Sec. & Exch. Comm'n v. Montano
| Decision Date | 05 October 2020 |
| Docket Number | Case No: 6:18-cv-1606-GAP-GJK |
| Parties | SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. RONALD C. MONTANO, TRAVIS STEPHENSON, ANTONIO GIACCA, and MICHAEL WRIGHT, Defendants, ROMEO MONTANO, ELMA C. MONTANO, DENISE MONTANO, and REM FLORIDA PROPERTIES, LLC, Relief Defendants. |
| Court | U.S. District Court — Middle District of Florida |
This matter comes before the Court on the Motion for Partial Summary Judgment (Doc. 99) filed by Securities and Exchange Commission (the "SEC"); and the Motion for Summary Judgment (Doc. 111) filed by Ronald Montano ("Montano"). On referral, Magistrate Judge David A. Baker issued separate Reports and Recommendations recommending the denial of both motions. (Docs. 124, 125). Montano and the SEC filed Objections to the Reports pertaining to their respective motions (Docs. 126, 127), and each filed a Response (Docs. 128, 129). Upon de novo review of the above, the Reports will be adopted.
In this case, the SEC claims the defendants engaged in a massive fraud involving the offer and sale of binary options to prospective investors through false, misleading and otherwise deceptive marketing material promoted on the Internet and disseminated via spam email.1
On March 11, 2019, the SEC sued the defendants alleging violations of the Securities Act of 1933 ("Securities Act") and the Exchange Act of 1934 ("Exchange Act"). (Doc. 54). The SEC asserts the following claims against Montano:
On November 21, 2019, the SEC filed a motion for partial summary judgment on liability, (Doc. 99), and Montano filed a competing motion for summary judgment, (Doc. 111). The Courtreferred both motions to United States Magistrate Judge David A. Baker. Upon review, and after briefing by the parties (see Docs. 113, 114, 115, 117), Judge Baker recommends the denial of both motions, (see Docs. 124, 125).
As discussed in greater detail below, Montano and the SEC object to Judge Baker's recommendation to deny their respective motions. (Docs. 126, 127). With briefing complete (Docs. 128, 129), this matter is ripe for adjudication.
In resolving objections to the recommendation of a magistrate judge, the district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to.2 Fed. R. Civ. P. 72(b)(3). De novo review requires independent consideration of factual issues based on the record. Jeffrey S. by Ernest S. v. State Bd. of Educ. of Ga., 896 F.2d 507, 513 (11th Cir. 1990). After conducting a careful and complete review of the findings and recommendations, the district judge "may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3).
A party is entitled to summary judgment when the party can show that there is no genuine issue as to any material fact. Fed. R. Civ. P. 56(c). Which facts are material depends on the substantive law applicable to the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that no genuineissue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). In determining whether the moving party has satisfied its burden, the Court considers all inferences drawn from the underlying facts in a light most favorable to the party opposing the motion and resolves all reasonable doubts against the moving party. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513. The Court is not, however, required to accept all of the nonmovant's factual characterizations and legal arguments. Beal v. Paramount Pictures Corp., 20 F.3d 454, 458-59 (11th Cir 1994).
When a party moving for summary judgment points out an absence of evidence on a dispositive issue for which the non-moving party bears the burden of proof at trial, the nonmoving party must "go beyond the pleadings and by [his] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Celotex Corp., 477 U.S. at 324, 106 S.Ct. at 2553. Thereafter, summary judgment is mandated against the nonmoving party who fails to make a showing sufficient to establish a genuine issue of fact for trial. Id. The party opposing a motion for summary judgment must rely on more than conclusory statements or allegations unsupported by facts. Evers v. Gen. Motors Corp., 770 F.2d 984, 986 (11th Cir. 1985) ().
Montano raises six objections to the Report on his motion for summary judgment. The Court addresses each objection in turn.
