Justia Securities Law Opinion Summaries

Defendant-Appellant George David Gordon was a former securities attorney convicted of multiple criminal charges relating to his alleged participation in a "pump-and-dump" scheme where he (along with others) violated the federal securities laws by artificially inflating the value of various stocks, then turning around and selling them for a substantial profit. The government restrained some of his property before the indictment was handed down and ultimately obtained criminal forfeiture of that property. On appeal, Defendant raised multiple issues relating to the validity of his conviction and sentence, and the propriety of the government’s conduct (both before and after trial) related to the forfeiture of his assets. In the end, the Tenth Circuit found no reversible error and affirmed Defendant's conviction and sentence, as well as the district court’s forfeiture orders. View "United States v. Gordon" on Justia Law

Defendants Michael Nouri, Eric Nouri, and Anthony Martin appealed convictions stemming from their involvement with a market manipulation scheme with Smart Online, Inc. stock. On appeal, defendants contended that the district court erred in instructing the jury on fraud by deprivation of honest services, especially in the context of securities fraud, and that there was insufficient evidence to sustain convictions for securities fraud. Martin also contended that there was insufficient evidence to convict him of honest-services wire fraud, that the district court erroneously limited his examination of a witness, and that his sentence was unreasonable. The court affirmed the judgment, finding no merit in defendants' arguments. View "United States v. Nouri" on Justia Law

Defendants are MB, a registered investment adviser, and people affiliated with MB. A fraudulent scheme was perpetrated by Bloom while he was an employee and officer of MB, through a hedge fund called North Hills that Bloom controlled and managed outside the scope of his responsibilities at MB. Bloom was arrested and indicted in New York in 2009 on charges relating to the Ponzi scheme, by which time most of the money invested in North Hills was gone. Investors filed suit, alleging: controlling person liability under Section 20(a) of the Securities and Exchange Act; negligent supervision; violations of Securities and Exchange Commission Rule 10b-5; violations of the Pennsylvania Unfair Trade Practice and Consumer Protection Law; and breach of fiduciary duty. The district court rejected all claims. The Third Circuit vacated and remanded with respect to MB on the claims for violations of Rule 10b-5 and the state UTPCPL, and otherwise affirmed. View "Belmont v. MB Inv. Partners, Inc." on Justia Law

Defendant appealed from a Memorandum and Order of Restitution by the district court resentencing him to pay restitution to the victims of a massive "pump-and-dump" securities fraud scheme he and his co-conspirators designed and executed. Defendant contended, inter alia, that the district court should have released some or all of defendant's money held by the court pending his resentencing. The court held that a district court could exercise its authority under the All Writs Act, 28 U.S.C. 1651(a), to restrain a convicted defendant's funds in anticipation of sentencing. Therefore, the court affirmed the restitution order. View "United States v. Catoggio" on Justia Law

Sklena and Sarvey were floor traders in the Five-Year Treasury Note futures pit at the Chicago Board of Trade. Sklena was a “local,” authorized to trade only on his own behalf; Sarvey was a “broker” and could trade for himself and for his customers. On April 2, 2004, the price of the Five-Year Note futures fluctuated wildly. Sarvey and Sklena executed the series of transactions that resulted in criminal prosecution. According to the government, Sklena and Sarvey conspired to sell Sarvey’s customers’ contracts noncompetitively. The U.S. Commodity Futures Trading Commission filed a civil complaint alleging that the two “engaged in a series of non-competitive trades” that defrauded customers out of over $2 million. Sarvey died before trial on charges of wire and commodity fraud and noncompetitive futures contract trading. In Sklena’s trial, the district court excluded Sarvey’s deposition as inadmissible hearsay. Sklena was convicted. The Seventh Circuit reversed. There was sufficient evidence to support the conviction, but the court erred in excluding the deposition testimony.View "United States v. Sklena" on Justia Law

Contorinis was a co-portfolio manager of the Fund, which invested in companies in the retail and personal products sectors. In 2000, Contorinis befriended Stephanou, who became an investment banker in the Mergers and Acquisitions group at UBS in 2002. Stephanou regularly provided confidential information to several friends and, in 2005, shared information about a planned acquisition with Contorinis and others. Based on a series of transactions following Stehanou’s disclosures the about and on-again, off-again acquisition, Contorinis was convicted of conspiracy to commit securities fraud and insider trading. The district court imposed a forfeiture order of $12.65 million. The Second Circuit affirmed the conviction. A challenged jury instruction adequately conveyed the definition of material, nonpublic information; the court was within its discretion in admitting evidence of contemporaneous trades by individuals who received inside information from the same source as Contorinis. The court vacated the order to forfeit gains acquired by Contorinis’s employer, but not by him.View "United States v. Contorinis" on Justia Law

