interpreting Cal. Corp. Code § 25012(e) and the March 25, 1967 24 “Guidelines for Determining when Securities are Being ‘Offered to the Public’” issued by 25 the Commissioner of Corporations
How later courts described this case
- interpreting Cal. Corp. Code § 25012(e) and the March 25, 1967 24 “Guidelines for Determining when Securities are Being ‘Offered to the Public’” issued by 25 the Commissioner of Corporations
- noting that § 25102(f) was “amended in significant regard effective 27 28 1 November 1, 1986”
- applying 13 only the risk-capital test
- interpreting 10 C.C.R. § 260.102.2 which today 22 references Cal. Corp. Code § 25102(g) and (e)
Written by the judges who cited it.
The opinion
U.S. BANKRUPTCY COURT a sy
NORTHERN DISTRICT OF CALIFORNIA . □□ eS □□□
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□□□□ KS
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> The following constitutes the order of the Court.
Signed: August 29, 2022
3
4 LES Re YO OA
5 CharlesNovack = ss—<—s
6 UNITED STATES BANKRUPTCY COURT
7 NORTHERN DISTRICT OF CALIFORNIA
8
In re: Case No. 19-40959 CN
9 Chapter 7
10 RAYMOND WON BAE,
Debtor.
12 Adversary No. 19-4032 CN
13 RANDALL R. FULLER, DARIUS
ORAVEC AND JOO-YOUNG KIM, MEMORANDUM DECISION
14 oe
Plaintiffs,
15
V.
16
RAYMOND WON BAE,
17
Defendant.
18
19
50 On May 9, 10 and 11, 2022, this court conducted a trial in the above captioned
> adversary proceeding. All appearances were noted on the record. The following
39 constitutes this court’s findings of fact and conclusions of law under Federal Rule of
33 Bankruptcy Procedure 7052.
In 2012 and 2013, plaintiffs Randall Fuller, Darius Oravec and Joo-Young Kim
35 (collectively, “Plaintiffs”) were enticed by defendant Raymond Won Bae to invest
substantial funds in INB, Inc., a South Korean startup with a business plan to fabricate
4 “ultra high tech” circuit boards in South Korea for the South Korean and American
58 markets. The Plaintiffs — all of whom knew Bae personally and/or professionally before
1 they invested – approached their investments from different perspectives. Oravec was
2 strictly a passive investor in INB, and his investment was a pure profit play. Fuller and
3 Kim, who have held various positions in the semi-conductor industry, became more
4 involved in INB’s operations after they invested, and they were eventually employed by
5 INB or an INB affiliate in South Korea. Notwithstanding their different investment
6 strategies, all three lost their investments when INB ceased operating in 2015. The
7 question before this court is whether their losses were simply the unfortunate by-product
8 of a well-intentioned but chaotically run start-up or the result of fraudulent representations
9 by Bae, INB’s CEO, founder, and largest shareholder.
10 The parties spent a substantial amount of trial time describing INB’s operations,
11 financing, and relationship with certain affiliates. While such information can be
12 significant in investment fraud cases, the evidence presented here was incomplete at best.
13 For example, this court is still unsure how INB was financed, and the parties’ efforts to
14 describe the relationship between INB and several other Bae owned entities fell short. If
15 nothing else, the trial demonstrated the precarious nature of investing in Silicon Valley-
16 like start-ups. Regardless, Bae, who was an experienced Silicon Valley entrepreneur,
17 formed INB in 2011 to manufacture specialty circuit boards, a niche field which he
18 believed was underserved. Bae owned and operated RB Technology, a Fremont, California
19 company that purchased circuit board components and did substantial business in South
20 Korea. He believed that there was an undeveloped market for high end circuit boards, and
21 he began discussing his concept with several persons in 2011, including some of the
22 Plaintiffs. Plaintiffs do not dispute that Bae’s concept was worthwhile, and they believed
23 that he had the business experience and acumen to lead INB. Bae believed that he needed
24 approximately eight million dollars to properly capitalize INB’s initial operations. He
25 began soliciting investments from friends and business associates in 2011 and ultimately
26 developed and presented a business plan to potential investors, including Plaintiffs.1 While
27
28 1 Bae solicited investments by discussing INB with friends, RB Technology
1 Bae drafted at least two business plans, the first, dated January 23, 2012, was the one Bae
2 presented to Plaintiffs before they invested (the “January 2012 Plan”). The January 2012
3 Plan explained INB’s business goals, listed financial and manufacturing milestones that it
4 hoped to accomplish, provided economic projections describing the anticipated market for
5 its product, named some of its management team, and stated the names of several parties
6 who had purportedly invested substantial sums in INB.
7 At trial, Bae downplayed the significance of the January 2012 Plan and described it
8 as a “work in progress.” He correctly noted that over the next three years INB’s business
9 plans and timelines changed while it struggled to build its manufacturing plant, purchase
10 the correct equipment, and train its employees before it terminated its operations in
11 December 2015. While the January 2012 Plan presumably was Bae’s best efforts to
12 describe INB’s prospects, its representations regarding INB’s management team, existing
13 investors, and current capitalization were not conjecture or prognostications. For example,
14 the January 2012 Plan stated that INB’s “current ownership” included Bae and Vijay Israni
15 (an apparently well-known businessman with a good track record of investing in Silicon
16 Valley startups) who each owned 40% of INB’s shares and had “invested heavily in the
17 company.” The January 2012 Plan’s Valuation and Investment Analysis stated that the
18 company’s “initial investment” was eight million dollars, allowing potential investors to
19 surmise that Israni (and Bae) had invested substantial funds in the venture.
20 The January 2012 Plan’s references to Israni as an investor, principal, and advisor
21 were incorrect. While Bae testified that he discussed INB with Israni in 2011, Israni
22 informed Bae in or around December 2011/January 2012 that he was not interested in
23 investing in INB. Moreover, while the January 2012 Plan indicated that Bae had poured
24 millions of dollars into INB, the only evidence regarding the scope of his investment was
25 Bae’s insistence that he had done so. Bae repeatedly testified that his investment included
26
27 customers and vendors, and other individuals associated with these friends, customers, and
vendors. Bae estimated that he talked to a hundred people about INB, thirty of which also
28 reviewed the business plan.
1 personal funds and monies contributed by RB Technology, Inc. Unfortunately, no party
2 introduced any documentary evidence establishing exactly how much Bae invested, and,
3 perhaps more significantly, exactly how much money INB had in the bank at any moment
4 in time.
