ORDER

JAMES L. ROBART, District Judge.

I. INTRODUCTION

Before the court is the Receiver Michael A. Grassmueck's motion for final approval of the terms of a proposed restructuring transaction for the commercial development project ("Tower Project") located at 2116 Fourth Avenue, Seattle, Washington ("Land") submitted by Binjiang Tower Corp. ("Binjiang"), PH Seattle Tower I, LLC ("Molasky"), and Defendant Lobsang Dargey and certain affiliated companies. (Mot. (Dkt # 356).) The court has reviewed the motion and the responses of (1) Mr. Dargey and Relief Defendants Dargey Development, LLC, Dargey Enterprises, LLC, Path Othello, LLC, Path Farmer's Market, LLC, and Dargey Holdings, LLC (collectively, "Defendants") (Def. Resp. (Dkt. # 365); (2) certain EB-5 investors in the Tower Project (EB-5 Resp. (Dkt. # 366)); and (3) Plaintiff Securities and Exchange Commission ("SEC") (SEC Resp. (Dkt. # 367)). The court has also reviewed other relevant portions of the record and the applicable law. Being fully advised, the court GRANTS the motion with certain modifications as more fully described below.

II. BACKGROUND

The Receiver was appointed pursuant to the Order Appointing Receiver entered on October 22, 2015. (Rec. Ord. (Dkt. # 88).) Pursuant to the terms of the Appointment Order, the court took "exclusive jurisdiction and possession of the assets, of whatever kind and wherever situated," of the Receivership Entities, which assets include the Tower Project and related interests (collectively, the "Tower Project Assets"). (Id. ¶ 2.) The Appointment Order further authorized the Receiver to take immediate possession of all real and personal property of the Receivership Entities, wherever located, and to engage brokers to sell or dispose of these assets, "in the manner the Receiver deems most beneficial to the Receivership Estate" without further order from the court, subject to procedures that the court may establish to administer any planned disposition. (Id. ¶¶ 16-17, 33-35.)

The Tower Project is a planned commercial development in downtown Seattle intended to be a mixed-use facility comprised of residential apartment units, a hotel, and other retail facilities. (6/23/16 Grassmueck Decl. (Dkt. # 357) ¶ 3.) The land for the Tower Project development was acquired in 2013 by Tower LLC, whose members are Dargey Holdings and Binjiang. (Id.)

Based on his review of the financial condition of the Tower Project, the Receiver determined, in his reasonable business judgment, that completion of the development would not be feasible absent a source of alternative funding, and that it would not be cost effective or appropriate for him to attempt to raise equity in the market to complete the development. (See generally 2/4/16 Mot. (Dkt. # 183).) Thus, on February 4, 2016, the Receiver filed a motion recommending that the Tower Project Assets be sold out of receivership, and sought authorization from the court to begin the process for marketing the Tower Project for sale. (Id.) Following the submission of substantial further briefing by interested parties and the Receiver regarding the Receiver's recommendation, and after having conducted a hearing on April 18, 2016, the court entered an order on April 20, 2016, granting the Receiver's request to market the Tower Project Assets for sale. (See 4/20/16 Order (Dkt. # 282).) The April 20, 2016, order directed the Receiver to solicit proposals from prospective purchasers for both an "AS-IS, WHERE-IS" sale of the Land, and proposals that contemplate a restructuring of the Tower Project where the project would be completed in a manner consistent with EB-5 investors' goals. (See generally id.)

After having solicited and evaluated a number of proposals, on May 13, 2016, the Receiver filed a memorandum providing the court with his recommendations for the: (1) best offer proposal for sale of the Land only; (2) the best proposal for restructuring of the Tower Project; and (3) the best overall proposal. (5/13/16 Rec. Mem. (Dkt. # 303).) As described in the Receiver's memorandum, the Receiver recommended the proposal submitted by Binjiang and PH, LLC (a Molasky affiliate) to acquire the Tower Project Assets for continued development of the Tower Project ("Binjiang/Molasky Proposal") as the best overall proposal. (Id.)

Following further briefing by interested parties and the Receiver, and after conducting a hearing on the matter on May 19, 2016, the court entered an Order on May 20, 2016 ("Preliminary Approval Order") approving the Receiver's recommendation to select the Binjiang/Molasky Proposal. (Prelim. App. Order (Dkt. # 336).) The Preliminary Approval Order further established relevant deadlines for final approval and closing of the transaction contemplated by the Binjiang/Molasky Proposal (the "Restructuring Transaction"). (See id.) Among these deadlines was a June 23, 2016, deadline for the Receiver to submit this Motion for the court to consider and approve the final terms of the Restructuring Transaction, including (i) the fully executed deal documents memorializing the agreement between the parties, (ii) a form of proposed notice to EB-5 investors of the Restructuring Transaction and their choice to opt-in or opt-out of the transaction ("Notice to Investors"), and (iii) the method(s) by which the Notice to Investors will be delivered. (Id.) The Preliminary Approval Order also requires the Notice to Investors to be sent by no later than July 25, 2016 and investor responses to be returned to the Receiver by no later than August 24, 2016, with the Restructuring Transaction to close on or before August 31, 2016. (Id.)

