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SEC v. E-Smart Techs., Inc.

SEC v. E-Smart Techs., Inc.

United States District Court for the District of Columbia

November 21, 2014, Decided; November 21, 2014, Filed

Civil Action No. 11-895 (JEB)

Opinion

 [*311]  MEMORANDUM OPINION

In this civil-enforcement action, the Securities and Exchange Commission alleges that e-Smart Technologies, Inc., a public company, was a sham. While it purported to be at the cutting edge of developing and manufacturing a biometric "smart" card, such claims, according to the Commission, were bogus. Instead, pro se Defendant Mary Grace (the company's CEO) and others repeatedly misrepresented the cards' capabilities and e-Smart's success to induce investors to part with their money. That money, in turn, was used to subsidize Grace's extravagant, globe-trotting lifestyle.

Through three years of contentious litigation, this Court has had occasion to rule on myriad motions. It now addresses the SEC's First Motion for Summary Judgment against Grace. That Motion seeks resolution of two of the five claims against her — [**2]  namely, that she violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by making material misrepresentations in connection with the sale of securities (Count I), and that she violated Sections 5(a) and 5(c) of the Securities Act by selling unregistered securities (Count II). Although the materials submitted are voluminous and Grace's are particularly daunting, the Court believes that the SEC has proved its case. It will therefore grant the Motion and enter judgment against Grace on both counts.

I. Background

On a motion for summary judgment, the Court must view the facts in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). As explained more fully below, however, Grace did not submit a proper Statement of Facts. As a result, to summarize the relevant background, the Court draws primarily from the SEC's Statement of Undisputed Material Facts, ECF No. 324-1.

A. E-Smart's Technology

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74 F. Supp. 3d 306 *; 2014 U.S. Dist. LEXIS 163405 **; Fed. Sec. L. Rep. (CCH) P98,303; 2014 WL 6612422

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. E-SMART TECHNOLOGIES, INC., et al., Defendants.

Prior History: U.S. SEC v. e-Smart Techs., Inc., 828 F. Supp. 2d 167, 2011 U.S. Dist. LEXIS 142419 (D.D.C., Dec. 12, 2011)

CORE TERMS

E-mail, e-Smart, investors, cards, shares, loans, stock, press release, misrepresentations, funds, summary judgment, scienter, lenders, smart, Deposition, orders, technology, summary judgment motion, opinion letter, material fact, sale of securities, unregistered, asserts, contracts, default, filings, genuine, traded, Memo, supply contract

Civil Procedure, Judgments, Summary Judgment, Evidentiary Considerations, Entitlement as Matter of Law, Genuine Disputes, Materiality of Facts, Burdens of Proof, Movant Persuasion & Proof, Nonmovant Persuasion & Proof, Opposing Materials, Accompanying Documentation, Securities Law, Implied Private Rights of Action, Elements of Proof, General Overview, Reliance, Justifiable & Reasonable Reliance, Materiality, Connection Requirement, Appropriateness, Securities Exchange Act of 1934 Actions, Burdens of Proof, Scienter, Relevant Factors, Recklessness, Insider Trading, Deceptive & Manipulative Devices, Puffery, Civil Liability Considerations, Disclosures, Forward Looking Statements, Business & Corporate Compliance, Postoffering & Secondary Distributions, Registration Requirements, Registration of Securities