Securities and Exchange Commission v. Perkins

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

NO. 5:19-CV-243-FL

SECURITIES AND EXCHANGE )

COMMISSION, )

)

Plaintiff, )

)

v. )

)

ALTON PERKINS; YILAIME )

CORPORATION OF NC; YILAIME ) ORDER

CORPORATION OF NEVADA, PERKINS )

HSU EXPORT CORPORATION; )

AMERICATOWNE HOLDINGS, INC.; )

MABIALA PHUATI; and ALTON AND )

XIANG MEI LIN PERKINS FAMILY )

TRUST, )

)

Defendants. )

This matter comes before the court on plaintiff’s motion for partial summary judgment,

pursuant to Rule 56(a) of the Federal Rules of Civil Procedure. (DE 72). Issues raised are ripe for

ruling. For the following reasons, the motion is granted.

STATEMENT OF THE CASE

Plaintiff initiated this action June 13, 2019, asserting defendants Alton Perkins (“Perkins”),

Yilaime Corporation of NC (“Yilaime NC”), and Perkins Hsu Export Corporation (“Perkins

Corp.”) made material misstatements and omissions in connection with the offer and sale of

securities, in violation of section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) (“section

17(a)”), section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C § 78j(b) (“section 10(b)”),

and 17 C.F.R. § 240.10b-5 (“rule 10b-5”) promulgated thereunder (counts I through III)

(collectively the “fraud claims”). It complains, too, that defendant Yilaime Corporation of Nevada

(“Yilaime NV”) aided and abetted this fraud (count IV). Plaintiff alleges defendants Perkins,

Yilaime NC, and Mabiala Phuati (“Phuati”) failed to register securities sold in connection with

two Yilaime NC offerings, in violation of 15 U.S.C. § 77e (“section 5”) (count V). Defendant

AmericaTowne Holdings, Inc. (“AmericaTown”), plaintiff alleges, made three public filings with

false information, in violation of 15 U.S.C. § 78m (“section 13”), 17 C.F.R. §§ 240.12b-20 (“rule

12b-20”), 240.13a-1 (“rule 13a-1”), 240.13a-11 (“rule 13a-11”), and 240.13a-13 (“rule 13a-13”)

promulgated thereunder (count VI), and defendant Perkins aided and abetted the same (count VII).

Plaintiff also complaints that relief defendant Alton and Xiang Mei Lin Perkins Family Trust

(“Family Trust”), denominated as relief defendant,1 received and retains some of the investor funds

allegedly obtained by fraud (count VIII). Plaintiff seeks injunctive relief, disgorgement of unjust

enrichment or gains, and civil penalties.2

The court denied defendants’ motions to dismiss January 2, 2020,3 and voluminous

discovery ensued, prolonged by issues emanating from the novel coronavirus and other concerns

variously raised in eight consent motions to revise and extend the discovery schedule. Discovery

delays then required cumulative extension of the dispositive motions deadline for about a year, up

to September 28, 2021, on which date plaintiff filed the instant motion directed to the fraud claims

1 A relief defendant is “part of a suit only as the holder of assets that must be recovered in order to afford

complete relief.” Commodity Futures Trading Comm’n v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 192 (4th

Cir. 2002). Plaintiff does not allege relief defendant Family Trust committed securities fraud, but rather joins it to

facilitate the collection of funds traceable to securities fraud by others. See S.E.C. v. Cherif, 933 F.2d 403, 414 (7th

Cir. 1991).

2 The court has appended to this order a glossary with a more complete explanation of the claims and

defendants involved.

3 Senior U.S. District Judge W. Earl Britt presided over the case until June 2, 2022, when it was reassigned

upon his retirement to the undersigned.

(counts I, II, and III) asserted against defendants Perkins, Yilaime NC, and Perkins Corp., and the

claim for equitable relief of disgorgement (count VIII) against relief defendant Family Trust.

In support of its motion, plaintiff relies upon: 1) testimony of Nana Jorjoladze

(“Jorjoladze”), paralegal for plaintiff; defendant Perkins; Jay Hsu (“Jay”), senior vice president of

investment finance for AmericaTowne; and John Sherrick (“Sherrick”), staff accountant with

plaintiff; 2) a criminal indictment and sentencing document against defendant Perkins originating

in State of Maryland v. Alton Perkins, Criminal Case No. CT991963X (Md. Cir. Ct.); 3) a desist

and refrain order issued by the California Department of Corporations against defendant Perkins

dated March 21, 2008; 4) private placement memoranda (“PPMs”) (variously, the “Yilaime NC

Bond PPM,” the “Yilaime NC Stock PPM,” and the “Perkins Corp. Bond PPM”) 5) responses to

interrogatories; 6) a Family Trust formation documents; 7) email transmittals between Jay and

Perkins, among others; and 8) banking and brokerage accounts documentation.

Defendants Perkins, Perkins Corp., Yilaime NC, Yilaime NV,4 and relief defendant Family

Trust, responded in opposition, introducing into evidence: 1) correspondence issued from the

Commonwealth of Virginia to defendant Perkins regarding an investigation of securities activities;

2) an intellectual property assignment agreement between Perkins and Yilaime corporation; and

3) a Yilaime business plan dated January 3, 2013.

STATEMENT OF THE FACTS

The undisputed facts, viewed in the light most favorable to defendants, may be summarized

as follows. 5

4 While the instant motion is not directed against Yilaime NV, it concerns the alleged fraud plaintiff contends

Yilaime NV aided and abetted in count IV.

5 Pursuant to Local Rule 56.1(a)(2), the court cites to paragraphs in the parties’ statements of facts, or portions

of such paragraphs, where not “specifically controverted by a correspondingly numbered paragraph in the opposing

statement.”

Defendants Yilaime NC and Perkins Corp. are corporations in the initial stages of

operations, described as “startups,” engaged in international exports. (Pl. Stmt. (DE 72-2) ¶¶ 12-

13). For both, defendant Perkins served as “the Chairman, Chief Executive Officer, Chief

Financial Officer, majority shareholder, and final decision-maker.” (Id. ¶ 14). Defendant Perkins

also was “the Chairman, Chief Executive Officer, Chief Financial Officer” and owner of defendant

Yilaime NV, as well as, together with his wife, Xiang Mei Lin Perkins (“Lin”), the creator and

beneficiary of relief defendant Family Trust. (Id. ¶¶ 15-16, 17-19).

Defendant Perkins previously was indicted by a grand jury in Maryland on 11 felony counts

of fraudulently misappropriating more than $115,000.00 from 17 individuals to whom he owed a

fiduciary duty. (Id. ¶¶ 1-2). He pleaded nolo contendere on August 31, 2000, and was sentenced

to five years’ incarceration, credited four days of time served with the balance suspended, and

ordered to comply with terms of probation for three years. (Id. ¶¶ 4-5).

