Justia Securities Law Opinion Summaries

Defendant appealed from two judgments of conviction related to his involvement in "pump and dump" stock schemes. At issue was whether the first judgment of conviction, entered upon a jury verdict, should be overturned, either because the evidence was insufficient to permit a jury to find a fiduciary duty, or because the jury was improperly instructed about how to determine the existence of a fiduciary duty. Also at issue was whether the second judgment of conviction should be overturned because defendant's guilty plea, entered after his conviction in the first trial, was premised on the outcome of that trial. The court held that, upon reviewing the jury instructions for plain error and taking the evidence in the light most favorable to the Government, the jury was entitled to find that the brokers in this case had a duty to disclose their exorbitant commissions, just as they had a duty to refrain from making affirmative misrepresentations regarding the size of their commissions, and thus, the district court properly instructed the jury on the elements of that duty. The court also held that, because it found no principled basis on which to distinguish this case from United States v. Szur, the court concluded that there was no error in the charge, and affirmed defendant's first conviction. Therefore, the court's conclusion necessarily defeated defendant's argument challenging his subsequent guilty plea and the second judgment of conviction was also affirmed.

The Commodity Futures Trading Commission sued operators of commodity trading pools for fraud and related violations of the Commodity Exchange Act. Following earlier proceedings in the Seventh Circuit, the district court entered judgment against remaining defendants. Defendantâs assets of $104 million, 39% of the amount owed the investors in the pools, were placed in the control of a receiver. The district court approved the receiverâs proposed allocation of the assets among the investors, which excluded a claim filed by an Andorran bank as untimely and rejected a valuation claim by GAMAG. The Seventh Circuit affirmed. The district court acted within its discretion in disallowing the bankâs claim, based on the bankâs neglect in pursuing its claim and the difficulty in recalculating the shares of the investors. GAMAGâs claim to be a creditor, rather than a shareholder, was properly rejected; its funds were commingled with and managed with the funds of the other investors and there was no difference in the level of risk.

The defendant was convicted of counts relating to securities fraud in connection with an improper revenue recognition scheme. The Tenth Circuit affirmed denial of a post-trial motion based on the statute of limitations because the defendant had signed a waiver. The waiver was valid, despite not being executed in open court and not mentioning specific constitutional rights being waived; the limitations period is statutory, not constitutional. The court remanded a claim of ineffective assistance of counsel; the district court should not have ruled on the merits because the record was not sufficiently developed for determination of whether the claim could be raised on direct appeal.