5 Bae’s plans for INB never came to fruition. INB’s employees struggled to operate
6 the equipment needed to manufacture the circuit boards, and the equipment that INB
7 purchased – whether new or from a defunct Israeli business – was initially inadequate for
8 the task. These factors dramatically delayed the business’s operations, and despite
9 borrowing substantial funds from a South Korean bank, INB ceased operations in 2015.
10 As more fully discussed below, Fuller, Oravec and Kim did not receive any return on their
11 investments.
12 Oravec
13 Oravec and Bae were business acquaintances and friends, and he respected Bae’s
14 business acumen and trusted him. Oravec was familiar with the circuit board industry, and
15 he agreed with Bae that a niche circuit board manufacturer such as INB could be profitable.
16 Bae began discussing INB with Oravec in 2011 and it appears that Oravec initially
17 committed to investing $150,000.00 in INB before he reviewed the January 2012 Plan. In
18 yet another of its misstatements, the January 2012 Plan represented that Oravec had already
19 invested this amount well before INB received any funds from him. Oravec was
20 nonplussed by this error during his direct and cross-examinations. While he initially
21 informed Bae that he was interested in investing the requisite $150,000 (the January 2012
22 Plan indicated that INB was looking for investors who would invest that minimum
23 amount), Oravec was only able to invest $85,000, which he provided to Bae in two tranches
24 in the summer of 2012. Oravec first gave Bae a $40,000.00 check made payable to Bae or
25 RB Technology, and he later, at Bae’s instruction, deposited an additional $45,000.00 into
26 a South Korean bank account that Oravec opened for this purpose. Oravec testified that he
27 established this account in his name and that he did not know how or who withdrew these
28
1 funds. Regardless, INB acknowledged that he had invested $85,000 with it. Oravec also
2 traveled with Bae to South Korea before he invested to get a better sense of INB’s potential.
3 Oravec testified that Bae informed him that Israni was investing in INB during their
4 initial discussions, and that his review of the January 2012 Plan further disclosed that Israni
5 was a 40% investor and an advisor to the company. Oravec stated that he knew that Israni
6 had successfully invested in other start-ups. While Plaintiffs’ counsel guided Oravec
7 through various sections of the January 2012 Plan to elicit his understanding of its terms,
8 Oravec stated that he did not crunch any of its numbers before investing or focus on the
9 January 2012 Plan’s projections; instead, he was impressed by Israni’s involvement and
10 investment, trusted Bae, and believed that Bae’s expertise and experience would turn INB
11 into a profitable business.
12 Kim
13 Kim invested $300,000 in INB in January 2013 for a two percent equity interest in
14 the company. Kim was a circuit design engineer by trade and had no experience in printed
15 circuit board fabrication. Regardless, he was not strictly a passive investor in INB. Bae
16 also owned/controlled Ara Technology, Inc., a South Korean based company that
17 distributed circuit boards and certain raw materials which it purchased from RB
18 Technology. Bae explained to Kim that he wanted to expand Ara Technology’s business
19 and use it (as disclosed in the January 2012 Plan) to market INB’s product. Bae informed
20 Kim that INB required his full attention and that he needed a CEO for Ara Technology.
21 He offered the position to Kim, with one condition: that he invest $300,000 in INB. Kim
22 accepted these terms and moved to South Korea to assume the CEO position.2 Kim made
23 his investment on January 15, 2013 by depositing $300,000 into RB Technology’s HSBC
24 account.
25
26 2 The parties agreed that Kim would have an annual salary of $180,000 and receive
a 20% equity position in Ara Technology along with a percentage of its annual dividends.
27 Kim served as Ara’s CEO from early 2013 to mid-2016, and he received his full salary
during this time. Because of their intertwined finances, Ara Technology closed its doors
28 in May 2016, a few months after INB’s demise.
1 Kim testified that Bae approached him regarding INB in late 2012 and that he
2 reviewed the January 2012 Plan at that time; he invested in INB a few months later. Kim
3 also visited INB’s South Korean worksite and saw that work was progressing on its
4 manufacturing plant. Kim had experience drafting business plans, and he understood that
5 the January 2012 Plan’s projections may have been overly optimistic. He testified,
6 however, that he was more interested in how its financial projections were going to trend.
7 Kim stated that he invested in INB because of: a) Bae’s expertise in the field, b) the
8 investors listed in the January 2012 Plan, including Israni and Bae, who both had
9 experience in the circuit board industry (Kim understood that Israni and Bae both owned
10 40% of the company), c) Bae’s verbal representation that INB was worth $15 million, d)
11 his visit to INB’s (then under construction) business facility, and e) his opportunity to
12 become ARA Technology’s CEO. He testified that while he wanted the CEO position, his
13 $300,000 investment was fundamentally premised on INB’s opportunity to become a
14 successful company.3
15 Kim’s relationship with Bae soured after he became Ara Technology’s CEO. Kim
16 testified that despite his CEO title his job was primarily limited to marketing while Bae
17 controlled Ara Technology’s finances.4 Kim stated that Bae regularly ordered Ara
18 Technology’s accountant to transfer funds to INB to address INB’s cash needs, and that
19 Ara Technology was forced to guaranty INB’s substantial “leasing loan.” Ara Technology
20 eventually sued INB in South Korea to recover the transferred funds, and it obtained a
21 substantial, but uncollectible, judgment. Ara Technology closed in May 2016, a few
22 months after INB terminated its operations.
23
24
3 Bae purportedly drafted a second INB business plan in February 2012. This plan
25 omitted all references to Israni. Kim did not recall reviewing the second business plan
before he invested in INB. Oravec also testified that he did not review the February 2012
26 plan before he invested in INB. The evidence indicated that this second business plan may
have been drafted in 2014.
27
4 There was no testimony regarding what representations Bae made to Kim
28 regarding the CEO position.