On March 21, 2008, the California Department of Corporations found that defendant

Perkins failed to disclose in connection with the sale and offer of securities his plea of nolo

contendere and the sentence following. (Id. ¶ 6). Defendant Perkins was ordered to “desist and

refrain” from the sale of securities in the state of California, which punishment the California

Department of Corporations found necessary for the protection of investors. (Defs. Exhibit 3 (DE

79-3) ¶ 6).

Beginning in approximately January 2014, defendants Perkins and Yilaime NC engaged in

one bond offering and one stock offering. (Pl. Stmt. (DE 72-2) ¶¶ 20, 21, 23). The Yilaime NC

bond offering sought to raise up to $15,000,000.00. (Id. ¶ 21). In connection with that offering,

defendant Perkins created the Yilaime NC Bond PPM dated March 11, 2014, provided to investors,

including by email transmittal. (Id. ¶ 22). The Yilaime NC stock offering also sought to raise up

to $15,000,000.00. (Id. ¶ 23). In connection with that offering, defendant Perkins created the

Yilaime NC Stock PPM dated June 8, 2014, also provided to investors, including by email. (Id. ¶

24).

The Yilaime NC Bond PPM and the Yilaime NC Stock PPM each state that defendant

Yilaime NC is a “startup” company seeking to engage in the trading and exporting of U.S. goods

to China. (Id. ¶ 26). They include pro-forma financial statements concerning future project costs.

(Id. ¶ 27). The statements are devoid of any line item for intellectual property or for money

otherwise to be paid to defendant Perkins directly. (See Pl. Exhibit 9: Yilaime NC Bond PPM (DE

72-13) at 81-84 (section titled “Pro Forma Financial Statements”); Pl. Exhibit 10: Yilaime NC

Stock PPM (DE 72-14) at 79-83 (same)).6 However, a section titled “Source and Use of Funds”

includes a line item for intellectual property, with the amount listed as $550,000.00. (See Pl. Exhibit

9: Yilaime NC Bond PPM (DE 72-13) at 30; Pl. Exhibit 10: Yilaime NC Stock PPM (DE 72-14)

at 28).

The Yilaime NC Bond PPM and the Yilaime NC Stock PPM additionally include a section

titled “Certain Transactions” containing the following statement:

Other than the transactions described below, there has not been any transaction or

series of transactions to which [w]e were or will be a party in which any director or

executive officer of the [c]orporation, any immediate family member of such

person, or any person who will be considered to be a promoter of this [o]ffering has

had a direct or indirect material interest.

(Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 54; Pl. Exhibit 10: Yilaime NC Stock

PPM (DE 72-14) at 53). Below that is a single subsection titled “Related Party

Transactions” providing:

The founders lent the [c]ompany funds to cover the pre-developmental and research

phase of the operations primarily conducted in China. Development costs included

6 In citations to exhibits in the record, the court relies upon the pagination supplied by the court’s case

management/electronic case filing (“CM/ECF”) system.

researching the market in China, visiting several locations and sites, conducting

numerous meetings with government officials and business people in China,

designing the actual concept as well as other areas covering pre-developmental

stage costs and expenses. While in China which covered an almost three year

period, Chinese citizens were hired to help with research, and coordinating

applications and procedures with government officials in China.

The founders covering these expenses included Mr. Perkins, Mr. Hu, and Mr.

Williams of the USA and Mr. Li of China. The [c]ompany signed promissory notes

for only a portion of the funds lent. The remaining expenses, including

considerable time and effort by the founders were either accounted for as

founders[’] stock or not expensed, and rendered to the [c]ompany at no costs.

The various notes total $115,000 and carry interest from 7.5% to 9.0%. The [n]otes

are to be paid within six to 12 months.

Previously Mr. Perkins [footnote omitted] was on the board of two reporting

companies. At present, founders do not serve on any outside boards.

(Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 55; Pl. Exhibit 10: Yilaime NC Stock PPM

(DE 72-14) at 54). The Yilaime NC Bond PPM additionally includes the following paragraph:

Pursuant to agreement with the [c]ompany and Mr. Perkins, the [c]ompany acquired

rights to the “AmericaTowne® and AmericaStreet™.” In [e]xchange for founders’

stock Mr. Perkins provided perpetual intellectual property rights to the

[c]orporation. These rights are outlined in the “Intellectual Property License and

Preservation Agreement” between Mr. Perkins and the [c]ompany.

(Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 55).

Elsewhere, in a section titled “Principal Shareholders,” both the Yilaime NC Bond PPM

and the Yilaime NC Stock PPM expressly state that no executive officers or directors received

cash compensation for services rendered. (Pl. Stmt. (DE 72-2) ¶ 34). In a section titled

“Management” and “Directors, Executive Officers and Key Advisors,” defendant Perkins is

described as the “Chairman and Chief Executive Officer, and President” of defendant Yilaime NC.

(Id. ¶ 35).

The PPMs also describe some of defendant Perkins’s biographical background, including

“starting companies ‘from [the] ground-up’ and serving as ‘Chairman, Chief Executive Officer,

President, Principal Accounting and Financial Officer of two companies that reported to the U.S.

Securities and Exchange Commission.’” (Id. ¶ 36). No mention is made in those sections of

defendant Perkins’s past criminal history. (Id. ¶ 37). The sole mention of Perkins’s securities

disciplinary history is contained in a footnote that reads:

6 Mr. Perkins served as Chairman and CEO [of] two public reporting companies, both has [sic]

ceased their public reporting status. Over 10 years ago Mr. Perkins participated in a private business

and the [c]ourts sanctioned him. In conjunction with completing a private transaction a state security

official who without full material to base its decision made an adverse ruling against him. Upon

subsequent review by security officials in Mr. Perkins’ home state, it was determined that after

investigating [sic] “after careful review of the matter and the applicable law we have concluded that

know [sic] further action is warrant[ed] . . . and this matter is closed.”

(Id. ¶ 38). Additional information regarding defendant Perkins’s criminal and securities

disciplinary history was also not otherwise disclosed to investors in Yilaime NC. (Id. ¶ 39).

Between January 2014 and April 2015, defendant Yilaime NC raised approximately

$1,000,000.00 through the stock and bond offerings. (Id. ¶ 40). All of this money was deposited

into a Wells Fargo Bank account ending in 2566 (“Wells Fargo #2566 Account”), which belonged

to defendant Perkins’s entity, Yilaime NV. (Id. ¶ 41). Defendant Perkins and his wife, Lin, created

and controlled the account. (Id. ¶ 42).

