UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 20-cv-21254-BLOOM/Louis

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

JUSTIN W. KEENER, d/b/a JMJ Financial,

Defendant.

________________________________________/

OMNIBUS ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

THIS CAUSE is before the Court upon Plaintiff Securities and Exchange Commission’s 

(“Plaintiff” or “SEC”) Motion for Summary Judgment, ECF No. [68] (“Plaintiff’s Motion”), and 

Defendant Justin Keener’s (“Defendant” or “Keener”) Motion for Summary Judgment, ECF No. 

[71] (“Defendant’s Motion”) (collectively, “Motions”). The Court has carefully reviewed the 

Motions, all opposing and supporting submissions, the arguments presented at the hearing on the 

Motions, the record in this case, the applicable law, and is otherwise fully advised. For the reasons 

set forth below, Plaintiff’s Motion is granted, and Defendant’s Motion is denied.

I. BACKGROUND

Plaintiff initiated this action against Defendant on March 24, 2020, arising from 

Defendant’s alleged violation of Section 15(a)(1) of the Securities Exchange Act of 1934 

(“Exchange Act”), 15 U.S.C. § 78o(a)(1). According to the Complaint, ECF No. [1], between 

January 2015 and January 2018, Defendant bought and sold billions of newly issued shares of 

microcap securities (penny stocks) and generated millions of dollars of profits from those sales, 

but he failed to comply with dealer registration requirements under the Exchange Act. Id. ¶ 1. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 1 of 32
Case No. 20-cv-21254-BLOOM/Louis

2

Specifically, Defendant’s business model entailed buying convertible notes from penny stock 

issuers, holding the notes for at least six months, converting the notes into newly issued shares of 

stock at a deep discount to the prevailing market price (generally ranging between 35-50% less), 

and then selling those shares into the public market for a significant profit. Id. ¶¶ 2, 8, 13, 15. 

Defendant purportedly purchased or converted more than 100 notes from more than 100 different 

microcap issuers, and he sold over 17.5 billion newly issued shares into the public market 

generating approximately $21.5 million in profits during the alleged three-year period. Id. ¶¶ 2, 8, 

16. In Plaintiff’s view, Defendant operated as an unregistered securities dealer. Id. ¶¶ 3-4, 19, 22.

The Complaint further alleges that Defendant “held himself out to the public as being 

willing to buy convertible notes at a regular place of business[.]” Id. ¶ 10. In particular, he 

“operated a website that advertised his business to issuers;” “hired employees, who worked on 

commission, to solicit issuers who were willing to sell convertible notes to him;” he and his 

employees “attended, and sometimes sponsored, conferences at which they solicited penny stock 

issuers in person;” and he gave presentations at conferences “that included a notarized affidavit 

from his accountant stating that he had $20 million ‘committed’ to purchase convertible notes from 

issuers.” Id. Plaintiff allegedly obtained “nearly all of the stock that he sold in his business directly 

from the issuers, through note conversion, and not from purchases in the secondary market.” Id.

¶ 11. 

Based on the foregoing, the Complaint asserts a single count for violation of Section 

15(a)(1) of the Exchange Act. Id. ¶¶ 23-26. Plaintiff seeks four forms of relief: (i) a permanent 

injunction restraining Defendant and his agents from acting as an unregistered securities dealer; 

(ii) an injunction restraining Defendant from participating in the offering of any penny stock; (iii) 

ordering Defendant to pay a civil penalty; and (iv) ordering Defendant to disgorge, with 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 2 of 32
Case No. 20-cv-21254-BLOOM/Louis

3

prejudgment interest, all ill-gotten gains derived from the activities set forth in the Complaint. Id.

at 11-12.

On June 22, 2020, Defendant moved to dismiss the Complaint largely on the basis that he 

is a “trader” and not a “dealer” under the Exchange Act and therefore does not need to register 

with the SEC. See generally ECF No. [15] (“Motion to Dismiss”). Defendant made five 

overarching arguments: (1) there is extensive legal guidance on the definition of a dealer; (2) 

Plaintiff fails to allege any facts to show that Defendant was a dealer; (3) the Complaint’s 

allegations show that Defendant was a trader; (4) Plaintiff fails to state a claim for injunctive relief; 

and (5) the Complaint alternatively should be dismissed as a due process violation because of a 

lack of fair notice that his conduct could be unlawful. Id. 

On August 13, 2020, the Court entered its order denying the Motion to Dismiss in its 

entirety. See generally ECF No. [29] (“Order on Motion to Dismiss”). Thereafter, on August 27, 

2020, Defendant filed his Answer and Affirmative Defenses to Plaintiff’s Complaint, ECF No. 

[30] (“Answer”), in which he asserts ten affirmative defenses: (1) incorporation of all defenses, 

including the Motion to Dismiss; (2) failure to state a claim; (3) due process; (4) estoppel; (5) 

statute of limitations; (6) advice of counsel; (7) injunctive relief; (8) disgorgement; (9) penny-stock 

bar; and (10) penalties. Id. at 7-8.

Regarding the instant Motions, Plaintiff filed its Motion, ECF No. [68], along with its 

corresponding Statement of Material Facts, ECF No. [67] (“Plaintiff’s SMF”). Defendant filed his

Opposition to Plaintiff’s Motion, ECF No. [90] (“Defendant’s MSJ Response”), and his

Opposition to Plaintiff’s SMF, ECF No. [91] (“Defendant’s SMF Response”). Plaintiff also filed 

a Reply to Defendant’s MSJ Response, ECF No. [102] (“Plaintiff’s MSJ Reply”), and a Reply in 

Support of Plaintiff’s SMF, ECF No. [101] (“Plaintiff’s SMF Reply”). 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 3 of 32
Case No. 20-cv-21254-BLOOM/Louis

4

Defendant filed his Motion, ECF No. [71], along with his corresponding Statement of 

Material Facts in Support of Motion, ECF No. [72] (“Defendant’s SMF”). Plaintiff filed its

Opposition to Defendant’s Motion, ECF No. [89] (“Plaintiff’s MSJ Response”), together with its 

Opposition Statement of Material Facts, ECF No. [88] (“Plaintiff’s SMF Response”). Finally, 

Defendant filed a Reply in Support of his Motion, ECF No. [99] (“Defendant’s MSJ Reply”), and 

a Reply Statement of Material Facts, ECF No. [98] (“Defendant’s SMF Reply”).

On October 18, 2021, the Court held a hearing on the Motions, during which the parties 

argued their respective positions. ECF No. [114]; see also ECF No. [116]. The Motions are ripe 

for consideration. 

II. MATERIAL FACTS

Based on the parties’ statements of material facts in support of and in opposition to the 

Motions, along with the evidence in the record, the following facts are not genuinely in dispute 

unless otherwise noted.1

1

In his SMF Response, Defendant urges the Court to reject Plaintiff’s assertions of fact and deny Plaintiff’s 

Motion because it “simply appended its exhibits to its motion, rather than to a declaration attesting to their 

authenticity as true and correct copies.” ECF No. [91] at 1. While the Court recognizes that Federal Rule 

of Civil Procedure 56(e) previously required that documents be authenticated by and attached to an 

affidavit, that is no longer required under the current version of Rule 56. The current version now states: 

“A party may object that the material cited to support or dispute a fact cannot be presented in a form that 

would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2). “[U]nder current Rule 56, an objection cannot 

be based solely on evidence not being authenticated—the objection must be that evidence cannot be 

presented in admissible form, not that the evidence has not been presented in admissible form.” Abbott v. 

Elwood Staffing Servs., Inc., 44 F. Supp. 3d 1125, 1135 (N.D. Ala. 2014) (emphasis in original); see also 

Cosmo v. Carnival Corp., 272 F. Supp. 3d 1336 (S.D. Fla. 2017) (finding that document relied upon in 

opposition to motion for summary judgment “need not be authenticated” because all that is required is that 

“evidence be presentable in admissible form at trial”). Defendant’s objection is not that the evidence cannot 

be presented in an admissible form at trial, but rather than the documents have not been authenticated. 

Because authentication is no longer a requirement at the summary judgment stage and Defendant does not 

argue that documents are fabricated or cannot otherwise be authenticated at trial, Defendant’s request that 

the Court reject Plaintiff’s assertions is denied.

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 4 of 32
Case No. 20-cv-21254-BLOOM/Louis

5

A. Defendant and JMJ Financial 

Defendant was a resident of Miami, Florida from 2006 to 2018. ECF No. [67-1] at 25:18-

20. Defendant does business under the fictitious name JMJ Financial (“JMJ”), which he registered 

in Florida in 2008. ECF No. [1] ¶ 5, ECF No. [30] ¶ 5; ECF No. [67-2] at 2. Some of Defendant’s 

bank and brokerage accounts are held under the name Justin W. Keener d/b/a/ JMJ Financial, and 

some are held under the name Justin W. Keener. ECF No. [72-6] at 2. Both types of accounts are 

operated with Defendant’s social security number. ECF No. [72-3] at 29:4-11; ECF No. [72-2] at 

79:5-9. 

