Ponzi scheme
Securities and Exchange Commission (SEC) v. Hill
Date: Aug. 25, 2026
Issue: Whether the district court denied UniBank due process by overruling its objections to the receiver’s distribution plan in the SEC’s Clean Energy Technology Association Inc. receivership without holding an evidentiary hearing.
Case Summary: In a unanimous decision, a Fifth Circuit panel vacated a Texas federal court decision that overruled UniBank’s objections to a receivership distribution plan without holding an evidentiary hearing.
In 2023, the SEC brought an enforcement action against Texas attorney Roy W. Hill, Pennsylvania dentist Eric N. Shelly, the Clean Energy Technology Association Inc. (CETA), and Freedom Impact Consulting LLC, alleging they operated a $155 million Ponzi scheme. The SEC alleged that Hill and Shelly raised money from more than 500 investors by selling interests in purported carbon capture units. CETA claimed the units would generate revenue from oil and natural gas operations. The SEC alleged that Hill and Shelly misled investors by claiming that CETA’s carbon capture units were patented, that CETA had contracts with ExxonMobil and other major oil and gas producers to lease hundreds of the units, and that the investments consistently generated 10% quarterly returns. The SEC asked the district court to freeze CETA’s assets and appoint a receiver, and the court appointed Albert C. “Tre” Black III to manage the receivership estate.
Several investors had financed their CETA investments through UniBank, a Washington state-based commercial bank that provided them with secured loans. Those investors later sued UniBank in Washington for fraud and negligence. UniBank obtained summary judgment on the negligence claim because the court found that UniBank owed no duty to the investors.
Black later recommended that the district court distribute the remaining receivership funds on a pro rata basis. Under that approach, each claimant would receive a proportional share based on the claimant’s net cash loss. UniBank objected and argued that its perfected security interests gave it priority over distributions owed to the investors it had financed. Black recommended that the court reject UniBank’s objection and place its claim with the other victim claims. In November 2025, Judge Alan Albright of the Western District of Texas adopted Black’s report and recommendation, overruled UniBank’s objection, and ordered Black to distribute the funds on a pro rata basis. UniBank appealed the district court’s decision.
On appeal, the panel rejected UniBank’s jurisdictional challenges. UniBank argued that the Texas federal court lacked personal jurisdiction because the bank operated in Washington and appeared only to protect its secured interests. The panel disagreed. It ruled that the district court had in rem jurisdiction because it controlled the CETA funds in the receivership estate. The panel also found that UniBank effectively consented to the court’s jurisdiction when it asked the court to transfer receivership funds to the Washington court. The panel viewed that request as a request for affirmative relief.
The panel also rejected UniBank’s argument that the district court should have deferred to the related Washington litigation. According to the panel, the federal court had taken control of the receivership assets before the Washington case began, and federal receivership law governed the distribution of those assets. The panel also rejected UniBank’s full faith and credit argument. UniBank argued that the Texas court had to honor the Washington court’s ruling that UniBank owed no duty to the investors and could not treat UniBank the same as those investors in the receivership distribution. The panel disagreed because the Washington ruling addressed only UniBank’s duty to the investors on their negligence claim. It did not decide whether UniBank was a victim of the Ponzi scheme or whether its secured interests gave it priority in the receivership distribution.
But the panel concluded that the district court denied UniBank due process by resolving the bank’s objection through summary proceedings. The district court adopted Black’s brief report and recommendation without holding an evidentiary hearing or making detailed factual findings of its own. Black bore the burden of proof and had supported his position through earlier quarterly reports. Still, the panel found that the district court’s one-paragraph order did not give UniBank a meaningful chance to defend its claimed property rights. UniBank had submitted about 9,100 pages of evidence from the Washington litigation, and the panel ruled that the district court needed to address those disputed facts more fully.
The panel explained that courts may use streamlined procedures in equity receiverships, but they must still provide basic due process. A court must let an objector present evidence and arguments, address the objector’s claims and defenses, and connect its factual findings to the record. The panel found that the district court failed to do enough in each area and that Black’s analysis did not fully answer UniBank’s claims or tie its conclusions to specific evidence. As a result, the panel vacated the order and remanded the case for further proceedings. It did not decide whether the district court could ultimately impair UniBank’s state-law security interests.
Bottom Line: The Fifth Circuit vacated the district court’s order and remanded the case because the summary proceedings did not provide UniBank adequate due process, while leaving the district court free to decide the appropriate procedures and merits on remand.
Document: Opinion
