UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 

MIAMI DIVISION 

SECURITIES AND EXCHANGE 

COMMISSION, 

 

Plaintiff, 

v. 

JUSTIN W. KEENER D/B/A JMJ 

FINANCIAL, 

Defendant. 

CASE NO. 1:20-CV-21254-

BLOOM/LOUIS 

DEFENDANT JUSTIN W. KEENER’S OPPOSITION TO PLAINTIFF SECURITIES 

AND EXCHANGE COMMISSION’S MOTION FOR REMEDIES

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TABLE OF CONTENTS 

I. INTRODUCTION ........................................................................................................ 1

II. ARGUMENT ................................................................................................................. 3

A. Disgorgement Is Not Warranted ................................................................................... 3

1. Disgorgement Is Barred Because There Is No Causal Connection Between the Alleged 

Violation and Any Profits.................................................................................................................. 3

2. Disgorgement Is Barred Under Liu Because the SEC Cannot Identify Any Victims .............. 5

B. The SEC’s Disgorgement Calculation Is Not a Reasonable Approximation of Net 

Profits ........................................................................................................................... 10

C. Prejudgment Interest Is Not Warranted ...................................................................... 12

D. Injunctive Relief Is Not Warranted ............................................................................. 13

E. A Penny Stock Bar Is Not Warranted .......................................................................... 17

F. A Civil Penalty Is Not Warranted ................................................................................ 17

G. Mr. Keener Is Willing to Surrender and Cancel His Remaining Shares ..................... 20

III. CONCLUSION ........................................................................................................... 20

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TABLE OF AUTHORITIES 

 Page(s) 

Cases 

Aaron v. SEC, 

446 U.S. 680 (1980) ................................................................................................................................... 16

Beaubrun v. Geico Gen. Ins. Co., 

2017 WL 3025852 (S.D. Fla. July 17, 2017) ............................................................................................ 9

CFTC v. Sidoti, 

178 F.3d 1132 (11th Cir. 1999) ........................................................................................................ 1, 3, 4

CFTC v. Southern Trust Metals, Inc., 

894 F.3d 1313 (11th Cir. 2018) ........................................................................................................ 4, 5, 8

In re David B. Havanich Jr., 

SEC Release No. 935, 2016, 2016 WL 25746 (Jan. 4, 2016) ....................................................... 15, 16

Glob. Digit. Sols., Inc. v. Grupo Rontan Electro Metalurgica, 

2020 WL 8816214 (S.D. Fla. Dec. 1, 2020) ............................................................................................. 9

Gov’t Emps. Ins. Co. v. KJ Chiropractic Ctr. LLC, 

2017 WL 9939048 (M.D. Fla. Aug. 22, 2017) ....................................................................................... 12

Guevara v. NCL (Bahamas) Ltd., 

920 F.3d 710 (11th Cir. 2019) ................................................................................................................... 9

Hanna Yachts, LLC v. Caribbean Breeze Marine A.C., X, LLC, 

2013 WL 12141336 (S.D. Fla. Mar. 19, 2013) ....................................................................................... 12

Hinds v. Am. Sec. Ins. Co., 

2016 WL 8677901 (S.D. Fla. Dec. 7, 2016) ............................................................................................. 9

Indus. Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 

141 F.3d 1434 (11th Cir. 1998) ............................................................................................................... 12

Liu v. SEC, 

140 S. Ct. 1936 (2020) ........................................................................................................................ passim

SEC v. Aerokinetic Energy Corp., 

2010 WL 5174514 (M.D. Fla. Sept. 10, 2010)....................................................................................... 20

SEC v. Almagarby, 

2021 WL 4461831 (S.D. Fla. Aug. 16, 2021)................................................................................... passim

SEC v. Bevil, 

2020 WL 7048263 (D. Nev. Nov. 30, 2020) ........................................................................................... 6

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SEC v. Big Apple, 

2013 WL 1352166 (M.D. Fla. Mar. 29, 2013) ....................................................................................... 17

SEC v. BIH Corp., 

2014 WL 7499053 (M.D. Fla. Dec. 12, 2014) ....................................................................................... 17

SEC v. Blackburn, 

15 F.4th 676 (5th Cir. 2021) ...................................................................................................................... 5

SEC v. Blatt, 

583 F.2d 1325 (5th Cir. 1978) ................................................................................................................. 13

SEC v. Calmes, 

2011 WL 13174658 (S.D. Fla. Nov. 10, 2011) ...................................................................................... 19

SEC v. Calvo, 

378 F.3d 1211 (11th Cir. 2004) .................................................................................................. 10, 13, 14

SEC v. Carrillo, 

325 F.3d 1268 (11th Cir. 2003) ............................................................................................................... 13

SEC v. Collyard, 

154 F. Supp. 3d 781 (D. Minn. 2015) ..................................................................................................... 15

SEC v. Cope, 

2021 WL 653088 (S.D.N.Y. Feb. 19, 2021) .......................................................................................... 10

SEC v. Dang, 

2021 WL 1550593 (D. Conn. Apr. 19, 2021) .......................................................................................... 5

SEC v. E-Smart Techs., Inc., 

2016 WL 183503 (D.D.C. Jan. 14, 2016) ............................................................................................... 13

SEC v. ETS Payphones, Inc., 

408 F.3d 727 (11th Cir. 2005) ................................................................................................................... 3

SEC v. Friendly Power Co., 

49 F. Supp. 2d 1363 (S.D. Fla. 1999) ..................................................................................................... 19

SEC v. Gane, 

2005 WL 90154 (S.D. Fla. Jan. 4, 2005) ................................................................................ 4, 15, 18, 19

SEC v. Graham, 

823 F.3d 1357 (11th Cir. 2016) ............................................................................................................... 16

SEC v. Huff, 

2010 WL 148232 (S.D. Fla. Jan. 12, 2010) ............................................................................................ 19

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SEC v. Ingoldsby, 

1990 WL 120731 (D. Mass. May 15, 1990) .................................................................................... 14, 16

SEC v. J.W. Korth & Co., 

991 F. Supp. 1468 (S.D. Fla. 1998) ......................................................................................................... 18

SEC v. Janus Spectrum LLC, 

811 Fed. App’x 432 (9th Cir. 2020) .......................................................................................................... 6

SEC v. Kahlon, 

2016 WL 5661642 (E.D. Tex. Sept. 30, 2016) ...................................................................................... 19

SEC v. Lefkowitz, 

2013 WL 12170296 (M.D. Fla. Sept. 6, 2013)....................................................................................... 19

SEC v. Miller, 

744 F. Supp. 2d 1325 (N.D. Ga. 2010) .................................................................................................. 19

SEC v. Monterosso, 

2012 WL 12950028 (S.D. Fla. Feb 16, 2012) ........................................................................................ 12

SEC v. Offill, 

2012 WL 1138622 (N.D. Tex. Apr. 5, 2012) ................................................................................. 15, 19

SEC v. Perez, 

2011 WL 5597331 (S.D. Fla. Nov. 17, 2011) ........................................................................................ 15

SEC v. Pros Int’l Inc., 

994 F.2d 767 (10th Cir. 1993) ................................................................................................................. 15

SEC v. Razmilovic, 

738 F.3d 14 (2d Cir. 2013) ......................................................................................................................... 3

SEC v. Sky Way Glob., 

2010 WL 3025033 (M.D. Fla. July 29, 2010) ......................................................................................... 15

SEC v. Smyth, 

420 F.3d 1225 (11th Cir. 2005) ............................................................................................................... 16

SEC v. Steadman, 

967 F.2d 636 (D.C. Cir. 1992) ................................................................................................................. 14

SEC v. US Pension Tr. Corp., 

2010 WL 3894082 (S.D. Fla. Sept. 30, 2010) ........................................................................................ 18

SEC v. Wyly, 

56 F. Supp. 3d 394 (S.D.N.Y. 2014) ..................................................................................................... 4, 5

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In re Spring Hill Cap. Mkts., 

SEC Release No. 919, 2015 WL 7730856 (Nov. 30, 2015) ................................................................ 15

Steadman v. SEC, 

603 F.2d 1126 (5th Cir. 1979) .......................................................................................................... 14, 17

Validsa, Inc. v. PDVSA Servs., Inc., 

424 Fed. Appx. 862 (11th Cir. 2011) ...................................................................................................... 13

Vill. of Willowbrook v. Olech, 

528 U.S. 562 (2000) ...............................................................................................................................2, 19

Statutes 

15 U.S.C. § 78u(d) ...................................................................................................................................... passim

Other Authorities 

17 C.F.R. § 201.1001 ....................................................................................................................................... 19

Fed. R. Civ. P. 37(c)(1) ...................................................................................................................................... 9

Rule 144 Holding Period, 86 Fed. Reg. 5063, 5074 (proposed Jan. 19, 2021) .......................................... 6

SEC Release No. 34-94524, (Mar. 28, 2022) ....................................................................................... 2, 5, 19 

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I. INTRODUCTION 

The remedies the SEC demands against Mr. Keener are neither consistent with the law nor 

proportional to the violation in this case. Mr. Keener invested in microcap issuers who needed 

financing. He invested through a variety of instruments, including convertible notes that he later 

converted to stock. The issuers publicly disclosed the terms of his investments in SEC filings. He 

sold all stock through his registered brokerage firms, after confirming with attorneys that the sales 

complied with applicable securities laws. The Court found that after considering the volume of sales 

of stock he obtained through note conversions, he became subject to dealer registration requirements. 

