Securities and Exchange Commission v. Steve Chen et al

Filing 210

FINAL JUDGMENT AS TO DEFENDANT STEVE CHEN by Judge R. Gary Klausner. (SEE JUDGMENT FOR SPECIFICS) (bp)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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Western Division

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SECURITIES AND EXCHANGE
COMMISSION,

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Case No. CV 15-07425 (RGK)(GJSx)
[PROPOSED] FINAL JUDGMENT AS
TO DEFENDANT STEVE CHEN

Plaintiff,
vs.
STEVE CHEN, et al.,
Defendants.

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The Securities and Exchange Commission (“SEC”) having filed a Complaint

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and Defendant Steve Chen (“Defendant”) having entered a general appearance;

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consented to the Court’s jurisdiction over Defendant and the subject matter of this

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action; consented to entry of this Final Judgment without admitting or denying the

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allegations of the Complaint (except as to jurisdiction and except as otherwise

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provided herein in paragraph VI); waived findings of fact and conclusions of law; and
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waived any right to appeal from this Judgment:

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I.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that

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Defendant is permanently restrained and enjoined from violating Section 5 of the

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Securities Act [15 U.S.C. § 77e] by, directly or indirectly, in the absence of any

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applicable exemption:

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(a)

unless a registration statement is in effect as to a security, making

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use of any means or instruments of transportation or

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communication in interstate commerce or of the mails to sell such

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security through the use or medium of any prospectus or

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otherwise;

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(b)

unless a registration statement is in effect as to a security, carrying

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or causing to be carried through the mails or in interstate

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commerce, by any means or instruments of transportation, any

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such security for the purpose of sale or for delivery after sale; or

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(c)

making use of any means or instruments of transportation or

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communication in interstate commerce or of the mails to offer to

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sell or offer to buy through the use or medium of any prospectus

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or otherwise any security, unless a registration statement has been

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filed with the SEC as to such security, or while the registration

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statement is the subject of a refusal order or stop order or (prior to

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the effective date of the registration statement) any public

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proceeding or examination under Section 8 of the Securities Act

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[15 U.S.C. § 77h].

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as

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provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also

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binds the following who receive actual notice of this Final Judgment by personal

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service or otherwise: (a) Defendant’s officers, agents, servants, employees, and
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attorneys; and (b) other persons in active concert or participation with Defendant or

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with anyone described in (a).

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II.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that

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Defendant is permanently restrained and enjoined from violating Section 17(a) of the

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Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)] in the offer or sale

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of any security by the use of any means or instruments of transportation or

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communication in interstate commerce or by use of the mails, directly or indirectly:

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(a)

to employ any device, scheme, or artifice to defraud;

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(b)

to obtain money or property by means of any untrue statement of a

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material fact or any omission of a material fact necessary in order to

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make the statements made, in light of the circumstances under which

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they were made, not misleading; or

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(c)

to engage in any transaction, practice, or course of business which
operates or would operate as a fraud or deceit upon the purchaser.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as

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provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also

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binds the following who receive actual notice of this Final Judgment by personal

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service or otherwise: (a) Defendant’s officers, agents, servants, employees, and

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attorneys; and (b) other persons in active concert or participation with Defendant or

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with anyone described in (a).

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III.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is

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permanently restrained and enjoined from violating, directly or indirectly, Section

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10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §

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78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using

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any means or instrumentality of interstate commerce, or of the mails, or of any

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facility of any national securities exchange, in connection with the purchase or sale of
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any security:

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(a)

to employ any device, scheme, or artifice to defraud;

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(b)

to make any untrue statement of a material fact or to omit to state a

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material fact necessary in order to make the statements made, in the light

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of the circumstances under which they were made, not misleading; or

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(c)

to engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as

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provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also

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binds the following who receive actual notice of this Final Judgment by personal

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service or otherwise: (a) Defendant’s officers, agents, servants, employees, and

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attorneys; and (b) other persons in active concert or participation with Defendant or

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with anyone described in (a).

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IV.

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IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that

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Defendant is jointly and severally liable with USFIA, Inc., Alliance Financial Group,

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Inc., Amauction, Inc., Aborell Mgmt I, LLC, Aborell Advisors I, LLC, Aborell REIT

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II, LLC, Ahome Real Estate, LLC, Alliance NGN, Inc., Apollo REIT I, Inc., Apollo

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REIT II, LLC, Amkey, Inc., US China Consultation Association, and Quail Ranch

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Golf Course, LLC (collectively, “the Entity Defendants”) for disgorgement of

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$51,209,257.66, which the Court finds represents profits gained as a result of the

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conduct alleged in the Complaint, together with prejudgment interest thereon in the

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amount of $3,790,742.34, and a civil penalty in the amount of $16,728,064 pursuant

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to 15 U.S.C. §§ 77t(d)(2)(C), 78u(d)(3)(B)(iii), 80b-9(e)(2)(C). Defendant and the

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Entity Defendants shall satisfy this obligation by paying it to the SEC after entry of

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this Final Judgment.

