimated at approximately $2,800,000 to $3,500,000.

The combined original purchase price for both properties was $8,000,000, and the combined estimated current market value is approximately $7,300,000 to $8,700,000. Both properties were purchased entirely with funds traceable to the defendants' fraud.

B. Legal Theories

Multiple legal theories support Driftwood's right to reach and liquidate these properties:

Alter Ego / Veil-Piercing. Castellan Realty Holdings LLC is a Zelenko-controlled entity that served no independent business purpose beyond holding real estate purchased with diverted funds. Justice Vasquez's existing alter ego finding as to Meridian Prime — which determined that Zelenko exercised complete domination and control over MPC and used it as a personal instrumentality — provides a strong foundation for extending the same analysis to Castellan Realty. The factors typically considered in an alter ego analysis under New York law, including commingling of funds, failure to observe corporate formalities, use of the entity as a mere shell, and undercapitalization, are all present here. Castellan Realty had no employees, no independent management, no business operations apart from holding the two properties, and was funded exclusively with misappropriated funds.

Fraudulent Conveyance Under NYDCL §§ 273–276. The transfer of $8.0 million in misappropriated funds from Meridian Prime through Zelenko to Castellan Realty for the purpose of purchasing real estate constitutes both constructive and actual fraudulent conveyance under the NYDCL. The transfers were made without fair consideration (Castellan Realty provided nothing of value to Driftwood in exchange), while Meridian Prime was insolvent, and with the actual intent to hinder, delay, and defraud Driftwood and other creditors. The analysis under Sections 273, 274, 275, and 276 closely parallels the analysis applicable to the Zelenko Family Irrevocable Trust as set forth in Section IV.B above.

Constructive Trust / Equitable Lien. Under New York law, a constructive trust may be imposed where property has been acquired through fraud or in circumstances where the holder of legal title is unjustly enriched at the expense of another. The classic elements of a constructive trust — a confidential or fiduciary relationship, a promise or obligation, a transfer in reliance thereon, and unjust enrichment — are present here. Both properties were purchased directly with Driftwood's funds, and Driftwood is entitled to the imposition of a constructive trust over the properties or, alternatively, an equitable lien securing the judgment amount.

C. Recommended Enforcement Steps

We recommend the following enforcement steps with respect to the Castellan Realty properties:

1. Petition for Appointment of Receiver. File a petition for the appointment of a receiver over both Meridian Prime Capital LLC and Castellan Realty Holdings LLC, with authority to marshal, manage, and liquidate assets including both real properties. The receivership should encompass all assets of both entities, including any bank accounts, receivables, or other property not yet identified. We propose nominating Barrow & Fitch Realty Inc. as the receiver. Barrow & Fitch, led by Thomas Barrow, principal, at 1185 Avenue of the Americas, 15th Floor, New York, NY 10036, is a firm with deep expertise in court-appointed receiverships and real estate liquidation in New York City, and has been appointed as receiver in numerous Commercial Division cases involving similar circumstances.

2. Receiver's Powers. The proposed receivership order should empower the receiver to: (a) take immediate possession of both properties and all books and records of Castellan Realty; (b) manage and maintain the properties pending sale, including engaging property management services and collecting any rents or other income; (c) engage licensed real estate brokers and conduct marketing of the properties for sale; (d) sell the properties by private sale or public auction, subject to court approval of the terms of sale and the minimum acceptable price; (e) execute and deliver deeds, assignments, and all instruments necessary to transfer title; and (f) deposit sale proceeds with the court or distribute them to Driftwood in partial satisfaction of the judgment, as the court may direct.

3. Lis Pendens. File notices of pendency (lis pendens) against both properties with the New York County Clerk's Office. The lis pendens will provide constructive notice to all prospective purchasers, lenders, and other parties that the properties are subject to pending litigation and enforcement proceedings, and will effectively prevent any sale or encumbrance of the properties without court knowledge and approval.

4. Fraudulent Conveyance Action. Include Castellan Realty Holdings LLC as a party defendant in the fraudulent conveyance action filed under NYDCL §§ 273–276 (which will also name the Zelenko Family Irrevocable Trust and its trustee, as discussed in Section IV.C above). Seek a declaration that the transfers to Castellan Realty are void as to Driftwood and that Driftwood is entitled to the imposition of a constructive trust over both properties.

5. Title Search. Commission a full title search for both properties to identify any existing encumbrances, including mortgages, mechanics' liens, tax liens, or other claims that may have priority over Driftwood's interests. This information is critical to accurately estimating the net recovery available from the properties.

D. Potential Obstacles

• Encumbrances. The properties may be subject to existing mortgages or other liens. If the original purchases were financed in whole or in part with mortgage debt, the mortgage lender's lien will have priority over Driftwood's claims. However, given that the purchases were made with cash (diverted from Driftwood), it is likely that the properties were acquired free and clear of mortgage debt. Tax liens, if any, would also take priority. The title search will resolve this question.

• Current Market Value. Real estate values fluctuate, and the current market values of the two properties may differ from the original purchase prices. The Manhattan luxury condominium market has experienced some softening since mid-2022, which could result in a sale price below the original $4,850,000 for the East 58th Street property. Conversely, the SoHo commercial market has remained relatively stable, and the Wooster Street property may have appreciated modestly. A formal appraisal should be obtained by the receiver as part of the marketing process.

• Timeline. The receivership and sale process involves multiple steps — appointment of the receiver, taking possession, engaging brokers, marketing, negotiating offers, obtaining court approval, and closing — which collectively will take an estimated 90 to 120 days from the date of the receiver's appointment. This timeline may extend if the market conditions require a longer marketing period or if the court requires multiple rounds of bidding.

• Transaction Costs. The net proceeds from the sale will be reduced by transaction costs, including: brokerage commissions (typically 4–6% for luxury residential and commercial property); New York State and City real estate transfer taxes (approximately 1.4–2.075% combined, depending on the sale price); receiver's fees and commissions (typically set by the court at 3–5% of gross proceeds); and property maintenance and carrying costs during the receivership period. We estimate that total transaction costs will consume approximately 10–15% of the gross sale price.

• Zelenko's Residence. The East 58th Street property is Zelenko's primary residence. While this does not create a legal impediment to sale — New York does not have a homestead exemption that would shield an unlimited amount of residential equity, and in any event the property is held through a corporate entity, not in Zelenko's individual name — the practical reality of displacing a judgment debtor from his home may attract judicial scrutiny and require careful handling.

E. Estimated Recovery

Estimated $7,000,000 to $8,500,000 net of transaction costs. This estimate assumes combined gross sale proceeds of approximately $7,800,000 to $9,700,000 at current market values, reduced by estimated transaction costs of 10–15%. As a conservative baseline, we estimate net recovery of approximately $7,000,000, representing approximately 87.5% of the original $8,000,000 purchase price after all costs.

VII. Recovery Target 5: Potential Cryptocurrency Holdings

A. Basis for Suspicion

The Kelvantis Report identified $5.1 million in cash withdrawals and personal expenditures by the defendants that were not traced to identifiable asset repositories. A portion of these funds may have been converted to cryptocurrency or other digital assets. Several factors support this suspicion:

• Zelenko's Sophistication. Zelenko's background as a professional FX trader, his demonstrated facility with international wire transfers and multi-jurisdictional entity structures, and the overall sophistication of the diversion scheme suggest familiarity with digital assets and the ability to acquire and custody cryptocurrency.

• Incomplete discovery. The defendants' discovery responses, produced through Whitmore & Gaines prior to that firm's withdrawal, were materially incomplete and evasive. No disclosure of any cryptocurrency holdings, wallet addresses, or exchange accounts was made. Given the breadth of our discovery demands — which specifically requested production of records relating to all digital assets and cryptocurrency — the absence of any responsive documents is notable and suggests either that such assets do not exist or that they were deliberately concealed.

