1024-00003 · Driftwood Absolute Return Fund Ltd · Pleadings

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK — COMMERCIAL DIVISION

DRIFTWOOD ABSOLUTE RETURN FUND LTD.,

Plaintiff,

— against —

MERIDIAN PRIME CAPITAL LLC, VIKTOR ANDREYEVICH ZELENKO, IRENE MARIA CARVALLO, and DMITRI PAVLOVICH SOBCHAK,

Defendants.

Index No. 654321/2023

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S EX PARTE APPLICATION FOR A TEMPORARY RESTRAINING ORDER AND ORDER OF ATTACHMENT

CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Priya Anand, Partner Hannah Brinkley, Senior Associate

Attorneys for Plaintiff Driftwood Absolute Return Fund Ltd.

Matter No. 1024-00003

August 7, 2023

PRELIMINARY STATEMENT

Plaintiff Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"), a Cayman Islands–domiciled hedge fund managed by Driftwood Capital Management LP, respectfully submits this memorandum of law in support of its ex parte application for: (i) a temporary restraining order pursuant to Section 6301 of the New York Civil Practice Law and Rules ("CPLR") freezing all accounts held by defendant Meridian Prime Capital LLC ("Meridian Prime") at Bridgemont Bank NA, located at 383 Madison Avenue, New York, New York 10179, and restraining the individual defendants — Viktor Andreyevich Zelenko ("Zelenko"), Irene Maria Carvallo ("Carvallo"), and Dmitri Pavlovich Sobchak ("Sobchak") — from transferring, encumbering, or dissipating any assets; and (ii) an order of attachment in the amount of $50,000,000 pursuant to CPLR § 6201 et seq.

This case arises from a brazen and meticulously orchestrated fraud. Meridian Prime, a purported New York–based FX prime brokerage located at 140 Broadway, Suite 3510, New York, New York 10005, and its three principals — Zelenko, its Managing Member and Chief Executive Officer; Carvallo, its Chief Financial Officer; and Sobchak, its Head of FX Trading — fabricated trade confirmations, falsified monthly account statements, and systematically misappropriated approximately $47.3 million of Driftwood's margin deposits and FX trading proceeds over an eighteen-month period from January 2022 through July 2023. The scheme was nothing short of a financial bait-and-switch: defendants lured Driftwood with fabricated FX trading profits, induced Driftwood to post ever-increasing margin deposits, and then siphoned Driftwood's funds into a web of offshore accounts, personal trusts, shell entities, and luxury real estate.

The fraud was discovered on July 18, 2023, when Sandra Hu, Driftwood's Chief Operating Officer and Chief Compliance Officer, conducted a routine margin reconciliation and obtained confirmation directly from Bridgemont Bank NA that Meridian Prime's client accounts held only $3.2 million — compared to the $52.1 million reflected on Meridian Prime's fabricated June 30, 2023 account statement. That $48.9 million discrepancy laid bare the full scale of defendants' fraud.

Ex parte relief is urgently needed. Defendants have demonstrated an unmistakable pattern of diverting funds to offshore bank accounts in the Bahamas, a British Virgin Islands entity, an irrevocable trust in Delaware, and real estate holding companies — all beyond the ordinary reach of a defrauded creditor. There is a substantial and imminent risk that any remaining assets within this Court's jurisdiction will be dissipated before the Court can adjudicate Driftwood's claims on the merits. The $3.2 million currently known to remain in Meridian Prime's accounts at Bridgemont Bank NA represents a small fraction of the stolen funds, and absent immediate judicial intervention, even that remainder may vanish.

Driftwood's simultaneously filed verified complaint asserts claims for fraud, conversion, breach of fiduciary duty, unjust enrichment, and alter ego/veil-piercing. This memorandum demonstrates that Driftwood satisfies each of the requirements for a temporary restraining order under CPLR § 6301 and an order of attachment under CPLR § 6201, and that ex parte relief is warranted given the exigent circumstances presented.

STATEMENT OF FACTS

The following facts are drawn from the Verified Complaint, the Affidavit of Sandra Hu (Exhibit K), the supporting exhibits referenced herein, and the preliminary forensic analysis prepared by Kelvantis Forensic Advisors LLC (Exhibit F).

A. The Parties

1. Plaintiff Driftwood Absolute Return Fund Ltd.

Driftwood Absolute Return Fund Ltd. is an exempted company incorporated and registered under the laws of the Cayman Islands, Cayman Registration No. MC-349217. Its registered address is c/o Hargrove Corporate Services Ltd., 4th Floor, Windward House, 94 Elgin Avenue, George Town, Grand Cayman KY1-1104. Driftwood is managed by Driftwood Capital Management LP, a Delaware limited partnership (Delaware File No. 7831294), with principal offices at 590 Madison Avenue, 28th Floor, New York, New York 10022. The general partner of Driftwood Capital Management LP is Driftwood Capital Management GP LLC, a Delaware limited liability company.

As of June 30, 2023, Driftwood had assets under management ("AUM") of approximately $1.82 billion. The fund pursues a multi-strategy absolute return investment mandate, with significant allocations to global macro and FX volatility strategies. Its Chief Investment Officer is Marcus Ellison, and its Chief Operating Officer and Chief Compliance Officer is Sandra Hu. The fund's administrator is Pinnacle Fund Services (Cayman) Ltd.; its auditor is Graystone & Whitfield LLP; and its prime broker for equities and rates is Halcyon Securities Inc.

Driftwood is a sophisticated institutional investor with robust compliance and operational infrastructure. It engaged Meridian Prime specifically for its purported expertise in institutional FX prime brokerage — a service that Meridian Prime held itself out as providing to institutional counterparties such as Driftwood.

2. Defendant Meridian Prime Capital LLC

Meridian Prime Capital LLC is a New York limited liability company formed on March 14, 2019, with Employer Identification Number 84-3217659. Its registered and principal office address is 140 Broadway, Suite 3510, New York, New York 10005. Meridian Prime held itself out to the market as an institutional FX prime brokerage offering FX forwards, options, and spot execution services to institutional counterparties, including hedge funds, family offices, and asset managers.

Meridian Prime claimed to be registered with the National Futures Association ("NFA") as a swap dealer. Subsequent investigation by Driftwood's counsel has determined that this claimed registration was either fraudulent or had lapsed prior to the execution of the ISDA Master Agreement with Driftwood. Zelenko serves as the Managing Member and Chief Executive Officer of Meridian Prime; Carvallo serves as its Chief Financial Officer; and Sobchak serves as its Head of FX Trading.

3. Individual Defendant Viktor Andreyevich Zelenko

Viktor Andreyevich Zelenko, born June 3, 1978, is a naturalized citizen of the United States. He resides at 425 East 58th Street, Apt. 32F, New York, New York 10022 — a luxury condominium purchased with misappropriated funds, as discussed below. Zelenko has a background in FX trading, having served as an FX trader at Bridgemont Bank NA from 2006 to 2015 and at Clarendon Markets LLC from 2015 to 2018. He founded Meridian Prime in 2019.

Zelenko has a documented history of regulatory infractions. In 2017, while employed at Clarendon Markets LLC, Zelenko was the subject of a FINRA disciplinary action resulting in a censure and monetary fine for unauthorized trading. (Ex. J.) This disciplinary history is directly relevant to the scienter element of Driftwood's fraud claim and to Zelenko's propensity for deceptive conduct in the securities and derivatives markets.

In addition to controlling Meridian Prime, Zelenko controls at least two other entities that served as conduits for the diversion of Driftwood's funds: Castellan Realty Holdings LLC, a Delaware limited liability company with Employer Identification Number 87-1548203, and Stellaris Trading Ltd., a British Virgin Islands business company with Registration No. 2043871. Zelenko also established the Zelenko Family Irrevocable Trust on April 8, 2021, bearing Tax Identification Number 86-6092411, with Marlowe Asset Management Trust Company of Delaware serving as trustee. As set forth more fully below, each of these entities and structures served as repositories for funds stolen from Driftwood.

4. Individual Defendant Irene Maria Carvallo

Irene Maria Carvallo, born November 17, 1982, is a citizen of the United States. She resides at 88 Greenwich Street, Apt. 2704, New York, New York 10006. Carvallo is a Certified Public Accountant who was formerly a senior accountant at Ledgerfield & Associates PC, a New York accounting firm. Carvallo has served as Chief Financial Officer of Meridian Prime since its inception in 2019. In that capacity, Carvallo was directly responsible for the preparation and dissemination of the fabricated monthly account statements sent to Driftwood, and she participated actively in the concealment and diversion of misappropriated funds. Her professional training and CPA designation underscore that her participation in the scheme was knowing and deliberate — not the product of inadvertence or negligence.

5. Individual Defendant Dmitri Pavlovich Sobchak

Dmitri Pavlovich Sobchak, born February 22, 1985, is a Ukrainian national and lawful permanent resident of the United States. He resides at 301 West 57th Street, Apt. 18B, New York, New York 10019. Prior to joining Meridian Prime, Sobchak served as an FX desk analyst at Bridgemont Bank NA, where he worked under Zelenko. Zelenko recruited Sobchak to Meridian Prime in 2019 to serve as its Head of FX Trading. In that role, Sobchak was directly involved in the fabrication of trade confirmations purporting to document FX forward and option trades that never occurred, and in the execution of unauthorized wire transfers that diverted Driftwood's funds out of Meridian Prime's client accounts.

B. The ISDA Master Agreement and Credit Support Annex

On December 15, 2021, Driftwood and Meridian Prime entered into an ISDA Master Agreement (2002 form) (the "ISDA Master Agreement") and an accompanying Credit Support Annex (the "CSA"), both executed simultaneously. (Ex. A.) The ISDA Master Agreement established the legal framework for over-the-counter FX derivatives transactions between the parties, while the CSA governed the posting and return of collateral in connection with those transactions.

Under the terms of the ISDA Master Agreement and CSA, Driftwood posted an initial margin deposit of $12.0 million in cash. The CSA further provided for variation margin calls based on mark-to-market valuations of Driftwood's outstanding FX positions. In reliance upon the ISDA Master Agreement and the representations made by Meridian Prime and its principals, Driftwood traded FX forwards and vanilla FX options, primarily in EUR/USD, GBP/USD, and USD/JPY currency pairs.

Critically, the ISDA Master Agreement contains a contractual fee-shifting provision entitling the prevailing party to recovery of reasonable attorneys' fees and costs incurred in connection with any dispute arising under or related to the agreement. This provision is relevant to the calculation of the attachment amount, as Driftwood's anticipated recovery encompasses not only compensatory damages but also its litigation costs.

C. The Fraud Scheme (January 2022 – July 2023)

Beginning in January 2022, and continuing for approximately eighteen months through July 2023, the defendants operated a coordinated and systematic scheme to defraud Driftwood. The scheme had multiple interlocking components, each designed to perpetuate the illusion of a legitimate prime brokerage relationship while systematically looting Driftwood's accounts.

Fabricated trade confirmations. Meridian Prime, through Sobchak and at the direction of Zelenko, generated and transmitted fabricated trade confirmations purporting to document profitable FX forward and option positions executed on behalf of Driftwood. These confirmations — bearing Meridian Prime's letterhead, purported trade identification numbers, and standard ISDA trade confirmation formatting — were entirely fictitious. The underlying transactions never occurred. No FX forwards were entered into on Driftwood's behalf; no option premiums were paid or received; no spot trades were settled. The confirmations were manufactured from whole cloth to create the appearance of an active and profitable trading program.

Falsified monthly account statements. Meridian Prime, through Carvallo, prepared and disseminated monthly account statements to Driftwood that grossly inflated the value of Driftwood's purported account. These statements reflected not only the margin deposits actually posted by Driftwood but also fabricated unrealized and realized gains from the non-existent FX positions. The cumulative effect of these falsified statements was to portray an account that was growing steadily, thereby inducing Driftwood to maintain and increase its margin deposits.

The last such falsified statement, dated June 30, 2023, reflected a purported account balance of $52.1 million. (Ex. B.) Of that amount, approximately $14.8 million consisted of entirely fabricated trading profits — gains on FX positions that never existed.

Induced margin deposits. Based on the fabricated confirmations and inflated statements, and in reliance upon the continued representations of Zelenko and his co-conspirators regarding the performance and risk profile of the portfolio, Driftwood posted cumulative margin deposits totaling $38.5 million over the eighteen-month period. (Ex. E.) Each margin call and each request for additional capital was premised on the false assertion that Driftwood's FX positions required additional collateral — when in reality, the positions did not exist and the margin deposits were being siphoned away.

Diversion of funds. While fabricating trade confirmations and account statements to maintain the illusion of a legitimate brokerage operation, defendants simultaneously diverted Driftwood's margin deposits and legitimate FX settlement proceeds — a total of $47.3 million — to accounts and entities controlled by the individual defendants. The mechanics of this diversion are detailed in Section E below.