During the relevant period of January 2015 to January 2018 (“the Relevant Period”), 

Defendant had offices in Miami, Florida, San Diego, California, and San Juan, Puerto Rico. ECF 

No. [67-1] at 30:21-31:6. JMJ’s San Diego office had 7,400 square feet and accommodated “15 to 

20 individual offices” and cubicles. ECF No. [67-3] at 30:16-31:1. JMJ employed as many as 25 

employees at one time during the Relevant Period. ECF No. [72-2] at 47:13-18; ECF No. [67-24] 

at 4, 6. According to Defendant’s tax records, he had an employee payroll of $2,695,185 in 2015, 

$2,428,808 in 2016, and $1,629,300 in 2017. ECF No. [67-6] at 15, 21, 31; see also ECF No. [67-

1] at 88:23-90:9. 

Defendant has never registered with the SEC as a securities dealer. ECF No. [1] ¶ 5; ECF 

No. [30] ¶ 5; see also ECF No. [91] ¶ 2. Defendant describes himself as an “investor” who has a 

“long term view” of his investments. ECF No. [72-3] at 36:3-16; ECF No. [72-2] at 92:2-3, 201:9-

14. Defendant only invests his own money and does not handle anyone else’s money. ECF No. 

[72-9] ¶¶ 21-22; see also ECF No. [72] ¶ 8; ECF No. [88] ¶ 8. Additionally, Defendant alone 

decides when and how to invest his money. ECF No. [72-3] at 33:16-21; ECF No. [72-10] at 53:11-

54:1; see also ECF No. [72] ¶ 9; ECF No. [88] ¶ 9. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 5 of 32
Case No. 20-cv-21254-BLOOM/Louis

6

B. JMJ’s QuickLoan Program

During the Relevant Period, Defendant purchased convertible notes from microcap 

companies (issuers) in need of cash. ECF No. [67-9] at 13; ECF No. [67-24] at 9; ECF No. [67-1] 

at 208:8-15; ECF No. [72-2] at 25:1-22. Defendant directly “negotiated the terms of the convertible 

notes and signed contracts to memorialize the investments he made into [the] issuers.” ECF No. 

[30] ¶ 9; see also ECF No. [72-2] at 117:23-118:6.

The convertible notes were contracts in which the issuer of the note promised to pay JMJ 

a designated sum of principal and potentially interest within a designated time frame. See, e.g., 

ECF No. [72-14] at 41-43; ECF No. [72-15] at 36-38; ECF No. [67-12] at 2-5. The convertible 

notes also gave JMJ the option to demand that sums owed under the notes be paid in the form of 

the issuer’s stock at a discount to the market price. Id.; see also ECF No. [67-3] at 36:7-37:13; 

ECF No. [67-4] at 108:21-109:22. Defendant testified that the convertible notes held between 2014 

and 2016 had a “10 percent discount to 40 or 50 percent discount[.]” ECF No. [67-1] at 61:13-

62:2. Defendant also testified that the stock converted from the notes were not publicly traded until 

Defendant “introduces it to the market.” ECF No. [67-1] at 120:15-121:8. 

When evaluating issuers for JMJ’s QuickLoan program, Defendant and/or his employees 

considered the liquidity of an issuer’s existing stock, the volume at which it traded in the market, 

the amount of outstanding convertible debt, ECF No. [67-14] at 2; ECF No. [67-15] at 3, along 

with “the basic financial data” of the issuers, such as “assets, liabilities, revenue, profits, losses, 

[and] cash flow” and other information in public filings, ECF No. [72-3] at 51:9-18; see also ECF 

No. [72-11] (due diligence review for red flags); ECF No. [72-12] (same); ECF No. [72] ¶ 10; ECF 

No. [88] ¶ 10. Defendant also “developed proprietary technology,” at a cost of more than $3 

million, to find convertible notes for sale and to account for existing convertible notes. ECF No. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 6 of 32
Case No. 20-cv-21254-BLOOM/Louis

7

[67-3] at 24:21-26:17, 27:20-28:23; ECF No. [67-17] at 58:5-59:19, 61:23-62:15; ECF No. [67-

24] at 14; see also ECF No. [67] ¶¶ 23-24; ECF No. [91] ¶¶ 23-24. 

Defendant himself decided when to seek to convert some or all of an outstanding loan 

balance into stock. ECF No. [72-3] at 36:3-16, 36:25-37:5; see also ECF No. [72] ¶ 35; ECF No. 

[88] ¶ 35. When seeking to convert, Defendant would first place a request with an issuer’s transfer 

agent. ECF No. [72-35] at 2; ECF No. [72-36] at 2; see also ECF No. [72] ¶ 36; ECF No. [88] 

¶ 36. Once the transfer agent approved the conversion, Defendant would place a request with his 

brokerage firm to deposit the stock into his account. ECF No. [72-38] at 2; see also ECF No. [72] 

¶ 39; ECF No. [88] ¶ 39. After the stock from a conversion was deposited into Defendant’s 

brokerage account, he decided when and in what volume to sell, and would accordingly place a 

sale request with his brokerage firm. ECF No. [72-3] at 119:20-120:2; ECF No. [73-11] at 2; ECF 

No. [73-12] at 2; see also ECF No. [72] ¶ 51; ECF No. [88] ¶ 51. Defendant would hold the 

converted stock for at least six months before selling the shares into the market. ECF No. [72-3] 

at 36:3-16, 118:21-120:2; ECF No. [67-4] at 52:6-53:14. 

Many of Defendant’s convertible note transactions were risky. ECF No. [72] ¶ 30; ECF 

No. [88] ¶ 30. In some cases, the stock price of these companies declined while Defendant was 

holding the convertible note, companies went bankrupt or out of business during that period, or 

companies refused to honor the terms of the convertible notes because they were unsecured. ECF 

No. [72-3] at 36:25-37:5, 54:17-55:17, 56:18-57:10, 226:15-227:25; see also ECF No. [72] ¶¶ 30-

31; ECF No. [88] ¶¶ 30-31. Defendant explains that because his investments were risky, his 

strategy was to hold a large number of similar convertible notes with the knowledge that some 

would fail, and with the hope that some would succeed. ECF No. [72-3] at 54:17-55:7, 70:21-71:9, 

208:25-209:14; ECF No. [72-10] at 66:7-67:7; see also ECF No. [72] ¶ 32; ECF No. [88] ¶ 32.

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 7 of 32
Case No. 20-cv-21254-BLOOM/Louis

8

The parties dispute the exact number of notes converted during the Relevant Period, as well 

as the net proceeds received from the sale of the converted stock. Compare ECF No. [67-11] ¶¶ 11-

12 (Taveras Declaration, calculating net proceeds of approximately $34 million), with ECF No. 

[84-5] ¶ 36 (Flemmons Expert Report, calculating net proceeds of approximately $10 million). 

However, Defendant testified that between “100 to 200 issuers” sold JMJ convertible notes at part 

of its QuickLoan program, and that “50 to 100 percent would be a reasonable . . . estimate” of 

JMJ’s profit margin on convertible notes. ECF No. [67-1] at 71:20-24, 246:7-20; see also ECF No. 

[67-24]. Defendant also admits that during the Relevant Period, he “converted more than 100 

[convertible] notes from more than 100 different microcap issuers” and “liquidated billions of 

shares of common stock[.]” ECF No. [30] ¶¶ 1-2. 

C. Efforts to Acquire Convertible Notes 

During the Relevant Period, Defendant maintained a website that described the QuickLoan 

Program and JMJ’s interest in purchasing convertible notes that “generally range between $50,000 

and $250,000.” ECF No. [67-9] at 8. The website set forth JMJ’s interest in offering bridge loans 

and engaging in “convertible debentures” and “registered equity financing” with publicly traded 

companies. Id. The website also represented that “JMJ has placed over $60 million in the last five 

years, closing transactions with over 70 public companies in 2015 alone.” Id. 

Additionally, Defendant issued press releases that made statements such as: (1) “[JMJ] 

commits $20 Million in unsecured investment to emerging public companies in 2015[,]” ECF No. 