See Omnibus Order, ECF No. 118 at 21-22. But there is no evidence that his unlicensed status had 

anything to do with any proceeds he generated or that his counterparties—likely market makers and 

other sophisticated actors—suffered any losses. The SEC’s demand to disgorge $22.7 million with 

prejudgment interest thus fails as a matter of law. Nor do the SEC’s numbers bear any relation to Mr. 

Keener’s actual net profits, when he lost millions of dollars on his investments. 

The SEC’s disgorgement demand fails first because the SEC does not attempt to and cannot 

show that any of Mr. Keener’s proceeds were generated because of the registration violation. The Court 

lacks jurisdiction to disgorge profits not causally connected to the violation. CFTC v. Sidoti, 178 F.3d 

1132, 1138 (11th Cir. 1999). Yet the SEC does not even mention this requirement let alone try to 

meet it, because it cannot. The SEC has offered no evidence that a single fact about Mr. Keener’s 

transactions or proceeds—from the terms of his investments to the price at which he sold—would 

have been different had he registered. 

Second, the SEC’s disgorgement demand contravenes the plain language of the authorizing 

statute and Supreme Court precedent. The SEC must demonstrate that the disgorgement is 

“appropriate or necessary for the benefit of investors,” see 15 U.S.C. § 78u(d)(5), and specifically that 

the disgorgement amounts would be “awarded for victims,” Liu v. SEC, 140 S. Ct. 1936, 1940 (2020). 

The SEC does not and cannot make such a showing. There are no “victims.” There is no evidence 

that any counterparty who acquired stock from Mr. Keener was a retail investor who lost money, and 

in fact, his counterparties had many opportunities to make a profit. Nor is there any evidence that 

Mr. Keener’s unlicensed status impacted his counterparties in any way. 

Third, the SEC’s demand is also not a reasonable approximation of net profits. The 

transactions at issue are Mr. Keener’s “Quick Loan” convertible note investments, which Mr. Keener 

stopped making in 2017 because they were no longer profitable. His other investments—e.g., bridge 

loans and stock and warrants obtained through syndicates and public offerings—bore no resemblance 

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to the Quick Loan investments and did not involve note conversions at all. The SEC arrives at its 

$22.7 million demand by improperly including proceeds from all of these other investments. 

Nonetheless, even considering all of his investments together since 2014, Mr. Keener has lost more 

than $5 million. He took substantial risk and incurred major expenses. The SEC cannot be allowed 

to cherry-pick wins and ignore losses. Its disgorgement demand cannot stand. 

At bottom, remedies are about fairness. Mr. Keener always acted in good faith, and through 

multiple gatekeepers (i.e., registered broker-dealers, clearing firms, securities attorneys, and stock 

transfer agents). Attorneys specifically advised him that he was not a securities dealer. Many persons 

who engaged in the exact same activity as Mr. Keener (i.e., trading a large volume of securities for their 

own account) are not registered. The Court found a single Section 15(a) registration violation. But 

when considering culpability and fairness—which are highly relevant to the remedies analysis—the 

SEC’s demands are unjustified. 

A brand-new rule proposal issued by the Commission on March 28, 2022 highlights the 

injustice of the SEC’s position in this case. In the rule proposal, the Commission purports to “further 

define” the statutory phrase “as part of a regular business” to clarify that some of the largest, most 

sophisticated investment funds have always had to register as dealers. See SEC Release No. 34-94524 

(Mar. 28, 2022), https://tinyurl.com/2ekh8s7j, at 4. Instead of seeking to bankrupt these firms in a 

retroactive enforcement action—as the SEC tries to do to Mr. Keener here—the Commission is giving 

these firms (politically connected hedge funds) notice and a full year to register. Id. at 34. 

Mr. Keener was never given that notice. Instead, he was hit with a lawsuit in which the SEC 

demands $24.5 million in disgorgement, prejudgment interest, and penalties. In a statement issued in 

connection with the rule proposal, SEC Commissioner Hester Peirce commented on this exact 

disparity: 

I particularly appreciate the use of the rulemaking process to clarify the scope of the term 

“dealer.” Using the notice-and-comment rulemaking process to solicit public input to inform 

the Commission’s response to market and technological evolution, in lieu of extending 

ambiguous provisions of the law through enforcement actions against unsuspecting 

market participants, demonstrates a commitment to transparency and good government 

that should be the hallmark of all our work at the Commission. 

Peirce, Statement on Proposal (Mar. 28, 2022), https://tinyurl.com/2p8msfv2, at 1 (emphasis added). 

The Commission’s singling out of Mr. Keener runs headlong into the equal protection component of 

the Fifth Amendment. See Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). There is no basis to 

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punish Mr. Keener to the extent the SEC seeks. Mr. Keener respectfully requests that the SEC’s 

Motion be denied. 

II. ARGUMENT 

A. Disgorgement Is Not Warranted 

There are two separate reasons why the SEC’s disgorgement demand fails as a matter of law: 

(1) it is not limited to profits obtained as a result of the violation; and (2) it will not be “awarded for 

victims” as required by Liu. These points are addressed in Sections II.A.1 and II.A.2 below. 

1. Disgorgement Is Barred Because There Is No Causal Connection 

Between the Alleged Violation and Any Profits 

The Court should not award disgorgement because Mr. Keener did not generate any proceeds 

as a result of the registration violation. Disgorgement must be limited to “property causally related to 

the wrongdoing”; it cannot extend to profits “obtained without the aid of any wrongdoing.” Sidoti, 

178 F.3d at 1138; see also SEC v. ETS Payphones, Inc., 408 F.3d 727, 735 (11th Cir. 2005) (“[T]he power 

to order disgorgement extends only to the amount with interest by which the defendant profited from 

his wrongdoing. Any further sum would constitute a penalty assessment.”); SEC v. Razmilovic, 738 

F.3d 14, 31 (2d Cir. 2013) (SEC “must distinguish between the legally and illegally derived profits” 

and identify those profits “causally connected to the violation”). 

Sidoti is directly on point. That case concerned an individual, Sidoti, who provided capital for 

a brokerage house in exchange for 90% of the profits. Sidoti, 178 F.3d at 1134. The Commodity 

Futures Trading Commission charged Sidoti with failing to register as a principal of that brokerage 

house and sought to disgorge all profits he obtained from the brokerage house. Id. at 1135. The 

district court granted the CFTC’s disgorgement request, but the Eleventh Circuit reversed. The CFTC 

argued that Sidoti’s failure to register “provides the nexus for deeming illegal all profits received by 

him,” but the Eleventh Circuit rejected that argument, and instead held as follows: 

Sidoti’s failure to register, by itself, is not causally related to [any] ill-gotten profits. 

Indeed, the CFTC has not cited and we are not aware of any case in which a court has 

disgorged profits from a defendant whom it finds liable solely for failure to register as a 

principal. A district court may not disgorge profits, unless there is record evidence the 

defendant is liable (either directly or indirectly) for fraud. 