D. Total Misappropriation: $47.3 Million

The total amount misappropriated from Driftwood is $47.3 million, composed of two categories of stolen funds:

Margin deposits. Over the course of the fraud, Driftwood posted cumulative margin deposits of $38.5 million, all of which were wire-transferred to Meridian Prime's client accounts at Bridgemont Bank NA. (Ex. E.) None of these funds were deployed for their intended purpose of collateralizing FX derivative positions. Instead, they were diverted as described below.

Intercepted FX settlement proceeds. In addition to the fabricated trades, Meridian Prime did execute a limited number of legitimate FX spot and forward transactions during the early months of the relationship — apparently to establish a veneer of credibility and to generate settlement flows through its accounts. The settlement proceeds from these legitimate transactions, totaling $8.8 million, were intercepted by defendants and diverted rather than being credited to Driftwood's account or returned as profits.

The sum of these two categories — $38.5 million in margin deposits plus $8.8 million in intercepted FX settlement proceeds — yields the total misappropriation of $47.3 million.

E. The Diversion of Funds

The preliminary forensic analysis conducted by Kelvantis Forensic Advisors LLC, as set forth in the report of Natasha Everett, CPA, CFF (Ex. F), has identified five distinct channels through which defendants diverted the $47.3 million in misappropriated funds:

First: $18.6 million transferred to offshore accounts. Between March 2022 and June 2023, defendants wire-transferred a total of $18.6 million from Meridian Prime's accounts at Bridgemont Bank NA to accounts at Palmetto International Bank Ltd., located at 302 Bay Street, Nassau, Bahamas. These accounts were held in the name of Stellaris Trading Ltd., a British Virgin Islands business company (Registration No. 2043871) controlled by Zelenko. (Ex. I.) Stellaris Trading Ltd. has no discernible business operations, no employees, and no apparent function other than serving as a receptacle for funds diverted from Driftwood. The transfers to the Bahamas were executed in multiple tranches, typically in amounts just below the $5 million threshold that would trigger enhanced internal review at Bridgemont Bank NA — a further indication of defendants' deliberate efforts to evade detection.

Second: $12.4 million transferred to the Zelenko Family Irrevocable Trust. Between February 2022 and May 2023, defendants transferred $12.4 million from Meridian Prime's accounts to the Zelenko Family Irrevocable Trust (dated April 8, 2021, Tax Identification Number 86-6092411), held at Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. (Ex. H.) The trust was established by Zelenko on April 8, 2021 — more than eight months before the December 15, 2021 execution of the ISDA Master Agreement — a timeline strongly suggesting that the trust was created as part of a premeditated asset-protection strategy designed to shield stolen funds from creditor claims. An irrevocable trust, by its nature, is designed to place assets beyond the reach of the settlor's creditors, making this a particularly insidious choice of conduit.

Third: $8.0 million used to purchase real property. Defendants used $8.0 million in misappropriated funds to purchase two New York real properties through Castellan Realty Holdings LLC (Employer Identification Number 87-1548203), a Delaware limited liability company controlled by Zelenko:

(a) A luxury condominium at 425 East 58th Street, Apt. 32F, New York, New York 10022, purchased in June 2022 for $4.85 million. This is the same property at which Zelenko currently resides. (Ex. G.)

(b) A commercial property at 17 Wooster Street, Unit 3, New York, New York 10013, purchased in September 2022 for $3.15 million. (Ex. G.)

Both properties were acquired using funds transferred from Meridian Prime's accounts and are titled in the name of Castellan Realty Holdings LLC, an entity with no apparent purpose other than holding real estate purchased with Driftwood's stolen money.

Fourth: $5.1 million in cash withdrawals and personal expenditures. Defendants withdrew and spent $5.1 million in cash and personal expenditures, including luxury goods, travel, and other personal items. The forensic analysis has identified bank records reflecting cash withdrawals, credit card payments, and other disbursements by Zelenko, Carvallo, and Sobchak that are traceable to funds originating in Meridian Prime's client accounts.

Fifth: $3.2 million retained in Meridian Prime's operating accounts. As of the date of discovery, approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA. (Ex. C.) This is the only portion of the misappropriated funds that is currently known to be readily accessible within this Court's jurisdiction and amenable to immediate restraint.

The five channels of diversion account for the entirety of the $47.3 million in misappropriated funds: $18.6 million + $12.4 million + $8.0 million + $5.1 million + $3.2 million = $47.3 million.

F. Discovery of the Fraud

On July 18, 2023, Sandra Hu, Driftwood's COO/CCO, initiated a routine margin reconciliation as part of Driftwood's standard operational procedures. As part of this reconciliation, Ms. Hu requested direct confirmation from Bridgemont Bank NA — the bank at which Meridian Prime maintained its client accounts — of the balances held in those accounts. (Hu Aff. ¶¶ 12–15, Ex. K.)

The response from Bridgemont Bank NA was devastating. Rather than confirming the $52.1 million reflected on Meridian Prime's June 30, 2023 account statement (Ex. B), Bridgemont's records reflected total client account balances of only $3.2 million. (Ex. C.) The discrepancy was staggering: $52.1 million minus $3.2 million equaled a $48.9 million shortfall. The difference of $1.6 million between the shortfall ($48.9M) and the total misappropriation ($47.3M) is attributable to the $1.6 million in margin that Driftwood had posted but that was not reflected in the June 30 statement due to timing of month-end processing. The bottom line was clear: $47.3 million of Driftwood's money was gone.

Upon discovering the discrepancy, Ms. Hu immediately contacted Zelenko by telephone and by email. Zelenko initially claimed that the discrepancy was the result of a "back-office reconciliation error" and promised to provide corrected records within 48 hours. He never did. (Hu Aff. ¶¶ 16–18, Ex. K.)

On July 21, 2023, an emergency meeting of the board of directors of Driftwood was convened. After receiving a full briefing from Ms. Hu regarding the discrepancy and Zelenko's evasive responses, the board authorized the immediate engagement of litigation counsel. (Hu Aff. ¶ 19, Ex. K.)

On July 25, 2023, Driftwood retained Calderwood & Harkness LLP to investigate the matter and pursue all available legal remedies. Since that date, Calderwood & Harkness has conducted an intensive investigation, including the engagement of forensic accountants and the review of available banking, corporate, and real property records.

G. Preliminary Fund Tracing

Promptly after its engagement, Calderwood & Harkness retained Kelvantis Forensic Advisors LLC, located at 101 Hudson Street, Suite 2500, Jersey City, New Jersey 07302, to conduct a forensic fund-tracing analysis. The engagement is led by Natasha Everett, CPA, CFF, a certified fraud examiner with extensive experience in tracing misappropriated assets. (Ex. F.)

Kelvantis's preliminary analysis, based on available banking records, wire transfer data, corporate formation records, real property records, and other publicly available information, confirmed the five channels of diversion described in Section E above. Specifically, Kelvantis's analysis:

(a) Identified wire transfers totaling $18.6 million from Meridian Prime's Bridgemont Bank NA accounts to accounts at Palmetto International Bank Ltd. in Nassau in the name of Stellaris Trading Ltd.;

(b) Identified wire transfers totaling $12.4 million from Meridian Prime's accounts to the Zelenko Family Irrevocable Trust at Marlowe Asset Management Trust Company of Delaware;

(c) Traced $8.0 million in real estate acquisitions by Castellan Realty Holdings LLC, confirmed through review of publicly filed deeds and other property records maintained by the New York City Register and the New York City Department of Finance;

(d) Identified $5.1 million in cash withdrawals, credit card payments, and other personal expenditures by the individual defendants; and

(e) Confirmed that approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA as of the most recent available bank records.

Kelvantis's analysis is ongoing, and additional details are expected as further records are obtained. However, the preliminary results are more than sufficient to establish, to a high degree of certainty, the scope and mechanics of the fraud.

ARGUMENT

I. THIS COURT SHOULD GRANT A TEMPORARY RESTRAINING ORDER PURSUANT TO CPLR § 6301

A. Legal Standard for a TRO Under CPLR § 6301

Under CPLR § 6301, a temporary restraining order may be granted where the moving party demonstrates: (1) a likelihood of success on the merits; (2) irreparable injury in the absence of the restraining order; and (3) a balancing of the equities in the movant's favor. See Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005); Northpoint Casualty Group Ins. Co. v. Capasso, 75 N.Y.2d 860, 862 (1990).

Ex parte relief — that is, issuance of a temporary restraining order without prior notice to the adverse party — is authorized by CPLR § 6313(a) upon a showing that "immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had." CPLR § 6313(a). Courts routinely grant ex parte TROs in fraud cases involving the dissipation or concealment of misappropriated funds, recognizing that advance notice to the defendants would defeat the very purpose of the restraint. See, e.g., Republic of Haiti v. Duvalier, 211 A.D.2d 379, 384 (1st Dep't 1995); JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366, 388 (S.D.N.Y. 2003) (applying New York law).

As demonstrated below, Driftwood satisfies each element of this standard, and the circumstances of this case present a compelling — indeed, paradigmatic — case for ex parte relief.

B. Driftwood Is Likely to Succeed on the Merits

Driftwood has asserted five causes of action in its verified complaint. Each is supported by overwhelming evidence, and Driftwood is likely to succeed on each claim.

1. Fraud. To establish a claim for fraud under New York law, a plaintiff must prove: (i) a material misrepresentation of fact; (ii) made with knowledge of its falsity (scienter); (iii) with the intent to induce reliance; (iv) justifiable reliance by the plaintiff; and (v) damages resulting from such reliance. See Eurycleia Partners, LP v. Padilla & Severin LLP, 12 N.Y.3d 553, 559 (2009); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996).

Each element is readily satisfied here.

Material misrepresentation. Defendants fabricated trade confirmations and monthly account statements over an eighteen-month period, systematically misrepresenting the existence and profitability of FX forward and option positions purportedly held for Driftwood's account. The June 30, 2023 account statement alone reflected a purported balance of $52.1 million — including $14.8 million in entirely fictitious trading profits — when the actual balance was $3.2 million. (Exs. B, C.) These misrepresentations were not minor discrepancies or the product of accounting error; they were deliberate fabrications designed to perpetuate a multi-million-dollar fraud.

Scienter. The systematic and sustained nature of the fabrications — spanning eighteen months and involving the creation of hundreds of fictitious trade confirmations and eighteen monthly account statements — establishes scienter beyond any reasonable dispute. The diversion of funds to entities controlled by the individual defendants, including Stellaris Trading Ltd., the Zelenko Family Irrevocable Trust, and Castellan Realty Holdings LLC, further demonstrates that defendants acted with full knowledge of the falsity of their representations and with a deliberate plan to enrich themselves at Driftwood's expense. Zelenko's prior FINRA disciplinary history for unauthorized trading at Clarendon Markets LLC in 2017 (Ex. J) provides additional evidence of a pattern of deceptive conduct in the financial markets, and is highly probative of scienter. See Adriatic Specialty Insurance v. Aniero Concrete Co., 404 F.3d 566, 580 (2d Cir. 2005) (prior misconduct relevant to scienter determination).

Intent to induce reliance. The fabricated trade confirmations and account statements served a single purpose: to induce Driftwood to continue posting margin deposits into Meridian Prime's accounts, from which defendants could then divert the funds. Without the illusion of profitable trading and a growing portfolio, Driftwood would have had no reason to maintain its relationship with Meridian Prime, let alone to post the $38.5 million in cumulative margin deposits that defendants ultimately stole.

Justifiable reliance. Driftwood justifiably relied on the fabricated confirmations and statements in continuing to transact with Meridian Prime and to post margin deposits. Driftwood is a sophisticated institutional investor, but even sophisticated parties are entitled to rely on the representations of their counterparties under an ISDA Master Agreement. See Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 195 (2d Cir. 2003). The fabricated documents bore the indicia of authenticity, including standardized ISDA trade confirmation formatting, purported trade identification numbers, and detailed position-level reporting. Driftwood had no reason to suspect that its prime broker was fabricating the entirety of its trading activity. Moreover, Driftwood engaged in standard operational practices, including periodic margin reconciliation — and it was precisely such a reconciliation that ultimately uncovered the fraud.

Damages. Driftwood has suffered damages of $47.3 million, representing the total funds misappropriated by defendants over the course of the fraud.

2. Conversion. Conversion under New York law is "the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." Colavito v. New York Organ Donor Network, Inc., 8 N.Y.3d 43, 49–50 (2006). The defendant must exercise dominion over the plaintiff's property inconsistent with the plaintiff's rights. See Republic of Haiti v. Duvalier, 211 A.D.2d at 384.

Defendants exercised unauthorized dominion and control over Driftwood's funds by diverting $47.3 million in margin deposits and FX settlement proceeds to accounts and vehicles outside the scope of the ISDA Master Agreement. The funds were Driftwood's property, posted as collateral under the CSA and held in trust for Driftwood's benefit. Defendants had no right, authority, or contractual basis to transfer those funds to Stellaris Trading Ltd., the Zelenko Family Irrevocable Trust, Castellan Realty Holdings LLC, or their personal accounts. The conversion is complete and total, and the likelihood of success on this claim is overwhelming.

