United States v. Blakstad
| Decision Date | 09 October 2020 |
| Docket Number | 19 Cr. 486 (ER) |
| Parties | UNITED STATES OF AMERICA, v. DONALD BLAKSTAD, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Before the Court are a number of pretrial motions by Blakstad to transfer venue, Doc. 52, suppress evidence from several search warrants, Docs. 70, 72, secure a bill of particulars, Doc. 48, issue a Rule 17(c) subpoena, Doc. 35, to disclose or preserve Brady, Giglio, and Jencks Act material, Docs. 50, 56, and to condition the admissibility of summary charts on early disclosure, Doc. 54. For the following reasons, all of Blakstad's motions are DENIED.
A Southern District grand jury returned the first of two indictments in this case in July 2019. Doc. 2. The indictment alleged an insider trading scheme led by Blakstad directed at Illumina, Inc., a San Diego biotechnology company listed on the Nasdaq in New York. Id. ¶¶ 1, 3. In addition to Blakstad, the alleged scheme included Martha Patricia Bustos, an accountant at Illumina who allegedly provided inside information to Blakstad, as well as four unnamed coconspirators. Id. ¶¶ 2, 4-7, 20, 26. In each alleged instance of insider trading, Blakstad would receive inside information from Bustos and either execute a profitable trade himself or pass the information to a coconspirator, who would then make the trade him or herself for personal benefit or for the benefit of Blakstad. Id. ¶¶ 9-11.
This indictment alleged one count of conspiracy to commit securities fraud, two counts of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. The alleged conspiracy involved the use of Bustos' information in sets of transactions that occurred in April 2016, October 2016, August 2017, and July 2018. Indictment ¶ 40. The April 2016 transaction involved "CC-4," a Florida-based friend and business associate of Blakstad. Id. ¶¶ 7, 14. The October 2016 transaction involved all of the coconspirators, including "CC-4," "CC-1," a San Francisco-based principal of a New York firm, "CC-2," a Manhattan-based owner of the same firm, and "CC-3," a California-based watchmaker, who attempted to act on the information Blakstad provided while CC-3 was in Manhattan. Id. ¶¶ 4-6, 18, 20. The indictment alleged that CC-1 transferred nearly $2.6 million to Blakstad via wires that traveled through Manhattan. Id. ¶ 19. The August 2017 transaction involved CC-2, CC-3, and CC-4, with the indictment alleging that Blakstad wired money through Manhattan and coordinated the purchase via phone calls and emails with the Manhattan-based CC-2. Id. ¶¶ 27, 28. The July 2018 transaction involved only CC-4. Id. ¶ 34. Blakstad was arrested on August 8, 2019, in the Southern District of California. See Doc. 12.
Another grand jury returned a superseding indictment in January 2020. Doc. 60. This indictment realleged the scheme contained in the original indictment, and it made new allegations regarding the April 2016, August 2017, and July 2018 transactions as they pertained to a Florida-based associate of Blakstad ("Associate-3").1 See, e.g., id. ¶¶ 16, 34, 42. The superseding indictment also added one count of conspiracy to commit securities and wire fraud, as well as one count of wire fraud. These new counts involved a scheme separate from the transactions allegedly driven by Bustos' inside information. This scheme involved only Blakstad and CC-4, wherein they solicited investments intothree different business. Superseding Indictment ¶ 56. Rather than invest the funds they raised in those businesses, Blakstad and CC-4 allegedly used the funds to make luxury purchases for themselves. Id. ¶ 59. One of the alleged victims of the scheme was Associate-3. See id. ¶ 58.
Before either indictment was issued and Blakstad was arrested, the Government obtained four warrants relevant to this motion. The first warrant was directed to Microsoft in October 2018, Doc. 71 ex. A ("Microsoft Warrant"), and the second to Apple in November 2018, Doc. 71 ex. B ("Apple Warrant").2 Based on affidavits by FBI Special Agent Sylvia Marakas, Magistrate Judge Parker in the case of the Microsoft warrant and Magistrate Judge Lehrburger in the case of Apple found that there was probable cause to believe that one Microsoft MSN email account and four Apple iCloud accounts contained evidence of securities fraud and wire fraud involving insider trading in violation of sections 2, 371, 1343, 1348 and 1349 of Title 18 of the U.S. Code, sections 78j(b) and 78ff of Title 15, and section 240.10b-5 of Title 17 of the Code of Federal Regulations. Microsoft Warrant at 4; id. attach. A at 2 (); Apple Warrant at 1, id. attach. A at 2. The magistrate judges directed Microsoft and Apple to produce all emails sent or received after January 1, 2015, as well as files, history, address book information, subscriber information, transactional records, customer correspondence, service information, and backup data from the accounts. Microsoft Warrant attach. A at 1-2; Apple Warrant attach. A at 1-2. The warrants then permitted law enforcement to look for evidence associated with the Subject Offenses, specifically including:
Microsoft Warrant attach. A at 2-3; see also Apple Warrant attach. B at 2-3 ().
In the affidavits on which both warrants were based, the affiant, Special Agent Marakas, described the procedures that would be used to review the information produced by Microsoft and Apple. Marakas indicated that law enforcement personnelwould conduct a "cursory inspection" of all information in the accounts, in addition to the use of keyword searches, because data in images, for example, may not be discoverable through text search, and because "it is impossible to know in advance all of the unique words or phrases" suspects may use. Doc. 80, exs. 1 ¶ 21, 2 ¶ 30. The Government represents in its briefing that it used a filter team to "segregate[] material that was potentially protected by attorney-client privilege" and provided to Blakstad both the entirety of what was produced by Microsoft and Apple and what the Government deemed responsive to the warrants. Doc. 73 at 17.
The third and fourth warrants were issued by Magistrate Judge Moses in April and July 2019, addressed to Verizon, Sprint, T-Mobile, and AT&T, and directed at obtaining cellphone location information and prospective call logs. Doc. 73 exs. A, B. Together, the two warrants targeted eight cellphones. Id. ¶ 1. Judge Moses found probable cause that evidence of "criminal insider trading" would be "reveal[ed]" through prospective and historical location information of the targeted cell phones, and she found that call log information would be relevant to the Government's ongoing investigation into Blakstad. Id. ¶¶ 2, 4. The warrants directed the cell phone providers to produce prospective location data for a period of 45 days from the dates of the warrants, prospective call log information for a period of 60 days from the dates of the warrants, and historical data dating from March 2, 2019 for the April warrant and June 1, 2019 for the July warrant. Id. ¶ 7-9.
Both of these warrants were supported by affidavits, with Marakas swearing out the affidavit supporting the April warrant and FBI Special Agent Jennifer Riker swearing out the affidavit supporting the July warrant. Doc. 80, exs. 3, 4. In addition to reviewing the evidence of the schemes described in the indictments, Marakas averred that the Government sought the location and call log data of target cellphones to track their movements and aid in seizing them simultaneously at a later time. Doc. 80, ex. 1 ¶ 34. In her affidavit, Riker averred that the cell phone data sought in the July warrant wouldassist in locating and arresting Blakstad, specifically noting that Blakstad kept residences in both San Diego and Las Vegas. Doc. 80, ex. 2 ¶ 6.
The Court held an initial pretrial conference in August 2019. At that...
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