[67-23] at 10; (2) “Keener and JMJ Financial have committed $20,000,000 to unsecured 

investments in 2016[,]” id. at 4; (3) “JMJ Financial’s primary investment vehicle, the QuickLoan, 

allows small publicly-traded companies the ability to access up to $500,000 utilizing a simple twopage promissory note[,]” id. at 6; and (4) “With a portfolio of over 200 companies and many years 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 8 of 32
Case No. 20-cv-21254-BLOOM/Louis

9

of operating experience, JMJ Financial is one of the most active, stable, and reliable investors 

focused on the smallcap segment[,]” id. at 8; see also ECF No. [67] ¶ 54; ECF No. [91] ¶ 54. 

Defendant maintained “lead generation software,” known internally at JMJ as “the 

screener,” that helped employees “screen public filings . . . to identify potential borrowers.” ECF 

No. [67-3] at 24:21-25:16; see also ECF No. [67] ¶ 50; ECF No. [91] ¶ 50. The screener had the 

capacity to track every public company in the SEC’s EDGAR database and then JMJ “could decide 

if it made sense to contact those companies to see if they had any capital needs.” ECF No. [67-3] 

at 27:20-28:13. JMJ contacted hundreds of those companies. Id. at 28:14-23; see also ECF No. 

[67-1] at 46:5-8, 161:19-24; ECF No. [67] ¶¶ 50, 64; ECF No. [91] ¶¶ 50, 64. 

Defendant sponsored and, with his employees, attended approximately 10 industry 

conferences in 2016 to “network[]” and meet “[c]ompanies who are seeking investors, other 

vendors, maybe attorneys and accountants” as well as for “education[al]” purposes. ECF No. [67-

1] at 125:11-18; ECF No. [73-31]; see also ECF No. [67] ¶ 51; ECF No. [91] ¶ 51. Defendant 

hosted a dinner at Nobu Restaurant in Las Vegas for 24 “brokers and finders” on April 13, 2015. 

ECF No. [67-30]; see also ECF No. [67] ¶ 56; ECF No. [91] ¶ 56. Defendant also held a “Partner 

Seminar” at the Wynn Hotel in Las Vegas on August 14, 2015, ECF No. [67-16] at 2; see also 

ECF No. [67] ¶ 58; ECF No. [91] ¶ 58, and a “Broker and Finder Seminar” on April 8, 2016 at the 

Wynn Hotel, where JMJ covered all expenses for attendees, including the costs for 

accommodations and airfare, ECF No. [67-24] at 2; see also ECF No. [67] ¶ 59; ECF No. [91] 

¶ 59. 

At both Wynn Hotel events, Defendant made a presentation to the participants requesting 

that they send JMJ referrals of issuers that were looking to sell convertible notes. ECF No. [67-16] 

at 5, 41; ECF No. [67-24] at 5, 35; see also ECF No. [67] ¶ 60; ECF No. [91] ¶ 60. Defendant’s 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 9 of 32
Case No. 20-cv-21254-BLOOM/Louis

10

presentations also included a notarized affidavit of his CFO Conrad Nagel stating that JMJ “has in 

excess of $20,000,000 in liquid cash and cash equivalents that is immediately available for 

investment into small cap emerging companies.” ECF No. [67-16] at 24 (emphasis omitted); ECF 

No. [67-24] at 32 (same); see also ECF No. [67] ¶ 60; ECF No. [91] ¶ 60. According to 

Defendant’s tax records, he took business deductions of $101,701 in 2015, and $67,407 in 2016 

for the costs of sponsoring and sending his employees to industry conferences, as well as 

sponsoring JMJ-branded conferences. ECF No. [67-6] at 15, 21; see also ECF No. [67] ¶ 63; ECF 

No. [91] ¶ 63. 

Plaintiff now moves for summary judgment on its claim that Defendant violated Section 

15(a)(1) by operating as “dealer” without registering as such, as well as on Defendant’s Third, 

Fourth, Fifth, and Sixth Affirmative Defenses. Defendant also moves for summary judgment on 

the bases that Plaintiff can neither establish Section 15(a)(1) liability nor entitlement to the 

remedies it seeks. 

III. LEGAL STANDARD

The standard of review on cross-motions for summary judgment does not differ from the 

standard applied when only one party files such a motion. See Am. Bankers Ins. Grp. v. United 

States, 408 F.3d 1328, 1331 (11th Cir. 2005). A court may grant a motion for summary judgment 

“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). The parties may support their 

positions by citations to materials in the record, including, among other things, depositions, 

documents, affidavits, or declarations. See Fed. R. Civ. P. 56(c). An issue is genuine if “a 

reasonable trier of fact could return judgment for the non-moving party.” Miccosukee Tribe of 

Indians of Fla. v. United States, 516 F.3d 1235, 1243 (11th Cir. 2008) (quoting Anderson v. Liberty 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 10 of 32
Case No. 20-cv-21254-BLOOM/Louis

11

Lobby, Inc., 477 U.S. 242, 247-48 (1986)). A fact is material if it “might affect the outcome of the 

suit under the governing law.” Id. (quoting Anderson, 477 U.S. at 247-48). 

A court views the facts in the light most favorable to the non-moving party, draws “all 

reasonable inferences in favor of the nonmovant and may not weigh evidence or make credibility 

determinations, which ‘are jury functions, not those of a judge.’” Lewis v. City of Union City, Ga., 

934 F.3d 1169, 1179 (11th Cir. 2019) (quoting Feliciano v. City of Miami Beach, 707 F.3d 1244, 

1252 (11th Cir. 2013)); Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006); see also Crocker 

v. Beatty, 886 F.3d 1132, 1134 (11th Cir. 2018) (“[W]e accept [the non-movant’s] version of the 

facts as true and draw all reasonable inferences in the light most favorable to him as the nonmovant.”). “The mere existence of a scintilla of evidence in support of the [non-moving party’s] 

position will be insufficient; there must be evidence on which a jury could reasonably find for the 

[non-moving party].” Anderson, 477 U.S. at 252. “If more than one inference could be construed 

from the facts by a reasonable fact finder, and that inference introduces a genuine issue of material 

fact, then the district court should not grant summary judgment.” Bannum, Inc. v. City of Fort 

Lauderdale, 901 F.2d 989, 996 (11th Cir. 1990). The Court does not weigh conflicting evidence. 

See Skop v. City of Atlanta, Ga., 485 F.3d 1130, 1140 (11th Cir. 2007) (quoting Carlin Comm’n, 

Inc. v. S. Bell Tel. & Tel. Co., 802 F.2d 1352, 1356 (11th Cir. 1986)).

Initially, the moving party bears the “responsibility of informing the . . . 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); see also Shiver v. Chertoff, 549 F.3d 1342, 1343 (11th Cir. 2008). If a movant 

satisfies this burden, “the nonmoving party ‘must do more than simply show that there is some 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 11 of 32
Case No. 20-cv-21254-BLOOM/Louis

12

metaphysical doubt as to the material facts.’” Ray v. Equifax Info. Servs., LLC, 327 F. App’x 819, 

825 (11th Cir. 2009) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 

586 (1986)). Instead, “the non-moving party ‘must make a sufficient showing on each essential 

element of the case for which he has the burden of proof.’” Id. (quoting Celotex Corp., 477 U.S. 

at 322). The non-moving party must produce evidence, going beyond the pleadings, and by its own 

affidavits, or by depositions, answers to interrogatories, and admissions on file, designating 

specific facts to suggest that a reasonable jury could find in the non-moving party’s favor. See 

Shiver, 549 F.3d at 1343. Yet, even where a non-movant neglects to submit any alleged material 

facts in dispute, a court must still be satisfied that the evidence in the record supports the 

uncontroverted material facts proposed by the movant before granting summary judgment. Reese 

v. Herbert, 527 F.3d 1253, 1268-69, 1272 (11th Cir. 2008); United States v. One Piece of Real 

Prop. Located at 5800 S.W. 74th Ave., Miami, Fla., 363 F.3d 1099, 1103 n.6 (11th Cir. 2004) 

(“One Piece of Real Prop.”). Indeed, even “where the parties agree on the basic facts, but disagree 

about the factual inferences that should be drawn from those facts,” summary judgment may be 

inappropriate. Warrior Tombigbee Transp. Co., Inc. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th 

Cir. 1983). 

Additionally, “cross motions for summary judgment may be probative of the nonexistence 

of a factual dispute, but this procedural posture does not automatically empower the court to 

dispense with the determination whether questions of material fact exist.” Ga. State Conf. of 

NAACP v. Fayette Cnty. Bd. of Comm’rs, 775 F.3d 1336, 1345-46 (11th Cir. 2015). Indeed, even 

where the issues presented on motions for summary judgment overlap, a court must consider each 

motion on its own merits, “resolving all reasonable inferences against the party whose motion is 

under consideration.” S. Pilot Ins. Co. v. CECS, Inc., 52 F. Supp. 3d 1240, 1243 (N.D. Ga. 2014) 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 12 of 32
Case No. 20-cv-21254-BLOOM/Louis

13

(citing Am. Bankers Ins. Grp., 408 F.3d at 1331). In particular, where “the parties respond[] to 

each respective summary judgment motion with disputes as to the ‘undisputed’ facts, add[] 

‘material facts’ of their own, and then repl[y] with subsequent objections to the other party’s 

additional facts,” the mere filing of cross motions for summary judgment is not conclusive. Id. 

