Securities and Exchange Commission v. Knox et al

Filing 342

Judge Richard G. Stearns: ORDER entered granting 330 Motion for Summary Judgment. The Clerk will enter judgment against Gastauer. (RGS, law4)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 18-12058-RGS
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff
v.
ROGER KNOX, WINTERCAP S.A., MICHAEL T. GASTAUER, WB21 US
INC., SILVERTON SA INC., WB21 NA INC., C CAPITAL CORP.,
WINTERCAP SA INC., and B2 CAP INC.,
Defendants
and
RAIMUND GASTAUER, SIMONE GASTAUER FOEHR, B21 LTD.,
SHAMAL INTERNATIONAL FZE, and WB21 DMCC,
Relief Defendants
MEMORANDUM AND ORDER ON PLAINTIFF’S RENEWED MOTION
FOR SUMMARY JUDGMENT
January 29, 2025
STEARNS, D.J.
Before the court is plaintiff United States Securities and Exchange
Commission’s (the Commission or SEC) renewed motion for summary
judgment as to relief defendant Raimund Gastauer.
reasons, the court will allow the motion.
BACKGROUND

For the following

The court assumes the reader’s familiarity with the factual and
procedural history of the case. However, by way of brief background, on
October 7, 2022, the court issued a final judgment against Gastauer, finding
him liable on the SEC’s claim of unjust enrichment after his appropriation of
proceeds of securities fraud committed by his son, Michael Gastauer. See
Dkt. # 286 at 1.

The court entered an order of disgorgement against

Gastauer, requiring him to pay $3,315,305 plus prejudgment interest to the
SEC. See Dkt. # 286 at 2. Gastauer appealed the court’s determination that
it could exercise personal jurisdiction over him and the proceeds of the fraud
ancillary to its uncontested jurisdiction over his son, whom the court deemed
as the real defendant-in-interest. See Dkt. # 287 at 1. On February 9, 2024,
the First Circuit reversed the court’s entry of final judgment against
Gastauer, rejecting the court’s theory of derivative jurisdiction and
remanded the matter for further proceedings.1

See SEC v. Gastauer, 913

F.4th 1, 13 (1st Cir. 2024).
On remand, the court ordered the parties to submit supplemental
briefing on the issue of whether Gastauer had sufficient minimum contacts

1 As the Commission limited its argument on appeal to the imputation

of jurisdictional contacts from the defendant-in-interest, Michael, to
Gastauer, the First Circuit did not consider whether Gastauer satisfied the
minimum contacts requirement, such as by engaging in financial
transactions facilitated through U.S.-based institutions. See id. at 9 n.4.
2

with this forum for the court to exercise specific personal jurisdiction over
him. See Dkt. # 314. The SEC then moved against Gastauer based on his
personal contacts with the forum or, in the alternative, to take jurisdictional
discovery. See Dkt. # 315. Gastauer did not oppose the motion. Responding
to the SEC’s motion, the court ruled that the SEC had “ma[de] out a colorable
case for jurisdiction” and “identifie[d] factual disputes that may show
exercising jurisdiction over Gastauer is proper” – including discovery
confirming the extent of Gastauer’s involvement in financial transactions in
the United States and his obtaining of funds from bank accounts in the
United States.2 Dkt. # 317. The court accordingly permitted the Commission
to take limited jurisdictional discovery on the issue of Gastauer’s
involvement in U.S.-based financial transactions involving Michael, WB21
US Inc., and C Capital Corp.3 See id.
The Commission properly served on Gastauer document requests and
interrogatories, and noticed a deposition of Gastauer. See Shields Decl. (Dkt.

2 The court, on the factual record at the time, denied the SEC’s motion

to exercise personal jurisdiction without prejudice.
3 After applying the balancing test of Société Nationale Industrielle

Aérospatiale v. U.S. District Court for the Southern District of Iowa, 482
U.S. 522 (1987), the court also allowed the Commission to rely on the Federal
Rules of Civil Procedure instead of the Hague Evidence Convention and
Hague Service Convention for jurisdictional discovery. See Dkt. # 317.
3

# 320) ¶ 2. After Gastauer, again, refused to produce any documents, answer
the interrogatories, or sit for a deposition, the Commission moved a second
time for an order to compel Gastauer to respond to its discovery requests, or
in the alternative, for sanctions under Federal Rules of Civil Procedure 37(b)
and (d), specifically a finding that personal jurisdiction over Gastauer is
conclusively established. See Dkt. # 318 at 1. Gastauer did not oppose the
Commission’s motion. Instead, he terminated his U.S. counsel and relayed
through his German counsel that “he does not admit to the US courts as a
valid jurisdiction.” See Dkt. # 327; Ex. 4 at 1 (Dkt. # 320-4).
The court scheduled a hearing for August 6, 2024 via video conference
for the SEC’s motion and ordered that “Gastauer should be prepared to show
cause why sanctions up to and including establishing as admitted
jurisdictional facts should not issue.” Dkt. # 322, 324. The court also stated
that “[i]f Gastauer fails to appear at the hearing, the court will entertain a
motion for default judgment,” but underscored that Gastauer’s appearance
at the hearing would not waive any valid jurisdictional defense that he might
wish to pursue. Dkt. # 324.
Despite having notice of the hearing, Gastauer failed to appear. Dkt. #
328. The court granted the Commission’s motion and deemed as admitted
facts sufficient to establish specific personal jurisdiction over him. See id.,
4

