Securities and Exchange Commission v. Lek Securities Corporation et al

Filing 594

ORDER: Accordingly, it is hereby ORDERED that Avalon, Fayyer, and Pustelnik shall each pay a civil penalty of $7.5 million. IT IS FURTHER ORDERED that each defendant be permanently enjoined from violating Sections 9(a)(2) and 10(b) of the Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act. (Signed by Judge Denise L. Cote on 2/9/2021) (jca) Transmission to Finance Unit (Cashiers) for processing.

Case 1:17-cv-01789-DLC Document 594 Filed 02/09/21 Page 1 of 3

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
SECURITIES AND EXCHANGE COMMISSION,
:
:
Plaintiff,
:
:
-v:
:
LEK SECURITIES CORPORATION, SAMUEL
:
LEK, VALI MANAGEMENT PARTNERS dba
:
AVALON FA LTD, NATHAN FAYYER, and
:
SERGEY PUSTELNIK,
:
:
Defendants.
:
:
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17cv1789 (DLC)
ORDER

DENISE COTE, District Judge:
Following a jury verdict in favor of plaintiff Securities
and Exchange Commission (“SEC”), defendants Vail Management
Partners dba Avalon FA Ltd (“Avalon”), Nathan Fayyer (“Fayyer”),
and Sergey Pustelnik (“Pustelnik”) (collectively, the
“Defendants”) were ordered on March 20, 2020 to jointly and
severally disgorge $4,495,564, plus prejudgment interest in the
sum of $131,750 (the “March 20, 2020 Opinion”).

Each Defendant

was also assessed a civil penalty in the amount of $5 million
and permanently enjoined from violating Sections 9(a)(2) and
10(b) of the Exchange Act, Rule 10b-5 thereunder, and Section
17(a) of the Securities Act.

The March 20, 2020 Opinion further

stated that “[i]n the event that no order of disgorgement may be

Case 1:17-cv-01789-DLC Document 594 Filed 02/09/21 Page 2 of 3

enforced, the civil penalty assessed against each Defendant
shall be increased to $7.5 million.”
The Defendants appealed to the United States Court of
Appeals for the Second Circuit.

During the pendency of their

appeal, the United States Supreme Court decided Liu v.
Securities and Exchange Commission, 140 S. Ct. 1936 (2020),
which imposed certain limitations on district courts’ ability to
order disgorgement in SEC enforcement actions.

On November 20,

2020, the Second Circuit remanded the case to allow this Court
to consider “whether its judgment in this case is consistent”
with the Supreme Court’s decision in Liu.

SEC v. Vali

Management Partners, DBA Avalon FA LTD, et al., No. 20-1854 (2d
Cir. Nov. 20, 2020).

Following the Second Circuit’s remand, the

parties were ordered to file memoranda addressing the impact of
Liu on the judgment described in the March 20, 2020 Opinion.
The briefing became fully submitted on January 29, 2021.
The SEC concedes that the disgorgement remedy described in
the March 20, 2020 Opinion is no longer enforceable following
Liu, and requests that the $7.5 million civil penalty described
in the March 20, 2020 Opinion be imposed against each Defendant
as an alternative to the now-unenforceable disgorgement order.
Defendants object to this proposed remedy, but their objections
have either been considered and rejected in the March 20, 2020

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Case 1:17-cv-01789-DLC Document 594 Filed 02/09/21 Page 3 of 3

Opinion or are otherwise unpersuasive.

Accordingly, it is

hereby
ORDERED that Avalon, Fayyer, and Pustelnik shall each pay a
civil penalty of $7.5 million.
IT IS FURTHER ORDERED that each defendant be permanently
enjoined from violating Sections 9(a)(2) and 10(b) of the
Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the
Securities Act.
Dated:

New York, New York
February 9, 2021
____________________________
DENISE COTE
United States District Judge

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