Hodges v. Harrison, Case No. 17-81370-CV-MIDDLEBROOKS

• Decision Date: 08 February 2019
• Docket Number: Case No. 17-81370-CV-MIDDLEBROOKS
• Citation: 372 F.Supp.3d 1342
• Parties: Andrew HODGES, an individual; Vladimir Cood, an individual; Gautam Desai, an individual; Jody Powell, an individual; Jeffrey Heberling, an individual; Shammi Nabukumar, an individual; and Anthony Sajewicz, an individual, Plaintiffs, v. Daniel HARRISON, Defendant.
• Court: U.S. District Court — Southern District of Florida

372 F.Supp.3d 1342

Andrew HODGES, an individual; Vladimir Cood, an individual; Gautam Desai, an individual; Jody Powell, an individual; Jeffrey Heberling, an individual; Shammi Nabukumar, an individual; and Anthony Sajewicz, an individual, Plaintiffs,

v.Daniel HARRISON, Defendant.

Case No. 17-81370-CV-MIDDLEBROOKS

United States District Court, S.D. Florida.

Signed February 8, 2019

Jason Stuart Miller, David Chad Silver, Silver Miller, Coral Springs, FL, for Plaintiffs.

Daniel Harrison, pro se.

ORDER ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

DONALD M. MIDDLEBROOKS, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court on the Motion for Summary Judgment against Defendant Daniel Harrison filed by Plaintiffs on December 28, 2018. (DE 54). Defendant Harrison is proceeding pro se in this matter. On January 4, 2019, I entered an Order with instructions to Defendant Harrison regarding the operation of Fed. R. Civ. P. 56 and advising him of the consequences of his failure to properly respond (DE 57). Thereafter, on January 22, 2019, Harrison filed a Response in Opposition to the Motion for Summary Judgment (DE 59), and a "Motion to Order Immediate and Urgent Subpoena of Potentially Connected Parties" (DE 60). Plaintiffs filed a Reply in support of their Motion for Summary Judgment on January 29, 2019 (DE 62), and Response in Opposition to Harrison's motion for subpoena on February 6, 2019 (DE 63).

I. OVERVIEW

On March 7, 2018, Plaintiffs filed an Amended Complaint for damages and equitable relief against Defendants Monkey Capital, LLC, Monkey Capital, Inc., and Daniel Harrison. (DE 28 or "Amended Complaint"). At the heart of Plaintiffs' lawsuit are allegations that Plaintiffs contributed cryptocurrency worth millions of dollars in advance of a scheduled Initial Coin Offering (ICO) and supposed launch of a private cryptocurrency exchange and decentralized hedge fund (the "Monkey Capital Market"). Plaintiffs state that the ICO never occurred, the status of the development of the Monkey Capital Market is unknown, and that Defendants unlawfully pocketed investor money. On August 14, 2018, I entered final default judgment against Defendants Monkey Capital LLC and Monkey Capital Inc. (DE 44). On August 27, 2018, after an evidentiary hearing, I awarded damages. (DE 50). Harrison is the only remaining Defendant, and Plaintiffs' now seek summary judgment against him as to all claims.

II. LEGAL STANDARD

"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Genuine disputes are those in which the evidence is such that a reasonable jury could return a verdict for the non-movant." Ellis v. England , 432 F.3d 1321, 1325-26 (11th Cir. 2005). "For factual issues to be considered genuine, they must have a real basis in the record." Id. at 1326 (internal citation omitted). "For instance, mere conclusions and unsupported factual allegations are legally insufficient to defeat a summary judgment motion." Id. (internal citation omitted). "Moreover, statements in affidavits that are based, in part, upon information and belief, cannot raise genuine issues of fact, and thus also cannot defeat a motion for summary judgment." Id. (internal citations omitted).

The movant "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R. Civ. P. 56(c)(1)(A) ). When the moving party bears the burden of proof at trial, "the moving party must show that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the nonmoving party." United States v. Four Parcels of Real Prop. in Greene & Tuscaloosa Ctys. in State of Ala. , 941 F.2d 1428, 1438 (11th Cir. 1991) (internal citation omitted). "If the moving party makes such an affirmative showing, it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact." Id. (internal quotations and citations omitted).