• FX/Crypto Market Overlap. The FX trading community has a well-documented overlap with cryptocurrency markets. Many FX traders maintain cryptocurrency positions as part of diversified trading activity, and the infrastructure for converting between fiat currency and cryptocurrency is readily accessible to persons with FX trading experience and bank accounts.

• Social Media and Open-Source intelligence. Our team has conducted preliminary social media analysis of the defendants' known accounts, including Westmark Health IT, Ashford Systems, and Kestrel Data Systems profiles. While no direct evidence of cryptocurrency holdings has been identified, Zelenko's social media activity includes engagement with cryptocurrency-related content and follows of several prominent cryptocurrency influencers and exchanges.

• blockchain Analytics Potential. Publicly available blockchain records (for Bitcoin, Ethereum, and other major chains) may reveal wallet addresses associated with the defendants if transaction patterns, timing, or known deposit addresses can be correlated with the cash withdrawals identified in the Kelvantis Report.

B. Recommended Enforcement Steps

We recommend the following steps to investigate and, if warranted, recover cryptocurrency holdings:

1. CPLR § 5223 Post-Judgment Disclosure Examination. Schedule post-judgment disclosure examinations of Zelenko, Carvallo, and Sobchak. Include detailed questions and interrogatories regarding: all cryptocurrency holdings, including Bitcoin, Ethereum, stablecoins, and any other digital assets; all cryptocurrency wallets, whether custodial or self-custodied (hardware wallets, software wallets, paper wallets); all accounts at cryptocurrency exchanges and custodians (Coinbase, Hollowell Industries, Gemini, Binance, etc.); all transactions involving the purchase, sale, transfer, or exchange of cryptocurrency at any time from January 2022 to the present; and all seed phrases, private keys, and access credentials for any cryptocurrency wallets.

2. Subpoenas to Cryptocurrency Exchanges. Serve subpoenas under CPLR § 5224 on major cryptocurrency exchanges and custodians — including Northpoint Corporation, Stonefield & Co., Hollowell Industries (Cobalt Ridge Group), and Marlowe Holdings (Kestrel & Co.) — for records associated with the defendants' names, known email addresses, phone numbers, Social Security numbers, and any other identifying information. These platforms are subject to Know Your Customer ("KYC") requirements and maintain identity verification records for their users.

3. blockchain Analytics Engagement. Engage Kelvantis Forensic Advisors LLC (or, if a more specialized firm is preferred, Glenrock Holdings or Meridian Enterprises) to conduct on-chain tracing and blockchain analytics. The engagement should focus on: identifying wallet addresses associated with the defendants or their known entities; tracing the flow of funds from identified fiat-to-crypto on-ramps (i.e., exchange deposits) to destination wallets; analyzing transaction patterns and timing correlations with the cash withdrawals identified in the Kelvantis Report; and identifying any connections between the defendants' wallets and known darknet markets, mixing services, or other suspicious infrastructure.

4. Turnover Orders. If cryptocurrency holdings are identified — whether held at exchanges, in custodial wallets, or in self-custodied wallets — seek turnover orders under CPLR § 5225. For exchange-held cryptocurrency, a turnover order directed at the exchange will be effective. For self-custodied cryptocurrency, enforcement will depend on obtaining the private keys or compelling the judgment debtor to transfer the assets, backed by contempt sanctions for non-compliance.

C. Potential Obstacles

• Self-Custody. Cryptocurrency held in self-custodied wallets (hardware wallets, paper wallets, or software wallets controlled exclusively by the holder) cannot be seized through traditional garnishment or third-party turnover mechanisms. Recovery requires either the judgment debtor's voluntary cooperation or the application of contempt sanctions sufficient to compel disclosure of private keys and transfer of assets. This obstacle underscores the importance of the Zelenko cooperation strategy discussed in Section IX.

• Identification Challenges. If the defendants acquired cryptocurrency through peer-to-peer transactions, decentralized exchanges, or privacy-enhancing tools (e.g., mixers, tumblers, or privacy coins such as Monero), identification of the holdings may be extremely difficult or impossible through conventional means.

• Valuation Fluctuations. Cryptocurrency values are highly volatile. Even if holdings are identified, their value at the time of recovery may differ materially from their acquisition cost. This factor cuts both ways — prices may have appreciated or depreciated significantly since the date of acquisition.

• Jurisdictional Issues. If cryptocurrency is held at exchanges or custodians outside the United States, enforcement may require international cooperation similar to that described in Section V regarding the Palmetto/Stellaris accounts.

D. Estimated Recovery

The recovery from cryptocurrency holdings is speculative at this stage. We estimate a potential range of $1,000,000 to $5,000,000, based on the assumption that a meaningful portion of the $5.1 million in untraced cash withdrawals and personal expenditures was converted to digital assets. The actual amount recoverable will depend entirely on whether holdings can be identified, located, and reached through the enforcement mechanisms described above. If Zelenko cooperates and discloses cryptocurrency wallets, the recovery could be at or above the high end of this range; if no holdings are identified, the recovery from this target could be zero.

VIII. Recovery Target 6: Other Personal Assets of Individual Defendants

A. Viktor Andreyevich Zelenko

Zelenko is the primary architect of the fraud and the individual against whom the greatest recovery potential exists. In addition to the assets held through his controlled entities (Stellaris, the Zelenko Family Irrevocable Trust, and Castellan Realty) and any cryptocurrency holdings, Zelenko may have substantial personal assets that can be reached to satisfy the judgment.

Residence. Zelenko's primary residence is 425 East 58th Street, Apartment 32F, New York, NY 10022 — the Castellan Realty condominium that is the subject of the receivership and sale process described in Section VI above. As discuss

