U.S. Securities and Exchange Commission v. Spartan Securities Group, LTD.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v. Case No. 8:19-cv-448-VMC-CPT

SPARTAN SECURITIES GROUP, LTD,

ISLAND CAPITAL MANAGEMENT,

CARL DILLEY, and MICAH ELDRED,

Defendants.

____________/

ORDER

Before the Court is the Motion for Remedies filed by Plaintiff

Securities and Exchange Commission (“SEC”) on April 13, 2022. (Doc.

# 270). Defendants Spartan Securities Group, Ltd., Island Capital

Management, Carl E. Dilley, and Micah J. Eldred (collectively,

“Defendants”) filed a response in opposition on May 23, 2022. (Doc.

# 273). The SEC filed a reply on July 12, 2022. (Doc. # 284). The

Court thereafter held an evidentiary hearing and oral argument on

this matter, and it solicited supplemental materials from the

parties. Following careful consideration, and for the reasons that

follow, the Motion is granted in part and denied in part.

I. Background

Following a 12-day trial in July 2021, a jury handed down a

verdict in Defendants’ favor on 13 of the 14 counts brought by the

SEC. (Doc. # 250). However, the jury rendered a verdict in favor

of the SEC as to Count Six of the complaint, finding that Spartan,

Island, Dilley, and Eldred made materially misleading statements

or omissions in connection with the purchase or sale of securities,

in violation of Section 10(b) and Rule 10b-5(b) of the Exchange

Act. (Id.). Defendants filed a renewed motion for judgment as a

matter of law, which this Court denied. (Doc. # 263).

The SEC now seeks certain remedies against Defendants,

including an injunction, penny stock bars, and monetary relief

consisting of disgorgement and civil penalties. (Doc. # 270).

Defendants have responded, and the Motion is ripe for review.

II. Legal Standard

Congress has authorized the SEC to enforce the Securities Act

of 1933 and the Securities Exchange Act of 1934 and to punish

securities fraud through administrative and civil proceedings. Liu

v. SEC, 140 S. Ct. 1936, 1940 (2020). Once a court determines that

a federal securities law violation has occurred, it has broad

equitable powers to fashion appropriate remedies. SEC v. Lorin, 76

F.3d 458, 461-62 (2d Cir. 1996).

III. Discussion

A. Injunctive Relief

The Exchange Act authorizes the SEC to seek an injunction

“[w]henever it shall appear to the Commission that any person is

engaged or is about to engage in acts or practices constituting a

violation of any provision of this chapter.” 15 U.S.C. § 78u(d)(1).

“The SEC is entitled to injunctive relief when it establishes (1)

a prima facie case of previous violations of federal securities

laws, and (2) a reasonable likelihood that the wrong will be

repeated.” SEC v. Calvo, 378 F.3d 1211, 1216 (11th Cir. 2004).

The jury’s verdict against Defendants sufficiently meets the

requirement of a previous violation, leaving the issue of whether

there is a “reasonable likelihood that the wrong will be repeated.”

The SEC bears the burden of proving that a recurrent violation is

reasonably likely to occur and, in the Eleventh Circuit, the “mere

fact of past violations” is insufficient to establish the propriety

of an injunction. SEC v. Yun, 148 F. Supp. 2d 1287, 1293 (M.D.

Fla. 2001) (citing SEC v. Blatt, 583 F.2d 1325, 1334 (5th Cir.

1978)). In determining whether to grant injunctive relief, factors

to consider are: “[1] [the] egregiousness of the defendant’s

actions, [2] the isolated or recurrent nature of the infraction,

[3] the degree of scienter involved, [4] the sincerity of the

defendant’s assurances against future violations, [5] the

defendant’s recognition of the wrongful nature of the conduct, and

[6] the likelihood that the defendant’s occupation will present

opportunities for future violations.” Calvo, 378 F.3d at 1216.

The SEC seeks permanent injunctive relief against all four

Defendants. Defendants claim that, under the Calvo factors, an

injunction is not warranted in this case. (Doc. # 273 at 3-8). The

Court must first, then, determine whether an injunction is

appropriate.

First, as to the egregiousness of Defendant’s actions, the

SEC presented evidence at trial that Defendants submitted Form

211s to FINRA for multiple issuers containing information that

Defendants knew or reasonably should have known was false, made

materially false statements or omissions in connection with

clearance from the Depository Trust Company, and/or processed bulk

transfers in instances where shares were restricted or their

actions were otherwise improper. In short, the Court agrees with

the SEC that, taking the evidence in the light most favorable to

the jury’s verdict, the evidence demonstrated that Defendants

abused their “gatekeeper” role by enabling the purchase and sale

of securities on the public market that should have been barred or

more carefully vetted by FINRA. This factor leans in favor of an

injunction.

Second, as to the isolated or recurrent nature of the

infraction, the SEC calls the Defendants’ conduct “far-reaching,”

arguing that for more than five years, they played “critical roles

in bringing at least 19 separate blank check companies public under

false pretenses.” Defendants argue that the SEC only presented

evidence of 19 problematic securities offerings, out of the over

1,200-1,500 Form 211 applications Defendants filed , or about 1%

of the applications filed during the relevant time. The Court

believes both parties make valid points, and this factor is

neutral.

Third, as to the degree of scienter involved, based on the

jury’s verdict, Defendants had to make the material

misrepresentations or omissions at issue with at least severe

recklessness. Scienter weighs in favor of an injunction.

Fourth, as to the sincerity of Defendant’s assurances against

future violations and Defendants’ recognition of the wrongful

nature of their conduct, Defendants have not expressed any remorse

for their actions. But they rightly point out that their right to

defend themselves should not be held against them. While the Court

respects Defendants’ right to raise a vigorous defense, the fact

remains that neither individual Defendant has provided the Court

with specific assurances against future violations, has not

admitted any wrongful conduct, and has not shown any remorse. This

factor weighs in favor of an injunction.

Finally, the Court turns to the likelihood that Defendants’

occupation(s) will present opportunities for future violations.

The parties presented evidence on this point at the hearing. Mr.

Eldred, who is 54 years old, testified that he is no longer

registered as a securities broker with the SEC or FINRA. He

voluntarily withdrew his licenses with the regulators in 2019. Mr.

Eldred explained that FINRA requires brokers to have a “sponsoring

organization,” so that to reactivate his FINRA license, he would

need to first find an organization willing to sponsor him and then

FINRA would need to re-grant his licensure. He believes that, based

on his convictions in this case, the likelihood of this happening

is very slim.