Separately, in 2015, defendant Perkins Corp. engaged in a bond securities offering which

sought to raise $22,000,000.00. (Id. ¶ 43). Investor funds received were sent via wire transfer, as

well as being deposited electronically. (Id. ¶ 45). In connection with the Perkins Corp. offering,

defendant Perkins drafted and provided to investors the Perkins Corp. Bond PPM dated January 1,

2015. (Id. ¶ 44). The Perkins Corp. PPM explains that Perkins Corp. aids exporters of “U.S. made

goods and services,” and planned to profit from taxes available to those exporting companies. (Id.

¶ 47).

The Perkins Corp. Bond PPM includes a section titled “Certain Transactions” identical to

that excerpted above in relation to the Yilaime NC Stock PPM and the Yilaime NC Bond PPM,

providing Perkins Corp. had engaged in no insider transactions with its officers or family members

of officers, which included Perkins:

Other than the transactions described below, there has not been any transaction or

series of transactions to which [w]e were or will be a party in which any director or

executive officer of the [c]orporation, any immediate family member of such

person, or any person who will be considered to be a promoter of this [o]ffering has

had a direct or indirect material interest.

(Id. ¶ 50). Below that is a subsection titled “Related Party Transactions” nearly identical to the

Yilaime NC Bond PPM and the Yilaime NC Stock PPM, and like the Yilaime Bond PPM it

includes reference to an intellectual property agreement between the company and defendant

Perkins:

The founders lent the [c]ompany funds to cover the pre-developmental and research

phase of the operations primarily conducted in China. Development costs included

researching the market in China, visiting several locations and sites, conducting

numerous meetings with government officials and business people in China,

designing the actual concept as well as other areas covering pre-developmental

stage costs and expenses. While in China which covered an almost three year

period, Chinese citizens were hired to help with research, and coordinating

applications and procedures with government officials in China.

The founders covering these expenses included Mr. Perkins, Mr. Hu, and Mr.

Williams of the USA and Mr. Li of China. The [c]ompany signed promissory notes

for only a portion of the funds lent. The remaining expenses, including

considerable time and effort by the founders were either accounted for as

founders[’] stock or not expensed, and rendered to the [c]ompany at no costs.

The various notes total $750,000 and carry interest from 7.5% to 9.0%. The [n]otes

are to be paid within six to 12 months.

Pursuant to agreement with the [c]ompany and Mr. Perkins, the [c]ompany acquired

rights to the “AmericaTowne® and AmericaStreet™.” In [e]xchange for founders’

stock Mr. Perkins provided perpetual intellectual property rights to the

[c]orporation. These rights are outlined in the “Intellectual Property License and

Preservation Agreement” between Mr. Perkins and the [c]ompany.

For agreeing to serve as [d]irectors of the [c]orporation the Zhou [b]rothers received

founders[’] stock. All founders[’] stock was purchased at $.05 a share pursuant to

Section 4(2) of the Securities Act of 1933.

Previously Mr. Perkins [footnote omitted] was on the board of two reporting

companies. At present, founders do not serve on any outside boards.

(Pl. Exhibit 11: Perkins Corp. Bond PPM (DE 72-15) at 42). Other than as set forth in the “related

party transactions” sections, nowhere in the Perkins Corp. PPM does it state that funds were owed

to defendant Perkins personally. (Pl. Stmt. (DE 72-2) ¶ 51). The Perkins Corp. PPM also expressly

states that no executive officers or directors received any cash compensation for services rendered.

(Id. ¶ 52).

The Perkins Corp. PPM includes pro-forma financial statements containing future project

costs. (Id. ¶ 53). The statements are devoid of any line item for intellectual property, and they do

not list any funds due to defendant Perkins. (See Pl. Exhibit 11: Perkins Corp. Bond PPM (DE

72-15) at 68-70). They do, however, refer generally to company debt, both short term and long

term. (Id. at 69).

The Perkins Corp. PPM’s section entitled “Management” and “Directors, Executive

Officers and Key Advisors” describes defendant Perkins as the “Chairman and Chief Executive

Officer, and President” of Perkins Corp. (Pl. Stmt. (DE 72-2) ¶ 55). The Perkins Corp. PPM

provides “certain biographical background of [defendant] Perkins, including that he started

companies ‘from [the] ground-up’ and serves as ‘Chairman, Chief Executive Officer, President,

Principal Accounting and Financial Officer of two companies that reported to the U.S. Securities

and Exchange Commission.’” (Id. ¶ 56). The only mention in the Perkins Corp. PPM of defendant

Perkins’s past criminal and securities regulatory history is in a footnote that reads:

2 Mr. Perkins served as Chairman and CEO [of] two public reporting companies, both has [sic]

ceased their public reporting status. Over 15 years ago Mr. Perkins participated in a private business

and the [c]ourts sanctioned him. In conjunction with completing a private transaction a state security

official who without full material to base its decision made an adverse ruling against him and

directed a [c]ease and [d]esist action be taken against Mr. Perkins. Further Mr. Perkins was alleged

to have been convicted of a crime in the [s]tate of Maryland. Mr. Perkins confirms that he was not

convicted of a crime pursuant to Maryland law. However, he did plead no-lo [sic] contender to an

action which resulted in Mr. Perkins receiving a suspended sentence. Additionally, Mr. Perkins

sued individuals for defamation and liable [sic] for the false assertion that he had been convicted of

the alleged action. Mr. Perkins was awarded a judgment exceeding $125,000 for defamation and

liable [sic]. Further, [u]pon subsequent review by security officials in Mr. Perkins’ home state, it

was determined that after investigating [sic] “after careful review of the matter and the applicable

law we have concluded that know [sic] further action is warrant[ed] . . . and this matter is closed.”

(Id. ¶ 57). This footnote is the sole disclosure to Perkins Corp. investors of Perkins’s criminal and

securities disciplinary history. (Id. ¶ 58).

Between April 15, 2015, and April 28, 2015, defendant Perkins Corp. raised at least

$184,142.00 through the offering. (Id. ¶ 59). The entirety of these funds were deposited into the

Wells Fargo #2566 Account. (Id. ¶ 60).

In this manner, all the money raised through the Yilaime NC offerings and the Perkins

Corp. offering were deposited into the Wells Fargo #2566 Account. (Id. ¶ 61). Perkins thereafter

used at least $764,000.00 of the funds for his private use, including $584,000.00 to buy his personal

residence, owned by relief defendant Family Trust. (Id. ¶¶ 61, 71).

COURT’S DISCUSSION

A. Standard of Review

Summary judgment is appropriate where “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).7 The party seeking summary judgment “bears the initial responsibility of informing

the district court of the basis for its motion, and identifying those portions of [the record] which it

believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986).

