Opinion ID: 3163898
Heading Depth: 2
Heading Rank: 1

Heading: Facts and Trial Evidence

Text: Although the case against the Wyly Brothers was complex,2 the facts relevant to the instant appeal are relatively straightforward. Samuel Wyly and Charles Wyly were officers, directors, and shareholders of four publicly traded corporations. Beginning in the early 1990s, the Wyly Brothers transferred millions of stock options received from those corporations to an extensive system of offshore trusts and subsidiary entities in the Isle of Man (“IOM”), a self‐ governing British Crown dependency in the Irish Sea. For the next dozen years, the IOM trusts exercised those options and traded in the securities, while the Wyly Brothers failed to properly disclose their beneficial ownership. The undisclosed transactions numbered in the hundreds and returned profits of more than $550 million. On July 29, 2010, the SEC initiated a civil enforcement action against the Wyly Brothers, asserting multiple claims of securities fraud. The District Court bifurcated the liability and remedies phases of the case. In May 2014, following a six‐week trial, a jury returned a verdict finding the Wyly Brothers liable for nine claims of securities fraud, involving the violation of multiple antifraud, registration, and reporting provisions of federal law. Following a See generally SEC v. Wyly, 33 F. Supp. 3d 290 (S.D.N.Y. 2014); SEC v. 2 Wyly, 950 F. Supp. 2d 547 (S.D.N.Y. 2013); SEC v. Wyly, 788 F. Supp. 2d 92 (S.D.N.Y. 2011). 6 separate bench proceeding, the District Court dismissed a tenth claim of insider trading. According to trial evidence, the Wylys used the IOM trusts from 1992 to 2005 to trade in secret without making the requisite disclosures, to protect their assets from creditors, and to avoid taxes on trading profits earned. Evidence adduced at trial also indicated that some of the proceeds from the IOM trusts flowed to family members of the Wyly Brothers.