United States Court of Appeals

for the Fifth Circuit ____________

No. 23-50327

____________

Securities and Exchange Commission,

Plaintiff—Appellee, 

versus

William Andrew Stack,

Defendant—Appellant. 

______________________________

Appeal from the United States District Court

for the Western District of Texas

USDC No. 1:21-CV-51

______________________________

Before Jones, Haynes, and Douglas, Circuit Judges. 

Per Curiam:

*

In this civil enforcement action, the Securities and Exchange 

Commission (“SEC”) alleged that William S. Marshall (an un-charged 

person) perpetrated investor fraud in a gold mine penny-stock venture and 

enlisted Appellant William Andrew Stack to raise $333,110 from more than 

fifty-five investors in the scheme. Stack kept $75,000 for himself for personal 

_____________________

* Pursuant to 5th Circuit Rule 47.5, the court has determined that this opinion 

should not be published and is not precedent except under the limited circumstances set 

forth in 5th Circuit Rule 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

September 16, 2024

Lyle W. Cayce

Clerk

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expenses and caused the corporation to transfer $16,500 to his wife and the 

rest to Marshall. The court ordered Stack to disgorge the full $333,110 plus 

prejudgment interest. In sum, the district court held him liable for funds he 

never received or benefited from.

Stack appeals and contends that the district court erred in imposing

liability on him for the full amount of the proceeds rather than individual 

liability for the amount he transferred to himself. We REVERSE and 

REMAND.

BACKGROUND

A. Factual Background

In January 2021, the SEC filed a complaint against Stack, a Dallas, 

Texas securities lawyer, alleging that he violated, and aided and abetted the 

violation of, various antifraud and registration provisions of federal securities 

laws.1

 The complaint concerns Preston Royalty Corp., a “penny stock issuer 

that purported to provide royalty financing to gold mining operations.” In 

2015, an undisclosed individual contacted Stack and stated that he and 

Marshall wanted Preston Royalty to invest in the royalty streams of a gold 

mine Marshall owned. Marshall subsequently asked Stack to become Preston 

Royalty’s chief executive officer.

Stack became the chief executive officer, president, and treasurer of 

Preston Royalty. But Stack was “CEO in name only.” From April to 

September 2016, Stack and Marshall engaged in a fraudulent scheme for the 

_____________________

1 Specifically, the complaint alleges violations of sections 5(a), 5(c), and 17(a) of the 

Securities Act of 1933, 15 U.S.C. §§ 77e(a), 77e(c), and 77q(a), as well as section 10(b) of 

the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 

17 C.F.R. § 240.10b-5. For the purposes of the disgorgement order at issue here, Stack 

agreed that the allegations of the complaint “shall be accepted as and deemed true.”

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sale of unregistered securities and made fraudulent statements to investors. 

Stack acted at the behest of Marshall, who was Preston Royalty’s undisclosed 

control person. In August 2016, Stack complained to Marshall, “You have 

told me that you’re bringing in $50,000+ per week for months. I’m not sure 

where that money has gone, or if it in fact has really come in. I only know 

what I’m told. . . . I am CEO of Preston and I have no idea what is ever being 

done.” Although Marshall did not hold a formal position at Preston Royalty, 

Stack reported to him.

Marshall initially told Stack that Preston Royalty planned to issue $5 

million in corporate bonds and use the proceeds to invest in gold mine royalty 

streams, specifically one derived from Marshall’s gold mine. Pending the 

close of such offering, Marshall claimed that Preston Royalty would seek to 

raise money through a private placement of its stock to investors. Stack 

opened two bank accounts in Preston Royalty’s name for the expected 

private placement. Stack then began raising revenue for Preston Royalty

using a “Private Offering Memorandum” and “Preston Royalty Business 

Plan.”

The documents contained numerous false statements, including that 

Stack was Preston Royalty’s founder and that “[a]ll funds will be allocated 

towards the acquisition of permitted and operating alluvial gold mines or 

properties considered to be in near term production.” The documents also 

made “various misrepresentations regarding [Preston Royalty’s] operations 

and prospects.”