III. ANALYSIS

A. Legal Standard

Federal courts have inherent equitable authority to issue a variety of ancillary relief measures in actions brought by the SEC to enforce the federal securities laws. SEC v. Wencke, 622 F.2d 1363, 1369 (9th Cir. 1980). "The power of a district court to impose a receivership or grant other forms of ancillary relief does not in the first instance depend on a statutory grant of power from the securities laws. Rather, the authority derives from the inherent power of a court of equity to fashion effective relief." Id. The "primary purpose of equity receiverships is to promote orderly and efficient administration of the estate by the district court for the benefit of creditors." SEC v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986).

District courts have the broad power of a court of equity to determine the appropriate action in the administration and supervision of an equity receivership. See SEC v. Capital Consultants, LLC, 397 F.3d 733, 738 (9th Cir. 2005) ("[A] district court's power to supervise an equity receivership and to determine the appropriate action to be taken in the administration of the receivership is extremely broad.") (quoting Hardy, 803 F.2d at 1037); see also CFTC v. Topworth Int'l, Ltd., 205 F.3d 1107, 1115 (9th Cir. 1999) ("This court affords `broad deference' to the court's supervisory role, and `we generally uphold reasonable procedures instituted by the district court that serve th[e] purpose' of orderly and efficient administration of the receivership for the benefit of creditors.") (quoting Hardy, 803 F.2d at 1037-38). In the estate administration context, courts are deferential to the business judgment of bankruptcy trustees, receivers, and similar estate custodians. See, e.g., Bennett v. Williams, 892 F.2d 822, 824 (9th Cir. 1989); Sw. Media, Inc. v. Rau, 708 F.2d 419, 425 (9th Cir. 1983).

The court's powers to administer the receivership and, specifically, to sell receivership assets, are not limited by the terms of private contracts. The court's authority over the assets of a receivership estate derives from the court's inherent power to exercise jurisdiction over assets taken into the receivership, rather than from underlying contracts. SEC v. Am. Capital Invs., Inc., 98 F.3d 1133, 1143-45 (9th Cir. 1996), abrogated on other grounds by Steel Co. v. Citizens for a Better Env't, 523 U.S. 83 (1998) (approving sale of property over limited partners' objections based on court's equitable powers, irrespective of state law or contract rights). Accordingly, the court has broad equitable powers and discretion to grant this motion and authorize and approve the terms of the Restructuring Transaction.

B. Defendants' Response

Although Defendants take issue with some of the statements of the Receiver in his motion, they do not object to the proposed Restructuring Transaction. (Def. Resp. at 1.) Indeed, "Defendants join with the Receiver in moving the [c]ourt for the relief identified in the proposed Order Granting Final Approval of Disposition of Potala Tower Related Assets (ECF No. 356-1)." (Id.)

C. EB-5 Investors' Response

A group of approximately 65 investors in the Tower Project whose funds remain invested ("EB-5 Investors") filed a response to the Receiver's motion. (See EB-5 Resp. at 1.) EB-5 Investors "generally support the Binjiang/Molasky Proposal and ask that the Receiver's [m]otion be granted." (Id. at 2.) EB-5 Investors, however, raise three concerns about the Restructuring Transaction, and the court addresses each in turn.

1. Continued Pursuit of the USCIS Appeal

EB-5 investors state that they believe that the Binjiang/Molasky Proposal or the proposed Restructuring Transaction "presents the best option" to maximize the potential that they will achieve the EB-5 immigration benefit they originally sought when investing in the Tower Project. (EB-5 Resp. at 3.) They ask the court, however, to "explicitly order Molasky to do everything in its power to give the appeal the best possible chance of succeeding." (Id.) They specifically ask the court to require Molasky to: (a) "diligently pursue the [United States Citizenship and Immigration Services ("USCIS")] appeal with the continued assistance of competent, experienced EB-5 counsel; (b) supplement the USCIS appeal as necessary with all documentation showing that the Tower Project is going forward in a manner consistent with its original business plan; and (c) pursue all other available avenues of appeal should the pending appeal be denied in the first instance." (Id.)

The Receiver responds that the existing Master Agreement, which has been agreed to and fully executed by the parties to the transaction, already includes terms that address EB-5 Investors' concerns. (Reply (Dkt. # 370) at 1.) Specifically, the Master Agreement provides that Molasky would be "appointed to implement and execute the remaining design and construction of the [Tower] Project in a manner consistent with the original offering . . . as approved by the USCIS." (Master Agreement (Dkt. # 357-2) at 23.) The Master Agreement further provides that "Molasky, or its designee, shall be responsible for continued prosecution of the Appeal after the Closing." (Id. at 31.) Given these terms, the Receiver believes, and the court agrees, that EB-5 Investors' concerns are adequately addressed by the terms of the Master Agreement and that no revisions to the documents are necessary.