Once the moving party has met its burden, the non-moving party must then “come forward

with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. Ltd.

v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Only disputes between the parties over facts

7 Internal citations and quotation marks are omitted from all citations unless otherwise specified.

that might affect the outcome of the case properly preclude the entry of summary judgment. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (holding that a factual dispute is

“material” only if it might affect the outcome of the suit and “genuine” only if there is sufficient

evidence for a reasonable jury to return a verdict for the non-moving party).

“[A]t the summary judgment stage the [court’s] function is not [itself] to weigh the

evidence and determine the truth of the matter but to determine whether there is a genuine issue

for trial.” Id. at 249. In determining whether there is a genuine issue for trial, “evidence of the

non-movant is to be believed, and all justifiable inferences are to be drawn in [non-movant’s]

favor.” Id. at 255; see United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (“On summary

judgment the inferences to be drawn from the underlying facts contained in [affidavits, attached

exhibits, and depositions] must be viewed in the light most favorable to the party opposing the

motion.”).

Nevertheless, “permissible inferences must still be within the range of reasonable

probability, . . . and it is the duty of the court to withdraw the case from the [factfinder] when the

necessary inference is so tenuous that it rests merely upon speculation and conjecture.” Lovelace

v. Sherwin-Williams Co., 681 F.2d 230, 241 (4th Cir. 1982). Thus, judgment as a matter of law

is warranted where “the verdict in favor of the non-moving party would necessarily be based on

speculation and conjecture.” Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485, 489 (4th Cir.

2005). By contrast, when “the evidence as a whole is susceptible of more than one reasonable

inference, a [triable] issue is created,” and judgment as a matter of law should be denied. Id. at

489-90.

B. Summary Judgment Against Defendants Perkins, Yilaime NC, and Perkins Corp.

Plaintiff contends the undisputed evidence establishes these defendants violated the anti-

fraud provisions of the securities laws by making false and misleading statements in connection

with the Yilaime NC and Perkins Corp. securities offerings, as alleged in the fraud claims. The

court agrees.

Section 17(a) of the Exchange Act, which applies only to sellers, provides:

It shall be unlawful for any person in the offer or sale of any securities by the use

of any means or instruments of transportation or communication in interstate

commerce or by the use of the mails, directly or indirectly—

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a

material fact or any omission 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, or

(3) to engage in any transaction, practice, or course of business which

operates or would operate as a fraud or deceit upon the purchaser.

15 U.S.C. § 77q(a).

Section 10(b), which applies to both buyers and sellers, makes it unlawful “[t]o use or

employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive

device or contrivance in contravention of such rules and regulations as the Commission may

prescribe.” 15 U.S.C. § 78j(b). Section 10(b) is implemented by rule 10b-5, which makes it

unlawful “[t]o employ any device, scheme or artifice to defraud[;] [t]o make any untrue statement

of a material fact or to omit to state a material fact necessary in order to make the statements made

. . . not misleading, or[;] [t]o engage in any act, practice, or course of business which operates or

would operate as a fraud or deceit upon any person.” 17 C.F.R. § 240.10b-5; see Singer v. Reali,

883 F.3d 425, 437–38 (4th Cir. 2018) (referring to section 10(b) and Rule 10b-5 as “companion

regulatory provision[s]”).

Courts apply identical tests for determining liability under sections 17(a)(1), 10(b), and

rule 10b-5. See Aaron v. SEC, 446 U.S. 680, 701-02 (1980); U.S. SEC v. Pirate Inv. LLC, 580

F.3d 233, 237 n.1 (4th Cir. 2009); see, e.g., SEC v. Frohling, 851 F.3d 132, 136 (2d Cir. 2016);

SEC v. Gotchey, No. 91-1855, 1992 WL 385284, at *1 (4th Cir. Dec. 28, 1992). To prove liability,

the Securities and Exchange Commission (“SEC”) must establish that defendant 1) made a false

statement or omission 2) of material fact 3) with scienter 4) in connection with the purchase or sale

of securities. Pirate Inv. LLC, 580 F.3d at 239. The SEC additionally must establish that

defendants 5) used the instrumentalities of interstate commerce in their fraudulent offerings. See

15 U.S.C. § 77q(a); 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. The test under subsections 17(a)(2)

and 17(a)(3) is the same, except that the SEC does not need to prove the third element of scienter.

Aaron, 446 U.S. at 697. (“[T]he language of § 17(a) requires scienter under § 17(a)(1), but not

under § 17(a)(2) or § 17(a)(3).”). “The SEC bears the burden of establishing each element by a

preponderance of the evidence.” Pirate Inv. LLC, 580 F.3d at 239.

The court addresses these elements below.

1. False Statement or Omission

The first element necessary to state a claim under sections 17(a), 10(b), and rule 10b-5 is

“a material misrepresentation or omission by the defendant.” Stoneridge Inv. Partners, 552 U.S.

at 157. “To allege a false statement or omission of material fact, plaintiffs must point to a factual

statement or omission—that is, one that is demonstrable as being true or false.” Nolte v. Capital

One Fin. Corp., 390 F.3d 311, 315 (4th Cir. 2004).

Sections 17(a), 10(b), and rule 10b-5 “do not create an affirmative duty to disclose any and

all material information.” Singer, 883 F.3d at 440. “Nevertheless, disclosure of material

information is required when necessary to make statements made, in the light of the circumstances

under which they were made, not misleading.” Id. “In other words, companies can control what

they have to disclose under [sections 17(a), 10(b), and rule 10b-5] by controlling what they say to

the market.” Id.

Plaintiff contends defendants made two misrepresentations in the PPMs at issue. First the

PPMs indicate investor funds would be used for corporate purposes, including marketing,

promotion, and insurance, when, in fact, defendant Perkins took for himself a minimum of

$764,000.00 of the approximately $1,000,000.00 raised for his personal use. Second, after touting

defendant Perkins’s background, including his prior experience as the chief executive officer of

several small corporations, defendants failed to disclose fully defendant Perkins’s criminal and

securities disciplinary history.

It is undisputed that defendant Perkins expended at least $764,000.00 of the approximately

$1,000,000.00 raised on personal expenses, including the purchase of a new residence. The

relevant inquiry is whether the PPMs created by defendant Perkins and provided to investors

placed the investors on notice of those intended expenditures.

The Yilaime NC Bond PPM and the Yilaime NC Stock PPM both explain that Yilaime NC

is a “startup” company seeking to engage in the trading and exporting of U.S. goods to China. (Pl.

