Securities and Exchange Commission v. Nutra Pharma Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

-----------------------------------X

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

MEMORANDUM & ORDER

-against- 18-CV-5459(JS)(ST)

NUTRA PHARMA CORPORATION; ERIK

DEITSCH a/k/a RIK DEITSCH; and SEAN

PETER McMANUS,

Defendants.

-----------------------------------X

APPEARANCES

For Plaintiff: Lee A. Greenwood, Esq.

Preethi Krishnamurthy, Esq.

Lindsay S. Moilanen, Esq.

U.S. Securities and Exchange Commission

New York Regional Office

200 Vesey Street, Suite 400

New York, New York 10281

For Defendant

Nutra Pharma

Corporation: Daniel DeSouza, Esq.

DeSouza Law, P.A.

101 NE Third Avenue, Suite 1500

Fort Lauderdale, Florida 33301

For Defendant

Erik Deitsch: Carl F. Schoeppl, Esq.

Schoeppl & Burke, P.A.

4651 North Federal Highway

Boca Raton, Florida 33431

For Defendant

Sean McManus: Pro se

SEYBERT, District Judge:

On February 28, 2018, the Securities and Exchange

Commission (“Plaintiff” or the “Commission”) initiated this

enforcement action against Nutra Pharma Corporation (“Nutra

Pharma”), Erik Deitsch (“Deitsch,” and together with Nutra Pharma,

“Defendants”), and Sean Peter McManus (“McManus”), alleging

violations of the Securities Act of 1933 (the “Securities Act”)

and the Securities Exchange Act of 1934 (the “Exchange Act”).

Pending before the Court is the Commission’s motion for partial

summary judgment on its “non-fraud” claims. (Mot., ECF No. 68)

For the following reasons, the motion is GRANTED IN PART and DENIED

IN PART.

BACKGROUND

Unless otherwise noted, the following facts are

undisputed.1

I. Facts

A. Nutra Pharma and Deitsch

Nutra Pharma is a Florida-based company incorporated in

2000 in California under the name Exotic-bird.com. (SEC 56.1

1 Unless otherwise noted, the following facts are taken from the

Commission’s Local Rule 56.1 Statement (“SEC 56.1 Stmt.,” ECF No.

68-2), and Defendants’ Local Rule 56.1 Counterstatement (“Defs.

56.1 Counterstmt.,” ECF No. 72-1). The Commission’s exhibits,

which are attached to the Declarations of Lindsay S. Moilanen (ECF

No. 69) and Elizabeth Baier (ECF No. 70), are identified by

numbers.

Stmt. ¶ 1.) Nutra Pharma sells, among other products, two over-

the-counter homeopathic products made with cobra venom that are

used to treat chronic pain: Cobroxin, which it began selling in

2009; and Nyloxin, a stronger version of Cobroxin that it began to

sell in 2011. (Id. ¶ 3; Deitsch Depo. Tr. at 32-33, Ex. 14,

attached to Moilanen Decl.) At all times between April 1, 2008

and June 30, 2018, the time period relevant to the Commission’s

allegations, Nutra Pharma’s common stock has been registered with

the SEC pursuant to Section 12(g) of the Exchange Act and qualified

as a penny stock. (SEC 56.1 Stmt. ¶ 2.) In at least 2015, Nutra

Pharma qualified as a “smaller reporting company” under SEC rules.

(Id. ¶ 7.)

Deitsch, who has a background in chemistry, has served

as Nutra Pharma’s chief executive officer, chairman of the board,

and -- except for nine months in 2011 -- chief financial officer

since December 2003. (Id. ¶ 5.) Throughout this time, Deitsch

has had responsibility for all filings Nutra Pharma made with the

SEC, including annual reports on Form 10-K, quarterly reports on

Form 10-Q, and current reports on Form 8-K. (Id. ¶ 6.)

B. Nutra Pharma Engages Wall Street Buy Sell Hold

In 2009 or 2010, Christopher Castaldo (“Castaldo”), a

former stockbroker based on Long Island, approached Deitsch to

offer Nutra Pharma “investor relations” services through

Castaldo’s firm, Wall Street Buy Sell Hold (“Wall Street Buy”),

which published a stock newsletter by the same name. (Id. ¶¶ 8,

10.) Deitsch understood that Castaldo knew McManus, another

consultant retained by Nutra Pharma, and that Castaldo and McManus

had previously worked together as brokers. (Id. ¶ 9.) Deitsch

further understood that the Wall Street Buy newsletter had at least

hundreds, and possibly thousands, of subscribers who spoke,

primarily by telephone, to Castaldo’s team of employees based in

his Long Island office. (Id. ¶¶ 10, 11.)

From 2013 through approximately 2016, Nutra Pharma

entered into a series of contracts with Wall Street Buy, pursuant

to which Castaldo’s team provided “investor relations” services in

exchange for payments in cash and stock. (Id. ¶ 13.) Nutra Pharma

engaged Wall Street Buy to “tell the Nutra Pharma story to as many

people as possible,” and, if prospective investors believed Nutra

Pharma would “be a greater value in the future,” then to purchase

Nutra Pharma stock. (Id. ¶ 14; Defs. 56.1 Counterstmt. ¶ 14.)

C. The 2015 Offering

In 2015, Nutra Pharma and Deitsch decided to raise

capital for the company by selling shares of Nutra Pharma common

stock directly to individual investors. (SEC 56.1 Stmt. ¶ 16.)

Whether these sales were exempt from registration under the

Securities Act is central to several of the SEC’s non-fraud

allegations and the parties’ present dispute. (E.g., id. ¶ 16;

Defs. 56.1 Counterstmt. ¶¶ 16, 17.) As it had done in the past,

Nutra Pharma sold these shares directly to investors at a 50%

discount to the then-market price of the stock. (SEC 56.1 Stmt.

¶¶ 17-18) In order to make them an attractive option to open

market purchases, the shares were restricted and could not

immediately be resold. (Defs. 56.1 Counterstmt. ¶ 17.) Nutra

Pharma engaged Wall Street Buy in three separate agreements to

perform investor relations work in connection with the 2015

Offering. (SEC 56.1 Stmt. ¶ 19.)

1. Castaldo and McManus Call Prospective Investors

McManus helped identify potential investors in the 2015

Offering by speaking with subscribers on Castaldo’s subscriber

list in order to get people “excited about Nutra Pharma.” (Id. ¶¶

21, 23.) He spoke to between five and seven prospective investors

whose names he does not recall. (Id. ¶¶ 22-24.) According to

Deitsch, “most of the private placement participants were

subscribers to [the Wall Street Buy] newsletter, and at some point,

Mr. Castaldo was the conduit by which [Deitsch] met some of these

people.” (Id. ¶ 25.) Indeed, Deitsch claims that nearly all of

the Wall Street Buy subscribers who eventually purchased shares in

the 2015 Offering were already Nutra Pharma shareholders, having

previously purchased shares of Nutra Pharma on the open market.

(Defs. 56.1 Counterstmt. ¶ 25; Deitsch Depo. Tr. at 319:10-23.)