Id. at 1138 (emphasis added).1 

1

 The Eleventh Circuit’s ruling that disgorgement is improper when “there [is] no record evidence of 

fraud” is yet another reason why the SEC’s disgorgement demand is unwarranted. Sidoti, 178 F.3d at 

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It is the SEC’s burden to demonstrate a causal connection. SEC v. Gane, 2005 WL 90154, at 

*19 (S.D. Fla. Jan. 4, 2005). In other words, the SEC must show that, “but for” the registration 

violation, Mr. Keener would not have generated the profits. SEC. v. Wyly, 56 F. Supp. 3d 394, 405 

(S.D.N.Y. 2014). Yet the SEC skips this step entirely and does not attempt to show Mr. Keener’s 

unregistered status caused any profits. In fact, there is no relationship between the two. There is no 

evidence that any specific transactions would have been different had Mr. Keener registered. Nor is 

there any evidence that he was able to obtain better terms on his convertible note investments or sell 

converted stock at a higher price because of his unregistered status. There is no evidence that the public 

or FINRA would have reacted differently to Mr. Keener’s convertible note investments had he 

registered. The details about Mr. Keener’s investments were already disclosed to the public in issuer 

filings. See Def.’s Statement of Facts in Supp. of Mot. for Summ. J. (“DSOF”), ECF No. 72, ¶ 26. 

The brokerage firms that executed his transactions were registered, and they disclosed his transaction 

details to FINRA in real time, and FINRA never objected to those transactions. Id. at ¶ 53. In short, 

there is no evidence that Mr. Keener’s lack of registration had anything to do with any of the profits 

he generated, let alone caused them. In fact, as discussed below, there were no net profits at all. See 

Sec. II.B, infra. In such circumstances, disgorgement is not warranted. See, e.g., Gane, 2005 WL 90154, 

at *19 (denying disgorgement when “there is no record evidence of any causal connection at all”).2

Compare this scenario to the scenario of the unlicensed lawyer considered in CFTC v. Southern 

Trust Metals, Inc., 894 F.3d 1313, 1330-31 (11th Cir. 2018). As the Court concluded, whether or not 

the lawyer was licensed would have no causal relationship to the fees he generated or the outcome in 

his client’s cases, which could depend on a variety of factors. Id. (“[A] client might well prevail in 

court despite the lawyer’s unlicensed status. Or, if there is a loss, the loss might flow from . . . 

unfavorable precedent, judicial error, or a jury’s caprice.”). Also consider the scenario of a ride-share 

driver who failed to or could not obtain a driver’s license. All the profits this driver generated from 

chauffeuring passengers around town would not be “ill-gotten” gains subject to disgorgement by the 

state just because the driver was not licensed. In both scenarios, the unlicensed status did not cause

any profits generated. The same is true for Mr. Keener—the fact that he was not registered as a 

1138. It is undisputed that Mr. Keener’s registration violation was a non-scienter Section 15(a) 

registration violation, and there was no fraud. 

2

 The court in Almagarby stated that the profits the defendant generated “are connected to” the 

registration violation. SEC v. Almagarby, 2021 WL 4461831, at *3 (S.D. Fla. Aug. 16, 2021). But the 

court did not explain how the profits were causally connected to the violation or address Sidoti. 

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securities dealer had nothing to do with the profits he generated (to the extent such profits even exist). 

There is no evidence that his unlicensed status resulted in “any market distortion, price impact, or 

profit,” and thus disgorgement is unwarranted. Wyly, 56 F. Supp. 3d at 269. 

At most, the SEC conflates correlation with causation—claiming that because Mr. Keener 

generated proceeds and because he was unregistered, the latter must have caused the former. But the 

Eleventh Circuit has already rejected that argument. Southern Trust Metals., 894 F.3d at 1330 (vacating 

restitution award that “conflate[d] correlation with causation”). And although he was barred from 

becoming a principal of a FINRA member firm (see DSOF Ex. 51, ECF No. 73-2), there is still no 

evidence that the transactions would have been different if carried out by a registered person. Indeed, 

the only fact that would have been different had Mr. Keener registered is he would have incurred the 

specific expenses associated with registration. According to SEC, the cost would have been 

approximately $520,000 for the initial registration plus annual fees. See SEC Release No. 34-94524 at 

135 n.268. As the SEC itself highlighted, the purpose behind disgorgement is to ensure individuals 

“incur the cost of full compliance with the securities laws.” Pl.’s Mot. for Remedies (“Mot.”), ECF 

No. 122, at 11 (quoting Congressional history). Here, the cost of full compliance is orders of 

magnitude less than the disgorgement the SEC seeks. 

2. Disgorgement Is Barred Under Liu Because the SEC Cannot Identify 

Any Victims 

Moreover, the Court should not award disgorgement because the SEC’s demand does not 

comply with the Supreme Court’s holding in Liu. Under Liu, a disgorgement award must be “awarded 

for victims” to be proper equitable relief rather than an unlawful penalty. Liu, 140 S.Ct. at 1940. The 

Court specifically rejected the SEC’s argument that the purpose of disgorgement was to take away “illgotten gains,” and held that a disgorgement award must do “more than depriv[e] a [defendant] of his 

net profits alone,” and instead must be “‘appropriate or necessary for the benefit of investors.’” Id. at 

1948 (quoting 15 U.S.C. § 78u(d)(5)). Otherwise, the direction in 15 U.S.C. § 78u(d)(5) that equitable 

relief must be “appropriate or necessary for the benefit of investors” would be meaningless. Id. The 

Court further held that in order to satisfy this direction, the disgorgement award “must do more than 

simply benefit the public at large” and instead must be “for the benefit” of specific “investors.” Id. at 

1948. 

Accordingly, after Liu, courts only authorize disgorgement awards after the SEC has identified 

a discrete set of specific victims. See, e.g., SEC v. Blackburn, 15 F.4th 676, 682 (5th Cir. 2021) (affirming 

disgorgement award “[b]ecause the SEC has already identified the defrauded [] investors”); SEC v. 

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Dang, 2021 WL 1550593, at *7 (D. Conn. Apr. 19, 2021) (SEC identified two investor victims). Indeed, 

in those cases where the SEC failed to demonstrate that the disgorgement award would benefit a 

specific set of victims, the court refused to award disgorgement. SEC v. Bevil, 2020 WL 7048263, at 

*2 (D. Nev. Nov. 30, 2020) (denying disgorgement because of the SEC’s “failure to identify whether 

the disgorgement award is for the benefit of investors”); SEC v. Janus Spectrum LLC, 811 Fed. App’x 

432, 434 (9th Cir. 2020) (remanding disgorgement award for the same reason).3

The SEC’s disgorgement demand should be rejected because the SEC has not identified, and 

cannot identify, specific victims as required by Liu. There are no victims here. Mr. Keener made 

convertible note and other investments in companies that were struggling to find financing. See, e.g., 

Rule 144 Holding Period, 86 Fed. Reg. 5063, 5074 (proposed Jan. 19, 2021) (these issuers “have limited 

options to raise capital” and rely on convertible notes). His investments benefited the companies’ 

employees and existing shareholders. For instance, Mr. Keener invested several million dollars in 

Advanced Cell Technology (“ACTC”), which develops treatments for eye diseases; ACTC was 

thereafter able to uplist from the Over-the-Counter (“OTC”) market to NASDAQ, and was 

subsequently acquired by a global pharmaceutical company for nearly $400 million. DSOF Ex. 29, 

ECF No. 72-31, at -468; see also Pl.’s Statement of Material Facts (“PSOF”) Ex. 9, ECF No. 67-9, at 

18 (CEO describing how company “was able to expand its operations and subsequently launch a wider 

range of product offerings” because of Mr. Keener’s investment). Without his investments, some of 

these companies may have gone out of business, wiping out shareholders. Indeed, as the SEC itself 

recently recognized, without these kinds of investments, issuers would face “an increase in the cost 

of financing and a decrease in total access to financing.” 86 Fed. Reg. at 5074 (emphasis added). 

The SEC ignores the benefits that Mr. Keener’s investments provided to shareholders. 

Nor is there evidence that any of Mr. Keener’s counterparties, i.e., the persons who purchased 

the stock that he sold, experienced losses. His counterparties were likely the registered brokerage 

firms where he held accounts or other sophisticated market participants. See, e.g., OTC Markets, 

3 Almagarby is the exception. That court held that disgorgement can be awarded under Liu even if 

the SEC does not “identify specific victims,” or “return [disgorged funds] to investors,” and that no 

analysis of how the award would benefit victims is necessary. Almagarby, 2021 WL 4461831, at *3. 

Respectfully, that contradicts the central holding of Liu: a disgorgement award must be “for victims” 

and “must do more than simply benefit the public at large.” Liu, 140 S.Ct. at 1940, 1948. As 

described above, it also contradicts all the other cases following Liu, where the SEC was required to 

demonstrate how disgorgement would benefit victims. 

