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U.S. Commodity Futures Trading Commission v. Coats

United States District Court, W.D. North Carolina, Charlotte Division

September 18, 2017

U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
v.
BRYAN COATS, and JONATHAN DAVEY, Defendants

          ORDER

          ROBERT J. CONRAD, JR. UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court on the motion of Plaintiff U.S. Commodity Futures Trading Commission (“CFTC”) for summary judgment, (Doc. No. 157), against Bryan Coats (“Coats”) and Defendants Jonathan Davey (“Davey”), and related pleadings. Defendants have responded to the motion, (Doc. No. 160: Davey Response; Doc. No. 178: Coats Response; Doc. No. 179: Davey Supplemental Response); therefore, the issues are ripe for adjudication.

         I. BACKGROUND

         This 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, 6-12). 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)).

         For purposes of this motion, Coats pled guilty to conspiring to commit offenses against the United States, including violations of Title 7, United States Code, Section 6b, and Title 17, Code of Federal Regulations, Section 1.1 (commodities fraud); Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5 (securities fraud); and Title 18, United States Code, Section 1343 (wire fraud) (Count One) and to conspiring to commit money laundering in violation of Title 18, United States Code, Section 1956(h) (Count Two). (Case No. 3:11-cr-309, Doc. No. 11: Superseding Information; Doc. No. 12: Plea Agreement; Doc. No. 14: Acceptance and Entry of Guilty Plea).

         Davey was convicted by a jury of conspiring to commit offenses against the United States, including violations of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5 (securities fraud); and Title 18, United States Code, Section 1343 (wire fraud) (Count One); conspiring to commit wire fraud in violation of Title 18, United States Code, Section 1349 (Count Two); conspiring to commit money laundering in violation of Title 18, United States Code, Section 1956(h) (Count Three);. and tax evasion in violation of Title 26, United States Code, Section 7201 (Count Four). (Case No. 3:12-cr-68, Doc. No. 174: Verdict).

         The evidence at trial and sentencing tended to show that Simmons, Coats, Davey, and others fraudulently solicited approximately $40 million from hundreds of investors for purported trading in off-exchange foreign currency. (Doc. No. 157-1: CFTC Mem. at 5).[1] Even though false account statements showed profits for customers, investor funds were never traded, but rather were comingled and misappropriated for the personal benefit of Coats, Davey, and other co-conspirators. (Id. at 6). Davey generally denies the accusations against him, (Doc. No. 179: Davey Supp. Resp. at 1), but neither Defendant has submitted evidence to create a genuine issue about these material facts.

         II. STANDARD OF REVIEW

         Summary 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.

         Once 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. 1995).

         When 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).

         III. DISCUSSION

         A. Collateral Estoppel

         Davey's guilty verdict and Coats's guilty plea prevent each of them from relitigating the same issues in this civil proceeding. See SEC v. Farkas, 557 F. App'x 204, 206 (4th Cir. 2014) (guilty verdict in criminal securities fraud case collaterally estopped defendant from denying liability for civil securities fraud); Williams v. Comm'r of Internal Revenue, 498 F. App'x 284, 291 n. 6 (4th Cir. 2012) (guilty plea in criminal tax evasion case had same conclusive effect as trial for purposes of collateral estoppel in civil tax fraud case). The issue in this civil proceeding of fraudulent solicitation, misappropriation, and false statements in connection with future transactions in violation of 7 U.S.C. § 6b(a)(2)(A)-(C) of the Commodity Exchange Act (“CEA”) is identical to the one previously litigated in Defendants' criminal cases. The issue was resolved against them by guilty plea or jury verdict, which was critical and necessary to their criminal judgments. Those ...


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