SEC v. Drake

SEC v. Drake

Opinion

ORDER RE: MOTIONS FOR FINAL JUDGMENT AS TO MONETARY REMEDIES [ECF NOS. 78-80]

Before the Court are Plaintiff Securities and Exchange Commission's ("SEC") following motions:

• Motion for Final Judgment Ordering Disgorgement of Ill-Gotten Gains, Prejudgment Interest, and a Civil Penalty against Defendant Stephen Kenneth Grossman ("Grossman Mot."), ECF No. 78;

• Motion for Final Judgment Ordering Disgorgement of Ill-Gotten Gains, Prejudgment Interest, and a Civil Penalty against Defendant Stephen Scott Moleski ("Moleski Mot."), ECF No. 79; and

• Motion [*2]  for Final Judgment Ordering Disgorgement of Ill-Gotten Gains, Prejudgment Interest, and a Civil Penalty against Defendant David Alan Wolfson ("Wolfson Mot."), ECF No. 80.

Defendants Stephen Kenneth Grossman ("Grossman") and Stephen Scott Moleski ("Moleski") filed oppositions and the SEC filed replies. Grossman Opp'n, ECF No. 81; Moleski Opp'n, ECF No. 82; Reply ISO Grossman Mot., ECF No. 83; Reply ISO Moleski Mot., ECF No. 84. Wolfson did not file an opposition. The Court heard oral argument on September 20, 2021. ECF No. 85. For the following reasons, the Court GRANTS all three motions.

I. BACKGROUND

The SEC filed a Complaint on January 15, 2020 against multiple defendants. See Compl., ECF No. 1. Defendants Grossman, Moleski, and Wolfson are three of the defendants ("Defendants"). Id. The three Defendants have each consented to the entry of a judgment and the Court entered those judgments. J. as to Defendant David Alan Wolfson ("Wolfson Judgment"), ECF No. 18; J. as to Defendant Stephen Scott Moleski ("Moleski Judgment"), ECF No. 24; J. as to Stephen Kenneth Grossman ("Grossman Judgment"), ECF No. 76. The judgments permanently enjoin the Defendants from violating various federal securities [*3]  laws and give the Court, upon the SEC's motion, discretion to order disgorgement of ill-gotten gains, prejudgment interest, and a civil penalty. Wolfson Judgment; Moleski Judgment; Grossman Judgment. The judgments also state that the allegations in the Complaint are to be taken as true for the purposes of the SEC's motions. Wolfson Judgment; Moleski Judgment; Grossman Judgment.

According to the Complaint, the Defendants operated and worked in call centers that sold microcap securities as part of a "matched trading scheme." See Compl. None of the Defendants registered with the SEC as brokers or dealers and none of the Defendants associated with a registered broker or dealer. Id. ¶ 8. Defendant Wolfson "operated four call centers" and hired individuals to "cold call[] prospective investors." Id. ¶¶ 18, 20, 25. Defendant Grossman initially "cold called prospective investors" and later managed one of the call centers. Id. ¶¶ 20, 21. Defendant Moleski also initially "cold called prospective investors" and later managed one of the call centers. Id. ¶¶ 24-26. The Complaint alleges the following claims against Defendant Wolfson: violations of Section 15(a)(1) of the Exchange Act; violations of Section 17(a)(1) and (3) of the [*4]  Securities Act; and violations of Section 10(b) of the Exchange Act as well as Rule 10b-5(a) and (c). Id. ¶¶ 50-61. The Complaint also alleges that Defendants Grossman and Moleski violated Section 15(a)(1) of the Exchange Act. Id. ¶¶ 50-52. According to each judgment, the "allegations of the Complaint shall be accepted as and deemed true" and the Defendants are precluded from arguing that they "did not violate the federal securities laws as alleged in the Complaint." Wolfson Judgment; Grossman Judgment; Moleski Judgment.

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