SEC v. Erwin

SEC v. Erwin

Opinion

 [*898]  ORDER GRANTING IN PART AND DENYING IN PART BOTH PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST RELIEF DEFENDANT DANIEL SCOTT CODDINGTON AND RELIEF DEFENDANT CODDINGTON'S MOTION FOR SUMMARY JUDGMENT

This matter is before the Court on Plaintiff's  [*899]  Motion for Summary Judgment Against D. Scott Coddington (Doc. # 251) and Relief Defendant Scott Coddington's Motion for Summary Judgment (Doc. # 253). In its Motion, the Securities and Exchange Commission (the "Commission") moves for summary judgment against Relief Defendant Daniel Scott Coddington [**2]  ("Scott Coddington" or "Mr. Coddington") on its claim that he was unjustly enriched when he received ill-gotten funds obtained from securities fraud committed by his father Daniel Dirk Coddington ("Daniel Coddington"), Golden Summit Investors Group Ltd. ("Golden Summit"), Extreme Capital Ltd. ("Extreme Capital"), and Jesse W. Erwin, Jr. (collectively, "Defendants"). In his Motion, Scott Coddington asserts that he is an improperly named relief defendant on the grounds that he has a legitimate claim to the funds he received and he no longer possesses the funds. For the following reasons, both Motions are granted in part and denied in part.

I. BACKGROUND¹

A. SECURITIES FRAUD BACKGROUND

In December 2013, the Commission filed this civil action against thirteen defendants and five relief defendants based on their respective roles in fraudulently inducing more than 30 investors to transfer approximately $18 million in cash and approximately $11.4 million in collateralized mortgage obligations ("CMOs") to entities controlled by Mr. Erwin and Daniel Coddington, who is now deceased.

From at least July 2010 through at least July 2011, Defendants offered and sold securities in the form of investment [**3]  contracts with Golden Summit and Extreme Capital to participate in a "CMO Trading Program." Only 60- to 70% of the money Daniel Coddington and Mr. Erwin received from investors was used to purchase CMOs. They diverted, on average, approximately 30% of the investors' funds for their own personal use and for purposes other than for purchasing CMOs. See (Doc. # 241 at 8-27).²

Based on Defendants' misrepresentations, three investors wire transferred $1,324,983 to Golden Summit's bank account and at least twelve investors wire transferred $7,332,908 to Mr. Erwin's escrow account in October and November of 2010. (Doc. # 251 at 7.) Of the $7.3 million that came into Mr. Erwin's escrow account during November 2010, only $4.2 million was sent to Golden Summit's brokerage account. Nearly all of the investors' funds left in Mr. Erwin's escrow account were transferred to Extreme Capital and Coddington Family Trust without any consideration.

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