However, as discussed below, the SEC has identified at least one

investor who had not previously purchased Nutra Pharma stock but

who nevertheless participated in the 2015 Offering. (See infra.)

2. Prospective Investor Subscription Documents

Once someone expressed an interest in purchasing Nutra

Pharma shares in the 2015 Offering, Deitsch sent the prospective

investor a subscription agreement and purchaser questionnaire.

(SEC 56.1 Stmt. ¶ 26.) The subscription agreement included a

three-page purchaser questionnaire designed to determine whether

the potential investor was an “accredited investor” as defined

under Rule 501 of Regulation D. (Id. ¶ 28; Subscription Agmt.,

Ex. 24, attached to Moilanen Decl.) The questionnaire asked

prospective investors three numbered questions: whether the

investor’s net worth (with a spouse, if applicable) exceeded $1

million; whether the individual had an individual annual income

exceeding $200,000 or a joint income with his or her spouse

exceeding $300,000 in each of the two most recent years; and about

the investor’s educational background and experience investing in

securities. (SEC 56.1 Stmt. ¶ 29.) The questionnaire further

required the investor’s signature, along with a representation

that the information was true and correct. (Id. ¶ 30.) In

executing the subscription agreement, the investor acknowledged:

[T]hat the proposed investment is being

offered in a manner that is intended to comply

with the requirements of Section 4(2) of the

Act, and Rule 506 of Regulation D promulgated

thereunder . . . .

(Defs. 56.1 Counterstmt. ¶ 30 (quoting Subscription Agmt.).)

Generally, Deitsch sent the subscription agreement with

a cover email that described, among other things, the terms of the

2015 Offering, and provided numerous links to sites that contained

additional information about Nutra Pharma, its products, and its

shares. (Id. ¶ 26 (citing June 29, 2015 Email from Deitsch to

Harrell, Ex. 26, attached to Moilanen Decl.).) Deitsch also

offered to speak with potential investors about any questions that

arose. (Id. ¶ 27.) However, the subscription agreement itself

did not contain any financial information about Nutra Pharma.

(Id.) Moreover, it is undisputed that this cover email and

accompanying information was not sent to two investors, as detailed

below. (See infra.)

In the event an individual decided to invest, the

investor filled out and signed the subscription agreement,

including the attached questionnaire, and sent both forms to

Deitsch, who would “make sure that the [agreement and

questionnaire] were complete” and that the investor’s payment had

cleared, and then counter-sign the agreement. (SEC 56.1 Stmt. ¶

33.) Deitsch counter-signed all such subscription agreements

documenting investments in the 2015 Offering. (Id. ¶ 34.)

3. Harrell Invests in the 2015 Offering

In 2015, Paul Stan Harrell (“Harrell”) -- a former

trucking entrepreneur who had worked as a licensed stockbroker for

about two years in the 1980s -- received a call from Castaldo’s

brother, Jerry Castaldo, who worked at Wall Street Buy. Jerry

Castaldo had been put in touch with Harrell by a mutual friend who

had purchased Nutra Pharma shares in the past. (Id. ¶¶ 35-36.)

Jerry Castaldo and Harrell spoke on the phone four or five times,

discussing several companies, including Nutra Pharma. (Id. ¶¶ 39,

41.) According to Harrell, he understood Wall Street Buy “to be

a small boutique brokerage, and some kind of research group where

they bird-dogged stocks and then they tried to make recommendations

to people,” some of whom would buy, and some of whom would not

buy. (Defs. 56.1 Counterstmt. ¶ 37 (quoting Harrell Depo. Tr. at

23:1-6, Ex. 17, attached to Moilanen Decl.).) For his part,

Harrell had limited experience in purchasing penny stocks, and at

no time during their calls did Jerry Castaldo ask Harrell any

questions about his investing experience or finances; nor did he

ask whether Harrell had previously invested in Nutra Pharma. (SEC

56.1 Stmt. ¶¶ 38, 42.)

To the extent Harrell knew anything about Nutra Pharma

before his conversations with Jerry Castaldo, it came from their

mutual friend. (Compare SEC 56.1 Stmt. ¶ 40; with Defs. 56.1

Counterstmt. ¶ 40.) However, when Nutra Pharma came up during a

call, Harrell was particularly interested because the company was

developing treatment for multiple sclerosis, a disease with which

Harrell had a personal interest. (SEC 56.1 Stmt. ¶ 44.) Shortly

after that call, on June 9, 2015, Harrell received an email from

Wall Street Buy attaching a Nutra Pharma press release. (Id. ¶

45.)

In a subsequent June 29, 2015 email, Deitsch attached

the subscription agreement and described the basic terms of the

2015 Offering, including that Nutra Pharma was offering to sell

its stock at a 50% discount to its then-market price. (Id. ¶ 51)

Deitsch further advised Harrell that he could call him at any time.

(Defs. 56.1 Counterstmt. ¶¶ 51, 53.) In fact, shortly after

receiving the email Harrell called Deitsch and they had their first

conversation, which Deitsch does not recall. (SEC 56.1 Stmt. ¶¶

54-56.) During the call, Deitsch talked to Harrell about Nutra

Pharma, including the company’s plans to expand the cobra farm,2

and Harrell’s potential $15,000 investment in the company. (Id.

¶¶ 57-58.) According to Harrell, Deitsch did not ask him about

his background; investing experience; finances; or whether he had

previously invested in Nutra Pharma. Nor did Harrell provide

Deitsch with any such information, although it appears Harrell

2 (See Second Amended Complaint ¶¶ 4-6, 126-31, ECF No. 49

(providing background on the Commission’s allegations regarding

Nutra Pharma’s claimed cobra farm operations).)

understood that such information would be provided through the

subscription agreement. (Id. ¶¶ 59-60; Defs. 56.1 Counterstmt. ¶

59.) Although Deitsch claims he generally asked prospective

investors whether they already owned Nutra Pharma stock, he did

not have anyone check any records to determine whether any

prospective investor in fact had a pre-existing investment in the

company. (SEC 56.1 Stmt. ¶ 64.) As for Harrell, Deitsch does not

recall whether he had a prior investment in Nutra Pharma. (Id. ¶

65.) After the call, Harrell decided to invest $15,000 in Nutra

Pharma. (Id. ¶ 61.) The following day he signed the subscription

agreement, filled out the purchaser questionnaire, and returned

them to Deitsch. (Id. ¶ 63; Harrell Subscription Agmt., Ex. 27,

attached to Moilanen Decl.)

D. Barbee and Thomas Invest in Nutra Pharma

The Commission identifies two investments by

unaccredited investors arising out of the 2015 Offering: the first

to Charles J. Barbee (“Barbee”), and the second to Jane E. Thomas

(“Thomas”).

