Securities and Exchange Commission v. Keenan Gracey

Filing 13

PRELIMINARY INJUNCTION AND ORDERS : (1) FREEZING ASSETS; (2) PROHIBITING THE DESTRUCTION OF DOCUMENTS; (3) REQUIRING ACCOUNTINGS; AND (4) GRANTING EXPEDITED DISCOVERY by Judge Andre Birotte Jr.: Upon Consent of Defendant Keenan Grace ("Defendant ") to the Entry of Preliminary Injunction and Orders 12 , IT IS HEREBY ORDERED that Defendant and his agents, servants, employees, attorneys, and those persons in active concert or participation with him, who receive actual notice of this Order , by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined re the offer or sale of any securities, etc. See document for further details. The hearing set for 5/23/2018 at 1:00 PM is hereby VACATED. (gk)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA

10
11
12

SECURITIES AND EXCHANGE
COMMISSION,

13

Plaintiff,

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

vs.
KEENAN GRACEY,
Defendant.

Case No. CV 18-03872-AB(ASx)
[PROPOSED] PRELIMINARY
INJUNCTION AND ORDERS : (1)
FREEZING ASSETS; (2)
PROHIBITING THE DESTRUCTION
OF DOCUMENTS; (3) REQUIRING
ACCOUNTINGS; AND (4)
GRANTING EXPEDITED
DISCOVERY

1
2

This matter is before the Court on the Consent of Defendant Keenan Grace

3

(“Defendant”) to the Entry of Preliminary Injunction and Orders: (1) Freezing Assets;

4

(2) Prohibiting the Destruction of Documents; and (3) Requiring an Accounting; and

5

Granting Expedited Discovery.

6

The Court, having previously issued a Temporary Restraining Order and

7

Orders: (1) Freezing Assets; (2) Prohibiting the Destruction of Documents; (3)

8

Granting Expedited Discovery; and (4) Requiring Accountings and Order To Show

9

Cause Re Preliminary Injunction on May 11, 2018 (“TRO”); and having considered

10

the SEC’s Complaint, the TRO Application, the supporting Memorandum of Points

11

and Authorities, the supporting declarations and exhibits, the other evidence and

12

argument presented to the Court, as well as the Defendant’s Consent, finds that:

13

A.

this action.

14
15

This Court has jurisdiction over the parties to, and the subject matter of,

B.

Defendant has consented to the entry of a preliminary injunction on the
terms below.

16

I.

17
18

IT IS HEREBY ORDERED that Defendant and his agents, servants,

19

employees, attorneys, and those persons in active concert or participation with him,

20

who receive actual notice of this Order, by personal service or otherwise, and each of

21

them, be and hereby are preliminarily restrained and enjoined from, directly or

22

indirectly, in the offer or sale of any securities, by the use of any means or

23

instruments of transportation or communication in interstate commerce or by the use

24

of the mails:

25

A.

employing any device, scheme or artifice to defraud;

26

B.

obtaining money or property by means of any untrue statement of a

27

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

28

make the statements made, in light of the circumstances under which
1

they were made, not misleading; or

1
2

C.

operates or would operate as a fraud or deceit upon the purchaser;

3
4

engaging in any transaction, practice, or course of business which

in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

5

II.

6

IT IS FURTHER ORDERED that Defendant and his agents, servants,

7

employees, attorneys, and those persons in active concert or participation with him,

8

who receive actual notice of this Order, by personal service or otherwise, and each of

9

them, be and hereby are preliminarily restrained and enjoined from, directly or

10

indirectly, in connection with the purchase or sale of any security, by the use of any

11

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

12

any national securities exchange:

13

A.

employing any device, scheme or artifice to defraud; or

14

B.

engaging in any act, practice, or course of business which operates or

15

would operate as a fraud or deceit upon any person; in violation of

16

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5

17

thereunder [17 C.F.R. § 240.10b-5].

18
19

III.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court,

20

Defendant and his agents, servants, employees, attorneys, and those persons in active

21

concert with him, who receive actual notice of this Order, by personal service or

22

otherwise, and each of them, be and hereby are preliminarily restrained and enjoined

23

from, directly or indirectly, transferring, assigning, selling, hypothecating, changing,

24

wasting, dissipating, converting, concealing, encumbering, or otherwise disposing of,

25

in any manner, any funds, assets, securities, claims or other real or personal property,

26

including any notes or deeds of trust or other interest in real property, wherever

27

located, owned by, controlled by, managed by or in the possession or custody of the

28

Defendant and from transferring, encumbering dissipating, incurring charges or cash
2

1

advances on any debit or credit card of the credit arrangement of the Defendant.

2
3

IV.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court,

4

the freeze, previously ordered by the TRO, shall remain in place on all monies and

5

assets (with an allowance for necessary and reasonable living expenses to be granted

6

only upon good cause shown by application to the Court with notice to and an

7

opportunity for the SEC to be heard) in all accounts at any bank, financial institution

8

or brokerage firm, or third-payment payment processor, all certificates of deposit, and

9

other funds or assets, held in the name of, for the benefit of, or over which account

10

authority is held by Defendant including, but not limited to, the bank accounts listed

11

below:

12
13

Bank Name

Account Name

Account Number

14
15

JP Morgan Chase

Keenan Gracey

XXXX9697

Wells Fargo, N.A.

