Justia Securities Law Opinion Summaries

The defendants, Richard Maike, Doyce Barnes, and Faraday Hosseinipour, were involved in a company called Infinity 2 Global (I2G), which the FBI determined to be a pyramid scheme. The company collected approximately $34 million from investors, most of whom lost money. After a 25-day trial, a jury convicted the defendants of conspiracy to commit mail fraud and conspiracy to commit securities fraud. The defendants appealed their convictions, presenting numerous arguments for reversal.The United States District Court for the Western District of Kentucky initially handled the case, where the jury found the defendants guilty on both counts. The defendants were sentenced to varying prison terms: Maike received 120 months, Barnes 48 months, and Hosseinipour 30 months. The defendants then appealed to the United States Court of Appeals for the Sixth Circuit, challenging the sufficiency of the evidence and the jury instructions, among other issues.The United States Court of Appeals for the Sixth Circuit reviewed the case and rejected all the defendants' arguments. The court found that there was sufficient evidence to support the jury's verdicts on both counts. The court also determined that the jury instructions were appropriate and did not mislead the jury. The court affirmed the criminal judgments of Maike and Barnes. For Hosseinipour, the court affirmed her criminal judgment but vacated the district court's denial of her Rule 33 motion for a new trial, remanding her case for reconsideration of that motion. View "United States v. Maike" on Justia Law

In 2008, Kelly James Schnorenberg formed KJS Marketing, Inc. to secure funding and recruit agents for insurance companies. Between 2009 and 2015, KJS solicited over $15 million from approximately 250 investors, promising a 12% annual return. Schnorenberg failed to disclose to investors his past legal and financial troubles, including a lawsuit by the Colorado Division of Securities, a permanent injunction from selling securities in Colorado, a bankruptcy filing, and unpaid civil judgments.Schnorenberg was charged with twenty-five counts of securities fraud under section 11-51-501, with twenty-four counts based on materially false statements or omissions and one count based on a fraudulent course of business. He planned to defend himself by arguing that he acted in good faith reliance on the advice of his securities lawyer, Hank Schlueter. However, the trial court denied his motions for a continuance to secure Schlueter's testimony and excluded Schnorenberg's testimony about the specific advice he received, ruling it as hearsay.The Colorado Court of Appeals vacated seven of Schnorenberg's convictions as time-barred, reversed the remaining convictions, and remanded the case for further proceedings. The court concluded that the trial court erred in excluding Schnorenberg's testimony about his lawyer's advice and in not instructing the jury that good faith reliance on the advice of counsel could negate the mens rea element of the securities fraud charges.The Supreme Court of Colorado reviewed the case and held that the mens rea of "willfully," synonymous with "knowingly," applies to each element of securities fraud under subsections 11-51-501(1)(b) and (c). The court concluded that Schnorenberg's testimony about his lawyer's advice was relevant to whether he had the requisite mens rea and that the trial court erred in excluding this testimony. The court affirmed the judgment of the Court of Appeals and remanded the case for a new trial. View "People v. Schnorenberg" on Justia Law

The case involves codefendant brothers Joshua and Jamie Yafa, who were convicted of securities fraud and conspiracy to commit securities fraud for their involvement in a "pump-and-dump" stock manipulation scheme. They promoted the stock of Global Wholehealth Products Corporation (GWHP) through various means, including a "phone room" and social media, to inflate its price. Once the stock price rose significantly, they sold their shares, earning over $1 million. Following the sale, the stock price plummeted, causing significant losses to individual investors. A grand jury indicted the Yafas, along with their associates Charles Strongo and Brian Volmer, who pled guilty and testified against the Yafas at trial.The United States District Court for the Southern District of California sentenced the Yafas, applying the United States Sentencing Guidelines (U.S.S.G.) § 2B1.1. The court used Application Note 3(B) from the commentary to § 2B1.1, which allows courts to use the gain from the offense as an alternative measure for calculating loss when the actual loss cannot be reasonably determined. The district court found it difficult to calculate the full amount of investor losses and thus relied on the gain as a proxy. This resulted in a fourteen-level increase in the offense level for both brothers, leading to sentences of thirty-two months for Joshua and seventeen months for Jamie.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the term "loss" in § 2B1.1 is genuinely ambiguous and that Application Note 3(B)'s instruction to use gain as an alternative measure is a reasonable interpretation. The court concluded that the district court did not err in using the gain from the Yafas's offenses to calculate the loss and affirmed the district court's decision. View "USA V. YAFA" on Justia Law

