Justia Securities Law Opinion Summaries

The case involves Plaintiff-Appellant Joel J. Malek, who filed a complaint alleging that Defendants-Appellees, including Leonard Feigenbaum and AXA Equitable Life Insurance Co., engaged in a deceptive marketing scheme to trick him and others into replacing their existing life insurance policies with more expensive and less valuable ones. Malek claimed violations of New York law and the Racketeer Influenced and Corrupt Organizations Act (RICO).The United States District Court for the Eastern District of New York dismissed Malek’s complaint and denied him leave to amend. The court found that Malek’s New York claims were time-barred and that he failed to plead the existence of a RICO enterprise. Malek served a motion for reconsideration on the Defendants but did not file it with the court until after the deadline. The district court subsequently denied the motion for reconsideration.The United States Court of Appeals for the Second Circuit reviewed the case. The Defendants moved to dismiss the appeal, arguing that Malek’s notice of appeal was untimely because he did not file his motion for reconsideration within the required timeframe, thus failing to toll the deadline for filing a notice of appeal. The Second Circuit reiterated its holding in Weitzner v. Cynosure, Inc. that Appellate Rule 4(a)(4)(A) requires timely filing, not just service, of a post-judgment motion to toll the appeal deadline. The court also concluded that under Nutraceutical Corp. v. Lambert, Appellate Rule 4(a)(4)(A) is a mandatory claim-processing rule not subject to equitable tolling.The Second Circuit found that Malek’s notice of appeal was untimely and dismissed the appeal for lack of appellate jurisdiction. The court also determined that Malek’s notice of appeal could not be construed to include the order denying reconsideration. View "Malek v. Feigenbaum" on Justia Law

Ryan Cox filed a class action lawsuit alleging that the defendants manipulated the price of a cryptocurrency called HEX by artificially lowering its ranking on CoinMarketCap.com. The defendants include two domestic companies, a foreign company, and three individual officers of the foreign company. Cox claimed that the manipulation caused HEX to trade at lower prices, benefiting the defendants financially.The United States District Court for the District of Arizona dismissed the case for lack of personal jurisdiction, concluding that Cox needed to show the defendants had sufficient contacts with Arizona before invoking the Commodity Exchange Act's nationwide service of process provision. The court found that none of the defendants had sufficient contacts with Arizona.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the Commodity Exchange Act authorizes nationwide service of process independent of its venue requirement. The court concluded that the district court had personal jurisdiction over the U.S. defendants, CoinMarketCap and Binance.US, because they had sufficient contacts with the United States. The court also found that Cox's claims against these defendants were colorable under the Commodity Exchange Act. Therefore, the court reversed the district court's dismissal of the claims against the U.S. defendants and remanded for further proceedings.However, the Ninth Circuit affirmed the district court's dismissal of the claims against the foreign defendants, Binance Capital and its officers, due to their lack of sufficient contacts with the United States. The court vacated the dismissal "with prejudice" and remanded with instructions to dismiss the complaint against the foreign defendants without prejudice. View "COX V. COINMARKETCAP OPCO, LLC" on Justia Law

Robert Allen Stanford operated a billion-dollar Ponzi scheme through various entities in Texas and Antigua. In 2009, a federal district court appointed an equity receiver (the "Receiver") to manage the assets of the Stanford entities, handle claims from defrauded investors, and pursue claims against third parties. This appeal concerns a settlement with Societe Generale Private Banking (Suisse) S.A. ("SGPB"), which included a bar order preventing future Stanford-related claims against the Swiss bank. Two individuals appointed by an Antiguan court to liquidate one of the Stanford entities argued that the bar order should not apply to their claims against SGPB.The United States District Court for the Northern District of Texas approved the settlement and issued the bar order. The Joint Liquidators objected, arguing that the district court lacked personal jurisdiction over them. They filed their objection in a related Chapter 15 proceeding rather than the main SEC action, leading to a jurisdictional dispute. The district court held a hearing, during which it indicated that any participation by the Joint Liquidators' counsel would be considered a waiver of their jurisdictional objection. The court approved the settlement and entered the bar order, prompting the Joint Liquidators to appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court did not have the necessary personal jurisdiction to bind the Joint Liquidators with its bar order. The court emphasized that injunctions require in personam jurisdiction, which the district court lacked over the Joint Liquidators. The court vacated the district court's scheduling order and the bar order as it applied to the Joint Liquidators, and remanded the case for further proceedings consistent with its opinion. View "Dickson v. Janvey" on Justia Law