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Defendant may transmit payment electronically to the SEC, which will provide
detailed ACH transfer/Fedwire instructions upon request. Payment may also be
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made directly from a bank account via Pay.gov through the SEC website at

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http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified

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check, bank cashier’s check, or United States postal money order payable to the

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Securities and Exchange Commission, which shall be delivered or mailed to

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Enterprise Services Center

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Accounts Receivable Branch

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6500 South MacArthur Boulevard

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Oklahoma City, OK 73169

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and shall be accompanied by a letter identifying the case title, civil action number,

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and name of this Court; Steve Chen as a defendant in this action; and specifying that

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payment is made pursuant to this Final Judgment.

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Defendant shall simultaneously transmit photocopies of evidence of payment

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and case identifying information to the SEC’s counsel in this action. By making this

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payment, Defendant relinquishes all legal and equitable right, title, and interest in

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such funds and no part of the funds shall be returned to Defendant.

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The SEC may enforce the Court’s judgment for disgorgement and prejudgment

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interest by moving for civil contempt (and/or through other collection procedures

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authorized by law) at any time after 14 days following entry of this Final Judgment.

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Defendant shall pay post judgment interest on any delinquent amounts pursuant to 28

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U.S.C. § 1961. The SEC shall hold the funds, together with any interest and income

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earned thereon (collectively, the “Fund”), pending further order of the Court.

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The SEC may propose a plan to distribute the Fund subject to the Court’s

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approval. Such a plan may provide that the Fund shall be distributed pursuant to the

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Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. The

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Court shall retain jurisdiction over the administration of any distribution of the Fund.

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If the SEC staff determines that the Fund will not be distributed, the SEC shall send

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the funds paid pursuant to this Final Judgment to the United States Treasury.

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Regardless of whether any such Fair Fund distribution is made, amounts
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ordered to be paid as civil penalties pursuant to this Judgment shall be treated as

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penalties paid to the government for all purposes, including all tax purposes. To

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preserve the deterrent effect of the civil penalty, Defendant shall not, after offset or

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reduction of any award of compensatory damages in any Related Investor Action

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based on Defendant’s payment of disgorgement in this action, argue that he is entitled

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to, nor shall he further benefit by, offset or reduction of such compensatory damages

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award by the amount of any part of Defendant’s payment of a civil penalty in this

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action (“Penalty Offset”). If the court in any Related Investor Action grants such a

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Penalty Offset, Defendant shall, within 30 days after entry of a final order granting

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the Penalty Offset, notify the SEC’s counsel in this action and pay the amount of the

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Penalty Offset to the United States Treasury or to a Fair Fund, as the SEC directs.

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Such a payment shall not be deemed an additional civil penalty and shall not be

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deemed to change the amount of the civil penalty imposed in this Judgment. For

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purposes of this paragraph, a “Related Investor Action” means a private damages

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action brought against Defendant by or on behalf of one or more investors based on

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substantially the same facts as alleged in the Complaint in this action.

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V.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that

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Defendant’s Consent is incorporated herein with the same force and effect as if fully

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set forth herein, and that Defendant shall comply with all of the undertakings and

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agreements set forth therein.

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VI.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for

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purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code,

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11 U.S.C. §523, the allegations in the complaint are true and admitted by Defendant,

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and further, any debt for disgorgement, prejudgment interest, civil penalty or other

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amounts due by Defendant under this Final Judgment or any other judgment, order,

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consent order, decree or settlement agreement entered in connection with this
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proceeding, is a debt for the violation by Defendant of the federal securities laws or

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any regulation or order issued under such laws, as set forth in Section 523(a)(19) of

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the Bankruptcy Code, 11 U.S.C. §523(a)(19).

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VII.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court

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shall retain jurisdiction of this matter for the purposes of enforcing the terms of this

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Judgment.

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VIII.

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There being no just reason for delay, pursuant to Rule 54(b) of the Federal

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Rules of Civil Procedure, the Clerk is ordered to enter this Judgment forthwith and

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without further notice.

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Dated: March 13, 2017
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UNITED STATES DISTRICT JUDGE

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3182564.1