Opinion ID: 71727
Heading Depth: 3
Heading Rank: 1

Heading: The Relatedness Prong

Text: 22 Under the first prong of the minimum contacts inquiry, we find that the alleged contacts are related to, or gave rise to, the causes of action because each of the contacts was a step by which the allegedly fraudulent scheme was carried out. Bosque contends that the SEC has failed to show that the advertisements actually caused any United States investor to purchase Bosque's securities. 6 See Brief of Corporate Appellee at 18, 24. This argument fails with respect to the claim under 15 U.S.C. § 77e(c), which forbids making an offer to sell unregistered securities regardless of whether the securities are actually purchased, and the claim under 15 U.S.C. § 77q(a)(1), which forbids use of any scheme to defraud in the offer or sale of securities. 23 Bosque's argument on this point also misconstrues our test. Under our case law, the contacts must be related to the plaintiff's cause of action or have given rise to it. See, e.g., Francosteel, 19 F.3d at 627; Vermeulen, 985 F.2d at 1546 (emphasis added). In this case, it is clear that the advertisements were related to the causes of action because the advertisements were a means by which Bosque offered and sought to sell its unregistered securities to potential American investors. 7 24 As to the mailed offerings, Bosque contends that they were simply notifications of further stock offerings that were required by Costa Rican law. However, the status of the offerings under Costa Rican law is irrelevant for our purposes. The fact is the offerings included information and application forms pertaining to Bosque's unregistered securities that were mailed directly to United States investors. Additionally, the money for purchases of these securities was sent to Bosque's Miami bank accounts, which it admittedly maintained for the convenience of these investors. See Brief of Corporate Appellee at 22. Thus, these offerings and bank accounts were related to, and gave rise to, the causes of action for fraudulent offer and sale of unregistered securities because they were the means by which the alleged offers and sales were carried out. 25 Bosque argues that these bank accounts, by themselves, were not fraudulent and thus did not give rise to the causes of action. This argument overlooks the exact nature of the SEC's allegations. It is not the existence of the bank accounts that is alleged to have given rise to the causes of action but rather the use of the bank accounts to carry out the sale of unregistered securities to United States investors. The use of these bank accounts was manifestly related to, and gave rise to, the causes of action for fraudulent sale of unregistered securities in the United States. See Chase & Sanborn, 835 F.2d at 1346 n. 10 (use of bank accounts in Miami, New York, Chicago, and San Francisco to conduct transactions out of which cause of action arose as well as other transactions constituted sufficient minimum contacts with entire United States and with Florida). When these bank accounts are considered together with the other contacts, it is even clearer that the contacts gave rise to the instant causes of action in the sense that by advertising, offering shares, and accepting payment in this country, Bosque did everything necessary to complete the offer and sales of the unregistered securities here.