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION
TO: Priya Anand, Partner
FROM: Hannah Brinkley, Senior Associate
DATE: January 15, 2024
RE: Post-Judgment Enforcement Strategy — Driftwood Absolute Return Fund Ltd. v. Meridian Prime Capital LLC et al., Index No. 654321/2023 (Sup. Ct., N.Y. Cnty., Commercial Division)
MATTER NO.: 1024-00003
CLIENT: Driftwood Absolute Return Fund Ltd.
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I. Executive Summary
On January 10, 2024, the Honorable Eleanor Vasquez, J.S.C., entered judgment in the Supreme Court of the State of New York, County of New York, Commercial Division, in favor of our client, Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"), and against Meridian Prime Capital LLC ("Meridian Prime" or "MPC"), Viktor Andreyevich Zelenko ("Zelenko"), Irene Maria Carvallo ("Carvallo"), and Dmitri Pavlovich Sobchak ("Sobchak"), jointly and severally, in the total amount of $58,900,000. The judgment is composed of the following elements:
• Compensatory Damages: $47,300,000, representing the total amount of misappropriated margin deposits and settlement proceeds diverted by the defendants during the fraud period;
• Prejudgment Interest: $9,460,000, calculated at the statutory rate of 9% per annum under CPLR § 5004 on a weighted-average basis from January 1, 2022 (the approximate date on which diversion of funds commenced) through January 10, 2024 (the date of judgment entry); and
• Attorneys' Fees and Costs: $2,140,000, awarded pursuant to the contractual fee-shifting provision contained in Section 11 of the ISDA Master Agreement dated December 15, 2021 (2002 form), between Driftwood and Meridian Prime.
The judgment was entered as a default judgment against Meridian Prime following that entity's failure to appear through counsel after the withdrawal of Whitmore & Gaines LLP became effective on November 13, 2023, and following the lapse of the court-imposed December 15, 2023 deadline for substitute counsel to appear. As to the individual defendants — Zelenko, Carvallo, and Sobchak — the court granted Driftwood's motion for summary judgment on its fraud and alter ego claims, finding that undisputed evidence established each individual's participation in, and personal liability for, the fraudulent scheme.
The purpose of this memorandum is to provide a comprehensive analysis of available enforcement avenues, identify and prioritize recovery targets, assess the legal mechanisms available under New York law and applicable international frameworks, and recommend a coordinated, multi-pronged enforcement plan designed to maximize recovery on the $58.9 million judgment. This memorandum reflects the current state of our knowledge as of the date hereof, supplemented by the note regarding Zelenko's retention of post-judgment counsel on January 22, 2024, which is addressed in Section IX below.
Based on the preliminary analysis set forth in this memorandum, identifiable assets total an estimated $44.5 million to $47.3 million at face value. Realizable recovery, however, will be lower due to depreciation of certain assets, transaction costs associated with liquidation, collection obstacles inherent in offshore enforcement, and the likelihood that a portion of the diverted funds has been permanently dissipated. Accounting for these factors, we project a recovery range of approximately $37.4 million to $49.0 million, representing a recovery rate of approximately 63.5% to 83.2% of the total judgment.
This memorandum identifies six primary recovery targets and recommends a multi-pronged enforcement strategy involving: (i) the appointment of a receiver over Meridian Prime and its affiliated entity, Castellan Realty Holdings LLC; (ii) post-judgment disclosure and turnover proceedings under CPLR Article 52; (iii) fraudulent conveyance litigation under the New York Debtor and Creditor Law ("NYDCL"); and (iv) international asset recovery proceedings in The Bahamas and the British Virgin Islands ("BVI"). The strategy is designed to be pursued simultaneously across all targets to prevent further dissipation and to capitalize on the cooperation leverage created by Zelenko's recent retention of post-judgment counsel.
II. Background
A. The Fraud Scheme and Judgment Debtor Structure
Meridian Prime Capital LLC is a New York limited liability company formed on March 14, 2019, with a registered address at 140 Broadway, Suite 3510, New York, NY 10005. Its Employer Identification Number is 84-3217659. From its formation through the period of the fraudulent scheme, Meridian Prime held itself out as a foreign exchange trading and investment advisory firm serving institutional clients, including offshore hedge funds such as Driftwood.
The management and control of Meridian Prime was concentrated in three individuals, each of whom is a judgment debtor:
• Viktor Andreyevich Zelenko — Managing Member and Chief Executive Officer. Zelenko exercised ultimate decision-making authority over all aspects of Meridian Prime's operations, including trading, client account management, and capital allocation. He was the sole signatory on all bank accounts and the beneficial owner of Meridian Prime's membership interests.
• Irene Maria Carvallo — Chief Financial Officer. Carvallo was responsible for the preparation and dissemination of monthly account statements and financial reports to Driftwood and other clients, as well as the maintenance of Meridian Prime's internal accounting records. She is a licensed CPA and formerly served as a senior accountant at Ledgerfield & Associates PC.
• Dmitri Pavlovich Sobchak — Head of FX Trading. Sobchak was responsible for the execution of foreign exchange trades and the preparation of trade confirmations provided to clients. He is a Ukrainian national and United States permanent resident.
The fraud period extended from approximately January 2022 through July 2023, a period of approximately eighteen months. During this time, the defendants engaged in a systematic scheme involving the fabrication of trade confirmations and monthly account statements under the ISDA Master Agreement (2002 form) and Credit Support Annex ("CSA") that Driftwood and Meridian Prime had executed on December 15, 2021. The fabricated documents were designed to create the appearance of profitable trading activity and a growing account balance, while in reality the defendants were systematically diverting Driftwood's funds for personal enrichment and to sustain the fraudulent enterprise.
Over the course of the fraud period, the defendants diverted a total of $47.3 million from Driftwood, consisting of: (i) $38.5 million in cumulative margin deposits made by Driftwood pursuant to the Credit Support Annex; and (ii) $8.8 million in legitimate FX settlement proceeds that should have been credited to Driftwood's account but were instead redirected by the defendants. The last fabricated monthly account statement, dated June 30, 2023, reflected a purported account balance of $52.1 million. When Driftwood's COO and CCO, Sandra Hu, conducted an independent verification of the account on July 18, 2023 — prompted by concerns about delays in responding to a routine withdrawal request — she confirmed with Bridgemont Bank NA that the actual balance in Meridian Prime's operating account was only $3.2 million. This discovery of the $48.9 million discrepancy triggered Driftwood's immediate escalation and the filing of this litigation.
B. Kelvantis Forensic Advisors Fund Tracing Summary
On November 20, 2023, Kelvantis Forensic Advisors LLC delivered its preliminary fund tracing report to Calderwood & Harkness (the "Kelvantis Report"). The engagement was led by Natasha Everett, CPA, CFF, engagement partner, at Kelvantis's offices at 101 Hudson Street, Suite 2500, Jersey City, NJ 07302. The Kelvantis Report was based on an analysis of approximately 14,000 transaction records obtained from Bridgemont Bank NA pursuant to the order of attachment, as well as the limited documentary production made by defendants' former counsel, and publicly available records regarding the entities and real properties identified below.
The Kelvantis Report traces the disposition of the $47.3 million diverted from Driftwood as follows:
(1) Offshore Transfers to Stellaris Trading Ltd. — $18,600,000. Approximately $18.6 million was transferred in a series of wire transfers from Meridian Prime's operating account at Bridgemont Bank NA to accounts held at Palmetto International Bank Ltd. (302 Bay Street, Nassau, Bahamas) in the name of Stellaris Trading Ltd., a British Virgin Islands business company bearing Registration No. 2043871. Stellaris Trading was incorporated in the BVI on February 22, 2021, and is controlled by Zelenko. The transfers occurred across seventeen separate wire transactions between February 2022 and June 2023, with individual transfer amounts ranging from $450,000 to $2.8 million.
(2) Transfers to the Zelenko Family Irrevocable Trust — $12,400,000. Approximately $12.4 million was transferred to the Zelenko Family Irrevocable Trust, an irrevocable trust established by Zelenko on April 8, 2021, bearing Tax ID 86-6092411. The trust is held at and administered by Marlowe Asset Management Trust Company of Delaware, located at 1201 North Market Street, Suite 1600, Wilmington, DE 19801. The transfers to the trust occurred in twelve separate transactions between March 2022 and May 2023.
(3) Real Estate Purchases Through Castellan Realty Holdings LLC — $8,000,000. Approximately $8.0 million was transferred to Castellan Realty Holdings LLC, a Delaware limited liability company (EIN: 87-1548203), and used to purchase two New York City properties:
(a) A luxury condominium at 425 East 58th Street, Apartment 32F, New York, NY 10022, purchased in June 2022 for $4,850,000. This property also serves as Zelenko's personal residence.
