Securities and Exchange Commission v. Chalk

Background

The Securities and Exchange Commission brought an enforcement action against Terrence Chalk, also known as “Dr. Terrence Cash,” and Greenlight Advantage Group Inc., Greenlight Business Solutions Inc., Greenlight Consulting Corp., and Greenlight Investment Partners Inc. The SEC alleged that the defendants engaged in fraud and made misleading statements in violation of Sections 10(b) and 10b-5 of the Securities Exchange Act of 1934, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Advisers Act of 1940.

The Department of Justice separately filed a criminal complaint against Chalk based on the same conduct and later filed an indictment charging securities fraud and wire fraud. The criminal case alleged that Chalk solicited money from Greenlight clients and falsely promised to invest the money through a purported “Chairman’s Fund,” including promises of fixed or guaranteed returns.

Motion to Stay

The defendants moved to stay, or pause, the SEC action while the criminal case proceeded. The motion argued that the two cases involved substantially overlapping issues, that Chalk had been indicted, and that continuing the civil case could harm the defendants’ criminal-defense rights. Specifically, the defendants argued that civil discovery could expose their criminal defense strategy or force Chalk to invoke his right against self-incrimination, potentially causing an unfavorable inference in the civil case.

The motion also argued that a stay would not prejudice the SEC because the SEC took no position on the request. According to the motion, a stay would avoid duplicated work, conserve judicial resources, and protect the public interest in an unobstructed criminal prosecution. The motion described six factors used by courts to evaluate a stay: overlap between the civil and criminal issues, the criminal case’s status, the plaintiff’s interest in proceeding quickly, the defendants’ interests and burdens, the court’s interests, and the public interest.

Ruling

Judge Paul G. Gardephe granted the defendants’ application for a stay for the reasons stated in their February 18, 2021 letter. The order therefore paused the SEC enforcement action. The opinion does not state a specific end date or other detailed terms for the stay.

The court did not decide whether the SEC’s fraud allegations were true or whether the defendants violated the cited securities laws. This was an ancillary case-management ruling based on the parallel criminal proceedings.