Defendant was indicted for bank fraud, mail fraud, and wire fraud. The government alleged that Defendant's sale of collateral pledged as security for a loan from a bank and his failure to carry out his disclosure duties under the security agreement amounted to a scheme to defraud for purposes of the bank, mail, and wire fraud statutes. The district court dismissed the indictment, finding (1) a false representation is a required element of a federal fraud offense and the indictment failed to allege any express misrepresentation by Defendant; and (2) absent a statutory, fiduciary, or independent disclosure duty, nondisclosure was insufficient to state a fraud claim under any of the charged offenses. The Eighth Circuit Court of Appeals affirmed, holding that the district court correctly dismissed the indictment for failure to state an offense, as the indictment failed to sufficiently allege a scheme to defraud under the mail, wire, and bank fraud statutes. View "United States v. Steffen" on Justia Law

Traders employed by brokerage firms were indicted for conspiring with employees of Watley, a day trading firm, to commit securities fraud by providing their employers’ confidential information to Watley. After a mistrial on conspiracy to commit securities fraud, 18 U.S.C. 1348, 1349, the government retried the conspiracy count with honest services fraud and property fraud as the charged objects of conspiracy. The jury convicted under each theory. The Supreme Court subsequently decided Skilling, limiting honest services fraud to schemes effectuated through bribes or kickbacks. After sentencing, the SEC initiated administrative proceedings and disclosed transcripts of investigative depositions taken as early as 2004. With access to those transcripts, defendants moved for a new trial, contending that the transcripts included material required to be disclosed under Brady because it contradicted or undermined testimony of key government witnesses on a central question: whether allegedly misappropriated information was confidential under Carpenter v. U. S. The district court concluded that the jury would not have reached a different result had the transcripts been disclosed. The Second Circuit vacated. Failure to disclose portions of the transcripts violated Brady and undermined confidence in the verdict. The court also did not adequately instruct the jury on the scope of honest services fraud. View "United States v. Mahaffy" on Justia Law

Defendant sold investors secured debt obligations (SDOs) based on the loans his company made to used-car purchasers. Defendant misrepresented his credentials and insurance coverage on the investments and marketed his investment offerings as though they were as safe as FDIC-backed certificates of deposit. After a jury trial in which Defendant represented himself, Defendant was convicted of securities fraud. The district court sentenced him to twenty-five years in prison, three years' supervised release, and almost $7.3 million in restitution. The Fifth Circuit Court of Appeals affirmed the conviction and sentence, holding (1) the district court did not plainly err in admitting a civil order at trial; (2) the jury did not convict Defendant on an invalid alternative theory; (3) the district court properly managed Defendant's pro se representation; (4) the evidence was sufficient to support the convictions; and (5) the district court did not err in imposing the sentence. View "United States v. Bruteyn" on Justia Law

Plaintiff owned a rental center and retained defendants, who provide investment banking services to the equipment rental industry, to help him obtain an investor or buyer. Defendants’ advice culminated in sale of a majority of plaintiff’s stock for about $30 million. Defendants billed plaintiff $758,675. Plaintiff paid without complaint but later sued for return of the entire fee on the ground that defendants lacked a brokerage license required by Wis. Stats. 452.01(2)(a), 452.03. The district court dismissed, finding the parties equally at fault. The Seventh Circuit affirmed, declining to definitively answer whether a license was required under the circumstances that a negotiated sale of assets fell through in favor of a sale of stock. Plaintiff is not entitled to relief even if there was a violation. Referring to the classic Highwayman’s Case, the court rejected claims of in pari delicto and unclean hands; plaintiff was not equally at fault. To bar relief, however, is not punishing a victim. Plaintiff did not incur damages and is not entitled to restitution. Plaintiff sought compensation for spotting a violation and incurring expenses to punish the violator, a bounty-hunter or private attorney general theory, not recognized under Wisconsin law. The voluntary-payment doctrine is inapplicable. View "Schlueter v. Latek" on Justia Law