Bradford Wayne Snedeker was convicted of various fraud and theft charges in two separate Boulder County District Court cases. In the first case, he was sentenced to four years in prison for securities fraud and a consecutive one-year term of work release plus twenty years of probation for theft. In the second case, he was sentenced to fifteen years of probation for theft, to run concurrently with the first case's sentence. After serving the prison term, Snedeker argued that his sentences were illegal under the ruling in Allman v. People, which held that a court cannot impose both imprisonment and probation for different offenses in the same case. The district court agreed that the first case's sentence was illegal and ordered resentencing but found the second case's sentence legal.The Colorado Court of Appeals reviewed the Fraud Case and affirmed the district court's resentencing decision. Snedeker then petitioned the Supreme Court of Colorado for review, arguing that reimposing the original probationary sentence after serving the prison term still violated Allman and that imposing concurrent prison and probation sentences in separate cases also violated Allman.The Supreme Court of Colorado held that when a sentence is illegal under Allman and the defendant has already served the prison portion, the court can reimpose a probationary term because probation remains a legal sentencing option. The court also held that it does not violate Allman to sentence a defendant to imprisonment in one case and probation in a separate case. Thus, the court affirmed the court of appeals' judgment in the Fraud Case and the district court's resentencing in the Theft Case. View "Snedeker v. People" on Justia Law

Jeffrey Horn, a former registered stockbroker, was convicted by a jury in April 2022 of conspiracy to commit mail and wire fraud, conspiracy to commit securities fraud, and securities fraud. The district court sentenced him to 100 months in prison, followed by three years of supervised release, and ordered him to pay restitution of $1,469,702. Horn appealed his convictions, challenging the sufficiency of the evidence and alleging cumulative error. He also raised objections regarding the calculation of his loss, restitution, and offense level under the Sentencing Guidelines.The United States District Court for the Southern District of Florida initially reviewed the case. The jury found Horn guilty on all counts, and the district court sentenced him accordingly. Horn's co-defendant, Omar Leon Plummer, was also convicted and sentenced. Horn's appeal followed, raising several issues related to the trial and sentencing.The United States Court of Appeals for the Eleventh Circuit reviewed the case. The court affirmed the district court's judgment, finding that the evidence was sufficient to support Horn's convictions. The court held that Horn acted with the requisite intent to defraud, as evidenced by his distribution of materially false information to investors and his role in the fraudulent scheme. The court also rejected Horn's arguments regarding cumulative error, finding no merit in his claims.Regarding sentencing, the Eleventh Circuit upheld the district court's application of the Sentencing Guidelines. The court found no clear error in the district court's determination that Horn was an organizer or leader of the criminal activity, justifying a four-level enhancement. The court also affirmed the use of intended loss rather than actual loss for sentencing purposes, consistent with the Guidelines and relevant case law. The court concluded that the district court's loss calculation and restitution order were supported by reliable and specific evidence. View "USA v. Horn" on Justia Law

Joseph Cammarata and his associates, Eric Cohen and David Punturieri, created Alpha Plus Recovery, LLC, a claims aggregator that submitted fraudulent claims to securities class action settlement funds. They falsely represented that three entities, Nimello, Quartis, and Invergasa, had traded in securities involved in class action settlements, obtaining over $40 million. The fraudulent claims included falsified trade data and fabricated reports. The scheme unraveled when a claims administrator, KCC, discovered the fraud, leading to the rejection of the claims and subsequent legal action.The United States District Court for the Eastern District of Pennsylvania charged the defendants with conspiracy to commit mail and wire fraud, wire fraud, conspiracy to commit money laundering, and money laundering. Cohen and Punturieri pled guilty, while Cammarata proceeded to trial and was found guilty on all counts. The District Court sentenced Cammarata to 120 months in prison, ordered restitution, and forfeiture of certain property.The United States Court of Appeals for the Third Circuit reviewed the case. The court upheld most of the District Court's rulings but found issues with the restitution order and the forfeiture of Cammarata's vacation home. The court held that the restitution order did not fully compensate the victims, as required by the Mandatory Victims Restitution Act (MVRA), and remanded for reconsideration. The court also found procedural error in the forfeiture process, as Cammarata was deprived of his right to a jury determination on the forfeitability of his property. The court vacated the forfeiture order in part and remanded for the Government to amend the order to reflect that the property is forfeitable as a substitute asset under 21 U.S.C. § 853(p). View "USA v. Cammarata" on Justia Law

Andrew Hackett, a stock promoter, was convicted of conspiracy to commit securities fraud and securities fraud related to the manipulative trading of a public company's stock. Hackett engaged in a pump-and-dump scheme, promoting the stock of First Harvest (later renamed Arias Intel) and recruiting others to do the same. He used call rooms to solicit investors and artificially inflate the stock price before selling his shares. The scheme was exposed by an FBI informant, leading to Hackett's conviction.The United States District Court for the Southern District of California sentenced Hackett to forty-six months of imprisonment, applying a sixteen-level sentencing enhancement under U.S.S.G. § 2B1.1(b)(1)(I) for a loss exceeding $1.5 million. The court calculated an intended loss of $2.2 million based on Hackett's ownership of 550,000 shares and his intent to sell them at four dollars per share. Hackett's counsel objected to the loss calculation but did not argue that intended loss was an improper measure of loss.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's judgment. The Ninth Circuit held that the district court did not plainly err in relying on the guideline commentary defining "loss" as the greater of actual loss or intended loss. The court noted that any error was not clear or obvious given the precedent recognizing both actual and intended loss and the lack of consensus among circuit courts on this issue. The court applied plain error review because Hackett's objection to the loss calculation was not sufficiently specific to preserve de novo review. View "USA V. HACKETT" on Justia Law