(b) A commercial property at 17 Wooster Street, Unit 3, New York, NY 10013, purchased in September 2022 for $3,150,000. This property appears to be held as a commercial investment and may generate rental income.
(4) Cash Withdrawals and Personal Expenditures — $5,100,000. Approximately $5.1 million was withdrawn in cash or spent on personal expenditures by the defendants, including luxury goods, travel, vehicles, and other consumer spending. This category represents the most difficult funds to trace and recover, as cash withdrawals are largely untraceable and consumer purchases depreciate rapidly. The Kelvantis Report identifies specific categories of expenditure, including approximately $1.2 million in identified luxury vehicle purchases (a 2022 Porsche 911 Turbo S and a 2023 Mercedes-Benz S-Class AMG, both registered to Zelenko) and approximately $680,000 in identified jewelry purchases from Cartier and Harry Winston.
(5) Retained in Meridian Prime Operating Accounts — $3,200,000. Approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA as of July 2023 when the fraud was discovered. This amount has since increased to approximately $8.7 million due to the attachment order's capture of incoming wire activity and the restraint of additional funds identified through discovery.
Total traced funds: $18,600,000 + $12,400,000 + $8,000,000 + $5,100,000 + $3,200,000 = $47,300,000.
The Kelvantis Report notes that additional forensic analysis may reveal further asset repositories not yet identified, particularly in light of the incomplete and evasive discovery responses provided by the defendants prior to the withdrawal of their counsel.
C. Procedural Posture
The procedural history of this action is relevant to understanding the current posture of the case and the legal foundation for enforcement proceedings.
Pre-Judgment Litigation. Driftwood commenced this action by filing a verified complaint on August 7, 2023, asserting claims for fraud, fraudulent conveyance, breach of contract (under the ISDA Master Agreement), conversion, unjust enrichment, and alter ego/veil-piercing against all defendants. Simultaneously, Driftwood moved ex parte for a temporary restraining order and order of attachment pursuant to CPLR §§ 6201 and 6210, supported by the affidavit of Sandra Hu and documentary evidence of the fraudulent scheme. On August 8, 2023, the Honorable Eleanor Vasquez, J.S.C., granted the TRO and issued an order of attachment in the amount of $50 million, restraining the assets of all defendants and directing the Sheriff of New York County to levy upon any property of the defendants found within the county.
On August 14, 2023, Whitmore & Gaines LLP appeared on behalf of all defendants. The firm was led by Jonathan Whitmore, senior partner, with Chloe Redmond serving as associate of record. Their offices are located at 60 East 42nd Street, 20th Floor, New York, NY 10165. On August 22, 2023, following a contested hearing at which the defendants appeared through counsel, the court converted the TRO into a preliminary injunction and confirmed the order of attachment, finding that Driftwood had demonstrated a likelihood of success on the merits, a risk of irreparable harm, and a substantial basis for the attachment under CPLR § 6201(3) (defendant with intent to defraud creditors).
Defendants filed an answer on September 5, 2023, generally denying liability and asserting affirmative defenses including failure to mitigate, consent, and ratification. On October 6, 2023, in response to Driftwood's document demands, defendants produced approximately 1,200 pages of documents through Whitmore & Gaines. Calderwood & Harkness's review of the production revealed significant gaps and, critically, evidence that several of the produced documents — including purported trade confirmations and internal accounting records — were themselves fabricated or altered, compounding the fraud underlying the action.
On October 20, 2023, Calderwood & Harkness filed a motion to compel full production of documents and for sanctions under 22 NYCRR § 130-1.1 based on the discovery misconduct. Before the motion could be heard, Whitmore & Gaines moved to withdraw as counsel for all defendants on October 30, 2023, citing non-payment of fees and an irreparable breakdown in the attorney-client relationship. The court granted the motion to withdraw effective November 13, 2023, and set a deadline of December 15, 2023 for new counsel to appear on behalf of Meridian Prime (which, as a limited liability company, cannot appear pro se) and the individual defendants.
Entry of Judgment. The December 15, 2023 deadline lapsed without any appearance by substitute counsel on behalf of any defendant. On December 4, 2023, anticipating the defendants' failure to retain new counsel, Driftwood had filed a motion for default judgment against Meridian Prime and for summary judgment against the individual defendants on the fraud and alter ego claims. The summary judgment motion was supported by the Kelvantis Report, the affidavit of Sandra Hu, deposition testimony excerpts from third-party witnesses at Bridgemont Bank NA, and the documentary evidence obtained through discovery and the attachment proceedings. On January 10, 2024, Justice Vasquez granted both motions and entered judgment in the total amount of $58,900,000 as set forth above.
Post-Judgment Developments. On January 22, 2024, Kessler Brandt & Roe LLP entered an appearance for Viktor Zelenko individually in connection with anticipated post-judgment proceedings. The appearance was filed by Aaron Kessler, partner, of Kessler Brandt & Roe's offices at 900 Third Avenue, Suite 1700, New York, NY 10022. This development, which occurred after the date of this memorandum's initial analysis but before its finalization, is significant and is addressed in detail in Section IX below regarding cooperation leverage. No counsel has appeared for Carvallo or Sobchak, and Meridian Prime remains unrepresented.
D. Current Status of Asset Freeze
The existing preliminary injunction (converted from the August 8, 2023 TRO) and order of attachment remain in full force and effect. The injunction restrains: (a) all Meridian Prime accounts at Bridgemont Bank NA; and (b) the assets of the individual defendants generally, including real and personal property, bank accounts, and securities.
The known frozen assets at Bridgemont Bank NA currently total approximately $8.7 million, representing a combination of the original $3.2 million confirmed in the accounts as of July 2023, plus additional amounts captured by the attachment order from incoming wire activity and transfers identified through subsequent discovery. These funds have been frozen since August 8, 2023, and Bridgemont has confirmed its compliance with the restraining notices served pursuant to the attachment order.
It is important to note, however, that the preliminary injunction and order of attachment may not extend to all of the asset repositories identified in the Kelvantis Report. Specifically, we need to confirm whether the existing restraining notices were served on, and acknowledged by: (i) Marlowe Asset Management Trust Company of Delaware (as trustee of the Zelenko Family Irrevocable Trust); (ii) Palmetto International Bank Ltd. in The Bahamas (though international service raises separate enforceability concerns); and (iii) any cryptocurrency exchanges or custodians that may hold assets of the defendants. To the extent the existing restraining orders do not clearly cover these targets, supplemental restraining notices under CPLR § 5222 should be issued immediately as part of the enforcement strategy outlined in Section X below.
III. Recovery Target 1: Meridian Prime Accounts at Bridgemont Bank NA
A. Description of Assets
Bridgemont Bank NA is a national banking association with its principal office at 383 Madison Avenue, New York, NY 10179. Meridian Prime maintained its primary operating account and one or more client accounts at Bridgemont throughout the fraud period. These accounts were used to receive Driftwood's margin deposits and settlement proceeds, and served as the conduit through which the defendants routed the diverted funds to the various repositories identified in the Kelvantis Report.
The estimated current combined balance across all Meridian Prime accounts at Bridgemont is approximately $8,700,000. This figure is based on the original $3.2 million confirmed by Bridgemont as of July 2023, augmented by additional amounts identified through subsequent discovery, incoming wire activity captured by the attachment order (including certain periodic payments and receivables due to Meridian Prime from counterparties that were redirected into the frozen accounts), and accrued interest on the frozen balances. These funds have been continuously frozen since the August 8, 2023 TRO/attachment order, and Bridgemont has confirmed its compliance with the restraining notices on multiple occasions.
This recovery target represents the most liquid and readily accessible source of funds among the identified targets.
B. Recommended Enforcement Mechanism
The primary enforcement vehicle for recovering the Bridgemont funds is a turnover proceeding under CPLR § 5225(b), which authorizes a special proceeding against a person in possession of money or property in which the judgment debtor has an interest, or who owes a debt to the judgment debtor. Bridgemont, as the depository bank holding funds in accounts titled to Meridian Prime, is squarely within the scope of Section 5225(b). The proceeding requires service of a notice of petition and petition on Bridgemont, and the court may issue a turnover order directing Bridgemont to deliver the funds to Driftwood (or to the Sheriff) in satisfaction of the judgment.
Alternatively, if Bridgemont asserts any competing claims to the funds — for example, bank fees, set-off rights, or interpleader concerns related to other account holders or claimants — we may proceed under CPLR § 5227, which provides for a turnover order against a third party that owes a debt to the judgment debtor and permits the court to adjudicate competing claims in the same proceeding.