Ultimately, Preston Royalty “raised over $333,000 from more than 

fifty-five retail investors around the country in a private placement of Preston 

Corp.’s common stock.” According to the allegations in the complaint, 

Stack “knew or recklessly disregarded” that Preston Royalty was issuing 

false and misleading statements and misappropriating funds.

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As signatory to Preston Royalty’s corporate bank account, Stack 

caused Preston Royalty to wire approximately $229,500 of primarily investor 

funds to Marshall’s gold mining company. Stack also withdrew more than 

$12,000 in cash and transferred $63,400 to his nominal business entity’s bank 

account. Finally, he transferred $16,500 to his wife.

B. Procedural Background

On January 15, 2021, the SEC filed its complaint. The district court 

denied Stack’s motion to dismiss. On September 16, 2022, the parties filed 

an Agreed Motion to Enter Partial Judgment, and the district court entered a 

partial judgment permanently enjoining Stack from future securities 

violations, and imposing on him for five years an officer-and-director bar, a 

penny stock bar, and a legal services Regulation D bar. The parties agreed

that the district court would later determine “whether it is appropriate to 

order disgorgement of ill-gotten gains and/or a civil penalty . . . and, if so, the 

amount(s) of the disgorgement and/or civil penalty.”

Upon the SEC’s motion, the magistrate judge issued a report 

recommending, among other relief, that the district court should impose a 

disgorgement award of $333,110 plus prejudgment interest. The magistrate 

judge found that joint and several liability should be imposed on Stack for the 

entirety of Preston’s proceeds rather than just the amount he kept. The 

district court adopted the order in full and entered final judgment on 

March 10, 2023. Stack filed a timely appeal.

STANDARD OF REVIEW

This court reviews disgorgement orders for abuse of discretion. SEC

v. World Tree Fin., LLC, 43 F.4th 448, 459 (5th Cir. 2022). Pure questions 

of law are reviewed de novo. SEC v. AMX, Int’l, Inc., 7 F.3d 71, 73 (5th Cir. 

1993). Findings of fact are reviewed for clear error. See Fed. R. Civ. 

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P. 52(a)(6). This case was decided largely on agreed facts contained in the 

Consent Judgment, which are to be taken as true.

DISCUSSION

The only issue on appeal is whether the district court erred in ordering 

disgorgement of the entire alleged loss against Stack. In 2020, the Supreme 

Court made clear that disgorgement is an “equitable remedy” authorized by 

15 U.S.C. § 78u(d)(5) (“The [SEC] may seek, and any Federal Court may 

grant, any equitable relief that may be appropriate or necessary for the benefit 

of investors.”). See Liu v. SEC, 591 U.S. 71, 74–75, 140 S. Ct. 1936, 1940 

(2020). The Court in Liu cautioned courts against expanding disgorgement 

in ways that “test the bounds of equity practice,” such as “by . . . imposing 

joint-and-several disgorgement liability, and declining to deduct even 

legitimate expenses from the receipts of fraud.” Id. at 85, 140 S. Ct. at 1946. 

Although Liu ultimately countenanced the possibility of joint and several 

disgorgement liability in SEC cases, the Court several times expressed 

concern that the application of joint and several liability to disgorgement 

could turn the remedy into a penalty that is “at odds” with traditional 

equitable principles requiring “individual liability for wrongful profits.” See, 

e.g., id. at 90, 140 S. Ct. at 1949.

In response to Stack’s arguments against liability, the SEC originally 

contended eitherthat the district court correctly ordered disgorgement of the 

entire loss amount based on Stack’s own violations or that the order was a 

proper assessment of joint and several liability. We reject the SEC’s former 

contention but find the latter was waived.

First, the SEC’s contention that the district court imposed individual 

liability on Stack solely for his violations is wrong. The magistrate judge 

stated, “Stack should be held jointly liable for the full amount of money raised 

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in the scheme on behalf of Preston” (emphasis added). And the district court 

ordered disgorgement based on joint and several liability.

