Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—D.N.J.: Receiver's final fee application in FTC fraud case over Commission's objections granted, (Jul 22, 2026)

By Wendy Biddle, J.D.

The court rejected FTC's accounting challenges, rules receiver's compensation is properly charged against receivership fund under terms of original restraining order.

The federal district court in Newark, New Jersey approved a receiver's application for final legal fees, discharge from duties, and turnover of remaining receivership funds, rejecting the FTC’s objections to the fee request in a consumer fraud case that produced a $15.7 million stipulated judgment. The court held that the receiver's counsel was entitled to be compensated from receivership assets under the terms of the court's original temporary restraining order, and that none of the FTC's four objections to the fee application had merit (FTC v. Thefbamachine Inc., No. 2:24-cv-06635-JXN-LDW (D.N.J. Jul. 20, 2026)).

The underlying case arose from the FTC's June 2024 suit against TheFBAMachine Inc. and several related corporate entities, along with an individual defendant, alleging violations of the FTC Act, the agency's Business Opportunity Rule, and the Consumer Review Fairness Act. The FTC alleged that the defendants induced consumers to invest in an e-commerce business opportunity through false promises of passive income, defrauding consumers of at least $15.9 million while using non-disparagement clauses to suppress negative reviews. The court entered an ex parte TRO freezing defendants' assets and appointing Anthony Sodono, III as receiver, later making the appointment permanent through a Stipulated Preliminary Injunction. The TRO authorized the receiver and his retained professionals, including counsel at McManimon, Scotland & Baumann, LLC, to receive "reasonable compensation" from receivership assets, subject to periodic fee applications to the court.

Over the following two years, the receiver and his counsel undertook substantial work, including securing and liquidating assets, conducting third-party discovery, inspecting business premises, deposing the individual defendant, and obtaining court authority to sell a Florida property purchased with receivership funds. The parties eventually settled, and the court entered a stipulated judgment in July 2025 that permanently enjoined the defendants' conduct, entered judgment of over $15.7 million, and authorized sale of the Florida property, directing that any proceeds remaining after payment of liens, sale costs, and the receiver's fees be paid to the FTC. The property sold for $1.3 million, yielding net proceeds of roughly $95,000 after satisfying the mortgage and liens.

The receiver subsequently applied to pay counsel's final fees of approximately $190,000, representing both new fees and an outstanding balance from an earlier interim fee award, an amount exceeding the receiver's total funds on hand. The FTC opposed, raising four objections: that the application lacked sufficient detail under Local Civil Rule 66.1(e); that the receiver failed to account for property-sale proceeds owed to the FTC under the stipulation governing that sale; that payments had been made to counsel without leave of court; and that the application improperly included costs attributable to the individual defendant's contempt.

The court first addressed an apparent conflict between the TRO's general compensation provision and the narrower stipulation order governing the Florida property sale. The court held that to the extent the two orders conflicted, the TRO controlled, but concluded no real conflict existed. The stipulation order, the court reasoned, merely supplemented the TRO for the specific circumstance of that sale rather than capping the receiver's overall compensation to proceeds from a single asset, particularly given the far larger judgment obtained by the FTC.

Turning to the FTC's specific objections, the court found none persuasive. On the local-rule compliance argument, the court held the receiver had adequately itemized the components of funds on hand, and that the FTC's desire for greater specificity did not establish a violation of the rule, especially where the FTC had never previously challenged the receiver's accounting methods. On the property-proceeds objection, the court observed that the FTC was not actually disputing the adequacy of the accounting, since receiver's counsel had provided an itemized list of proposed deductions at oral argument, but was instead disputing entitlement to roughly $62,000, a separate legal question. The court found the third and fourth objections, concerning unauthorized payments and contempt-related costs, subsumed within its overall reasonableness determination.

Applying the reasonableness standard drawn from Local Civil Rule 66.1(h) and Bankruptcy Code § 330(a)(3), and noting the FTC never actually disputed reasonableness, the court found the fee request reflected fair value for services rendered in a complex, multi-year case involving control of a dozen interconnected entities. Finally, invoking the general principle that receivership expenses are properly charged against the fund in the receiver's hands, and citing concerns about discouraging qualified receivers from accepting appointments absent assurance of payment, the court resolved any doubt in favor of compensating the receiver from receivership assets under the TRO's terms, granting the application in full.

The Case is No. 2:24-cv-06635-JXN-LDW.

Judge: Neals, J.

Attorneys: Elsie Bennett Kappler for the FTC. Alex Susi (Usher Law Group PC) for The FBA machine Inc.

Companies: The FBA machine Inc.

Cases: ConsumerProtection NewJerseyNews FederalTradeCommissionNews