District Court Grants SEC's Motion Seeking Final Judgment for Disgorgement Against Ponzi Scheme Defendants

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[author: Michael S. Gordon]

The U.S. District Court for the District of Colorado granted the Securities and Exchange Commission’s motion for entry of final judgment against two defendants that had perpetrated a Ponzi scheme, ordering disgorgement and assessing civil monetary penalties equal to the difference between the amounts received from and distributed to investors. For the purposes of reaching a final judgment, the defendants admitted the facts as alleged by the SEC that they ran a Ponzi scheme that raised over $54 million and defrauded hundreds of investors; however, defendants disputed the disgorgement and penalty amounts sought by the SEC. Noting that the primary purpose of disgorgement is deterrence, the District Court found that the SEC’s requested amount of disgorgement, the difference between the amounts received from and distributed to investors (approximately $37 million), was proper. In reaching its conclusion, the District Court rejected defendants’ arguments that disgorgement should be limited to the amount defendants’ “actually received” in their bank accounts on the ground that all contributions to the corporation controlled by defendants “benefitted” them. The District Court did, however, order the amount of disgorgement to be reduced by any amount returned to the corporation’s investors by its receiver.

SEC v. Mantria Corp. et al., Civil Action No. 09-cv-02676-CMA-MJW (D. Co. Aug. 30, 2012).

 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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