Stmt. (DE 72-2) ¶ 26). Similarly, the Perkins Corp. PPM provides that Perkins Corp. aids exporters

of U.S. made goods and services. (Id. ¶ 47). In explanation of how proceeds will be used, all three

PPMs include some iteration of the following:

Summary of the Offering: Management created this offering to provide investors

with the key elements of a quality investment vehicle. The purchase price of the

[b]onds are payable in USD or Bitcoins upon delivery of the Subscription

Agreement. The proceeds of this [o]ffering will be used for all general business

purposes in carrying out the [c]ompany’s [b]usiness [p]lan.

(Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 23; Pl. Exhibit 10: Yilaime NC Stock PPM

(DE 72-14) at 23 (same); see Pl. Exhibit 11: Perkins Corp. Bond PPM (DE 72-15) at 42

(“Management created this offering to provide investors with the key elements of a quality

investment vehicle, using both Convertible Participating Common Shares and Convertible

Notes.”)).

The PPMs additionally include pro forma financial statements and a business plan that set

forth future project costs, including, for example, marketing and promotion, contract services,

office rent, utilities, and website development, depicted as follows:

23.0 Exhibits - Pro forma Financial Statements

23.1 Business Plan - Pro forma Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $10,505,000 $19,400,000 $41,400,000 $59,650,000 $80,800,000

Direct Cost $5,937,250 $11,085,000 $24,195,000 $35,150,000 $47,590,000

Gross Margin $4,567,750 $8,315,000 $17,205,000 $24,500,000 $33,210,000

Gross Margin % 43% 43% 42% 41% 41%

Operating

Expenses

Salary $236,172 $1,252,863 $1,843,967 $3,557,846 $3,588,866

Employee

Related $59,048 $313,217 $460,994 $889,464 $897,218

Expenses

Marketing & $155,700 $388,000 $828,000 $1,193,000 $1,616,000

Promotion 2 , ® i □

Importer

Procurement $64,000 $100,000 $150,000 $200,000 $250,000

Services

Legal and

Aeesuncing $60,000 $70,000 $80,000 $90,000 $100,000

License Fees $31,000 $50,000 $75,000 $100,000 $150,000

Cammunication

SahieGs $21,000 $36,000 $36,000 $36,000 $36,000

Contract

sereiees $1,500 $3,000 $3,000 $3,000 $3,000

Shipping &

Packing $40,000 $60,000 $60,000 $60,000 $60,000

Office Rent $82,500 $90,000 $90,000 $90,000 $90,000

Utilities $1,500 $3,000 $3,000 $3,000 $3,000

Office Supplies $300 $1,200 $1,200 $1,200 $1,200

(Pl. Exhibit 9: Yilazme NC Bond PPM (DE 72-13) at 81; see Pl. Exhibit 10: Yilatme NC Stock

PPM (DE 72-14) at 79; Pl. Exhibit 11: Perkins Corp. Bond PPM (DE 72-15) at 68).

16

The Yilaime NC Bond PPM and Yilaime NC Stock PPM also contain sections excerpted

above titled “Certain Transactions” and “Related Party Transactions” stating that the four

founders, including defendant Perkins, were owed for various notes totaling $115,000.00 (carrying

interest from 7.5% - 9%), with all other expenses incurred by them either accounted for as founders

stock or not expensed, and rendered to Yilaime NC at no costs. (Pl. Exhibit 9: Yilaime NC Bond

PPM (DE 72-13) at 55; Pl. Exhibit 10: Yilaime NC Stock PPM (DE 72-14) at 54). The Yilaime

NC Bond PPM section concerning “Related Party Transactions” also notes that Yilaime NC had

acquired perpetual intellectual property rights to the “AmericaTowne” and “AmericaStreet”

trademarks from defendant Perkins in exchange for founders’ stock. (Exhibit 9: Yilaime NC Bond

PPM (DE 72-13) at 55). The Yilaime NC Stock PPM does not mention that transaction.

Both the Yiliaime NC Stock PPM and the Yilaime NC Bond PPM provide that other than

these transactions, Yilaime NC had engaged in no insider transactions with its officers or family

members of officers. In a section titled “Principal Shareholders” both PPMs additionally assure

investors that that none of the executive officers or directors had received any cash compensation

for services rendered, and further describe defendant Perkins as the “Chairman and Chief

Executive Officer, and President” of Yilaime NC. (Exhibit 9: Yilaime NC Bond PPM (DE 72-13)

at 51-52; Pl. Exhibit 10: Yilaime NC Stock PPM (DE 72-14) at 50-51).

Similarly, the “Certain Transactions” and “Related Party Transactions” sections of the

Perkins Corp. PPM state that founders of Perkins Corp., including defendant Perkins, were owed

a total of $750,000.00 for various notes (carrying interest from 7.5% - 9%), with all other expenses

incurred by them either accounted for as founders stock or not expensed, and rendered to Perkins

Corp. at no costs. (Pl. Exhibit 11: Perkins Corp. Bond PPM (DE 72-15) at 42). Also, as in the

Yilaime NC Bond PPM, the “Related Party Transactions” section noted that Perkins Corp. had

acquired perpetual intellectual property rights to the “AmericaTowne” and “AmericaStreet”

trademarks from defendant Perkins in exchange for founders’ stock. (Id.). Other than as set forth

in the “related party transactions” sections, the Perkins Corp. PPM is devoid of reference to

obligations due to defendant Perkins personally. (Pl. Stmt. (DE 72-2) ¶ 51). The Perkins Corp.

PPM indeed expressly states that none of its executive officers or directors had received any cash

compensation for services rendered. (Id. ¶ 52).

On these undisputed facts, the Yilaime NC investors were reasonably on notice that some

of the $1,000,000.00 raised by the Yilaime NC offerings would go to defendant Perkins to

reimburse his part of the $115,000.00 plus interest lent to Yilaime NC. Similarly, the Perkins

Corp. investors were on notice that some of the $184,142.00 raised by the Perkins Corp. offerings

would go to defendant Perkins to reimburse his part of the $750,000.00 plus interest lent to Perkins

Corp. The investors were not on notice, however, that roughly $764,000.00 of the $1,000,000.00

collectively raised, or 76.4% of the funds, would go to defendant Perkins personally. Such

distribution is inconsistent with the stated purpose of using the money raised for “general business

purposes” in the Yilaime NC Bond PPM and the Yilaime Stock PPM and with the pro forma

financial statements as well as the “Certain Transactions” and “Related Party Transactions”

sections included in all three PPMs. Where it is undisputed that defendant Perkins did in fact take

roughly $764,000.00 of the $1,000,000.00 collectively raised for his personal use, defendants in

all three offerings misrepresented the purpose for which investor funds would be utilized.