1 Fuller
2 Fuller invested $300,000 in INB in April 2012 for a two percent equity interest.
3 Fuller was an experienced Silicon Valley businessman who had known Bae both personally
4 and professionally for several years before his INB investment. Fuller testified that he and
5 Bae both believed that a South Korea based specialty circuit board manufacturer could be
6 very profitable, and they had generally discussed the merits of such a venture before Bae
7 approached him regarding INB. Fuller reviewed the January 2012 Plan more carefully that
8 Oravec and Kim, and he was also more familiar with this aspect of the semi-conductor
9 industry. He therefore read the January 2012 Plan with an experienced eye.5 He testified
10 that he reviewed the January 2012 Plan and believed that INB was a sound business concept
11 that was adequately capitalized. He stated that he relied on its representations regarding
12 the identify of its two significant investors – Israni and Bae – and the January 2012 Plan’s
13 statement that they had “heavily invested” in the company. Fuller calculated that Israni
14 must have invested six million dollars to obtain his 40% interest.6 He also testified that he
15 relied on the balance sheet information contained in the January 2012 Plan, which indicated
16 that INB had at least eight million dollars in the bank and net working capital of more than
17 nine million dollars. He also noted that Oravec had also invested $150,000. While Fuller
18 believed that Israni had a good track record with Silicon Valley start-ups, it was the amount
19 of Israni’s alleged investment, and not his advisory role, that interested him.7
20 A closer scrutiny of the January 2012 Plan may have raised some red flags. Fuller
21 calculated that Israni had invested six million dollars to obtain his 40% interest in INB.
22 Since Bae also owned 40%, Fuller should have surmised that Bae, too, had paid six million
23
24 5 Fuller testified that he did not review the February 2012 Plan before he invested.
25 6 The January 2012 Plan stated that the remaining 20% of INB equity would be sold
for $150,000 for each one percent interest. Fuller therefore concluded that Israni paid six
26 million dollars for his 40% interest.
27 7 While Fuller testified that he thought Israni’s experience could help a start-up
succeed, Plaintiffs did not introduce any evidence regarding Israni’s business experience
28 or investment expertise.
1 dollars for his ownership interest. Yet the January 2012 Plan indicated that INB had only
2 received eight million dollars in “paid in capital,” which, as Bae would concede, was also
3 an overstatement. In addition, the January 2012 Plan was incomplete (INB had not filled
4 several important executive level positions), listed Fuller as a “Material Process Advisor”
5 well before he was retained by INB, and contained confusing milestone dates.
6 Fuller acknowledged the January 2012 Plan’s flaws and indicated that they did not
7 dissuade him from investing. He also testified that Bae may have informed him that his
8 business plan would describe Fuller as a business advisor. Fuller, who had informally
9 advised Bae regarding INB for some time, assented to this language.8
10 Fuller reviewed the January 2012 Plan on January 28, 2012, committed to investing
11 in INB in late March 2012, and invested his $300,000 on April 20, 2012 by depositing his
12 funds into RB Technology’s HSBC bank account. In May 2012, INB asked Fuller to serve
13 as its vice president of manufacturing. He accepted the offer in July 2012 and moved to
14 South Korea in September 2012 to address INB’s stalled manufacturing efforts. Fuller
15 testified that INB (i.e., Bae) was generally plagued by “inattention to detail” regarding what
16 equipment it needed, how to install the equipment, and what training and experience its
17 employees needed to successfully manage its manufacturing process, and he believes that
18 these issues contributed to INB’s demise. INB fired Fuller in mid-2013.
19 Bae
20 Bae generally testified regarding INB’s origin and prospects. As stated above,
21 Plaintiffs do not dispute that Bae’s business concept was sound. Bae testified that the
22 January 2012 Plan was a work in progress and its numbers and valuations were good faith
23 “estimates.” He conceded that INB did not have $8 million in working capital in 2012,
24 and that this figure was his estimate of the amount that INB needed to begin operations.
25 He repeatedly stated that he had at his disposal (through RB Technology and his own
26
27
8 This statement leaves Fuller in the difficult position of acceding to one
28 misrepresentation while complaining of another.
1 personal resources) five to six million dollars to invest in INB, and that INB closed its
2 doors because the corporation lacked the capital (despite its investor capital, “loans” from
3 Ara Technology, cash infusions from RB Technology, and a substantial South Korean bank
4 loan) to finish its manufacturing facility and train its staff.9 He also conceded that he knew,
5 by late December 2011/early January 2012, that Israni was not interested in investing in
6 INB, and that he did not disclose this to Plaintiffs before they invested. Bae testified that
7 INB had nine shareholders, which included himself, Ara Technology, RB Technology,
8 Plaintiffs, Bae’s brother, Bae’s cousin, and the person in charge of INB’s waste
9 management program.
10 Bae also testified that Plaintiffs’ funds were used by INB. The bank records
11 introduced into evidence could not fully substantiate his testimony. Most of the Plaintiffs’
12 investments were deposited into RB Technology accounts, and while RB Technology’s
13 bank records indicate that it transferred substantial funds to South Korean bank accounts,
14 there was no documentary evidence indicating which entity controlled this accounts.
15 Plaintiffs’ § 523(a)(2) Claims
16 Plaintiffs assert that Bae’s misrepresentations regarding INB constituted non-
17 dischargeable fraud and entitle them to damages. Section 523(a)(2) recognizes two
18 separate forms of actionable fraud/misrepresentation: under §523(a)(2)(A), claims
19 obtained by false pretenses, false representations, or actual fraud are non-dischargeable, so
20 long as they do not arise from a “statement respecting the debtor’s or an insider’s financial
21 condition.” If the latter is at issue, the claim falls under §523(a)(2)(B), which requires a
22 plaintiff to demonstrate that their claim arises from a materially false written statement
23 respecting the debtor’s or an insider’s financial condition which they reasonably relied on
24 to their detriment.
25
26
27
9 The court takes judicial notice under Federal Rule of Evidence 201 that RB
28 Technology filed its own no-asset Chapter 7 in July 2017. _____________.
1 Plaintiffs collectively testified that they relied on the January 2012 Plan’s statements
2 regarding the very presence and identity of Israni as an investor, director, and advisor and
3 his allegedly substantial investment in the company. At the very least, any claim regarding
4 the veracity of Israni’s investment falls under§ 523(a)(2)(B). See 11 U.S.C. §
5 101(31)(A)(iv); Lamar, Archer & Cofrin, LLP v. Appling, 138 S.Ct. 1752 (2018).
6 Regrettably, Plaintiffs’ complaint, trial brief, and this court’s Pre-Trial Order did not
7 disclose that Plaintiffs intended to pursue a § 523(a)(2)(B) claim for relief. Plaintiffs
8 made this request for the first time in their post-trial brief (which this court addressed
9 during its August 5, 2022 law and motion calendar).
