Securities and Exchange Commission v. Medient Studios, Inc. et al
Filing
67
ORDER granting 66 Motion for Default Judgment. Signed by Judge William T. Moore, Jr. on November 17, 2020. (jrb)
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 1 of 13
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
CASE NO. CV416-253
V.
MANU KUMARAN,
Defendant.
ORDER
Before
the
Court
is
Plaintiff
Securities
and
Exchange
Commission's (the "SEC") Motion for Default Judgment. (Doc. 66.)
On September 23, 2016, the SEC filed a complaint against Defendant
Manu Kumaran for violations of federal securities laws. (Doc. 1.)
The SEC served Defendant by publication on September 10, 2020.^
(Docs. 60, 61, 63.) After the response period expired, the SEC
1 The SEC previously attempted service via several methods but was
unsuccessful because Defendant left the United States prior to the
filing of the complaint. (Docs. 10, 14, 16.) On April 10, 2019,
the Magistrate Judge granted the SEC leave to effect service of
process on Manu Kumaran by publishing notice of this action in
four foreign newspapers. The Times, The Financial Times, The Times
of India, and The Economic Times. (Doc. 56.) The Magistrate Judge
later
allowed
the
SEC to
substitute
publication
in
the
international edition of The New York Times for publication in The
Financial Times. (Doc. 61.) The SEC published notices in accordance
with the Magistrate Judge's directive, with the last such notice
being published on September 10, 2020. (Docs. 60, 61, 63.) As a
result, the latest date for Kumaran to file a response expired on
October 1, 2020. Fed. R. Civ. P. 12(a)(1)(C).
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 2 of 13
moved for entry of default against Defendant, which the Clerk
entered on October 21, 2020. (Doc. 65.) The SEC now requests that
this Court enter default judgment against Defendant pursuant to
Federal Rule of Civil Procedure 55. (Doc. 66.)
Under
Rule 55, a
party can
only obtain
default judgment
through a two-step process. First, "[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or
otherwise
defend,
and
that
failure
is
shown
by
affidavit
or
otherwise, the clerk must enter the party's default." Fed. R. Civ.
P. 55(a). After a clerk's entry of default, the moving party may
request an entry of default judgment.
Fed. R. Civ. P. 55(b).
"MBjefore entering a default judgment for damages, the district
court
must
ensure
that
the
well-pleaded
allegations
in
the
complaint, which are taken as true due to the default, actually
state
a
substantive
cause
of
action
and
that
there
is
a
substantive, sufficient basis in the pleadings for the particular
relief sought." Tyco Fire & Sec., LLC v. Alcocer, 218 F. App'x
860, 863 (11th Cir. 2007); see also Adolph Coors Co. v. Movement
Against Racism and the Klan, 111 F.2d 1538, 1543 (11th Cir.1985)
(finding that court may enter a default judgment without conducting
a hearing ^'if the amount claimed is a liquidated sum or one capable
of
mathematical
calculation," or
where
^'the
record
adequately
reflects the basis for the award via a . . . demonstration by
detailed affidavits establishing the necessary facts.").
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 3 of 13
As previously established, the Clerk entered default against
Defendant on October 21, 2020. (Doc. 65.) Additionally, the Court
finds that the allegations in the SECs complaint, taken as true,
state
a
substantive
cause
of
action
against
Defendant
for
violations of Sections 5(a), 5(c), and 17(a) of the Securities
Act^
and
Section
10(b)
of
the
Exchange
Act
and
Rule
lOb-5
thereunder,3 as well as aiding and abetting Co-Defendant Medient
Studios, Inc.'s violations of Sections 5(a), 5(c), and 17(a) of
the Securities Act^ and Sections 10(b), 13(a), and 14(c) of the
Exchange Act and Rules lOb-5, 12b-2, 13a-l and 14c-6 thereunder.^
(Doc. 1 at 11-45.) The Court also finds the SEC has provided a
sufficient basis for the following relief sought:
1. Permanent injunctive relief against Defendant for each of
the violated sections and rules previously listed;
2. Disgorgement in the amount of $130,028.56 and prejudgment
interest in the amount of $26,246.30;®
3. A civil penalty pursuant to Section 20(d) of the Securities
Act and Section 21(d)(3) of the Exchange Act in the amount
2 15 U.S.C. §§ 77e(a), 77e(c), and 77q(a).
3 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5.
^ 15 U.S.C. § lie(a), 77e(c)h, and 77q(a).
5 15 U.S.C. §§ 78j(b), 78m(a) and 78n(c); 17 C.F.R. §§ 240.10b-5,
240.12b-20, 240.13a-l and 240.14c-6.
® (Doc. 66, Attach. 2 at 2-7.)
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 4 of 13
of
Defendant's
gross
amount
of
pecuniary
gain,
$130,028.56;^
4. An Officer and Director bar against Defendant pursuant to
Section 21(d)(2) of the Exchange Act;^ and
5. A Penny Stock bar against Defendant pursuant to Section
21(d)(6) of the Exchange Act and Section 20(g) of the
Securities Act.^
Accordingly, the Court finds that the SEC is entitled to entry
of a default judgment against Defendant, and the SEC s motion (Doc.