Currently, Mr. Eldred is the CEO and on the Board of Directors

of Endurance Exploration Group, a shipwreck recovery and salvage

company. He does not draw a salary from Endurance, although he

could receive dividends or shares of the company’s profits, should

the company do well. Mr. Eldred also works as a non-lawyer partner

in a small law firm, in which he provides business development

services and “expertise,” including securities expertise, to the

firm’s clients.

Mr. Eldred also elaborated on the current status of Spartan

and Island. Island went out of business in 2020 and is not

currently operating. He explained that it shut down due to this

litigation – clients left, and the firm became unprofitable. Island

is no longer registered with the relevant regulators and, to resume

operations, it would have to re-register with the SEC and the DTC.

Mr. Eldred testified that, upon closing, Island sold its book of

business and Eldred has drawn continuing payments from that sale

– he received approximately $100,000 in the past year, and there

are three years left on the sales agreement.

Spartan is also no longer in operation. Mr. Eldred explained

that, in June 2019, Spartan lost more than $15 million in one day

due to the actions of a rogue employee. Spartan initiated a FINRA

arbitration action against the employee and received a $5.4 million

judgment in its favor. However, under an agreement they made with

another firm who paid their legal expenses, if the employee were

to ever pay the judgment, the firm would be reimbursed first. The

employee has thus far not paid any amount of the judgment, and Mr.

Eldred does not believe he has the means to do so.

Pursuant to SEC regulations, Spartan was required to wind

down and cannot operate because of its negative resources. Thus,

to restart operations, Spartan would need to recover all of its

lost capital and also receive regulatory approval from the SEC and

FINRA. Mr. Eldred stated that he does not believe FINRA would allow

Spartan to re-register. Mr. Eldred explained that, although he

personally had no prior disciplinary history with securities

regulators, FINRA had filed 10 actions against Spartan over the

years, fining them close to $400,000. The Court finds Mr. Eldred’s

testimony credible with respect to Spartan and Island.

Mr. Dilley, who is 67 years old, concurred with Mr. Eldred’s

statements about what would be required for Island, Spartan, or

himself as an individual broker to re-enter the securities

business. Given these hurdles, he similarly believes it highly

unlikely that Island or Spartan could resume operations. Mr. Dilley

voluntarily gave up his securities licenses in 2014. Mr. Dilley

retired from Island in January 2018 but remained a consultant for

the company. Mr. Dilley is also involved with Endurance, the

shipwreck salvage company, as the COO and a member of the Board of

Directors. He receives de minimus amounts for overseeing that

company’s accounting, but, like Mr. Eldred, could plausibly

receive profit sharing or dividends from the company. Mr. Dilley

receives income from Social Security, a Canadian pension, work

from his repair shop, and “limited securities consulting.” He also

has a real estate license but testified that he has not yet earned

any money in the real estate business. He is also the owner or

part-owner of certain companies that do not generate much, if any,

income.

1. Injunction against Spartan

The Court is persuaded that the economic, logistical, and

regulatory impediments to Spartan resuming operations make it

unlikely that it will ever re-enter the securities business. The

Court is mindful that “[t]he purpose of injunctive relief is, after

all, not to punish but to deter future violations.” SEC v. Advance

Growth Capital, Corp., 470 F.2d 40, 54 (7th Cir. 1972). The SEC

argues that Spartan could plausibly resurrect operations in the

securities realm, but the standard the SEC must show is a

“reasonable likelihood that the wrong will be repeated.” Calvo,

378 F.3d at 1216 (emphasis added). They have not met that standard

here, and the Court will not issue an injunction against Spartan

because that entity is basically defunct with little to no chance

of ever resuming operations. See SEC v. Scott, 565 F. Supp. 1513,

1537 (S.D.N.Y. 1983) (refusing to grant injunctive relief where,

based on the record, the court was “unable to find a reasonable

likelihood that, absent an injunction, [the defendant] would be

likely to commit future violations of the securities laws”); see

also SEC v. Blockvest, LLC, No. 18CV2287-GPB(BLM), 2018 WL 6181408,

at *8 (S.D. Cal. Nov. 27, 2018), on reconsideration, No. 18CV2287-

GPB(BLM), 2019 WL 625163 (S.D. Cal. Feb. 14, 2019) (refusing to

grant preliminary injunction where defendant agreed to stop his

challenged actions and thus, SEC had not demonstrated a reasonable

likelihood that the wrong will be repeated). Finally, the Court

also notes that Spartan will be subject to a penny stock bar, as

explained further below, which is appropriate because its business

(and the misconduct at issue here) centered on penny stocks.

2. Injunction against Island

Testimony from the evidentiary hearing showed that Island,

like Spartan, is no longer operational. However, there are two

important differences between the companies. First, while Island

may be de-registered with regulators, it does not face the same

capitalization concerns that Spartan does if it wished to resume

operations. Second, as a transfer agent, the SEC is not seeking a

penny stock bar against Island, a measure that the Court believes

to be adequate with respect to Spartan. For these reasons, the

Court will issue an injunction against Island. Furthermore, as a

corporate defendant, the Court need not consider impacts upon

livelihood or credibility like it does with individual defendants.

The Court sees no reason why the injunctive relief granted here

cannot be permanent. Furthermore, the Court finds the SEC’s

proposed injunctive language, as revised, is sufficiently

specific, and the Court adopts it here:

IT IS ORDERED, ADJUDGED, AND DECREED that Defendant is

permanently restrained and enjoined from violating,

directly or indirectly, Section 10(b) of the Exchange

Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) promulgated

thereunder [17 C.F.R. § 240.10b-5(b)], by using any

means or instrumentality of interstate commerce, or of

the mails, or of any facility of any national securities

exchange, in connection with the purchase or sale of any

security:

to make any untrue statement of a material fact or to

omit to state a material fact necessary in order to make

the statements made, in the light of the circumstances

under which they were made, not misleading, regarding:

i. whether an issuer is a shell or blank check

company; or

ii. information submitted to the Depository Trust

Company (“DTC”) or its participants when seeking

DTC eligibility for an issuer; or

iii. the designation of securities as free trading;

or

iv. the issuance and transfer of securities,

including by means of stock certificates without

restrictive legends.

(Doc. # 296-1).