10 The Plaintiffs’ request to amend the pleadings to include a § 523(a)(2)(B) claim is
11 GRANTED. Federal Rule of Bankruptcy Procedure 7015(b)(2) provides
12 When an issue not raised by the pleadings is tried by the
parties’ express or implied consent, it must be treated in all
13 respects as if raised in the pleadings. A party may move – at
any time, even after judgment – to amend the pleadings to
14 conform them to the evidence and to raise an unpleaded issue.
But failure to amend does not affect the result of the trial of
15 that issue.
16
Bae did not object to the introduction of any evidence regarding Israni’s purported
17
investment and the other financial information and representations contained in the January
18
2012 Plan, and he fully addressed Plaintiffs’ allegations in his direct and cross-examination
19
testimony. Accordingly, the court will address both Plaintiffs’ §§ 523(a)(2)(A) and
20
(a)(2)(B) claims for relief.
21
Plaintiffs assert that the January 2012 Plan contained two material sets of
22
misrepresentations: the presence of Israni as an INB investor, director, and advisor, and
23
INB’s capitalization, which included Israni’s allegedly substantial equity investment. Only
24
the former is potentially non-dischargeable under § 523(a)(2)(A). Statements respecting
25
the debtor’s or an insider’s financial condition are only non-dischargeable under §
26
523(a)(2)(B). Lamar, Archer & Cofrin, LLP v. Appling, 138 S.Ct. 1752 (2018). A
27
statement respecting a debtor or insider’s financial condition are those that have “a direct
28
1 relation to or impact” on the debtor or insider’s overall financial status.”10 Id. at 1761. The
2 amount of Israni’s alleged investment had a direct relation to INB’s overall financial status,
3 and Plaintiffs’ allegation that this misrepresentation (and the other misstatements regarding
4 INB’s capital) deceived them can only be analyzed under (a)(2)(B). Bae’s
5 misrepresentations regarding Israni’s corporate presence are distinct from the size of his
6 equity investment, and these allegations fall under (a)(2)(A).
7 Plaintiffs’ § 523(a)(2)(A) Claims
8 To establish a non-dischargeable claim under §523(a)(2)(A), Plaintiffs must
9 establish by a preponderance of the evidence that (1) Bae falsely represented that Israni
10 had invested in INB and was going to serve as a principal and advisor; (2) Bae knew these
11 representations were false; (3) Bae included them in the January 2012 Plan with the
12 intention and purpose of deceiving Plaintiffs; (4) Plaintiffs justifiably relied on the false
13 representations; and (5) Plaintiffs suffered damages proximately caused by the false
14 representations. Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010).
15 Plaintiffs have collectively and individually met their burden of proof regarding the first
16 three elements. The evidence overwhelming establishes that Bae knew when he presented
17 the January 2012 Plan to each Plaintiff that Israni had not and was not going to invest in
18 INB nor serve it in any corporate capacity. Given Israni’s apparent status as a successful
19 investor in start-ups, Bae knew that associating his name (and money) with INB would
20 make INB a more attractive investment. The more difficult issue is the extent to which
21 each Plaintiff under §523(a)(2)(A) relied on this representation to invest in INB.
22 Oravec testified that Bae told him that Israni was investing in INB even before he
23 reviewed the January 2012 Plan, and the January 2012 Plan’s contents confirmed this
24 statement. Oravec’s understanding that Israni was a significant investor is even more
25
26
10 Lamar addressed a statement made by an individual debtor regarding his financial
27 status; hence the Supreme Court’s reference to a “debtor’s” financial condition. Section
523(a)(2)(A) and (B) refer to statements regarding a debtor and an insider’s financial
28 condition. INB is an insider under Bankruptcy Code § 101(31)(a)(iv).
1 material given his admission that he paid little attention to the rest of the January 2012
2 Plan. While Oravec’s investment decision was also a product of his trust in Bae’s business
3 abilities, there was no indication that Oravec would have invested in INB solely due to his
4 friendship with Bae. Oravec substantially relied on this representation when he decided to
5 invest in INB.
6 Bae contends that the January 2012 Plan’s inconsistencies prevented Oravec from
7 justifiably relying on its contents. He argues that its misstatements (excerpts of which may
8 be found in Bae’s Post-Trial brief, filed on June 30, 2022) created “red flags” regarding
9 the veracity of the entire document. The court disagrees. Justifiable reliance is a subjective
10 test, and Oravec persuasively testified that he relied on Bae’s and the January 2012 Plan’s
11 representations regarding Israni’s alleged role with INB. Simply, Bae has not
12 demonstrated that the falsity of these misrepresentations was or should have been readily
13 apparent to Oravec. See In re Kirsh, 973 F.2d 1454, 1460 (9th Cir. 1992); see also Collier
14 on Bankruptcy ¶ 523.08 (Richard Levin & Henry J. Sommer eds., 16th ed.). Bae never
15 informed Orvaec before he invested that Israni had no interest in INB, and while the
16 January 2012 Plan certainly contained several holes regarding its management team and
17 inconsistent statements regarding the timing of certain milestones, the January 2012 Plan’s
18 blanket representation that Israni was a significant investor and advisor was not an
19 averment subject to future determination. Instead, it was an unambiguous statement of
20 existing fact which was not true, and Ovarec had no reason to question its accuracy. Oravec
21 is entitled to an $85,000 non-dischargeable judgment under Bankruptcy Code §
22 523(a)(2)(A).
23 Kim reviewed the January 2012 Plan in November 2012 and invested $300,000.00
24 in January 2013 based upon several factors, including the identity of Israni as a substantial
25 investor, Bae’s offer to install Kim as Ara Technology’s CEO, and INB’s apparent progress
26 on building and equipping its manufacturing plant.11 He, too, had no reason to question
27
28 11 Kim also testified that he was impressed by the amount of Israni and Bae’s
1 the January 2012 Plan’s representation that Israni owned 40% of INB. Bae argues that
2 Kim invested these funds so that he could return to South Korea (where he had family) and
3 become Ara Technology’s CEO. This court does not question that these factors played a
4 role in Kim’s decision to invest in INB, yet it disagrees with Bae’s premise that these facts
5 alone control. This court does not believe that Kim invested $300,000 simply to become a
6 CEO, and Bae cannot untangle the two companies’ prospects. Ara Technology’s future
7 was directly dependent on INB’s success, and Kim’s decision to become CEO was
8 therefore influenced by his belief that INB would prosper. Despite this, Kim has not
9 demonstrated by a preponderance of the evidence that he was defrauded by Bae. Several
10 facts convinced Kim to invest in INB, and he has not convinced this court, by a
11 preponderance of the evidence, that he would not have invested if he had known that Israni
12 was not a principal and an advisor. After Kim moved to South Korea, he regularly met
13 with Bae to discuss Ara Technology and, tangentially, INB. Kim testified that Bae
14 compelled Ara Technology to transfer funds to INB, and that Bae ran INB into the ground.
