The court-appointed receivership for Legend Venture Partners LLC has moved from asset recovery into active cash distribution, paying out millions to defrauded pre-IPO investors after the U.S. District Court for the Southern District of New York approved a liquidation-and-distribution plan. Melanie L. Cyganowski of Otterbourg P.C. was appointed receiver on July 7, 2023, after the Securities and Exchange Commission obtained an emergency asset freeze in SEC v. Legend Venture Partners LLC, No. 1:23-cv-05326, before Judge Lewis A. Kaplan.
Unlike a chapter 11 reorganization, this is an SEC enforcement receivership: there is no debtor seeking to reorganize, no DIP financing, and no plan of reorganization. The estate's value sits in indirect pre-IPO equity positions — interests tied to SpaceX, Voyager, Triller, and The Zebra — that the receiver has been monetizing and distributing ratably to roughly 320 investors. Judge Kaplan approved the receiver's plan of distribution on August 29, 2025, and the estate has since completed its largest monetization events and begun silo-specific distributions.
Legend Venture Partners LLC (and five affiliated Legend Ventures funds)
Court
U.S. District Court, Southern District of New York
Case Number
1:23-cv-05326
Receiver Appointed
July 7, 2023
Receiver
Melanie L. Cyganowski (Otterbourg P.C.)
Judge
Hon. Lewis A. Kaplan
Claims Agent
Stretto
Distribution Plan Approved
August 29, 2025
Case Snapshot
From StraightPath to Legend: Pre-IPO Fraud Origins
The receivership grew out of a securities-fraud enforcement action targeting a pre-IPO stock scheme. The SEC alleged that operators who had previously run StraightPath Venture Partners simply rebranded as Legend Venture Partners and continued selling interests in private, pre-IPO companies to retail investors through high-pressure sales tactics. The agency described Legend as an unregistered broker-dealer and said the sales force continued the same scheme under a new name.
On July 7, 2023, the SEC obtained emergency relief, including an asset freeze, in a case the regulator tied to roughly $35 million raised from investors through Legend. The SEC complaint sought to halt the scheme and preserve estate assets, and the court entered injunctive relief and appointed a receiver the same day. The SEC summarized the emergency action in Litigation Release No. 25758.
The enforcement effort widened in 2024. On June 7, 2024, the SEC charged three New Yorkers with raising more than $184 million through the broader pre-IPO fraud spanning StraightPath and Legend, and the U.S. Attorney's Office for the Southern District of New York unsealed parallel criminal charges the same day in connection with a $185 million fraud scheme. The SEC separately settled charges against three StraightPath sales agents on September 12, 2024. By September 2024, several boiler-room brokers tied to the scheme had pleaded guilty. The receiver's most recent status report identifies the related criminal proceedings as involving Mario Gogliormella, Steven Lacaj, and Karim Ibrahim, whom the receiver continues to monitor while investigating potential estate claims against third parties.
Receivership Estate and Pre-IPO SPV Portfolio
The receivership covers Legend Venture Partners LLC and five affiliated funds, Legend Ventures Fund 1 LLC through Legend Ventures Fund 5 LLC. In her first quarterly status report, Cyganowski reported that the estate had identified roughly 320 investors, secured the legacy electronic systems and records, and held no cash on hand as of September 30, 2023. The estate's principal assets were indirect pre-IPO positions held through special-purpose vehicles and forward contracts, with more than 90% of those interests held through SPVs managed by Midway Venture Partners, LLC.
The portfolio's value concentrated in a handful of private-company positions — interests tied to Voyager, SpaceX, Triller, and The Zebra, among others. In the opening phase of the case, the receiver and her professionals took control of pre-existing bank accounts, the Google Drive and Microsoft 365 systems, and physical records and devices from the former New York office, as described in the first quarterly status report. The receiver also filed the entities' 2022 tax returns and K-1s and disclosed a roughly $90,000 New York penalty assessment tied to late filings she attributed to a legacy accountant error.
Securing the estate's records required litigation. On May 14, 2024, the receiver filed a motion to compel turnover of records from individuals she said had not complied with the receivership order. That turnover dispute became one of the most cross-referenced operational filings on the docket as the receiver worked to consolidate control of the estate's books and SPV documentation before she could value and monetize the underlying positions.
Liquidation Plan and Overruled Investor Objections
On August 29, 2025, Judge Kaplan granted the receiver's motion to approve her proposed plan of distribution. The memorandum and order approved liquidation of the estate-held shares and cash distributions to investors rather than in-kind distributions of the underlying securities. The court found the proposed plan "fair and reasonable."
In the same order, Judge Kaplan overruled three investor objections. One set of objections challenged the decision to liquidate rather than distribute shares in kind; another sought to carve out specific holdings for favored treatment; and a third argued that certain recoveries should be redirected to administrative expenses instead of being shared ratably among investors. The plan-and-procedures phase also established a claims and investor-resolution process that generated individualized investor statements, a claims analysis report, and deadlines for objections, as reflected in the receiver's eighth quarterly status report.
Voyager IPO and SpaceX Redemption
The estate's monetization accelerated in 2025 as the receiver moved from asset control into liquidation. The receiver's ninth status report states that Voyager conducted its IPO in mid-2025 and the estate received a cash dividend of $2,134,275.14, with the remaining Voyager shares still subject to a six-month lock-up period following the June 2025 IPO.
