Opinion ID: 4024287
Heading Depth: 5
Heading Rank: 1

Heading: DNY Constituting Securities Fraaud

Text: Accts in the ED The d district cou urt did nott err in con ncluding th hat a reaso onable trierr of fact cou uld find tha at a BSMI co‐conspirrator comm mitted actss within th he EDNY th hat were in n furtheran nce of the B BSMI securrities fraud d scheme, and thereffore constitu uted securiities fraud. The G Governmeent presentted direct aand circum mstantial eevidence th hat BSMI personnel teelephoned d and emaiiled resideents of the EDNY to ssolicit ‐24‐ investments, see Potamitis, 739 F.2d at 791 (circumstantial evidence may establish venue), including the following:  BSMI personnel engaged in cold calling to solicit investments;  they did so aggressively, on a national basis;  they did so using call lists that included dozens of individuals residing in the EDNY6; and  BSMI personnel communicated with Inspector Lucente in the EDNY, and sent him an electronic newsletter used to solicit investments. These communications within the district constituted securities fraud violations. The calls made by BSMI employees and email distribution of the BSMI newsletter ʺwere crucial to the success of the schemeʺ of securities fraud and contained a number of material misstatements regarding the BSMI 6 The unscrubbed list included approximately 40 individuals with EDNY addresses, representing two percent of the total names on the list. The first scrubbed list contained 15 individuals with EDNY addresses, representing 21 percent of the total names on the list. We have previously found that a jury could reasonably conclude venue was established based on circumstantial evidence where only 2.3 percent of paying subscribers to an insider tip website resided in the EDNY. See Royer, 549 F.3d at 894. There, the defendant sent private messages to his subscriber base advising them to short stock or publish information to affect the value of certain stock. See id. We concluded that ʺthe jury could reasonably infer that it was more likely than not that one or more of these [EDNY] subscribers traded in the applicable securities.ʺ Id. Here, approximately two percent of EDNY residents were included on the unscrubbed list and approximately 18 percent of EDNY residents were included on the first scrubbed list. Accordingly, like in Royer, a reasonable juror could conclude that an EDNY resident was solicited. ‐25‐ scheme. Royer, 549 F.3d at 895. For example, the talking points and newsletter falsely provided that BSMI had a valuable gold mind in Alaska and that testing established that the mine contained great quantities of gold. Accordingly, these acts constituted securities fraud violations, and were not just preparatory. See 15 U.S.C. § 78j(b) (making it a violation to ʺuse or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive deviceʺ); cf. Tzolov, 642 F.3d at 319 (concluding that boarding flights in the EDNY to travel to investor meetings where material false statements were made was insufficient to establish venue on substantive securities fraud count). Russell and Kristofor argue that the email correspondence was merely preparatory because Inspector Lucente did not ultimately invest in BSMI. But whether Inspector Lucente, or any EDNY recipient of a cold call, actually invested is irrelevant. The making of an investment is not an element of the crime of securities fraud. Instead, the mere use of material misrepresentations to solicit investment is the ʺessential element of the crimeʺ in furtherance of securities fraud. Tzolov, 642 F.3d at 318‐9. Considering the evidence ʺin the light most favorable to the government, [and] crediting every inference that could have been drawn in its ‐26‐ favor,ʺ id. at 318 (internal qu uotation m marks omittted), we co onclude th hat the jury y have reason could h nably foun nd by a preeponderan nce of the eevidence th hat BSMI employ yees called and emailled residen EDNY for the purpose of soliciiting nts of the E investm ments throu ugh materiial misstattements.