On June 19, 2015, Barbee executed the subscription

agreement and attached purchaser questionnaire for a $900

investment in Nutra Pharma. (SEC 56.1 Stmt. ¶ 66.) On the

purchaser questionnaire, Barbee stated that he had only occasional

experience investing in stocks and bonds and no experience with

venture capital investments. (Id. ¶ 67.) Moreover, Barbee advised

that he and his wife’s net worth did not exceed $1 million, that

his income did not exceed $200,000, and that their joint income

did not exceed $300,000. (Id. ¶ 68.) That same day, Deitsch

countersigned Barbee’s subscription agreement, and on June 24,

2015, Nutra Pharma issued 15,000 shares of common stock to Barbee

as part of the 2015 Offering. (Id. ¶¶ 69-70.) There is no dispute

that Barbee was not an accredited investor within the meaning Rule

of 501(a) of Regulation D. (Id. ¶ 71.)

On June 30, 2015, Thomas executed the subscription

agreement and attached purchaser questionnaire for a $10,000.02

investment in Nutra Pharma. (Id. ¶ 72.) On the purchaser

questionnaire, Thomas stated that she had frequent experience

investing in stocks and bonds; Thomas did not fill out the box

regarding her experience with venture capital investments. (Id.

¶ 73.) Moreover, Thomas advised that she and her spouse’s net

worth did not exceed $1 million, that her income did not exceed

$200,000, and that their joint income did not exceed $300,000.

(Id. ¶ 74.) On July 20, 2015, Deitsch countersigned Thomas’s

subscription agreement, and on August 26, 2015, Nutra Pharma issued

166,667 shares of its common stock to Thomas as part of the 2015

Offering. (Id. ¶¶ 75-76.) There is no dispute that Thomas was

not an accredited investor within the meaning of Rule 501(a) of

Regulation D. (Id. ¶ 77.)

While Defendants concede that Barbee and Thomas were not

accredited investors, they point to representations Barbee and

Thomas assented to in the subscription agreement regarding their

understanding of the risks involved with respect to their

investment in Nutra Pharma. (Defs. 56.1 Counterstmt. ¶¶ 71, 77.)

There is no record evidence that Defendants provided any financial

information about Nutra Pharma to Barbee or Thomas before they

invested, although Defendants point out that both individuals had

relationships with Nutra Pharma investors. (SEC 56.1 Stmt. ¶ 78;

Defs. 56.1 Counterstmt. ¶ 78.)

E. Summary of the 2015 Offering

From May 1 through December 31, 2015, Nutra Pharma issued

a total of 12,585,000 shares of its common stock to investors in

the 2015 Offering. (SEC 56.1 Stmt. ¶ 80.) Through these stock

sales, Nutra Pharma raised a total of $756,300.82 from thirty-

three investors located in ten states and Canada. (Id. ¶ 81.)

Nutra Pharma did not file a registration statement with the SEC in

connection with any of the sales from the 2015 Offering; rather,

Nutra Pharma maintains it was exempt from such a requirement. (Id.

¶ 82.)

Nutra Pharma also issued a total of 3,310,000 shares of

its common stock to various individuals and entities in return for

services during this same period, including 200,000 shares to

Castaldo and 750,000 shares to McManus. (Id. ¶ 83.) Deitsch

counter-signed each of the agreements obligating Nutra Pharma to

issue these shares for services. (Id. ¶ 84.) Nutra Pharma did

not file a registration statement with the SEC for any of these

issuances of shares for services; again, Nutra Pharma maintains it

was exempt from such a requirement. (Id. ¶ 85.)

From May 1 through December 31, 2015, twenty-five

separate issuances of common stock -- either to investors or in

exchange for services -- resulted in a more than 5% increase in

the number of shares outstanding disclosed in Nutra Pharma’s then-

most-recent Form 10-Q. (Id. ¶ 86.) Nutra Pharma’s common stock

issuances to investors on July 13, 2015 resulted in a percentage

increase of more than 20% to the number of outstanding shares

disclosed in the prior Form 10-Q. (Id. ¶ 87.) However, Nutra

Pharma did not file a Form 8-K with the SEC concerning any of the

2015 issuances of unregistered common stock to investors or in

exchange for services. (Id. ¶ 88.) In comparison, Nutra Pharma

filed Forms 8-K concerning at least two earlier unregistered

issuances of common stock to investors in 2008 and 2009, one of

which also disclosed the issuance of unregistered shares in

exchange for services. (Id. ¶ 89.) Deitsch signed these earlier

Forms 8-K. (Id. ¶ 90.) However, Defendants respond that the

circumstances in 2008 and 2009 differed from those in 2015. (Defs.

56.1 Counterstmt. ¶ 89.) Specifically, in the 2008 Form 8-K, there

was a specific date when the private placement closed and the Nutra

Pharma Board authorized the issuance of shares in exchange for

services; and in the 2009 Form 8-K, there was a specific date when

all subscriptions for unregistered shares were accepted. (Id.)

On the other hand, in 2015, “there were a significant number of

different dates when shares were issued.” (Id.) For these

reasons, Nutra Pharma disclosed the issuance of unregistered

shares “on a rolling basis” in its Forms 10-Q filed on August 18,

2015 and November 23, 2015. (Id.)

F. Deitsch’s Personal Holdings in Nutra Pharma

On April 1, 2008, Deitsch filed with the SEC a Schedule

13D reporting his beneficial ownership of 54.5 million shares of

Nutra Pharma common stock, which amounted to 33.8% of the company’s

outstanding common stock. (SEC 56.1 Stmt. ¶ 91.) It is undisputed

that this was the only Schedule 13D form that Deitsch filed with

the SEC until June 2018. (Id. ¶ 92.)

In annual Forms 10-K, however, Nutra Pharma disclosed

Deitsch’s holdings, along with the holdings of Nutra Pharma’s other

officers and directors. (Id. ¶ 93.) For example, in the 2013

Form 10-K, Nutra Pharma disclosed that Deitsch beneficially owned

141,678,334 shares of common stock as of December 31, 2013, which

amounted to 14.1% of the outstanding common stock. (Id. ¶¶ 94-

95.) On April 10, 2014, Nutra Pharma issued 50 million shares of

common stock to Deitsch, increasing his holdings to 191,68,360

shares and boosting his beneficial ownership stake to 17.3%. (Id.

¶ 96.) On May 18, 2015, Nutra Pharma effected a 40-for-1 reverse

split of its common stock, which reduced by a factor of 40 the

number of shares that Deitsch and all other shareholders held.

(Id. ¶ 97.) According to the 2015 Form 10-K, Deitsch beneficially

owned 9,219,275 shares of common stock as of April 14, 2016, which

represented 8.6% of the 106,894,580 outstanding shares. (Id. ¶

98.)

The following year, on June 28 and July 5, 2016, Deitsch

acquired 19 million shares of common stock, increasing his holding

by more than 200% and his beneficial ownership of Nutra Pharma

common stock to approximately 18.4% of the outstanding shares.

(Id. ¶ 99.) According to the 2016 Form 10-K, Deitsch beneficially

owned 43,219,275 shares of common stock as of April 17, 2017, which

represented 11.7% of the outstanding shares. (Id. ¶ 100.)