3. Injunctions against Mr. Dilley and Mr. Eldred

The Court will issue injunctions against Mr. Dilley and Mr.

Eldred. Looking at the totality of the facts and circumstances,

including the fact that both individuals still have at least

tangential contacts with the securities industry (Mr. Dilley with

his “limited securities consulting” and Mr. Eldred in his advisory

role at the law firm), there is a reasonable likelihood that the

wrong could be repeated. Both men have been involved with the

securities industry for most of their lives. Both are involved or

have been involved in multiple businesses and are likely still

well connected in the industry. Furthermore, while the Court does

not penalize them for defending this case, neither man has given

adequate assurances against future misconduct, beyond (credible)

doubts regarding their ability to re-enter the industry. See, e.g.,

SEC v. Selden, 632 F. Supp. 2d 91, 99 (D. Mass. 2009) (imposing

injunction where defendant worked at a non-public company, but

“should it become [a public company], Selden would once again

assume the ultimate responsibility of ensuring the accuracy of the

company’s public statements. His abuse of such authority in the

past and his refusal to accept full responsibility in this case .

. . demonstrates, at the very least, a lack of adequate assurance

against future misconduct.”).

Here, both Mr. Dilley and Mr. Eldred are serial entrepreneurs

with years of experience offering services whereby private

companies can access the public markets. The Court believes there

to be a reasonable likelihood that both men could attempt to

leverage their knowledge of the securities business and the penny

stock market and possibly repeat the wrongs for which they were

convicted. See SEC v. Miller, 744 F. Supp. 2d 1325, 1341-42 (N.D.

Ga. 2010) (holding that defendant’s “background as an entrepreneur

and his proven ability to start a private company and take it

public weighs in favor of an injunction”).

However, while the SEC seeks permanent lifetime injunctions

against Mr. Dilley and Mr. Eldred, the Court is not persuaded that

such a drastic remedy is necessary. These violations occurred many

years ago and both men have voluntarily withdrawn their securities

licenses. They are also advancing in age, being 54 and 67 years

old. Thus, after careful consideration, the Court believes a five-

year injunction to be appropriate against Mr. Dilley and Mr.

Eldred. See Miller, 744 F. Supp. 2d at 1348 (imposing a five-year

bar); Selden, 632 F. Supp. 2d at 99 (imposing a two-year bar)

Having determined that a five-year injunction is appropriate,

the Court must fashion relief that is fair and legal. The SEC seeks

an injunction against Mr. Dilley and Mr. Eldred that states as

follows:

IT IS ORDERED, ADJUDGED, AND DECREED that Defendant is

permanently restrained and enjoined from violating,

directly or indirectly, Section 10(b) of the Exchange

Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) promulgated

thereunder [17 C.F.R. § 240.10b-5(b)], by using any

means or instrumentality of interstate commerce, or of

the mails, or of any facility of any national securities

exchange, in connection with the purchase or sale of any

security:

to make any untrue statement of a material fact or to

omit to state a material fact necessary in order to make

the statements made, in the light of the circumstances

under which they were made, not misleading, regarding:

i. initiating a quoted market in an issuer’s

security; or

ii. the listing and trading of an issuer’s stock;

or

iii. applications or submissions pursuant to

Exchange Act Rule 15c2-11; or

iv. whether an issuer is a shell or blank check

company; or

v. the identity of any consultants or persons in

control of an issuer; or

vi. the relationships or affiliations among an

issuer’s shareholders and those in control of

the issuer; or

vii. an issuer’s plans for potential mergers or

acquisitions; or

viii. an issuer’s business purpose; or

ix. the nature and conduct of due diligence of an

issuer; or

x. the identity of the person or entity for whom

a security’s quotation is being submitted,

when seeking to initiate or resume quotations

of an issuer’s security; or

xi. whether material information, including

adverse material information, exists

regarding an issuer; or

xii. information submitted to the Depository Trust

Company (“DTC”) or its participants when

seeking DTC eligibility for an issuer; or

xiii. information submitted to Financial Industry

Regulatory Authority (“FINRA” when seeking to

initiate or resume quotations of an issuer’s

security; or

xiv. the designation of securities as free trading;

or

xv. the issuance and transfer of securities,

including by means of stock certificates

without restrictive legends.

(Doc. ## 296-3, 296-4).

Defendants argue that injunctive relief is inappropriate

because the SEC seeks “obey the law” injunctions, which are not

permitted in this Circuit.1 Another court within the Middle

District of Florida has explained why “obey the law” injunctions

are problematic:

Articulating the standard of specificity that every

injunction must satisfy, Rule 65(d), Federal Rules of

Civil Procedure, states that “[e]very order granting an

injunction . . . must: state the reasons why it issued;

state its terms specifically; and describe in reasonable

detail — and not by referring to the complaint or other

document — the act or acts sought to be restrained or

required[.]” The specificity requirement “prevent[s]

uncertainty and confusion on the part of those faced

with injunctive orders and . . . avoid[s] the possible

founding of a contempt citation on a decree too vague to

be understood.” Schmidt v. Lessard, 414 U.S. 473, 476

(1974) (finding that because “an injunctive order

prohibits conduct under threat of judicial punishment,

basic fairness requires that those enjoined receive

explicit notice of precisely what conduct is

outlawed.”). Thus, every injunction must contain “an

operative command capable of ‘enforcement.’” “A person

enjoined by court order should only be required to look

within the four corners of the injunction to determine

what he must do or refrain from doing.” Accordingly,

“appellate courts will not countenance injunctions that

merely require someone to ‘obey the law.’”

SEC v. Sky Way Glob., LLC, 710 F. Supp. 2d 1274, 1277–78 (M.D.

Fla. 2010) (citations omitted or altered); see also SEC v. Smyth,

420 F.3d 1225, 1233 (11th Cir. 2005) (finding that proposed

injunctions that tracked the provisions of the statute or

regulation was a “quintessential ‘obey-the-law’ injunction”).

1 At oral argument, the Court indicated that it agreed with

Defendants that the SEC’s first set of proposed injunctions was

inadequate. While the Defendants have not proffered this argument

against the SEC’s revised injunctive language, the Court will still

discuss it.

The Court believes that the additional, revised language

proposed by the SEC takes the proposed injunctive language outside

the realm of an “obey the law” injunction because it describes

specific conduct that is prohibited. Certain of the language,

however, remains too broad or vague. For example, the prohibition

on making any misrepresentation pertaining to “the listing and

trading of an issuer’s stock” is very broad and not directly linked

to the misconduct at issue in this case. For this reason, the Court

has adopted only those prohibitions on conduct that are

sufficiently specific and tied to the misconduct at issue in this

case.

