Securities and Exchange Commission v. One or More Unknown Traders in the…

Background

The Securities and Exchange Commission filed an amended complaint. The caption identifies the defendant as Robert M. Mathys, but the body of the order refers to the defendant as Roland M. Mathys in several places. The defendant did not answer, plead, or otherwise defend the action. The court entered a certificate of default on February 21, 2020.

The SEC applied for a default judgment. The court considered the pleadings and evidence submitted in support of that application and found that the defendant had not shown cause why judgment should not be entered. The court also found that the defendant was not an infant or incompetent person and was not serving in the United States military.

Court’s Findings

The court determined that the uncontested allegations in the amended complaint established the defendant’s liability for insider trading in connection with a tender offer. The court found violations of Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3. The SEC established that the defendant’s profits from the insider trading were $4,944,684.64.

Ruling and Relief

The court granted the SEC’s application for a default judgment. A default judgment is a judgment entered because a party failed to defend, rather than after a contested trial or motion on the merits.

The court permanently restrained and enjoined the defendant from violating Section 14(e) and Rule 14e-3 in connection with any tender offer or request or invitation for tenders. The injunction covers purchasing or selling covered securities while possessing specified material, nonpublic information, as well as communicating that information when it is reasonably foreseeable that the communication will lead to such trading, subject to the exceptions stated in the order. The injunction also binds certain officers, agents, employees, attorneys, and other persons acting in active concert with the defendant who receive actual notice of the judgment.

The court ordered the defendant to pay a civil penalty of $9,889,369.28 to the SEC under Section 21A of the Exchange Act. The SEC had requested a penalty equal to three times the defendant’s profits. The court instead selected a penalty equal to twice the profits, citing the facts and circumstances and the relatively brief period of unlawful activity. Payment was due within 30 days after entry of the final judgment. The order provides that the SEC may use lawful collection procedures and seek civil contempt for violations of court orders, and that post-judgment interest applies to amounts unpaid after 30 days.

The court ordered that approximately $2.2 million remaining frozen at Credit Suisse Securities (USA) LLC be released from the asset freeze because of a separate judgment of forfeiture in a related federal case. The court retained jurisdiction to enforce the final judgment, directed the Clerk to enter it, and ordered the case closed.