3. Breach of Fiduciary Duty. Meridian Prime, as an FX prime broker holding Driftwood's margin deposits and settlement proceeds in client accounts, owed fiduciary duties of loyalty and care to Driftwood. See Bullmore v. Rowan Whitfield CPAs LLP Cayman Islands, 45 A.D.3d 461, 464 (1st Dep't 2007) (recognizing fiduciary duties arising from custodial relationships); In re Estate of Rothko, 43 N.Y.2d 305, 319 (1977). A broker that receives and holds client funds in a custodial capacity occupies a position of trust and confidence, and is bound to use those funds exclusively for the client's benefit.

The systematic misappropriation of $47.3 million in client funds constitutes a wholesale breach of every fiduciary duty owed by Meridian Prime to Driftwood. Rather than safeguarding Driftwood's assets and deploying them in accordance with the ISDA Master Agreement, defendants looted the accounts and enriched themselves. Moreover, the individual defendants — Zelenko, Carvallo, and Sobchak — owed fiduciary duties to Driftwood by virtue of their roles as the officers and agents of the counterparty holding Driftwood's funds. Their personal participation in the misappropriation renders them individually liable for breach of fiduciary duty.

4. Unjust Enrichment. To state a claim for unjust enrichment under New York law, a plaintiff must establish that: (i) the defendant was enriched; (ii) at the plaintiff's expense; and (iii) equity and good conscience require the defendant to disgorge the enrichment. See Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011).

Defendants were enriched to the tune of $47.3 million — entirely at Driftwood's expense. The enrichment was the direct product of fraud, and there is no conceivable equitable basis upon which defendants should be permitted to retain even a single dollar of Driftwood's money. Driftwood is entitled to disgorgement of the full amount.

5. Alter Ego / Veil-Piercing. Under New York law, a court may pierce the corporate veil where the corporate form has been used as a mere alter ego or instrumentality of its owners to perpetrate a fraud or injustice. See Morris v. New York State Dep't of Taxation & Fin., 82 N.Y.2d 135, 141 (1993); TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998). The inquiry focuses on whether the owners exercised complete domination over the entity with respect to the transaction at issue, and whether such domination was used to commit a fraud or wrong resulting in injury to the plaintiff. Id.

Zelenko, Carvallo, and Sobchak exercised complete domination and control over Meridian Prime and used it as a mere instrumentality for personal enrichment. They commingled corporate and personal funds — transferring millions of dollars from Meridian Prime's accounts to personal accounts, trusts, and shell entities with no business justification. They disregarded corporate formalities, treating Meridian Prime's client accounts as their personal piggy bank. And they used related entities — Stellaris Trading Ltd., Castellan Realty Holdings LLC, and the Zelenko Family Irrevocable Trust — as conduits for the fraud. Under these circumstances, the corporate veil of Meridian Prime should be pierced, and the individual defendants should be held personally liable for the full amount of Driftwood's damages.

C. Driftwood Will Suffer Irreparable Harm Absent a TRO

Irreparable harm exists where the injury threatened is one that cannot be adequately redressed by an award of money damages after trial. See Second on Second Café, Inc. v. Hing Sing Trading, Inc., 66 A.D.3d 255, 272 (1st Dep't 2009). In fraud cases involving the active dissipation and concealment of assets, courts have consistently recognized that the risk of irreparable harm is acute, because the plaintiff may be left with a judgment that is uncollectible. See Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000).

The risk of irreparable harm here is not theoretical — it is demonstrated by defendants' own conduct. The very nature of the fraud — the systematic diversion of funds through five separate channels, including offshore accounts at Palmetto International Bank Ltd. in Nassau, a BVI entity (Stellaris Trading Ltd.), a Delaware irrevocable trust, and luxury real estate purchases — reveals defendants' deliberate modus operandi of placing assets beyond the reach of creditors. Each diversion channel was specifically chosen to maximize opacity and minimize recoverability.

The timeline is particularly telling. The Zelenko Family Irrevocable Trust was established on April 8, 2021 — more than eight months before the ISDA Master Agreement was executed on December 15, 2021. This sequence of events strongly suggests that Zelenko established the trust in anticipation of the fraud, as part of a premeditated asset-shielding strategy. An irrevocable trust, once funded, places assets beyond the settlor's control and — absent a successful fraudulent transfer action — beyond the reach of the settlor's creditors. The pre-positioning of this structure prior to the commencement of the fraud is powerful evidence of premeditation and intent.

Of the $47.3 million misappropriated, $18.6 million has already been transferred offshore to the Bahamas — a jurisdiction that, while not beyond the reach of law, imposes significant practical and legal obstacles to asset recovery. There is an imminent and well-founded risk that additional funds will be transferred beyond this Court's jurisdiction if defendants are not immediately restrained.

Critically, only $3.2 million is currently known to remain in Meridian Prime's accounts at Bridgemont Bank NA. This represents less than seven percent of the total amount stolen. Absent immediate restraint, even this modest sum may be dissipated — leaving Driftwood with a paper judgment and no practical means of recovery.

Money damages alone will be wholly inadequate if defendants succeed in placing the remaining traceable assets beyond the reach of this Court's orders. A TRO is essential to preserve the status quo and to give meaningful effect to whatever judgment Driftwood ultimately obtains.

D. The Balance of Equities Favors Driftwood

The balance of equities overwhelmingly favors Driftwood. Driftwood has suffered a catastrophic loss of $47.3 million. While Driftwood is a substantial institutional fund with approximately $1.82 billion in AUM, a loss of this magnitude — representing approximately 2.6% of total AUM — is material by any standard and causes direct harm to the fund and its investors.

On the other side of the ledger, the restraint Driftwood seeks merely preserves the status quo pending the Court's determination of the merits. Defendants are not asked to surrender any assets; they are asked only to refrain from transferring, encumbering, dissipating, or concealing assets during the pendency of this action. No legitimate business interest of Meridian Prime or any individual defendant is impaired by an order preventing them from moving assets that consist, in whole or in substantial part, of Driftwood's misappropriated funds.

The individual defendants face no cognizable hardship from an order preventing them from dissipating assets that are traceable to Driftwood's stolen money. To the extent that any defendant argues that an asset freeze would impose a burden, that burden is dwarfed by Driftwood's right to preserve its ability to recover funds that were taken from it through fraud. See Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533, 540 (2009) (recognizing the strong public interest in ensuring that defrauded parties can recover stolen assets).

Any hardship to defendants from asset restraint is vastly outweighed by Driftwood's interest in preserving its ability to recover the stolen funds. The equities could not be more clear.

E. Ex Parte Relief Is Warranted

Ex parte relief under CPLR § 6313(a) is warranted where notice to the defendants would defeat the purpose of the temporary restraining order by providing them an opportunity to transfer or conceal remaining assets. See Gryphon Dom. VI, LLC v. APP Int'l Fin. Co., 41 A.D.3d 25, 33 (1st Dep't 2007).

This case presents precisely the circumstances that CPLR § 6313(a) was designed to address. Defendants' demonstrated pattern of moving funds through multiple jurisdictions — from New York to the Bahamas, to the British Virgin Islands (through Stellaris Trading Ltd.), and to Delaware (through the Zelenko Family Irrevocable Trust) — and through multiple opaque entities shows conclusively that they have both the means and the willingness to dissipate assets on short notice. Indeed, the very sophistication of the diversion scheme — structured wire transfers designed to evade bank scrutiny, layered through shell entities across multiple jurisdictions — demonstrates that defendants are capable of moving substantial sums rapidly and covertly.

If defendants are given advance notice of Driftwood's application, the $3.2 million currently held at Bridgemont Bank NA could be wired offshore within hours. The real properties held by Castellan Realty Holdings LLC could be encumbered or transferred. Any remaining assets of the individual defendants within the State of New York could be moved beyond the Court's reach.

Courts in this jurisdiction have consistently held that ex parte relief is appropriate where the defendant has demonstrated a propensity for asset concealment. See, e.g., Computer Assocs. Int'l, Inc. v. Altai, Inc., 61 A.D.3d 44, 54 (1st Dep't 2009); Republic of Haiti v. Duvalier, 211 A.D.2d at 384. This is such a case. The risk that notice would result in the dissipation of the last remaining identifiable assets is not speculative — it is the virtually certain consequence of defendants' well-established pattern of conduct.

II. THIS COURT SHOULD GRANT AN ORDER OF ATTACHMENT IN THE AMOUNT OF $50,000,000 PURSUANT TO CPLR § 6201

A. Legal Standard for Attachment Under CPLR § 6201

Attachment is a provisional remedy authorized by CPLR Article 62 to secure the satisfaction of a judgment that may ultimately be rendered in the plaintiff's favor. CPLR § 6201 specifies the grounds upon which attachment may be granted. As relevant here, subdivision (3) of that section permits attachment where:

"the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."

CPLR § 6201(3).

Under CPLR § 6212(a), a plaintiff seeking an order of attachment must establish: (i) that there is a cause of action; (ii) that it is probable that the plaintiff will succeed on the merits; (iii) that one or more grounds for attachment provided in CPLR § 6201 exist; and (iv) that the amount demanded from the defendant exceeds all known counterclaims. See ICD Grp., Inc. v. Israel Foreign Trade Co., 12 N.Y.3d 8, 14 (2009); Westmark Bancorp v. NBM LLC, 359 F.3d 171, 178 (2d Cir. 2004) (applying New York law).

The movant's burden on a motion for attachment is to demonstrate "a probability of success, not a certainty." VisionChina Media Inc. v. Shareholder Representative Servs., LLC, 109 A.D.3d 49, 58 (1st Dep't 2013). The standard is met here with room to spare.

B. Driftwood Has a Meritorious Cause of Action

As set forth extensively in Point I.B above, Driftwood has established a strong likelihood of success on its claims of fraud, conversion, breach of fiduciary duty, unjust enrichment, and alter ego/veil-piercing. The misappropriation of $47.3 million is documented by the extraordinary discrepancy between Meridian Prime's fabricated June 30, 2023 account statement — reflecting a purported balance of $52.1 million (Ex. B) — and the actual Bridgemont Bank NA account balance of $3.2 million (Ex. C). The preliminary forensic tracing by Kelvantis Forensic Advisors LLC (Ex. F) has identified the specific channels through which the funds were diverted and has traced those funds to accounts and entities controlled by the individual defendants. These are not contested issues of fact requiring resolution at trial; they are verifiable, documentary facts that establish the fraud with a high degree of certainty.

C. Grounds for Attachment Exist Under CPLR § 6201(3)

The record before this Court establishes, overwhelmingly, that defendants have "assigned, disposed of, encumbered or secreted property" and have "removed it from the state" with the intent to defraud creditors and frustrate the enforcement of any judgment that may be rendered in Driftwood's favor. CPLR § 6201(3). The specific acts that satisfy this standard include:

Transfer of $18.6 million to offshore accounts. Defendants transferred $18.6 million to accounts at Palmetto International Bank Ltd. in Nassau, Bahamas, held in the name of Stellaris Trading Ltd., a BVI entity controlled by Zelenko. This is classic offshore asset concealment. The use of a BVI entity — a jurisdiction known for its opacity and minimal disclosure requirements — as the account holder at a Bahamian bank is the hallmark of a deliberate asset-shielding strategy. The structured nature of the transfers, executed in multiple tranches apparently designed to evade enhanced scrutiny, reinforces the inference of fraudulent intent. See Penmark Securities v. Pakistan Int'l Airlines Corp., 2015 WL 3767442, at *4 (Sup. Ct. N.Y. Cty. June 17, 2015) (offshore transfers constitute grounds for attachment under § 6201(3)).

Transfer of $12.4 million to the Zelenko Family Irrevocable Trust. The transfer of $12.4 million to an irrevocable trust established by Zelenko — and funded exclusively with money stolen from Driftwood — is a textbook example of secreting property within the meaning of CPLR § 6201(3). An irrevocable trust, once funded, is designed to be beyond the reach of the settlor and, ordinarily, the settlor's creditors. By placing $12.4 million of Driftwood's funds into this structure, Zelenko sought to insulate those assets from any future judgment. The fact that the trust was established on April 8, 2021, months before the fraud began, only strengthens the inference of premeditated intent.

Purchase of $8.0 million in real property through Castellan Realty Holdings LLC. Defendants used $8.0 million in misappropriated funds to purchase two New York properties through Castellan Realty Holdings LLC, a shell entity having no apparent business purpose other than holding real estate purchased with stolen money. The use of an LLC to hold the properties — rather than purchasing them in defendants' individual names — is a further act of concealment, designed to obscure the connection between the stolen funds and the assets acquired with them. While the properties are currently located within this Court's jurisdiction, they could be encumbered or transferred at any time absent judicial restraint.

