IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

JUSTIN W. KEENER D/B/A JMJ FINANCIAL, 

Defendant.

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No. 20-cv-21254 

Hon. Beth Bloom 

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S LIMITED

OBJECTIONS TO THE REPORT AND RECOMMENDATION ON REMEDIES

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Plaintiff Securities and Exchange Commission (“SEC”) files this limited set of objections to 

the Report and Recommendation of the Magistrate Judge (hereinafter “R&R”). See DE 138. The 

SEC agrees with every recommendation in the R&R except: (1) the conclusion that “the Court [in its 

summary judgment order] effectively precluded consideration of the” parties’ one-year tolling 

agreement, leading the Magistrate Judge to shorten the relevant period and thereby reduce 

disgorgement from $17,557,840 to $7,227,934; (2) the recommendation that prejudgment interest be

measured starting on February 1, 2018 as opposed to the end of each year in which Defendant 

Justin W. Keener d/b/a JMJ Financial (“Defendant”) generated net profits ordered to be disgorged; 

and (3) the recommendation to reduce the civil penalty from $1.75 million to $1.03 million.

FACTUAL AND PROCEDURAL BACKGROUND

Defendant operated as an unregistered dealer in violation of Section 15(a)(1) of the 

Securities Exchange Act of 1934 (“Exchange Act”). R&R at 1. He maintained a regular business of 

buying convertible notes from penny stock issuers, waiting at least six months, then converting them 

to stock of the issuers at a deep discount to the prevailing market price, and selling that stock into 

the public market for substantial profits. Id. at 2. Defendant admitted that he converted more than 

100 notes from more than 100 different microcap issuers and subsequently liquidated billions of 

shares of stock. Id. Through a declaration summarizing Defendant’s records submitted by Dr. 

Carmen Taveras, the SEC showed that, for the period March 24, 2014 through January 31, 2018, 

Defendant had net profits under SEC v. Liu from this business of $17,557,840 (net income from 

notes of $32,971,128 minus total business expenses of $15,413,288). See DE 122-3 at ¶ 19 (“Taveras 

Remedies Declaration”).

The Court granted summary judgment to the SEC on liability only and denied Defendant’s 

cross-motion. DE 118 (“Omnibus Order on Cross-Motions for Summary Judgment”). The SEC 

then filed a motion for remedies seeking: (1) a permanent injunction; (2) a penny stock bar; (3) 

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disgorgement of net profits of $17,557,840; (4) prejudgment interest thereon in the amount of 

$5,141,461; (5) a civil penalty of $1,750,000; and (6) an order requiring Defendant to surrender for 

cancellation shares of stock from, and conversion rights under, convertible notes that issuers had 

sold him. DE 122 at ECF page 7. 

After receiving briefs on the SEC’s motion for remedies, the Court referred the motion to 

the Magistrate Judge for the preparation of a Report and Recommendation. DE 130. In her R&R, 

Magistrate Judge Louis recommended that the Court impose all of the remedies that the SEC

requested with three exceptions as to the amounts. First, she agreed that the SEC was entitled to 

disgorgement but recommended decreasing disgorgement by approximately $10.3 million based on 

her conclusion that the Court “effectively precluded consideration” of the parties’ one-year tolling 

agreement when it stated in the summary judgment order that “Plaintiff is entitled to relief for 

conduct that occurred on or after March 24, 2015.” R&R at 22-23; DE 118 at 30. Second, she 

recommended that the Court calculate prejudgment interest (on her revised disgorgement amount)

using the period February 1, 2018 through January 21, 2022. R&R at 25-26. Third, she 

recommended a different methodology for calculating a civil penalty, which would reduce the 

amount from $1,750,000 to $1,030,000. Id. at 29. The Commission files this limited set of 

objections only as to these three recommendations. 

STANDARD OF REVIEW

The SEC is entitled to de novo review of any portion of the Magistrate Judge’s findings or

recommendations that it identifies with specificity and to which it articulates a specific objection. 

Macort v. Prem, Inc., 208 F. App'x 781, 783–84 (11th Cir. 2006) (citing Heath v. Jones, 863 F.2d 815, 822 

(11th Cir. 1989)). The “District Judge shall make a de novo determination of those portions of the 

report ... to which objection is made and may accept, reject, or modify in whole or in part, the 

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findings or recommendations made by the magistrate [judge].” Id. (internal quotation marks 

omitted).