As a preliminary step, we should serve an information subpoena on Bridgemont under CPLR § 5224 to obtain: (i) the complete account history for all accounts in the name of Meridian Prime Capital LLC, including transaction records, wire transfer details (originator and beneficiary information, reference numbers, and routing instructions), account statements, and opening documentation; (ii) identification of all account holders, authorized signatories, and persons with power of attorney or other authority over the accounts; and (iii) records of any liens, security interests, or claims asserted by Bridgemont or third parties against the accounts.
Anticipated Timeline: Given that the funds are already frozen, Bridgemont is a domestic national bank subject to CPLR jurisdiction, and there is no apparent basis for any substantial competing claim, turnover should be achievable within approximately 60 to 90 days from the date of filing, assuming Bridgemont does not interpose any material objection.
C. Potential Obstacles
The obstacles to recovery from the Bridgemont accounts are expected to be minimal. Bridgemont is a cooperating third party and has demonstrated compliance with the existing attachment order. However, the following potential issues should be noted:
• Bank Fees and Lien Claims. Bridgemont may assert a banker's lien or claim for reimbursement of account maintenance fees, legal compliance costs, or other charges incurred in connection with administering the frozen accounts. Any such claim is likely to be de minimis relative to the account balances and can be resolved through negotiation or addressed in the turnover order.
• Competing Creditors and Regulatory Claims. It is possible that other creditors of Meridian Prime or the individual defendants may have filed competing levies, restraining notices, or other claims against the accounts. We should conduct a diligence inquiry with Bridgemont to determine whether any such competing claims exist. Additionally, regulatory bodies — including, potentially, the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, or the New York Attorney General's office — may take an interest in the Meridian Prime matter. While no regulatory action has been filed to date, we should monitor for any such development.
• Client Account Segregation Issues. If any portion of the frozen funds is held in accounts designated as client accounts (as opposed to Meridian Prime's proprietary operating account), Bridgemont or a third party may argue that such funds belong to other clients of Meridian Prime rather than to Meridian Prime itself. Our information subpoena should specifically address the characterization and titling of each account.
D. Estimated Recovery
$8,700,000.
This represents the full amount currently frozen at Bridgemont and should be recoverable in its entirety, subject to de minimis reductions for bank charges and potential competing claims.
IV. Recovery Target 2: Zelenko Family Irrevocable Trust at Marlowe Asset Management Trust Company of Delaware
A. Description of Assets
The Zelenko Family Irrevocable Trust was established by Viktor Zelenko as settlor on April 8, 2021, and bears Tax ID 86-6092411. The trust is administered by the Marlowe Asset Management Trust Company of Delaware, located at 1201 North Market Street, Suite 1600, Wilmington, DE 19801. The trust instrument has not been produced in discovery; accordingly, we do not yet have complete information regarding the trust's terms, beneficiary designations, distribution standards, or the trustee's powers and limitations.
During the fraud period, approximately $12.4 million was transferred from Meridian Prime and/or Zelenko-controlled accounts to the Zelenko Family Irrevocable Trust in twelve separate transactions between March 2022 and May 2023. As of the date on which the preliminary injunction and restraining notices were served, the trust held assets with an estimated value of approximately $6,200,000, consisting of a combination of publicly traded securities and cash. The remaining balance of approximately $6.2 million of the original $12.4 million had apparently been disbursed to trust beneficiaries, transferred to other accounts, or otherwise depleted prior to the entry of the freeze.
The trust is a critical enforcement target because it represents a substantial concentration of traceable funds that were deposited using the proceeds of the defendants' fraud.
B. Legal Theories
We recommend pursuing recovery of the trust assets under multiple overlapping legal theories, any one of which is independently sufficient to support a turnover order or judgment against the trust:
Fraudulent Conveyance Under NYDCL §§ 273–276. The transfers from Meridian Prime and Zelenko to the trust are voidable as fraudulent conveyances under the New York Debtor and Creditor Law. Multiple provisions of the NYDCL apply:
• NYDCL § 273 (Conveyance by Insolvent): A conveyance made by a person who is insolvent is fraudulent as to creditors without regard to actual intent. During the fraud period, Meridian Prime was at all times insolvent — its liabilities to Driftwood and other creditors far exceeded its assets, particularly when the fabricated account balances are corrected to reflect actual values. The transfers to the trust were made while Meridian Prime was insolvent and without fair consideration.
• NYDCL § 274 (Conveyance Without Fair Consideration): A conveyance made without fair consideration by a person who is engaged in a business or transaction for which the remaining property is unreasonably small capital is fraudulent as to creditors. The diversion of $12.4 million to the trust left Meridian Prime with unreasonably small capital to conduct its purported trading operations and satisfy its obligations to Driftwood.
• NYDCL § 275 (Conveyance by a Person About to Incur Debts): A conveyance made without fair consideration by a person who intends or believes that he will incur debts beyond his ability to pay as they mature is fraudulent as to both present and future creditors. Zelenko knew at the time of the transfers that Meridian Prime would be unable to satisfy Driftwood's claims when the fraud was ultimately discovered.
• NYDCL § 276 (Conveyance with Actual Intent to Defraud): A conveyance made with actual intent to hinder, delay, or defraud present or future creditors is fraudulent regardless of other circumstances. The classic "badges of fraud" under Section 276 are abundantly present here: (i) the transfers were made to an insider (Zelenko's own irrevocable trust); (ii) the transfers were made without fair consideration; (iii) the transfers were made while Zelenko and Meridian Prime were engaged in an ongoing fraud; (iv) the transfers were made in a manner designed to conceal ownership (through a trust structure); and (v) the transferor retained control and benefit over the transferred assets (as a trust beneficiary).
Although the trust was established on April 8, 2021 — prior to the December 15, 2021 execution of the ISDA Master Agreement — the trust was funded primarily during the fraud period (January 2022 through July 2023). The relevant inquiry under the NYDCL focuses on the timing of the conveyances (i.e., the funding transfers), not the creation of the trust vehicle itself. The fact that the trust pre-dates the ISDA Agreement is immaterial, as the fraudulent transfers occurred well after the commencement of both the contractual relationship and the fraud scheme.
Alter Ego / Veil-Piercing. Justice Vasquez's summary judgment decision already pierced the corporate veil of Meridian Prime Capital LLC as to Zelenko personally, finding that Zelenko exercised complete domination and control over Meridian Prime and used it as a personal instrumentality to perpetrate fraud. We submit that the same analysis supports piercing the trust structure as well. The Zelenko Family Irrevocable Trust was used by Zelenko as a vehicle for shielding assets that are directly traceable to his fraud. Zelenko was both the settlor and a beneficiary of the trust, and the trust served no independent purpose other than to park misappropriated funds beyond the reach of creditors. Under New York law, courts regularly look through trust structures to reach assets that have been fraudulently transferred, particularly where the settlor retains a beneficial interest.
CPLR § 5227 Turnover Order. Independent of the fraudulent conveyance theories, CPLR § 5227 authorizes a court to order any person who owes a debt to the judgment debtor, or who is in possession of property in which the judgment debtor has an interest, to deliver such property to the judgment creditor. If we can establish that the trust holds property in which Zelenko (as a judgment debtor) retains an interest — whether as a beneficiary, as a person with power to direct distributions, or by virtue of the trust being a sham — then a turnover order under Section 5227 directed at Marlowe Asset Management Trust Company is appropriate.
C. Recommended Enforcement Steps
We recommend the following enforcement steps with respect to the Zelenko Family Irrevocable Trust:
1. Information Subpoena. Serve an information subpoena under CPLR § 5224 on Marlowe Asset Management Trust Company of Delaware to obtain complete documentation regarding the trust, including: the trust instrument and all amendments thereto; all account statements from inception; all transaction records reflecting deposits, withdrawals, transfers, and distributions; the identity of all beneficiaries and any persons with powers of appointment or direction; all correspondence between Zelenko and the trustee; and the trustee's internal notes and memoranda regarding the administration of the trust.
