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FREQUENTLY ASKED QUESTIONS

Q. When will I get my Palantir shares?

A. We have begun the process of making the distribution of Palantir shares now that the lockup period has ended. This process will involve a number of steps before distribution is made. The Receiver initiated the transfer of shares from Computershare to the Receiver’s brokerage firm on February 18, 2021, which was the day the lock up period expired. It may take several days to a few weeks to obtain the shares. The Receiver has also filed a motion for authority to make the distribution, which is set for hearing on February 25, 2021 at 1:30 p.m. Once the shares and Court approval are both obtained, the Receiver will sell the shares necessary for the tax holding account and administrative reserve. The number of shares to be sold will be determined on the date of the sale. We will then process the distribution of shares for each of the more than 200 claimants. Our team is working hard to complete as much of the distribution as possible in March 2021. We cannot provide estimated dates of distribution beyond that. If you have not received your shares by March 31, 2021, and you have not otherwise heard from us regarding issues with your specific distribution, please reach out to us and we will work through whatever issues remain.

We further request that, especially during the month of March while we are working hard to process these distributions to over 200 claimants, you contact us only if necessary. And please further note that requests for updates as to the process generally, estimates on delivery dates and the number of shares, and confirmations of transfers will not be provided to individual claimants. Please check the Receivership’s website where we will continue to post updates as applicable.

Q. How many Palantir shares am I getting?

A. Please see the schedule here, which contains of how many shares each claimant will receive, using the confidential claimant ID that was provided to you.

Q. How will I know when my Palantir shares have been successfully transferred?

A. Check your brokerage account. As stated above, due to the enormous volume and complexity of this process, we are unable to provide claimants with individualized confirmations of each transfer. If you do not have shares by March 31, 2021, you can reach out to us and we will work hard to try to resolve any issues that remain.

Q. What do you need from me to send my Palantir shares?

A. We need your brokerage account information, and then our bankers can process the transfer using the Depository Trust Company (DTC) clearing system. That means we need your account name, account number, brokerage name, and brokerage DTC number. That last number is like a routing number for brokerage accounts and is likely available on your brokerage’s website or can be obtained directly from your broker.

 You can email that information to us. If you feel the need to add some extra security, you can send the information in a password-protected PDF or using a secure email program.

If you are requesting distribution to an international account or to an IRA, or to an account that otherwise requires special handling, we may need additional information. In those instances, our team will be in touch.

Q. Is there a court hearing on the topic?

A. We have made a separate motion to the Court to make this distribution, and a copy of that motion has been sent to you at the email address we have on file. The hearing date for that motion is February 25, 2021 at 1:30pm, via zoom. That email contains instructions for how to dial in to that hearing, and please note that any response must be filed by February 22, 2021. The Zoom link may also be found under the Recent Updates on the website.

Q. Why is the distribution 51% of the Palantir Allowed Shares? What were the other shares sold for?

A. The total Allowed Shares for Palantir, based upon the valid claims submitted, is 5,895,855. The Receivership was in possession of 5,740,249 shares, of which: (a) 966,995 were sold for the Plan Fund and associated commissions and taxes; (b) 1,052,465 were sold to fund the Tax Holding Account to pay known tax liabilities of the Receivership; and (c) 716,003 were sold to fund the administrative reserve for potential tax liabilities of the Receivership. That leaves 3,004,786 shares – or 51% of the Allowed Shares – available for distribution to claimants. Therefore, each claimant will receive 51% of their Allowed Shares, and we are working to complete the bulk of the distribution in March 2021. There will not be another distribution of Palantir shares. However, if there are excess cash reserves after the final tax liabilities are ascertained (no earlier than 2023), the Receiver may be able to make a cash distribution at such later date. The Receiver notes that all of these sales and reserves were completed consistent with the Distribution Plan in this case and pursuant to Court order – please see the Motion By Receiver Kathy Bazoian Phelps For Order: (1) Approving Sale And Distribution Of Palantir Shares Pursuant To Distribution Plan; And (2) For Modification Of The Distribution Plan [Doc 638] on the Filing / Court Documents tab for more information.

Q. Why did you place $9.76 million of the Palantir sales proceeds in the Plan Fund? Is that your fee?

A. THAT IS NOT OUR FEE. The SRA funds were placed into federal receivership by the Securities Exchange Commission, and there are a number of claimants that have a valid claim against the receivership. Some claims are for shares (Class 4 investor claims), and some are for cash (Class 3 unsecured creditor claims and Class 5 subordinated claims). As you can see on our website, the total Class 3 unsecured creditor claims total nearly $10 million.