Defendants’ arguments to the contrary are unavailing. According to defendants, defendant

Perkins was entitled to $550,000.00 per year pursuant to an intellectual property agreement

between defendant Perkins and both Yilaime NC and Perkins Corp. Defendants argue this

disclosure was made in “multiple areas” of the PPMs, but rest primarily on a line item included in

a chart outlining the uses of funds in the Yilaime NC offerings:

6.0 Source and Use of Funds

Marketing & Promotion

Professional Services (Legal & Accounting Oe ee a ONO.

Travel & Accommodations

insurance SSS ac

Web & Data base development

Equipment

Art Invento 60,00.

[Investments $3,000,000 |

Cash Reserve

Total Project Costs ee Ga ants □□□□

(Defs. Exhibit 6: Yilazme NC Stock PPM (DE 79-7) at 29 (highlighting added); Defs. Exhibit 7:

Yilaime NC Bond PPM (DE 79-8) at 31 (same). This chart, however, indicates only that

$550,000.00 out of the $10,210,000.00 sought from Yilaime NC investors, or roughly 5.4% of

investor funds raised, would be allocated for “trademarks and license.” Such disclosure plainly

does not put investors on notice that over 75% of the funds raised would be diverted for that

purpose. It also does not put investors on notice that the funds would go to defendant Perkins

personally. Indeed, any such inference is rebutted by affirmative statements elsewhere that

19

defendant Perkins had granted “perpetual rights” to the “AmericaTowne” and “AmericaStreet”

trademarks in exchange for “founders stock” and that no other related party transactions had

occurred. (See Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 55; Pl. Exhibit 11: Perkins

Corp. Bond PPM (DE 72-15) at 42; see also Pl. Exhibit 10: Yilaime NC Stock PPM (DE 72-14)

at 54 (reference to the intellectual property agreement with defendant Perkins omitted entirely).

Defendants also make reference to a business plan for a different entity, Yilaime NV, which

defendants contend all three PPMs incorporated by reference. Defendants fail, however, to cite to

a page in the PPMs where such incorporation is made, and the court’s search has yielded none.

(See Defs. Resp. (DE 79) at 5 (citing generally to the Perkins Corp. bond offering for the

proposition that all offerings “incorporated by reference disclosures in the Yilaime business plan,

which thoroughly details the payments due to Perkins under the [intellectual property]

agreement”). Defendants additionally fail to provide evidence that the Yilaime NV business plan

was made available to Yilaime NC and Perkins Corp. investors.

Turning, then, to defendant Perkins’s criminal and disciplinary history, it is undisputed that

all three PPMs provide favorable biographical information about defendant Perkins, including that

he “start[ed] companies ‘from [the] ground-up’ and serv[ed] as ‘Chairman, Chief Executive

Officer, President, Principal Accounting and Financial Officer of two companies that reported to

the U.S. Securities and Exchange Commission.’” (Pl. Stmt. (DE 72-2) ¶¶ 36, 56). It is also

undisputed that defendant Perkins previously was indicted on and pleaded nolo contendere to

eleven felony counts of fraudulent misappropriation by a fiduciary. The court sentenced him to

five years’ incarceration, with four days of time served and the balance suspended, and three years

of supervised probation. Finally, it is undisputed that the California Department of Corporations

later ordered defendant Perkins to desist and refrain from the sale of securities in the state of

California based on its finding that he failed to disclose his plea of nolo contendere to eleven counts

of fraudulent misappropriation in connection with the offer and sale of securities.

Where “disclosure of material information is required when necessary to make statements

made . . . not misleading,” the question here is whether defendant Perkins sufficiently disclosed

his criminal and disciplinary history to make his statements about his favorable business

experience not misleading. Singer, 883 F.3d at 440. As excerpted above, the Yilaime NC Stock

PPM and Yilaime NC Bond PPM include an identical footnote providing that over ten years prior

defendant Perkins “participated in a private business and the [c]ourts sanctioned him.” (Pl. Exhibit

9: Yilaime NC Bond PPM (DE 72-13) at 55; Pl. Exhibit 10: Yilaime NC Stock PPM (DE 72-14)

at 54). It is further elaborated in the footnote that a state security official made an adverse ruling

against him “without full material to base its decision.” (Id.). Upon subsequent review by a

security official in defendant Perkins’s home state, however, it was determined that no further

action was warranted, and the matter was closed. It is undisputed that there was no other disclosure

of Perkins’s criminal or disciplinary history in the PPMs, nor was this information otherwise

disclosed to investors.

There is no mention in this footnote of defendant Perkins’s plea of nolo contendere to

charges of fraud by a fiduciary and his subsequent criminal sentence. Although it refers generally

to defendant Perkins’s disciplinary history, the footnote fails to disclose that defendant Perkins

was ordered to desist and refrain from further sale of securities in the state of California based on

the finding that he failed to disclose material information about his criminal history. On these

undisputed facts, defendants omitted factual information about defendant Perkins’s criminal and

disciplinary history in the Yilaime NC offerings.

In the Perkins Corp. offering, defendants included much the same regarding defendant

Perkins’s disciplinary history, noting in a footnote that previously defendant “Perkins participated

in a private business and the [c]ourts sanctioned him.” (Pl. Exhibit 11: Perkins Corp. Bond PPM

(DE 72-15) at 42). Further, a state security official “without full material to base its decision”

directed that a “[c]ease and [d]esist action be taken against [defendant] Perkins.” (Id.). Thus,

defendants provided further detail by disclosing that the sanction was a cease-and-desist order, but

again defendants omit mention of the factual basis for that order and of the details of the sanction.

Such omissions are conspicuous where the sanction prohibited the exact conduct in question here

in another state.

Unlike the Yilaime NC Bond PPM and Yilaime NC Stock PPM, the footnote included in

the Perkins Corp. PPM does note that defendant Perkins “was alleged to have been convicted of a

crime in the [s]tate of Maryland.” (Id.). It is further elaborated in the footnote that “Perkins

confirms that he was not convicted of a crime pursuant to Maryland law. However, he did plead

no-lo contender [sic] to an action which resulted in [defendant] Perkins receiving a suspended

sentence.” (Id.). The Perkins Corp. PPM neglects to mention the basis of the charges, fraudulent

misappropriation by a fiduciary, and it provides further, this time apparently in reference to the

criminal charge, that “[u]pon subsequent review by security officials in [defendant] Perkins’ home

state, it was determined that after investigating ‘after careful review of the matter and the

applicable law we have concluded that know [sic] further action is warrant[ed] . . . and this matter

is closed.” (Id. at 42-43). Such an evasive and defensive depiction of the charges renders favorable

mention of defendant Perkins’s business experience elsewhere in the PPMs misleading.

In sum, on these undisputed facts, defendants misrepresented the purpose for which

investor funds would be used and misleadingly omitted factual information about defendant

Perkins’s criminal and disciplinary history in the Yilaime NC and Perkins Corp. PPMs.

