U.S. Seeks Appointment of Trustee in Slatkin Bankruptcy

The U.S. trustee’s office filed an emergency motion Monday asking that a trustee be appointed to take over EarthLink co-founder Reed E. Slatkin’s Chapter 11 bankruptcy case.

Slatkin has been sued by investors for allegedly mishandling their funds, and his offices were raided Friday by the Federal Bureau of Investigation and the Internal Revenue Service. The Securities and Exchange Commission won an order, also Friday, freezing Slatkin’s assets.

U.S. Trustee Brian Fittipaldi cited the FBI’s investigation in asking for the emergency appointment of a trustee.

“Every hour that passes places creditors at greater risk of further damage,” Fittipaldi wrote in a declaration seeking the emergency appointment, which is scheduled to be heard at a hearing Wednesday.

Fittipaldi has said investor claims in the case could reach $600 million. Slatkin, who was not registered as an investment advisor, managed money for more than 500 investors, including Hollywood celebrities, Internet moguls and Santa Barbara socialites.

Slatkin’s attorneys could not be reached for comment.