The Plan Fund is primarily to be used to pay those Class 3 claims, as well as administrative expenses and subordinated claims. So while administrative fees are to be paid from the Plan Fund, most of the Plan Fund is used to pay creditor claims. Any administrative fees that will be paid are subject to approval of the Court.

Moreover, if you have a Class 4 claim, but the value of the shares you received was less than your allowed claim amount, then the remainder (or “deficiency”) will become a Class 5 subordinated claim. Those claims will be evaluated at the end of the receivership, and the Receiver will make a distribution on them if there are sufficient assets in the estate, subject to further Court approval.

Q. I’m a Class 3 Claimant. When and how do I get paid?

A. As a result of the Palantir sale, the receivership now has enough cash for the Receiver to make an interim distribution to Class 3 claimants. To ensure that the receivership retains sufficient cash to satisfy all its obligations, the Receiver will request court authority to retain an administrative reserve. The Receiver intends to file a motion with the Court asking for permission to distribute a portion of the cash on hand to Class 3 unsecured creditor claimants on an interim basis.

The Receiver is requesting that Class 3 Claimants make an election to receive their distribution by wire or otherwise provide their current mailing address to the Receiver if they wish to receive a check. If the Receiver does not hear from a claimant, the Receiver will mail a check to the claimant’s last known address on file following Court approval of the interim distribution.

Q. I’m a Class 4 Claimant. Don’t I own these shares? That’s what I thought when I invested.

A. When the SRA entities were placed into receivership by the Securities Exchange Commission, all of the shares in the entities became part of the receivership, which is treated as a Qualified Settlement Fund. When you filled out a claim form, you asserted a claim against the receivership, as did many other claimants.

The Receiver worked with the SEC and the investor group to come up with a Distribution Plan for how to handle all those claims. Some claimants will get back cash, and some will get back shares, as stated in the Distribution Plan. But until that distribution is made, the shares are owned by the receivership, not each claimant. And as this is a receivership with many claimants and limited assets, you should NOT expect to receive 100% of the shares in which you thought you invested. Nevertheless, the Receiver, her staff, her advisors, and the SEC are all working very hard to ensure that all claimants receive a fair distribution as quickly as possible.

Q. What about the rest of the publicly traded shares?

A. In July and August 2020, the Receiver distributed to claimants most of eight publicly traded securities – Bloom Energy, Cloudera, Dropbox, Lyft, MongoDB, Pinterest, Snapchat, and Uber. The Receiver also sold enough shares in each of those companies to fund the Plan Fund – around $2.5 million as stated in the Distribution Plan – and to reserve for taxes. With few exceptions, you should have received the first interim distribution of those shares.

The Receiver also held back a percentage of the shares in an administrative reserve, in order to ensure that she has sufficient assets to satisfy the tax liabilities of the receivership in case they turn out to be higher than expected. If those assets are needed to satisfy increased tax liabilities, they will be used as such. Once the final tax liabilities of the Receivership are settled, if there are assets remaining in the receivership, the Receiver will be in a position to distribute those assets to claimants, subject to the all of the receivership’s obligations.

Q. Why do some accounts need special handling?

A. Our bankers use the DTC system, which works great and fast for most US-based brokerages. But for transfers to international accounts at institutions that use correspondent accounts, it gets a little more complicated. In those situations, the financial institution with the DTC number accepts the shares and then sends them to the international institution, which then deposits them with the claimant. To handle that, our bankers generally need to coordinate with the receiving institution in advance to make sure that the transfer is complete. That means we’ll need an email address of either a private banker or the settlements department at the receiving institution so our bankers can coordinate. Please note that our bankers still must use the DTC system to make the transfer, and cannot use SWIFT.

Other situations can require special handling as well. For example, if you are asking that we distribute to a retirement account because you invested through a retirement account, we will need some additional documentation to make that distribution. Or, if your account is a trust that requires additional instructions to send to the receiving institution, that can take extra time.

Q. How can I avoid the delays caused by special handling?

A. Unfortunately, there is not much we can do if you have an account that requires special handling. Our goal is to accommodate every type of account that we can reasonably. That said, we can typically distribute to discount online brokerages very quickly. Any claimant is free to open an account at one of those for the distribution, and where the shares go after that is up to the claimant.

Q. I thought my investment was tax-free. Why are you holding back for taxes?

A. When the receivership was created, by operation of federal law the receivership assets became part of a Qualified Settlement Fund, or QSF. A QSF is a taxable entity that has tax obligations independent of the original SRA funds, and independent of any of your individual tax obligations. The Receiver has engaged professional tax counsel and accountants to assess the tax obligations of the QSF. 