On October 30, 2017, Nutra Pharma discharged $400,000 in

loans owed to Deitsch in exchange for three million shares of the

company’s Series A Preferred Stock, with each share entitling

Deitsch to 1,000 votes per share, or 3 billion additional votes in

total. (Id. ¶¶ 101-02.) As a result, Deitsch beneficially owned

3,043,298,859 shares, or 62.7% of Nutra Pharma’s voting common

stock.

Between November 8, 2012 and April 5, 2016, Deitsch

executed a total of 273 separate transactions to purchase Nutra

Pharma shares in his personal brokerage accounts, spending a total

of $12,802.94 before commissions and fees. (Id. ¶ 104.) Deitsch

did not report any of these purchases on a Form 4 or a Form 5.

(Id. ¶ 105.) Indeed, Deitsch did not file any Forms 4 at all

between March 22, 2014, and June 25, 2018, and he has not filed a

Form 5 since January 1, 2005. (Id. ¶ 106.) Defendants respond

that Deitsch was not required to report any of the 273 de minimis

purchases on Form 4. (Defs. 56.1 Counterstmt. ¶ 105.) Nor was

Deitsch required to disclose these purchases on a Form 5, because

they were reported elsewhere. (Id. ¶ 105.) However, in a Form 4

filed on June 26, 2018, Deitsch disclosed his receipt of nearly 40

million split-adjusted shares in 2014, 2015, and 2016. (SEC 56.1

Stmt. ¶ 107.) Moreover, each of the Forms 10-K that Nutra Pharma

filed since the fiscal year ending in 2010 state that “based on

our review of Forms 3, 4, 5 and Schedule 13D furnished to us during

the last fiscal year, all of our officers and directors filed the

required reports.” (Id. ¶ 109.) Deitsch signed each of these

Forms 10-K as Nutra Pharma’s chief executive officer. (Id. ¶ 110.)

II. Procedure

The Commission initiated this action on September 28,

2018 against Nutra Pharma, Deitsch, and McManus. (Compl., ECF No.

1.) After the SEC filed an Amended Complaint on May 29, 2019 that

mooted the pending motions to dismiss, Defendants and McManus

renewed their respective motions to dismiss, which the Court

granted in part and denied in part in a Memorandum and Order dated

March 31, 2020. In the subsequently filed, operative Second

Amended Complaint, the SEC asserts several “non-fraud” claims that

are the subject of the present motion for partial summary

judgment.3

With leave of Court, on April 4, 2021, the Commission

filed the instant motion seeking summary judgment on its non-fraud

claims. (Mot., ECF No. 68; Support Memo, ECF No. 68-1.)

Specifically, the Commission seeks summary judgment on its claim

that the Defendants violated Section 5 of the Securities Act by

offering and selling Nutra Pharma stock in 2015 without a

registration statement (Claim 7); Nutra Pharma violated Section

13(a) of the Exchange Act and Rule 13a-11 thereunder by failing to

file Forms 8-K disclosing unregistered stock sales and issuances

above a certain numerical threshold (Claim 10), and that Deitsch

aided and abetted that violation (Claim 14); and Deitsch violated

Exchange Act Section 13(d) and Rule 13d-2(a) by failing to file

Schedule 13D forms disclosing changes in his ownership of Nutra

Pharma’s outstanding shares above a certain numerical threshold

(Claim 8), as well as Exchange Act Section 16(a) and Rule 16a-3 by

failing to timely file Forms 4 and 5 disclosing his acquisitions

3 The Commission also asserts several fraud-based claims that are

not subject to the present motion, including violations Securities

Act Section 17(a) and violations of Exchange Act Section 10(b) and

Rule 10b-5.

of Nutra Pharma stock (Claim 9).4 Defendants oppose the motion.

(Opp’n, ECF No. 72; Reply, ECF No. 74.)

DISCUSSION

I. Legal Standard

Summary judgment is appropriate where 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). “Material

facts are those which might affect the outcome of the suit under

the governing law, and a dispute is genuine if the evidence is

such that a reasonable jury could return a verdict for the

nonmoving party.” Wagner v. Chiari & Ilecki, LLP, 973 F.3d 154,

164 (2d Cir. 2020) (quoting Coppola v. Bear Stearns & Co., 499

F.3d 144, 148 (2d Cir. 2007)) (internal quotation marks omitted).

“The moving party bears the initial burden of showing that there

is no genuine dispute as to a material fact.” CILP Assocs., L.P.

v. PriceWaterhouse Coopers LLP, 735 F.3d 114, 123 (2d Cir. 2013)

(cleaned up). “In moving for summary judgment against a party who

will bear the ultimate burden of proof at trial, the movant may

satisfy this burden by pointing to an absence of evidence to

support an essential element of the nonmoving party’s claim.”

Gummo v. Vill. of Depew, 75 F.3d 98, 107 (2d Cir. 1996) (citing

Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986)). “If, as

4 The Commission is not seeking summary judgment on any of its

claims against McManus.

to the issue on which summary judgment is sought, there is any

evidence in the record from which a reasonable inference could be

drawn in favor of the opposing party, summary judgment is

improper.” Hetchkop v. Woodlawn at Grassmere, Inc., 116 F.3d 28,

33 (2d Cir. 1997). Moreover, “the court is not to make assessments

of the credibility of witnesses” on a motion for summary judgment,

as “[c]redibility assessments, choices between conflicting

versions of events, and weighing of the evidence are matters for

the jury.” Id.

On a motion for summary judgment the Court considers the

“pleadings, deposition testimony, answers to interrogatories and

admissions on file, together with any other firsthand information

including but not limited to affidavits.” Nnebe v. Daus, 644 F.3d

147, 156 (2d Cir. 2011). In reviewing the record, “the court is

required to resolve all ambiguities and draw all permissible

factual inferences in favor of the party against whom summary

judgment is sought.” Sheet Metal Workers’ Nat’l Pension Fund v.

Vadaris Tech. Inc., No. 13-CV-5286, 2015 WL 6449420, at *2

(E.D.N.Y. Oct. 23, 2015) (quoting McLee v. Chrysler Corp., 109

F.3d 130, 134 (2d Cir. 1997)).

II. Analysis

The Court begins with the Commission’s claims under

Section 5 of the Securities Act, including any potential exemptions

from registration, before turning to the Commission’s remaining

claims under the Exchange Act.

A. Section 5: Unregistered Offering of Securities

1. The Commission’s Prima Facie Case

“Section 5 of the Securities Act makes it unlawful,

directly or indirectly, to publicly offer or sell unregistered

stock, see 15 U.S.C. § 77e, unless the offering is covered by an

exemption.” SEC v. Frohling, 851 F.3d 132, 135 (2d Cir. 2016).

“To state a cause of action under Section 5, one must show

‘(1) lack of a [required] registration statement as to the subject

securities; (2) the offer or sale of the securities; and (3) the

use of interstate transportation or communication and the mails in

connection with the offer or sale.’” Id. at 136 (quoting SEC v.

Cavanagh, 445 F.3d 105, 111 n.13 (2d Cir. 2006)). Moreover, “[a]

person not directly engaged in transferring title of the security

can be held liable under § 5 if he or she ‘engaged in steps

necessary to the distribution of [unregistered] security issues.’”