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Trading, otcmarkets.com/learn/market-101/trading (describing typical broker-dealer practice after 

receiving investor sale order as “execut[ing] the trade internally” or “attempt[ing] to execute the trade 

with another broker-dealer”).4 And Mr. Keener’s brokerage firms were fully aware of the details of 

his convertible note investments because they conducted extensive due diligence before accepting a 

sale order from Mr. Keener. DSOF ¶¶ 39-47. Moreover, the market generally was aware of the terms 

of his convertible note investments before he sold any stock, including the amount invested and the 

conversion price, because issuers were obligated to disclose this information in their public filings. 

See, e.g., DSOF Ex. 25, ECF No. 72-27, (excerpted public filings disclosing notes); Ex. E (excerpt from 

ACTC Form S-1 filing disclosing number of Mr. Keener’s shares) at 3-4; Ex. K (list of hundreds of 

SEC filings describing Mr. Keener’s investments) at App’x C. Indeed, the SEC actively reviewed 

issuer disclosures about Mr. Keener’s investments and has been aware of those investments for years. 

See, e.g., Ex. J (sample SEC letter reviewing disclosure about Mr. Keener’s investment) at 1. 

Mr. Keener’s counterparties would also have made money when the stock price of the 

companies he invested in went up after his sales. For instance, the trading price of biotechnology 

company Advaxis, Inc. (“ADXS”) more than doubled during the time of Mr. Keener’s sales within 

the relevant period, and then almost doubled again two weeks after his last sale. Ex. C at 3. Ninetynine percent of his counterparties in ADXS sales had an opportunity to make a profit. Ex. A 

(Mayhew Decl.) at Ex. 1. The SEC nevertheless seeks to disgorge nearly $4.8 million in ADXS sale 

proceeds. The same is true for Northwest Biotherapeutics, Inc. (“NWBO”)—the SEC seeks to 

disgorge $4 million in NWBO sales, but ninety-nine percent of his counterparties here too had a 

profit opportunity. Id.; DSOF Ex. 2, ECF No. 72-4, at 120 (showing net proceeds for ADXS and 

NWBO). In fact, the NWBO trading price increased during Mr. Keener’s sales and a few months 

after his last sale, the price was up 50%. Ex. C at 1. 

The SEC claims it has complied with Liu through the conclusory assertion that “there should 

be no shortage” of victims because “93% of issuers experienced stock price declines between 

Defendant’s first and last sales.” Mot. at 9. Not so. The length of time between Mr. Keener’s first 

and last sales was hundreds of days and in many cases more than a thousand days. Ex. A at Ex. 1. 

But the average microcap investor holds for less than a month—not for the hundreds or even 

4

 The SEC assumes Mr. Keener’s counterparties were retail “investors” rather than broker-dealers 

and market makers. Mot. at 9. But the SEC provides no basis for this assumption and has refused 

to identify any specific counterparties in this case. 

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8 

thousands of days between Mr. Keener’s first and last sales—thus, the SEC’s statistic is meaningless. 

Ex. A ¶ 5. The date of the counterparty’s actual purchase and sale (which the SEC has refused to 

determine) matters. In fact, the SEC’s own analysis demonstrates that if that counterparty purchased 

on the day of Mr. Keener’s last sale, and sold a week later, then it is more likely that the counterparty 

did not lose money and may even have made money. Ex. A at Ex. 4 (chart summarizing SEC’s “Week 

After Last Sale” analysis). Indeed, a comprehensive analysis of the trading price of these issuers 

demonstrates how important it is to identify the counterparty’s actual purchase and sale date: in the 

vast majority of cases, the issuer’s stock price increased on certain dates following Mr. Keener’s sales; 

and if his counterparty sold on those dates, that counterparty would have made money. Ex. A at Ex. 1. 

Specifically, on average, ninety percent of his counterparties had an opportunity to avoid a loss and 

make a profit. Id.

Moreover, even assuming that some counterparties lost money—and it is only an assumption 

because the SEC has not identified any counterparty that actually lost money—there are no “victims” 

of Mr. Keener’s unregistered status because that status did not cause any losses. See, e.g., Southern Trust 

Metals, 894 F.3d at 1331 (11th Cir. 2018) (vacating restitution award when the defendant did not cause 

investor losses). The SEC already conceded that there was no causal relationship between Mr. 

Keener’s conduct and any particular losses. See Taveras Dep. (July 27, 2021), ECF No. 66-13, at 161:5-

7 (“I don’t show causation. . . . As I sit here today, I think it would be hard, or impossible, perhaps.”).5 

There are dozens of factors that would have impacted the stock price of any particular company, from 

the company’s business performance to industry trends to world events. Nor would the dollar amount 

of any investor loss have any relationship, causal or otherwise, to the dollar amount of Mr. Keener’s 

proceeds. Simply put, there is no basis to find that if any particular counterparty lost money, that loss 

had anything to do with Mr. Keener or the fact that he was not registered. 

Because it cannot identify any victims, the SEC seeks to postpone its obligation to identify 

victims until some indeterminate point in the future when Mr. Keener no longer has the opportunity 

to challenge its analysis. Mot. at 9 (planning to later identify “investors who lost money holding stock 

that they purchased” from Mr. Keener). The SEC’s approach not only contravenes Liu and 

subsequent caselaw; it also violates the Federal Rules of Civil Procedure and the Due Process Clause. 

5

 Indeed, in some cases, the company’s stock price did not fluctuate during Mr. Keener sales, and 

only fluctuated during long periods in which Mr. Keener held the stock, which shows there was no 

causal connection. See Ex. C. 

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Litigants are required to timely disclose the evidence they intend to rely on and allow the adversary a 

chance to challenge that evidence. Guevara v. NCL (Bahamas) Ltd., 920 F.3d 710, 719 (11th Cir. 2019) 

(compliance with disclosure rules is required and “is not merely aspirational”). If a party fails to timely 

disclose evidence, fundamental fairness and the Federal Rules bar it from later using that evidence. 

See Fed. R. Civ. P. 37(c)(1). 

The SEC has not complied with its disclosure obligations—it has not identified any alleged 

victims, any specific losses allegedly suffered by those victims, or any causal connection between those 

losses and Mr. Keener’s unregistered status. The one witness the SEC listed regarding counterparties 

(Robert Nesbitt) has not identified a single counterparty and indeed cannot determine whether they 

suffered any losses. See SEC’s Rule 26(a) 2d Supp. Discl., ECF No. 69-13, at 4 (Nesbitt’s role is “to 

identify counterparties”); DSOF Ex. 65, ECF No. 73-16, (Nesbitt Tr.) at 103:23-104:22 (“I typically 

do not get involved in [] issues [relating to harm]”). Nor did the SEC produce any of the data that 

would be required to do this analysis. Id. at 107:19-108:5. 

The SEC’s conduct is neither substantially justified nor harmless; instead, it is highly prejudicial 

because it deprives Mr. Keener of the ability to challenge the SEC’s analysis that any particular 

counterparties were victims and show the counterparties did not suffer losses or that losses were 

caused by other market forces. See, e.g., Beaubrun v. Geico Gen. Ins. Co., 2017 WL 3025852, at *3 (S.D. 

Fla. July 17, 2017) (finding late disclosure of evidence harmful and prejudicial to defendants). The 

appropriate sanction is that the SEC be barred from later identifying alleged victims. See, e.g., Hinds v. 

Am. Sec. Ins. Co., 2016 WL 8677901, at *3 (S.D. Fla. Dec. 7, 2016) (excluding evidence when defendant 

was “deprived of the opportunity to investigate” and challenge it); Glob. Digit. Sols., Inc. v. Grupo Rontan 

Electro Metalurgica, 2020 WL 8816214, at *3-4 (S.D. Fla. Dec. 1, 2020) (same when late disclosure 

“deprived [party] of a meaningful opportunity to conduct discovery” regarding the evidence). 

Finally, it is clear that the SEC will ultimately ask for “an order directing disgorged funds to 

the Treasury” rather than to any individual investors, because it will never be able to identify any 

specific wronged investors. Mot. at 8. The SEC claims that Liu “did not rule out [this] possibility,” 

and by implication the Court can order the same here. Id. The SEC is wrong. The Supreme Court 

specifically held that prior disgorgement orders that “deposit[ed disgorgement proceeds] in Treasury 

funds instead of disbursing them to victims” were problematic and “test[ed] the bounds of equity.” 