Thus, where the parties disagree as to the facts, summary judgment cannot be entered unless one 

of the parties meets its burden of demonstrating that “there is no dispute as to any material facts 

with the evidence and all inferences drawn therefrom viewed in the light most favorable” to the 

non-moving party. Shook v. United States, 713 F.2d 662, 665 (11th Cir. 1983) (citing M/V Nan 

Fung, 695 F.2d at 1296-97).

IV. DISCUSSION

In Plaintiff’s Motion, Plaintiff argues that summary judgment is warranted as to liability 

on its claim that Defendant violated Section 15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1), 

because there is no genuine issue of material fact that Defendant operated as a securities “dealer” 

without registering with the SEC. See generally ECF No. [68]. Plaintiff further argues that 

Defendant’s Third, Fourth, Fifth, and Sixth Affirmative Defenses fail as a matter of law, and that 

Defendant’s Seventh, Eighth, Ninth, and Tenth Affirmative Defenses do not qualify as a defense 

to liability and cannot defeat Plaintiff’s Motion. Id. 

Defendant’s Motion, on the other hand, argues that summary judgment should be granted 

in his favor because no reasonable jury could conclude that Defendant meets the definition of a 

“dealer” under the Exchange Act. See generally ECF No. [71]. Defendant alternatively argues that 

even if the Court were to find a material dispute of fact on liability, Defendant is nonetheless 

entitled to summary judgment on the basis that Plaintiff’s claim is barred by due process. Id. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 13 of 32
Case No. 20-cv-21254-BLOOM/Louis

14

Defendant further maintains that Plaintiff has failed to show that it is entitled to the disgorgement 

or injunctive relief it seeks. Id. 

As both parties filed motions for summary judgment on the same legal issue—namely, 

whether Defendant qualifies as a “dealer” under the Exchange Act—the Court first sets forth the 

relevant framework for addressing this claim. The Court will then turn to the respective Motions, 

beginning with Plaintiff’s Motion. 

A. “Dealer” Under the Exchange Act 

Section 15(a)(1) of the Exchange Act makes it unlawful for anyone who is a dealer to use 

the mails or interstate commerce to engage in or attempt to induce the purchase or sale of securities 

unless the dealer is registered with the SEC. See 15 U.S.C. § 78o(a)(1).2 Section 3(a)(5)(A) of the 

Exchange Act defines the term “dealer” as “any person engaged in the business of buying and 

selling securities . . . for such person’s own account through a broker or otherwise.” 15 U.S.C. 

§ 78c(a)(5)(A). Section 3(a)(5)(B) specifically excludes from the term “dealer” a person that buys 

or sells securities “for such person’s own account, either individually or in a fiduciary capacity, 

but not as a part of a regular business.” 15 U.S.C. § 78c(a)(5)(B) (emphasis added). 

The Eleventh Circuit Court of Appeals has explained that “the centerpiece to [the ‘dealer’] 

definition is the word ‘business,’ which is defined as ‘a commercial enterprise carried on for profit, 

2 Section 15(a)(1) of the Exchange Act provides: 

It shall be unlawful for any broker or dealer which is either a person other than a natural 

person or a natural person not associated with a broker or dealer which is a person other 

than a natural person (other than such a broker or dealer whose business is exclusively 

intrastate and who does not make use of any facility of a national securities exchange) to 

make use of the mails or any means or instrumentality of interstate commerce to effect any 

transactions in, or to induce or attempt to induce the purchase or sale of, any security (other 

than an exempted security or commercial paper, bankers' acceptances, or commercial bills) 

unless such broker or dealer is registered in accordance with subsection (b) of this section.

15 U.S.C. § 78o(a)(1)

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 14 of 32
Case No. 20-cv-21254-BLOOM/Louis

15

a particular occupation or employment habitually engaged in for livelihood or gain[.]’” SEC v. Big 

Apple Consulting USA, Inc., 783 F.3d 786, 809 (11th Cir. 2015) (emphasis in original) (alteration 

adopted) (quoting Black’s Law Dictionary 239 (10th ed. 2009)).3 The Eleventh Circuit has further 

explained that “[c]entral to this definition is profit or gain.” Id. (emphasis in original). 

Additionally, “[c]ase law has established that the primary indicia in determining that a person 

has ‘engaged in the business’ within the meaning of the term ‘dealer’ is that the level of 

participation in purchasing and selling securities involves more than a few isolated transactions.”

In the Matter of the Application of Gordon Wesley Sodorff, Jr., 50 S.E.C. 1249, 1992 WL 224082, 

at *4 (Sept. 2, 1992); see also SEC v. Big Apple Consulting USA, Inc., No. 6:09-cv-1963-Orl-28, 

2011 WL 3753581, at *9 (M.D. Fla. Aug. 25, 2011) (“This definition ‘connotes a certain regularity 

of participation in securities transactions at key points in the chain of distribution.’” (alteration 

adopted) (quoting Mass. Fin. Servs., Inc. v. Sec. Investor Prot. Corp., 411 F. Supp. 411, 415 (D. 

Mass. 1976))). “There is no requirement, however, that such activity be a person’s principal 

business or the principal source of income.” Sodorff, 1992 WL 224082, at *4.

Further, “the SEC has promulgated guidelines to help determine whether someone is acting 

as a dealer of not.” Big Apple, 2011 WL 3753581, at *9; see also Guide to Broker-Dealer 

Registration, U.S. Securities and Exchange Commission, Division of Trading and Markets, Apr. 

2008, https://www.sec.gov/reportspubs/investor-publications/divisionsmarketregbdguidehtm. 

html (last visited Jan. 11, 2022). The SEC Guide to Broker-Dealer Registration (the “SEC Guide”) 

states that “each of the following individuals and businesses may need to register as a dealer” if: 

3

In Big Apple, the Eleventh Circuit interpreted the Securities Act of 1933 rather than the Exchange Act. 

However, the Eleventh Circuit panel noted that the definition of a “dealer” under both statutes is “very 

similar” and found the district court’s analysis to be “sound” where the district court “analyzed the 

definition of dealer as it related to the SEC’s [Exchange Act] claims and generally applied that analysis to 

the [Securities Act of 1933] exception.” Big Apple, 783 F.3d at 809 n.11.

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 15 of 32
Case No. 20-cv-21254-BLOOM/Louis

16

• a person who holds himself out as being willing to buy and sell a particular 

security on a continuous basis;

• a person who runs a matched book of repurchase agreements; or

• a person who issues or originates securities that he also buys and sells.

SEC Guide, § II.B.

The SEC Guide also sets forth “some of the questions [individuals and businesses] should 

ask to determine whether [they] are acting as a dealer:” 

• Do you advertise or otherwise let others know that you are in the business of 

buying and selling securities?

• Do you do business with the public (either retail or institutional)?

• Do you make a market in, or quote prices for both purchases and sales of, one 

or more securities?

• Do you participate in a “selling group” or otherwise underwrite securities?

• Do you provide services to investors, such as handling money and securities, 

extending credit, or giving investment advice?

• Do you write derivatives contracts that are securities?

Id. The SEC Guide makes clear that “[a] ‘yes’ answer to any of these questions indicates that you 

may need to register as a dealer.” Id. 

B. Plaintiff’s Motion for Summary Judgment 

1. Liability under Section 15(a)(1) 

Plaintiff first argues that summary judgment is warranted as to liability on its Section 

15(a)(1) claim because there is no genuine issue of material fact that Defendant operated as a 

securities “dealer” without registering with the SEC. See generally ECF No. [68]. According to 

Plaintiff, the undisputed material facts establish that Defendant meets the statutory “dealer” 

definition as a matter of law based upon: (1) Defendant’s “business model and his day-to-day 

operations” which “focused almost entirely upon finding issuer clients that were offering securities 

(convertible notes) to buy, buying the notes, converting them to stock, and then selling the newly 

issued stock in the public market[;]” (2) “the ‘sheer volume’ of Defendant’s convertible notes 

business, as well as the significant profits that it generated[;]” and (3) Defendant’s practice of 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 16 of 32
Case No. 20-cv-21254-BLOOM/Louis

17

making a profit by “purchasing deeply discounted stock directly from his issuer clients and then 

promptly reselling in the marketplace.” Id. at 24-26. Plaintiff further argues that even if the Court 

were to consider the activities listed in the SEC Guide, “Defendant held himself out to the public 

as being in the business of buying and selling securities.” Id. at 29. 

