SEC v. Ahmed (2d Cir. 2025): Tightening Asset-Freeze Relief, Permitting Counsel Withdrawal, Declining Federal Interference with State Tax Levies under the Tax Injunction Act

Introduction

In a non-precedential summary order, the United States Court of Appeals for the Second Circuit addressed a series of disputes arising from a longstanding SEC enforcement action that led to a comprehensive asset freeze and a court-appointed receivership governing property held by the primary defendant, Iftikar Ahmed, and various relief defendants, including his then-spouse, Shalini Ahmed, and their children.

On remand from an earlier appeal, Shalini Ahmed—proceeding pro se—moved for increased living expenses from frozen assets, authority to implement divorce-related financial terms, funding to pursue a Supreme Court petition, and the vacatur of a state tax levy. The SEC cross-moved to terminate future living expense payments. Separately, counsel (Murtha Cullina LLP) for certain relief defendants sought either payment of fees from the estate or permission to withdraw.

The Second Circuit’s November 17, 2025 order resolves the ensuing appellate challenges by:

Affirming the district court’s refusal to increase living expense allowances and its termination of future payments;
Affirming the allowance of counsel’s withdrawal and denial of fee disbursements from the receivership in the interim;
Affirming the denial of divorce-related relief that would have redirected frozen assets;
Vacating and remanding the state tax levy ruling with instructions to dismiss for lack of jurisdiction under the Tax Injunction Act; and
Dismissing as moot the appeal from the denial of funds to pursue a certiorari petition because the Supreme Court had already denied certiorari and the rehearing period had expired.

Although styled as a summary order without precedential effect, the decision provides clear, practical guidance on (1) the stringent standards for modifying asset freezes, (2) counsel withdrawal and minors’ representation in civil enforcement contexts, (3) the limited reach of domestic relations doctrines vis-à-vis federal receiverships, and (4) the jurisdictional bar imposed by the Tax Injunction Act on federal interference with state tax collection.

Summary of the Opinion

The panel (Judges Walker, Jacobs, and Bianco) disposed of five district court orders as follows:

Living Expense Order: Affirmed denial of increased funds and affirmed termination of future monthly living-expense payments from the frozen estate. The district court found changed circumstances and questioned demonstrated need, citing lack of candor about alternative funding and capacity to work.
Withdrawal Order: Affirmed granting counsel’s withdrawal and denial of interim fee payments from frozen assets, permitting a renewed fee application after liquidation and with proper documentation.
Divorce Order: Affirmed denial of relief to effectuate a marital settlement that would have diverted frozen assets, emphasizing the court’s control over receivership property and rejecting domestic relations jurisdiction and abstention arguments.
State Tax Order: Vacated and remanded with instructions to dismiss for lack of subject matter jurisdiction under the Tax Injunction Act because the requested relief would restrain the collection of state taxes where adequate state remedies exist.
Certiorari Order: Dismissed as moot. The Supreme Court had denied certiorari in 2024, and the rehearing deadline had passed.

The court exercised interlocutory appellate jurisdiction under 28 U.S.C. § 1292(a)(1) to review orders effectively refusing to modify an injunction (i.e., the asset freeze), and it retained limited jurisdiction to vacate and remand the tax issue for dismissal when the district court lacked jurisdiction.

Analysis

Precedents Cited and Their Influence

28 U.S.C. § 1292(a)(1): Authorized the appeal of interlocutory orders that refused to dissolve or modify injunctions (the asset freeze is an injunction).
Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, 814 F.3d 146 (2d Cir. 2016): Allowed the appellate court to retain jurisdiction “for the purpose of correcting the error” when the district court lacked subject matter jurisdiction (used to vacate and remand the State Tax Order).
TransUnion LLC v. Ramirez, 594 U.S. 413 (2021): Clarified standing via concrete monetary injury; supported standing for Shalini Ahmed to appeal the withdrawal order because she would need to finance counsel for her children.
Martin-Trigona v. Shiff, 702 F.2d 380 (2d Cir. 1983) and Video Tutorial Servs., Inc. v. MCI Telecomms. Corp., 79 F.3d 3 (2d Cir. 1996): Defined mootness and compelled dismissal when relief is no longer possible; applied to the certiorari funding motion post-denial.
CFTC v. Walsh, 618 F.3d 218 (2d Cir. 2010), Weight Watchers Int’l, Inc. v. Luigino’s, Inc., 423 F.3d 137 (2d Cir. 2005), and SEC v. Credit Bancorp, Ltd., 290 F.3d 80 (2d Cir. 2002): Established abuse-of-discretion review for asset freezes, their modification, and receivership administration.
Phoenix Global Ventures, LLC v. Phoenix Hotel Assocs., Ltd., 422 F.3d 72 (2d Cir. 2005) (per curiam): Required deference to district court credibility determinations—key to affirming the denial of increased living expenses.
Cheung v. Youth Orchestra Found. of Buffalo, Inc., 906 F.2d 59 (2d Cir. 1990) and Wenger v. Canastota Cent. Sch. Dist., 146 F.3d 123 (2d Cir. 1998): Confirmed that non-lawyer parents cannot represent their children pro se; did not mandate appointment of counsel at receivership expense.
Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989): No right to use tainted assets to fund one’s legal defense; reinforced denial of fees from the frozen estate.
Ankenbrandt v. Richards, 504 U.S. 689 (1992), Am. Airlines, Inc. v. Block, 905 F.2d 12 (2d Cir. 1990) (per curiam), and Deem v. DiMella-Deem, 941 F.3d 618 (2d Cir. 2019): Clarified the domestic relations exception and abstention doctrine. Because this case arises under federal question jurisdiction and involves receivership control over assets, the exception and abstention were inapplicable.
SEC v. Hardy, 803 F.2d 1034 (9th Cir. 1986): Highlighted the broad discretion necessary to administer receiverships, buttressing the denial of divorce-related relief affecting frozen assets.
Tax Injunction Act, 28 U.S.C. § 1341; Bernard v. Vill. of Spring Valley, 30 F.3d 294 (2d Cir. 1994); Luessenhop v. Clinton Cnty., 466 F.3d 259 (2d Cir. 2006); Hibbs v. Winn, 542 U.S. 88 (2004); Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503 (1981): Confirmed that federal courts cannot enjoin or restrain state tax collection if a “plain, speedy and efficient” state remedy exists; used to vacate and remand with instructions to dismiss Ahmed’s attack on the Connecticut tax levy.