Accordingly, the Court will enter injunctions against Mr.

Dilley and Mr. Eldred as follows:

IT IS ORDERED, ADJUDGED, AND DECREED that Defendant is

restrained and enjoined, for a period of five years from

the date of this judgment, from violating, directly or

indirectly, Section 10(b) of the Exchange Act [15 U.S.C.

§ 78j(b)] and Rule 10b-5(b) promulgated thereunder [17

C.F.R. § 240.10b-5(b)], by using any means or

instrumentality of interstate commerce, or of the mails,

or of any facility of any national securities exchange,

in connection with the purchase or sale of any security:

to make any untrue statement of a material fact or to

omit to state a material fact necessary in order to make

the statements made, in the light of the circumstances

under which they were made, not misleading, regarding:

i. initiating a quoted market in an issuer’s

security; or

ii. applications or submissions pursuant to

Exchange Act Rule 15c2-11; or

iii. whether an issuer is a shell or blank check

company; or

iv. the identity of any consultants or persons

in control of an issuer; or

v. an issuer’s plans for potential mergers or

acquisitions; or

vi. the identity of the person or entity for

whom a security’s quotation is being

submitted, when seeking to initiate or

resume quotations of an issuer’s security;

or

vii. information submitted to the Depository

Trust Company (“DTC”) or its participants

when seeking DTC eligibility for an issuer;

or

viii. information submitted to Financial Industry

Regulatory Authority (“FINRA”) when seeking

to initiate or resume quotations of an

issuer’s security.

B. Penny Stock Bar

Courts may enter a penny stock bar “against any person

participating in, or, at the time of the alleged misconduct, who

was participating in, an offering of penny stock[.]” 15 U.S.C. §

77t(g)(1); 15 U.S.C. § 78u(d)(6)(A). A “penny stock” generally

includes an equity security bearing a price of less than five

dollars. See SEC v. E-Smart Techs., Inc., 139 F. Supp. 3d 170, 182

(D.D.C. 2015). The Court may enter a penny stock bar “permanently

or for such period of time as the court shall determine.” 15 U.S.C.

§§ 77t(g)(1), 78u(d)(6). Defendants do not dispute that the

underlying scheme involved penny stocks. Nor do they dispute that

they participated in an “offering of penny stock,” which broadly

encompasses “engaging in activities with a broker, dealer, or

issuer for purposes of issuing, trading, or inducing or attempting

to induce the purchase or sale of, any penny stock.” 15 U.S.C §§

77t(g), 78u(d)(6).

The only question, then, is whether such a bar is warranted.

In deciding whether to impose a penny stock bar, “the court

examines the nature of the defendant’s conduct and the likelihood

that his occupation and experience will present further

opportunities to violate the securities laws.” SEC v. BIH Corp.,

No. 2:10-cv-577-JES-DNF, 2014 WL 7499053, * 6 (M.D. Fla. Dec. 12,

2014) (citation omitted).

Here, a penny stock bar against Mr. Dilley and Mr. Eldred is

warranted. The jury convicted them of securities fraud in

connection with the offering of penny stocks. There was testimony

at the evidentiary hearing that the vast majority of businesses

with which Mr. Eldred and Mr. Dilley involved themselves were penny

stocks. In other words, a penny stock bar would prohibit Mr. Dilley

and Mr. Eldred from engaging in precisely the sort of misconduct

that led to their instant convictions. Both men protest that such

a bar would have ramifications on innocent investors in Endurance,

the shipwreck salvage company with which they are both involved.

But the Court finds that the need to protect the investing public

as a whole outweighs the speculative possibility that 400 investors

within one company could suffer future harm.

The SEC requests a lifetime ban, but the statute permits the

Court to fashion a penny stock bar “for such period of time as the

court shall determine.” 15 U.S.C. §§ 77t(g)(1), 78u(d)(6). Given

the age of Mr. Dilley and Mr. Eldred, the Court determines that a

10-year penny stock bar is appropriate in this case. In declining

to impose a lifetime bar, the Court is mindful of the guidance

offered by the Fifth Circuit: “[W]hen the [SEC] chooses to order

the most drastic remedies at its disposal, it has a greater burden

to show with particularity the facts and policies that support

those sanctions and why less severe action would not serve to

protect investors.” Steadman v. SEC, 603 F.2d 1126, 1137 (5th Cir.

1979).2 The SEC has not explained why a lifetime bar is more

appropriate than a lesser sanction. Given the Commission’s failure

to do so here, the Court will not impose the most drastic remedy,

deciding that a temporally limited bar is sufficient on these

facts.

The SEC also seeks a permanent penny stock bar against

Spartan. Considering that Spartan dealt in penny stocks, the Court

is persuaded that a permanent ban with respect to penny stocks is

in order for Spartan.

C. Disgorgement

The SEC originally sought disgorgement from Island in the

amount of $147,508. (Doc. # 270 at 2). As the SEC explains it,

2 Decisions of the Fifth Circuit rendered prior to October 1, 1981,

are binding upon courts in the Eleventh Circuit. Bonner v. City of

Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).

Island collected fees from 14 identified issuers as part of the

scheme, and the Commission seeks to recover these “ill-gotten

gains.”

Currently, federal law provides for disgorgement in this way:

(5) Equitable relief

In any action or proceeding brought or instituted by the

Commission under any provision of the securities laws,

the Commission may seek, and any Federal court may grant,

any equitable relief that may be appropriate or

necessary for the benefit of investors.

. . .

(7) Disgorgement

In any action or proceeding brought by the Commission

under any provision of the securities laws, the

Commission may seek, and any Federal court may order,

disgorgement.

15 U.S.C. §§ 78u(d)(5), 78u(d)(7).

The first question this Court must address is whether it may

order disgorgement at all. The key case in this area is the recent

Supreme Court case of Liu v. SEC, 140 S. Ct. 1936 (2020). In that

case, the Supreme Court held that the SEC could seek disgorgement

through its power to award “equitable relief” under 15 U.S.C. §

78u(d)(5) so long as the award did not exceed the wrongdoer’s net

profits and was “awarded for victims.” Id. at 1940. The Court wrote

that while disgorgement was at heart an equitable remedy so long

as it sought to restore ill-gotten gains from the wrongdoer to his

victims, the SEC had been pushing the bounds of the equitable

nature of the remedy in three ways: (1) “by ordering the proceeds

of fraud to be deposited in Treasury funds instead of dispersing

them to victims”; (2) “imposing joint and several disgorgement

liability”; and (3) “declining to deduct even legitimate expenses

from the receipts of fraud.” Id. at 1946.