In response,4 Defendant contends that summary judgment in Plaintiff’s favor is not 

warranted. See generally ECF No. [90]. First, Defendant arguesthat Plaintiff “misstates the law”—

“[Plaintiff] ignores anything about the context, purpose, or actual language of the Exchange Act, 

and instead demands an interpretation that is nowhere in the ‘plain language’ of the statute.” Id. at 

13-14. According to Defendant, Plaintiff’s Motion “conspicuously and studiously avoids any 

mention of even one specific dealer factor” and “[i]t is obvious [Plaintiff] remained silent because 

even a cursory look at the factors will demolish [Plaintiff’s] position in this case.” Id. at 16-18. 

Defendant further urges the Court to “reject [Plaintiff’s] invitation to apply brand new 

factors and impose retroactive liability on [Defendant] based on them.” Id. at 19. Defendant 

explains that “[t]here is no basis in law” to support Plaintiff’s claim that his business activities—

namely, maintaining a large office, hiring employees and contractors, and creating a computer 

system to find, manage, and account for investments—qualify as “dealer” activity. Id. 

Additionally, Defendant maintains that “there is no law or guidance that even suggests that 

advertising directed at companies for the purpose of identifying investment opportunities could 

qualify” as “dealer” activity. Id. at 20-21. Further, according to Defendant, the volume of his 

trading activity is irrelevant because “[a]nyone who buys and sells microcap stocks even with 

small investments by definition will engage with hundreds of millions, if not billions of shares.” 

4 Defendant admits that he has never registered with the SEC as a securities dealer. ECF No. [30] ¶ 5; ECF 

No. [91] ¶ 2. Additionally, Defendant does not challenge whether he or his employees used the mails or 

interstate commerce in conducting securities transactions. ECF No. [30] ¶ 13; ECF No. [91] ¶ 37. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 17 of 32
Case No. 20-cv-21254-BLOOM/Louis

18

Id. at 22. Lastly, Defendant avers that acquiring newly issued stock at a discount to the trading 

price does not make him a “dealer” because he held the stock long enough to demonstrate it was 

obtained for investment purposes. Id. at 23-25. At a minimum, Defendant argues that he is entitled 

to a jury trial on whether his activities qualify as being “in the business of buying and selling 

securities.” See generally id. 

2. The factors set forth in the SEC Guide are not controlling

The crux of the parties’ dispute is whether the Court should apply the statutory language 

of the Exchange Act or the factors set forth in the SEC Guide in determining whether Defendant 

is a “dealer” subject to the Exchange Act’s provisions. Plaintiff contends that “the plain language 

of the statute and the controlling precedent in the Eleventh Circuit that construes that language 

govern the determination of whether Defendant was acting as a dealer.” ECF No. [68] at 28. In 

Plaintiff’s view, “[t]he SEC Guide merely walks through the statutory dealer framework involving 

broker and dealer registration in an effort to aid those who may be required to register. But it does 

not supplant the plain language of the Exchange Act or the Eleventh Circuit’s holding in Big 

Apple.” Id. Stated differently, the SEC Guide sets forth non-binding factors that “are merely 

examples of activity or actions that might render one a dealer.” Id. (citation omitted). 

Defendant, conversely, argues that he is a “private investor” and not a “dealer” based upon 

various factors mentioned in the SEC Guide, ECF No. [90] at 10, 16-19, and urges the Court to 

reject Plaintiff’s “remarkably overbroad” interpretation of the Exchange Act, id. at 36. According 

to Defendant, “[t]he very existence of the Guide demonstrates conclusively that the SEC concedes 

that the Exchange Act dealer definition is not transparent, and instead requires a complex factsand-circumstances analysis.” Id. at 16. In his view, “the SEC’s 30-page motion for summary 

judgment on a dealer registration claim conspicuously and studiously avoids any mention of even 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 18 of 32
Case No. 20-cv-21254-BLOOM/Louis

19

one specific dealer factor[,]” leading to the only conclusion that Defendant, under a totality of the 

circumstances, cannot meet any of the dealer factors set forth in the SEC Guide. Id. at 16-17. 

As this Court previously stated in its Order on Motion to Dismiss, the Court is unconvinced 

that it should overlook the actual statutory language of the Exchange Act and instead look only to 

the factors set forth in the SEC Guide to determine whether Defendant was engaged in “dealer” 

activity. ECF No. [29] at 7-8; see also SEC v. Almagarby, 479 F. Supp. 3d 1266, 1272-73 (stating 

that “various factors and activities identified in previous SEC releases or SEC staff no-action 

letters” are “merely examples of activity or actions that might render one a dealer” and explaining 

that there is nothing that “implies that the listed factors are an exclusive or exhaustive checklist 

that creates a burden of proof for the SEC.”); SEC v. River N. Equity LLC, 415 F. Supp. 3d 853, 

858 (N.D. Ill. 2019) (noting that “these factors (and any decisions construing them) are not 

controlling. They are neither exclusive, nor function as a checklist through which a court must 

march to resolve a dispositive motion. And whether and which are met is necessarily a fact-based 

inquiry best reserved for summary judgment or trial.”). Indeed, the SEC Guide provides that a 

“yes” to any one of the referenced factors “indicates that you may need to register as a dealer.” 

SEC Guide, § II.B. Under that same reasoning, a “no” answer to one or even all of the factors does 

not foreclose the possibility that someone is a “dealer.” 

The SEC Guide further warns readers “CAUTION — MAKE SURE YOU FOLLOW 

ALL LAWS AND RULES” and advises that “it is not comprehensive” and that readers “may 

wish to consult with a private lawyer who is familiar with the federal securities laws, to assure 

that you comply with all laws and regulations.” Id. § I (emphasis in original). While courts have

considered the factors set forth in the SEC Guide to determine whether a person is subject to the 

Exchange Act’s registration requirements, the Court is unaware of any authority suggesting that 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 19 of 32
Case No. 20-cv-21254-BLOOM/Louis

20

these factors amount to binding legislation or supplant the plain language of the statute or judicial 

interpretation construing its language.

5

Moreover, the Eleventh Circuit has examined the explicit statutory language defining a 

“dealer” without referencing factors when evaluating whether a party is subject to securities 

registration requirements. See Big Apple, 783 F.3d at 809-10; Eastside Church of Christ v. Nat’l 

Plan, Inc., 391 F.2d 357, 361 (5th Cir. 1968) (determining that defendant was a dealer under the 

explicit terms of the Exchange Act because defendant purchased church bonds “for its own account 

as part of its regular business and sold some of them”);6see also SEC v. Offill, No. 3:07-CV-1643-

D, 2012 WL 246061, at *8-9 (N.D. Tex. Jan. 26, 2012) (granting summary judgment in favor of 

the SEC, explaining that while “there is not an abundance of binding case law defining broker and 

dealer,” Eastside Church, 391 F.2d at 361, is “illustrative,” and determining that defendant was a 

dealer under the Exchange Act because he “bought and sold securities as part of his regular 

business”).

5 The Court is not persuaded that the case authorities relied upon by Defendant stand for the proposition 

that the factors mentioned in the SEC Guide are controlling or exclusive in determining whether Defendant 

engaged in “dealer” activity. See, e.g., SEC v. Kramer, 778 F. Supp. 2d 1320, 1334 (M.D. Fla. 2011) 

(identifying factors that courts have relied upon, articulated in both scholarly literature and judicial 

precedent, to determine whether someone meets the statutory broker definition under the Exchange Act); 

SEC v. Federated All. Grp., Inc., No. 93-cv-0895E(F), 1996 WL 484036, at *4, n.39 (W.D.N.Y. Aug. 21, 

1996) (applying nine factors to determine whether defendant was a government securities dealer pursuant 

to Section 20(a) of the Securities Act and noting that “courts that have considered statutory language 

defining ‘dealers’ have required that a party be shown to have regularly participated in securities 

transactions at key points in the distribution chain in order to be characterized as a dealer.” (citations 

omitted)); see also Chapel Invs., Inc. v. Cherubim Ints., Inc., 177 F. Supp. 3d 981, 990 (N.D. Tex. 2016) 

(analyzing whether plaintiff may resell freely tradeable shares acquired from defendant in a court approved 

Section 3(a)(10) exchange). 