Legal Reasoning

1) Appellate Jurisdiction and Mootness

The court exercised interlocutory jurisdiction under § 1292(a)(1) over orders effectively refusing to modify an injunction—here, the asset freeze and related receivership controls. For the state tax issue, the panel retained jurisdiction solely to correct the district court’s jurisdictional error (vacating and remanding for dismissal), consistent with Hapag-Lloyd.

The “certiorari funding” appeal was dismissed as moot: the Supreme Court had already denied certiorari in 2024, and the 25-day period to seek rehearing had elapsed under Supreme Court Rule 44.2. No effective relief remained.

2) Living Expenses: Denial of Increased Funds and Termination of Future Payments

Applying abuse-of-discretion review, the panel affirmed the district court’s refusal to augment living expenses and its decision to end ongoing payments. Two threads drove the outcome:

Credibility and Need: The court credited findings that Ahmed had not demonstrated genuine need or candor about funding sources, citing unexplained expenditures (e.g., international travel, private school tuition) and a failure to pursue gainful employment despite a strong professional background. Deference to credibility determinations (Phoenix Global Ventures) sealed this point.
Changed Circumstances and Victim Recovery: Since 2016, appellate developments and the maturing of the case heightened the importance of preserving assets for victims. Ahmed’s “oversecured” argument—comparing a $94.9 million judgment to allegedly $120+ million in frozen assets—failed to account for prejudgment interest, additional relief on remand, tax liabilities, and receivership costs.

3) Counsel Withdrawal and Fee Denial

The court affirmed the denial of immediate fee disbursements to Murtha Cullina from frozen assets (with leave to renew post-liquidation upon proper documentation) and affirmed permission for the firm to withdraw. The district court properly weighed:

Hardship to Counsel: Continued representation without reasonable assurance of payment would impose undue costs.
Effect on the Case: The court’s concerns about non-disclosure of assets and true ownership undermined claims that relief defendants could not afford replacement counsel; no disruption to the proceedings was shown to outweigh the burdens on existing counsel.

On appeal, Ahmed had standing to challenge withdrawal because the order plausibly imposed a monetary burden on her to retain counsel for her minor children—an Article III injury recognized in TransUnion. As to minors’ representation, Cheung and Wenger prevent non-lawyer parents from representing minors pro se, but they do not require appointment of counsel at the receivership’s expense. Caplin & Drysdale further counsels against using tainted assets for legal fees.

4) Divorce-Related Relief and Receivership Control

The district court correctly denied approval for a marital settlement that would have reallocated frozen assets (including a proposed $87.7 million lump-sum maintenance). The Second Circuit rejected two jurisdiction-based objections:

Domestic Relations Exception: Inapplicable because the case arises under federal question jurisdiction (SEC enforcement), not diversity (Ankenbrandt; Deem).
Domestic Relations Abstention: Unwarranted because the order simply preserved the receivership’s exclusive control over frozen assets. Federal receiverships require broad equitable discretion to manage and protect assets for victims (Hardy).

The order expressly preserved the parties’ ability to participate in state divorce proceedings so long as those proceedings do not jeopardize receivership assets, including the option to present a structured proposal acceptable to the SEC and the court.

5) State Tax Levy and the Tax Injunction Act (TIA)

The court vacated the district court’s order addressing Ahmed’s request to invalidate a Connecticut Department of Revenue Services levy and compel a refund, and remanded with instructions to dismiss for lack of jurisdiction under the TIA. Federal courts may not “enjoin, suspend or restrain” the assessment, levy, or collection of state taxes if the state affords a “plain, speedy and efficient” remedy (§ 1341).

