United States District Court, W.D. North Carolina, Charlotte Division
U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
KEITH F. SIMMONS, et al. Defendants, and LAWRENCE SALAZAR, et al. Relief Defendants.
J. Conrad, Jr. United States District Judge
MATTER comes before the Court on the motion of Plaintiff U.S.
Commodity Futures Trading Commission (“CFTC”) for
summary judgment, (Doc. No. 156), against Relief Defendant
Shiloh Estate, LLC (“Shiloh”), and related
pleadings. The issues have been fully briefed and are
ripe for adjudication.
civil case arises out of a Ponzi scheme operating in this
district and elsewhere approximately between 2007 and 2011.
(Doc. No. 1: Complaint at 2, 6). Investigation of the scheme
led to the criminal convictions of Keith Simmons, Bryan
Coats, Jonathan Davey and others for various offenses
including securities fraud, wire fraud, money laundering, and
tax evasion. (See Case Nos. 3:10-cr-23 (Simmons),
3:11-cr-309 (Coats), 3:12-cr-68 (Davey)).
purposes of this motion, it is undisputed that Shiloh
received $1, 305, 642.33 in ill-gotten gains from Davey.
(Doc. No. 164: Shiloh Resp. at 2). Specifically, Simmons,
Davey, and others fraudulently solicited approximately $35
million from at least 240 investors for purported trading in
off-exchange foreign currency. (Doc. No. 156-1: CFTC Mem. at
Davey diverted investor funds into a number of accounts and
transferred a portion of those funds to Shiloh as
“loans” from an entity he controlled called
Sovereign Grace. (Id. at 8-10).
sole purpose was to own a luxury home for Davey's
residence. (Id. at 4, 6). After purchasing land,
Shiloh contracted with Claggett & Sons, Inc.
(“Claggett”) to build the house. Claggett continued
to perform construction work after Shiloh defaulted by
failing to pay a $93, 000 invoice in May 2009. (Id. at
11). Claggett purchased Shiloh from Davey in January 2010 for
$1 and released the purported debt for the unpaid and
post-default construction invoices totaling over $1.8
million. (Id.). According to the Sale of
LLC Interest Agreement between Davey and Claggett,
“Claggett and Sons purchased the stocks of Shiloh and
became its sole member …” (Id.).
are no disputes about these material facts, but the parties
contest whether Shiloh has a legitimate claim to the $1, 305,
642.33 “loaned” to it by Davey's Sovereign
Grace. As detailed below, CFTC is entitled to summary
judgment as a matter of law because Shiloh did nothing to
merit the receipt of funds fraudulently obtained from
STANDARD OF REVIEW
judgment shall be granted “if the movant shows that
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). A factual dispute is genuine “if
the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is
material only if it might affect the outcome of the suit
under governing law. Id. The movant has the
“initial responsibility of informing the district court
of the basis for its motion, and identifying those portions
of the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,
which it believes demonstrate the absence of a genuine issue
of material fact.” Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986) (internal quotation marks omitted).
This “burden on the moving party may be discharged by
‘showing'- that is, pointing out to the district
court-that there is an absence of evidence to support the
nonmoving party's case.” Id. at 325.
this initial burden is met, the burden shifts to the
nonmoving party, which “must set forth specific facts
showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 250. The nonmoving party may
not rely upon mere allegations or denials of allegations in
the pleadings to defeat a motion for summary judgment, rather
it must present sufficient evidence from which “a
reasonable jury could return a verdict for the nonmoving
party.” Id. at 248; accord Sylvia Dev.
Corp. v. Calvert Cnty., Md., 48 F.3d 810, 818 (4th Cir.
ruling on a summary judgment motion, a court must view the
evidence and any inferences from the evidence in the light
most favorable to the nonmoving party. Anderson, 477
U.S. at 255. “Where the record taken as a whole could
not lead a rational trier of fact to find for the nonmoving
party, there is no genuine issue for trial.” Ricci
v. DeStefano, 557 U.S. 557, 586 (2009) (quoting
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986)). The mere argued existence of a
factual dispute does not defeat an otherwise properly
supported motion. Anderson, 477 U.S. at 248-49.
“If the evidence is merely colorable or is not
significantly probative, ” summary judgment is
appropriate. Id. at 249-50 (citations omitted).
Disgorgement by Shiloh
Commodity Exchange Act (CEA), 7 U.S.C. § 13a-1(d)(3)(B),
enables a court to impose the equitable remedy of
disgorgement of gains received in connection with a person
found in violation of the Act. Appellate courts have
recognized the broad equitable power of federal courts to
recover ill-gotten gains for the benefit of victims held by
the original wrong doer or a subsequent holder of the
proceeds. CFTC v. Kimberlynn Creek Ranch, Inc., 276
F.3d 187, 192 n.4 (4th Cir. 2002) (citing SEC v.
Colello, 139 F.3d 674, 676 (9th Cir. 1998); SEC v.
Cavanagh, 155 F.3d 129, 136 (2d Cir. 1998). The exercise
of such power prevents a violator from circumventing the
government's authority to recapture fraud proceeds by
simply passing them on to others, even without their
knowledge. Cavanagh, 155 F.3d at 137. Thus, a