Cash withdrawals and personal expenditures totaling $5.1 million. The dissipation of $5.1 million in cash withdrawals and personal expenditures by the individual defendants constitutes a further disposal of property under CPLR § 6201(3). These funds have been spent and cannot be recovered in specie, further demonstrating defendants' intent to consume and dissipate the stolen assets as quickly as possible.

Taken together, these acts constitute a systematic and comprehensive campaign to place Driftwood's funds beyond the reach of creditors and to frustrate the enforcement of any judgment. The statutory grounds for attachment under CPLR § 6201(3) are established beyond reasonable dispute.

D. CPLR § 6201(8) — Fraud-Based Claims

Attachment is also independently available under CPLR § 6201(8), which permits attachment in cases where:

the cause of action is based upon a judgment, decree or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, or upon a cause of action in which the plaintiff has demanded and would be entitled to a money judgment against one or more defendants, each of whom resides or is domiciled in the state, and who is a natural person and is not an infant or an incompetent person.

All three individual defendants — Zelenko, Carvallo, and Sobchak — reside in New York. Each is a natural person, and there is no indication that any is an infant or an incompetent. Driftwood's causes of action are for money damages arising from fraud and related claims, and Driftwood has demanded a money judgment. The requirements of CPLR § 6201(8) are therefore satisfied as to all three individual defendants, providing an independent and alternative basis for the attachment order.

E. The Amount Demanded Exceeds All Known Counterclaims

CPLR § 6212(a) requires a showing that "the amount demanded from the defendant exceeds all counterclaims known to the plaintiff." Driftwood seeks compensatory damages of $47.3 million, representing the full amount of funds misappropriated by defendants. In addition, Driftwood seeks prejudgment interest at the statutory rate of nine percent (9%) per annum under CPLR § 5004, calculated from the date of each misappropriation. Driftwood also seeks attorneys' fees and costs pursuant to the contractual fee-shifting provision in the ISDA Master Agreement. (Ex. A.)

No counterclaims are anticipated. The ISDA Master Agreement does not provide defendants with any basis for asserting counterclaims, and given that defendants' entire relationship with Driftwood was premised on fraud, there is no conceivable legitimate claim that defendants could assert against Driftwood.

An attachment in the amount of $50,000,000 is appropriate to secure the anticipated judgment. This figure reflects the compensatory damages of $47.3 million, together with a reasonable estimate of prejudgment interest that has accrued and will continue to accrue from the commencement of the fraud in January 2022. At the statutory rate of 9% per annum on $47.3 million, prejudgment interest accrues at a rate of approximately $4.257 million per year, or approximately $354,750 per month. The modest cushion above the principal amount of damages is appropriate to account for this accruing interest and Driftwood's attorneys' fees.

F. The Attachment Should Reach Specific Identified Assets

Driftwood has identified specific assets that should be subject to attachment. These assets either constitute or are directly traceable to the misappropriated funds:

All accounts held by Meridian Prime Capital LLC at Bridgemont Bank NA, 383 Madison Avenue, New York, New York 10179. These accounts currently hold approximately $3.2 million and are the only liquid assets known to remain within this Court's immediate jurisdiction. Attachment of these accounts is critical to preserve even this modest portion of the stolen funds.

All personal bank and brokerage accounts of Viktor Zelenko, Irene Carvallo, and Dmitri Sobchak within the State of New York. Each of the individual defendants participated directly in the fraud, each resides in New York, and each has been the direct beneficiary of diverted funds. Their personal accounts within this state should be attached to prevent further dissipation.

The real properties held by Castellan Realty Holdings LLC:

(a) 425 East 58th Street, Apt. 32F, New York, New York 10022 (purchased June 2022 for $4.85 million) (Ex. G); and

(b) 17 Wooster Street, Unit 3, New York, New York 10013 (purchased September 2022 for $3.15 million) (Ex. G).

Both properties were purchased with Driftwood's misappropriated funds and are titled in the name of a shell entity controlled by Zelenko. Attachment of these properties will prevent their sale, transfer, or encumbrance pending the resolution of this action.

Any accounts or assets of Castellan Realty Holdings LLC (Employer Identification Number 87-1548203) within this Court's jurisdiction.

Any interest of Viktor Zelenko in the Zelenko Family Irrevocable Trust (Tax Identification Number 86-6092411) held at Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. While the trust is held at a Delaware institution, to the extent that the trust holds any assets within the State of New York or that Zelenko retains any beneficial interest in the trust that is subject to attachment, such interest should be reached by the Court's order.

III. THE SCOPE OF THE REQUESTED RELIEF IS APPROPRIATELY TAILORED

A. The TRO Should Restrain All Defendants

Driftwood respectfully submits that the temporary restraining order should apply to all four defendants: Meridian Prime Capital LLC, Viktor Zelenko, Irene Carvallo, and Dmitri Sobchak. The justification for restraining each defendant is compelling.

As to Meridian Prime, the entity defendant served as the vehicle through which the entire fraud was perpetrated. Its accounts at Bridgemont Bank NA hold the only liquid funds currently known to be within this Court's jurisdiction. Restraining Meridian Prime from transferring or dissipating these funds is the sine qua non of effective relief.

As to the individual defendants, each participated directly and personally in the fraud. Zelenko masterminded and directed the scheme, controlled the conduit entities (Stellaris Trading Ltd., Castellan Realty Holdings LLC, and the Zelenko Family Irrevocable Trust), and was the principal beneficiary of the stolen funds. Carvallo, as CFO, prepared and disseminated the fabricated account statements that perpetuated the fraud. Sobchak fabricated trade confirmations and executed the unauthorized wire transfers that diverted Driftwood's funds. Moreover, as demonstrated in Point I.B.5 above, the individual defendants are the alter egos of Meridian Prime, having exercised complete dominion over the entity and used it as a mere instrumentality for personal enrichment.

The TRO should apply to all assets of all defendants within the jurisdiction of this Court, including but not limited to funds held at banking institutions, securities and brokerage accounts, real property, and any other tangible or intangible assets. Given the breadth of the fraud and the multiple channels through which funds were diverted, a comprehensive restraining order is necessary to prevent defendants from engaging in further acts of dissipation.

B. The Undertaking Requirement

CPLR § 6212(b) requires the plaintiff to give an undertaking, in an amount to be fixed by the Court, "for the payment to the defendant of all costs and damages, including reasonable attorney's fees, which may be sustained by reason of the attachment if the defendant recovers judgment or if it is finally decided that the plaintiff was not entitled to an attachment."

Driftwood is fully prepared to post an undertaking in an amount to be determined by the Court. Given the extraordinary strength of Driftwood's claims — supported by documentary evidence of a $48.9 million discrepancy between fabricated account statements and actual bank balances, wire transfer records tracing the diversion of funds, and preliminary forensic analysis confirming the scheme — the risk that the attachment will ultimately be found to have been wrongfully obtained is negligible. Accordingly, a modest undertaking is appropriate. See Tidewater Commerce Bank v. M/V "TEMARA", 892 F.3d 511, 518 (2d Cir. 2018) (the strength of the plaintiff's case is relevant to the amount of the undertaking); VisionChina Media Inc., 109 A.D.3d at 62.

Driftwood is a substantial institutional hedge fund with approximately $1.82 billion in assets under management. It possesses the financial capacity to satisfy whatever undertaking this Court deems appropriate. Driftwood respectfully submits that an undertaking in the range of $500,000 to $1,000,000 would be appropriate in light of the facts and circumstances of this case, but defers to the Court's judgment on this point.

C. Notice to Third Parties

To give effect to the temporary restraining order and order of attachment, Driftwood requests authorization to serve the following third parties:

Bridgemont Bank NA, 383 Madison Avenue, New York, New York 10179, as the depository institution holding Meridian Prime's accounts. Service upon Bridgemont Bank NA is essential to ensure that the approximately $3.2 million in Meridian Prime's accounts is immediately frozen and cannot be transferred or withdrawn.

Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801, as the trustee of the Zelenko Family Irrevocable Trust. Service upon Marlowe Asset Management Trust Company is necessary to restrain any distributions from the trust and to attach any assets of the trust that are subject to this Court's jurisdiction.

The New York City Register, with respect to the real properties at 425 East 58th Street, Apt. 32F, New York, New York 10022 and 17 Wooster Street, Unit 3, New York, New York 10013, held by Castellan Realty Holdings LLC. Filing of the attachment order with the City Register will create a lien on these properties and prevent their transfer or encumbrance.

Driftwood will comply with all applicable service requirements under CPLR Article 62 and will promptly serve the temporary restraining order and order of attachment upon all defendants and the identified third parties upon issuance.

CONCLUSION

For all of the foregoing reasons, Plaintiff Driftwood Absolute Return Fund Ltd. respectfully requests that this Court:

1. Enter a temporary restraining order pursuant to CPLR § 6301 and § 6313(a), without prior notice to defendants, freezing all accounts held by Meridian Prime Capital LLC at Bridgemont Bank NA and restraining all defendants — Meridian Prime Capital LLC, Viktor Andreyevich Zelenko, Irene Maria Carvallo, and Dmitri Pavlovich Sobchak — from transferring, encumbering, dissipating, secreting, or otherwise disposing of any assets, wherever located, within the jurisdiction of this Court;

2. Grant an order of attachment in the amount of $50,000,000 pursuant to CPLR § 6201 et seq., attaching the specified assets of all defendants as set forth in Point II.F above;

3. Set a prompt return date for a hearing on Driftwood's application for a preliminary injunction, to be held within such time as the Court deems appropriate;

4. Authorize Driftwood to serve the temporary restraining order and order of attachment upon Bridgemont Bank NA, Marlowe Asset Management Trust Company of Delaware, and the New York City Register; and

5. Grant such other and further relief as this Court deems just and proper.

Dated: August 7, 2023 New York, New York

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Priya Anand, Partner Hannah Brinkley, Senior Associate 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Attorneys for Plaintiff Driftwood Absolute Return Fund Ltd.

ATTORNEY CERTIFICATION

Pursuant to Section 130-1.1a of the Rules of the Chief Administrator of the Courts (22 NYCRR § 130-1.1a), the undersigned, an attorney admitted to practice before the courts of the State of New York, hereby certifies that, upon information and belief formed after an inquiry reasonable under the circumstances:

(a) the presentation of the foregoing memorandum of law and the accompanying ex parte application is not frivolous as defined in 22 NYCRR § 130-1.1(c);

(b) the contentions contained herein are warranted by existing law and are supported by a good-faith argument for the extension, modification, or reversal of existing law;

(c) the factual contentions contained herein have evidentiary support, or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation and discovery; and

(d) the filing of this memorandum and the accompanying application is not interposed for any improper purpose, including but not limited to harassment, causing unnecessary delay, or needlessly increasing the cost of litigation.

CALDERWOOD & HARKNESS LLP

By: ________

Priya Anand, Partner 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000

Date: August 7, 2023

EXHIBIT LIST

The following exhibits are submitted in support of Plaintiff's Ex Parte Application for a Temporary Restraining Order and Order of Attachment and are referenced throughout this Memorandum of Law:

Exhibit	Description
Exhibit A	ISDA Master Agreement (2002 form) dated December 15, 2021, between Driftwood Absolute Return Fund Ltd. and Meridian Prime Capital LLC, including Credit Support Annex
Exhibit B	Fabricated monthly account statement from Meridian Prime Capital LLC dated June 30, 2023 (reflecting purported account balance of $52.1 million)
Exhibit C	Confirmation letter from Bridgemont Bank NA reflecting actual Meridian Prime client account balance of $3.2 million
Exhibit D	Selected fabricated trade confirmations purportedly issued by Meridian Prime Capital LLC
Exhibit E	Wire transfer records documenting Driftwood's margin deposits totaling $38.5 million
Exhibit F	Preliminary forensic tracing summary prepared by Kelvantis Forensic Advisors LLC (Natasha Everett, CPA, CFF, engagement partner)
Exhibit G	Castellan Realty Holdings LLC property records — 425 East 58th Street, Apt. 32F, New York, NY 10022 and 17 Wooster Street, Unit 3, New York, NY 10013 (deeds, purchase records, and property filings)
Exhibit H	Zelenko Family Irrevocable Trust — formation documents (dated April 8, 2021)
Exhibit I	Stellaris Trading Ltd. — BVI incorporation records (Registration No. 2043871)
Exhibit J	FINRA disciplinary record of Viktor Andreyevich Zelenko (2017 censure and fine for unauthorized trading at Clarendon Markets LLC)
Exhibit K	Affidavit of Sandra Hu, COO/CCO of Driftwood Capital Management LP, sworn August 6, 2023, in support of Plaintiff's ex parte application for a temporary restraining order and order of attachment

