TD Bank scored a victory in bankruptcy court Thursday when a judge approved a protective order allowing the bank and a trustee unraveling Scott Rothstein’s Ponzi scheme to keep their controversial settlement agreement sealed.

Lawyers for money-losing investors have been trying to get TD Bank and trustee Herbert Stettin to produce details of any "secret settlements" or "side deals" the bank has made with victims, according to court documents.

A federal jury decided TD Bank aided and abetted Rothstein’s $1.2 billion fraud, and the bank was sanctioned for discovery violations. But Stettin proposes appointing the bank to help administer the reorganization plan for the defunct Rothstein Rosenfeldt Adler law firm.

The hearing before U.S. Bankruptcy Judge Raymond Ray underscored the deep rift that has opened between investor attorneys and Stettin and his legal team at Berger Singerman.

Where the Conrad & Scherer investor attorneys once sat with Berger Singerman attorneys pressing to recover money for victims, Conrad & Scherer attorneys sat at one end of the courtroom Thursday and Berger Singerman at the other, joined by an army of TD Bank attorneys from McGuireWoods.

Conrad & Scherer and co-counsel Kozyak Tropin & Throckmorton represent several investor groups, including the Razorback and Beverly victims. William Scherer obtained a $170 million settlement against TD Bank, the deepest pocket in the case, for the Razorback victims and is seeking up to $300 million in punitive damages for the Beverly victims.

Scherer filed a new complaint in Broward Circuit Court on Thursday against Rothstein, TD Bank and two former bank employees. The 157-page complaint alleges 20 investors lost $8 million in the Ponzi scheme.

The conflict arose after Berger Singerman filed a proposed reorganization plan, which would give the bank a key role in post-confirmation administration. The plan also calls for TD Bank to make a $55 million contribution to victims. In return, the bank would receive a bar order against lawsuits on Rothstein matters, including the Beverly case.

Rothstein is serving 50 years in prison for masterminding the settlement financing fraud from his Fort Lauderdale law firm. In depositions, he detailed how his key banks, TD Bank and Gibraltar Private Bank & Trust, helped him as they ignored numerous red flags for money laundering.

‘Almost Like Incest’

Conrad & Scherer was furious last week after Ray unsealed TD Bank’s settlement with Emess Capital LLC, another group of Rothstein investors, which disclosed the deal was worth $41 million.

In a motion filed Monday, the firm accused TD Bank of failing to comply with bankruptcy rules by engaging in "secret dealings."

"TD Bank has violated both the letter and the spirit of Bankruptcy Rule 2019, which requires the disclosure of all creditors an entity represents and their economic interests," the motion said. "TD Bank has done so in order to subvert the open process of bankruptcy."

At one point, Ray remarked, "This is almost like incest."

Paul Singerman of Berger Singerman said, "May I not respond to that, Judge?"

Ray answered, "I suggest that you don’t."

Singerman strongly defended the trustee’s actions, noting the reorganization plan calls for authorized claims to be fully compensated — something Conrad & Scherer refutes.

"We don’t think it’s in the best interests of the majority of victims to delay confirmation of this plan," Singerman said. "We don’t think our purpose should be to punish TD Bank but to get creditors paid off."

When Ray questioned why the trustee does not simply wait until "the end" to make such a deal, Singerman fired back: "We are at the end. We’ve scrambled through claims, and it’s time to be done with this."

Singerman accused the investor attorneys of operating under "ulterior motives."

"They are risking a deal to pay 100 cents on the dollar in order to allow a small group of claimants a chance to get punitive damages," he added. "This is a hopelessly irreconcilable conflict. This is a ruse to delay the case for reasons that don’t make sense."

David Rosendorf of Kozyak Tropin & Throckmorton countered that the trustee has refused to turn over any discovery on the TD Bank-Emess settlement, including a mediation agreement, and has refused to appear at depositions. After his firm made the requests, TD Bank filed the motion for protective order.

"The Emess settlement was cloaked under a confidential agreement," Rosendorf said. "We are not trying to delay anything. But we need to see these documents."