15 Yet, despite his concern regarding INB’s finances and operations, there was no evidence
16 that Kim ever inquired into Israni’s status with INB, questioned the absence of his guiding
17 hand., or begrudgingly accepted that Israni had never invested in INB and that Kim (and
18 the other Plaintiffs) had to make the best of it. Absent some additional, tangible evidence
19 that Kim relied on the January 2012 Plan’s statements regarding Israni’s corporate
20 presence, the court cannot find in Kim’s favor.12
21 Fuller is also not entitled to a non-dischargeable judgment against Bae under
22 Bankruptcy Code §523(a)(2)(A), but for different reasons. Fuller invested in INB because
23 he believed that it was a sound business idea that was - based on the January 2012 Plan’s
24
investments, and by Bae’s representation that INB was worth $15 million. These
25 representations relate to INB’s financial condition and cannot form the basis of a
523(a)(2)(A) claim.
26
12 To the extent that Kim asserts that Bae defrauded him regarding the duties of his
27 CEO position, Kim failed to introduce any evidence regarding what representations Bae
made regarding his CEO position. In addition, Bae disputed Kim’s assertions that Kim did
28 not control Ara Technology’s finances.
1 representations - sufficiently capitalized. These representations go to INB’s financial
2 condition, and thus fall under § 523(a)(2)(B).
3 Plaintiffs’ § 523(a)(2)(B) Claims
4 Under Bankruptcy Code §523(a)(2)(B), a claim is non-dischargeable if it arises
5 from the use of a written statement “(i) that is materially false; (ii) respecting the debtor’s
6 or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable
7 for such money . . . reasonably relied; and (iv) that the debtor caused to be made or
8 published with intent to deceive.” Only Fuller has a §523(a)(2)(B) claim for relief that
9 requires serious scrutiny. Oravec testified that his investment strategy was essentially to
10 trust Bae and follow Israni, and he paid scant attention to the January 2012 Plan’s financial
11 information and projections. Kim testified that he was persuaded, in part, to invest in INB
12 due to Bae’s statement that INB was worth $15 million dollars.13 The court understood
13 Kim to mean that Bae orally conveyed this information to him. If so, this statement, if
14 false, cannot form the basis of a §523(a)(2)(B) claim for relief.
15 Fuller demonstrated by a preponderance of the evidence that Bae’s use of the
16 January 2012 Plan defrauded him. The January 2012 Plan’s representations regarding
17 Israni’s substantial investment in INB and INB’s overall working capital were materially
18 false statements regarding INB’s financial condition, and Fuller reasonably relied on these
19 written representations. Simply, Israni never “heavily invested” in INB, and INB was left
20 to rely on a handful of investors for its capital.14 Bae owned 70% of INB, and while he
21 testified that he invested five to six million dollars into the company, he presented no
22 documentary evidence to substantiate this amount. Indeed, no one provided this court with
23 any documentary evidence of the balance(s), at any time, of INB’s bank account(s). In
24 addition, Bae testified that INB did not have eight million dollars in capital in January
25
26 13 Kim also stated in passing that he had scrutinized the January 2012 Plan’s
financial trends. He did not, however, specifically identify which financial trends he
27 examined.
28 14 Exhibit I indicates that INB had nine shareholders.
1 2012. To establish materiality and reliance, a “creditor opposing discharge must explain
2 why it viewed the debtor’s false representation as relevant to the decision to extend
3 money.” Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1761 (2018). A finding
4 of “reasonable reliance” moreover focuses on whether a hypothetical average person would
5 have relied on these representations. Collier on Bankruptcy ¶ 523.08 (Richard Levin &
6 Henry J. Sommer eds., 16th ed.); see also Field v. Mans, 516 U.S. 59, 76 (1995). Fuller
7 meets these tests. Fuller clearly stated that he invested because INB had enough capital to
8 build its facility and commence production. In addition, given Bae’s experience in the field
9 and his CEO position with RB Technology, the hypothetical reasonable person would have
10 believed Bae’s representations regarding Israni’s investment and INB’s working capital
11 totals.
12 No one disputes that the January 2012 Plan was imperfect. But its imperfections
13 were unrelated to its clear statements that Israni was a significant shareholder who had
14 invested heavily in INB and the precise capital figures in the January 2012 Plan. There
15 also was insufficient evidence for this court to determine that the amount of time that
16 passed from Fuller’s receipt of the January 2012 Plan and his investment would have put a
17 reasonably prudent person on notice to revisit these numbers. Accordingly, Fuller is
18 entitled to a $300,000 non-dischargeable judgment under Bankruptcy Code §
19 523(a)(2)(B).
20 Plaintiffs’ § 523(a)(19) Claims
21 Plaintiffs allege that their claims are also non-dischargeable under § 523(a)(19).
22 Section 523(a)(19) excludes from discharge (under § 727) any debt
23 (19) that–
24 (A) is for–
25 (i) the violation of any of the Federal securities
laws (as that term is defined in section 3(a)(47)
26 of the Securities Exchange Act of 1934), any of
the State securities laws, or any regulation or
27 order issued under such Federal or State
securities laws; or
28
(ii) common law fraud, deceit, or manipulation
1 in connection with the purchase or sale of any
security; and
2
(B) results, before, on, or after the date on which the
3 petition was filed, from—
4 (i) any judgment, order, consent order, or decree
entered in any Federal or State judicial or
5 administrative proceeding;
6 (ii) any settlement agreement entered into by the
debtor; or
7
(iii) any court or administrative order for any
8 damages, fine, penalty, citation, restitutionary
payment, disgorgement payment, attorney fee,
9 cost, or other payment owed by the debtor.
