Judge Miriam Cedarbaum
To pay his lawyer, Walsh, who was criminally charged with securities, commodities and wire fraud, sought release of assets relating to the 2011 sale of his Half Moon Lane home, frozen in a parallel action by the SEC and Commodities Futures Trading Commission. The court had found Walsh was entitled to $900,000, the 1993 purchase price of a property whose 1999 sale in excess of $4 million purportedly financed Half Moon Lane’s $3.125 million purchase. After a Monsanto hearing, the court held the government showed probable cause that Walsh committed securities fraud. It found at least $6 million of his marital estate with Schaberg traceable to the fraud. Informed by the Second Circuit’s “drugs-in, first-out” rule in United States v. Banco Cafetero Panama, the court concluded that Half Moon Lane’s $3.8 million sale proceeds could be analogized to a withdrawal from a commingled account. Because the government showed probable cause to believe that at least $6 million of the marital estate was traceable to fraud, there was probable cause to believe that Half Moon Laneas a withdrawal from a commingled accountwas also traceable to fraud. Thus, the Half Moon Lane proceeds could not be released to Walsh so as to pay his lawyer.