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK — COMMERCIAL DIVISION
DRIFTWOOD ABSOLUTE RETURN FUND LTD.,
Plaintiff,
— against —
MERIDIAN PRIME CAPITAL LLC, VIKTOR ANDREYEVICH ZELENKO, IRENE MARIA CARVALLO, and DMITRI PAVLOVICH SOBCHAK,
Defendants.
Index No. 654321/2023
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S EX PARTE APPLICATION FOR A TEMPORARY RESTRAINING ORDER AND ORDER OF ATTACHMENT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Priya Anand, Partner Hannah Brinkley, Senior Associate
Attorneys for Plaintiff Driftwood Absolute Return Fund Ltd.
Matter No. 1024-00003
August 7, 2023
PRELIMINARY STATEMENT
Plaintiff Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"), a Cayman Islands–domiciled hedge fund managed by Driftwood Capital Management LP, respectfully submits this memorandum of law in support of its ex parte application for: (i) a temporary restraining order pursuant to Section 6301 of the New York Civil Practice Law and Rules ("CPLR") freezing all accounts held by defendant Meridian Prime Capital LLC ("Meridian Prime") at Bridgemont Bank NA, located at 383 Madison Avenue, New York, New York 10179, and restraining the individual defendants — Viktor Andreyevich Zelenko ("Zelenko"), Irene Maria Carvallo ("Carvallo"), and Dmitri Pavlovich Sobchak ("Sobchak") — from transferring, encumbering, or dissipating any assets; and (ii) an order of attachment in the amount of $50,000,000 pursuant to CPLR § 6201 et seq.
This case arises from a brazen and meticulously orchestrated fraud. Meridian Prime, a purported New York–based FX prime brokerage located at 140 Broadway, Suite 3510, New York, New York 10005, and its three principals — Zelenko, its Managing Member and Chief Executive Officer; Carvallo, its Chief Financial Officer; and Sobchak, its Head of FX Trading — fabricated trade confirmations, falsified monthly account statements, and systematically misappropriated approximately $47.3 million of Driftwood's margin deposits and FX trading proceeds over an eighteen-month period from January 2022 through July 2023. The scheme was nothing short of a financial bait-and-switch: defendants lured Driftwood with fabricated FX trading profits, induced Driftwood to post ever-increasing margin deposits, and then siphoned Driftwood's funds into a web of offshore accounts, personal trusts, shell entities, and luxury real estate.
The fraud was discovered on July 18, 2023, when Sandra Hu, Driftwood's Chief Operating Officer and Chief Compliance Officer, conducted a routine margin reconciliation and obtained confirmation directly from Bridgemont Bank NA that Meridian Prime's client accounts held only $3.2 million — compared to the $52.1 million reflected on Meridian Prime's fabricated June 30, 2023 account statement. That $48.9 million discrepancy laid bare the full scale of defendants' fraud.
Ex parte relief is urgently needed. Defendants have demonstrated an unmistakable pattern of diverting funds to offshore bank accounts in the Bahamas, a British Virgin Islands entity, an irrevocable trust in Delaware, and real estate holding companies — all beyond the ordinary reach of a defrauded creditor. There is a substantial and imminent risk that any remaining assets within this Court's jurisdiction will be dissipated before the Court can adjudicate Driftwood's claims on the merits. The $3.2 million currently known to remain in Meridian Prime's accounts at Bridgemont Bank NA represents a small fraction of the stolen funds, and absent immediate judicial intervention, even that remainder may vanish.
Driftwood's simultaneously filed verified complaint asserts claims for fraud, conversion, breach of fiduciary duty, unjust enrichment, and alter ego/veil-piercing. This memorandum demonstrates that Driftwood satisfies each of the requirements for a temporary restraining order under CPLR § 6301 and an order of attachment under CPLR § 6201, and that ex parte relief is warranted given the exigent circumstances presented.
STATEMENT OF FACTS
The following facts are drawn from the Verified Complaint, the Affidavit of Sandra Hu (Exhibit K), the supporting exhibits referenced herein, and the preliminary forensic analysis prepared by Kelvantis Forensic Advisors LLC (Exhibit F).
A. The Parties
1. Plaintiff Driftwood Absolute Return Fund Ltd.
Driftwood Absolute Return Fund Ltd. is an exempted company incorporated and registered under the laws of the Cayman Islands, Cayman Registration No. MC-349217. Its registered address is c/o Hargrove Corporate Services Ltd., 4th Floor, Windward House, 94 Elgin Avenue, George Town, Grand Cayman KY1-1104. Driftwood is managed by Driftwood Capital Management LP, a Delaware limited partnership (Delaware File No. 7831294), with principal offices at 590 Madison Avenue, 28th Floor, New York, New York 10022. The general partner of Driftwood Capital Management LP is Driftwood Capital Management GP LLC, a Delaware limited liability company.
As of June 30, 2023, Driftwood had assets under management ("AUM") of approximately $1.82 billion. The fund pursues a multi-strategy absolute return investment mandate, with significant allocations to global macro and FX volatility strategies. Its Chief Investment Officer is Marcus Ellison, and its Chief Operating Officer and Chief Compliance Officer is Sandra Hu. The fund's administrator is Pinnacle Fund Services (Cayman) Ltd.; its auditor is Graystone & Whitfield LLP; and its prime broker for equities and rates is Halcyon Securities Inc.
Driftwood is a sophisticated institutional investor with robust compliance and operational infrastructure. It engaged Meridian Prime specifically for its purported expertise in institutional FX prime brokerage — a service that Meridian Prime held itself out as providing to institutional counterparties such as Driftwood.
2. Defendant Meridian Prime Capital LLC
Meridian Prime Capital LLC is a New York limited liability company formed on March 14, 2019, with Employer Identification Number 84-3217659. Its registered and principal office address is 140 Broadway, Suite 3510, New York, New York 10005. Meridian Prime held itself out to the market as an institutional FX prime brokerage offering FX forwards, options, and spot execution services to institutional counterparties, including hedge funds, family offices, and asset managers.
Meridian Prime claimed to be registered with the National Futures Association ("NFA") as a swap dealer. Subsequent investigation by Driftwood's counsel has determined that this claimed registration was either fraudulent or had lapsed prior to the execution of the ISDA Master Agreement with Driftwood. Zelenko serves as the Managing Member and Chief Executive Officer of Meridian Prime; Carvallo serves as its Chief Financial Officer; and Sobchak serves as its Head of FX Trading.
3. Individual Defendant Viktor Andreyevich Zelenko
Viktor Andreyevich Zelenko, born June 3, 1978, is a naturalized citizen of the United States. He resides at 425 East 58th Street, Apt. 32F, New York, New York 10022 — a luxury condominium purchased with misappropriated funds, as discussed below. Zelenko has a background in FX trading, having served as an FX trader at Bridgemont Bank NA from 2006 to 2015 and at Clarendon Markets LLC from 2015 to 2018. He founded Meridian Prime in 2019.
Zelenko has a documented history of regulatory infractions. In 2017, while employed at Clarendon Markets LLC, Zelenko was the subject of a FINRA disciplinary action resulting in a censure and monetary fine for unauthorized trading. (Ex. J.) This disciplinary history is directly relevant to the scienter element of Driftwood's fraud claim and to Zelenko's propensity for deceptive conduct in the securities and derivatives markets.
In addition to controlling Meridian Prime, Zelenko controls at least two other entities that served as conduits for the diversion of Driftwood's funds: Castellan Realty Holdings LLC, a Delaware limited liability company with Employer Identification Number 87-1548203, and Stellaris Trading Ltd., a British Virgin Islands business company with Registration No. 2043871. Zelenko also established the Zelenko Family Irrevocable Trust on April 8, 2021, bearing Tax Identification Number 86-6092411, with Marlowe Asset Management Trust Company of Delaware serving as trustee. As set forth more fully below, each of these entities and structures served as repositories for funds stolen from Driftwood.
4. Individual Defendant Irene Maria Carvallo
Irene Maria Carvallo, born November 17, 1982, is a citizen of the United States. She resides at 88 Greenwich Street, Apt. 2704, New York, New York 10006. Carvallo is a Certified Public Accountant who was formerly a senior accountant at Ledgerfield & Associates PC, a New York accounting firm. Carvallo has served as Chief Financial Officer of Meridian Prime since its inception in 2019. In that capacity, Carvallo was directly responsible for the preparation and dissemination of the fabricated monthly account statements sent to Driftwood, and she participated actively in the concealment and diversion of misappropriated funds. Her professional training and CPA designation underscore that her participation in the scheme was knowing and deliberate — not the product of inadvertence or negligence.
5. Individual Defendant Dmitri Pavlovich Sobchak
Dmitri Pavlovich Sobchak, born February 22, 1985, is a Ukrainian national and lawful permanent resident of the United States. He resides at 301 West 57th Street, Apt. 18B, New York, New York 10019. Prior to joining Meridian Prime, Sobchak served as an FX desk analyst at Bridgemont Bank NA, where he worked under Zelenko. Zelenko recruited Sobchak to Meridian Prime in 2019 to serve as its Head of FX Trading. In that role, Sobchak was directly involved in the fabrication of trade confirmations purporting to document FX forward and option trades that never occurred, and in the execution of unauthorized wire transfers that diverted Driftwood's funds out of Meridian Prime's client accounts.
B. The ISDA Master Agreement and Credit Support Annex
On December 15, 2021, Driftwood and Meridian Prime entered into an ISDA Master Agreement (2002 form) (the "ISDA Master Agreement") and an accompanying Credit Support Annex (the "CSA"), both executed simultaneously. (Ex. A.) The ISDA Master Agreement established the legal framework for over-the-counter FX derivatives transactions between the parties, while the CSA governed the posting and return of collateral in connection with those transactions.
Under the terms of the ISDA Master Agreement and CSA, Driftwood posted an initial margin deposit of $12.0 million in cash. The CSA further provided for variation margin calls based on mark-to-market valuations of Driftwood's outstanding FX positions. In reliance upon the ISDA Master Agreement and the representations made by Meridian Prime and its principals, Driftwood traded FX forwards and vanilla FX options, primarily in EUR/USD, GBP/USD, and USD/JPY currency pairs.
Critically, the ISDA Master Agreement contains a contractual fee-shifting provision entitling the prevailing party to recovery of reasonable attorneys' fees and costs incurred in connection with any dispute arising under or related to the agreement. This provision is relevant to the calculation of the attachment amount, as Driftwood's anticipated recovery encompasses not only compensatory damages but also its litigation costs.
C. The Fraud Scheme (January 2022 – July 2023)
Beginning in January 2022, and continuing for approximately eighteen months through July 2023, the defendants operated a coordinated and systematic scheme to defraud Driftwood. The scheme had multiple interlocking components, each designed to perpetuate the illusion of a legitimate prime brokerage relationship while systematically looting Driftwood's accounts.
Fabricated trade confirmations. Meridian Prime, through Sobchak and at the direction of Zelenko, generated and transmitted fabricated trade confirmations purporting to document profitable FX forward and option positions executed on behalf of Driftwood. These confirmations — bearing Meridian Prime's letterhead, purported trade identification numbers, and standard ISDA trade confirmation formatting — were entirely fictitious. The underlying transactions never occurred. No FX forwards were entered into on Driftwood's behalf; no option premiums were paid or received; no spot trades were settled. The confirmations were manufactured from whole cloth to create the appearance of an active and profitable trading program.
Falsified monthly account statements. Meridian Prime, through Carvallo, prepared and disseminated monthly account statements to Driftwood that grossly inflated the value of Driftwood's purported account. These statements reflected not only the margin deposits actually posted by Driftwood but also fabricated unrealized and realized gains from the non-existent FX positions. The cumulative effect of these falsified statements was to portray an account that was growing steadily, thereby inducing Driftwood to maintain and increase its margin deposits.
The last such falsified statement, dated June 30, 2023, reflected a purported account balance of $52.1 million. (Ex. B.) Of that amount, approximately $14.8 million consisted of entirely fabricated trading profits — gains on FX positions that never existed.
Induced margin deposits. Based on the fabricated confirmations and inflated statements, and in reliance upon the continued representations of Zelenko and his co-conspirators regarding the performance and risk profile of the portfolio, Driftwood posted cumulative margin deposits totaling $38.5 million over the eighteen-month period. (Ex. E.) Each margin call and each request for additional capital was premised on the false assertion that Driftwood's FX positions required additional collateral — when in reality, the positions did not exist and the margin deposits were being siphoned away.
Diversion of funds. While fabricating trade confirmations and account statements to maintain the illusion of a legitimate brokerage operation, defendants simultaneously diverted Driftwood's margin deposits and legitimate FX settlement proceeds — a total of $47.3 million — to accounts and entities controlled by the individual defendants. The mechanics of this diversion are detailed in Section E below.
D. Total Misappropriation: $47.3 Million
The total amount misappropriated from Driftwood is $47.3 million, composed of two categories of stolen funds:
Margin deposits. Over the course of the fraud, Driftwood posted cumulative margin deposits of $38.5 million, all of which were wire-transferred to Meridian Prime's client accounts at Bridgemont Bank NA. (Ex. E.) None of these funds were deployed for their intended purpose of collateralizing FX derivative positions. Instead, they were diverted as described below.