Id. (quoting SEC v. Chinese Consol. Benevolent Ass’n, 120 F.2d

738, 741 (2d Cir. 1941)). The registration requirements of the

Securities Act “protect investors by promoting full disclosure of

information thought necessary to informed investment decisions.”

SEC v. Ralston Purina Co., 346 U.S. 119, 124 (1953).

The Commission has stated a prima facie violation of

Section 5. It is undisputed that through the 2015 Offering,

Defendants offered Nutra Pharma common stock to prospective

investors and sold 12,585,000 shares to thirty-three investors for

a total of $756,300.82, and that no registration statement covered

those sales. Moreover, there can be no dispute that Deitsch

engaged in steps necessary to the distribution of these

unregistered shares. Deitsch spoke with prospective investors,

emailed them subscription agreements and purchaser questionnaires,

received and reviewed the signed documents in the event an offeree

decided to invest, and then counter-signed the executed

subscription agreements. These undisputed facts are sufficient to

establish that Deitsch engaged in steps necessary to the

distribution of unregistered Nutra Pharma securities. See SEC v.

Tecumseh Holdings Corp., No. 03-CV-5490, 2009 WL 4975263, at *3

(S.D.N.Y. Dec. 22, 2009) (granting summary judgment on Section 5

claim against alleged corporate officer who “drafted or reviewed

offering memoranda used to sell [unregistered] securities,

authorized the distribution of these memoranda to prospective

investors, and participated in conversations regarding ‘matters

pertaining to the sale of [unregistered] securities’ and ‘the

compliance oversight of . . . sales personnel’”); SEC v. Mattera,

No. 11-CV-8323, 2013 WL 6485949, at *10–11 (S.D.N.Y. Dec. 9, 2013)

(granting summary judgment on Section 5 claim against broker-

dealer liaison who introduced broker-dealers to the offeror, acted

as a liaison between the broker-dealers and the offeror, and

assisted his friends in the creation of an LLC with the purpose of

purchasing offeror funds). Nor is there any dispute that

Defendants used interstate commerce for the 2015 Offering,

including telephone calls and emails with potential investors

located in at least ten states and Canada.

Based on the foregoing, the Court finds that the

Commission has established a prima facie violation of Section 5.

2. The 506(b) Exemption

Because the SEC has established a prima facie violation

of Section 5, Defendants must prove that the Nutra Pharma

securities offered and sold through the 2015 Offering were exempted

from registration to avoid liability. “The burden is on defendant

to prove that a registration exemption applies.” SEC v.

Opulentica, LLC, 479 F. Supp. 2d 319, 328 (S.D.N.Y. 2007) (citing

Ralston Purina Co., 346 U.S. at 126); see also Cavanagh, 445 F.3d

at 111, n.13 (“Once a prima facie case has been made, the defendant

bears the burden of proving the applicability of an exemption.”).

i. Applicable Law

Under the Rule 506 exemption for private placements,

“offerings are exempt from registration if there are no more than

thirty-five unaccredited purchasers for the offering and the

offering conforms to the general requirements laid out by the SEC.”

Mattera, 2013 WL 6485949, at *11 (citing 17 C.F.R. §§ 230.502,

230.506). One of those requirements, described in Rule 502(b),

obligates the issuer to disclose certain types of financial

information, including the company’s most recent annual report

filed on Form 10-K and “a brief description of the securities being

offered, the use of the proceeds from the offering, and any

material changes in the issuer’s affairs that are not disclosed in

the documents furnished.” 17 C.F.R. § 230.502(b)(1), (b)(2)(ii)

(Sept. 23, 2013).

The second relevant provision, described in Rule 502(c),

“prohibits general solicitations for sales of unregistered

securities.” Mattera, 2013 WL 6485949, at *11 (citing 17 C.F.R.

§§ 230.502(c), 230.508). According to Rule 502(c), general

solicitations include, but are not limited to, “[a]ny

advertisement, article, notice or other communication published in

any newspaper, magazine, or similar media or broadcast over

television or radio.” 17 C.F.R. § 230.502(c)(1) (Sept. 23, 2013).

“[W]hen the promoters begin to bring in a diverse group of

uninformed friends, neighbors and associates,” such as through a

cold-calling campaign, the protections of Rule 502 will not apply.

See Nonpublic Offering Exemption, 1933 Act Release No. 33–4552, 27

Fed. Reg. 11316 (Nov. 6, 1962). Cold calls to prospective

investors constitute a general solicitation under Rule 502(c)

where they have “the potential to reach a large number of people”

throughout a large geographic area, and “target[] people with whom

the issuer does not have a prior relationship and who are unlikely

to have any special knowledge about the offered security.”

Tecumseh Holdings Corp., 2009 WL 4975263, at *4; see also SEC v.

Rabinovich & Assocs., LP, No. 07-CV-10547, 2008 WL 4937360, at *4

(S.D.N.Y. Nov. 18, 2008). On the other hand, when the issuer or

its agent makes targeted calls to investors with whom the issuer

has a “substantive relationship” at the time of the offer to sell

securities, the issuer will not be found to have engaged in a

general solicitation. Bateman Eichler, Hill Richards, Inc., 1985

WL 55679, at *1 (SEC No-Action Letter Dec. 3, 1985); Citizen VC,

Inc., 2015 WL 4699193, at *1 (SEC No-Action Letter Aug. 6, 2015).

“[A] ‘substantive’ relationship is one in which the issuer (or a

person acting on its behalf) has sufficient information to

evaluate, and does, in fact, evaluate, a prospective offeree’s

financial circumstances and sophistication, in determining his or

her status as an accredited or sophisticated investor.” Citizen

VC, Inc., 2015 WL 4699193, at *1.

ii. Application

While fewer than thirty-five unaccredited purchasers

participated in the 2015 Offering, the undisputed facts show

Defendants failed to comply with the remaining requirements under

Rule 506. To begin, Defendants have failed to produce any

documents showing that they provided any financial information

about Nutra Pharma to Barbee or Thomas -- both undisputedly

unaccredited investors -- before they purchased stock in the 2015

Offering. “Uncontradicted evidence of defendants’ offers and

sales of [unregistered securities] to unaccredited investors

without providing those investors with the required information

render[s] the exemption under Rule 506 unavailable.” SEC v. Empire

Dev. Grp., LLC, No. 07-CV-3896, 2008 WL 2276629, at *9 (S.D.N.Y.

May 30, 2008). For this reason alone Defendants cannot establish

the Rule 506 exemption applies, and their arguments to the contrary

are unpersuasive for several reasons. Defendants do not dispute

that Deitsch did not provide Barbee or Thomas the necessary

financial documents; rather, they blame the Commission for not

asking Deitsch during his depositions to explain why his customary

email identifying numerous sources of information about Nutra

Pharma had not been provided. (Defs. Counterstmt. ¶ 78.) But at

this stage Defendants bear the burden of showing that disputed

facts preclude a finding that no registration exemption applies,

and they cannot shift that burden to the Commission. See

Opulentica, LLC, 479 F. Supp. 2d at 328 (citing Ralston, 346 U.S.

at 126).