The case involves defendants Aghee William Smith II and David Alcorn, who were convicted in the Eastern District of Virginia for their roles in fraudulent schemes that defrauded investors of millions of dollars. The schemes included marketing and selling phony investments in a dental services marketing program and fraudulent spectrum investments. The fraudulent activities primarily targeted elderly victims, resulting in significant financial losses.In the district court, Smith and Alcorn were tried together before a jury in February 2022. They raised three main issues on appeal: a joint constitutional challenge to the district court’s COVID-19 trial protocol under the Public Trial Clause of the Sixth Amendment, Smith’s separate challenge to the admission of videotaped depositions under the Confrontation Clause, and Alcorn’s challenge to the imposition of supervised release conditions.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court rejected Smith and Alcorn’s joint contention that the COVID-19 trial protocol violated their rights under the Public Trial Clause, finding that the protocol did not constitute a partial courtroom closure and was justified by substantial public health reasons. The court also rejected Smith’s Confrontation Clause challenge, concluding that the government had made a good faith effort to secure the witnesses’ presence at trial and that the witnesses were unavailable due to health concerns.However, the court found merit in Alcorn’s challenge regarding the imposition of supervised release conditions. The district court had failed to properly incorporate the standard conditions of supervised release during the oral pronouncement of Alcorn’s sentence, leading to a Rogers error. As a result, the Fourth Circuit vacated Alcorn’s sentences and remanded for resentencing.In summary, the Fourth Circuit affirmed Smith’s convictions and sentences, affirmed Alcorn’s convictions, but vacated Alcorn’s sentences and remanded for resentencing. View "United States v. Smith" on Justia Law

In this case, the plaintiff, Shandor S. Badaruddin, was sanctioned by the Nineteenth Judicial District Court, Lincoln County, for his conduct as defense counsel in a criminal trial involving his client, Kip Hartman, who faced multiple felony charges related to securities and insurance fraud. The trial was conducted under strict time constraints due to the COVID-19 pandemic, and the court allocated equal time for both the prosecution and defense. Badaruddin was accused of mismanaging his allotted time, leading to a mistrial declaration by the District Court.The District Court found that Badaruddin had deliberately delayed the trial, which led to the mistrial. Consequently, the court imposed monetary sanctions amounting to $51,923.61 against Badaruddin for the costs associated with the trial. Badaruddin appealed the sanctions, arguing that he was not given adequate notice of the court's concerns and that his actions were not deliberate but rather a result of the challenging circumstances.The Supreme Court of the State of Montana reviewed the case and noted that the U.S. District Court had previously ruled that the mistrial declaration was erroneous. The U.S. District Court found that Badaruddin's actions did not constitute deliberate delay and that his efforts to manage the trial time were competent. The U.S. District Court's ruling was affirmed by the U.S. Court of Appeals for the Ninth Circuit, which held that Hartman could not be retried due to double jeopardy protections.Given the federal court's findings, the Supreme Court of Montana concluded that there was no basis for the sanctions under § 37-61-421, MCA, as there was no multiplication of proceedings. The court reversed the District Court's sanction order, determining that the costs incurred were not "excess costs" as defined by the statute. View "Badaruddin v. 19th Judicial District" on Justia Law

The case revolves around the interpretation of the Sarbanes-Oxley Act of 2002, specifically 18 U.S.C. §1512(c)(2), which imposes criminal liability on anyone who corruptly obstructs, influences, or impedes any official proceeding, or attempts to do so. The petitioner, Joseph Fischer, was charged with violating this provision for his actions during the Capitol breach on January 6, 2021. Fischer moved to dismiss the charge, arguing that the provision only criminalizes attempts to impair the availability or integrity of evidence. The District Court granted his motion, but a divided panel of the D.C. Circuit reversed and remanded for further proceedings.The Supreme Court of the United States held that to prove a violation of §1512(c)(2), the Government must establish that the defendant impaired the availability or integrity for use in an official proceeding of records, documents, objects, or other things used in an official proceeding, or attempted to do so. The Court reasoned that the "otherwise" provision of §1512(c)(2) is limited by the list of specific criminal violations that precede it in (c)(1). The Court also considered the broader context of §1512 in the criminal code and found that an unbounded interpretation of subsection (c)(2) would render superfluous the careful delineation of different types of obstructive conduct in §1512 itself. The Court vacated the judgment of the D.C. Circuit and remanded the case for further proceedings consistent with its opinion. View "Fischer v. United States" on Justia Law