6 The Eleventh Circuit has adopted, as binding precedent, all decisions of the former Fifth Circuit handed 

down prior to close of business on September 30, 1981. See Bonner v. City of Prichard, 661 F.2d 1206, 

1209 (11th Cir. 1981). 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 20 of 32
Case No. 20-cv-21254-BLOOM/Louis

21

3. Defendant operated as a “dealer” under the Exchange Act 

Upon review of the record and consideration of the parties’ briefings, the Court agrees with 

Plaintiff that the undisputed material facts demonstrate that Defendant acted as a “dealer” within 

the plain language of the Exchange Act and controlling judicial precedent. As set forth above, the 

Eleventh Circuit has previously stated that “the centerpiece to this definition is the word ‘business,’

which is defined as ‘a commercial enterprise carried on for profit, a particular occupation or 

employment habitually engaged in for livelihood or gain[.]’” Big Apple, 783 F.3d at 809 (emphasis 

in original) (alteration adopted) (quoting Black’s Law Dictionary 239 (10th ed. 2009)). In Big 

Apple, the Eleventh Circuit affirmed the district court’s finding that the entities were dealers and 

did not qualify for a registration exemption. Id. at 809-10. The court found that where a company’s 

business model is based entirely on the purchase and sale of securities, that fact constitutes 

conclusive proof that the company is a dealer: 

While evidence of merely some profits from buying and selling securities may 

alone be inconclusive proof, the defendants’ entire business model was predicated 

on the purchase and sale of securities. [The defendants] depended on acquiring 

client stock and selling that stock to support operations and earn a profit. . . . As 

further evidence of their dealer status, [the defendants] purchased [an issuer’s] 

stocks at deep discounts pursuant to its contractual agreement with [the issuer] and 

then sold those stocks for profit. 

Id. (emphasis in original). 

Here, the Court agrees with Plaintiff that the volume of Defendant’s trading activity and 

his business operations support the finding that Defendant was “engaged in the business” of buying 

and selling securities within the meaning of the term “dealer” under the Exchange Act. 

Specifically, while the parties disagree on the precise number of convertible notes purchased and 

subsequently converted during the Relevant Period, Defendant “admits that he converted more 

than 100 [convertible] notes from more than 100 different microcap issuers” and “liquidated 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 21 of 32
Case No. 20-cv-21254-BLOOM/Louis

22

billions of shares of common stock during the Relevant Period.” ECF No. [30] ¶¶ 1-2, 8. 

Additionally, Defendant does not genuinely dispute that he sought to make a profit from selling 

the converted stock, and Defendant’s own expert concluded that he generated approximately $10 

million in net proceeds from these transactions during the Relevant Period. See ECF No. [84-5].

7

Moreover, while Defendant contends that he was merely an active investor, Defendant had 

offices in Miami, Florida, San Diego, California, and San Juan, Puerto Rico, ECF No. [67-1] at 

30:21-31:6, and spent $2,695,185 in 2015, $2,428,808 in 2016, and $1,629,300 in 2017 on 

employee payroll, ECF No. [67-6] at 15, 21, 31; see also ECF No. [67-1] at 88:23-90:9. Notably, 

Defendant’s employees also contacted hundreds of companies to inquire whether they could sell 

Defendant convertible notes, ECF No. [67-3] at 27:20-28:14-23, and developed proprietary 

software to find convertible notes for sale and to account for existing convertible notes, ECF No. 

[67-3] at 24:21-26:17, 27:20-28:23; ECF No. [67-17] at 58:5-59:19, 61:23-62:15; ECF No. [67-

24] at 14. Defendant further advertised his interest in buying convertible notes via a website and 

press releases, which made statements such as: (1) “[JMJ] commits $20 Million in unsecured 

investment to emerging public companies in 2015[,]” ECF No. [67-23] at 10; (2) “Keener and JMJ 

Financial have committed $20,000,000 to unsecured investments in 2016[,]” id. at 4; (3) “JMJ 

Financial’s primary investment vehicle, the QuickLoan, allows small publicly-traded companies 

the ability to access up to $500,000 utilizing a simple two-page promissory note[,]” id. at 6; and 

(4) “With a portfolio of over 200 companies and many years of operating experience, JMJ 

7 The Court recognizes that Defendant takes the position that his convertible notes business ultimately 

operated at a loss rather than at the significant profit that Plaintiff suggests. See ECF No. [84-5] (Flemmons 

Report, opining that Defendant incurred approximately $14 million in business expenses against his net 

income of $10 million. Defendant’s challenge will be appropriately addressed at the remedies phase of the 

proceedings. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 22 of 32
Case No. 20-cv-21254-BLOOM/Louis

23

Financial is one of the most active, stable, and reliable investors focused on the smallcap 

segment[,]” id. at 8; see also ECF No. [67] ¶¶ 45, 54; ECF No. [91] ¶¶ 45, 54. 

Defendant maintains that the volume of his trading activity is “irrelevant” because 

“[a]nyone who buys and sells microcap stocks even with small investments by definition will 

engage with hundreds of millions, if not billions of shares.” ECF No. [90] at 22. Alternatively, 

Defendant argues that he is “at minimum entitled to a jury trial on whether his volume of activity 

turned him into a dealer” particularly since “the SEC has admitted that no dollar or volume 

thresholds exist for identifying dealers[.]” Id. at 22-23. The Court is not persuaded. First, as the 

Court recognized in its Order on Motion to Dismiss, volume tends to establish that Defendant’s 

“level of participation in purchasing and buying securities involves more than a few isolated 

transactions.” ECF No. [29] at 8 (quoting River North, 415 F. Supp. 3d at 858); see also Soforff, 

1992 WL 224082, at *4 (“[T]he primary indicia in determining that a person has ‘engaged in the 

business’ within the meaning of the term ‘dealer’ is that the level of participation in purchasing 

and selling securities involves more than a few isolated transactions.”). Additionally, in granting 

summary judgment in favor of the SEC on its Section 15(a)(1) claim, the court in Almagarby found 

that defendants, who operated a business of buying aged corporate debt of microcap companies 

and were engaged in even less securities trading, operated as unregistered dealers as a matter of 

law. See Almagarby, 479 F. Supp. 3d at 1272 (finding that “the sheer volume of the number of 

deals and the large sums of profit [d]efendants generated—no fewer than 962 sales of shares and 

more than $2.8 million in proceeds—gives credence to the proposition that [d]efendants were 

engaged in the ‘business’ of buying and selling securities.”); see also SEC v. Ridenour, 913 F.2d 

515, 517 (8th Cir. 1990) (defendant “was a dealer because his ‘high level of activity . . . made him 

more than an active investor’”)).

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 23 of 32
Case No. 20-cv-21254-BLOOM/Louis

24

As further evidence that Defendant meets the statutory “dealer” definition, Defendant 

acquired newly issued stock directly from microcap issuers at a discount, ranging between 10% to 

50% depending on the terms of the convertible notes, and then resold the stock into the public 

market. ECF No. [67-1] at 61:13-62:2; ECF No. [67-24] at 15. See Big Apple, 783 F.3d at 810 

(“As further evidence of their dealer status, [defendants] purchased [issuer’s] stocks at deep 

discounts pursuant to its contractual agreement with [the issuer] and then sold those stocks for 

profit.”); Almagarby, 479 F. Supp. 3d at 1272 (“It is undisputed that [d]efendants purchased 

securities from [i]ssuers at deep discounts and sold them back on the market for profit.”); see also 

Sodorff, 1992 WL 224082, at *5 (“Unlike an investor or trader, [defendant’s] profits did not result 

from appreciation in the value of the securities, but rather from his markup over the price he 

paid.”); River North, 415 F. Supp. 3d at 859 (finding it “particularly significant” that, “like an 

underwriter,” defendant “purchased stocks at a discounted price directly from numerous issuers” 

rather than “purchasing stocks already in the marketplace, like a trader”).

Defendant argues that evidence that the stock was newly issued or that he obtained the 

stock at a discount to the trading price is “irrelevant” to the “dealer” analysis. First, Defendant 

seems to suggest that because he “complied with Rule 144 [of the Securities Act] in connection 

with every sale” he held the stock for long enough to demonstrate that he obtained the stock for 

investment purposes. ECF No. [90] at 23-24. However, as Defendant recognizes, Rule 144 

provides a “safe harbor” against underwriter status for the purpose of reselling unregistered 

securities into the market. 17 C.F.R. § 230.144(d)(1)(i). As such, the Court is not persuaded that 

Defendant’s compliance with Rule 144’s six-month holding period creates a genuine issue of 

material fact regarding whether Defendant operated as a “dealer” under the Exchange Act. 

Additionally, Defendant contends that a conversion discount “is a common feature in many 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 24 of 32
Case No. 20-cv-21254-BLOOM/Louis

25

convertible notes, especially where there is a long holding period before the investor can seek to 

convert the note and sell any stock.” ECF No. [90] at 24. Yet, cases within the Eleventh Circuit, 

as well as the SEC, have relied on this precise feature in determining whether an individual’s 

activity is characteristic of a “dealer.” See Big Apple, 783 F.3d at 810; Almagarby, 479 F. Supp. 