Defendants also point out that Barbee and Thomas

(1) executed subscription agreements in which they represented

each had “been furnished any and all materials relating to the

Company and its activities” that each had requested; and (2) their

friends or family were Nutra Pharma shareholders. (Defs.

Counterstmt. ¶ 78.) However, because Barbee and Thomas were not

provided the financial information required by Rule 506, these

facts are immaterial, and Defendants cite no authority suggesting

otherwise.

In any event, even if Defendants had provided the

necessary financial information to the unaccredited investors, the

Court finds the undisputed facts show Defendants engaged in a cold-

calling campaign that constituted a general solicitation.5

Tecumseh Holdings Corp., 2009 WL 4975263, at *4; see also SEC v.

Bio Def. Corp., No. 12-CV-11669, 2019 WL 7578525, at *16 (D. Mass.

Sept. 6, 2019), aff’d sub nom. SEC v. Morrone, 997 F.3d 52 (1st

Cir. 2021). In sum, Defendants retained a promoter, Wall Street

Buy, to generate demand for the 2015 Offering of Nutra Pharma stock

by making telephone calls to Wall Street Buy subscribers, who

Deitsch understood to number in the hundreds and, potentially,

thousands. Yet there was no effort to monitor and confirm whether

these subscribers were current Nutra Pharma shareholders. See

Tecumseh Holdings Corp., 2009 WL 4975263, at *4 (finding a cold

5 Defendants halfheartedly argue that the terms “general

solicitation” and “public offering” “appear to raise significant

due process issues,” apparently on vagueness grounds. (Opp’n at

20-21.) In support of their argument, raised at the end of a

single paragraph, Defendants cite to FCC v. Fox Television

Stations, Inc., a Supreme Court case outside of the securities law

context involving the void-for-vagueness doctrine. Because this

argument is not sufficiently developed, the Court declines to

address it. See In re Gen. Motors LLC Ignition Switch Litig., No.

14-MD-2543, 2021 WL 1415121, at *3 (S.D.N.Y. Apr. 14, 2021)

(finding the plaintiffs forfeited a constitutional argument raised

in passing).

calling campaign constitutes a form of general solicitation where

it “targets people with whom the issuer does not have a prior

relationship and who are unlikely to have any special knowledge

about the offered security”); see also Mattera, 2013 WL 6485949,

at *12 (finding the defendant engaged in a general solicitation

where its interns were told they could “feel free” to bring the

offering to the attention of friends and family who the issuer

“had no reason to believe” would be sophisticated investors).

In fact, it cannot be reasonably disputed that Harrell

did not have a substantive relationship with Defendants before

Deitsch offered him stock. Defendants’ contention that Harrell

knew about Nutra Pharma before he spoke with Jerry Castaldo falls

short of establishing that he and Nutra Pharma had a substantive

relationship, because there is no evidence Defendants had

“sufficient information to evaluate,” and did in fact evaluate,

Harrell’s “financial circumstances and sophistication” in order to

determine his status as an accredited or sophisticated investor.

See Citizen VC, Inc., 2015 WL 469919, at *1. Jerry Castaldo did

not ask Harrell any questions about the latter’s financial

background or pre-existing relationship with Nutra Pharma. Nor

did Deitsch inquire about these matters in his follow-up email.

While Harrell testified he “sort of” expected a call from Wall

Street Buy because a friend had transacted with Nutra Pharma in

the past, this only demonstrates that Harrell’s relationship with

Nutra Pharma was tenuous at best.

Accordingly, on the undisputed facts, the Court finds

that the Rule 506(b) exemption is unavailable.6

3. The Section 4(a)(2) Exemption

“When an issuer tries to comply with Rule 506 but fails,

the issuer may still rely on the statutory exemption of section

4(2).” SEC v. Life Partners, Inc., 912 F. Supp. 4, 10 (D.D.C.

1996).7 The Court now considers whether Defendants have raised

any material dispute of fact regarding the application of the

Section 4(a)(2) exemption.

i. Applicable Law

The test for whether an offering is an exempt “private

offering” under Section 4(a)(2) asks whether the offerees could

“fend” for themselves, and whether the offerees had access to the

same information that registration would provide. SEC v.

StratoComm Corp., 2 F. Supp. 3d 240, 264 (N.D.N.Y. 2014) (citing

Ralston Purina Co., 346 U.S. at 125–27), aff’d, 652 F. App’x 35

6 Nor does the Section 506(c) exemption, which requires evidence

that all investors in an offering were accredited investors, apply

here, because Defendants concede Thomas and Barbee, both of whom

participated in the 2015 Offering, were not accredited investors.

Moreover, as the Commission correctly argues, Rule 508 is not

available in the present case, because it is an SEC enforcement

action, not a private investor action.

7 Section 4(2) was re-designated Section 4(a)(2).

(2d Cir. 2016); see also Gilligan, Will & Co. v. SEC, 267 F.2d

461, 466 (2d Cir. 1959). “The factors to be considered in

determining whether the exemption applies include: the number of

potential investors; their relationship to the issuer and to one

another; the manner of the offering, information disclosure or

access; and the sophistication of the potential investors.” Empire

Dev. Grp., LLC, 2008 WL 2276629, at *9 (citing W. Fed. Corp. v.

Erickson, 739 F.2d 1439, 1442 (9th Cir. 1984)). “The party

claiming the exemption must show that it is met not only with

respect to each purchaser, but also with respect to each offeree.”

StratoComm Corp., 2 F. Supp. 3d at 264 (citing Life Partners, 912

F. Supp. at 10).

ii. Application

Defendants raise no genuine dispute of material fact

regarding the application of the Section 4(a)(2) exemption. Once

the Commission established that “there was no control placed on

the number of offerees, it was incumbent upon [Defendants], in

opposing summary judgment, to rebut that evidence.” SEC v. Murphy,

626 F.2d 633, 645 (9th Cir. 1980). But the precise number of

offerees -- as opposed to purchasers -- remains unknown, making it

impossible for the Court to assess their respective sophistication

and relationship to Nutra Pharma. As discussed below, Defendants’

failure to adduce any evidence regarding the number of offerees is

fatal to their claim that the 2015 Offering was a private placement

under Section 4(a)(2). See SEC v. Alt. Energy Holdings, Inc., No.

10-CV-0621, 2014 WL 2515710, at *9 (D. Idaho May 13, 2014) (quoting

Doran v. Petroleum Mgmt. Corp., 545 F.2d 893, 902 (5th Cir. 1977)).