For purposes of Plaintiffs' Motion for Summary Judgment, I rely on Plaintiffs' statement of undisputed facts for which there is supporting evidence in the record. "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record ... or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A)-(B). Pursuant to the Local Rule, "[a]ll material facts set forth in the movant's statement filed and supported as required ... will be deemed admitted unless controverted by the opposing party's statement, provided that the Court finds that the movant's statement is supported by evidence in the record." L.R. 56.1(b). Harrison's pro se Response to Plaintiffs' summary judgment motion fails to comply with applicable Federal Rules, Local Rules and law, rendering Plaintiffs' Motion effectively unopposed. Therefore all facts set forth in the following analysis of Plaintiffs' claims are deemed undisputed and/or admitted:

III. FACTS

On or after January 1, 2016, Defendant Daniel Harrison created Monkey Capital, LLC and Monkey Capital Inc. ("Monkey Capital"). (DE 55, Statement of Undisputed Facts ("SUF") at ¶¶ 1-6). He managed the business affairs of these companies, and controlled their development. (SUF at ¶¶ 1-6). Harrison's efforts were essential to the success of Monkey Capital's enterprise. (SUF at ¶¶ 7-8).

Monkey Capital scheduled an Initial Coin Offering ("ICO") to occur in July of 2017. (SUF ¶ 11). Harrison solicited people to invest in Monkey Capital at a valuation premium before the Monkey Capital ICO. (SUF ¶ 11). Harrison solicited investors in the Monkey Capital ICO, Coeval, and Monkey Coin. (SUF ¶¶ 12-14). Each of the named Plaintiffs invested in Monkey Capital with an expectation of garnering financial profit, based on Harrison's representations to investors that Monkey Coin would increase in value. (SUF ¶¶ 15, 17-35). The Plaintiffs' investments were pooled with funds of other investors in an effort by Monkey Capital to secure a profit for itself and the investors. (SUF ¶¶ 15, 17-35). Harrison represented to investors that Monkey Coin would increase in value, and Harrison believed that the Plaintiffs expected to profit from their Monkey Capital investments. (SUF ¶ 15, 17-35). The address on the Waves DEX to which Monkey Capital investors sent their investment assets was a wallet owned by Harrison. (SUF ¶ 9). The Monkey Capital ICO did not take place. (SUF ¶ 16).

Monkey Capital issued tokens, Monkey Coin and Coeval and offered these for sale across the United States, using electronic means. (SUF ¶¶ 52-54). Monkey Capital did not register its business -- including the issuance of tokens, Monkey Coin or Coeval -- with the U.S. Securities and Exchange Commission, nor did it obtain any exemption from registration requirements from the SEC. (SUF ¶¶ 36-51). Monkey Capital also did not register its business – including the issuance of tokens, Monkey Coin or Coeval - with any state securities regulator in the United States, nor did it obtain exemptions from registration requirements from such entities. (SUF ¶¶ 36-51).

IV. DISCUSSION

I note here, as I did at the final default judgment stage of these proceedings, that the legal conclusions reached in this Order pertain to legal theories that are somewhat novel. Because this Order arises within the context of a motion for summary judgment which is effectively unrebutted by the pro se defendant, my conclusions are necessarily based upon Plaintiffs' one-sided submissions to the Court, without the benefit of any meaningful adversarial process.

A. Violation of Section 12(a) of the Securities Act of 1933 (Count I)

Section 12(a)(1) [15 U.S.C. §§ 77/(a)(1) ] grants Plaintiffs a private right of action against any person who offers or sells a security in violation of Section 5 [ 15 U.S.C. § 77e ], and states that such person "shall be liable... to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security."

To prevail on a Section 5 claim, a plaintiff must establish the following elements: "(1) absence of an effective registration statement covering the securities in question; (2) the offer or sale of the securities; and (3) the use of the mails, or any means or instruments of transportation or communication in interstate commerce in connection with the sale or offer." Scheck Invs., L.P. v. Kensington Mgmt., Inc. , 2009 WL 10668565, *4 (S.D. Fla. June 17, 2009) (citing SEC v. Unique Fin. Concepts, Inc. , 119 F.Supp.2d 1332, 1339 (S.D. Fla. 1998) ). The definition of a "security" under the Securities Act includes "investment contract(s)." "An offering is an investment contract if there is: (1) an investment of money, (2) in a common enterprise, (3) with the expectation of profits to come solely from the efforts of others." Tippens v. Round Island Plantation LLC , 2009 WL 2365347, at *9 (S.D. Fla. July 31, 2009) (citing SEC v. Unique Fin. Concepts, Inc. , 196 F. 3d 1195, 1199 (11th Cir. 1999) ). See also , SEC v. W.J. Howey Co. , 328 U.S. 293, 298-301, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946) (" Howey ").

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