10
To prevail on their (a)(19) claims, Plaintiffs must demonstrate that (1) there was a
11
violation of state or federal securities law or fraud in connection with their purchase of INB
12
stock, and (2) their claims arise from a judicial or administrative order or settlement
13
agreement. The parties exclusively focus on the first element in their closing briefs. As
14
more fully discussed below, Plaintiffs assert that Bae violated California Corporations
15
Code §§ 25110, 25120, and 25130 and committed actual fraud when he induced Plaintiffs
16
to invest in INB. The parties did not address, however, whether this court can reach these
17
claims absent an earlier judicial or administrative order, judgment or settlement agreement
18
arising from these securities claims.15
19
Courts are divided on whether a bankruptcy court can address § 523(a)(19) claims
20
absent an earlier adjudication or settlement agreement. The Ninth Circuit has not addressed
21
this issue, and at least two Circuit Courts—the Tenth and Eleventh Circuits—have held
22
that the debt must first be memorialized in a settlement or order/judgment from a non-
23
bankruptcy forum.16 See Faris v. Bahram Amir Jafari (In re Bahram Amir Jafari), 401
24
25
15 The parties did not introduce any evidence that a nonbankruptcy tribunal had
26 determined that Bae violated California blue sky law or committed actual fraud relating to
the sale of INB stock. Because Plaintiffs limit their (a)(19) analysis to California securities
27 law, the court will not address whether Bae violated any federal securities statute.
28 16 Tradex Global Mast Fund SPC, Ltd. v. Pui-Yun Chui (In re Chui), 538 B.R. 793
1 B.R. 494, 496 (Bankr. D. Colo. 2009); Tripodi v. Welch, 810 F.3d 761, 766 (10th Cir.
2 2016); Creech v. Viruet (In re Creech), 782 Fed. Appx. 933, 938 (11th Cir. 2019). These
3 courts rely on the legislative history and purpose of § 523(a)(19). See In re Jafari, 401 B.R.
4 at 497–500 (analyzing the legislative history of § 523(a)(19), which emphasizes “that a
5 primary purpose of this statute was to ensure that judgments and settlements from state
6 securities fraud cases are nondischargeable without the need to re-litigate the matter in
7 bankruptcy court”).
8 Other courts have more broadly interpreted the code section and found that the
9 bankruptcy court itself can be the instigator court. See Tradex Global Mast Fund SPC,
10 Ltd. v. Pui-Yun Chui (In re Pui-Yun Chui), 538 B.R. 793 (Bankr. N.D. Cal. 2015); One
11 Longhorn Land I, L.P. v. Presley, 529 B.R. 755, 761–62 (C.D. Cal. 2015); Williams v. Sato
12 (In re Sato), 512 B.R. 241, 252 (Bankr. C.D. Cal. 2014); Floyd v. Hill (In re Hill), 495 B.R.
13 646, 660 (Bankr. D.N.J. 2013). These courts conclude that the express language of
14 subsection (B), its legislative history, and policy considerations support a more expansive
15 view. Id. This court is persuaded by their reasoning. The text of subsection (B) provides
16 that “any judgment, order, consent order or decree entered in any Federal or State judicial
17 or administrative proceeding” resulting, before, on, or after the date on which the petition
18 was filed may satisfy subsection (B). 11 U.S.C. § 523(a)(19)(B) (emphasis added).
19 Moreover, as discussed in In re Hill and In re Sato, BAPCPA amended subsection (B) to
20 eliminate the requirement of a pre-petition judgment. In re Sato, 512 B.R. at 251–52; In
21 re Hill, 495 B.R. at 659–60. Finally, this court is authorized to liquidate claims in
22
(Bankr. N.D. Cal. 2015) held that (a)(19) liability is not dependent on a prior securities
23 violation judgment and that a bankruptcy court’s non-dischargeability judgment satisfies
(a)(19)(B). The bankruptcy court’s decision was affirmed by the Ninth Circuit Bankruptcy
24 Appellate Panel and the Ninth Circuit. See Tradex Glob. Master Fund SPC LTD v. Chui,
702 Fed. Appx. 632 (9th Cir. 2017). However, the issue on appeal before the Ninth Circuit
25 was whether the Bankruptcy Court erred by not giving an SEC document preclusive effect.
As to whether a prior judgment was a prerequisite under §523(a)(19)(B), the Ninth Circuit
26 stated, “[w]e need not, and do not, determine any other issue urged by the parties, including
the question of the bankruptcy court's scope of authority to enter a new independent
27 judgment—apart from the judgment of the non-bankruptcy tribunal—on claims based on
violations of securities laws under 11 U.S.C. § 523(a)(19).” Tradex Global Master Fund
28 SPC Ltd., 702 Fed. Appx. at 634.
1 conjunction with determining their nondischargeability. In re Pui-Yun Chui, 538 B.R. at
2 807 (citing Sasson v. Sokoloff (In re Sasson), 424 F.3d 868, 875 (9th Cir. 2005)); see also
3 In re Sato, 512 B.R. at 252.
4 Plaintiffs argue that Bae violated the blue sky provisions in California Corporations
5 Code §§ 25110, 25120, and 25130, and committed actual fraud in his offering to sell INB
6 stock to Plaintiffs. As more fully discussed below, Plaintiffs contend that the stock sales
7 were unqualified, non-exempt issuer transactions which violated California Corporations
8 Code § 25110. They alternatively assert that if the sales were “non-issuer” transactions,
9 Bae nonetheless violated California Corporations Code § 25130. Bae argues that these
10 transactions did not involve “securities,” and should this court find otherwise, the sales
11 were “exempt” under California Corporations Code § 25102(f) because they were not
12 “public” sales.
13 The court’s Amended Pre-Trial Order contain several stipulated facts that Plaintiffs
14 contend support their (a)(19) arguments. The parties stipulated that (1) Bae offered to sell
15 and did sell INB securities (i.e. stock) to Plaintiffs without filing a registration statement
16 with the Securities Exchange Commission; (2) No one, including Bae, applied for
17 qualification of INB by notification, permit, coordination or otherwise; (3) No one,
18 including Bae, filed an offering statement with the SEC for on or INB’s behalf; (4) No stop
19 order, postponement or suspension of qualification issued by the Commissioner of
20 Business Oversight was in effect with respect to the qualification of the sale of INB stock
21 to Plaintiffs; and (5) No INB shares were authorized to be sold in California. In addition,
22 the Plaintiffs established at trial that the offering and sales were made in California, and
23 that the Plaintiffs were not “accredited investors” under Regulation D of the Securities