For his first objection, Montano argues that Judge Baker incorrectly found that the SEC hasjurisdiction over this matter because there is no summary judgment evidence that: (1) his marketing activities had any connection to securities-based binary options; (2) the trading software permitted securities-based binary options; (3) consumers traded securities-based binary options; or (4) consumers lost money.
Montano's arguments fail for two reasons. First, there is evidence showing that he marketed securities-based binary options. For example, the evidence reveals that Montano launched a binary options campaign called Larry's Cash Machine and disseminated solicitation material (either directly or indirectly) that promised investors trading software that could do all of the investor's trades in the stock market with 97% accuracy. (Doc. 113-2 at 128:2-16; Doc. 99-3, ¶¶ 15-27 (); Doc. 101 at 112-115 ()). The evidence reveals that Montano also launched other marketing campaigns to funnel prospective investors to broker intermediaries, Boost and BOA Elite, who then referred those investors to brokers who offered binary options tied to stock. (Doc. 100 at 98:5-107:22, 148:22-25, 238:3-239:4; Doc. 102; Doc. 102-1).
Second, the SEC isn't required to prove that the marketed trading software worked as promised or that any securities transactions actually occurred. (See generally Docs. 111, 117, 126). This is because the securities "fraud provisions are not defeated by the fact that a security purportedly traded is nonexistent or fictitious." S.E.C. v. Unique Fin. Concepts, Inc., 196 F.3d 1195, 1200 (11th Cir. 1999) (quoting First Nat. Bank of Las Vegas, N. M. v. Russell's Estate, 657 F.2d 668, 673 n.16 (5th Cir. 1981). In fact, "[i]t would be a considerable paradox if the worse the securities fraud, the less applicable the securities laws."3 Unique Fin. Concepts, 196 F.3d 1195 at1200 (quoting SEC v. Lauer, 52 F.3d 667, 670 (7th Cir. 1995).
Accordingly, Montano has failed to demonstrate that the SEC lacks jurisdiction over this matter.
As his second objection, Montano claims that Judge Baker erred in rejecting his vagueness challenge under the due process clause of the Fifth Amendment. (Doc. 126, pp. 5-6). "It is a basic principle of due process that an enactment is void for vagueness if its prohibitions are not clearly defined." Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972). However, the due process clause does not demand "perfect clarity and precise guidance." Ward v. Rock Against Racism, 491 U.S. 781, 794, 109 S.Ct. 2746, 105 L.Ed.2d 661 (1989). Rather, a statute is only unconstitutionally vague "if it fails to provide people of ordinary intelligence a reasonable opportunity to understand what conduct it prohibits" or "if it authorizes or even encourages arbitrary and discriminatory enforcement." Hill v. Colorado, 530 U.S. 703, 732, 120 S.Ct. 2480, 147 L.Ed.2d 597 (2000) (citation omitted).
There are two types of challenges under the void-for-vagueness doctrine—a facial challenge and an as-applied challenge. A facial challenge "seeks to invalidate a statute or regulation itself."4Indigo Room, Inc. v. City of Fort Myers, 710 F.3d 1294, 1302 (11th Cir. 2013) (citation omitted). By contrast, an as-applied challenge "addresses whether a statute is unconstitutional on the facts of a particular case or to a particular party." Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 1308 (11th Cir. 2009). !
Here, Montano argues that the laws underlying the SEC's claims are unconstitutionally vague "as applied to him." (Doc. 111, pp. 4-8, 13, 15, 16, 17, 18). But he submits no case law to support his bald assertions. Nor does he make any convincing argument that the laws impermissibly left him with doubt as to whether his activities were prohibited or that the laws invite arbitrary enforcement. (See generally, Docs. 111, 126). Indeed, Montano makes no attempt to even analyze the underlying laws to demonstrate how they are vague as applied to his conduct.
Instead, Montano essentially attacks the SEC's ability to prove its case. He argues...
To continue reading
Request your trial