SEC v. PlexCorps

SEC v. PlexCorps

Opinion

ECF Case

ORDER GRANTING PRELIMINARY INJUNCTION, ASSET FREEZE, AND OTHER INTERIM RELIEF

On December 1, 2017, Plaintiff Securities and Exchange Commission (the "Commission") filed the instant action against Defendants PlexCorps a/k/a and d/b/a PlexCoin and Sidepay.ca (the "Entity Defendant"), Dominic Lacroix ("Lacroix"), and Sabrina Paradis-Royer (with Lacroix, the "Individual Defendants"), alleging securities fraud in violation of the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. § 77a et seq.; the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78a et seq.; and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. That day, the Commission filed an emergency application (the "Application") for an order to show cause, temporary restraining [*2]  order, and asset-freezing order against Defendants, and the Court granted the application, issuing an ex parte Order to Show Cause, scheduling a preliminary injunction hearing to take place on December 12, 2017, and requiring Defendants to respond by December 7, 2017, at 5:00 p.m. Plaintiff duly served the Order to Show Cause on Defendants. On December 8, 2017, the Court granted an extension of the temporary restraining order against the Individual Defendants, who consented, and rescheduled the preliminary injunction hearing to March 5, 2018. However, the Entity Defendant neither consented to the extension nor responded to the Court's Order to Show Cause; in fact, it has not appeared in the instant action. Pursuant to Rule 65(b)(2) of the Federal Rules of Civil Procedure, the temporary restraining order against the Entity Defendant remains in effect for a 14-day period ending December 15, 2017.

Before the Court is the Commission's December 12, 2017, letter motion for preliminary injunction against the Entity Defendant. Normally, the Court applies the test articulated in eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 126 S. Ct. 1837, 164 L. Ed. 2d 641 (2006), to determine whether a preliminary injunction is warranted. See, e.g., Abbott Labs. v. Adelphia Supply USA, No. 15-CV-5826 (CBA), 2015 U.S. Dist. LEXIS 189555, 2015 WL 10906060, at *5 (E.D.N.Y. Nov. 6, 2015). Under the eBay test, which applies to purely equitable injunctions, the movant must establish [*3]  that (1) the movant likely will succeed on the merits; (2) the movant likely will suffer irreparable harm; (3) the balance of hardships tips in the movant's favor; and (4) the preliminary injunction would not disserve the public interest. See eBay, 547 U.S. at 391; Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d Cir. 2005). However, because preliminary injunctions in lawsuits brought by the Commission are "creatures of statute" and not "rooted wholly in the equity jurisdiction of the federal court," the Second Circuit has not required the Commission to prove the elements of the rigid eBay test. See SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975). Instead, the Commission "need only make 'a substantial showing of likelihood of success as to both a current violation and the risk of repetition.'" Smith v. SEC, 653 F.3d 121, 127-28 (2d Cir. 2011) (quoting SEC v. Cavanagh, 155 F.3d 129, 132 (2d Cir. 1998)). A "substantial showing of likelihood of success" is a sliding-scale standard; the Commission "should be obliged to make a more persuasive showing of its entitlement to a preliminary injunction the more onerous . . . the burdens of the injunction it seeks." Id. at 128 (quoting SEC v. Unifund SAL, 910 F.2d 1028, 1039 (2d Cir. 1990)).

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