As to the first problem, which centers on the importance of

returning ill-gotten gains to defrauded victims, the Supreme Court

stressed that “the SEC’s equitable, profits-based remedy must do

more than simply benefit the public at large by virtue of depriving

a wrongdoer of ill-gotten gains. To hold otherwise would render

meaningless” the statute’s language about the relief being

“appropriate or necessary for the benefit of investors.” Id. at

1948. This language “must mean something more than depriving a

wrongdoer of his net profits alone, else the Court would violate

the cardinal principle of interpretation that courts must give

effect, if possible, to every clause and word of a statute.” Id.

(quotation marks and citation omitted).

Importantly for this case, the Supreme Court specifically

declined to address the question of whether, when it is impossible

to identify defrauded victims, disgorged funds deposited into the

Treasury could comply with the requirements of the statute, writing

that:

The Government additionally suggests that the SEC’s

practice of depositing disgorgement funds with the

Treasury may be justified where it is infeasible to

distribute the collected funds to investors. It is an

open question whether, and to what extent, that practice

nevertheless satisfies the SEC’s obligation to award

relief “for the benefit of investors” and is consistent

with the limitations of § 78u(d)(5). The parties have

not identified authorities revealing what traditional

equitable principles govern when, for instance, the

wrongdoer’s profits cannot practically be disbursed to

the victims. But we need not address the issue here.

The parties do not identify a specific order in this

case directing any proceeds to the Treasury. If one is

entered on remand, the lower courts may evaluate in the

first instance whether that order would indeed be for

the benefit of investors as required by § 78u(d)(5) and

consistent with equitable principles.

Id. at 1948-49.

After Liu, Congress amended the securities remedies statute

as part of the National Defense Authorization Act of 2021 (“NDAA”).

Specifically, the NDAA added subsection (7) above to expressly

permit courts to “[i]n any action or proceeding brought by the

Commission under any provision of the securities laws, [] order []

disgorgement.” 15 U.S.C. § 78u(d)(7). The NDAA also amended

subsection (d)(3) to make it explicit that district courts have

the power to impose both civil penalties and to “require

disgorgement under paragraph (7) of any unjust enrichment by the

person who received such unjust enrichment as a result of such

violation.” Id. § 78u(d)(3). Thus, Sections 78u(d)(3) and (7), as

added by the NDAA, do not contain the “for the benefit of

investors” language that is still included in Section 78u(d)(5).

The NDAA applies to “any action or proceeding that is pending on”

January 1, 2021. NDAA, Section 6501(b). This action was pending on

that date.

With this background in mind, the Court turns to the parties’

arguments. The SEC concedes that “distribution of the disgorged

funds to harmed investors is not feasible or practical in this

case” and that while Defendants’ conduct harmed the capital markets

at large, “identifying specific investors who were harmed or the

amount by which any particular investor was harmed is not

possible.” (Doc. # 270 at 14). The SEC’s position is that “the

only alternative that is consistent with equitable principles is

to send the disgorged funds to the Treasury.” (Id.). The parties

have stipulated that a distribution to investors of the

disgorgement amount requested would be infeasible. (Doc. # 287).

The SEC argues that the recent amendments under the NDAA

“provide[] the courts with greater flexibility to determine where

collected disgorged funds may be distributed, because the

provision omits the phrase ‘for the benefit of investors.’” (Doc.

# 270 at 14 n.29). The Court takes the SEC’s position to be that

because the newly added provisions of the NDAA are silent on the

question of whether funds must be returned to investors – i.e.,

because subsections (d)(3) and (7) do not contain the “for the

benefit of investors” language that is included in subsection

(d)(5) – the SEC need not show that disgorgement is for “the

benefit of investors” and, thus, disgorgement to the Treasury is

appropriate.

Again, the NDAA applies to the instant action because it was

pending on January 1, 2021. NDAA, Section 6501(b). Thus, 15 U.S.C.

§ 78u(d)(7) explicitly provides this Court the ability to order

disgorgement and does not require that such disgorgement be “for

the benefit of investors.” The Court holds that it may order

disgorgement and direct that disgorged funds be sent to the

Treasury under Section 78u(d)(7).

Alternatively, the Court holds that, even if it is (post-

NDAA) still required to balance the equities under Liu, the

equities here weigh in favor of disgorgement to the Treasury,

rather than allowing Island to retain the money. Both parties,

acknowledging that this case squarely presents the “open question”

in Liu, have attempted to identify which traditional equitable

principles should govern here. The SEC identifies two such

principles. First, it argues that distribution to the Treasury

serves the foundational principle that no person should benefit

from his own wrongs and that, between Island and the Treasury, it

is more equitable for the money to go to Treasury. (Doc. # 270 at

14). Second, it points to the legal doctrine of cy pres, arguing

that where identifying victims is not feasible, the money should

go to the nearest possible alternative. (Id. at 15). And Defendants

also identify certain equitable principles: (1) that disgorgement

here is inherently a penalty on Island and that equity never “lends

its aid” to enforce a penalty; and (2) that the issuers who paid

the claimed money into Island were themselves fraudsters and the

doctrine of unclean hands bars repayment of these funds. (Doc. #

273 at 11-12).