The sale of securities for a gain and the distribution of securities at a gain are both taxable events under the federal tax laws. That means the receivership needs to sell sufficient shares in order to reserve for those tax liabilities. Moreover, the receivership’s tax liabilities are based on the tax bases of the underlying shares, and the Receiver engaged a valuation expert to ascertain the correct valuations. But due to the judgment and subjectivity that is necessarily part of that valuation exercise, the Receiver must reserve sufficient assets in case the tax liabilities turn out to be higher than expected.

As a federal receivership supervised by a federal district court, there is no question that the QSF must pay all federal taxes and cannot have a tax deficiency. The Receiver is therefore obligated to take a conservative approach to reserving for taxes. Once the tax status and liabilities of the receivership are resolved, the Receiver will be able to distribute any assets that were reserved but were not needed to satisfy the receivership’s tax or other obligations.

Q. How does the distribution affect my tax liability?

A. The Receiver cannot provide any legal or tax advice to claimants. The tax consequences discussed above are the taxes that the receivership owes based on federal and state tax laws. Your individual tax consequences are going to be based on the nature and circumstances of your investment, and you are going to have to determine those on your own or in consultation with your advisors. Neither the Receiver nor her counsel is permitted to give tax advice to individual claimants.

What is a Receiver?

A Receiver is an individual appointed by the United States District Court to act as a neutral party responsible for administering the assets of the receivership entities and to distribute them to the investors and creditors. The Court provides instructions concerning the Receiver’s various responsibilities, duties and obligations. The Order Appointing Receiver sets forth the Receiver’s duties in this case. The Receiver makes periodic reports to the Court. The Receiver will distribute the recovered assets to investors and creditors in accordance with an order from the Court.

Who does the Receiver work for?

The Receiver is an agent of the Court and therefore works for the appointing judge. The beneficiaries of the Receiver’s work are the investors and creditors. 

Can I write off my investment loss?

The Receiver cannot give tax or other legal advice. Please consult with your accountant or tax advisor and seek their advice.

Do you have an estimate of what percent of our original investment may be returned to us in the form of a distribution?

It is too early to make such an estimate. The Receiver cannot disburse funds or securities to creditors and investors until there has been a “Liquidity Event,” as defined by the operating agreements for the SRA Funds and until a Distribution Plan has been approved. The ultimate value of the shares, and whether there is a shortfall or surplus of shares, is unknown at this time. Additionally, the amount of administrative or other priority tax claims is presently unknown, which may impact distribution amounts.

Can an Investor’s position be liquidated at this time?

The Receiver will hold all shares in each series until a Liquidity Event occurs. The Receiver will dispose of the shares pursuant to the Distribution Plan that is approved by the Court.

Can I still file a claim?

A claims bar date was ordered by the Court, which was January 31, 2018. The Court has ordered that the Claims Bar Date may be reopened for the limited purpose of serving individuals and entities who may not have previously received notice. If you did not receive notice of the Claims Bar Date, please feel free to submit a claim with an explanation of why it is being submitted late, and the claim will be evaluated by the Receiver. Submission of a late claim is not a guarantee that such claim will ultimately be allowed. The Court has established May 14, 2019 as a firm claims bar date after which claims which have not been filed will be disallowed in their entirety. 

Is my Broker Dealer, responsible for my losses, and, if so, what will the Receiver do?

Investors will need to consult with their own attorney to ascertain their rights to pursue personal claims against brokers.

Is the Receiver under any time constraints by the Court and the SEC?

The Receiver shall file status reports with the Court every 120 days, which will reflect any upcoming established hearings or deadlines. Otherwise, at this time, there are no specific time frames specified by the Court. In addition, investors are advised that the receivership is part of Securities and Exchange Commission lawsuit enforcement litigation. Litigation by its very nature takes time. Notwithstanding the foregoing, the Receiver intends to move as quickly as possible, given the circumstances, but respectfully requests investors to be patient.

How do I contact the Receiver?

All parties are encouraged to search the site first, before attempting to contact the Receiver directly, which will keep costs down and limit the administrative burden to the estate. If direct contact is necessary, the Receiver can be contacted at:

Kathy Bazoian Phelps, Receiver

Raines Feldman LLP

1800 Avenue of the Stars, 12th Floor

Los Angeles, CA 90067

(310) 424-4080

kphelps@raineslaw.com

The website will also be updated to reflect significant receivership events.