ARGUMENT

A. The Relevant Period and the Parties’ One-Year Tolling Agreement

The Magistrate Judge determined that the relevant period for disgorgement was March 24, 

2015 through January 31, 2018. Magistrate Judge Louis reached this conclusion based on the 

Court’s order granting summary judgment to the SEC on liability. R&R at 22. Although the parties 

signed a one-year tolling agreement before this litigation began, see DE 67-8 (tolling agreement), the 

Magistrate Judge concluded that “the Court effectively precluded consideration of this agreement 

and defined the Relevant Period as beginning on March 24, 2015.” R&R at 22. The effect of this 

ruling is to reduce disgorgement from $17,557,840 to $7,227,934. Id. at 23. The SEC respectfully 

objects to this conclusion in the R&R because it does not believe that the Court prohibited 

consideration of the tolling agreement.

In his Fifth Affirmative Defense, Defendant claimed that the statute of limitations barred 

the SEC’s complaint in whole or in part. DE 30 at ECF page 7 (Defendant’s Answer). In briefing 

the cross-motions for summary judgment, Defendant argued that the SEC’s cause of action first 

accrued more than five years before it filed the complaint and that the parties’ one-year tolling 

agreement “cannot suspend the statute of limitations because Section 2462 [28 U.S.C. § 2462] is 

jurisdictional.” DE 118 at 30 (Summary Judgment Order). The SEC moved for summary judgment 

on this affirmative defense and prevailed. Id. at 31 (“Plaintiff’s Motion is granted as to the statute of 

limitations affirmative defense.”). In light of the Court’s ruling against Defendant on the statute of 

limitations defense, the SEC respectfully submits that the R&R is mistaken in concluding that the 

Court “effectively precluded consideration” of the tolling agreement. See R&R at 22. Simply put, 

the Court did not make any ruling concerning the tolling agreement in the summary judgment order, 

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nor did it need to do so. Instead, it relied upon the “continuing violation doctrine” to hold that, 

because Defendant had engaged in the violative conduct as recently as January 2018, the statute of 

limitations had not run. Id. at 31. 

There is no merit to Defendant’s argument that the tolling agreement “cannot suspend the 

statute of limitations because Section 2462 is jurisdictional.” First, 28 U.S.C. § 2462 is no longer the 

applicable statute of limitations for disgorgement claims. Congress amended the Exchange Act in 

2021 to create a new statute of limitations specifically for disgorgement claims, which applies to any 

case (like this one) that was pending on January 1, 2021. See Section 6501(a) of the National 

Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283 (“NDAA”), effective January 

1, 2021 (codified as 15 U.S.C. § 78u(d)(8)(A)); NDAA, § 6501(b) (application to pending actions). 

Whatever arguments Defendant has about Section 2462 do not apply to 15 U.S.C. § 78u(d)(8)(A)(ii), 

the correct statute of limitations for disgorgement in this matter. Less than two weeks ago, Judge 

Covington in the Middle District of Florida recognized that the new statute of limitations applies to 

pending SEC actions, and she also applied SEC tolling agreements to reach conduct dating back to 

2008. See SEC v. Spartan Securities Group, Ltd., et al., Case No. 8:19-cv-448-VMC-CPT, at 25-26 (M.D. 

Fla. August 10, 2022) (attached as Exhibit A for the Court’s convenience).

The Court should modify the R&R to recognize that the relevant period for purposes of 

disgorgement began on March 24, 2014, six years before the SEC filed its complaint. See DE 68 at 

28 (SEC’s explanation of the relevant period); DE 1 (complaint filed on March 24, 2020). The 

Court should also clarify that the proper amount of disgorgement for this relevant period is 

$17,557,840—the figure for net profits under Liu that Dr. Taveras calculated and which the R&R 

did not contest on any substantive basis.

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B. Prejudgment Interest 

The R&R recommends that the Court order Defendant to pay prejudgment interest on 

disgorgement at the IRS rate for underpayments and that it should be calculated starting on 

February 1, 2018 and ceasing on January 21, 2022. R&R at 25-26. The R&R did not itself calculate 

the precise amount of prejudgment interest that would result from using these parameters. 

The SEC agrees with the rule enunciated in Yun and cited in the R&R at 25-26 that “[t]he 

time frame for the imposition of prejudgment interest usually begins with the date of the unlawful 

gain and ends at the entry of judgment.” See SEC v. Yun, 148 F. Supp. 2d 1287, 1293 (M.D. Fla. 