Keenan Gracey

XXXXX1901

Union Bank.

Keenan Gracey

XXXXX0699

16
17
18
19
20
21
22
23
24
25
26
27
28

Any bank, financial institution or brokerage firm, or third-party payment
processor holding such monies and assets described above shall hold and retain
within their control and prohibit the withdrawal, removal, transfer or other disposal of
any such funds or other assets except as otherwise ordered by this Court:
V.
IT IS FURTHER ORDERED that Defendant’s obligation under the TRO to
3

1

forthwith prepare and deliver to the SEC a detailed and complete schedule of all of

2

his assets, including all real and personal property exceeding $5,000 in value, and all

3

bank, securities, and other accounts identified by institution, branch address and

4

account number, shall remain in effect. The accounting shall include a description of

5

the sources of all such assets. Such accounting shall be filed with the Court no later

6

than June 1, 2018, and a copy shall be delivered by email to the SEC to the attention

7

of Donald W. Searles, counsel for the SEC, [e-mail]. After completion of

8

the accounting, the Defendant shall produce to the SEC, at a time agreeable to the

9

SEC, all books, records and other documents supporting or underlying their

10
11
12

accounting.
VI.
IT IS FURTHER ORDERED that any person who receives actual notice of this

13

Order by personal service or otherwise, and who holds, possesses or controls assets

14

exceeding $5,000 for the account or benefit of the Defendant, shall within three days

15

of receiving actual notice of this Order provide counsel for the SEC with a written

16

statement identifying all such assets, the value of such assets, or best approximation

17

thereof, and any account numbers or account names in which the assets are held.

18
19

VII.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court,

20

Defendant and his agents, servants, employees, attorneys, and those persons in active

21

concert or participation with him, who receive actual notice of this Order, by personal

22

service or otherwise, and each of them, be and hereby are preliminarily restrained and

23

enjoined from, directly or indirectly: destroying, mutilating, concealing, transferring,

24

altering, or otherwise disposing of, in any manner, any documents, which includes all

25

books, records, computer programs, computer files, computer printouts, contracts,

26

emails, correspondence, memoranda, brochures, or any other documents of any kind

27

in their possession, custody or control, however created, produced, or stored

28

(manually, mechanically, electronically, or otherwise), pertaining in any manner to
4

1

Defendant.

2

IT IS FURTHER ORDERED that the SEC’s may continue to conduct

3

expedited discovery concerning Defendant, his assets and activities, as previously

4

granted in the TRO, in lieu of the time periods, notice provisions, and other

5

requirements of Rules 26, 30, 33, 34, 36, and 45 of the Federal Rules of Civil

6

Procedure and the corresponding Local Rules of this Court, and that discovery shall

7

proceed as follows:

8
9

(A)

Pursuant to Rule 30(a) of the Federal Rules of Civil Procedure, the

SEC may take depositions upon oral examination on five calendar days’ notice of any

10

such deposition. Depositions may be taken Monday through Friday. As to the

11

Defendant and his agents, servants, employees, attorneys, and those persons in active

12

concert or participation with him the SEC may depose such witnesses after serving a

13

deposition notice by facsimile, hand or overnight courier upon such individuals, and

14

without serving a subpoena on such witness. Depositions that have not been signed

15

by the witness may be used for purposes of the hearing on the SEC’s application for

16

preliminary injunction;

17

(B)

Pursuant to Rule 33(a) of the Federal Rules of Civil Procedure,

18

Defendant shall answer the SEC’s interrogatories within fourteen calendar days of

19

service of such interrogatories;

20

(C)

Pursuant to Rule 34(b) of the Federal Rules of Civil Procedure,

21

Defendant shall produce all documents requested by the SEC within fourteen

22

calendar days of service of such request, with production of the documents made to

23

Donald W. Searles, U.S. Securities and Exchange Commission, 444 S. Flower Street,

24

Suite 900, Los Angeles, CA 90071, or such person or place as counsel for the SEC

25

may direct in writing;

26

(D)

Pursuant to Rule 36(a) of the Federal Rules of Civil Procedure,

27

Defendant shall respond to the SEC’s requests for admissions within fourteen

28

calendar days of such requests; and
5

1

(E)

All written responses to the SEC’s requests for discovery under the

2

Federal Rules of Civil Procedure shall be delivered by email and overnight courier to

3

the SEC to the attention of Donald W. Searles, U.S. Securities and Exchange

4

Commission, 444 S. Flower Street, Suite 900, Los Angeles, CA 90071,

5

[e-mail], or such other place and person as counsel for the SEC may direct

6

in writing.

7
8
9

IX.
IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this
action for the purpose of implementing and carrying out the terms of all orders and

10

decrees which may be entered herein and to entertain any suitable application or

11

motion for additional relief within the jurisdiction of this Court.

12

The hearing set for May 23, 2018, at 1:00 p.m. is hereby VACATED.

13
14

IT IS SO ORDERED.

15
16
17
18

Dated: May 23, 2018

________________________________
HON. ANDRÉ BIROTTE JR.
UNITED STATES DISTRICT JUDGE

19
20
21
22
23
24
25
26
27
28
6