Liu, 140 S.Ct. at 1946. The only question the Court left open was whether in those instances where 

“it is infeasible to distribute the collected funds to investors” as a practical matter, for instance if the 

investors are deceased or cannot be located, the disgorgement award could be deposited with the 

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10 

Treasury. Id. at 1948. The SEC offers no reason why distribution to individual victims—if any exist—

would be “infeasible.” It cites no logistical impediment to such distribution. Instead, the SEC seeks 

an escape hatch because it knows finding any victims is impossible—Mr. Keener’s activity did not 

cause any losses suffered by any individual investor. Liu does not allow this. “[L]ower courts should 

view requests for disgorgement skeptically where the SEC intends to deposit disgorgement funds with 

the United States Treasury.” SEC v. Cope, 2021 WL 653088, at *2 (S.D.N.Y. Feb. 19, 2021). 

B. The SEC’s Disgorgement Calculation Is Not a Reasonable Approximation 

of Net Profits 

If the Court finds that disgorgement is warranted, the Court should nevertheless reject the 

SEC’s amount because the $17.6 million in disgorgement the SEC demands grossly exceeds any net 

profits Mr. Keener made from his convertible note investments. In order to obtain disgorgement, the 

SEC must “produc[e] a reasonable approximation of a defendant’s ill-gotten gains.” SEC v. Calvo, 378 

F.3d 1211, 1217 (11th Cir. 2004). Under Liu, that amount must be limited to “net profits” and must 

deduct “legitimate expenses.” Liu, 140 S. Ct. at 1940, 1950. 

The SEC’s numbers are not a reasonable approximation. Instead, the SEC draws every factor 

in its own favor to artificially exceed by leaps and bounds any reasonable approximation of Mr. 

Keener’s actual net profits. First, the SEC’s calculation includes transactions beyond those that 

allegedly turned him into a securities dealer. The SEC previously cited only those convertible note 

investments where he was able to convert at a “deep discount[] . . . from the prevailing market price” 

and quickly resell to “lock in his profits.” Compl. ¶¶ 2, 8, 13. That is why this Court also focused on 

his convertible notes and the conversion discount in finding he was a dealer. ECF No. 118 at 21-25 

(dealer activity was “convert[ing] more than 100 convertible notes” into stock at a “discount to the 

trading price” and selling that stock). Yet, the SEC now seeks to disgorge the proceeds of the sale of 

every single share of microcap stock regardless of the terms of his investments and whether they bore 

any resemblance to the convertible notes. This is improper because the other investments were 

different. For instance, the two largest investments (ADXS and NWBO) were bridge loans where 

Mr. Keener was to be repaid in cash out of the proceeds of a larger stock offering; although he later 

obtained stock, it was at the companies’ request (as opposed to a conversion at his election) and he 

held that stock for years. See Exs. C and D (NWBO and ADXS agreements and stock sale dates); see 

also Def’s Opp. to PSOF, ECF No. 91, ¶ 12. The SEC has never attempted to justify disgorging these 

bridge loan proceeds, which account for $8.8 million of the net proceeds. See ECF No. 72-4 at 120. 

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The SEC also has errors in its numbers. For instance, the SEC agreed that proceeds obtained 

through open market purchases or syndicated offerings should be excluded. See Mot. Ex. 3 ¶ 3.d. Yet 

the SEC improperly included more than $600,000 in proceeds from warrants that were obtained 

through syndicated offerings or open market purchases. Ex. B (Flemmons Decl.) ¶ 10. Moreover, 

the SEC also improperly included $3 million in cash repayments in its entry for “OID, Interest and 

Penalties,” which were not proceeds from stock sales at all. Id ¶ 9. Thus, by the SEC’s own terms, its 

disgorgement calculation must be reduced by millions of dollars. 

Furthermore, the SEC manipulates the date range in its favor. The SEC previously identified 

the relevant period as January 2015 through January 2018. See Ex. F (Pl.’s 1st Reqs. for Admis.) at 4 

(defining “Relevant Period” as “from January 2015 through January 2018”) and (Pl.’s 1st Interrogs.) 

at 6 (“The term ‘Relevant Period’ means January 2015 through January 2018.”). But now the SEC 

seeks to extend the time period back to March 24, 2014, which by its own calculation more than 

doubles its disgorgement demand from $8.7 million to $17.6 million. The SEC’s tactics are particularly 

unfair when most of Mr. Keener’s proceeds from 2014 were from sales of ADXS and NWBO, which 

were bridge loan investments and his counterparties likely made substantial profits because the stock 

price increased after his sales. See Sec. II.A.2, supra. 

Mr. Keener’s accounting expert (Jason Flemmons, the former Deputy Chief Accountant at 

the SEC’s Division of Enforcement) properly calculated Mr. Keener’s net profits based on the SEC’s 

allegations in the Complaint—that is, based on proceeds from sales of converted stock obtained at a 

discount during the 2015 to 2018 time period. He concluded that Mr. Keener generated approximately 

$10 million in gross proceeds, and at the same time incurred approximately $12.4 million in expenses. 

DSOF Ex. 70, ECF No. 73-21, (Flemmons Report) ¶¶ 35-36, 46. Accordingly, Mr. Keener suffered 

a net loss of almost $2.5 million based on the activity singled out in the Complaint. Virtually all of 

Mr. Keener’s expenses were tied to the labor-intensive convertible note investments. See DSOF ¶¶ 

55, 59, 65. Yet even with the expenses prorated to the percentage of overall revenue related to 

converted stock, Mr. Keener’s net profits from this time period were only $3 million. See Ex. B 

(Flemmons Decl.) at Ex. 2. 

Nor is there any basis for the SEC’s end date of January 31, 2018, which also results in an 

inflated disgorgement figure. Mr. Keener suffered substantial losses in 2018 and 2019 from earlier 

investments—notably, he lost more than $17 million dollars from a failed bridge loan in a company 

called Connekt Media Inc. (“Connekt”). See DSOF Ex. 1, ECF 72-2, at 183:14-186:4; Ex. G (showing 

$17.2 million investment) at 3; Ex. H (2019 tax return) at 3, 9-10 (showing losses). Thus, even 

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12 

assuming the relevant period began on March 24, 2014, and disgorgement is expanded beyond 

convertible notes, Mr. Keener lost money and there are no profits to disgorge.6 If the Court believes 

it is appropriate to award disgorgement, the amount should take into account Mr. Keener’s substantial 

losses after January 2018, which includes losses for investments in earlier years in both bridge loans 

and convertible notes. Ex. B at Ex. 1. Mr. Flemmons’ summary of Mr. Keener’s investment activity 

from 2014 to 2019 demonstrates clearly that his securities investments were not profitable and his net 

losses since 2014 were more than $5 million. Id. 

C. Prejudgment Interest Is Not Warranted 

Nor is the additional $5.1 million in prejudgment interest demanded by the SEC equitable in 

this case. First, prejudgment interest is calculated based on disgorgement, and disgorgement is 

unwarranted here. See Sec. II.A, supra. Yet even if the Court awards disgorgement, it should still 

decline to impose prejudgment interest. The Court has wide discretion to determine whether to 

impose prejudgment interest. See, e.g., Indus. Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 141 F.3d 

1434, 1446-47 (11th Cir. 1998). The purpose of awarding prejudgment interest is not to penalize the 

defendant or to disgorge ill-gotten gains; instead, the purpose is to “compensate[] the plaintiff for the 

use of funds that were rightfully his.” Id.; see also Hanna Yachts, LLC v. Caribbean Breeze Marine A.C., 

X, LLC, 2013 WL 12141336, at *4 (S.D. Fla. Mar. 19, 2013) (the “purpose of awarding prejudgment 

interest is compensatory”). 

Courts consider several factors in determining whether to impose prejudgment interest: “(1) 

the need to fully compensate the wronged party for actual damages suffered, (2) considerations of 

fairness and the relative equities of the award, (3) the remedial purpose of the statute involved and/or 

(4) such other general principles as are deemed relevant by the court.” SEC v. Monterosso, 2012 WL 

12950028, at *7 (S.D. Fla. Feb 16, 2012). 