66) is GRANTED.
For good cause shown, the Clerk of Court is
DIRECTED to enter judgment against the Defendant as follows:
I.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is
permanently restrained and enjoined from violating, directly or
indirectly. Section 10(b) of the Securities Exchange Act of 1934
(the ''Exchange Act") [15 U.S.C. § 78j(b)] and Rule lOb-5 promulgated
thereunder
[17
C.F.R.
§
240.10b-5],
by
using
any
means
or
instrumentality of interstate commerce, or of the mails, or of any
facility of any national securities exchange, in connection with
the purchase or sale of any security:
(a)
to employ any device, scheme, or artifice to defraud;
7 15 U.S.C. § 78u(d)(3).
8 15 U.S.C. § 78u(d)(2).
9 15 U.S.C. § 78u(d)(6); 15 U.S.C. § 77t(g)
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 5 of 13
(b)
to make any untrue statement of a material fact or to
omit to state a material fact necessary in order to make
the statements made, in the light of the circumstances
under which they were made, not misleading; or
(c)
to engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon
any person
by, directly or indirectly, (i) creating a false appearance or
otherwise deceiving any person about the price or trading market
for any security, or (ii) making any false or misleading statement,
or disseminating any false or misleading documents, materials, or
information,
concerning
matters
relating
to
a
decision
by
an
investor or prospective investor to buy or sell securities of any
company.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided
in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph
also binds the following who receive actual notice of this Final
Judgment
by
personal
service
or
otherwise:
(a)
Defendant's
officers, agents, servants, employees, and attorneys; and (b) other
persons in active concert or participation with Defendant or with
anyone described in (a).
II.
IT
IS
HEREBY
FURTHER ORDERED, ADJUDGED, AND
DECREED
that
Defendant is permanently restrained and enjoined from violating
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 6 of 13
Section 17(a) of the Securities Act of 1933 (the "Securities Act")
[15 U.S.C. § 77q(a)] in the offer or sale of any security by the
use of any means or instruments of transportation or communication
in
interstate
commerce
or
by
use
of
the
mails,
directly
or
indirectly:
(a)
to employ any device, scheme, or artifice to defraud;
(b)
to
obtain
money
or
property
by
means
of
any
untrue
statement of a material fact or any omission of a material
fact necessary in order to make the statements made, in
light of the circumstances under which they were made,
not misleading; or
(c)
to engage in any transaction, practice, or course of
business which operates or would operate as a fraud or
deceit upon the purchaser.
by, directly or indirectly, (i) creating a false appearance or
otherwise deceiving any person about the price or trading market
for any security, or (ii) making any false or misleading statement,
or disseminating any false or misleading documents, materials, or
information,
concerning
matters
relating
to
a
decision
by
an
investor or prospective investor to buy or sell securities of any
company.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided
in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph
also binds the following who receive actual notice of this Final
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 7 of 13
Judgment
by
personal
service
or
otherwise:
(a)
Defendant's
officers, agents, servants, employees, and attorneys; and (b) other
persons in active concert or participation with Defendant or with
anyone described in (a).
III.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendant is permanently restrained and enjoined from violating
Section 5 of the Securities Act [15 U.S.C. § lie] by, directly or
indirectly, in the absence of any applicable exemption:
(a)
Unless a registration statement is in effect as to a
security, making use of any means or instruments of
transportation or communication in interstate commerce
or of the mails to sell such security through the use or
medium of any prospectus or otherwise;
(b)
Unless a registration statement is in effect as to a
security, carrying or causing to be carried through the
mails
or
in
interstate
commerce,
by
any
means
or
instruments of transportation, any such security for the
purpose of sale or for delivery after sale; or
(c)
Making use of any means or instruments of transportation
or communication in interstate commerce or of the mails
to offer to sell or offer to buy through the use or
medium of any prospectus or otherwise
any security,
unless a registration statement has been filed with the
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 8 of 13
Commission
as
to
such
security,
or
while
the
registration statement is the subject of a refusal order
or stop order or (prior to the effective date of the
registration
statement)
any
public
proceeding
or
examination under Section 8 of the Securities Act [15
U.S.C. § 77h].
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided
in
Federal
Rule
of
Civil
Procedure
65(d)(2),
the
foregoing
paragraph also binds the following who receive actual notice of
this
Final
Judgment
by
personal
service
or
otherwise:
(a)
Defendant's officers, agents, servants, employees, and attorneys;
and (b) other persons in active concert or participation with
Defendant or with anyone described in (a).
IV.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendant is permanently restrained and enjoined from aiding and
abetting any violation of Section 13(a) of the Exchange Act [15
U.S.C. § 78m(a)] and Rules 12b-20 and 13a-l promulgated thereunder
[17 C.F.R. §§ 240.12b-20 and 240.13a-l] by knowingly or recklessly
providing substantial assistance to an issuer that failed to file
with the Commission true and correct annual reports made on Form
10-K and current reports made on Form 8-K that contain all material
information
necessary
to
make
the
required
statements
in
the
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 9 of 13
reports, in the light of the circumstances under which they are
made, not misleading.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided
in
Federal
Rule
of
Civil
Procedure
65(d)(2),
the
foregoing
paragraph also binds the following who receive actual notice of
this
Final
Judgment
by
personal
service
or
otherwise:
(a)
Defendant's officers, agents, servants, employees, and attorneys;
and (b) other persons in active concert or participation with
Defendant or with anyone described in (a).