3d at 1272; Sodorff, 1992 WL 224082, at *5.8

Based on the foregoing, the Court concludes that Defendant operated as “dealer” within 

the meaning of the Exchange Act as a matter of law. Nonetheless, even if the Court were to apply 

the factors set forth in the SEC Guide, there is no genuine dispute of fact that Defendant “[held] 

himself out as being willing to buy and sell a particular security on a continuous basis[.]” See SEC 

Guide, § II.B. Specifically, during the Relevant Period, Defendant operated a website that 

described his business operations, ECF No. [67-9], hired employees to find issuers who were 

willing to sell convertible notes to him, ECF No. [67-1] at 166:6-169:19, ECF No. [67-3] at 22:3-

23:15, sponsored and attended conferences in which he and his employees would find microcap 

issuers in person, ECF No. [67-1] at 123:11-18; ECF No. [67-3] at 93:12-94:24; ECF No. [69-29] 

at 2; and made PowerPoint presentations at conferences representing that he had $20 million 

“committed” to purchase convertible notes from issuers, ECF No. [67-16] at 24; ECF No. [67-24] 

8 On December 29, 2021, Defendant filed a Notice of Supplemental Authority, ECF No. [117] (“Notice”), 

citing three cases in support of his position that “[w]hen a defendant has no customers and its ‘only activities 

were buying securities from issuers at a discount, and then reselling them into the market for a profit,’ 

defendant is not a dealer.” Id. at 1 (quoting In re ScripsAmerica, Inc., No. 16-11991 (JTD), 2021 WL 

5745698, at *4-5 (Bankr. D. Del. Nov. 29, 2021) and citing In re Immune Pharms. Inc., No. 19-13273 

(VFP), 2021 WL 5989337, at *4-5 (Bankr. D.N.J. Dec. 8, 2021); Discover Growth Fund, LLC v. Beyond 

Com., Inc., No. 3:21-cv-00328-MMD-CLB, 2021 WL 5404634, at *4-5 (D. Nev. Nov. 17, 2021))). 

However, the out of circuit authorities relied upon by Defendant do not provide a basis for the Court to 

stray from the Eleventh Circuit’s unequivocal determination in Big Apple that evidence of a conversion 

discount is instructive of dealer activity. 783 F.3d at 810. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 25 of 32
Case No. 20-cv-21254-BLOOM/Louis

26

at 32. See SEC Guide, § II.B (noting as a consideration, whether one “advertise[s] or otherwise 

let[s] others know that you are in the business of buying and selling securities”).9

Accordingly, Plaintiff is entitled to summary judgment on its claim that Defendant violated 

Section 15(a)(1) by failing to register as a securities dealer.

4. Defendant’s Affirmative Defenses 

Next, Plaintiff seeks summary judgment on Defendant’s Third, Fourth, Fifth, and Sixth 

Affirmative Defenses (due process, estoppel, statute of limitations, and advice of counsel). ECF 

No. [68] at 29-37. Plaintiff explains that Defendant’s Seventh, Eighth, Ninth, and Tenth 

Affirmative Defenses (injunctive relief, disgorgement, penny-stock bar, and penalties) “relate 

solely to whether [Plaintiff] is entitled to various forms of relief” and do not qualify as a defense 

to liability. Id. at 37-38. In response, Defendant does not address Plaintiff’s challenges regarding 

his estoppel or advice of counsel affirmative defenses and is therefore deemed to have abandoned 

those claims.10 See generally ECF No. [90]. Additionally, Defendant does not challenge Plaintiff’s 

contention that his remaining affirmative defenses should be addressed after a decision on liability 

has been issued by the Court. Id. As such, the Court only addresses Defendant’s due process and 

statute of limitations affirmative defenses. 

9 Defendant avers that he did not hold himself out to the public that he was in the business of buying and 

selling securities because “neither his website nor any other marketing materials ever reference selling at 

all, let alone the sale of any of [Defendant’s] converted stock[.]” ECF No. [90] at 11, 17. However, as 

Plaintiff correctly argues, Defendant promised issuers “[g]entle conversions and equity sales over time[,]” 

ECF No. [67-24] at 12, 29, 33; ECF No. [72-2] at 486, to reassure issuers that he would be “responsible” 

and not sell the converted stock all at once, ECF No. [72-2] at 133:23-135:11. 

10 See Melford v. Kahane & Assocs., 371 F. Supp. 3d 1116, 1126 n.4 (S.D. Fla. 2019) (“Generally, a litigant 

who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a 

lack of supporting authority or in the face of contrary authority, forfeits the point. The court will not do his 

research for him.” (internal quotation marks omitted) (citation omitted)); see also Resol. Tr. Corp. v. 

Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995) (“There is no burden upon the district court to distill 

every potential argument that could be made based upon the materials before it on summary judgment. 

Rather, the onus is upon the parties to formulate arguments; grounds alleged in the complaint but not relied 

upon in summary judgment are deemed abandoned.” (internal citations omitted)).

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 26 of 32
Case No. 20-cv-21254-BLOOM/Louis

27

a. Third Affirmative Defense: due process 

Defendant’s Third Affirmative Defense states that this action is “barred by due process, in 

whole or in part, where Defendant had no fair notice that his conduct could be unlawful.” ECF No. 

[30] at 7. Plaintiff argues that Defendant’s affirmative defense fails as a matter of law because 

“[t]he language of the Exchange Act Section 15(a)(1)—the dealer registration statute—and Section 

3(a)(5)(A)—the definition of the term dealer—are clear and unambiguous, and Defendant can 

point to no case holding otherwise.” ECF No. [68] at 31. Plaintiff further argues that “the Court 

should reject any argument that the SEC was required to or failed to provide guidance with respect 

to the dealer registration statute.” Id. at 33. 

In response, Defendant makes three overarching arguments: (1) “the statutory language [of 

the Exchange Act] is not transparent, which is why the SEC has issued so many interpretations of 

it over the years[;]” (2) “[Plaintiff’s] position in this litigation directly contradicts its prior 

guidance” which Defendant reasonably relied upon in determining that he is not a dealer; and (3) 

“whether [Defendant] had fair notice of the new way in which the Exchange Act definition of 

‘dealer’ would be applied is a factual question that must be decided by the jury.” ECF No. [71] at 

28-32. 

“A fundamental principle in our legal system is that laws which regulate persons or entities 

must give fair notice of conduct that is forbidden or required.” FCC v. Fox Television Stations, 

Inc., 567 U.S. 239, 253 (2012). This principle raises two due process concerns: (1) “that regulated 

parties should know what is required of them so they may act accordingly;” and (2) “precision and 

guidance are necessary so that those enforcing the law do not act in an arbitrary or discriminatory 

way.” Id. at 254. The Eleventh Circuit has recognized that this doctrine has been applied in “very 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 27 of 32
Case No. 20-cv-21254-BLOOM/Louis

28

limited set of cases.” Glob. Green, Inc. v. SEC, 631 F. App’x 868, 870 (11th Cir. 2015) (citation 

omitted). For example, the Eleventh Circuit explained that: 

the doctrine has been applied where the agency’s interpretation was “so far from a 

reasonable person’s understanding of the regulations” that regulated parties could 

not have been fairly informed of the agency’s perspective, Gen. Elec. Co. v. EPA, 

53 F.3d 1324, 1330 (D.C.Cir.1995); where an agency changed course with respect 

to its interpretation of a governing statute, [FCC, 567 U.S. 239]; and where the 

Commission imposed civil penalties “pursuant to a substantial change in its 

enforcement policy,” Upton v. SEC, 75 F.3d 92, 98 (2d Cir.1996).

Id. 

Upon review of the record and consideration of the parties’ briefings, the Court agrees that 

Defendant’s due process defense fails as a matter of law. As the Court observed in its Order on 

Motion to Dismiss, Defendant had notice that his conduct could be unlawful based upon “the 

express language of the Exchange Act, decisions from this circuit applying the definition of 

‘dealer,’ and the SEC Guide itself[.]” ECF No. [29] at 10. The Court finds no basis in law or fact 

to compel a different conclusion at this juncture of the proceedings. See supra IV.B.3. 

Additionally, while Defendant contends that the statutory language of the Exchange Act is not 

transparent, Defendant’s due process challenge is further underscored by controlling precedent 

applying the plain language of the Exchange Act’s “dealer” definition. See Big Apple,783 F.3d at 

809 (applying the plain language of the statute and finding defendant was a dealer); Eastside 

Church, 391 F.2d at 362 (same); Almagarby, 479 F. Supp. 3d at 1268 (same). 