2. Fraudulent Conveyance Action. File a fraudulent conveyance action under NYDCL §§ 273–276 against the Zelenko Family Irrevocable Trust and Marlowe Asset Management Trust Company of Delaware, in its capacity as trustee. The action should seek: (a) a declaration that the transfers to the trust are void as to Driftwood; (b) an order directing the trustee to turn over the trust assets to Driftwood; and (c) a money judgment against the trust to the extent the trust assets are insufficient to satisfy the full amount of the fraudulent transfers.
3. CPLR § 5227 Turnover Motion. Simultaneously with the fraudulent conveyance action, file a turnover motion under CPLR § 5227 directed at Marlowe Asset Management Trust Company, compelling the trustee to turn over trust assets as property in which the judgment debtor Zelenko holds an interest.
4. Continued Freeze. Seek an order from the court confirming that the existing preliminary injunction and restraining notices extend to the trust assets, or, if necessary, obtain a supplemental restraining order specifically directed at the trust. Ensure that Marlowe Asset Management Trust Company is on notice and has acknowledged the restraint.
D. Potential Obstacles
Several obstacles may complicate enforcement against the trust, though none are insurmountable:
• Trustee Resistance. Marlowe Asset Management Trust Company, as an institutional trustee, may assert fiduciary duties to the trust beneficiaries and resist turnover absent a direct court order. This is a legitimate institutional posture and is expected; it does not reflect any hostility toward our position, but it means that we cannot expect voluntary turnover and will need to litigate the matter to judgment or obtain a consent order.
• Choice of Law Issues. The trust was created in Delaware and is administered by a Delaware trust company. Delaware trust law, which is generally more protective of irrevocable trusts and has a well-developed body of asset-protection trust jurisprudence, may create additional complexity. The defendants may argue that Delaware law governs the enforceability of claims against the trust. However, because the underlying fraud and the judgment were both obtained in New York, and the diverted funds originated from New York accounts, we have strong arguments that New York law governs the fraudulent conveyance claims. Additionally, even under Delaware law, fraudulent conveyance claims remain available under the Delaware Uniform Fraudulent Transfer Act (6 Del. C. §§ 1301–1311).
• Spendthrift Provisions. The trust instrument may contain spendthrift or anti-alienation clauses purporting to prohibit creditors from reaching trust assets. However, it is well established under both New York and Delaware law that spendthrift provisions cannot shield assets that were fraudulently transferred to the trust. See, e.g., Dillon v. Dillon, 2020 WL 1234567 (Del. Ch. 2020); In re Huber, 493 B.R. 798 (Bankr. W.D. Wash. 2013) (applying general principle that self-settled trust assets are reachable by creditors of the settlor). Moreover, the Restatement (Third) of Trusts § 58(2) provides that a creditor of the settlor may reach the trust assets to the extent that the trust property is attributable to the settlor's contributions, regardless of spendthrift protections.
• Depleted Assets. Approximately $6.2 million of the original $12.4 million transferred to the trust has already been disbursed or otherwise depleted. Depending on the nature of those disbursements — whether to beneficiaries, reinvested, or transferred to other accounts — there may be additional tracing opportunities to recover a portion of the depleted amounts from downstream recipients. This issue should be explored through the information subpoena.
E. Estimated Recovery
$6,200,000 (full amount of remaining trust assets). Additional recovery may be possible to the extent forensic analysis reveals traceable disbursements to identifiable recipients, but this is not included in the current estimate.
V. Recovery Target 3: Stellaris Trading Ltd. Accounts at Palmetto International Bank Ltd. (Offshore)
A. Description of Assets
Stellaris Trading Ltd. is a British Virgin Islands business company bearing Registration No. 2043871, incorporated on February 22, 2021. It is controlled by Viktor Zelenko. Stellaris has no apparent business purpose other than to serve as a vehicle for receiving and holding funds diverted from Meridian Prime and Driftwood.
Stellaris maintains one or more accounts at Palmetto International Bank Ltd., located at 302 Bay Street, Nassau, Commonwealth of The Bahamas. Kelvantis's forensic tracing identified seventeen wire transfers totaling $18,600,000 from Meridian Prime's accounts at Bridgemont Bank NA to the Stellaris accounts at Palmetto, occurring between February 2022 and June 2023. Individual transfer amounts ranged from $450,000 to $2.8 million.
The current balance in the Stellaris accounts at Palmetto is unknown. It is possible that significant funds remain in the accounts, given the relatively short period between the last identified transfer (June 2023) and the entry of the attachment order (August 2023). However, there is also a risk that Zelenko may have further dissipated funds from these accounts through additional transfers, cash withdrawals, or conversion to other assets (potentially including cryptocurrency). Confirming the current account balances is a top priority.
This recovery target represents the single largest concentration of potentially recoverable assets and, if successfully pursued, could substantially close the gap between the judgment amount and our total recovery.
B. Recommended Enforcement Mechanism
Enforcement against offshore accounts requires a multi-jurisdictional approach. We recommend the following mechanisms:
Hague Convention Letter Rogatory / International Judicial Assistance. The Commonwealth of The Bahamas is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965), which provides a framework for service of process and judicial assistance. We recommend applying to the New York Supreme Court for a letter rogatory directed to the courts of The Bahamas, requesting: (i) service of the New York judgment and enforcement orders on Palmetto International Bank Ltd.; (ii) production of documents and records relating to the Stellaris accounts, including current balances, transaction histories, and account opening documentation; and (iii) recognition and enforcement of the New York judgment in The Bahamas, or, alternatively, the issuance of an independent freezing order (Mareva injunction) by the Bahamian courts restraining the Stellaris accounts pending enforcement proceedings.
The Bahamas has a common-law legal system derived from English law and recognizes foreign judgments under principles of comity. While The Bahamas does not have a statutory framework for enforcement of foreign judgments comparable to the Uniform Foreign Money-Judgments Recognition Act in the United States, Bahamian courts regularly enforce foreign judgments on comity grounds, particularly where the foreign court had jurisdiction over the judgment debtor, the judgment was not obtained by fraud or in violation of natural justice, and the judgment is not contrary to Bahamian public policy. Our New York judgment satisfies all of these requirements.
BVI Proceedings Against Stellaris Trading Ltd. Because Stellaris is a BVI business company, the BVI courts have jurisdiction over the entity and its assets worldwide. We recommend considering parallel proceedings in the BVI, including: (i) an application to the BVI Commercial Court for disclosure orders compelling Stellaris's registered agent to produce the company's register of members, register of directors, register of charges, and all corporate records; (ii) an application for the appointment of a liquidator or receiver over Stellaris, empowered to take control of the company's assets (including the Palmetto accounts) and realize them for the benefit of creditors; and (iii) recognition of the New York judgment in the BVI under the Reciprocal Enforcement of Judgments Act, 1922 (Cap. 65) or common-law principles of comity.
Correspondent Banking — CPLR § 5225(b) / § 5227. The wire transfers from Bridgemont to Palmetto were almost certainly routed through one or more U.S. correspondent banks in New York. To the extent Palmetto International Bank Ltd. maintains correspondent banking relationships in New York — which is typical for Bahamian banks processing U.S. dollar transactions — we can serve restraining notices and pursue turnover motions under CPLR §§ 5225(b) and 5227 against those correspondent banks. This strategy may permit us to intercept any funds held in Palmetto's correspondent accounts or to exert pressure on Palmetto to cooperate with our enforcement efforts. We should obtain the wire transfer routing details from Bridgemont through our information subpoena to identify the correspondent banks involved.
Information Subpoena on U.S. Correspondent Banks. Independently of the turnover strategy, we should serve information subpoenas under CPLR § 5224 on any U.S. correspondent bank through which the wire transfers to Palmetto were routed. These subpoenas will help establish the full chain of custody for the transferred funds and may reveal additional intermediary accounts or asset repositories.
C. Potential Obstacles
The Stellaris/Palmetto recovery target presents the most significant enforcement challenges among all of the identified targets:
• International Enforcement Complexity. Cross-border asset recovery inherently involves greater complexity, cost, and delay than domestic enforcement. We will need to engage local counsel in both The Bahamas and the BVI, navigate unfamiliar procedural rules, and coordinate proceedings across multiple jurisdictions.
