Securities and Exchange Commission v. Simeo

Background

The court had previously granted the Securities and Exchange Commission’s unopposed motion for summary judgment and found Tom Simeo liable on the claims in the complaint. The SEC then filed a memorandum requesting remedies. Although the court had given Simeo an opportunity to respond, he did not file a response. The court therefore considered injunctive relief and civil penalties without arguments opposing the SEC’s requested remedies.

Remedies

The court found a substantial likelihood that Simeo would violate federal securities laws again. It relied on findings that he had violated those laws, acted with the required state of mind, engaged in misconduct over multiple years, had not accepted responsibility, and had a history in capital-raising ventures that could place him in a position to commit future violations.

The court permanently restrained and enjoined Simeo from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, including by using fraudulent schemes, materially false or misleading statements, or fraudulent practices in connection with securities transactions. It also permanently restrained and enjoined him from violating Section 17(a) of the Securities Act of 1933 through similar conduct in the offer or sale of securities.

The court permanently prohibited Simeo from serving as an officer or director of an issuer with a class of securities registered under Section 12 of the Exchange Act or required to file reports under Section 15(d). It also permanently barred him from participating in penny-stock offerings, including activities with a broker, dealer, or issuer involving the issuance, trading, or attempted sale of penny stock.

Civil penalty

The court treated the violations as third-tier violations because they involved fraud, deceit, manipulation, or deliberate or reckless disregard of regulatory requirements and created a significant risk of substantial investor losses. The court noted that the SEC had not shown Simeo received a financial gain from the fraud, so it considered other factors, including the number of violative transactions or investors targeted.

The court found that Simeo repeatedly and intentionally violated securities laws, lied about matters important to investors, created a substantial risk of investor losses, destroyed his laptop, fabricated evidence, and had not shown financial hardship preventing payment. It treated the 2014 and 2015 Form 10-K annual filings as separate violations and imposed a total civil penalty of $350,000: $160,000 for the 2014 violation and $190,000 for the 2015 violation.

Disposition

Judge John P. Cronan entered final judgment for the SEC and against Simeo. The judgment required payment within 30 days, allowed the SEC to use lawful collection procedures, and provided that the court would retain jurisdiction to enforce the judgment. The Clerk of Court was directed to close the case.