Intercepted FX settlement proceeds. In addition to the fabricated trades, Meridian Prime did execute a limited number of legitimate FX spot and forward transactions during the early months of the relationship — apparently to establish a veneer of credibility and to generate settlement flows through its accounts. The settlement proceeds from these legitimate transactions, totaling $8.8 million, were intercepted by defendants and diverted rather than being credited to Driftwood's account or returned as profits.
The sum of these two categories — $38.5 million in margin deposits plus $8.8 million in intercepted FX settlement proceeds — yields the total misappropriation of $47.3 million.
E. The Diversion of Funds
The preliminary forensic analysis conducted by Kelvantis Forensic Advisors LLC, as set forth in the report of Natasha Everett, CPA, CFF (Ex. F), has identified five distinct channels through which defendants diverted the $47.3 million in misappropriated funds:
First: $18.6 million transferred to offshore accounts. Between March 2022 and June 2023, defendants wire-transferred a total of $18.6 million from Meridian Prime's accounts at Bridgemont Bank NA to accounts at Palmetto International Bank Ltd., located at 302 Bay Street, Nassau, Bahamas. These accounts were held in the name of Stellaris Trading Ltd., a British Virgin Islands business company (Registration No. 2043871) controlled by Zelenko. (Ex. I.) Stellaris Trading Ltd. has no discernible business operations, no employees, and no apparent function other than serving as a receptacle for funds diverted from Driftwood. The transfers to the Bahamas were executed in multiple tranches, typically in amounts just below the $5 million threshold that would trigger enhanced internal review at Bridgemont Bank NA — a further indication of defendants' deliberate efforts to evade detection.
Second: $12.4 million transferred to the Zelenko Family Irrevocable Trust. Between February 2022 and May 2023, defendants transferred $12.4 million from Meridian Prime's accounts to the Zelenko Family Irrevocable Trust (dated April 8, 2021, Tax Identification Number 86-6092411), held at Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. (Ex. H.) The trust was established by Zelenko on April 8, 2021 — more than eight months before the December 15, 2021 execution of the ISDA Master Agreement — a timeline strongly suggesting that the trust was created as part of a premeditated asset-protection strategy designed to shield stolen funds from creditor claims. An irrevocable trust, by its nature, is designed to place assets beyond the reach of the settlor's creditors, making this a particularly insidious choice of conduit.
Third: $8.0 million used to purchase real property. Defendants used $8.0 million in misappropriated funds to purchase two New York real properties through Castellan Realty Holdings LLC (Employer Identification Number 87-1548203), a Delaware limited liability company controlled by Zelenko:
(a) A luxury condominium at 425 East 58th Street, Apt. 32F, New York, New York 10022, purchased in June 2022 for $4.85 million. This is the same property at which Zelenko currently resides. (Ex. G.)
(b) A commercial property at 17 Wooster Street, Unit 3, New York, New York 10013, purchased in September 2022 for $3.15 million. (Ex. G.)
Both properties were acquired using funds transferred from Meridian Prime's accounts and are titled in the name of Castellan Realty Holdings LLC, an entity with no apparent purpose other than holding real estate purchased with Driftwood's stolen money.
Fourth: $5.1 million in cash withdrawals and personal expenditures. Defendants withdrew and spent $5.1 million in cash and personal expenditures, including luxury goods, travel, and other personal items. The forensic analysis has identified bank records reflecting cash withdrawals, credit card payments, and other disbursements by Zelenko, Carvallo, and Sobchak that are traceable to funds originating in Meridian Prime's client accounts.
Fifth: $3.2 million retained in Meridian Prime's operating accounts. As of the date of discovery, approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA. (Ex. C.) This is the only portion of the misappropriated funds that is currently known to be readily accessible within this Court's jurisdiction and amenable to immediate restraint.
The five channels of diversion account for the entirety of the $47.3 million in misappropriated funds: $18.6 million + $12.4 million + $8.0 million + $5.1 million + $3.2 million = $47.3 million.
F. Discovery of the Fraud
On July 18, 2023, Sandra Hu, Driftwood's COO/CCO, initiated a routine margin reconciliation as part of Driftwood's standard operational procedures. As part of this reconciliation, Ms. Hu requested direct confirmation from Bridgemont Bank NA — the bank at which Meridian Prime maintained its client accounts — of the balances held in those accounts. (Hu Aff. ¶¶ 12–15, Ex. K.)
The response from Bridgemont Bank NA was devastating. Rather than confirming the $52.1 million reflected on Meridian Prime's June 30, 2023 account statement (Ex. B), Bridgemont's records reflected total client account balances of only $3.2 million. (Ex. C.) The discrepancy was staggering: $52.1 million minus $3.2 million equaled a $48.9 million shortfall. The difference of $1.6 million between the shortfall ($48.9M) and the total misappropriation ($47.3M) is attributable to the $1.6 million in margin that Driftwood had posted but that was not reflected in the June 30 statement due to timing of month-end processing. The bottom line was clear: $47.3 million of Driftwood's money was gone.
Upon discovering the discrepancy, Ms. Hu immediately contacted Zelenko by telephone and by email. Zelenko initially claimed that the discrepancy was the result of a "back-office reconciliation error" and promised to provide corrected records within 48 hours. He never did. (Hu Aff. ¶¶ 16–18, Ex. K.)
On July 21, 2023, an emergency meeting of the board of directors of Driftwood was convened. After receiving a full briefing from Ms. Hu regarding the discrepancy and Zelenko's evasive responses, the board authorized the immediate engagement of litigation counsel. (Hu Aff. ¶ 19, Ex. K.)
On July 25, 2023, Driftwood retained Calderwood & Harkness LLP to investigate the matter and pursue all available legal remedies. Since that date, Calderwood & Harkness has conducted an intensive investigation, including the engagement of forensic accountants and the review of available banking, corporate, and real property records.
G. Preliminary Fund Tracing
Promptly after its engagement, Calderwood & Harkness retained Kelvantis Forensic Advisors LLC, located at 101 Hudson Street, Suite 2500, Jersey City, New Jersey 07302, to conduct a forensic fund-tracing analysis. The engagement is led by Natasha Everett, CPA, CFF, a certified fraud examiner with extensive experience in tracing misappropriated assets. (Ex. F.)
Kelvantis's preliminary analysis, based on available banking records, wire transfer data, corporate formation records, real property records, and other publicly available information, confirmed the five channels of diversion described in Section E above. Specifically, Kelvantis's analysis:
(a) Identified wire transfers totaling $18.6 million from Meridian Prime's Bridgemont Bank NA accounts to accounts at Palmetto International Bank Ltd. in Nassau in the name of Stellaris Trading Ltd.;
(b) Identified wire transfers totaling $12.4 million from Meridian Prime's accounts to the Zelenko Family Irrevocable Trust at Marlowe Asset Management Trust Company of Delaware;
(c) Traced $8.0 million in real estate acquisitions by Castellan Realty Holdings LLC, confirmed through review of publicly filed deeds and other property records maintained by the New York City Register and the New York City Department of Finance;
(d) Identified $5.1 million in cash withdrawals, credit card payments, and other personal expenditures by the individual defendants; and
(e) Confirmed that approximately $3.2 million remained in Meridian Prime's operating accounts at Bridgemont Bank NA as of the most recent available bank records.
Kelvantis's analysis is ongoing, and additional details are expected as further records are obtained. However, the preliminary results are more than sufficient to establish, to a high degree of certainty, the scope and mechanics of the fraud.
ARGUMENT
I. THIS COURT SHOULD GRANT A TEMPORARY RESTRAINING ORDER PURSUANT TO CPLR § 6301
A. Legal Standard for a TRO Under CPLR § 6301
Under CPLR § 6301, a temporary restraining order may be granted where the moving party demonstrates: (1) a likelihood of success on the merits; (2) irreparable injury in the absence of the restraining order; and (3) a balancing of the equities in the movant's favor. See Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005); Northpoint Casualty Group Ins. Co. v. Capasso, 75 N.Y.2d 860, 862 (1990).
Ex parte relief — that is, issuance of a temporary restraining order without prior notice to the adverse party — is authorized by CPLR § 6313(a) upon a showing that "immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had." CPLR § 6313(a). Courts routinely grant ex parte TROs in fraud cases involving the dissipation or concealment of misappropriated funds, recognizing that advance notice to the defendants would defeat the very purpose of the restraint. See, e.g., Republic of Haiti v. Duvalier, 211 A.D.2d 379, 384 (1st Dep't 1995); JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366, 388 (S.D.N.Y. 2003) (applying New York law).
As demonstrated below, Driftwood satisfies each element of this standard, and the circumstances of this case present a compelling — indeed, paradigmatic — case for ex parte relief.
B. Driftwood Is Likely to Succeed on the Merits
Driftwood has asserted five causes of action in its verified complaint. Each is supported by overwhelming evidence, and Driftwood is likely to succeed on each claim.
1. Fraud.  To establish a claim for fraud under New York law, a plaintiff must prove: (i) a material misrepresentation of fact; (ii) made with knowledge of its falsity (scienter); (iii) with the intent to induce reliance; (iv) justifiable reliance by the plaintiff; and (v) damages resulting from such reliance. See Eurycleia Partners, LP v. Padilla & Severin LLP, 12 N.Y.3d 553, 559 (2009); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996).
Each element is readily satisfied here.
Material misrepresentation. Defendants fabricated trade confirmations and monthly account statements over an eighteen-month period, systematically misrepresenting the existence and profitability of FX forward and option positions purportedly held for Driftwood's account. The June 30, 2023 account statement alone reflected a purported balance of $52.1 million — including $14.8 million in entirely fictitious trading profits — when the actual balance was $3.2 million. (Exs. B, C.) These misrepresentations were not minor discrepancies or the product of accounting error; they were deliberate fabrications designed to perpetuate a multi-million-dollar fraud.
Scienter. The systematic and sustained nature of the fabrications — spanning eighteen months and involving the creation of hundreds of fictitious trade confirmations and eighteen monthly account statements — establishes scienter beyond any reasonable dispute. The diversion of funds to entities controlled by the individual defendants, including Stellaris Trading Ltd., the Zelenko Family Irrevocable Trust, and Castellan Realty Holdings LLC, further demonstrates that defendants acted with full knowledge of the falsity of their representations and with a deliberate plan to enrich themselves at Driftwood's expense. Zelenko's prior FINRA disciplinary history for unauthorized trading at Clarendon Markets LLC in 2017 (Ex. J) provides additional evidence of a pattern of deceptive conduct in the financial markets, and is highly probative of scienter. See Adriatic Specialty Insurance v. Aniero Concrete Co., 404 F.3d 566, 580 (2d Cir. 2005) (prior misconduct relevant to scienter determination).
Intent to induce reliance. The fabricated trade confirmations and account statements served a single purpose: to induce Driftwood to continue posting margin deposits into Meridian Prime's accounts, from which defendants could then divert the funds. Without the illusion of profitable trading and a growing portfolio, Driftwood would have had no reason to maintain its relationship with Meridian Prime, let alone to post the $38.5 million in cumulative margin deposits that defendants ultimately stole.
Justifiable reliance. Driftwood justifiably relied on the fabricated confirmations and statements in continuing to transact with Meridian Prime and to post margin deposits. Driftwood is a sophisticated institutional investor, but even sophisticated parties are entitled to rely on the representations of their counterparties under an ISDA Master Agreement. See Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 195 (2d Cir. 2003). The fabricated documents bore the indicia of authenticity, including standardized ISDA trade confirmation formatting, purported trade identification numbers, and detailed position-level reporting. Driftwood had no reason to suspect that its prime broker was fabricating the entirety of its trading activity. Moreover, Driftwood engaged in standard operational practices, including periodic margin reconciliation — and it was precisely such a reconciliation that ultimately uncovered the fraud.
Damages. Driftwood has suffered damages of $47.3 million, representing the total funds misappropriated by defendants over the course of the fraud.
2. Conversion.  Conversion under New York law is "the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." Colavito v. New York Organ Donor Network, Inc., 8 N.Y.3d 43, 49–50 (2006). The defendant must exercise dominion over the plaintiff's property inconsistent with the plaintiff's rights. See Republic of Haiti v. Duvalier, 211 A.D.2d at 384.
Defendants exercised unauthorized dominion and control over Driftwood's funds by diverting $47.3 million in margin deposits and FX settlement proceeds to accounts and vehicles outside the scope of the ISDA Master Agreement. The funds were Driftwood's property, posted as collateral under the CSA and held in trust for Driftwood's benefit. Defendants had no right, authority, or contractual basis to transfer those funds to Stellaris Trading Ltd., the Zelenko Family Irrevocable Trust, Castellan Realty Holdings LLC, or their personal accounts. The conversion is complete and total, and the likelihood of success on this claim is overwhelming.