The Eleventh Circuit has yet to issue any guidance on this

topic. The Court’s independent research demonstrates that multiple

district courts have, post-Liu, allowed disgorgement awards to be

directed toward the Treasury. See SEC v. Bronson, No. 12-CV-6421

(KMK), 2022 WL 1287937, at *14 (S.D.N.Y. Apr. 29, 2022) (denying

petitioner’s challenge to disgorgement award in Rule 60 motion

where the final judgment did not identify any identifiable harmed

investors to whom the disgorged profits should be returned,

concluding that the disgorgement award was consistent with Liu);

SEC v. Almagarby, No. 17-62255-CIV-COOKE/HUNT, 2021 WL 4461831, at

*3 (S.D.N.Y. Aug. 16, 2021) (rejecting defendants’ argument that

disgorgement should be denied because the SEC had not identified

any victims and there was no proximate causation between the

defendants’ securities law violation (failing to register as a

dealer) and any losses from investors, writing that Supreme Court

precedent does not require the SEC to “identify specific victims

to whom a disgorgement award shall be distributed, or that all

disgorged funds must be returned to investors, or that a

disgorgement award should be limited to those funds that could be

returned to investors”); SEC v. Laura, No. 18-CV-5075 (NGG)(VMS),

2020 WL 8772252, at *5 (E.D.N.Y. Dec. 30, 2020) (reasoning that

Liu “does not require that a disgorgement award reflect every

individually wronged investor’s private agreements. If it did, a

court would need to conduct a mini-trial as to each investor before

it could order disgorgement. There is no reason to believe that

Liu, which confirmed the breadth of the SEC’s power to seek

equitable awards, also stealthily erected such a substantial

barrier to SEC recovery”).

In sum, a balancing of the equities favors ordering

disgorgement and allowing it to be sent to the Treasury. Between

the money staying with Island, a key player in a scheme to put

dubious equities on the market, or a fund at the Treasury, it is

more equitable to order disgorgement.

Having determined that disgorgement is appropriate in this

case, the Court must next calculate the amount of the disgorgement.

The parties dispute the applicable statute of limitations. Once

again, the NDAA comes into play here. The previous statute of

limitations for disgorgement was five years. But in the NDAA,

Congress mandated that the SEC may bring a disgorgement action

under the newly added subparagraph (7) within 10 years of the

latest violation of the securities laws for which scienter must be

established, including section 10(b). 15 U.S.C. § 78u(d)(8)(A).

Defendants argue that the SEC did not amend its complaint to

plead relief under the NDAA and, thus, it is more equitable for

the five-year statute of limitations (in effect when the SEC first

filed this action) to apply. Moreover, Defendants call the NDAA’s

retroactivity provision constitutionally “dubious” because it

violates the ex post facto clause and violates Island’s due process

rights. These arguments are unconvincing. This case was currently

pending as of January 1, 2021, and thus the NDAA applies to it.

One court has applied the NDAA even to cases where a judgment was

entered under the old five-year statute of limitations but was

still “pending” because the Second Circuit had not yet ruled on

the parties’ appeal. See SEC v. Ahmed, No. 3:15CV675 (JBA), 2021

WL 2471526, at *4 (D. Conn. June 16, 2021) (citing Landgraf v. USI

Film Prod., 511 U.S. 244, 273-74 (1994) (“[A] court should apply

the law in effect at the time it renders its decision, even though

that law was enacted after the events that gave rise to the

suit.”)). What’s more, Defendants fail to cite any authority in

support of its due process and ex post facto arguments. Cf. SEC v.

Gallison, No. 15 CIV. 5456 (GBD), 2022 WL 604258 (S.D.N.Y. Mar. 1,

2022) (holding that ex post facto clause did not preclude

application of the NDAA’s extended statute of limitations to

disgorgement claims). Accordingly, the Court will apply a 10-year

statute of limitations to the disgorgement award. As explained at

the evidentiary hearing, taking into account certain tolling

agreements, this allows the SEC to recover fees going back to 2008.

The SEC is entitled to disgorgement upon producing “a

reasonable approximation” of a defendant’s ill-gotten gains.

Calvo, 378 F.3 at 1217. “Exactitude is not a requirement; so long

as the measure of disgorgement is reasonable, any risk of

uncertainty should fall on the wrongdoer whose illegal conduct

created that uncertainty.” Id. (citation and quotation marks

omitted). Once the SEC has met its burden, the burden then shifts

to the defendants to demonstrate that the SEC’s estimate is not a

reasonable approximation. Id. A defendant’s current financial

situation, or any hardship that disgorgement would impose, are not

factors to be considered in determining disgorgement. SEC v.

Warren, 534 F.3d 1368, 1370 (11th Cir. 2008). Both parties seem to

agree that the “reasonable approximation” standard has survived

Liu. See SEC v. Tayeh, 848 F. App’x 827, 828 (11th Cir. 2021)

(unpublished) (“Disgorgement is an equitable remedy intended to

prevent unjust enrichment from ill-gotten gains and must not be

used punitively. The CFTC has the burden to produce a reasonable

approximation of a defendant’s ill-gotten gains to sustain a

disgorgement amount.” (citation omitted)); SEC v. Camarco, No. 19-

1486, 2021 WL 5985058, at *15-16 (10th Cir. Dec. 16, 2021) (noting

multiple courts across the country that continue to abide by the

reasonable approximation standard).

The SEC here has compiled the amounts that Island received in

fees from each of the 14 Mirman/Rose companies from the applicable

statute of limitations date through the date of the issuer’s bulk

sale. In support, the SEC attached a declaration from Mark Dee, an

accountant with the SEC. He reviewed certain Island statements

showing fees invoiced and paid by these 14 issuers. Dee then

calculated a summary of the total fees paid by the issuers to

Island during the relevant time frames. Dee’s calculation shows

the total fees collected as follows:

(1) Topaz Resources, Inc. f/k/a Kids Germ Defense Corp:

$11,800

(2) MyGo Games Holding Co. f/k/a Obscene Jeans Corp.:

$18,923

(3) On the Move Systems Corp.: $11,875

(4) Rainbow Coral Corp.: $13,975

(5) Angiosoma f/k/a First Titan: $8,375

(6) Neutra Corp.: $8,175

(7) Aristocrat Group Corp.: $11,208

(8) Rebel Group Inc. f/k/a Inception Technology Group Inc.

f/k/a Moxian Group Holdings Inc. f/k/a First Social

Networx: $10,674

(9) Global Group Enterprises Corp.: $9,779

(10) E-Waste Corp.: $9,474

(11) Codesmart Holdings Inc. f/k/a First Independence Corp.:

$8,178

(12) Envoy Group: $7,500

(13) Changing Technologies Inc.: $9,400

(14) First Xeris Corp.: $8,172

TOTAL: $147,508

See (Doc. # 270-1, Ex. 2).

The analysis is not yet complete because, under Liu, courts

must deduct legitimate business expenses when fashioning

disgorgement awards. See Liu, 140 S. Ct. at 1950 (explaining that

“courts must deduct legitimate expenses before ordering

disgorgement under § 78u(d)(5)” because “[a] rule to the contrary

that makes no allowance for the cost and expense of conducting a

business would be inconsistent with the ordinary principles and

practice of courts of chancery” (internal alterations and

quotation marks omitted)).