24 Exchange Commission. See 17 C.F.R. § 230.501.
25 Liability under California Corporations Code §§ 25110 or 25130 is premised on the
26 sale or offering of a “security,” and this court must preliminarily address whether the INB
27 stock sales involved a security. California Corporations Code § 25019 broadly defines the
28
1 term “security,” and the INB stock sales seemingly fall within its ambit.17 California
2 courts, however, typically look beyond the descriptors used by the parties and examine the
3 substance of the transaction when applying § 25019. People v. Figueroa, 715 P.2d 680,
4 695 (Cal. 1986). The question asked is “whether a transaction falls within the regulatory
5 purpose of the law regardless of whether it involves an instrument which comes within the
6 literal language of the definition.” Id.; see also People v. Black, 214 Cal. Rptr. 3d 402, 411
7 (Cal. Ct. App. 2017). California court apply two tests to accomplish this task: (1) the risk-
8 capital test and (2) the federal or Howey test.18 Black, 214 Cal. Rptr. 3d at 411. Generally,
9 a transaction is a security if it satisfies either test. Id. at 411–12; see also Consolidated
10 Management Group, LLC v. Department of Corporations, 75 Cal. Rptr. 3d 795, 805 (Cal.
11 Ct. App. 2008); Reiswig v. Dep’t of Corporations, 50 Cal. Rptr. 3d 386, 391 (Cal. Ct. App.
12 2006); but see People v. Graham, 210 Cal. Rptr. 318, 320 (Cal. Ct. App. 1985) (applying
13 only the risk-capital test).
14 Under the risk-capital test, the sale of securities occurs when there is “an attempt
15 by an issuer to raise funds for a business venture or enterprise; an indiscriminate offering
16 to the public at large where the persons solicited are selected at random; a passive position
17 on the part of the investor; and the conduct of the enterprise by the issuer with other
18 people’s money.” Silver Hills Country Club v. Sobieski, 361 P.2d 906, 908 (Cal. 1961).
19 However, “[w]hen an investor entrusts money or other consideration to a promoter through
20 any arrangement but retains substantial power to affect the success of the enterprise, he has
21 not ‘risked capital’ within the meaning of the Corporations Securities Law.” Figueroa,715
22 P.2d at 697. As explained by the California Supreme Court, California blue sky law “was
23 not intended to afford supervision and regulation of instruments which constitute
24 agreements with persons who expect to reap a profit from their own services or other active
25
26
17 Section 25019 provides in pertinent part that “‘Security’ means any note; stock;
27 treasury stock . . . .”
28 18 The court shall refer to this test as the “Howey” test.
1 participation in a business venture.” Id. at 696 (quoting People v. Syde, 235 P.2d 601, 603
2 (Cal. 1951)). The Howey test examines whether “a person invested his money in a common
3 enterprise and is led to expect profits solely from the efforts of the promoter or third party.”
4 SEC v. W.J. Howey Co., 328 U.S. 293, 299 (1946). Similar to the risk-capital test, the test
5 queries whether the investor had substantial power to affect the success of the enterprise
6 and investment. People v. Park, 151 Cal. Rptr. 146, 152 (Cal. Ct. App. 1978). When an
7 investment’s success requires professional or managerial skill on the investor’s part, and
8 the investor has authority corresponding with his responsibility, the investment is not a
9 security within the meaning of the securities act. Id. Put another way, “[a]n expectation of
10 profits produced by the efforts of others exists when the efforts made by those other than
11 the investor are the undeniably significant ones, those essential managerial efforts which
12 affect the failure or success of the enterprise.” Black, 214 Cal. Rptr. 3d at 411 (citations
13 omitted).
14 Kim and Oravec’s purchases are securities under, at the very least, the Howey test.
15 Oravec was a passive investor, and he invested his money with the expectation that Bae
16 would successfully operate and manage INB. Kim similarly invested his funds. While
17 Kim was nominally the CEO of an affiliated company, he had no control over INB’s
18 operations, and he, too, relied on Bae’s managerial and entrepreneurial skills to run INB.
19 Fuller’s purchase of INB stock is a closer call. Fuller and Bae informally discussed
20 the material needs and operations of a prospective PCB manufacturer before Fuller
21 invested in INB, and the January 2012 Plan listed him as a “Material Process Advisor.”
22 Two months after he invested, Fuller became INB’s vice president of manufacturing and
23 played some role in INB’s equipment purchases, staffing and training. Despite his title,
24 Fuller’s corporate responsibilities were not the “undeniably significant ones.” Much of
25 INB’s equipment was purchased before he was employed by INB, and he testified (without
26 contradiction) that Bae had near absolute control over INB’s operations. In addition, Fuller
27 was terminated by Bae by mid-2013, and INB continued to operate until December 2015.
28
1 Accordingly, this court finds that Fuller’s stock purchases involved securities under the
2 Howey test.
3 The court now turns its attention to the substance of Plaintiffs’ argument.
4 California, like all other states, regulates corporate securities transactions. Every
5 transaction must be “qualified” under the Corporations Code or exempt from its provisions.
6 A purchaser of stock sold in violation of these registration provisions may rescind the sale
7 and recover their purchase price. See Cal. Corp. Code § 25503 (Deering 2022).
8 California’s Corporations Code “creates two major classifications of transactions [issuer
9 and nonissuer transactions] with different exemptions being relevant to each.” Goller v.
10 Nat’l Life of Florida Corp., 554 F.2d 1349, 1351 (5th Cir. 1977).
11 Plaintiffs first contend that the INB stock sales violated Corporations Code § 25110,
12 which makes it unlawful for any person to offer or sell a security in an “issuer transaction”
13 unless such sale has been “qualified” or the security or transaction is “exempted.” As stated
14 above, the parties stipulated that the INB stock sales were not qualified.19 This court thus
15 must determine whether the transactions were “issuer transactions” under § 25110 and if
16 so, whether they were exempt. The Corporations Code does not define the term “issuer
17 transaction;” instead, it defines the terms “issuer” and “nonissuer transaction,” allowing
18 this court to infer that a transaction that is not a “nonissuer” transaction is an “issuer
19 transaction.” In this instance, INB is the issuer in question. See Cal. Corp. Code § 25010.
20 An issuer is a person “who issues or proposes to issue any security.” Id. A “non-issuer”
21 transaction is a transaction not directly or indirectly for the benefit of the issuer. Cal. Corp.
22 Code § 25011. Section 25011 further provides that “[a] transaction is indirectly for the
23 benefit of the issuer if any portion of the purchase price of any securities involved in the
24 transaction will be received indirectly by the issuer.” Id. INB sold these shares to raise
25 capital for its operations. Accordingly, these transactions were issuer transactions. The
26
27
19 Moreover, no evidence was introduced establishing that the sales satisfied the
28 modes of qualification under Corporations Code sections §§ 25111 – 25113.