The larger event came in November. The receiver reported that all of Legend's interests in SpaceX were disposed of through a November 14, 2025 redemption transaction for gross proceeds of $12,190,230.00, per the ninth status report. Not every position recovered value: the report states that Triller was delisted from Nasdaq on December 30, 2025, leaving future recovery on that position uncertain.
Investor Distributions and Claims Resolution
With monetization proceeds in hand, the receiver opened the claims-resolution and distribution phase. On November 5, 2025, she filed a claims analysis report addressing the allowance or disallowance of proofs of claim and related treatment under the procedures order. The receiver's ninth status report states that the deadline for purported creditors to object to the claims report was December 20, 2025, and that no objections were filed.
Distributions followed on a silo-by-silo basis tied to the monetized positions. On December 12, 2025, the receiver distributed $535,231.55 to eligible Voyager silo investors who had submitted the required tax forms by the stated deadline. On December 29, 2025, she distributed $6,231,483.72 to eligible SpaceX silo investors who had met the same requirement. The receiver noted that distributions could not be completed for all investors until she obtained properly completed IRS Forms W-8 and W-9 from the applicable recipients, a constraint described in the fee-payment motion and reflected in the funds held back for investors who had not yet submitted tax forms.
The receivership's claims process ran in parallel with the SEC's enforcement timeline. The receiver, through claims agent Stretto, announced a notice of bar date to submit claims in July 2025, and Stretto maintains the official case portal for investor notices and distribution information.
Qualified Settlement Fund Treatment and Professional Fees
The Voyager dividend and SpaceX proceeds created estate-level tax consequences, and the receiver structured the estate accordingly. The December 5, 2025 fee-payment motion states that the receivership estate was being treated as a qualified settlement fund because the Voyager dividend and SpaceX redemption were taxable events at the estate level. The receiver argued that payment of court-approved professional fees would generate deductions that could offset estate tax liability on a dollar-for-dollar basis, which she characterized as effectively a net wash to the estate.
Professional fees are a recurring feature of the docket. As of the December 5, 2025 motion, the receiver sought authority to pay $993,025.89 in unpaid, court-approved fees and expenses, net of a 20% holdback. That amount broke down as approximately $11,266.20 for the receiver, $703,174.00 for Otterbourg, $200,901.84 for Stout, $68,507.22 for BRG, and $9,176.63 for Stretto, per the fee-payment motion. Judge Kaplan granted the motion on January 6, 2026.
Fee activity continued into 2026. The docket reflects ninth interim fee applications filed January 16, 2026 for the receiver and Otterbourg, Stout, BRG, and Stretto, followed by orders approving those applications on February 17, 2026. The same day, the receiver, Stout, and BRG filed tenth interim fee applications, reflecting how much of the late-stage docket is distribution-and-fee administration. These figures are drawn from the receiver's ninth status report and the related fee orders.
McLauchlan Intervention Bid
A late-stage contested matter arose when investor Robert A. McLauchlan filed a motion for limited permissive intervention on December 29, 2025 — the same day the receiver distributed proceeds to SpaceX silo investors. The receiver opposed the motion on January 12, 2026, arguing that intervention was untimely, that McLauchlan no longer held a direct legally protectable interest after being cashed out, that the claims and distribution process was already far advanced, and that intervention would create piecemeal and expensive litigation.
Judge Kaplan denied the intervention motion on January 27, 2026, substantially for the reasons stated in the receiver's opposition. The ruling left the distribution process intact, and investor-specific disputes in the case have been resolved through the procedures order rather than through broad contested litigation.
As of the receiver's ninth status report, filed January 30, 2026, the estate reported $12,080,676.95 in cash on hand as of December 31, 2025 — including reserves, a pre-receivership claimant pool, and funds held for investors who had not yet submitted tax forms — and valued the remaining Voyager shares at $11,234,292.36 as of year-end 2025. The receiver described the case as being in the implementation phase of the court-approved distribution plan.
Key Timeline
Date
Event
2023-07-07
SEC obtains emergency asset freeze; court appoints Melanie L. Cyganowski as receiver
2023-09-30
Estate reports roughly 320 investors identified and no cash on hand
2024-05-14
Receiver files motion to compel turnover of records
Who is the claims agent for the Legend Venture Partners receivership?
Stretto serves as the claims and noticing agent. The firm maintains the official case portal and distributes investor notices and distribution information for the receivership estate.
Is the Legend Venture Partners case a chapter 11 bankruptcy?
No. It is an SEC enforcement receivership in the U.S. District Court for the Southern District of New York, SEC v. Legend Venture Partners LLC, No. 1:23-cv-05326. A court-appointed receiver, not a debtor-in-possession, controls and liquidates the estate.
What recoveries has the receivership generated?
The estate received a $2,134,275.14 dividend from Voyager's 2025 IPO and $12,190,230.00 in gross proceeds from a November 2025 SpaceX redemption. As of December 31, 2025, the receiver reported $12,080,676.95 in cash on hand and Voyager shares valued at $11,234,292.36.
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