2001). That approach would be the most equitable, but the SEC understands that applying it here 

would be difficult because there were thousands of stock sales over a multi-year period. For that 

reason, Dr. Taveras calculated prejudgment interest for each year of sales beginning on the first day 

of the following year. DE 122-3 at ¶ 21. Her approach is still conservative because it treats all gains 

as if they were earned at the end of the year. But it at least ensures that Defendant will pay more 

interest on gains from 2015 than he will pay on gains from 2018. Prejudgment interest represents 

the amount of money a wrongdoer made or could have made from investing ill-gotten gains before 

disgorging them. See SEC v. Koenig, 557 F.3d 736, 745 (7th Cir. 2009). That concern is especially 

relevant here where Defendant was in the business of buying and selling securities for his own 

account as a professional dealer. He—more than most defendants—had ample opportunity to put 

his ill-gotten gains back into the market and make an economic return. Accordingly, the SEC 

believes that Dr. Taveras’s approach is equitable and appropriate, but recognizes that the Court has 

substantial discretion over this matter. 

For the Court’s convenience, the SEC has provided four versions of re-calculated 

prejudgment interest in a declaration of Dr. Taveras (attached hereto as Exhibit B). The first 

version uses the methodology that the R&R recommended applying to the disgorgement figure 

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recommended by the Magistrate Judge of $7,227,934, which results in $1,323,001 of interest. Id. at 

Exhibit 1. The second version uses Dr. Taveras’s approach to calculating prejudgment interest on 

that same disgorgement amount, which results in $1,824,839 of interest. Id. The third version uses 

the R&R’s approach to calculating prejudgment interest on the disgorgement amount that Dr. 

Taveras originally calculated ($17,557,840), which results in $3,213,787 of interest. Id. The fourth 

version uses Dr. Taveras’s approach to calculating prejudgment interest on the disgorgement figure 

of $17,557,840, just as she did in her summary declaration on remedies, see DE 122-3 at Ex. A, but 

stops counting interest on January 21, 2022, consistent with the R&R. Ex. B at Exhibit 1. 

Prejudgment interest under this approach would be $5,083,771. Id. 

C. Civil Penalty 

The R&R recommended decreasing the civil penalty amount from $1,750,000 to $1,030,000 

based on a different calculation methodology. R&R at 29. The SEC stands by its original proposal 

and methodology for a civil penalty, but also recognizes that the Court has wide discretion in this 

area. See SEC v. Aura Financial Services, Inc., No. 09-civ-21592, 2010 WL 3419200, at *3 (S.D. Fla. 

July 14, 2010). If the Court prefers the R&R’s approach to calculating a civil penalty, the SEC 

respectfully requests that it apply that methodology to a time period that also includes 2014. As the 

SEC argued in Section A, above, the relevant period should start on March 24, 2014. If the Court 

agrees, the civil penalty, at a minimum, should increase to $1,270,000.1

 1 The R&R calculated a civil penalty by summing the costs Defendant avoided during the 

relevant period by failing to register as a dealer, become a member of a national securities 

association, or comply with the association’s regulations. R&R at 29. Using figures that Defendant 

provided, it assumed that undertaking these tasks would have cost $545,000 for the first year and 

$240,000 for each subsequent year. Id. The R&R applied a three-year relevant period to arrive at a 

civil penalty of $1,030,000 (which also included $5,000 “for the actual violation”). Id. If the Court 

decides to include 2014 in the relevant period, the civil penalty under the R&R’s approach would 

increase by $240,000 for a total penalty of $1,270,000.

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DATE: August 22, 2022 Respectfully submitted, 

 

 By: 

 __________________________ 

Antony Richard Petrilla 

 Joshua E. Braunstein 

Attorneys for Plaintiff

SECURITIES AND EXCHANGE COMMISSION

100 F Street NE 

Washington, DC 20549

Telephone: (202) 551-4544

Petrillaa@sec.gov

ATTORNEYS FOR PLAINTIFF 

SECURITIES AND EXCHANGE 

COMMISSION 

 

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CERTIFICATE OF SERVICE

 I hereby certify that on August 22, 2022, I filed Plaintiff Securities and Exchange 

Commission’s Limited Objections to the Report and Recommendation on Remedies through the 

Court’s CM/ECF system, which automatically sends notices to counsel of record in this case. 

 

 Antony Richard Petrilla 

ATTORNEY FOR PLAINTIFF 

SECURITIES AND EXCHANGE 

COMMISSION 

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