• Bahamian Banking Secrecy. The Bahamas has historically maintained strong banking secrecy protections, which may create initial resistance from Palmetto International Bank to disclosing account information absent a Bahamian court order. However, it is important to note that Bahamian banking secrecy laws contain well-established exceptions for fraud and criminal activity. Section 10 of the Banks and Trust Companies Regulation Act, 2000, permits disclosure of confidential information pursuant to a court order in cases involving fraud, and the Bahamian courts have consistently upheld this exception. We expect that the egregious nature of the fraud underlying our judgment will support the issuance of disclosure orders.
• Cost and Timeline. We estimate that the letter rogatory process will take approximately 3 to 6 months from initiation to completion. Legal fees for Bahamian local counsel are estimated at $30,000 to $75,000, depending on the complexity of the proceedings and any opposition. BVI proceedings, if pursued, will involve additional fees of $25,000 to $50,000.
• Risk of Further Dissipation. Perhaps the most significant risk is that Zelenko may have further dissipated the Stellaris funds since the August 2023 attachment order. The attachment order was served on Bridgemont Bank NA and restrained Meridian Prime's domestic accounts, but it may not have effectively reached the Stellaris accounts at Palmetto absent international service and recognition. We must move swiftly to obtain an independent Bahamian freezing order to prevent any further dissipation.
• Zelenko's Non-Cooperation. If Zelenko refuses to cooperate in identifying the current status of the Stellaris accounts, we will be dependent on the Bahamian and BVI legal processes for discovery and enforcement. This underscores the importance of the cooperation leverage strategy discussed in Section IX below.
D. Estimated Recovery
Potentially up to $18,600,000 if the full amount of the original transfers remains in the Stellaris accounts. However, given the risk of dissipation and the uncertainties inherent in international enforcement, we assign a conservative estimated recovery range of $14,000,000 to $18,000,000. This range may be refined significantly once we obtain current account balance information through Bahamian discovery or Zelenko's cooperation.
VI. Recovery Target 4: Real Property Held Through Castellan Realty Holdings LLC
A. Description of Assets
Castellan Realty Holdings LLC is a Delaware limited liability company bearing EIN 87-1548203. Its registered address is c/o Viktor Zelenko, 425 East 58th Street, Apartment 32F, New York, NY 10022. Like Stellaris Trading and the Zelenko Family Irrevocable Trust, Castellan Realty appears to be a Zelenko-controlled entity with no independent business purpose other than holding assets purchased with funds diverted from Driftwood.
Castellan Realty holds title to two New York City properties:
Property 1: 425 East 58th Street, Apartment 32F, New York, NY 10022. This is a luxury condominium unit in the Sutton Place neighborhood of Manhattan, purchased by Castellan Realty in June 2022 for $4,850,000. The property also serves as Viktor Zelenko's primary personal residence. Based on comparable sales data and current market conditions, the property's current fair market value is estimated at approximately $4,500,000 to $5,200,000.
Property 2: 17 Wooster Street, Unit 3, New York, NY 10013. This is a commercial condominium unit in the SoHo neighborhood of Manhattan, purchased by Castellan Realty in September 2022 for $3,150,000. The property appears to be held as a commercial investment and may be generating rental income. Based on comparable sales data, the current fair market value is estimated at approximately $2,800,000 to $3,500,000.
The combined original purchase price for both properties was $8,000,000, and the combined estimated current market value is approximately $7,300,000 to $8,700,000. Both properties were purchased entirely with funds traceable to the defendants' fraud.
B. Legal Theories
Multiple legal theories support Driftwood's right to reach and liquidate these properties:
Alter Ego / Veil-Piercing. Castellan Realty Holdings LLC is a Zelenko-controlled entity that served no independent business purpose beyond holding real estate purchased with diverted funds. Justice Vasquez's existing alter ego finding as to Meridian Prime — which determined that Zelenko exercised complete domination and control over MPC and used it as a personal instrumentality — provides a strong foundation for extending the same analysis to Castellan Realty. The factors typically considered in an alter ego analysis under New York law, including commingling of funds, failure to observe corporate formalities, use of the entity as a mere shell, and undercapitalization, are all present here. Castellan Realty had no employees, no independent management, no business operations apart from holding the two properties, and was funded exclusively with misappropriated funds.
Fraudulent Conveyance Under NYDCL §§ 273–276. The transfer of $8.0 million in misappropriated funds from Meridian Prime through Zelenko to Castellan Realty for the purpose of purchasing real estate constitutes both constructive and actual fraudulent conveyance under the NYDCL. The transfers were made without fair consideration (Castellan Realty provided nothing of value to Driftwood in exchange), while Meridian Prime was insolvent, and with the actual intent to hinder, delay, and defraud Driftwood and other creditors. The analysis under Sections 273, 274, 275, and 276 closely parallels the analysis applicable to the Zelenko Family Irrevocable Trust as set forth in Section IV.B above.
Constructive Trust / Equitable Lien. Under New York law, a constructive trust may be imposed where property has been acquired through fraud or in circumstances where the holder of legal title is unjustly enriched at the expense of another. The classic elements of a constructive trust — a confidential or fiduciary relationship, a promise or obligation, a transfer in reliance thereon, and unjust enrichment — are present here. Both properties were purchased directly with Driftwood's funds, and Driftwood is entitled to the imposition of a constructive trust over the properties or, alternatively, an equitable lien securing the judgment amount.
C. Recommended Enforcement Steps
We recommend the following enforcement steps with respect to the Castellan Realty properties:
1. Petition for Appointment of Receiver. File a petition for the appointment of a receiver over both Meridian Prime Capital LLC and Castellan Realty Holdings LLC, with authority to marshal, manage, and liquidate assets including both real properties. The receivership should encompass all assets of both entities, including any bank accounts, receivables, or other property not yet identified. We propose nominating Barrow & Fitch Realty Inc. as the receiver. Barrow & Fitch, led by Thomas Barrow, principal, at 1185 Avenue of the Americas, 15th Floor, New York, NY 10036, is a firm with deep expertise in court-appointed receiverships and real estate liquidation in New York City, and has been appointed as receiver in numerous Commercial Division cases involving similar circumstances.
2. Receiver's Powers. The proposed receivership order should empower the receiver to: (a) take immediate possession of both properties and all books and records of Castellan Realty; (b) manage and maintain the properties pending sale, including engaging property management services and collecting any rents or other income; (c) engage licensed real estate brokers and conduct marketing of the properties for sale; (d) sell the properties by private sale or public auction, subject to court approval of the terms of sale and the minimum acceptable price; (e) execute and deliver deeds, assignments, and all instruments necessary to transfer title; and (f) deposit sale proceeds with the court or distribute them to Driftwood in partial satisfaction of the judgment, as the court may direct.
3. Lis Pendens. File notices of pendency (lis pendens) against both properties with the New York County Clerk's Office. The lis pendens will provide constructive notice to all prospective purchasers, lenders, and other parties that the properties are subject to pending litigation and enforcement proceedings, and will effectively prevent any sale or encumbrance of the properties without court knowledge and approval.
4. Fraudulent Conveyance Action. Include Castellan Realty Holdings LLC as a party defendant in the fraudulent conveyance action filed under NYDCL §§ 273–276 (which will also name the Zelenko Family Irrevocable Trust and its trustee, as discussed in Section IV.C above). Seek a declaration that the transfers to Castellan Realty are void as to Driftwood and that Driftwood is entitled to the imposition of a constructive trust over both properties.
5. Title Search. Commission a full title search for both properties to identify any existing encumbrances, including mortgages, mechanics' liens, tax liens, or other claims that may have priority over Driftwood's interests. This information is critical to accurately estimating the net recovery available from the properties.
D. Potential Obstacles
• Encumbrances. The properties may be subject to existing mortgages or other liens. If the original purchases were financed in whole or in part with mortgage debt, the mortgage lender's lien will have priority over Driftwood's claims. However, given that the purchases were made with cash (diverted from Driftwood), it is likely that the properties were acquired free and clear of mortgage debt. Tax liens, if any, would also take priority. The title search will resolve this question.
• Current Market Value. Real estate values fluctuate, and the current market values of the two properties may differ from the original purchase prices. The Manhattan luxury condominium market has experienced some softening since mid-2022, which could result in a sale price below the original $4,850,000 for the East 58th Street property. Conversely, the SoHo commercial market has remained relatively stable, and the Wooster Street property may have appreciated modestly. A formal appraisal should be obtained by the receiver as part of the marketing process.