Regardless, the record here does not justify holding Stack liable 

individually for the entire loss because of his violations. Stack’s degree of 

involvement was no greater than that of the minor defendants in SEC v. 

Blackburn, 15 F.4th 676 (5th Cir. 2021). In that case, on analogous facts, this 

court “did not impose joint-and-several liability but individually assessed 

each defendant’s gain” from the illegal conduct. Id. at 678. Here, by the 

SEC’s own allegations, Marshall, not Stack, was the true control person of 

Preston Royalty. Further, as the SEC alleged, Stack did “Marshall’s 

bidding,” and “ha[d] no idea what [was] ever being done.” The complaint 

quotes Stack as complaining to Marshall, “You have told me that you’re 

bringing in $50,000+ per week for months. I’m not sure where that money 

has gone, or if it in fact has really come in. I only know what I’m told. . . . I 

am CEO of Preston and I have no idea what is ever being done.” Stack 

correctly notes that all these facts must be taken as true under the terms of 

the parties’ Consent Judgment.

It is also significant that, unlike the spouses’ finances at issue in Liu, 

Stack’s and Marshall’s finances were not commingled. See Liu v. SEC, 

591 U.S. 71, 91, 140 S. Ct. 1936, 1949 (2020). And unlike in SEC v. World 

Tree Fin., LLC, the district court did not order Stack to disgorge funds he 

transferred to Preston Royalty, the corporation of which he was chief 

executive officer. See 43 F.4th 448, 459 (5th Cir. 2022). Rather, the district 

court imposed joint and several liability on Stack for funds he transferred from

Preston Royalty to Marshall. Holding Stack liable for funds he did not keep 

or benefit from does not constitute “a reasonable approximation of a 

defendant’s unjust enrichment,” as required by Liu and our precedent. See 

SEC v. Hallam, 42 F.4th 316, 341 (5th Cir. 2022). Under all of these 

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circumstances, disgorgement would be “unjust.” See Liu, 491 U.S. at 91, 

140 S. Ct. at 1949.

SEC’s second argument, purportedly relying on joint-and-several 

liability, was expressed in its brief. However, at oral argument counsel 

expressly disclaimed reliance on that theory. Counsel stated, “This is not a 

joint and several award because the Commission . . . if you look back, our 

initial remedies motion to the magistrate judge, we didn’t argue that he 

should be held jointly and severally liable with Marshall.” In response to a 

direct question from this court whether “joint and several is not on the 

page,” counsel then agreed, “Yes, your honor, there is no codefendant in this 

case, so there is no one he could be held jointly and severally liable with.” 

Later, to be exact, counsel argued that this court could uphold the 

disgorgement award “on any basis supported by the record.” But then 

counsel contended that the lower court in fact issued a judgment that held 

Stack liable only for his own misconduct and not on a joint-and-several basis. 

As we have noted above, this contention is belied by the record.

In sum, counsel affirmatively waived SEC’s reliance on the theory of 

joint and several liability, so we need not discuss that theory, and the record 

and precedent contradict the district court’s assessment of disgorgement far 

exceeding the amount by which Stack himself was unjustly enriched.

One more issue remains to be mentioned. The parties do not address 

the status of nearly $17,000 Stack transferred to his then-wife. Although

joint and several liability is inapplicable here, it may be reasonable to conclude

that Stack also “enjoyed” the benefits of the funds that he sent to her. See 

SEC v. Contorinis, 743 F.3d 296, 302 (2d Cir. 2014) (noting that a defendant 

could be forced to disgorge not only his own gains, but also “the profits of 

such exploitation that he channeled to friends, family, or clients”). But the 

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SEC did not make allegations regarding this issue. The district court should 

address this issue on remand.

CONCLUSION

For these reasons, we REVERSE and REMAND. On remand, the 

district court should recalculate a proper disgorgement award plus interest

limited to the funds that Stack received and benefited from.

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