The case involves a court-appointed receiver tasked with distributing funds recovered from a Ponzi scheme orchestrated by Kevin Merrill, Jay Ledford, and Cameron Jezierski. The scheme defrauded over 230 investors of more than $345 million. The appellants, comprising institutional and individual investors, were among the victims. The institutional investors, known as the Dean Investors, frequently withdrew and reinvested their funds, while the individual investors, known as the Connaughton Investors, invested through a third-party fund and later received settlements from that fund.The United States District Court for the District of Maryland approved the receiver's distribution plan, which used the "Rising Tide" method to allocate funds. This method ensures that no investor recovers less than a certain percentage of their principal investment, but it deducts pre-receivership withdrawals from the recovery amount. The Dean Investors objected to this method, arguing that their reinvested withdrawals should not be counted against them. The Connaughton Investors objected to the plan's "Collateral Offset Provision," which counted third-party settlements as withdrawals, reducing their distribution from the receiver.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The court found no abuse of discretion in the district court's approval of the distribution plan. It held that the Rising Tide method without the Maximum Balance approach was appropriate, as it ensured a fair distribution to more claimants. The court also upheld the Collateral Offset Provision, reasoning that it prevented the Connaughton Investors from receiving a disproportionately higher recovery compared to other victims. The court emphasized the need for equitable distribution and the administrative feasibility of the receiver's plan. View "CCWB Asset Investments, LLC v. Milligan" on Justia Law

Petitioners opened brokerage accounts with Stifel, Nicolaus & Company, managed by Coleman Devlin. Dissatisfied with Devlin's performance, they filed for arbitration with the Financial Industry Regulatory Authority (FINRA), alleging negligence, breach of contract, breach of fiduciary duty, negligent supervision, and violations of state and federal securities laws. After nearly two years of hearings, the arbitration panel ruled in favor of Stifel and Devlin without providing a detailed explanation, as the parties did not request an "explained decision."Petitioners moved to vacate the arbitration award in the United States District Court for the District of Maryland, arguing that the arbitration panel manifestly disregarded the law, including federal securities law. The district court denied the motion, stating that the petitioners failed to meet the high standard required to prove manifest disregard of the law. The court noted that the petitioners were essentially rearguing their case from the arbitration.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court noted that the Supreme Court's decision in Badgerow v. Walters requires an independent jurisdictional basis beyond the Federal Arbitration Act (FAA) itself for federal courts to have jurisdiction over petitions to vacate arbitration awards. Since the petitioners did not provide such a basis, the Fourth Circuit vacated the district court's judgment and remanded the case with instructions to dismiss the petition for lack of jurisdiction. The court emphasized that claims of manifest disregard of federal law do not confer federal-question jurisdiction. View "Friedler v. Stifel, Nicolaus, & Company, Inc." on Justia Law

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Dale Chappell and his investment entities for insider trading. The SEC alleged that Chappell traded securities based on material, nonpublic information about the FDA's feedback on a drug developed by Humanigen, a company in which Chappell's entities were the largest shareholders. The FDA had expressed significant concerns about the drug's clinical trial and recommended an additional trial. Despite this, Humanigen submitted an application for Emergency Use Authorization (EUA) without conducting a second trial. Chappell sold a significant portion of his Humanigen stock before the FDA's denial of the EUA application was publicly announced, avoiding substantial losses.In the District Court, the SEC sought and obtained a preliminary injunction to freeze Chappell’s assets. Chappell appealed this decision to the United States Court of Appeals for the Third Circuit.The Third Circuit affirmed the District Court's decision. It found that the SEC had shown a likelihood of success on its claim that Chappell violated insider trading laws. The court concluded that the FDA's feedback was material and that Chappell had the necessary mindset to commit fraud. The court also found that the preliminary injunction factors, including irreparable harm, balance of equities, and public interest, supported the injunction. The court noted that without the injunction, there was a substantial potential injury to Humanigen shareholders if Chappell was able to move assets out of reach of future judgment creditors. View "Securities and Exchange Commission v. Chappell" on Justia Law

