Can a court freeze the defendant's bank accounts before we get a judgment?
In federal court, generally not on a claim for money damages. In Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), the Supreme Court held that the district court lacked authority to issue a preliminary injunction preventing the defendants from disposing of their assets pending adjudication of a contract claim for money damages, because that remedy was historically unavailable from a court of equity. The plaintiffs there asserted no lien on and no equitable interest in the assets they wanted restrained.
The Grupo Mexicano rule surprises people because it does not turn on the strength of the evidence. A claimant can hold a complete reconstruction of every transfer and still be told the court has no power to restrain the account, because what is being asserted is a claim to a sum of money rather than a claim to property. The distinction is about the shape of the claim, not about how convincing the file is.
The holding rests on history rather than on policy. Federal courts have the equity jurisdiction the English Court of Chancery exercised when the Constitution was adopted and the Judiciary Act of 1789 was enacted, and at that time a judgment fixing the debt was needed before equity would interfere with a debtor’s use of his property. Two limits follow, for anyone reading the rule too broadly: the Court distinguished its earlier decision in Deckert v. Independence Shares Corp. on the ground that the bill there stated a cause for equitable relief, and the decision construes federal equity power rather than the practice of state courts, which have their own equity rules and their own attachment statutes. The forensic question underneath is the same in every one of those forums — can the records identify particular property, or only a number?
What kind of claim does support a prejudgment asset freeze?
A claim for final equitable relief over property, rather than a claim for a sum of money. The Supreme Court described the category in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 213 (2002): a plaintiff could seek restitution in equity, “ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.”
The Second Circuit applied the Knudson line in Leadenhall Capital Partners LLP v. Advantage Capital Holdings LLC, 171 F.4th 155 (2d Cir. 2026), vacating the part of a preliminary injunction that had frozen the assets of guarantors who had pledged none of their own property as collateral, because the lender held neither a lien on nor an equitable interest in those assets. What the lender actually sought was payment of a debt. The court’s formulation is the one worth holding on to: “The propriety of a preliminary injunction in relation to a court’s equitable powers is determined by the nature of the final relief sought.”
One nuance runs against the obvious reading, and a litigator will raise it. The injunction itself does not have to name particular dollars. Leadenhall accepts that a preliminary injunction may restrain fungible assets like money without identifying specific property, but only “where the plaintiff is pursuing a claim for final equitable relief, and the preliminary injunction is ancillary to the final relief.” The identification burden therefore sits on the underlying equitable claim, which is where the tracing requirement in Knudson bites. Establish the claim and the restraint can be drawn broadly; fail on the trace and there is no equitable claim for a restraint to be ancillary to.
The sequence runs trace first, freeze second. Identification of specific property is not corroboration filed alongside the motion. It is what makes the claim an equitable one in the first place, and it has to exist before the motion is drafted.
What does the forensic accounting work have to establish before a freeze motion is filed?
That identifiable funds or property now in the defendant’s hands are the product of the money that left the claimant, shown transfer by transfer against produced source documents rather than asserted as a total. The standard stated in Great-West Life & Annuity Insurance Co. v. Knudson is exacting: the money or property must be capable of being “clearly traced to particular funds or property in the defendant’s possession.”
Commingling is what makes that identification contestable. Once the claimant’s money sits in an account alongside other money, no observation of the record tells you which dollars left, so an allocation convention has to be applied. Four are in general use: first-in-first-out, last-in-first-out, pro rata, and the lowest intermediate balance rule. Applied to the same statement they produce materially different traceable amounts, and no rule of law mandates one of them. The Tenth Circuit put the position plainly in United States v. Henshaw, 388 F.3d 738, 741 (10th Cir. 2004): “There are several alternative methods, none of which is optimal for all commingling cases; courts exercise case-specific judgment to select the method best suited to achieve a fair and equitable result on the facts before them.”
The practical consequence for a declaration supporting a freeze is that the method has to be justified rather than defaulted to, and the justification has to come out of the transaction record itself: when the deposits at issue landed, how quickly withdrawals followed, whether the account had any legitimate operating rhythm. An expert who cannot say which methods were considered and why the others were rejected has a cross-examination waiting.
Two things the declaration should not contain. The first is the ultimate conclusion, for any expert bound by the professional codes that govern most of this work. AICPA Statement on Standards for Forensic Services No. 1, paragraph 10, prohibits a member performing forensic services from opining on the ultimate conclusion of fraud, reserving that to the trier of fact while expressly permitting opinions on whether evidence is consistent with certain elements of fraud; the ACFE’s CFE Code of Professional Standards, section V.B.2, bars any opinion on the legal guilt or innocence of any person or party. Neither document reaches an expert who is neither an AICPA member nor a Certified Fraud Examiner — but opposing counsel will have read both. The second is a damages figure. A traceable amount states what can still be identified, not what a claim is worth. That is a different question, frequently answered by the same expert on the same matter, and it is developed next door at the Economic Damages Institute. Conflating the two in a freeze declaration hands the other side an argument that the expert overstated their own work.
Why does a prejudgment freeze get harder to obtain the longer you wait?