The SEC neither identifies nor applies these factors, which weigh in Mr. Keener’s favor. First, 

as described above, there is no “wronged party” or “actual damages suffered.” The SEC has not 

identified any victims or harm suffered, let alone harm that would not be “fully compensate[d]” by 

the disgorgement award. See, e.g., Gov’t Emps. Ins. Co. v. KJ Chiropractic Ctr. LLC, 2017 WL 9939048, at 

6

 Deducting the Connekt loss is proper under Liu. The SEC has conceded that it is appropriate to 

deduct losses. See Mot. Ex. 3 ¶ 3.c. As the Supreme Court held: “Courts may not enter 

disgorgement awards that exceed the gains made upon any business or investment, when both the 

receipts and payments are taken into the account.” Liu, 140 S. Ct. at 1949-50 (emphasis added). The 

purpose of disgorgement is to “restore[] the status quo,” not to punish the defendant. Id. at 1943. 

Case 1:20-cv-21254-BB Document 124 Entered on FLSD Docket 04/15/2022 Page 18 of 28
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*2 (M.D. Fla. Aug. 22, 2017) (denying prejudgment interest when it would give plaintiff—who was 

“adequately compensate[d]” by the damages award—a windfall); Validsa, Inc. v. PDVSA Servs., Inc., 

424 Fed. Appx. 862, 878-79 (11th Cir. 2011) (same). 

Second, considerations of fairness and the relative equities also weigh in Mr. Keener’s favor. 

He stopped investing in convertible notes five years ago, and he made those investments after 

attorneys confirmed the transactions complied with applicable securities laws. See Sec. II.D, infra. 

Moreover, he invested virtually all of his proceeds earned between 2014 and 2018 into Connekt but 

lost his full investment when Connekt went out of business. See Sec. II.B, supra. Accordingly, he did 

not obtain any benefit at all from these proceeds. And courts “routinely refuse[] to award prejudgment 

interest when defendants are unable to use or secure a benefit from” the disgorged profits. SEC v. ESmart Techs., Inc., 2016 WL 183503, at *8 (D.D.C. Jan. 14, 2016).7

 

Even if the Court believes prejudgment interest is warranted, the amount calculated by the 

SEC is unjustifiably large. This Court has wide discretion to determine both the rate and the time 

period for accrual. See, e.g., SEC v. Carrillo, 325 F.3d 1268, 1273 (11th Cir. 2003). If prejudgment 

interest is imposed, the time period for accrual should begin no earlier than the end of the relevant 

period for disgorgement, as the court adopted in Almagarby (at the SEC’s request). Almagarby, 2021 

WL 4461831, at *3. The SEC instead demands here that the court calculate prejudgment interest 

separately for each year during the relevant period. But the SEC’s choice to deviate from Almagarby 

is unjustified and improperly increases the prejudgment interest by millions of dollars. 

D. Injunctive Relief Is Not Warranted 

The permanent injunction the SEC seeks against Mr. Keener is also unwarranted. The SEC 

can only obtain injunctive relief when it demonstrates that a “person is engaged or is about to engage 

in” a violation of the securities laws. 15 U.S.C. § 78u(d)(1). Accordingly, the SEC must show not 

only a prior violation, but also a reasonable likelihood that the wrong will be repeated. Calvo, 378 F.3d 

at 1216. That is, the SEC “must offer positive proof of the likelihood that the wrongdoing will recur.” 

SEC v. Blatt, 583 F.2d 1325, 1334 (5th Cir. 1978). 

7

 Nor does the third factor (the “remedial purpose of the statute”) justify the SEC’s demand. As the 

SEC itself highlighted, the purpose of imposing remedies for dealer registration violations is to 

“provide a financial disincentive to violations that reflect an unwillingness to incur the cost of full 

compliance.” Mot. at 11. And as discussed above, the cost of “full compliance” was far less than 

the SEC demands. See Sec. II.A.1, supra. 

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There is no possibility of a recurrent violation, let alone the “cognizable danger” of an 

imminent violation that the SEC must show. SEC v. Steadman, 967 F.2d 636, 648 (D.C. Cir. 1992); see 

also SEC v. Ingoldsby, 1990 WL 120731, at *2 (D. Mass. May 15, 1990) (injunctive relief requires showing 

that “recurring violations are a relatively imminent threat”). Mr. Keener is out of the convertible note 

business. His last investment in a new convertible note was in 2017, one year before the SEC began 

investigating him and three years before it filed this lawsuit. DSOF ¶ 56. He stopped investing in 

convertible notes because they were not profitable, after considering the substantial expenses 

associated with those investments. DSOF ¶ 65 (“[I]t just turned out to be not a good way to make 

money. . . . I have no interest in reentering that business whatsoever again.”). Mr. Keener is willing 

to surrender any remaining conversion rights and converted stock. See Sec. II.G, infra. Thus, there is 

no chance that the conduct that forms the basis of the SEC’s lawsuit will recur. 

The other factors courts consider in assessing the likelihood of a future violation also weigh 

against injunctive relief. Those factors are (1) the degree of scienter involved; (2) the egregiousness 

of the conduct; (3) the isolated or recurrent nature of the infraction; (4) the sincerity of defendant’s 

assurances against future violations; (5) the defendant’s recognition of the wrongful nature of the 

conduct; and (6) the likelihood that the defendant’s occupation will present opportunities for a future 

violation. Calvo, 378 F.3d at 1216. 

First, it is undisputed that Mr. Keener did not act with scienter. See Order, ECF No. 45 at 2 

(“SEC does not allege scienter.”). He did not overlook the dealer registration requirements knowingly 

or even recklessly. To the contrary, he routinely confirmed with attorneys that his transactions 

complied with applicable securities laws. DSOF ¶¶ 48, 49. During the relevant time period, three 

separate attorneys told him that he was not a securities dealer. Id. (citing letters from counsel stating 

that Mr. Keener “has not acted as a dealer” and “is not a dealer”). Moreover, his investing activity 

was similar to that of many other participants in the securities industry who were not registered dealers, 

including hedge funds, family offices, and high frequency traders. DSOF ¶¶ 91-95. At most, he was 

engaged in a “technical violation,” not one deserving of injunctive relief. Steadman, 967 F.2d at 648 

(denying injunctive relief when violation was not “flagrant or deliberate” but was “merely technical in 

nature” and defendant had relied on “advice of counsel” in good faith).8 

8

 While scienter is not an absolute prerequisite to imposing injunctive relief, it is “highly relevant” to 

the analysis. Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979) (“[W]hile scienter is not required 

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15 

For the same reason, there was no “egregious” misconduct warranting injunctive relief. SEC 

v. Perez, 2011 WL 5597331, at *3 (S.D. Fla. Nov. 17, 2011) (egregious conduct requires “flagrant” 

rather than “merely technical” violation); see also Gane, 2005 WL 90154, at *18 (denying injunctive 

relief in light of “mere technical violations”). The SEC argues Mr. Keener’s conduct was “egregious” 

because the dealer registration requirements are “importan[t].” Mot. at 4. Yet the SEC finds no 

support in the case law for its argument that a violation of an “important” law makes the conduct 

“egregious.” Indeed, if this was the correct standard, then every securities violation would 

automatically be egregious—surely, there are no “unimportant” securities laws. To the contrary, 

conduct is egregious only if it is “flagrant,” if it constituted a “breach of fiduciary duty,” if it “caused 

others to suffer significant financial loss,” or if it “arose out of a complex scheme to defraud.” Perez, 

2011 WL 5597331, at * 2. Not one of those circumstances is present here. 

Regarding the third factor, whether the conduct was isolated or recurrent, there was only one 

registration violation. See, e.g., In re David B. Havanich, Jr., SEC Release No. 935, 2016 WL 25746, at 

*11 (Jan. 4, 2016) (“The events at issue will be considered as one course of action—Respondents’ 

operations as an unregistered broker-dealer from 2010 to 2012.”); In re Spring Hill Cap. Mkts., SEC 

Release No. 919, 2015 WL 7730856, at *19 (Nov. 30, 2015) (finding that “SHCP’s operations as an 

unregistered broker-dealer” was one violation). The SEC argues the conduct was “recurrent” based 

solely on the number of investments Mr. Keener made, as though each purchase or sale of a security 

was a separate violation. Mot. at 4. Not so—there was only one violation. See also Sec. II.F, infra.