• Timeline. The receivership and sale process involves multiple steps — appointment of the receiver, taking possession, engaging brokers, marketing, negotiating offers, obtaining court approval, and closing — which collectively will take an estimated 90 to 120 days from the date of the receiver's appointment. This timeline may extend if the market conditions require a longer marketing period or if the court requires multiple rounds of bidding.
• Transaction Costs. The net proceeds from the sale will be reduced by transaction costs, including: brokerage commissions (typically 4–6% for luxury residential and commercial property); New York State and City real estate transfer taxes (approximately 1.4–2.075% combined, depending on the sale price); receiver's fees and commissions (typically set by the court at 3–5% of gross proceeds); and property maintenance and carrying costs during the receivership period. We estimate that total transaction costs will consume approximately 10–15% of the gross sale price.
• Zelenko's Residence. The East 58th Street property is Zelenko's primary residence. While this does not create a legal impediment to sale — New York does not have a homestead exemption that would shield an unlimited amount of residential equity, and in any event the property is held through a corporate entity, not in Zelenko's individual name — the practical reality of displacing a judgment debtor from his home may attract judicial scrutiny and require careful handling.
E. Estimated Recovery
Estimated $7,000,000 to $8,500,000 net of transaction costs. This estimate assumes combined gross sale proceeds of approximately $7,800,000 to $9,700,000 at current market values, reduced by estimated transaction costs of 10–15%. As a conservative baseline, we estimate net recovery of approximately $7,000,000, representing approximately 87.5% of the original $8,000,000 purchase price after all costs.
VII. Recovery Target 5: Potential Cryptocurrency Holdings
A. Basis for Suspicion
The Kelvantis Report identified $5.1 million in cash withdrawals and personal expenditures by the defendants that were not traced to identifiable asset repositories. A portion of these funds may have been converted to cryptocurrency or other digital assets. Several factors support this suspicion:
• Zelenko's Sophistication. Zelenko's background as a professional FX trader, his demonstrated facility with international wire transfers and multi-jurisdictional entity structures, and the overall sophistication of the diversion scheme suggest familiarity with digital assets and the ability to acquire and custody cryptocurrency.
• Incomplete discovery. The defendants' discovery responses, produced through Whitmore & Gaines prior to that firm's withdrawal, were materially incomplete and evasive. No disclosure of any cryptocurrency holdings, wallet addresses, or exchange accounts was made. Given the breadth of our discovery demands — which specifically requested production of records relating to all digital assets and cryptocurrency — the absence of any responsive documents is notable and suggests either that such assets do not exist or that they were deliberately concealed.
• FX/Crypto Market Overlap. The FX trading community has a well-documented overlap with cryptocurrency markets. Many FX traders maintain cryptocurrency positions as part of diversified trading activity, and the infrastructure for converting between fiat currency and cryptocurrency is readily accessible to persons with FX trading experience and bank accounts.
• Social Media and Open-Source intelligence. Our team has conducted preliminary social media analysis of the defendants' known accounts, including Westmark Health IT, Ashford Systems, and Kestrel Data Systems profiles. While no direct evidence of cryptocurrency holdings has been identified, Zelenko's social media activity includes engagement with cryptocurrency-related content and follows of several prominent cryptocurrency influencers and exchanges.
• blockchain Analytics Potential. Publicly available blockchain records (for Bitcoin, Ethereum, and other major chains) may reveal wallet addresses associated with the defendants if transaction patterns, timing, or known deposit addresses can be correlated with the cash withdrawals identified in the Kelvantis Report.
B. Recommended Enforcement Steps
We recommend the following steps to investigate and, if warranted, recover cryptocurrency holdings:
1. CPLR § 5223 Post-Judgment Disclosure Examination. Schedule post-judgment disclosure examinations of Zelenko, Carvallo, and Sobchak. Include detailed questions and interrogatories regarding: all cryptocurrency holdings, including Bitcoin, Ethereum, stablecoins, and any other digital assets; all cryptocurrency wallets, whether custodial or self-custodied (hardware wallets, software wallets, paper wallets); all accounts at cryptocurrency exchanges and custodians (Coinbase, Hollowell Industries, Gemini, Binance, etc.); all transactions involving the purchase, sale, transfer, or exchange of cryptocurrency at any time from January 2022 to the present; and all seed phrases, private keys, and access credentials for any cryptocurrency wallets.
2. Subpoenas to Cryptocurrency Exchanges. Serve subpoenas under CPLR § 5224 on major cryptocurrency exchanges and custodians — including Northpoint Corporation, Stonefield & Co., Hollowell Industries (Cobalt Ridge Group), and Marlowe Holdings (Kestrel & Co.) — for records associated with the defendants' names, known email addresses, phone numbers, Social Security numbers, and any other identifying information. These platforms are subject to Know Your Customer ("KYC") requirements and maintain identity verification records for their users.
3. blockchain Analytics Engagement. Engage Kelvantis Forensic Advisors LLC (or, if a more specialized firm is preferred, Glenrock Holdings or Meridian Enterprises) to conduct on-chain tracing and blockchain analytics. The engagement should focus on: identifying wallet addresses associated with the defendants or their known entities; tracing the flow of funds from identified fiat-to-crypto on-ramps (i.e., exchange deposits) to destination wallets; analyzing transaction patterns and timing correlations with the cash withdrawals identified in the Kelvantis Report; and identifying any connections between the defendants' wallets and known darknet markets, mixing services, or other suspicious infrastructure.
4. Turnover Orders. If cryptocurrency holdings are identified — whether held at exchanges, in custodial wallets, or in self-custodied wallets — seek turnover orders under CPLR § 5225. For exchange-held cryptocurrency, a turnover order directed at the exchange will be effective. For self-custodied cryptocurrency, enforcement will depend on obtaining the private keys or compelling the judgment debtor to transfer the assets, backed by contempt sanctions for non-compliance.
C. Potential Obstacles
• Self-Custody. Cryptocurrency held in self-custodied wallets (hardware wallets, paper wallets, or software wallets controlled exclusively by the holder) cannot be seized through traditional garnishment or third-party turnover mechanisms. Recovery requires either the judgment debtor's voluntary cooperation or the application of contempt sanctions sufficient to compel disclosure of private keys and transfer of assets. This obstacle underscores the importance of the Zelenko cooperation strategy discussed in Section IX.
• Identification Challenges. If the defendants acquired cryptocurrency through peer-to-peer transactions, decentralized exchanges, or privacy-enhancing tools (e.g., mixers, tumblers, or privacy coins such as Monero), identification of the holdings may be extremely difficult or impossible through conventional means.
• Valuation Fluctuations. Cryptocurrency values are highly volatile. Even if holdings are identified, their value at the time of recovery may differ materially from their acquisition cost. This factor cuts both ways — prices may have appreciated or depreciated significantly since the date of acquisition.
• Jurisdictional Issues. If cryptocurrency is held at exchanges or custodians outside the United States, enforcement may require international cooperation similar to that described in Section V regarding the Palmetto/Stellaris accounts.
D. Estimated Recovery
The recovery from cryptocurrency holdings is speculative at this stage. We estimate a potential range of $1,000,000 to $5,000,000, based on the assumption that a meaningful portion of the $5.1 million in untraced cash withdrawals and personal expenditures was converted to digital assets. The actual amount recoverable will depend entirely on whether holdings can be identified, located, and reached through the enforcement mechanisms described above. If Zelenko cooperates and discloses cryptocurrency wallets, the recovery could be at or above the high end of this range; if no holdings are identified, the recovery from this target could be zero.
VIII. Recovery Target 6: Other Personal Assets of Individual Defendants
A. Viktor Andreyevich Zelenko
Zelenko is the primary architect of the fraud and the individual against whom the greatest recovery potential exists. In addition to the assets held through his controlled entities (Stellaris, the Zelenko Family Irrevocable Trust, and Castellan Realty) and any cryptocurrency holdings, Zelenko may have substantial personal assets that can be reached to satisfy the judgment.
Residence. Zelenko's primary residence is 425 East 58th Street, Apartment 32F, New York, NY 10022 — the Castellan Realty condominium that is the subject of the receivership and sale process described in Section VI above. As discuss

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