The case revolves around Brad Packer, a shareholder of 1-800-Flowers.com, Inc. (FLWS), who alleged that Raging Capital Management, LLC, Raging Capital Master Fund, Ltd., and William C. Martin (collectively, the Appellees) violated Section 16(b) of the Securities Exchange Act of 1934. This section requires owners of more than 10% of a company's stock to disgorge profits made from buying and selling the company's stock within a six-month window. Packer claimed that the Appellees, as 10% beneficial owners of FLWS, engaged in such "short-swing" trading and failed to disgorge their profits. After FLWS declined to sue the Appellees, Packer filed a shareholder derivative suit on behalf of FLWS.The United States District Court for the Eastern District of New York dismissed Packer's suit, reasoning that he lacked constitutional standing because he did not allege a concrete injury. The District Court concluded that the Supreme Court's decision in TransUnion LLC v. Ramirez, which elaborated on the "concrete injury" requirement of constitutional standing, abrogated the Second Circuit's previous decision in Donoghue v. Bulldog Investors General Partnership. In Donoghue, the Second Circuit held that a violation of Section 16(b) inflicts an injury that confers constitutional standing.The United States Court of Appeals for the Second Circuit disagreed with the District Court's interpretation. The Appeals Court held that TransUnion did not abrogate Donoghue, and the District Court erred in holding that it did. The Appeals Court emphasized that a District Court must follow controlling precedent, even if it believes that the precedent may eventually be overturned. The Appeals Court found that nothing in TransUnion undermines Donoghue, and thus, the District Court erred in dismissing Packer's Section 16(b) suit. The Appeals Court reversed the District Court's judgment and remanded the case for further proceedings. View "Packer v. Raging Capital Management, LLC" on Justia Law

The case involves David Moeller, who was convicted of securities fraud after deceiving an acquaintance into investing $9,500 in a non-existent business. Moeller appealed his conviction, but died during the appeal process. The Court of Appeals, applying the precedent set in State v. Hollister, ruled that Moeller's death did not render his appeal moot and affirmed his conviction and sentence. Moeller's defense counsel petitioned for review, arguing that the court should overrule Hollister and that the panel erred in concluding his conviction was supported by sufficient evidence.The Supreme Court of the State of Kansas affirmed the judgment of the Court of Appeals and the district court. The court held that under the doctrine of stare decisis, it would continue to adhere to Hollister, which establishes that the death of a criminal defendant during the appeal of his or her conviction does not automatically abate the appeal but may render some issues moot. The court found that Hollister was not originally erroneous and that more good than harm would come from adhering to it. The court also held that the State presented sufficient evidence to support Moeller's conviction for securities fraud. The court concluded that Moeller's conduct constituted fraud or deceit and that the transaction between Moeller and the victim involved the sale of a security in the form of an investment contract. View "State v. Moeller" on Justia Law

The case involves Tammy O’Connor and Michael Stewart (the Sellers) who sold their company, Red River Solutions, LLC, to Atherio, Inc., a company led by Jason Cory, Greg Furst, and Thomas Farb (the Executives). The agreement stipulated that the Sellers would receive nearly half of their compensation upfront, with the rest—around $3.5 million—coming in the form of ownership units and future payments. However, Atherio went bankrupt and the Sellers received none of the promised $3.5 million. The Sellers sued the Executives, alleging fraud under federal securities law, Delaware common law, and the Texas Securities Act.The district court granted summary judgment to the Executives on all claims. The Sellers appealed the decision, arguing that the district court erred in applying the summary-judgment standard to the federal securities law and Delaware common law claims.The United States Court of Appeals for the Fifth Circuit affirmed the district court's decision on the extracontractual and Texas Securities Act fraud claims, but reversed the summary judgment grants on the federal securities law and Delaware common law claims. The court found that there was a genuine dispute as to whether the Executives' misrepresentation of Farb's role as CFO was a substantial factor in the Sellers' loss. The case was remanded for further proceedings. View "Cory v. Stewart" on Justia Law

The case revolves around Justin Keener, who operated under the name JMJ Financial. Keener's business model involved purchasing convertible notes from microcap issuers, converting those notes into common stock, and selling that stock in the public market at a profit. This practice, known as "toxic" or "death spiral" financing, can harm microcap companies and existing investors by causing the stock price to drop significantly. Keener made over $7.7 million in profits from this practice. However, he never registered as a dealer with the Securities and Exchange Commission (SEC).The SEC filed a civil enforcement action against Keener, alleging that he operated as an unregistered dealer in violation of the Securities Exchange Act of 1934. The United States District Court for the Southern District of Florida granted summary judgment for the SEC, enjoining Keener from future securities transactions as an unregistered dealer and ordering him to disgorge the profits from his convertible-note business.In the United States Court of Appeals for the Eleventh Circuit, Keener appealed the district court's decision. He argued that he did not violate the Securities Exchange Act because he never effectuated securities orders for customers. He also claimed that the SEC violated his rights to due process and equal protection.The Court of Appeals affirmed the district court's decision. It held that Keener operated as an unregistered dealer in violation of the Securities Exchange Act. The court rejected Keener's argument that he could not have been a dealer because he never effectuated securities orders for customers. It also dismissed Keener's claims that the SEC violated his rights to due process and equal protection. The court upheld the district court's imposition of a permanent injunction and its order for Keener to disgorge his profits. View "Securities and Exchange Commission v. Keener" on Justia Law