citing Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456
U.S. 694, 705-706 (1982); Hooper-Haas v. Ziegler Holdings, LLC, 690 F.3d
34, 38-39 (1st Cir. 2012) (holding if “the sanction fits the misconduct, a trial
court is not obligated to withhold the sanction.”)
LEGAL STANDARD
Summary judgment is appropriate when, based upon the pleadings,
affidavits, and depositions, “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). “To succeed, the moving party must show that there is an absence
of evidence to support the nonmoving party’s position.” Rogers v. Fair, 902
F.2d 140, 143 (1st Cir. 1990). “‘[T]he mere existence of a scintilla of evidence’
is insufficient to defeat a properly supported motion for summary
judgment.” Torres v. E.I. Dupont De Nemours & Co., 219 F.3d 13, 18 (1st
Cir. 2000), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
(1986).
DISCUSSION
The Commission now requests that the court reinstate its prior
summary judgment ruling against Gastauer, consistent with its prior
warning that it was prepared to impose sanctions for Gastauer’s refusal to

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cooperate with discovery. See Dkt. # 330 at 1. Gastauer, again, refused to
respond.4
There has been no subsequent factual development that calls the
court’s prior findings into question.5

Nor are due process concerns

implicated by the court’s reinstatement of its summary judgment ruling. See
Ins. Corp. of Ireland, Ltd., 456 U.S. at 705 (holding that there is no due
process violation when a district court imposes under Rule 37(b) an order
subjecting a party to personal jurisdiction as a sanction for the party’s failure
to comply with a discovery order seeking to establish facts relating to the
court’s personal jurisdiction over it). After Gastauer failed to respond to the

4 On October 28, 2024, the court reminded Gastauer, after his United

States counsel withdrew, that he had until November 14, 2024 to oppose the
Commission’s Motion for Summary Judgment. See Dkt. # 333. The
Commission emailed Gastauer’s German-based counsel the court’s
reminder, to which Gastauer’s counsel indicated that Gastauer would not be
accepting any “Court documents . . . other than that received from Germany’s
central authority under the Hague Convention on Service.” Klunder Decl.
(Dkt. # 298) ¶¶ 3, 4.
5 On June 3, 2022, the court found that Gastauer was liable for unjust

enrichment for $500,000 in proceeds that he received on December 26, 2017
from Entity Defendant WB21 US Inc. Dkt. # 263 at 18. After sanctioning
Gastauer – including granting the Commission’s motion for summary
judgment in full – for violating numerous discovery orders, the court on
October 7, 2022 held that Gastauer was liable for unjust enrichment for two
additional wire transfers, totaling $2,815,305, on February 27, 2018 from
Entity Defendant C Capital Corp. that were used to purchase a condominium
at 3 Dollar Bay Place, London.
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SEC’s jurisdictional discovery requests and failed to appear remotely at the
court’s August 6, 2024 hearing, which specifically noted that Gastauer
“should be prepared to show cause why sanctions up to and including
establishing as admitted jurisdictional facts should not issue,” Dkt. # 324,
the court sanctioned him under Rule 37(b), deeming as admitted facts
sufficient to establish specific personal jurisdiction over him – Gastauer’s
litigation misconduct is directly related to the merits of the jurisdictional
issue. Cf. Fuld v. Palestine Liberation Org., 82 F.4th 74, 94 (2d Cir. 2023).
The court will therefore reinstate its prior finding of summary
judgment and require Gastauer to pay to the Commission his ill-gotten gains,
which total $3,315,305, plus $1,347,326 in prejudgment interest to account
for the additional time that Gastauer has had use of his gains.6 See SEC v.
Sargent, 329 F.3d 34, 40 (1st Cir. 2003) (holding that “prejudgment interest,
like the disgorgement remedy, is intended to deprive wrongdoers of profits
they illegally obtained by violating the securities laws”).
ORDER

The prejudgment interest is calculated based on the IRS
Underpayment Rate, using the date on which Gastauer received the relevant
transfers as the starting date. See McCann Decl. (Dkt. # 332) ¶ 6.
7
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For the foregoing reasons, the Commission’s motion is GRANTED.
Gastauer is ordered to pay $4,662,631 to the Commission. The Clerk will
enter judgment accordingly.
SO ORDERED.
/s/ Richard G. Stearns
UNITED STATES DISTRICT JUDGE

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