SEC v. Thompson

SEC v. Thompson

Opinion

 [*1153]  EBEL, Circuit Judge.

This appeal arises out of a civil-enforcement action brought by the Securities and Exchange Commission ("SEC") against Defendant-Appellant Ralph W. Thompson, Jr., in connection with an alleged Ponzi scheme Thompson ran through his company, Novus Technologies, L.L.C. ("Novus"). The district court granted summary judgment in the SEC's favor on several issues, including the issue of whether the instruments Novus sold investors were "securities," as that term is defined under the Securities Act of 1933 and the Securities Exchange Act of 1934 (collectively, the "Securities Acts").

Thompson's sole claim on appeal is that the district  [**2] court ignored genuine disputes of material fact on the issue of whether the Novus instruments were securities, and that he was entitled to have a jury make that determination. We conclude, under the test articulated by the Supreme Court in Reves v. Ernst & Young, 494 U.S. 56, 110 S. Ct. 945, 108 L. Ed. 2d 47 (1990), that the district court correctly found that the instruments Thompson sold were securities as a matter of law. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.

 [*1154]  BACKGROUND

I. Factual background¹

Sometime in 2000, Appellant Thompson founded Novus as a vehicle for his business ventures in China and elsewhere across the globe. According to Thompson, by 2005, his connections in China  [**3] had yielded some lucrative business opportunities. Thompson's most promising prospect involved selling a quantity of biodiesel reactors to a Chinese company at a substantial profit. But before Thompson could cash in, he needed to raise $12 million to facilitate that transaction. In fact, each of Thompson's prospects in China required significant capital, of which Thompson had none.

By 2006, however, Thompson had attracted the attention of a partner, Duane C. Johnson,² who "had some borrowing power." Aplt. App. at 136. They began to "set about finding ways to obtain money to fund the China office for these projects." Id. at 137. Their search ultimately led them to the doorstep of Robert Holloway, who told the pair about a proprietary algorithm he had developed for trading on the S&P 500. Holloway explained that his algorithm enabled him to guarantee his investors minimum monthly returns of five percent on their investment, but that his investors sometimes received as much as forty percent per month. Holloway conducted a real-time demonstration of the algorithm for Thompson and Johnson, and as they watched the gains "occurring on his screen," they became believers. Id. at 141.

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