Ahmed’s arguments did not identify procedural deficiencies in Connecticut’s tax adjudication mechanisms; rather, she suggested she could not obtain the outcome she preferred. But Rosewell makes clear that the TIA turns on procedural adequacy—not the likelihood of success. Because her federal claims would directly enable avoidance or undoing of state tax collection (Luessenhop; Hibbs), they were barred.

The panel also noted that, at least on the current record, Ahmed’s assertion that the taxes were tied to receivership income was conclusory; in any event, the TIA jurisdictional bar controlled the forum for such disputes.

Impact and Practical Implications

Asset Freeze Modifications Will Be Tightened Over Time: As enforcement cases mature, courts will prioritize victim recovery and require transparent, credible proof of need before releasing frozen assets for living expenses. Evidence of undisclosed alternative funding can justify terminating allowances.
Receivership Gatekeeping Over Domestic Agreements: Parties cannot use divorce settlements to reposition or divert assets under receivership control. Federal courts will reject attempts to sidestep asset freezes via domestic relations processes, while still allowing state divorce proceedings that do not impair the estate.
Funding Counsel from Frozen Assets Remains Disfavored: Requests to pay attorneys with potentially tainted assets face heightened scrutiny. Courts may permit withdrawal to avoid imposing indefinite unpaid burdens on counsel, and will defer fee determinations until liquidation clarifies asset provenance and sufficiency.
Minors’ Representation Is Not a Blank Check Against the Estate: While minors generally may not proceed without licensed counsel, courts are not compelled to appoint or fund counsel from frozen assets. Parents seeking representation for minors must usually turn to non-tainted resources.
No Federal Shortcuts Around State Tax Collection: The Tax Injunction Act blocks federal injunctive or declaratory relief against state tax levies where adequate state procedures exist. Even in receivership contexts, taxpayers must pursue state administrative and judicial remedies.
Mootness Can Extinguish Funding Requests Post-Cert Denial: Requests to fund Supreme Court petitions become nonjusticiable once certiorari is denied and the rehearing window closes.
Standing Is Anchored in Concrete Monetary Harm: Even when a party was not the client of withdrawing counsel, potential personal financial responsibility for alternative representation can supply standing to appeal.

Because this disposition is a summary order, it is not precedential. Still, it aligns with—and will likely be cited as—persuasive authority reflecting Second Circuit practice on asset freezes, receiverships, and jurisdictional bars like the TIA.

Complex Concepts Simplified

Asset Freeze: A court order (a preliminary injunction) that prevents the transfer or dissipation of assets during litigation to preserve funds for potential judgments or restitution.
Receivership: A court-appointed neutral (the receiver) takes control of assets to preserve, manage, and often liquidate them for the benefit of victims or creditors, subject to court supervision.
Relief Defendant: A person or entity not accused of wrongdoing but alleged to hold assets traceable to fraud; the court can require disgorgement if they lack a legitimate claim to the funds.
Abuse of Discretion: A deferential appellate standard; the appellate court upholds decisions that are reasonable, factually supported, and legally correct, even if other judges might have ruled differently.
Mootness: Courts can only decide live controversies. If events make it impossible to grant effective relief (e.g., certiorari already denied), the appeal is dismissed as moot.
Standing: To appeal, a party must show a concrete, particularized injury (often monetary) caused by the order and redressable by a favorable decision.
Domestic Relations Exception and Abstention: Federal courts do not issue divorce, alimony, or child-custody decrees (exception), and may abstain from certain domestic matters. These doctrines do not block federal courts from managing receivership assets in SEC cases.
Tax Injunction Act (TIA): Bars federal courts from stopping state tax assessment/collection when the state offers adequate procedures to contest the tax. Relief must be sought through state administrative and judicial channels.
Tainted Assets: Property traceable to alleged wrongdoing. Defendants and relief defendants generally cannot tap such assets to pay for their defense or other private expenses.

Conclusion

The Second Circuit’s summary order in SEC v. Ahmed underscores several recurring themes in federal enforcement and equity practice: asset-freeze resources are tightly controlled and may be cut off upon changed circumstances or lack of transparency; receivership integrity trumps private reallocation efforts (including divorce settlements) that could undermine victim recovery; law firms representing relief defendants may withdraw when payment is uncertain, and minors’ representation does not automatically shift costs to an estate of disputed provenance; and the Tax Injunction Act sharply limits federal courts’ ability to interfere with state tax collection, even where federal receiverships are in play.

While non-precedential, the order is a blueprint for litigants navigating asset freezes, receivership governance, and jurisdictional limits. Its practical message is clear: candor, documentation, and respect for jurisdictional boundaries are indispensable when seeking relief from the strictures of an SEC asset freeze and related equitable controls.