9

Regarding the fourth factor, Mr. Keener’s assurances against future violations—as noted 

above, he is out of the convertible note business. And as to recognizing the wrongful nature of the 

to make out violations of several of the statutory sections involved here, the respondent’s state of 

mind is highly relevant in determining the remedy to impose. It would be a gross abuse of 

discretion to bar an investment adviser from the industry on the basis of isolated negligent 

violations.”) (emphasis added); see also SEC v. Pros Int’l Inc., 994 F.2d 767, 769 (10th Cir. 1993) 

(“Although no single factor is determinative . . . the degree of scienter bears heavily on the 

decision.”) (citing SEC v. Haswell, 654 F.2d 698, 699 (10th Cir. 1981)). In the SEC’s own cases, the 

courts only granted injunctive relief after finding defendant acted with scienter. See SEC v. Sky 

Way Glob., 2010 WL 3025033, at *1 (M.D. Fla. July 29, 2010) (defendant “demonstrates a high 

degree of scienter”); SEC v. Collyard, 154 F. Supp. 3d 781, 791 (D. Minn. 2015) (defendant’s conduct 

“was at least reckless”); SEC v. Offill, 2012 WL 1138622, at *5 (N.D. Tex. Apr. 5, 2012) (defendant 

acted “at least with reckless disregard . . . if not intentionally”). 

9

 Although Almagarby imposed an injunction against the defendant for a registration violation, that 

was because the defendant had multiple active companies with no apparent purpose other than to 

engage in alleged dealer activity, which is not the case here. Almagarby, 2021 WL 4461831, at *2. 

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16 

conduct, although he chose to litigate against the SEC, this fact is irrelevant. See, e.g., Ingoldsby, 1990 

WL 120731, at *3 (“While the defendant has not publicly acknowledged the wrongfulness of his 

conduct, I find that this is not evidence of a propensity . . . to commit future violations. . . [T]he 

defendant should not be prejudiced for presenting a vigorous defense and requiring the SEC to meet 

its proper evidentiary burden.”). The SEC claims that because Mr. Keener sold the stock of a company 

named Blink Charging last year, he “has [not] recognized the wrongful nature of his conduct.” Mot. 

at 5. The SEC is mistaken. In fact, Mr. Keener obtained that Blink Charging stock after he made a 

simple loan in 2018 with no conversion rights that the company later requested to repay in stock—

not through the Quick Loans at issue in this case. See Ex. I (Jan. 24, 2018 email confirming loan and 

Feb. 1, 2018 request from company to repay out of public offering); see also Def’s Opp. to PSOF ¶ 36 

(describing different investments in Blink Charging). 

As to the final factor, whether the occupation presents opportunities for future violations, Mr. 

Keener has shifted entirely to other types of investments. He has invested in blue chip stocks and 

“retirement type investments.” DSOF ¶ 66. Last year, he acquired a reference and education website. 

Id. The SEC claims because he is “self-employed” and has “access to capital,” it would be “easy for 

him to buy a new series of convertible notes.” Mot. at 5. But he made a conscious decision years ago 

to stop investing in convertible notes because it was not profitable. There is no basis to conclude he 

is now going to change his mind. Ultimately, “an injunction is a drastic remedy, not a mild 

prophylactic, and should not be obtained against” someone like Mr. Keener who was “acting in good 

faith.” Aaron v. SEC, 446 U.S. 680, 703 (1980) (concurring opinion); see also In re Havanich, 2016 WL 

25746, at *11 (“No Commission opinion in a litigated administrative proceeding has imposed a bar 

on a respondent solely for operating as an unregistered broker-dealer.”). 

Finally, the injunction requested by the SEC is also improper because it is an “obey the law” 

injunction that merely parrots the language of the Exchange Act. The Eleventh Circuit has clearly 

and repeatedly struck down “obey the law” injunctions: 

Repeatedly we have said that, in the context of SEC enforcement actions and otherwise, 

‘obey the law’ injunctions are unenforceable. . . . In particular, an injunction which merely 

tracks the language of the securities statutes and regulations . . . will not clearly and 

specifically describe permissible and impermissible conduct as required by Federal Rule of 

Civil Procedure 65(d). . . . We condemn these injunctions because they lack specificity and 

deprive defendants of the procedural protections that would ordinarily accompany a future 

charge of a violation of the securities laws. 

SEC v. Graham, 823 F.3d 1357, 1362 n.2 (11th Cir. 2016); see also SEC v. Smyth, 420 F.3d 1225, 1233 

n.14 (11th Cir. 2005) (directing district court to find obey the law injunction that “track[ed] the 

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17 

provisions of the statute” unenforceable). The SEC’s proposed injunction does nothing more than 

recite Sections 3(a)(5) and 15(a)(1) of the Exchange Act. See Mot. Ex. 4 at 1. It gives Mr. Keener no 

specificity as to what conduct would constitute a violation and is unwarranted for this additional 

reason.10 

E. A Penny Stock Bar Is Not Warranted 

The SEC also seeks a permanent bar preventing Mr. Keener from “participating in an offering 

of penny stock.” Mot. Ex. 4 at 2. In assessing the propriety of a penny stock bar, courts examine (1) 

the “nature of the defendant’s conduct” and (2) “the likelihood that his occupation and experience 

will present further opportunities to violate the securities laws.” SEC v. BIH Corp., 2014 WL 7499053, 

at *6 (M.D. Fla. Dec. 12, 2014). Neither factor weighs in favor of a bar. 

With regards to the nature of the conduct, as described above, the SEC has alleged a technical, 

non-scienter violation. See Sec. II.D, supra. This technical violation is far from the examples of 

conduct warranting a penny stock bar described in prior cases—namely conduct that is so egregious 

that it indicates the defendant “cannot ever operate in compliance with the law,” and he must be made an 

example of to serve as a “deterrent to others.” BIH Corp., 2014 WL 7499053, at *6 (emphasis added). 

The SEC does not even attempt such a showing. 

With regards to whether Mr. Keener has “opportunities” for further violations, as described 

above, Mr. Keener has left the convertible notes business and has no interest in returning. See Sec. 

II.D, supra. The SEC does not and cannot demonstrate otherwise. To obtain a permanent penny 

stock bar, the SEC must “specifically articulate[] compelling reasons for such a sanction.” Steadman, 

603 F.2d at 1140. The SEC has not met its burden. 

F. A Civil Penalty Is Not Warranted 

Nor is a penalty warranted in this case. The Court may only impose a penalty “upon a proper 

showing” that one is warranted. 15 U.S.C. § 78u(d)(3)(A)(i). In assessing whether a penalty is 

warranted, courts look at (1) the degree of scienter; (2) the egregiousness of the conduct; (3) whether 

the conduct created substantial losses or the risk of substantial losses to other persons; (4) whether 

the conduct was isolated or recurrent; and (5) whether the penalty should be reduced due to the 

defendant’s demonstrated current and future financial condition. SEC v. Big Apple, 2013 WL 1352166, 

at *3 (M.D. Fla. Mar. 29, 2013). None of these factors support the SEC’s request. 

10 For instance, it does not specify whether he is allowed to purchase stock on the open market, to 

hire accountants to administer any investments, or to attend investment conferences. 

Case 1:20-cv-21254-BB Document 124 Entered on FLSD Docket 04/15/2022 Page 23 of 28
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First, it is undisputed that Mr. Keener did not act with scienter. See Sec. II.D, supra. Nor was 

his failure to register “egregious.” See, e.g., Gane, 2005 WL 90154, at *17 (defendant’s conduct was not 

egregious when he “had continuously been consulting counsel”). Indeed, every sale was only executed 

after being approved by an attorney, transfer agent, clearing firm, and broker-dealer, and none of those 

third-party intermediaries ever raised concerns that he might be subject to the dealer registration 

requirements. DSOF ¶¶ 36-47. Mr. Keener’s conduct—investing in microcap companies in need of 

financing and selling stock after the sales were approved by multiple gatekeepers—does not come 

close to the conduct that other courts have found “egregious.” See, e.g., SEC v. US Pension Tr. Corp., 

2010 WL 3894082, at *25 (S.D. Fla. Sept. 30, 2010) (defining “egregious” conduct as conduct similar 

to “ponzi schemes”). Not to mention, his unregistered status was consistent with thousands of other 

market participants who buy and sell securities in tremendous volumes yet are unregistered. DSOF 

¶¶ 91-95. 

Moreover, there is no evidence that Mr. Keener’s unregistered status created substantial losses 

or the risk of such losses. As described above, there is no evidence of specific losses, let alone evidence 

Mr. Keener’s unregistered status caused those losses. See Sec. II.A.2, supra; see also Taveras Dep. (July 

27, 2021) at 161:5-7 (SEC conceding it doesn’t “show causation. . . . As I sit here today, I think it 

would be hard, or impossible, perhaps.”). To the contrary, Mr. Keener’s counterparties had many 

opportunities to generate a profit. Ex. A at Ex. 1. 