2. Memorializing the Scope of the Opt-Out Release

EB-5 Investors request that the terms of the release for EB-5 investors who choose to opt-out of the Restructuring Transaction be further clarified in the form "Release of Claims by EB-5 Investors." (EB-5 Resp. at 5.) In particular, EB-5 investors request clarification that: (1) the opting-out investors will retain a $250,000.00 claim against the Receivership estate, and (2) the release for opting-out investors will not include a waiver of claims for consequential damages against the Receivership estate. (Id.)

The Receiver does not object to the requested clarifications. (Reply at 3.) However, at the time he filed his reply memorandum, he had not yet obtained the parties' agreement to the proposed language. (Id.) Given the time constraints, the Receiver suggests that the following language be added to the end of paragraph 2 of the Proposed Order (Dkt. # 356-1): "If and to the extent the Receiver, Binjiang, Molasky, and the Dargey Parties agree in writing to revise the Notice to Investors (defined below) to narrow the scope of the release attached thereto as Exhibit E, such revised Disclosure Document is hereby APPROVED." (Reply at 3.) The Receiver "believes that the foregoing language provides the parties the opportunity to address the EB-5 Investors' concern without delaying the [proposed Restructuring Transaction]." (Id.) The court agrees and so orders the foregoing alteration.

3. Addition of a "Reasonable Efforts" Substitution and Refund Provision

EB-5 Investors propose adding a provision to the Master Agreement which generally provides that if an individual investor's immigration petition is denied for reasons unrelated to the Tower Project's EB-5 status, the project would use "reasonable efforts" to find a substitute EB-5 investor and issue a refund of the denied investor's investment principle. (EB-5 Resp. at 4.) The Receiver takes no position on the substance of EB-5 Investors' request. (Reply at 2.) However, he has reservations regarding the addition of such a term to the Restructuring Transaction during the final stages of this complex transaction, because he believes that addition may "create unnecessary obstacles to closing." (Id.) He warns about the time and expense required to renegotiate and document the terms of the provision and the uncertainty of future enforcement. (Id.) Finally, he confirms that the other parties to the Restructuring Transaction have not agreed to this request. (Id.)

Given the fact that EB-5 Investors are generally in favor of the Restructuring Transaction, and that both they and the court believe it offers "them the best chance of obtaining conditional permanent resident status" (see EB-5 Resp. at 2), the court is unwilling to imperil the closing of the Restructuring Transaction over this request. If the Restructuring Transaction fails to close, EB-5 Investors risk losing whatever chance the Restructuring Transaction offers with respect to their immigration goals. Accordingly, the court agrees with the Receiver that this request from EB-5 Investors should be denied, and the court denies this request.

D. The SEC's Response

The SEC filed a response to the Receiver's motion stating that it "does not oppose the Receiver's proposed disposition of the assets." (SEC Resp. at 1.) However, the SEC objects "to [Mr.] Dargey's injection of himself into the transaction in order to secure attorney's fees." (Id.) The SEC's position is that "[r]egardless whether the [c]ourt determines to approve the Receiver's [m]otion, [Mr.] Dargey should be required to move the [c]ourt and make a proper showing for the relief he seeks from the [c]ourt's freeze on his assets." (Id.)

The court notes that without Mr. Dargey's and his attorneys' "injection" into the transaction, any hope that EB-5 Investors had of fulfilling their EB-5 immigration goals would have been permanently lost. Without Mr. Dargey's persistence, the Tower Project would have been sold from the Receivership on an "AS IS, WHERE IS" basis. The court is, of course, mindful of the SEC's allegations that it was Mr. Dargey's fraudulent behavior that imperiled the EB-5 investors' immigration goals in the first place, as well as the evidence the SEC has presented so far in support of those allegations. Nevertheless, at this point in the litigation, the SEC's allegations remain just that. The SEC's claims against Mr. Dargey have not been proven in a court of law. Thus, Mr. Dargey's willingness to voluntarily and without objection relinquish his asserted ownership in the Tower Project represents a benefit to both the Receivership estate and to EB-5 Investors who support the proposed Restructuring Transaction. There is no doubt that Mr. Dargey will incur substantial legal fees in defending himself with respect to the SEC's allegations. Further, the court is reassured that the funds at issue will be use appropriately for legal expenses because the funds will be deposited into his attorney's trust account and thus will not be placed directly under his control. Finally, neither the Receiver, nor EB-5 Investors have objected to the fact that the Restructuring Transaction provides for $1.8 million to be set aside for payment of Mr. Dargey's legal fees. In light of the foregoing, the court rejects the SEC's objection.

IV. CONCLUSION

Based on the foregoing analysis, the court GRANTS the Receiver's motion for final approval of the disposition of the Potala Tower related assets, subject to the alteration set forth in section III.C.2 above. The court will enter the Receiver's proposed order (Dkt. # 356-1) with the alteration referenced in section III.C.2 above interlineated therein.