It is well established that “[t]o claim the private

offering exemption, evidence of the exact number and identity of

all offerees must be produced.” Erickson, 739 F.2d at 1442 (citing

SEC v. Continental Tobacco Co. of S.C., 463 F.2d 137, 161 (5th

Cir. 1972)); SEC v. Murphy, 626 F.2d 633, 645 (9th Cir. 1980);

Lively v. Hirschfeld, 440 F.2d 631, 633 (10th Cir. 1971);

StratoComm Corp., 2 F. Supp. 3d at 264. This information is

critical in assessing whether an offering was private or public,

as generally “the more offerees, the more likelihood that the

offering is public.” Murphy, 626 F.2d at 645–46. However,

Defendants have not identified the number of offerees in the 2015

Offering, and the undisputed facts further undermine Defendants’

claim to a private placement exemption. Defendants engaged Wall

Street Buy to generate interest in Nutra Pharma; Wall Street Buy

did so by calling subscribers to its stock newsletter, which

contained hundreds, if not thousands, of potential investors; and,

another Nutra Pharma consultant, McManus, could not recall the

names of the several prospective investors to whom he spoke. The

foregoing indicates an indeterminate number of offers made during

the 2015 Offering. Further, to the extent Defendants argue that

Wall Street Buy’s efforts did not constitute an offer, as they

only provided “factual business information” on the calls, this

argument is foreclosed by the broad definition Congress gave to

“offer,” which is “expansive enough to encompass the entire selling

process.” United States v. Naftalin, 441 U.S. 768, 773 (1979);

see also SEC v. Genovese, No. 17-CV-5821, 2021 WL 1164654, at *6

(S.D.N.Y. Mar. 26, 2021) (“Regardless of whether any solicitations

were made, the undisputed evidence discussed above shows that [the

broker-dealer] was preparing to sell the stock, and so was

‘offering’ the stock under the statutory definition.”).

Moreover, “[w]ithout knowing the identity of the

offerees, it is impossible to make individual assessments as to

the offerees’ levels of sophistication,” SEC v. Credit First Fund,

LP, No. 05-CV-8741, 2006 WL 4729240, at *12 (C.D. Cal. Feb. 13,

2006), or whether they could “fend for themselves.” Ralston Purina

Co., 346 U.S. at 125. The fact that investors -- as opposed to

offerees -- completed purchaser questionnaires with information

regarding their financial background does not indicate that

Defendants were aware of each offerees’ relative sophistication.

See Empire Dev. Grp., LLC, 2008 WL 2276629, at *9. In fact, at

least two investors who submitted completed questionnaires, Barbee

and Thomas, were not accredited investors.

With respect to Nutra Pharma’s relationship to the

offerees, “[t]he record does not establish that each offeree had

a relationship with [Nutra Pharma] giving access to the kind of

information that registration would have disclosed.” Cont’l

Tobacco Co. of S.C., 463 F.2d at 158. There is no evidence that

Defendants limited the 2015 Offering to a “select group,” id. at

159, or to individuals who “occupied a privileged position relative

to the issuer that afforded them an opportunity for effective

access to the information registration would otherwise provide,”

Erickson, 739 F.2d at 1443 (citing Doran, 545 F.2d at 906). To

the contrary, at least one investor, Harrell, had no prior

relationship with Nutra Pharma, and there is no dispute that Nutra

Pharma failed to provide the type of financial information that

registration reveals to Barbee and Thomas. Deitsch’s assertion

that such information “was there for the asking will not defeat a

motion for summary judgment.” Erickson, 739 F.2d at 1443.

Accordingly, the Court finds on the undisputed facts

that the Section 4(a)(2) exemption is unavailable. As a result,

the Commission is entitled to summary judgment on its Section 5

claims against Defendants.

B. Section 13(a) and Rule 13a-11

Next, the Commission asserts Nutra Pharma violated

Exchange Act Section 13(a) and Rule 13a-11 (Claim 10), which

require issuers of a security registered under Exchange Act Section

12 to file certain reports with the Commission. At issue here is

Nutra Pharma’s failure to file Forms 8-K concerning unregistered

stock sales from the 2015 Offering that represented 5% or more of

the company’s last-reported number of outstanding shares. The

Commission further alleges Deitsch aided and abetted Nutra

Pharma’s primary violation of Exchange Act Section 13 (Claim 14).

While the Court finds the undisputed facts make out a

primary violation of Section 13 by Nutra Pharma, triable issues

remain regarding Deitsch’s knowledge of the violations.

1. Primary Violation

Section 13(a) obligates issuers of a security registered

under Section 12 of the Exchange Act to file certain reports with

the Commission. See 15 U.S.C. § 78m(a). Exchange Act Rule 13a-

11 requires such issuers to file current reports on Form 8-K

disclosing certain events, including unregistered sales of equity

securities under Item 3.02. See 17 C.F.R. § 240.13a-11(a) (Sept.

20, 2011); SEC Form 8-K, Item 3.02,

https://www.sec.gov/files/form8-k.pdf. Item 3.02 requires

“smaller reporting companies” to report, within four business

days, such unregistered sales or issuances of stock if they

represent 5% or more of the issuer’s last-reported number of

outstanding stock. See SEC Form 8-K, Item 3.02. Lack of scienter

is not a defense to claims arising under Section 13 and the

regulations thereunder. SEC v. McNulty, 137 F.3d 732, 740–41 (2d

Cir. 1998).

The Commission is entitled to summary judgment on its

Section 13(a) claim. There is no dispute that (1) Nutra Pharma,

whose common stock was registered pursuant to Exchange Act Section

12(g), was required to file current reports on Form 8-K; (2) Nutra

Pharma sold shares of common stock without a registration statement

during the 2015 Offering; and (3) twenty-five of these issuances

resulted in over a 5% increase in Nutra Pharma’s number of

outstanding shares disclosed in its then-most-recent Form 10-Q.

(See Baier Decl. ¶¶ 7-9, Ex. 2.) As a smaller reporting company,

Nutra Pharma was thus required to file Forms 8-K concerning these

unregistered issuances within four business days. The company’s

failure to do so violated Rule 13(a) and the regulations

thereunder.

Defendants’ only argument in response is unavailing.

Defendants argue that Nutra Pharma included information about

unregistered stock issuances in its Forms 10-Q, apparently thereby

discharging its obligations under Rule 13a-11. (See Opp’n at 27.)

Defendants do not cite to any authority supporting the proposition

implicit in their argument, i.e., compliance with one disclosure

obligation protects the company from failing to comply with

another. This is unsurprising, because Form 10-Q and Form 8-K

serve different purposes. “The Form 10-Q includes unaudited

financial statements and provides a continuing view of the

company’s financial position during the year.” SEC, Glossary:

Form 10-Q, https://www.investor.gov/introduction-investing/

investing-basics/glossary/form-10-q. It is intended “to provide

shareholders and the investing public with a concise overview of

the company’s financial results, operations and management during

the preceding fiscal quarter.” Quarterly Report on Form 10-Q:

Purpose, Corp. Compl. Series: Securities § 1:43 (2022). Form 8-

K, on the other hand, “is for special event disclosures that cannot

wait to be disclosed in the next Form 10-Q or Form 10-K filing”;

in that way, it “completes the periodic reporting scheme by

supplementing the quarterly and annual reports filed on Forms 10-

Q and 10-K.” Current Report on Form 8-K: Purpose, Corp. Compl.

Series: Securities § 1:52 (2022). Thus, Nutra Pharma cannot

satisfy its Section 13(a) obligation to file Forms 8-K reporting

certain unregistered sales of equity securities by providing such

information in its Forms 10-Q.

