This website has been established and will be maintained by the Trustee of the BullionDirect, Inc. Litigation Trust (“Trust”) to facilitate the administration of this proceeding, as well as to timely and efficiently communicate with former customers and creditors of BullionDirect, Inc. (“BDI”) and other parties in interest.
How Was the Trust Formed?
Pursuant to the Confirmation Order dated July 26th, 2016 entered by the United States Bankruptcy Court for the Western District of Texas, Austin Division (“Confirmation Order”), Gregory S. Milligan (“Trustee”) was appointed as Trustee of the Trust, as further memorialized in the BullionDirect, Inc. Litigation Trust Agreement (“Trust Agreement”).
What was BDI’s Position When the Bankruptcy Case Was Filed?
Over a period of months and years preceding the Chapter 11 filing on July 20, 2015, BDI improperly sold customer precious metals held in trust and spent customer monied held in trust from the sale or for the purchase of precious metals. Pursuant to the Disclosure Statement approved by the Bankruptcy Court, at the time of the bankruptcy filing, BDI’s assets had dwindled to less than $1 million, and total obligations were approximately $25 million.
What Investigations or Actions Were Taken After the Chapter 11 Filing?
The Trustee completed his review and issued his report (“Trustee’s Investigation Report”) on January 26, 2018.
On January 18, 2018 The United States Department of Justice, through the United States Attorney’s Office, indicted Charles McAllister, BDI’s founder and largest shareholder, (“McAllister Indictment”) on charges of wire fraud, money laundering, and engaging in monetary transactions in criminally deprived property. The indictment demands more than $16 million in damages.
On October 4, 2019, McAllister was convicted by a jury on two counts of wire fraud and one count of engaging in a monetary transaction with criminally derived property. McAllister faces up to twenty (20) years in federal prison for each wire fraud count and up to ten (10) years in federal prison for the money laundering charge. The Court is also considering entering a $16,186,212.56 monetary judgment against McAllister to represent the amount of proceeds obtained directly or indirectly from the defendant’s alleged scheme. Sentencing is currently scheduled for 9:00am on December 19, 2019, before U.S. District Judge Lee Yeakel. A copy of the press release issued by the Department of Justice can be found here.
What Activities Has the Trustee Undertaken?
In addition to the activities detailed in the Trustee’s Investigation Report, the Trustee has also liquidated the metals inventory and other personal property on hand at the time of his appointment. The Trustee has also collected payments on two pre-petition promissory notes for the benefit of the Trust. At the time the Trustee was appointed, the Trust received the turnover of all available cash from BDI totaling approximately $110,000. As of June 30, 2018, the Trust’s cash balance was approximately $700,000.
Prior to the entry of the Confirmation Order and prior to the appointment of the Trustee, the Bankruptcy Court entered an Order Approving Debtor’s Sale of Assets Free and Clear of Claims, Interests, Liens and Encumbrances (“Sale Order”) to Platform Universe, LLC. (now operating as Bullion Universe) and as more specifically identified in the executed Asset Purchase Agreement (“APA”). Pursuant to the APA, the Trust is entitled to a percentage of all annual net profit for a trailing seven-year period at the following percentages, with net profit defined as “revenue minus all operating expenses, minus interest payable, minus taxes payable, as calculated on an annual basis for Buyer’s operations relating to the Business.”
Year 1 80%
Years 2 and 3 60%
Years 4 through 7 50%
Since his appointment, the Trustee has spent considerable time pursuing the Trust’s profit sharing interest in the ongoing operations of Bullion Universe
On November 20, 2017, the Bankruptcy Court entered an order authorizing a settlement between the Trust and Dillon Gage (“Dillon Gage Settlement Order”) as memorialized in the agreement executed by the the parties (“Dillon Gage Settlement Agreement”) on October 23, 2017, which resulted in Dillon Gage paying $324,500.00 to the Trust. A key element of the settlement negotiated by the Trustee was future support to be provided to Bullion Universe by Dillon Gage in an effort to maximize the Trust’s future profit sharing distributions from Bullion Universe.
To date, Bullion Universe has not generated any distributable profits as defined in the APA and the Trustee does not have any anticipation that Bullion Universe will be providing the Trust any profit share payments in the near term, so the Trustee is in the process of preparing and filing with the Bankruptcy Court a motion to distribute all available funds on hand to allowed claimants.