Investors Suing CD Services Win Legal Round

Elderly investors who have accused a Laguna Hills financial broker of defrauding them of millions of dollars won a legal victory this week when a bankruptcy judge determined that a receiver will have control over divvying up an estimated $30 million worth of assets, a lawyer for the investors said Thursday.

On Tuesday, Judge John E. Ryan in Santa Ana rejected an attempt by CD Services to liquidate itself under bankruptcy laws. Ryan ruled that the company made the bankruptcy filing in “bad faith,” sending the case back to the court-appointed receiver.

Receiver Dennis Schmucker, a San Diego business consultant, is expected to work with investors to come up with a gradual payout plan, investors’ attorney Jeff Ferentz said.

Lawyers said CD Services filed for liquidation on July 30, the same day the Los Angeles judge enjoined company and certain individuals from engaging in illegal activities and appointed Schmucker as receiver. The bankruptcy filing effectively froze the receiver’s activities until Ryan’s ruling, Ferentz said.

Schmucker said he expects investors will start receiving some of their money back next year.