V.
IT
IS
HEREBY
FURTHER ORDERED, ADJUDGED, AND
DECREED
that
Defendant is permanently restrained and enjoined from aiding and
abetting any violation Section 14(c) of the Exchange Act and Rule
14c-6 promulgated thereunder [17 C.F.R. § 240.14c-6], by knowingly
or recklessly providing substantial assistance to an issuer that
filed
with
the
Commission,
or
providing,
in
lieu
of
a
proxy
statement, to any investor, an information statement on Schedule
14C [17 C.F.R. § 14C-101] containing any statement which, at the
time and in the light of the circumstances under which it is made,
is false or misleading with respect to any material fact, or which
omits to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the same
meeting or subject matter which has become false or misleading.
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 10 of 13
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided
in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph
also binds the following who receive actual notice of this Final
Judgment
by
personal
service
or
otherwise:
(a)
Defendant's
officers, agents, servants, employees, and attorneys; and (b) other
persons in active concert or participation with Defendant or with
anyone described in (a).
VI.
IT IS HEREBY FURTHER ORDERDED, ADJUDGED, AND DECREED that,
pursuant to Section
21(d)(2)
of the
Exchange
Act [15
U.S.C.
§ 78u(d)(2)] and Section 20(e) of the Securities Act [15 U.S.C.
§ 77t(e)], Defendant is prohibited from acting as an officer or
director of any issuer that has a class of securities registered
pursuant to Section 12 of the Exchange Act [15 U.S.C. § 781] or
that is required to file reports pursuant to Section 15(d) of the
Exchange Act [15 U.S.C. § 78o(d)].
VII.
IT IS HEREBY FURTHER ORDERDED, ADJUDGED, AND DECREED that
Defendant is permanently barred from participating in an offering
of penny stock, including engaging in activities with a broker,
dealer, or issuer for purposes of issuing, trading, or inducing or
attempting to induce the purchase or sale of any penny stock. A
penny stock is any equity security that has a price of less than
10
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 11 of 13
five dollars, except as provided in Rule 3a51-l under the Exchange
Act [17 C.F.R. 240.3a51-l]
VIII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendant is liable for disgorgement of $130,028.56, representing
profits gained as a result of the conduct alleged in the Complaint,
together
with
prejudgment
interest
thereon
in
the
amount
of
$26,246.30, for a total of $156,274.86, and a civil penalty in the
amount of $130,028.56 pursuant to Section 20(d) of the Securities
Act and Section 21(d)(3) of the Exchange Act. Defendant shall
satisfy these obligations by paying the disgorgement, prejudgment
interest
thereon,
and
civil
penalty
in
the
total
amount
of
$286,303.42 to the Securities and Exchange Commission within 14
days after entry of this Final Judgment.
Defendant
Commission,
may
which
transmit
will
payment
provide
electronically
detailed
ACH
to
the
transfer/Fedwire
instructions upon request. Payment may also be made directly from
a
bank
account
via
Pay.gov
through
the
SEC
website
at
http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay
by certified check, bank cashier's check, or United States postal
money order payable to the Securities and Exchange Commission,
which shall be delivered or mailed to
Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
11
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 12 of 13
Oklahoma City, OK 73169
and shall be accompanied by a letter identifying the case title,
civil action number, and name of this Court; Medient Studios, Inc.,
as a defendant in this action; and specifying that payment is made
pursuant to this Final Judgment.
Defendant
evidence
shall
simultaneously
of
payment
and
Commission's
counsel
in
case
this
transmit
identifying
action.
photocopies
information
By making
this
to
of
the
payment.
Defendant relinquishes all legal and equitable right, title, and
interest in such funds and no part of the funds shall be returned
to Defendant. The Commission shall send the funds paid pursuant to
this Final Judgment to the United States Treasury.
The
Commission
may
enforce
the
Court's
judgment
for
disgorgement and prejudgment interest by moving for civil contempt
(and/or through other collection procedures authorized by law) at
any time after 14 days following entry of this Final Judgment.
Defendant shall
pay post judgment interest on
any delinquent
amounts pursuant to 28 U.S.C. § 1961.
IX.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court
shall retain jurisdiction of this matter for the purposes of
enforcing the terms of this Final Judgment.
12
Case 4:16-cv-00253-WTM-CLR Document 67 Filed 11/17/20 Page 13 of 13
X.
There being no just reason for delay, pursuant to Rule 54(b)
of the Federal Rules of Civil Procedure, the Clerk is ORDERED to
enter this Final Judgment forthwith and without further notice. The
Clerk of Court is DIRECTED to close this case.
SO ORDERED this //^ day of November 2020.
WILLIAM T. MOORE, JR.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
13
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