3. Breach of Fiduciary Duty.  Meridian Prime, as an FX prime broker holding Driftwood's margin deposits and settlement proceeds in client accounts, owed fiduciary duties of loyalty and care to Driftwood. See Bullmore v. Rowan Whitfield CPAs LLP Cayman Islands, 45 A.D.3d 461, 464 (1st Dep't 2007) (recognizing fiduciary duties arising from custodial relationships); In re Estate of Rothko, 43 N.Y.2d 305, 319 (1977). A broker that receives and holds client funds in a custodial capacity occupies a position of trust and confidence, and is bound to use those funds exclusively for the client's benefit.
The systematic misappropriation of $47.3 million in client funds constitutes a wholesale breach of every fiduciary duty owed by Meridian Prime to Driftwood. Rather than safeguarding Driftwood's assets and deploying them in accordance with the ISDA Master Agreement, defendants looted the accounts and enriched themselves. Moreover, the individual defendants — Zelenko, Carvallo, and Sobchak — owed fiduciary duties to Driftwood by virtue of their roles as the officers and agents of the counterparty holding Driftwood's funds. Their personal participation in the misappropriation renders them individually liable for breach of fiduciary duty.
4. Unjust Enrichment.  To state a claim for unjust enrichment under New York law, a plaintiff must establish that: (i) the defendant was enriched; (ii) at the plaintiff's expense; and (iii) equity and good conscience require the defendant to disgorge the enrichment. See Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011).
Defendants were enriched to the tune of $47.3 million — entirely at Driftwood's expense. The enrichment was the direct product of fraud, and there is no conceivable equitable basis upon which defendants should be permitted to retain even a single dollar of Driftwood's money. Driftwood is entitled to disgorgement of the full amount.
5. Alter Ego / Veil-Piercing.  Under New York law, a court may pierce the corporate veil where the corporate form has been used as a mere alter ego or instrumentality of its owners to perpetrate a fraud or injustice. See Morris v. New York State Dep't of Taxation & Fin., 82 N.Y.2d 135, 141 (1993); TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998). The inquiry focuses on whether the owners exercised complete domination over the entity with respect to the transaction at issue, and whether such domination was used to commit a fraud or wrong resulting in injury to the plaintiff. Id.
Zelenko, Carvallo, and Sobchak exercised complete domination and control over Meridian Prime and used it as a mere instrumentality for personal enrichment. They commingled corporate and personal funds — transferring millions of dollars from Meridian Prime's accounts to personal accounts, trusts, and shell entities with no business justification. They disregarded corporate formalities, treating Meridian Prime's client accounts as their personal piggy bank. And they used related entities — Stellaris Trading Ltd., Castellan Realty Holdings LLC, and the Zelenko Family Irrevocable Trust — as conduits for the fraud. Under these circumstances, the corporate veil of Meridian Prime should be pierced, and the individual defendants should be held personally liable for the full amount of Driftwood's damages.
C. Driftwood Will Suffer Irreparable Harm Absent a TRO
Irreparable harm exists where the injury threatened is one that cannot be adequately redressed by an award of money damages after trial. See Second on Second Café, Inc. v. Hing Sing Trading, Inc., 66 A.D.3d 255, 272 (1st Dep't 2009). In fraud cases involving the active dissipation and concealment of assets, courts have consistently recognized that the risk of irreparable harm is acute, because the plaintiff may be left with a judgment that is uncollectible. See Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000).
The risk of irreparable harm here is not theoretical — it is demonstrated by defendants' own conduct. The very nature of the fraud — the systematic diversion of funds through five separate channels, including offshore accounts at Palmetto International Bank Ltd. in Nassau, a BVI entity (Stellaris Trading Ltd.), a Delaware irrevocable trust, and luxury real estate purchases — reveals defendants' deliberate modus operandi of placing assets beyond the reach of creditors. Each diversion channel was specifically chosen to maximize opacity and minimize recoverability.
The timeline is particularly telling. The Zelenko Family Irrevocable Trust was established on April 8, 2021 — more than eight months before the ISDA Master Agreement was executed on December 15, 2021. This sequence of events strongly suggests that Zelenko established the trust in anticipation of the fraud, as part of a premeditated asset-shielding strategy. An irrevocable trust, once funded, places assets beyond the settlor's control and — absent a successful fraudulent transfer action — beyond the reach of the settlor's creditors. The pre-positioning of this structure prior to the commencement of the fraud is powerful evidence of premeditation and intent.
Of the $47.3 million misappropriated, $18.6 million has already been transferred offshore to the Bahamas — a jurisdiction that, while not beyond the reach of law, imposes significant practical and legal obstacles to asset recovery. There is an imminent and well-founded risk that additional funds will be transferred beyond this Court's jurisdiction if defendants are not immediately restrained.
Critically, only $3.2 million is currently known to remain in Meridian Prime's accounts at Bridgemont Bank NA. This represents less than seven percent of the total amount stolen. Absent immediate restraint, even this modest sum may be dissipated — leaving Driftwood with a paper judgment and no practical means of recovery.
Money damages alone will be wholly inadequate if defendants succeed in placing the remaining traceable assets beyond the reach of this Court's orders. A TRO is essential to preserve the status quo and to give meaningful effect to whatever judgment Driftwood ultimately obtains.
D. The Balance of Equities Favors Driftwood
The balance of equities overwhelmingly favors Driftwood. Driftwood has suffered a catastrophic loss of $47.3 million. While Driftwood is a substantial institutional fund with approximately $1.82 billion in AUM, a loss of this magnitude — representing approximately 2.6% of total AUM — is material by any standard and causes direct harm to the fund and its investors.
On the other side of the ledger, the restraint Driftwood seeks merely preserves the status quo pending the Court's determination of the merits. Defendants are not asked to surrender any assets; they are asked only to refrain from transferring, encumbering, dissipating, or concealing assets during the pendency of this action. No legitimate business interest of Meridian Prime or any individual defendant is impaired by an order preventing them from moving assets that consist, in whole or in substantial part, of Driftwood's misappropriated funds.
The individual defendants face no cognizable hardship from an order preventing them from dissipating assets that are traceable to Driftwood's stolen money. To the extent that any defendant argues that an asset freeze would impose a burden, that burden is dwarfed by Driftwood's right to preserve its ability to recover funds that were taken from it through fraud. See Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533, 540 (2009) (recognizing the strong public interest in ensuring that defrauded parties can recover stolen assets).
Any hardship to defendants from asset restraint is vastly outweighed by Driftwood's interest in preserving its ability to recover the stolen funds. The equities could not be more clear.
E. Ex Parte Relief Is Warranted
Ex parte relief under CPLR § 6313(a) is warranted where notice to the defendants would defeat the purpose of the temporary restraining order by providing them an opportunity to transfer or conceal remaining assets. See Gryphon Dom. VI, LLC v. APP Int'l Fin. Co., 41 A.D.3d 25, 33 (1st Dep't 2007).
This case presents precisely the circumstances that CPLR § 6313(a) was designed to address. Defendants' demonstrated pattern of moving funds through multiple jurisdictions — from New York to the Bahamas, to the British Virgin Islands (through Stellaris Trading Ltd.), and to Delaware (through the Zelenko Family Irrevocable Trust) — and through multiple opaque entities shows conclusively that they have both the means and the willingness to dissipate assets on short notice. Indeed, the very sophistication of the diversion scheme — structured wire transfers designed to evade bank scrutiny, layered through shell entities across multiple jurisdictions — demonstrates that defendants are capable of moving substantial sums rapidly and covertly.
If defendants are given advance notice of Driftwood's application, the $3.2 million currently held at Bridgemont Bank NA could be wired offshore within hours. The real properties held by Castellan Realty Holdings LLC could be encumbered or transferred. Any remaining assets of the individual defendants within the State of New York could be moved beyond the Court's reach.
Courts in this jurisdiction have consistently held that ex parte relief is appropriate where the defendant has demonstrated a propensity for asset concealment. See, e.g., Computer Assocs. Int'l, Inc. v. Altai, Inc., 61 A.D.3d 44, 54 (1st Dep't 2009); Republic of Haiti v. Duvalier, 211 A.D.2d at 384. This is such a case. The risk that notice would result in the dissipation of the last remaining identifiable assets is not speculative — it is the virtually certain consequence of defendants' well-established pattern of conduct.
II. THIS COURT SHOULD GRANT AN ORDER OF ATTACHMENT IN THE AMOUNT OF $50,000,000 PURSUANT TO CPLR § 6201
A. Legal Standard for Attachment Under CPLR § 6201
Attachment is a provisional remedy authorized by CPLR Article 62 to secure the satisfaction of a judgment that may ultimately be rendered in the plaintiff's favor. CPLR § 6201 specifies the grounds upon which attachment may be granted. As relevant here, subdivision (3) of that section permits attachment where:
"the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."
CPLR § 6201(3).
Under CPLR § 6212(a), a plaintiff seeking an order of attachment must establish: (i) that there is a cause of action; (ii) that it is probable that the plaintiff will succeed on the merits; (iii) that one or more grounds for attachment provided in CPLR § 6201 exist; and (iv) that the amount demanded from the defendant exceeds all known counterclaims. See ICD Grp., Inc. v. Israel Foreign Trade Co., 12 N.Y.3d 8, 14 (2009); Westmark Bancorp v. NBM LLC, 359 F.3d 171, 178 (2d Cir. 2004) (applying New York law).
The movant's burden on a motion for attachment is to demonstrate "a probability of success, not a certainty." VisionChina Media Inc. v. Shareholder Representative Servs., LLC, 109 A.D.3d 49, 58 (1st Dep't 2013). The standard is met here with room to spare.
B. Driftwood Has a Meritorious Cause of Action
As set forth extensively in Point I.B above, Driftwood has established a strong likelihood of success on its claims of fraud, conversion, breach of fiduciary duty, unjust enrichment, and alter ego/veil-piercing. The misappropriation of $47.3 million is documented by the extraordinary discrepancy between Meridian Prime's fabricated June 30, 2023 account statement — reflecting a purported balance of $52.1 million (Ex. B) — and the actual Bridgemont Bank NA account balance of $3.2 million (Ex. C). The preliminary forensic tracing by Kelvantis Forensic Advisors LLC (Ex. F) has identified the specific channels through which the funds were diverted and has traced those funds to accounts and entities controlled by the individual defendants. These are not contested issues of fact requiring resolution at trial; they are verifiable, documentary facts that establish the fraud with a high degree of certainty.
C. Grounds for Attachment Exist Under CPLR § 6201(3)
The record before this Court establishes, overwhelmingly, that defendants have "assigned, disposed of, encumbered or secreted property" and have "removed it from the state" with the intent to defraud creditors and frustrate the enforcement of any judgment that may be rendered in Driftwood's favor. CPLR § 6201(3). The specific acts that satisfy this standard include:
Transfer of $18.6 million to offshore accounts. Defendants transferred $18.6 million to accounts at Palmetto International Bank Ltd. in Nassau, Bahamas, held in the name of Stellaris Trading Ltd., a BVI entity controlled by Zelenko. This is classic offshore asset concealment. The use of a BVI entity — a jurisdiction known for its opacity and minimal disclosure requirements — as the account holder at a Bahamian bank is the hallmark of a deliberate asset-shielding strategy. The structured nature of the transfers, executed in multiple tranches apparently designed to evade enhanced scrutiny, reinforces the inference of fraudulent intent. See Penmark Securities v. Pakistan Int'l Airlines Corp., 2015 WL 3767442, at *4 (Sup. Ct. N.Y. Cty. June 17, 2015) (offshore transfers constitute grounds for attachment under § 6201(3)).
Transfer of $12.4 million to the Zelenko Family Irrevocable Trust. The transfer of $12.4 million to an irrevocable trust established by Zelenko — and funded exclusively with money stolen from Driftwood — is a textbook example of secreting property within the meaning of CPLR § 6201(3). An irrevocable trust, once funded, is designed to be beyond the reach of the settlor and, ordinarily, the settlor's creditors. By placing $12.4 million of Driftwood's funds into this structure, Zelenko sought to insulate those assets from any future judgment. The fact that the trust was established on April 8, 2021, months before the fraud began, only strengthens the inference of premeditated intent.
Purchase of $8.0 million in real property through Castellan Realty Holdings LLC. Defendants used $8.0 million in misappropriated funds to purchase two New York properties through Castellan Realty Holdings LLC, a shell entity having no apparent business purpose other than holding real estate purchased with stolen money. The use of an LLC to hold the properties — rather than purchasing them in defendants' individual names — is a further act of concealment, designed to obscure the connection between the stolen funds and the assets acquired with them. While the properties are currently located within this Court's jurisdiction, they could be encumbered or transferred at any time absent judicial restraint.
Cash withdrawals and personal expenditures totaling $5.1 million. The dissipation of $5.1 million in cash withdrawals and personal expenditures by the individual defendants constitutes a further disposal of property under CPLR § 6201(3). These funds have been spent and cannot be recovered in specie, further demonstrating defendants' intent to consume and dissipate the stolen assets as quickly as possible.