Because the traceable amount falls as the account is spent down, and it does not recover on its own. Where trust or misappropriated funds are commingled, courts commonly apply the lowest intermediate balance rule, which caps the claimant’s traceable interest at the lowest balance the account reached after the tainted deposit.
The Third Circuit stated the rule in In re Columbia Gas Systems Inc., 997 F.2d 1039, 1063 (3d Cir. 1993): “Once trust money is removed, however, it is not replenished by subsequent deposits. Therefore, the lowest intermediate balance in a commingled account represents trust funds that have never been dissipated and which are reasonably identifiable.” The Fourth Circuit applied it the same way in In re Dameron, 155 F.3d 718, 724 (4th Cir. 1998): “In no case is the trust permitted to be replenished by deposits made subsequent to the lowest intermediate balance,” and where the account is depleted entirely, the trust is considered lost. Courts have not settled when, if ever, an account may be treated as replenished, so no matter should be planned on the assumption that a later deposit will help.
Knudson closes the remedial end of the same problem. Where the property or its proceeds “have been dissipated so that no product remains,” the claimant’s claim “is only that of a general creditor.” The decay is therefore not merely evidentiary. An account that touches zero on a Tuesday can end the proprietary claim, whatever passes through it afterward, and no amount of later analytical work restores it.
The lowest intermediate balance rule is not the only convention a court may adopt, and pro rata allocation tends to be preferred where many similarly situated claimants trace to a single account. But every convention operates on an account that is being spent. Which is why the useful question early in a matter is not what the analysis will eventually show, but how much is left this week.
Is a preliminary injunction the only way to secure assets before judgment?
No. Prejudgment attachment is a separate route, and it does not depend on tracing. Federal Rule of Civil Procedure 64(a) provides that “[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment,” subject to any federal statute that applies, and Rule 64(b) names arrest, attachment, garnishment, replevin, sequestration and equivalent remedies.
The two routes ask for close to opposite things, which is the part worth noticing. A constructive trust or an equitable lien asks a court to recognize that particular property is, in equity, already the claimant’s. Attachment is built for the very claim that cannot support a freeze: New York’s CPLR 6201 opens by making an order of attachment available “in any action, except a matrimonial action, where the plaintiff has demanded and would be entitled… to a money judgment,” and subdivision 3 reaches a defendant who, with intent to defraud creditors or frustrate the enforcement of a judgment that might be rendered in the plaintiff’s favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state, or is about to do any of those things.
Leadenhall kept the two apart deliberately. The Second Circuit treated an attachment under Rule 64 as a distinct order applying state law rather than an alternative basis for a preliminary injunction under federal law, observed that the findings CPLR 6201(3) calls for had not been made, and left that question for the district court to address on remand.
The difference between the two routes reshapes what the forensic work is for. An attachment application is generally supported by evidence of what the defendant has been doing with assets — transfers out, changes in the ownership of property, movement offshore, and the timing of those movements relative to the litigation — rather than by a per-dollar identification of the claimant’s own money. Note where the expert’s contribution stops. The movements and their timing are the record; the intent the statute makes a condition of attachment is a finding for the court, and an expert who offers it has volunteered an opinion on state of mind. Both exhibits are built from the same underlying documents, but they are different exhibits, and which one is being built should be settled before the subpoenas go out. State practice varies substantially, so availability and the required findings are a jurisdictional question for counsel.
What is the risk in subpoenaing the bank records you need to trace?
Notice. Under Federal Rule of Civil Procedure 45(a)(4), where a subpoena commands the production of documents before trial, a notice and a copy of the subpoena must be served on every party before the subpoena is served on the person it is directed to. A defendant therefore generally learns which accounts are being examined before the bank produces anything.
That notice requirement sits at the center of prejudgment recovery work, because the three things a claimant needs pull against each other. The trace is what earns the freeze, the bank records are what make the trace possible, and asking for the bank records tells the other side exactly where somebody is looking. The alternative is deliberately hard: a temporary restraining order without notice requires, under Rule 65(b)(1), specific facts in an affidavit or a verified complaint clearly showing that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition, plus the movant’s attorney certifying in writing what efforts were made to give notice and why it should not be required. Meeting that standard usually means the analysis is already substantially done, built from records the claimant holds itself.
When the subpoena does go out, what is asked for decides what comes back. Bank statements show amounts and dates; they do not show where a deposit came from. The deposit items — the actual instruments deposited, rather than the deposit ticket — are what establish a deposit’s source, and the US Department of Justice’s Subpoena for Bank Records Checklist, which itemises what a complete production looks like for each and every account subpoenaed, lists “Deposit Tickets” and “Checks In Deposit” as separate lines. One item on that government list is out of reach for a private civil litigant. Section 5318(g)(2) of title 31 and its implementing regulations bar disclosure of a Suspicious Activity Report, or of any information that would reveal whether one was filed, and courts have treated that as a privilege the institution cannot waive: a subpoenaed bank must decline to produce and may not confirm or deny that a report exists. The underlying transaction records remain producible, and asking for those instead is the correct move.