Moreover, the Court is unconvinced that Plaintiff changed its interpretation of the 

Exchange Act’s “dealer” definition to pursue this enforcement action. Indeed, the SEC Guide 

makes explicit that it only “highlights certain provisions of the Act[,]” that “it is not 

comprehensive[,]” and that the public “should not rely on [the] guide without referring to the actual 

statutes, rules, regulations, and interpretations.” See SEC Guide, §§ I, IX (emphasis omitted). To 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 28 of 32
Case No. 20-cv-21254-BLOOM/Louis

29

the extent Defendant contends that Plaintiff was required to set forth guidance specifically on 

convertible notes or market-adjustable discounts, the Court is unaware of, and Defendant has failed 

to cite to, any authority requiring Plaintiff to issue precise guidance on the regulations it enforces. 

See SEC v. Chenery Corp., 332 U.S. 194, 203 (1947) (“[T]he choice made between proceeding by 

general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion 

of the administrative agency.” (citation omitted)); FTC v. Wyndham Worldwide Corp., 799 F.3d 

236, 253-54 (3d Cir. 2015) (“The relevant question is not whether [defendant] had fair notice of 

the [plaintiff’s] interpretation of the statute, but whether [defendant] had fair notice of what the 

statute itself requires.” (emphasis in original)). Accordingly, Plaintiff’s Motion is granted as to the 

due process affirmative defense. 

b. Fifth Affirmative Defense: statute of limitations 

Defendant’s Fifth Affirmative Defense states that this action “is barred, in whole or in part, 

by the applicable statute of limitations.” ECF No. [30] at 7. Plaintiff argues that the undisputed 

facts establish that its claim is timely under the limitation periods applicable to the various 

remedies sought. ECF No. [68] at 35. See 28 U.S.C. § 2462 (applying five-statute of limitations 

for penalties); 15 U.S.C. § 78u(d)(8)(A)(ii) (five-year statute of limitations for disgorgement in 

non-scienter claims); 15 U.S.C. § 78u(d)(8)(B) (ten-year statute of limitations for equitable 

remedies). Plaintiff explains that the parties entered into a one-year tolling agreement on March 

27, 2019, which specifically states that “the running of any statute of limitations . . . is tolled and 

suspended for the period beginning on March 7, 2019 through March 6, 2020[.]” ECF No. [67-8]. 

Thus, according to Plaintiff, this means that it may “seek disgorgement and a penalty for any 

conduct that occurred on or after March 24, 2014 and may seek an injunction and a penny stock

bar for any conduct that occurred on or after March 24, 2009.” ECF No. [68] at 36. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 29 of 32
Case No. 20-cv-21254-BLOOM/Louis

30

In response, Defendant argues that Plaintiff’s request for penalties and disgorgement are 

time-barred under 28 U.S.C. § 2462 because Plaintiff failed to commence this action within five 

years from when the claim first accrued. ECF No. [90] at 33. Defendant explains that Plaintiff’s 

Complaint refers “to several transactions entered into by [Defendant] throughout 2014 and early 

2015” and therefore had a “‘complete and present cause of action’ against [Defendant] for 

operating as an unregistered securities dealer” more than five years before Plaintiff filed the 

Complaint on March 24, 2020. Id. at 34. Defendant further argues that the parties’ tolling 

agreement cannot suspend the statute of limitations because Section 2462 is jurisdictional. Id. at 

34-35. Lastly, Defendant maintains that even if the Court enforces the tolling agreement, “the 

evidence shows that [Defendant] began engaging in the transactions that [Plaintiff] says make him 

a dealer even before March 24, 2014. Id. at 36. 

Upon review of the record and consideration of the parties’ briefings, the Court agrees with 

Plaintiff that its requests for penalties and disgorgement are not time barred. Specifically, Plaintiff 

filed its Complaint on March 24, 2020 and, under Section 2462, Plaintiff is entitled to relief for 

conduct that occurred on or after March 24, 2015. ECF No. [1] ¶ 1 (defining the relevant period as 

January 2015 through January 2018); see also 28 U.S.C. § 2462.11 Defendant contends that 

Plaintiff’s claim first accrued well-before March 25, 2015, as evidenced by Plaintiff’s reference 

“to several transactions entered into by [Defendant] throughout 2014 and early 2015[.]” ECF No. 

11 Section 2462 sets forth a general limitations period for civil suits seeking certain sanctions under the 

United States Code, and provides:

Except as otherwise provided by Act of Congress, an action, suit or proceeding for the 

enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be 

entertained unless commenced within five years from the date when the claim first accrued 

if, within the same period, the offender or the property is found within the United States in 

order that proper service may be made thereon. 

28 U.S.C. § 2462.

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 30 of 32
Case No. 20-cv-21254-BLOOM/Louis

31

[90] at 34. However, as Plaintiff correctly points out, the court in Almagarby rejected this precise 

“first accrual” argument raised by Defendant and held that “[b]ecause some of [defendant’s 

violative conduct] occurred within the limitations period, the statute of limitations [under Section 

2462] does not bar the SEC’s disgorgement claim.” Almagarby, 479 F. Supp. 3d at 1271 (citing 

United States v. Spectrum Brands, Inc., 924 F.3d 337, 350 (7th Cir. 2019); Taylor v. Meirick, 712 

F.2d 1112, 1118 (7th Cir. 1983))); see also Robinson v. United States, 327 F. App’x 816, 818 (11th 

Cir. 2007) (“The continuing violation doctrine permits a plaintiff to sue on an otherwise timebarred claim when additional violations of the law occur within the statutory period.” (citation 

omitted)). Here, Defendant admits that he engaged in his convertible notes business as late as 

January 2018—just over two years before Plaintiff initiated this action. ECF No. [30] ¶¶ 2, 8. As 

such, the Court concludes that Plaintiff’s requests for penalties and disgorgement are timely.12

Accordingly, Plaintiff’s Motion is granted as to the statute of limitations affirmative defense.

C. Defendant’s Motion for Summary Judgment 

Defendant’s Motion argues that summary judgment should be granted in his favor on the 

bases that: (1) no reasonable jury could conclude that Defendant meets the definition of a “dealer” 

under the Exchange Act; (2) Plaintiff’s Section 15(a)(1) claim is barred by due process; and (3) 

Plaintiff has failed to show that it is entitled to the disgorgement or injunctive relief it seeks. See 

generally ECF No. [71]. As set forth above in addressing Plaintiff’s Motion, even viewing the 

evidence in the light most favorable to Defendant, the record establishes that Defendant operated 

12 Defendant relies on the Supreme Court’s decision in Gabelli to support his contention that Plaintiff is 

precluded from seeking penalties and disgorgement for conduct that occurred more than five years before 

the Complaint was filed. Gabelli v. SEC, 568 U.S. 442 (2013). However, Gabelli is inapplicable to the 

present action, as the Court specifically stated that the SEC’s claims for “injunctive relief and 

disgorgement” were “not before [it,]” id. at 442 n.1, and only held that the discovery rule would not extend 

the five-year statute of limitations applicable to the SEC’s claim for civil penalties under Section 2464, id. 

at 454.

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 31 of 32
Case No. 20-cv-21254-BLOOM/Louis

32

as a “dealer” under the Exchange Act without registering as such, see supra IV.B.3, and 

Defendant’s due process affirmative defense fails as a matter of law, see supra IV.B.4.a. 

Accordingly, Defendant’s Motion is denied on these bases. Further, Defendant’s remaining 

challenges regarding Plaintiff’s ability to obtain disgorgement or injunctive relief are denied as 

premature and shall be addressed at the remedies phase of the proceedings.13

V. CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED as follows: 

1. Plaintiff’s Motion for Summary Judgment, ECF No. [68], is GRANTED.

2. Defendant’s Motion for Summary Judgment, ECF No. [71], is DENIED.

3. On or before February 8, 2022, the parties shall jointly file a proposed briefing 

schedule to address the appropriate remedies to be issued.

4. To the extent not otherwise disposed of, all pending motions are DENIED AS 

MOOT, any scheduled hearings are CANCELED, and all deadlines are 

TERMINATED. 

DONE AND ORDERED in Chambers at Miami, Florida, on January 21, 2022.

_________________________________

BETH BLOOM

UNITED STATES DISTRICT JUDGE

Copies to: 

Counsel of Record 

13 At the hearing on the Motions, the parties agreed that it is premature for the Court to address issues 

regarding Plaintiff’s requested relief until a decision as to liability has been issued. ECF No. [116] at 17:10-

17, 59:17-23. 

Case 1:20-cv-21254-BB Document 118 Entered on FLSD Docket 01/21/2022 Page 32 of 32