Following the evidentiary hearing, both parties submitted

documents identifying legitimate expenses incurred by Island prior

to the bulk sale date for each company. The SEC tacitly agreed to

most of these expenses, and to the extent it continues to argue

that such expenses should not be deducted, that position is both

unfair and inconsistent with Liu. The expenses identified by the

parties include fees that Island paid to third parties for courier

services, printing, and regulatory fees. The Court agrees that

these expenses are appropriate to deduct, and they are supported

by the statements provided by the SEC.

Defendants argue for further reductions, pointing out that

the fees paid into Island do not account for the business’s fixed

costs and overhead. That may well be, but the only evidence that

Island set forth in support of this argument were Island’s audited

annual financial statements for 2013 and 2014, along with the

testimony of Mr. Eldred that Island’s profit margins were typically

between 10 and 25%. But this is insufficient to show that the SEC’s

estimate is not a reasonable approximation and, moreover, any risk

of uncertainty necessarily falls on Island. See Calvo, 378 F.3 at

1217 (explaining that “[e]xactitude is not a requirement; so long

as the measure of disgorgement is reasonable, any risk of

uncertainty should fall on the wrongdoer whose illegal conduct

created that uncertainty”).

Accordingly, listed below are the total fees paid by each of

the 14 issuers to Island up to the stipulated bulk sale dates; the

legitimate business expenses incurred by Island prior to the bulk

sale date; and the net fees for that account (that is, fees paid

to Island less business expenses).

Issuer Fees Paid In Expenses Fees - Expenses

Angiosoma f/k/a

8375 75 8,300

First Titan

Aristocrat Group 110083 1136 9,872

Corp.

Changing

9400 925 8,475

Technologies

E-Waste Corp. 9474 274 9,200

Global Group

95794 229 9,350

Enterprises

MYGO Games f/k/a

18923 8500 10,423

Obscene Jeans

On the Move

116755 3575 8,100

Systems

Neutra Corp. 8175 75 8,100

Rainbow Coral

13975 5075 8,900

Corp.

Topaz Resources

f/k/a Kids Germ 11800 35006 8,300

Defense Corp.

3 The Court excluded one $200 payment made after the bulk sale

date.

4 The Court excluded one $200 payment made after the bulk sale

date.

5 The Court excluded one $200 payment made after the bulk sale

date.

6 The SEC disputes whether this expense, marked on the statement

as a $3,500 payment to the DTC (Depository Trust Company), should

be included. While it is true that this was invoiced on April 6,

2010 (before the bulk sale date), and the next payment made was

not until June 2010 (after the bulk sale date), as SEC witness

Codesmart f/k/a

First

8178 278 7,900

Independence

Corp.

Rebel Group f/k/a

First Social 10674 974 9,700

Networx Corp.

Envoy Group7 N/A

First Xeris

8172 272 7,900

Group8

TOTALS $139,408 $24,888 $114,520

Accordingly, Island will be ordered to disgorge $114,520.00.

D. Prejudgment Interest

The SEC also seeks prejudgment interest on any disgorged

amount, specifically, it seeks the IRS underpayment rate (what it

would have cost to borrow money from the government). Courts in

this Circuit regularly apply this rate in calculating prejudgment

interest on disgorgement awards. See SEC v. Lauer, 478 F. App’x

550, 557–58 (11th Cir. 2012) (noting the widespread use of the IRS

underpayment rate and holding that the district court did not abuse

Mark Dee testified, Topaz Resources had an odd payment history. It

began with a $1,500 payment, prior to any invoice, and the issuer

then made a $10,000 payment on February 23, 2010, even though there

was only a $6,500 balance. The Court believes, on the whole, this

DTC cost was in furtherance of setting up the issuer’s account and

is appropriately deducted as a legitimate business expense.

7 The Court agrees with Defendants that because the SEC submitted

only an invoice, not a statement, in support of the Envoy Group

issuer, there is insufficient evidence to support a fee payment

for Envoy Group.

8 No bulk sale date.

its discretion in applying this “commonly used” rate). Because

awards of prejudgment interest are compensatory, not punitive, the

district court should make the interest decision through an

“assessment of the equities.” Id.

Defendants note that over $21,000 of the $51,000 requested in

interest has accrued since the complaint was filed and they argue

that the award would therefore unfairly penalize Island for

exercising its right to defend itself. Defendants do not point to

any case law in support of this proposition, and the Court does

not find Defendants’ argument persuasive.

Rather, the Court utilized the same framework employed by the

SEC in calculating prejudgment interest – using the IRS

underpayment rate, with interest compounded quarterly, and running

from July 1, 2014 until February 28, 2022. But the Court utilized

the disgorgement value calculated above: $114,520. The Court

calculates that $39,874.05 is due in prejudgment interest. Thus,

in total, Island owes $154,394.05. Regardless of the precise

mathematical calculation, the Court believes this to be a fair and

appropriate amount of disgorgement principal and interest.

E. Civil Penalties

Federal securities law authorizes a court to impose civil

penalties for violation of the federal securities laws and provides

three “tiers” of penalties in escalating amounts.

(1) First tier

For each violation, the amount of the penalty shall not

exceed the greater of (i) $5,000 for a natural person or

$50,000 for any other person, or (ii) the gross amount

of pecuniary gain to such defendant as a result of the

violation.

(2) Second tier

The amount of penalty for each such violation shall not

exceed the greater of (i) $50,000 for a natural person

or $250,000 for any other person, or (ii) the gross

amount of pecuniary gain to such defendant as a result

of the violation.

(3) Third tier

The amount of penalty for each such violation shall not

exceed the greater of (i) $100,000 for a natural person

or $500,000 for any other person, or (ii) the gross

amount of pecuniary gain to such defendant as a result

of the violation.

15 U.S.C. §§ 77t(d), 78u(d)(3).

These amounts are occasionally adjusted for inflation. Thus,

for the relevant period, Tier One penalties are $7,500/$80,000,

Tier Two penalties are $80,000/$400,000, and Tier Three penalties

are $160,000/$775,000. See (Doc. # 296-8).