2. Aid and Abet Liability

“To establish liability for aiding and abetting a

violation of the securities laws, the SEC must show ‘(1) the

existence of a securities law violation by the primary (as opposed

to the aiding and abetting) party; (2) knowledge of this violation

on the part of the aider and abettor[;] and (3) substantial

assistance by the aider and abettor in the achievement of the

primary violation.’” SEC v. Paulsen, No. 18-CV-6718, 2020 WL

6263180, at *12 (S.D.N.Y. Oct. 23, 2020) (quoting SEC v. DiBella,

587 F.3d 553, 566 (2d Cir. 2009)). “The[se] three requirements

cannot be considered in isolation from one another. Satisfaction

of the knowledge requirement will depend on the theory of primary

liability, and there may be a nexus between the degree of knowledge

and the requirement that the alleged aider and abettor render

substantial assistance.” SEC v. Espuelas, 908 F. Supp. 2d 402,

409 (S.D.N.Y. 2012) (quoting DiBella, 587 F.3d at 566).

The Court finds Deitsch has raised a genuine dispute of

material fact regarding his knowledge of the Section 13(a)

violation. As to the knowledge requirement, the Commission must

show “defendant’s general awareness of [his] overall role in the

primary violator’s illegal scheme.” Paulsen, 2020 WL 6263180, at

*14 (citations omitted). So, to prevail here, the Commission needs

to show Deitsch knew the underlying facts giving rise to the

violation. Put simply, it must be undisputed that Deitsch knew

that Nutra Pharma’s sales of unregistered stock exceeded the 5%

reporting threshold and therefore triggered the company’s

obligation to file a Form 8-K disclosing the sales. The only

evidence in the record as to Deitsch’s knowledge is Nutra Pharma’s

prior Form 8-K filings, which Deitsch signed and approved, made

after unregistered stock issuances in 2008 and 2009. However,

Defendants point out that the circumstances of those issuances

differed from the 2015 Offering. In 2008 and 2009, there was a

specific date on which the private placement closed or when

subscriptions for unregistered shares were accepted. Conversely,

the 2015 Offering involved multiple issuances over an eight-month

period. Thus, the Court cannot say as a matter of law that Deitsch

knew the 5% reporting threshold had been met solely based on his

prior conduct as the officer responsible for filings made

previously for facially distinguishable, unregistered stock

issuances. A jury will decide whether Deitsch had the requisite

knowledge to render him liable as an aider and abettor of Nutra

Pharma’s 2015 Offering.

C. Sections 13(d) and 16(a) Claims

Next, the Commission asserts Deitsch violation Exchange

Act Section 13(d) and Rule 13d-2(a) (Claim 8), and Section 16(a)

and Rule 16a-3 (Claim 9).

1. Applicable Law

Section 13(d)(1) and Rule 13d-1(a) obligate a stock

purchaser who acquires beneficial ownership of 5% or more of a

company’s securities to disclose his ownership to the SEC by filing

a Schedule 13D. See SEC v. Verdiramo, 890 F. Supp. 2d 257, 273

(S.D.N.Y. 2011) (citing 15 U.S.C. § 78m(1)(D), 17 C.F.R. § 240.12d-

1(a)). Section 13(d)(2) establishes a “continuing obligation on

the person filing [the Schedule 13D] to amend his statements ‘[i]f

any material change’ occurs,” such as “when the person who was

required to file the statement ‘acquires additional securities in

an amount equal to one percent or more of such securities.” SEC

v. Drexel Burnham Lambert, Inc., 837 F. Supp. 587, 608 (S.D.N.Y.

1993) (cleaned up). The number of outstanding shares found in the

company’s most recent quarterly, annual, or current reports filed

with the SEC is used to calculate whether the 1% or 5% thresholds

have been reached. See 17 C.F.R. § 240.13d-1(j).

“Section 16(a) and Rule 16a–3 require every person who

is a director or an officer of the issuer of securities to file a

Form 4 with the SEC reporting any changes in beneficial ownership,

and also to file an annual statement reporting such changes on a

Form 5.” Verdiramo, 890 F. Supp. 2d at 273 (cleaned up); see also

15 U.S.C. § 78p(a); 17 C.F.R. § 240.16a–3. A Form 4 must be filed

within two business days after the officer’s stock purchase or

sale, and a Form 5 must be filed within 45 days after the company’s

fiscal year-end. See 17 C.F.R. §§ 240.16a–3(g)(1), (f)(1)(ii).

On Form 5, the officer must disclose certain holdings and

transactions not previously reported on Forms 3, 4, or 5, including

“small acquisitions” of less than $10,000 in aggregate market value

within the prior six months that need not be reported on a Form 4.

17 C.F.R. § 240.16a–3(f)(1)(ii); 17 C.F.R. § 240.16a–6(a).

Sections 13(d) and 16(a) do not require a showing of scienter to

establish liability. Verdiramo, 890 F. Supp. 2d at 274, n.14.

2. Application

The undisputed facts establish Deitsch’s violation of

Sections 13(d) and 16(a). To begin, Deitsch failed to file any

amended Schedule 13D forms during the relevant period -- April 1,

2008 through June 2018 -- even though his ownership of Nutra Pharma

stock increased by more than 1% on at least three occasions during

that time. As a Nutra Pharma officer and director, Deitsch has

acknowledged in each Form 10-K he signed that he was subject to

Section 16(a)’s reporting requirements. Yet, Deitsch failed to

report acquisitions of Nutra Pharma stock made during the relevant

period, including 273 separate purchases of Nutra Pharma common

stock in his personal brokerage accounts. It was not until June

2018 that Deitsch filed a Schedule 13D and Form 4. Deitsch cites

to no authority that these “curative” filings satisfy his

obligations under Sections 13(d) and 16(a), and caselaw suggests

the opposite. See SEC v. Sands, 902 F. Supp. 1149, 1165 (C.D.

Cal. 1995) (granting summary judgment on Sections 13(D) and 16(a)

claims where the defendant-CEO failed to file an amended Schedule

13D and filed an untimely Form 4), aff’d sub nom. SEC v. First

Pac. Bancorp, 142 F.3d 1186 (9th Cir. 1998). Nor is there any

support for Deitsch’s contention that his disclosure of Nutra

Pharma holdings in annual Forms 10-K discharged his obligations

under Sections 13(d) and 16(a). Cf. SEC v. e-Smart Techs., Inc.,

82 F. Supp. 3d 97, 105 (D.D.C. 2015) (rejecting similar argument).

CONCLUSION

Accordingly, for the stated reasons, IT IS ORDERED that

the Commission’s motion (ECF No. 68) is GRANTED as to Claims 7, 8,

9, and 10, and DENIED as to Claim 14.

IT IS FURTHER ORDERED that within sixty days from the

date of this Memorandum & Order, the parties shall file their joint

pre-trial order in accordance with the Court’s Individual Rules.

SO ORDERED.

/s/_JOANNA SEYBERT___________

Joanna Seybert, U.S.D.J.

Dated: August 31 , 2022

Central Islip, New York