The SEC’s main argument is that Mr. Keener should be punished because the “violations were 

recurrent rather than isolated” if each stock sale is treated as a separate violation. Mot. at 11. The 

SEC does not support this argument with a citation to any case law. To the contrary, the case law is 

clear that the failure to register is one violation. See Sec. II.D, supra; SEC v. J.W. Korth & Co., 991 F. 

Supp. 1468, 1473 (S.D. Fla. 1998) (rejecting the “SEC’s assessment regarding the number of 

violations” and finding only one technical violation). 

The SEC claims a penalty is needed “to deter Defendant and others from this type of 

conduct.” Mot. at 12. But there is no need to “deter” Mr. Keener because he has not invested in a 

convertible note in five years. See Sec. II.D, supra. And the SEC’s reference to “others” (Mot. at 12-

13) only highlights the unfairness of the SEC’s approach. Every firm in the convertible lending 

industry engaged in the same conduct as Mr. Keener, which is evidence of the reasonable, widespread 

belief that Mr. Keener’s conduct was lawful. Moreover, the SEC’s desire to punish Mr. Keener and 

make an example of him stands in stark contrast to the SEC’s approach to certain principal trading 

firms. As described above, the Commission recently issued a new rule proposal to clarify that some 

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of the largest, most sophisticated investment firms have actually been “dealers” under the existing 

statutory framework all along. SEC Release No. 34-94524. Yet the SEC is not seeking to investigate 

them; it is not seeking to file enforcement actions against them; it is not seeking to disgorge all of their 

profits; and it is not seeking to punish them in any way. There is no “rational basis for [this] difference 

in treatment.” Olech, 528 U.S. at 564.

If the Court believes a penalty is warranted here, the facts and circumstances do not justify the 

$1.75 million penalty the SEC seeks. 15 U.S.C. § 78u(d)(3)(B)(i) (penalty amount “shall be determined 

by the court in light of the facts and circumstances”). The Exchange Act authorizes three tiers of 

penalties in increasing severity, but only the first and lowest tier applies here because the SEC only 

alleges one non-scienter violation against Mr. Keener. For a non-scienter violation against an 

individual, the first tier provides for an inflation-adjusted penalty of $10,360. Id.; 17 C.F.R. § 

201.1001.11 Courts within the Eleventh Circuit routinely award this tier of penalty for violations like 

Mr. Keener’s failure to register. See, e.g., Gane, 2005 WL 90154, at * 20 (tier one penalty for “technical 

violations”); SEC v. Calmes, 2011 WL 13174658, at *5 (S.D. Fla. Nov. 10, 2011) (tier one penalty for 

registration violations). The SEC provides no reason to deviate from this statutory framework. 

Indeed, the SEC advocated for, and the court adopted, the statutory tier-one penalty in Almagarby. See 

Almagarby, 2021 WL 4461831, at *4. None of the SEC’s cases justify deviating so dramatically from 

the inflation-adjusted statutory penalties.12

The statute allows in the alternative that the penalty can go up to “the gross amount of 

pecuniary gain to such defendant as a result of the violation.” 15 U.S.C. § 78u(d)(3)(B)(i). For the 

Court to award a penalty under this provision, the SEC “must demonstrate” that the “financial gain 

that the defendant enjoyed” was “because of the violation that the penalizing court found him to have 

committed.” SEC v. Huff, 2010 WL 148232, at *3 (S.D. Fla. Jan. 12, 2010) (emphasis added). But for 

the reasons set forth above, the SEC has not met this burden—it has not identified any way in which 

Mr. Keener’s unregistered status caused his pecuniary gain. See Sec. II.A.1, supra. The SEC claims Mr. 

11 The Exchange Act authorizes the tier one penalty “for each violation,” see 15 U.S.C. § 

78u(d)(3)(B), and there was only one violation here—the failure to register as a securities dealer 

under Section 15(a). See SEC v. Miller, 744 F. Supp. 2d 1325, 1345 (N.D. Ga. 2010) (number of 

violations depends on “the number of statutes the defendant violated”). 

12 See Offill, 2012 WL 1138622, at *3-4 ($120,000 penalty); SEC v. Friendly Power Co., 49 F. Supp. 2d 

1363, 1373 (S.D. Fla. 1999) ($100,000 penalty); SEC v. Kahlon, 2016 WL 5661642, at *5 (E.D. Tex. 

Sept. 30, 2016) ($200,000 penalty); SEC v. Lefkowitz, 2013 WL 12170296, at *4 (M.D. Fla. Sept. 6, 

2013) (default judgment over an alleged scheme to evade the securities laws by recidivist violator). 

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Keener made “outsized gains,” see Mot. at 11, but that does not mean any of his gains were caused by 

his unregistered status. Not to mention Mr. Keener did not generate outsized gains, and instead lost 

money overall. Regardless, the SEC ignores this statutory causation requirement and does not show 

that any gain was caused by his unregistered status. 

Finally, the specific penalty amount demanded by the SEC—“approximately 10% of the SEC’s 

proposed disgorgement figure” (Mot. at 13)—is arbitrary, and thus improper. See, e.g., SEC v. 

Aerokinetic Energy Corp., 2010 WL 5174514, at *7-8 (M.D. Fla. Sept. 10, 2010) (cutting SEC’s penalty 

demand in half when it failed to “articulate[ ] any cogent basis for” the specific amount). 

G. Mr. Keener Is Willing to Surrender and Cancel His Remaining Shares 

Mr. Keener is willing to surrender any remaining shares in the hundreds of companies listed 

in Exhibit 1 to the SEC’s Motion, and to stipulate that he will not convert any convertible note of 

those companies. Mr. Keener stopped investing in convertible notes years ago because these 

investments were not profitable, and he has no interest in returning to them. See Sec. II.D, supra. 

However, the SEC’s proposed order also requires Mr. Keener to provide “copies of correspondence 

evidencing the surrender,” which is not possible. Mot. Ex. 4 at 5. Many of the companies have gone 

out of business, and there are no persons to “correspond” with to demonstrate the surrender. 

III. CONCLUSION 

The remedies the SEC seeks are unwarranted, unfair, and all out of proportion to the license 

violation at issue here. There is no basis to force Mr. Keener to pay more than $24 million, when 

the failure to register did not cause harm to others or cause Mr. Keener to earn profits he would not 

otherwise have made. Nor is it justified when his unregistered status was consistent with an entire 

industry of thousands of persons buying and selling securities for a living. Mr. Keener made 

convertible note investments for a few years and has now moved on. No further sanctions—and 

certainly not of the level the SEC seeks—are justifiable here. For these reasons, and all the others 

set forth herein, Mr. Keener respectfully requests that the SEC’s Motion be denied. 

Dated: April 15, 2022 Respectfully submitted, 

GREENBERG TRAURIG LLP 

Benjamin G. Greenberg 

Benjamin G. Greenberg 

Florida Bar No. 192732 

333 SE 2nd Avenue Suite 4400 

Miami, FL 33131 

Case 1:20-cv-21254-BB Document 124 Entered on FLSD Docket 04/15/2022 Page 26 of 28
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Telephone: (305) 579-0850 

Facsimile: (305) 579-0717 

greenbergb@gtlaw.com

BUCKLEY LLP

Christopher F. Regan (pro hac vice) 

Veena Viswanatha (pro hac vice) 

Adam Miller (pro hac vice) 

2001 M Street NW, Suite 500 

Washington, DC 20036 

Telephone: (202) 349-8000 

Facsimile: (202) 349-8080 

cregan@buckleyfirm.com

vviswanatha@buckleyfirm.com

amiller@buckleyfirm.com

Counsel for Defendant Justin W. Keener

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CERTIFICATE OF SERVICE 

I hereby certify that I have this day served via ECF a true and correct copy of the foregoing 

Defendant Justin W. Keener’s Opposition to Plaintiff Securities and Exchange Commission’s 

Motion for Remedies to the following: 

Joshua E. Braunstein (Special Bar No. A5502640) 

Antony Richard Petrilla (Special Bar No. A5502641) 

Attorneys for Plaintiff 

SECURITIES AND EXCHANGE COMMISSION 

100 F Street NE 

Washington, DC 20549 

Telephone: (202) 551-8470 

Braunsteinj@sec.gov 

Petrillaa@sec.gov 

Attorneys for Plaintiff 

Securities and Exchange Commission 

This, 15th day of April, 2022 

/s/ Benjamin G. Greenberg 

Benjamin G. Greenberg 

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