1 parties dedicated a significant amount of trial time attempting to establish whether INB
2 received Plaintiffs’ funds. While Bae testified that the investment funds were all used by
3 INB, the bank records introduced into evidence did not fully demonstrate this, and Bae
4 himself hedged on cross-examination.20 If this evidence was introduced to establish that
5 these sales were not issuer transactions, this pursuit was misdirected. All parties agree that
6 the sales were meant to provide INB with badly needed capital.
7 Nonetheless, Bae contends that these transactions were exempt under California
8 Corporations Code § 25102(f). California Corporations Code § 25102(f) exempts
9 transactions from § 25110 if (1) sales of the security are not made to more than 35 persons,
10 (2) all purchasers either had a preexisting personal or business relationship with the offeror
11 or its officers or directors, or had financial experience where they could be reasonably
12 assumed to have the capacity to protect their own interests in connection with the
13 transaction, (3) each purchaser represents that the purchaser is purchasing for the
14 purchaser’s own account and not with a view to or for sale in connection with any
15 distribution of the security, and (4) the offer and sale of the security is not accomplished
16 by publication of any advertisement. Cal. Corp. Code § 25102(f). Bae bears the burden of
17 proof under this code section. See Cal. Corp. Code § 25163 (“In any proceeding under this
18 law, the burden of proving an exemption or an exception from a definition is upon the
19 person claiming it.”); see also People v. Salas, 127 P.3d 40, 48 (Cal. 2006).
20 Bae has met his burden. INB had nine shareholders and Bae had a personal or
21 business relationship with each of them. INB’s shareholders were Bae, RB Technology,
22
23
20 The court is not implying nor inferring that Bae used any of the funds for his
24 personal gain. Fuller and Kim’s funds were deposited into a RB Technology bank account,
and its bank records indicate that these funds were probably transferred to a South Korean
25 bank account (albeit probably not an INB bank account). Given the intertwined financial
affairs of RB Technology, ARA Technology and INB, it appears that these funds benefited
26 INB. Oravec’s funds took a completely different path, and Plaintiffs did not introduce any
evidence that they were personally used by Bae or were not forwarded to INB. Given the
27 equipment it purchased and the construction of its manufacturing facility, the court finds
that – at the very least – a significant portion of Plaintiffs’ investments were used by INB
28 and were meant to benefit it.
1 Ara Technology, Fuller, Kim, Oravec, Bae’s cousin, Bae’s brother and a South Korean
2 native (a “Mr. Soong”) who managed INB’s waste management system. Given the
3 speculative nature of the investment, the court finds that the investors purchased the
4 securities for themselves without an intent to distribute them. Finally, there was no
5 evidence that Bae published any advertisement to attract investors. California Corporations
6 Code § 25014 defines the act of publication as to “publicly … issue or circulate by
7 newspaper, mail, radio or television, or otherwise disseminate to the public.” Section
8 25002 defines the term “advertisement” to mean “any written or printed communication or
9 any communication by means of recorded telephone messages or spoken on radio,
10 television, or similar communications media, published in connection with the offer or sale
11 of a security.” Cal. Corp. Code § 25002. Bae testified that he solicited investors by
12 discussing INB with friends, RB Technology customers and vendors, and other individuals
13 associated with these friends, customers, and vendors. There was no evidence that Bae
14 used any recognized form of media to solicit or sell INB stock. Of the investors Bae
15 solicited, he estimated that he showed the business plan to approximately 30 people, and
16 there was no evidence that Bae used any recognized form of media to solicit or sell INB
17 stock.
18 The court rejects Plaintiffs’ argument to the contrary. The cases cited by Plaintiffs
19 rely on now outdated Corporations Code provisions that dwelled on the number of offerors
20 instead of the present emphasis on the number of purchasers. See People v. Park, 151 Cal.
21 Rptr. 146, 153 (Cal. Ct. App. 1978) (interpreting 10 C.C.R. § 260.102.2 which today
22 references Cal. Corp. Code § 25102(g) and (e)); People v. Humphreys, 84 Cal. Rptr. 496,
23 498 (Cal. Ct. App. 1970) (interpreting Cal. Corp. Code § 25012(e) and the March 25, 1967
24 “Guidelines for Determining when Securities are Being ‘Offered to the Public’” issued by
25 the Commissioner of Corporations); see also Sherman v. Llyod, 226 Cal. Rptr. 495, 499 n.
26 4 (Cal. Ct. App. 1986) (noting that § 25102(f) was “amended in significant regard effective
27
28
1 November 1, 1986”).21 Because Bae has demonstrated that the INB sales were exempt,
2 issuer transactions, he has no liability under California blue sky law.
3 Plaintiffs also claim that Bae’s fraudulent conduct violated (a)(19). The elements
4 of common law fraud and false representation under § 523(a)(2)(A) are identical. See
5 Robinson Helicopter Co., Inc. v. Dana Corp., 102 P.3d 268, 274 (Cal. 2004) (listing the
6 elements of common law fraud under California law). Accordingly, Oravec’s fraud claim
7 is also non-dischargeable under § 523(a)(19).
8 Bae’s fraudulent conduct under § 523(a)(2)(B) also constitutes non-dischargeable
9 conduct under (a)(19). As stated supra, Fuller demonstrated all of the elements of common
10 law fraud: The January 2012 Plan misrepresented the amount of INB’s working capital and
11 the amount invested by Israni; Bae knew that these statements were false yet he included
12 them in the January 2012 Plan to induce investments; Fuller reasonably relied on them (to
13 the extent necessary, the court also finds that Fuller justifiably relied on these
14 representations); and he suffered damages as a result. See Alva State Bank & Trust Co. v.
15 Flaming (In re Flaming), 2007 Bankr. LEXIS 4040, at *19–*20 (Bankr. Kan. Nov. 21,
16 2007). Accordingly, Fuller’s fraud claim is also non-dischargeable under § 523(a)(19).
17 Plaintiffs shall prepare and submit a judgment consistent with this memorandum
18 decision.
19
20 ***END OF ORDER***
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27 21 Stated succinctly, the pre November 1986 version of § 25102(f) focused on the
number of offerors whereas the present version of § 25102(f) only focuses on the number
28 of purchasers.
1 Case No. 19-4032 CN
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