Taken together, these acts constitute a systematic and comprehensive campaign to place Driftwood's funds beyond the reach of creditors and to frustrate the enforcement of any judgment. The statutory grounds for attachment under CPLR § 6201(3) are established beyond reasonable dispute.
D. CPLR § 6201(8) — Fraud-Based Claims
Attachment is also independently available under CPLR § 6201(8), which permits attachment in cases where:
the cause of action is based upon a judgment, decree or order of a court of the United States or of any other court which is entitled to full faith and credit in this state, or upon a cause of action in which the plaintiff has demanded and would be entitled to a money judgment against one or more defendants, each of whom resides or is domiciled in the state, and who is a natural person and is not an infant or an incompetent person.
All three individual defendants — Zelenko, Carvallo, and Sobchak — reside in New York. Each is a natural person, and there is no indication that any is an infant or an incompetent. Driftwood's causes of action are for money damages arising from fraud and related claims, and Driftwood has demanded a money judgment. The requirements of CPLR § 6201(8) are therefore satisfied as to all three individual defendants, providing an independent and alternative basis for the attachment order.
E. The Amount Demanded Exceeds All Known Counterclaims
CPLR § 6212(a) requires a showing that "the amount demanded from the defendant exceeds all counterclaims known to the plaintiff." Driftwood seeks compensatory damages of $47.3 million, representing the full amount of funds misappropriated by defendants. In addition, Driftwood seeks prejudgment interest at the statutory rate of nine percent (9%) per annum under CPLR § 5004, calculated from the date of each misappropriation. Driftwood also seeks attorneys' fees and costs pursuant to the contractual fee-shifting provision in the ISDA Master Agreement. (Ex. A.)
No counterclaims are anticipated. The ISDA Master Agreement does not provide defendants with any basis for asserting counterclaims, and given that defendants' entire relationship with Driftwood was premised on fraud, there is no conceivable legitimate claim that defendants could assert against Driftwood.
An attachment in the amount of $50,000,000 is appropriate to secure the anticipated judgment. This figure reflects the compensatory damages of $47.3 million, together with a reasonable estimate of prejudgment interest that has accrued and will continue to accrue from the commencement of the fraud in January 2022. At the statutory rate of 9% per annum on $47.3 million, prejudgment interest accrues at a rate of approximately $4.257 million per year, or approximately $354,750 per month. The modest cushion above the principal amount of damages is appropriate to account for this accruing interest and Driftwood's attorneys' fees.
F. The Attachment Should Reach Specific Identified Assets
Driftwood has identified specific assets that should be subject to attachment. These assets either constitute or are directly traceable to the misappropriated funds:
All accounts held by Meridian Prime Capital LLC at Bridgemont Bank NA, 383 Madison Avenue, New York, New York 10179. These accounts currently hold approximately $3.2 million and are the only liquid assets known to remain within this Court's immediate jurisdiction. Attachment of these accounts is critical to preserve even this modest portion of the stolen funds.
All personal bank and brokerage accounts of Viktor Zelenko, Irene Carvallo, and Dmitri Sobchak within the State of New York. Each of the individual defendants participated directly in the fraud, each resides in New York, and each has been the direct beneficiary of diverted funds. Their personal accounts within this state should be attached to prevent further dissipation.
The real properties held by Castellan Realty Holdings LLC:
(a) 425 East 58th Street, Apt. 32F, New York, New York 10022 (purchased June 2022 for $4.85 million) (Ex. G); and
(b) 17 Wooster Street, Unit 3, New York, New York 10013 (purchased September 2022 for $3.15 million) (Ex. G).
Both properties were purchased with Driftwood's misappropriated funds and are titled in the name of a shell entity controlled by Zelenko. Attachment of these properties will prevent their sale, transfer, or encumbrance pending the resolution of this action.
Any accounts or assets of Castellan Realty Holdings LLC (Employer Identification Number 87-1548203) within this Court's jurisdiction.
Any interest of Viktor Zelenko in the Zelenko Family Irrevocable Trust (Tax Identification Number 86-6092411) held at Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. While the trust is held at a Delaware institution, to the extent that the trust holds any assets within the State of New York or that Zelenko retains any beneficial interest in the trust that is subject to attachment, such interest should be reached by the Court's order.
III. THE SCOPE OF THE REQUESTED RELIEF IS APPROPRIATELY TAILORED
A. The TRO Should Restrain All Defendants
Driftwood respectfully submits that the temporary restraining order should apply to all four defendants: Meridian Prime Capital LLC, Viktor Zelenko, Irene Carvallo, and Dmitri Sobchak. The justification for restraining each defendant is compelling.
As to Meridian Prime, the entity defendant served as the vehicle through which the entire fraud was perpetrated. Its accounts at Bridgemont Bank NA hold the only liquid funds currently known to be within this Court's jurisdiction. Restraining Meridian Prime from transferring or dissipating these funds is the sine qua non of effective relief.
As to the individual defendants, each participated directly and personally in the fraud. Zelenko masterminded and directed the scheme, controlled the conduit entities (Stellaris Trading Ltd., Castellan Realty Holdings LLC, and the Zelenko Family Irrevocable Trust), and was the principal beneficiary of the stolen funds. Carvallo, as CFO, prepared and disseminated the fabricated account statements that perpetuated the fraud. Sobchak fabricated trade confirmations and executed the unauthorized wire transfers that diverted Driftwood's funds. Moreover, as demonstrated in Point I.B.5 above, the individual defendants are the alter egos of Meridian Prime, having exercised complete dominion over the entity and used it as a mere instrumentality for personal enrichment.
The TRO should apply to all assets of all defendants within the jurisdiction of this Court, including but not limited to funds held at banking institutions, securities and brokerage accounts, real property, and any other tangible or intangible assets. Given the breadth of the fraud and the multiple channels through which funds were diverted, a comprehensive restraining order is necessary to prevent defendants from engaging in further acts of dissipation.
B. The Undertaking Requirement
CPLR § 6212(b) requires the plaintiff to give an undertaking, in an amount to be fixed by the Court, "for the payment to the defendant of all costs and damages, including reasonable attorney's fees, which may be sustained by reason of the attachment if the defendant recovers judgment or if it is finally decided that the plaintiff was not entitled to an attachment."
Driftwood is fully prepared to post an undertaking in an amount to be determined by the Court. Given the extraordinary strength of Driftwood's claims — supported by documentary evidence of a $48.9 million discrepancy between fabricated account statements and actual bank balances, wire transfer records tracing the diversion of funds, and preliminary forensic analysis confirming the scheme — the risk that the attachment will ultimately be found to have been wrongfully obtained is negligible. Accordingly, a modest undertaking is appropriate. See Tidewater Commerce Bank v. M/V "TEMARA", 892 F.3d 511, 518 (2d Cir. 2018) (the strength of the plaintiff's case is relevant to the amount of the undertaking); VisionChina Media Inc., 109 A.D.3d at 62.
Driftwood is a substantial institutional hedge fund with approximately $1.82 billion in assets under management. It possesses the financial capacity to satisfy whatever undertaking this Court deems appropriate. Driftwood respectfully submits that an undertaking in the range of $500,000 to $1,000,000 would be appropriate in light of the facts and circumstances of this case, but defers to the Court's judgment on this point.
C. Notice to Third Parties
To give effect to the temporary restraining order and order of attachment, Driftwood requests authorization to serve the following third parties:
Bridgemont Bank NA, 383 Madison Avenue, New York, New York 10179, as the depository institution holding Meridian Prime's accounts. Service upon Bridgemont Bank NA is essential to ensure that the approximately $3.2 million in Meridian Prime's accounts is immediately frozen and cannot be transferred or withdrawn.
Marlowe Asset Management Trust Company of Delaware, 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801, as the trustee of the Zelenko Family Irrevocable Trust. Service upon Marlowe Asset Management Trust Company is necessary to restrain any distributions from the trust and to attach any assets of the trust that are subject to this Court's jurisdiction.
The New York City Register, with respect to the real properties at 425 East 58th Street, Apt. 32F, New York, New York 10022 and 17 Wooster Street, Unit 3, New York, New York 10013, held by Castellan Realty Holdings LLC. Filing of the attachment order with the City Register will create a lien on these properties and prevent their transfer or encumbrance.
Driftwood will comply with all applicable service requirements under CPLR Article 62 and will promptly serve the temporary restraining order and order of attachment upon all defendants and the identified third parties upon issuance.
CONCLUSION
For all of the foregoing reasons, Plaintiff Driftwood Absolute Return Fund Ltd. respectfully requests that this Court:
1.  Enter a temporary restraining order pursuant to CPLR § 6301 and § 6313(a), without prior notice to defendants, freezing all accounts held by Meridian Prime Capital LLC at Bridgemont Bank NA and restraining all defendants — Meridian Prime Capital LLC, Viktor Andreyevich Zelenko, Irene Maria Carvallo, and Dmitri Pavlovich Sobchak — from transferring, encumbering, dissipating, secreting, or otherwise disposing of any assets, wherever located, within the jurisdiction of this Court;
2.  Grant an order of attachment in the amount of $50,000,000 pursuant to CPLR § 6201 et seq., attaching the specified assets of all defendants as set forth in Point II.F above;
3.  Set a prompt return date for a hearing on Driftwood's application for a preliminary injunction, to be held within such time as the Court deems appropriate;
4.  Authorize Driftwood to serve the temporary restraining order and order of attachment upon Bridgemont Bank NA, Marlowe Asset Management Trust Company of Delaware, and the New York City Register; and
5.  Grant such other and further relief as this Court deems just and proper.
Dated: August 7, 2023 New York, New York
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand, Partner Hannah Brinkley, Senior Associate 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Attorneys for Plaintiff Driftwood Absolute Return Fund Ltd.
ATTORNEY CERTIFICATION
Pursuant to Section 130-1.1a of the Rules of the Chief Administrator of the Courts (22 NYCRR § 130-1.1a), the undersigned, an attorney admitted to practice before the courts of the State of New York, hereby certifies that, upon information and belief formed after an inquiry reasonable under the circumstances:
(a) the presentation of the foregoing memorandum of law and the accompanying ex parte application is not frivolous as defined in 22 NYCRR § 130-1.1(c);
(b) the contentions contained herein are warranted by existing law and are supported by a good-faith argument for the extension, modification, or reversal of existing law;
(c) the factual contentions contained herein have evidentiary support, or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation and discovery; and
(d) the filing of this memorandum and the accompanying application is not interposed for any improper purpose, including but not limited to harassment, causing unnecessary delay, or needlessly increasing the cost of litigation.
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand, Partner 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4000
Date: August 7, 2023
EXHIBIT LIST
The following exhibits are submitted in support of Plaintiff's Ex Parte Application for a Temporary Restraining Order and Order of Attachment and are referenced throughout this Memorandum of Law:
Exhibit | Description
Exhibit A | ISDA Master Agreement (2002 form) dated December 15, 2021, between Driftwood Absolute Return Fund Ltd. and Meridian Prime Capital LLC, including Credit Support Annex
Exhibit B | Fabricated monthly account statement from Meridian Prime Capital LLC dated June 30, 2023 (reflecting purported account balance of $52.1 million)
Exhibit C | Confirmation letter from Bridgemont Bank NA reflecting actual Meridian Prime client account balance of $3.2 million
Exhibit D | Selected fabricated trade confirmations purportedly issued by Meridian Prime Capital LLC
Exhibit E | Wire transfer records documenting Driftwood's margin deposits totaling $38.5 million
Exhibit F | Preliminary forensic tracing summary prepared by Kelvantis Forensic Advisors LLC (Natasha Everett, CPA, CFF, engagement partner)
Exhibit G | Castellan Realty Holdings LLC property records — 425 East 58th Street, Apt. 32F, New York, NY 10022 and 17 Wooster Street, Unit 3, New York, NY 10013 (deeds, purchase records, and property filings)
Exhibit H | Zelenko Family Irrevocable Trust — formation documents (dated April 8, 2021)
Exhibit I | Stellaris Trading Ltd. — BVI incorporation records (Registration No. 2043871)
Exhibit J | FINRA disciplinary record of Viktor Andreyevich Zelenko (2017 censure and fine for unauthorized trading at Clarendon Markets LLC)
Exhibit K | Affidavit of Sandra Hu, COO/CCO of Driftwood Capital Management LP, sworn August 6, 2023, in support of Plaintiff's ex parte application for a temporary restraining order and order of attachment

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK — COMMERCIAL DIVISION

DRIFTWOOD ABSOLUTE RETURN FUND LTD.,

PRELIMINARY STATEMENT

STATEMENT OF FACTS

ARGUMENT

III. THE SCOPE OF THE REQUESTED RELIEF IS APPROPRIATELY TAILORED

CONCLUSION

CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP

ATTORNEY CERTIFICATION

CALDERWOOD & HARKNESS LLP

EXHIBIT LIST

Record

Parties

Dates

Amounts