2. Of Material Fact

A material misrepresentation or omission exists where “there is a substantial likelihood

that a reasonable purchaser or seller of a security 1) would consider the fact important in deciding

whether to buy or sell the security or 2) would have viewed the total mix of information made

available to be significantly altered by the disclosure of the fact.” Pirate Inv. LLC, 580 F.3d at

240. A fact is material as a matter of law, and consequently properly resolved at summary

judgment, if it is “so obviously important to an investor that reasonable minds cannot differ on the

question.” TSC v. Northway, 426 U.S. 438, 450 (1976).

Here, as described above, defendants made misrepresentations and omissions regarding the

use of the investor funds by failing to disclose that over 75% of the investments would be paid to

defendant Perkins personally. Such information about diversion of corporate funds for personal

use necessarily is “so obviously important to an investor that reasonable minds cannot differ on

the question.” TSC, 426 U.S. at 450; see, e.g., Gotchey, 1992 WL 385284, at *1 (“A reasonable

investor would obviously have found much significance in Gotchey’s assurances as to where the

money would be invested.”); SEC v. Rsch. Automation Corp., 585 F.2d 31, 35-36 (2d Cir. 1978)

(“What reasonable investor would not wish to know that the money raised by stock sales would

not be used for working capital but be diverted to RAC’s officers? It is beyond cavil that

appellants’ misleading statements and omissions concerned facts that were material as a matter of

law.”). Defendants’ misrepresentations and omissions as to the use of investors’ funds were

accordingly material as a matter of law.

As to defendants’ misrepresentations and omissions pertaining to defendant Perkins’s criminal

and disciplinary history, “a reasonable investor. . . is naturally interested in whether management is

following the law in marketing the securities.” SEC v. Merch. Capital, LLC, 483 F.3d 747, 771 (11th

Cir. 2007) see Breard v. Sachnoff & Weaver, Ltd., 941 F.2d 142, 143-44 (2d Cir. 1991) (failure to

disclose that key financier and guarantor had pled guilty to fraud in connection with similar

scheme, if proven, was material); Zell v. InterCapital Income Sec., Inc., 675 F.2d 1041, 1046 (9th

Cir. 1982) (proxy statement might be materially misleading if failed to disclose lawsuits charging

violations of state and federal securities laws and if those lawsuits bore on investment advisor’s

management ability). It is undisputed that defendant Perkins pleaded nolo contendere to an

indictment charging him with eleven counts of misappropriating funds from individuals to whom

he owed a fiduciary duty. Similarly, it is undisputed that defendant Perkins was subject to a desist

and refrain order disallowing the exact conduct at issue in this case in the state of California based

on the finding that it was necessary for the protection of investors. “[R]easonable minds cannot

differ on the question” of whether an investor would wish to know this information before

investing their funds in a company where defendant Perkins serves as chairman, chief executive

officer, chief financial officer, majority shareholder, and final decision-maker. TSC, 426 U.S. at

450; see, e.g., United States v. Bachynsky, 415 F. App’x 167, 172 (11th Cir. 2011) (12-year-old

prior conviction and securities fraud prohibitions were “needless to say” material to investors);

SEC v. Conrad, 354 F. Supp. 3d 1330, 1345 (N.D. Ga. 2019) (finding the defendant’s disciplinary

history “material as a matter of law”).

Though defendants argue that they sufficiently disclosed criminal and regulatory history in

the PPM footnotes, this fails to take into account the critical omissions of defendant Perkins’s

criminal conduct entirely in the Yilaime NC PPM, the nature of the charges to which defendant

Perkins pleaded nolo contendere and his sentence in all three PPMs, as well as the desist and refrain

order’s underlying facts and sanctions.

In sum, the misrepresentations and omissions regarding defendant Perkins’s charged

criminal conduct and the California Department of Corporations’s findings in the PPMs are

material as a matter of law.

3. With Scienter

Scienter refers to “a mental state embracing intent to deceive, manipulate, or defraud.”

Tellabs Inc. v. Makor Issues & Rts, Ltd., 551 U.S. 308, 319 (2007). This state of mind

“encompasses ‘severe recklessness,’ defined as ‘an act so highly unreasonable and such an extreme

departure from the standard of ordinary care as to present a danger of misleading the plaintiff to

the extent that the danger was either known to the defendant or so obvious that the defendant must

have been aware of it.’” Phillips v. LCI Int’l, Inc., 190 F.3d 609, 621 (4th Cir. 1999); Pirate Inv.

LLC, 580 F.3d at 241 (“The SEC meets its burden of proving scienter by establishing that the

speaker acted intentionally or recklessly; the negligent speaker, however, avoids liability.”).

Defendants “exercised [their] power of disposition for [defendant Perkins’s] own benefit,

[and] that conduct, without more, was a fraud.” S.E.C. v. Zandford, 535 U.S. 813, 820 (2002).

On that basis, the court finds as a matter of law defendants possessed a mental state “embracing

intent to . . . defraud.” Tellabs Inc., 551 U.S. at 319; see SEC v. George, 426 F. 3d 786, 795 (6th

Cir. 2005) (defendant’s expenditures of investor funds on personal expenses is a “fact that itself

that establishes the requisite state of mind for committing securities fraud”).

Where defendant Perkins previously was sanctioned for his failure to disclose that he “pled

nolo contendre [sic] to felony counts relating to an indictment for fraudulent misappropriation of

funds in a fiduciary capacity . . . and received a five year suspended sentence,” defendants’

repeated omission here in the Yilaime NC offerings and incomplete disclosure in the Perkins Corp.

offering at least are severely reckless, because they could not be the product of mere negligent

omission. (Defs. Exhibit 3 (DE 79-3) ¶ 6); see Breard, 941 F.2d at 144 (“Sachnoff’s failure to

mention Berg’s conviction in the initial offering memorandum could be considered reckless as a

matter of law.”). The same is true of defendants’ incomplete disclosure of his disciplinary history

in all three PPMs, wherein defendant provides that he was “completing a private transaction” and

a “state security official who without full material to base its decision made an adverse ruling

against him.” (Pl. Exhibit 9: Yilaime NC Bond PPM (DE 72-13) at 55; Pl. Exhibit 10: Yilaime

NC Stock PPM (DE 72-14) at 54; Pl. Exhibit 11: Perkins Corp. Bond PPM (DE 72-15) at 42 (also

noting that a state security official “directed a [c]ease and [d]esist action be taken against

[defendant] Perkins”). His opaque reference to “a private transaction” paired with exculpatory and

defensive language suggesting the official was uninformed, renders the omission of the factual

details and resulting sanction deceptive, particularly where those details pertain directly to the offer

of securities, the exact conduct in issue here. Indeed, the danger of misleading investors with such

framing and strategic omission was “so obvious that the defendant must have been aware of

it.” Phillips, 190 F.3d at 621.