The Court can determine the applicability of each tier only

“upon a proper showing” by the SEC. For a Tier Two penalty, the

Court must find that the violation “involved fraud, deceit,

manipulation, or deliberate or reckless disregard of a regulatory

requirement.” 15 U.S.C. § 78u(d)(3). For a Tier Three penalty, the

Court must find that the violation “involved fraud, deceit,

manipulation, or deliberate or reckless disregard of a regulatory

requirement” and that the violation “directly or indirectly

resulted in substantial losses or created a significant risk of

substantial losses to other persons.” (Id.).

The amount of the civil penalty is determined by the district

court judge “in light of the facts and circumstances” and is

subject to the statutory maximums prescribed above. In evaluating

the facts and circumstances of the case, the Court looks to factors

such as: (1) the egregiousness of the violations at issue, (2)

defendants’ scienter, (3) the repeated nature of the violations,

(4) defendants’ failure to admit to their wrongdoing, (5) whether

defendants’ conduct created substantial losses or the risk of

substantial losses to other persons, (6) defendants’ lack of

cooperation and honesty with authorities, if any, and (7) whether

the penalty that would otherwise be appropriate should be reduced

due to defendants’ demonstrated current and future financial

condition. SEC v. Aerokinetic Energy Corp., No. 08–CV–1409, 2010

WL 5174509, at *5 (M.D. Fla. Dec. 15, 2010).

The SEC here argues for Third Tier penalties, arguing that at

trial they presented evidence that (1) Defendants’ violations

involved fraud, deceit, manipulation, or deliberate or reckless

disregard of a regulatory requirement; and (2) the violations

created a significant risk of substantial losses. The Court agrees

only in part.

First, the Court agrees with the SEC that Defendants’

violations here involved fraud, deceit, manipulation, or

deliberate or reckless disregard of a regulatory requirement,

which is sufficient to support Tier Two penalties. The jury here

convicted Defendants of violating Section 10(b) and Rule 10b-5 of

the Exchange Act, which requires that a material misrepresentation

or omission be made with scienter. See FindWhat Inv. Grp. v.

FindWhat.com, 658 F.3d 1282, 1295 (11th Cir. 2011) (explaining

that the elements of a claim under Section 10(b) and Rule 10b-5

are: “(1) a material misrepresentation or omission; (2) made with

scienter; (3) a connection with the purchase or sale of a security;

(4) reliance on the misstatement or omission; (5) economic loss

[i.e., damages]; and (6) a causal connection between the material

misrepresentation or omission and the loss”).

The Supreme Court has defined the level of scienter necessary

to support a securities fraud claim as a “mental state embracing

intent to deceive, manipulate, or defraud.” Ernst & Ernst v.

Hochfelder, 425 U.S. 185, 194 n.12 (1976). In order to adequately

plead scienter in the Eleventh Circuit, a plaintiff must allege

facts creating a “strong inference” that the defendant acted

purposefully or with “severe recklessness.” Thompson v.

RelationServe Media, Inc., 610 F.3d 628, 634 (11th Cir. 2010).

Because the jury necessarily found that Defendants were at least

severely reckless, this aligns with the penalty statute’s

requirement of “deliberate or reckless disregard of a regulatory

requirement.”

The trial evidence supports that Defendants acted with, at

least, a reckless disregard for regulatory requirements and/or

that their violations involved fraud, deceit, or manipulation.

There were multiple instances where the FINRA Form 211s that Mr.

Eldred or Mr. Dilley signed contained misrepresentations that Mr.

Dilley or Mr. Eldred (and therefore Spartan and Island) should

have known to be false. For example, some of the Forms 211s stated

that Mr. Dilley had a phone call with the issuers when there was

evidence that that was false.

The Court does not believe, however, that the SEC has

demonstrated that the violations “directly or indirectly resulted

in substantial losses or created a significant risk of substantial

losses to other persons” sufficient to support Tier Three

penalties. The SEC has not pointed to any evidence showing that

the violations “resulted in substantial losses.” And while the

Court has reviewed the trial evidence that the SEC relies on to

argue that the violations “created a significant risk of

substantial losses to other persons,” the most that can be said is

that: (1) one of the fraudsters testified that the people who

bought the shell companies wanted unrestricted stock so they would

“be in a position” to engage in pump and dump schemes; and (2) the

fraudster was “aware” that “one or two” of those companies later

became pump and dumps, though he could not say which ones. (Doc.

# 194 at 90-91).

This is insufficient. “Although all Section 10(b) or Rule

10b-5 frauds could be said to create some ‘risk’ of some ‘harm’ to

investors, the Remedies Act reserves third-tier civil penalties

for those frauds that create a significant risk of substantial

losses.” SEC v. Madsen, No. 17-CV-8300 (JMF), 2018 WL 5023945, at

*4 (S.D.N.Y. Oct. 17, 2018). The SEC has not made that showing

here.

Moving on, the SEC requests that the Court assess penalties

for three “violations” against Mr. Dilley, two violations against

Mr. Eldred, and a single violation against the corporate

Defendants. (Doc. # 270 at 20). Defendants do not dispute this

particular point of the civil-penalties analysis.

Turning now to the factors that the Court may look to in

determining civil penalties, the Court has considered Defendants’

roles in the overall scheme, the evidence admitted at trial tending

to show that Defendants acted with a certain level of scienter in

submitting Form 211s to FINRA containing false information, the

fact that this information was originally provided by third parties

(at the behest of Mirman and Rose), the fact that Defendants’

actions facilitated the possibility of pump and dump schemes, the

inability of the SEC to identify any harmed investors, the

testimony given at the trial and the hearing on remedies, and all

of the other pertinent facts and circumstances. Being so advised,

the Court orders civil penalties in the amount of $150,000 each

against both Mr. Dilley and Mr. Eldred. The Court believes that

these Defendants have equal culpability and should face equal civil

penalties. The Court further orders that Spartan and Island each

pay civil penalties in the amount of $250,000. The Court has

determined that these amounts are fair and appropriate under all

the facts and circumstances.

Accordingly, it is now

ORDERED, ADJUDGED, and DECREED:

(1) The Motion for Remedies filed by Plaintiff Securities

and Exchange Commission (Doc. # 270) is GRANTED in part and DENIED

in part as set forth herein.

(2) The Clerk is directed to enter judgments against the

Defendants in accordance with this Order and thereafter CLOSE this

case.

DONE and ORDERED in Chambers in Tampa, Florida, this 10th day

of August, 2022,

lassie 9r. Hunenby

VIRGINIA M. HERNANDEZ*COVINGTON

UNITED STATES DISTRICT JUDGE

38