Securities and Exchange Commission v. Bronson et al
ORDER granting 293 Letter Motion for Discovery. All requests are granted: Mr. Bronson is to provide substantial details about his and Top Knot's offshore income, assets and cashflow, a current mortgage statement for the residence where the B ronsons reside. Also, Mr. Bronson is to bring multiple copies of each document produced in response to the November 22 hearing. Failure to comply with these directives could result in a contempt finding. Mr. Rachmuth is to appear and be prepared to testify at the November 22 hearing, which will not be adjourned. (Signed by Judge Kenneth M. Karas on 11/18/2021) (ate)
Case 7:12-cv-06421-KMK Document 293 Filed 11/18/21 Page 1 of 3
November 18, 2021
Hon. Kenneth M. Karas
United States District Court
United States Courthouse
300 Quarropas Street, Chambers 533
White Plains, New York 10601-4150
Re: U.S. Securities and Exchange Commission v. Bronson et al.,
Dear Judge Karas:
I write to provide a status update on the discovery the Court Ordered Defendant
Edward Bronson (“Bronson”) to provide by November 17. DE 292. Bronson has not
fully complied with the Court’s Order. To the extent that Bronson has provided
documents, they suggest access to significant funds. The documents also render any
claim that Bronson has no ability to pay impossible. Thus, Bronson cannot escape
As background, after entering a payment plan with the Commission that
essentially required Bronson to make $1.1 million per month payments to the
Commission starting on August 13, Bronson made the first payment late and then stopped
paying altogether. Consequently, he has now missed the September, October and
Bronson claims he lacks financial capacity. DE 272. Yet his filing provided no
detail about his purported incapacity. DE 272. And only a defendant’s “complete
inability, due to poverty or insolvency, to comply with an order to pay court-imposed
monetary sanctions is a defense to a charge of civil contempt.” Huber v. Marine Midland
Bank, 51 F.3d 5, 10 (2d Cir. 1995) (emphasis added; internal citations omitted).
Contempt is not avoided by showing an inability to pay the entire judgment. SEC v.
Musella, 818 F. Supp. 600, 602 (S.D.N.Y. 1993). “Inability to comply is only a complete
defense if he cannot pay any of the judgment; otherwise, he must pay what he can.” SEC
v. Bilzerian, 112 F. Supp. 2d 12, 17 (D.D.C. 2000) (internal citations omitted). This is so
“even if making the payment results in a diminution of his income or his relatively
comfortable standard of living.” Musella at 602. And a court is not required to credit an
alleged contemnor’s “incredible” denials of an ability to pay. Huber at 10 (internal
The Court ordered Bronson to provide proof of his lack of ability to pay by
November 17th – ahead of a November 22 hearing on this issue. Bronson has not
Case 7:12-cv-06421-KMK Document 293 Filed 11/18/21 Page 2 of 3
provided all the documents the Court ordered. To the extent that Bronson provided
information, it is not “categorical and in detail.” Bilzerian at 16. Moreover, the
documents Bronson provided render impossible any suggestion that Bronson is entirely
unable to make payments toward the Court’s Judgment.
The Court specifically ordered Bronson to provide, for the period from July 1 to
the present, the following: (i) proof of all sources of income and the amount of that
income; (ii) for all other funds received directly or indirectly the amount and source of
those funds; (iii) proof of all expenses he claims for himself and his family; (iv) all
amounts he has transferred to third parties; (v) documents reflecting all financial accounts
for the Bronson family and every Top Knot entity and any other entity or person that pays
expenses for the Bronsons; and (vii) a current mortgage statement for the Bronsons’
residence. DE 292.
The bank statements produced show hundreds of thousands of dollars flowing to
Top Knot Inc. from abroad. Bronson has not explained the receipt of these funds nor
how much more to which he has access or is entitled. Exs. C, D. Thus, it is impossible
to assess whether more funds from these or other sources would allow him to comply
with the Court ordered payment plan.
In addition, the Top Knot Inc. bank statements reveal that Bronson has not
identified all of his income sources as ordered. For example, in August and September,
Mr. Rachmuth (Bronson’s attorney) sent Bronson around $630,000 from his attorney
escrow account. Exs. C, D. Bronson has not explained the source of these funds. 1 Thus,
Commission counsel requests that the Court order Mr. Rachmuth to attend the November
22 Hearing and answer questions about these funds and about non-privileged financial
transactions with Bronson as it appears that Bronson uses Rachmuth’s escrow account as
a private banking institution.
Furthermore, Top Knot Inc.’s bank statements reflect exorbitant spending on
limousines, the Ritz Carlton, fine dining, high end retail and more. E.g. Exs. C, D. If
these are personal expenses of Bronson and his family, a significant portion of them
could be used to make the Court ordered payments.
As described herein, Bronson did not provide all of the documents as ordered. In
another example, Bronson did not provide a current mortgage statement for the
Bronsons’ residence. In trying to resolve this issue, Commission counsel specifically
pointed this omission out to Bronson’s counsel after receiving documents on November
17. Ex. A. Counsel advised that all the intended documents had been produced and
offered no reason for the omission. Ex. B.
Finally, the Top Knot Inc.’s bank records suggest that when Bronson sent the
Commission a check for $600,000, dated August 27, 2021, Top Knot Inc. did not have
the funds available to make the payment. DE 281, Exs. C, D. Top Knot Inc.’s account
1 As the Commission described in its contempt application, he has previously used Mr. Rachmuth’s escrow
account to receive funds from an investment client. DE 201-1.
Case 7:12-cv-06421-KMK Document 293 Filed 11/18/21 Page 3 of 3
balance on August 27 was $103,266.64. Ex. C, p. 14. Thus, Bronson’s representation to
the Court that he “was not aware that the U.S. Treasury rejected Top Knot’s bank check
until the SEC brought it to Mr. Bronson’s attention through counsel” strains credulity.
DE 284. Based on Top Knot Inc.’s bank records, only after Mr. Rachmuth transferred
almost $400,000 to Top Knot Inc. on September 13, 2021 (part of the $630,000
transferred) – from a yet undisclosed source of funds available to Bronson - was Bronson
able to make the payment in mid-September. Ex. D, pp. 5, 8.
In light of the foregoing, the Commission respectfully requests that the Court
order Bronson to provide detail about his and Top Knot Inc.’s offshore income and a
current mortgage statement for the Bronsons’ residence and impose any appropriate
sanction for his failure to provide discovery and his contempt of the Judgment. The
Commission further requests that Bronson bring sufficient copies of each document
produced in response to this proposed order to the November 22 hearing. Finally, the
Commission further requests that the Court order Mr. Rachmuth to appear and be
prepared to testify at the November 22 hearing.
s/Maureen Peyton King
All requests are granted: Mr. Bronson is to provide substantial details
about his and Top Knot’s offshore income, assets and cashﬂow, a current
mortgage statement for the residence where the Bronsons reside. Also,
Mr. Bronson is to bring multiple copies of each document produced in
response to the November 22 hearing. Failure to comply with these
directives could result in a contempt ﬁnding. Mr. Rachmuth is to appear
and be prepared to testify at the November 22 hearing, which will not be
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