California State Controller Malia Cohen is a defendant in a federal class action filed in Los Angeles that accuses her office, along with contractors Kroll LLC and Kelmar Associates LLC, of taking private property without adequate notice and profiting improperly from selling it. The suit, reported by Legal Newsline, challenges the mechanics of California's unclaimed property program rather than its existence.
Escheatment is the legal process by which a state takes custody of financial assets — bank balances, uncashed checks, brokerage shares — after the holder loses contact with the owner for a set period. The claims in this case are allegations; no court has ruled on them. The practical point for owners is unchanged: the Controller still holds the property, and it is still claimable for free.
Table of Contents
- What the lawsuit alleges happened to the shares
- Who is suing, and on whose behalf
- Where the case stands and what happens next
- How big the program is, and the Controller's response
- What owners should do now
- Frequently Asked Questions
What the lawsuit alleges happened to the shares
The central allegation is about addresses. Plaintiffs say overseas investors' addresses were altered so their brokerage holdings appeared connected to California, which let the state escheat the shares and sell them. Hoodline's report describes the pattern as the core of the complaint.
One named example makes the mechanism concrete. The complaint says Kroll changed plaintiff Karl Whitty's address from Cardiff, United Kingdom to "Cardiff, CA 00000." Whitty later recovered about $4,750 over seventeen months, against roughly $15,222 the shares would have been worth. That gap is the financial heart of the case. When a state sells escheated securities, the owner who later files a claim typically receives the cash proceeds from the sale date, not the shares themselves — so a sale during a rising market transfers the upside away from the owner.
Who is suing, and on whose behalf
Three named plaintiffs bring the case: Paul Hashim of Texas, Karl Whitty of the United Kingdom, and Edmilson Cesar Martim Jr. of Brazil. They sue on behalf of foreign investors whose holdings the state allegedly seized. The geography matters to the legal theory.
California's authority to escheat generally depends on the owner's last known address being in California. If an address was wrong, the state's basis for taking custody was wrong with it — which is why the plaintiffs are non-residents rather than Californians. A second claim concerns notice. Plaintiffs say the Controller's office limited owner notification to small, hard-to-find advertisements in California newspapers instead of contacting owners directly. For someone living in Cardiff, Wales, a classified ad in a California paper is not functional notice.
Where the case stands and what happens next
On October 7, 2026, plaintiffs moved for a preliminary injunction to stop further escheatment while the case proceeds. A hearing is set for January 21, 2027 before U.S. District Judge George H. Wu in Los Angeles.
A preliminary injunction is an order freezing conduct before any trial. Courts grant one only when the moving party shows likely success on the merits and harm that money cannot fix later. The January hearing is therefore the first real test of whether a judge finds the address allegations credible. No case number appears in the available reporting, and the Controller's office has not filed a formal answer on the record. Until it does, the state's legal position on the address claims is not public.
How big the program is, and the Controller's response
The State Controller's Office says its Unclaimed Property Program safeguards more than $15 billion across roughly 84 million individual properties belonging to nearly 39 million Californians. Those figures, published in February 2026, describe the pool the lawsuit targets. Cohen has answered by pointing to her record, saying her administration returned roughly $2 billion to Californians and cut the program's claims backlog.
Her office's performance on returning money and the legality of how property arrives in the program are separate questions, and the suit raises only the second. The litigation has also entered the Controller's race. Republican challenger Herb Morgan told ABC7 that the case "raises serious questions about whether [Cohen] possesses the financial competence or judgment this office demands." Campaign framing is not evidence, and readers should weigh it accordingly.
What owners should do now
Nothing about this case requires you to wait. The property the Controller holds stays claimable while litigation proceeds, and filing a claim does not depend on the outcome.
Claiming is free. The Controller charges nothing, and any service asking for a percentage of a California unclaimed property claim is offering to do, for a fee, what the state site does at no cost.
- Search your name at the Controller's official unclaimed property site: https://www.sco.ca.gov/upd_msg.html
- Search former names, maiden names, and misspellings — escheated records carry whatever the holder reported.
- Search old California addresses even if you never lived in the state; the complaint's whole point is that out-of-state records were coded as Californian.
- Check other states separately. Each state runs its own program, and California's search will not find Nevada's holdings.
- Keep documentation of what an escheated security was worth when it was sold, not just what you receive. If the share-value gap described in the complaint becomes a certified class issue, that record is what establishes your loss.
Frequently Asked Questions
Does this lawsuit freeze my pending claim with the Controller?
No. The injunction request asks the court to halt further escheatment of new property, not to stop the Controller from paying out claims already filed.
I am not a California resident. Can I still have property held by California?
Yes. Property reaches California based on the last address a bank or broker had on file, which is exactly the record the complaint says was altered in some cases.
If the plaintiffs win, will I automatically get my shares back?
Not automatically. No court has ruled, and remedies in a class action are decided late in the process. Filing your own claim now is independent of the case.