Thus, the court finds as a matter of law that defendants acted with scienter.

4. In Connection with the Purchase or Sale of Securities

To prove liability, the SEC must establish that the defendant “made a false statement or

omission . . . in connection with the purchase or sale of securities.” Pirate Inv. LLC, 580 F.3d at

239. Defendants’ false and misleading statements were made in PPMs for Yilaime NC and Perkins

Corp., which it is undisputed were provided to investors for the purpose of inducing the investors

to purchase the securities offerings. Defendants’ statements and omissions were thus clearly made

“in connection with” the sale of securities.

5. Use of Instrumentalities of Interstate Commerce

Finally, to prove liability, the SEC must establish that defendants used the instrumentalities

of interstate commerce in their fraudulent offerings. See 15 U.S.C. § 77q(a); 15 U.S.C. § 78j(b);

17 C.F.R. § 240.10b-5. This element is satisfied if the defendant knows that the use of mail or

wire services was a reasonably foreseeable consequence of a scheme. Pereira v. United States,

347 U.S. 1, 8-9 (1954). Here, it is undisputed that defendants made use of the Internet, namely

email, to solicit investments. Investments were subsequently made by wire transfer and electronic

deposits. That is all that is required. See, e.g., Matheson v. Armbrust, 284 F.2d 670, 673 (9th

Cir.1960); United States v. Tallant, 547 F.2d 1291, 1297 (5th Cir.1977).

In sum, there is no genuine issue of material fact that defendants violated sections 17(a)

and 10(b), and rule 10b–5 thereunder. Therefore, summary judgment is granted to plaintiff on its

fraud claims against defendants

C. Summary Judgment Against Relief Defendant Family Trust

“Federal courts may order equitable relief against a person who is not accused of

wrongdoing in a securities enforcement action where that person: (1) has received ill-gotten funds;

and (2) does not have a legitimate claim to those funds.” Commodity Futures Trading Comm’n v.

Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 192 (4th Cir. 2002).

It is undisputed that defendant Perkins used the investor money to purchase a personal

residence owned in the name of relief defendant Family Trust. Where the court has determined

that defendant Perkins did not have a legitimate claim to the full extent of the funds claimed,

disgorgement against relief defendant Family Trust is proper. Therefore, summary judgment is

granted on the issue of liability for equitable redress against relief defendant Family Trust. The

court reserves for further determination at later proceedings described below the appropriate

remedies to be imposed.

CONCLUSION

Based on the foregoing, plaintiff’s motion for partial summary judgment (DE 72) is

GRANTED. Plaintiff is awarded summary judgment against defendants Perkins, Yolaine NC, and

Perkins Corp., on the issue of liability as to its fraud claims (counts I, II, and III). Plaintiff also is

awarded summary judgment against defendant Family Trust on the issue of liability for equitable

relief of disgorgement (count VIII). Still remaining for trial are the specific amount of

disgorgement and civil penalties to be assessed against these defendants. The following claims

also remain for trial:

1. Count IV asserting Yilaime NV aided and abetted violation of the anti-fraud

provisions of the securities laws by defendants Perkins, Yilaime NC, and Perkins

Corp.;

2. Count V asserting defendants Perkins, Yilaime NC, and Phuati failed to register

securities sold in connection with the Yilaime NC offerings;

3. Count VI asserting defendant AmericaTowne made three public filings with false

information; and

4. Count VII asserting defendant Perkins aided and abetted the same.

Where issues remain for trial, the court NOTICES the parties of the setting of conference

at New Bern pursuant to Rule 16(a), Fed.R.Civ.Pro., Friday, October 14, 2022, commencing at

9:30 a.m. The court will engage in trial planning with the parties where a future trial date certain

then will be set, together with date for final pretrial conference, and other ancillary pretrial and

trial deadlines. Suggested agenda topic(s) may be promoted by one or more parties in filing(s)

due not later than October 7, 2022.

SO ORDERED, this the 30th day of September, 2022.

Crt W. FLANACWN

United States District Judge

29

Glossary

Defendants

 AmericaTowne Holdings, Inc. (“AmericaTowne”)

A Nevada corporation formerly known as ATI Modular Technology Corp., the surviving entity

following merger with its subsidiary AmericaTowne, Inc., a Delaware corporation.

AmericaTowne is named as a defendant in count VI, alleging certain reporting violations. This

count is not subject of the instant motion. AmericaTown is defendant only with respect to

count VI.

 Alton and Xiang Mei Lin Perkins Family Trust (“Family Trust”)

A trust formed by the named individuals allegedly holding ill gotten gains named as relief

defendant in county VIII. Of note, Perkins’s personal residence, funded at least in part by

investments in question, is owned in the name of the Family Trust. Count VIII, the only count

in which the Family Trust is named as a defendant, is subject of the instant motion.

 Alton Perkins (“Perkins”)

Chairman, chief executive officer, and chief financial officer of Yilaime NC, Yilaime NV, and

Perkins Corp. Perkins is named as defendant, with others, in fraud counts I, II, III, all subject

of the instant motion. Perkins also is named defendant, with others, in count V, alleging

securities registration violations. This defendant is the sole defendant named in count VII,

alleging aiding and abetting reporting violations complained about in count VI, involving

AmericaTowne.

 Perkins Hsu Export Corporation (“Perkins Corp.”)

A Nevada “startup” corporation that engaged in a bond securities offering relevant to the

instant action. Perkins Corp. is named as defendant, with others, in fraud counts I, II, III, all

subject of the instant motion.

 Mabiala Phuati (“Phuati”)

Vice chairman and managing director of Yilaime NC. Phuati is named as defendant, with

others, in count V, alleging securities registration violations. Plaintiff’s partial summary

judgment motion does not embrace this count. Phuati is not named as a defendant in any other

count.

 Yilaime Corporation of NC (“Yilaime NC”)

A North Carolina “startup” corporation engaged in a bond securities offering and a stock

offering relevant to the instant action. Yilaime NC is named as defendant, with others, in fraud

counts I, II, III, all subject of the instant motion. Yilaime NC also is named as a defendant,

with others, in count V, alleging securities registration violations. Plaintiff’s partial summary

judgment motion does not embrace count V.

 Yilaime Corporation of Nevada (“Yilaime NV”)

Owner of the Wells Fargo #2566 Account. Yilaime NV is named as a defendant in count IV,

alleging aiding and abetting fraud complained about in counts I, II, and III. Plaintiff’s partial

motion does not embrace this count. Yilaime NV is not named as a defendant in any other

count.