Securities and Exchange Commission v. Ibrahim Almagarby, 92f4th1306

Ibrahim Almagarby formed Microcap Equity Group LLC to purchase the aged debt of penny-stock companies, convert it to discounted stock, and rapidly resell shares, generating over $885,000 in profits in 3.5 years.
His business model involved high-volume, quick-turnaround transactions, using finders (telemarketers) and multiple attorneys, but not holding himself out as a seller to the public nor providing investment services to clients.
The SEC initiated a civil action alleging Almagarby violated the Securities Exchange Act of 1934 by acting as an unregistered “dealer”; the district court granted summary judgment for the SEC, imposed disgorgement, and barred Almagarby from future penny-stock offerings.
Almagarby appealed, attracting amicus support from industry groups arguing that his conduct did not constitute “dealer” activity under the Exchange Act.
The Eleventh Circuit affirmed that Almagarby was an unregistered dealer and upheld disgorgement and a general injunction against future violations, but reversed the permanent bar on participating in penny-stock offerings.

Issue	Plaintiff’s Argument	Defendant’s Argument	Held
Was Almagarby a “dealer” under the Exchange Act?	Almagarby’s high-volume, discount-resale business required registration as a dealer.	Acted only as a private trader, not a dealer; did not have customers or client relationships.	Almagarby was a dealer under the Act and violated registration requirements.
Did the Commission violate due process by using a novel interpretation of “dealer”?	Almagarby had fair notice based on statutes and precedent.	Guidance and no-action letters never covered his conduct; lacked fair notice.	No due process violation; fair notice was given via statutes/precedents.
Was disgorgement appropriate and timely?	Yes; profits were directly linked to unregistered transactions.	Disgorgement was not for investor benefit and not causally linked, also untimely.	Disgorgement was appropriate and timely, benefiting harmed investors.
Was the penny-stock ban an appropriate remedy?	Necessary to prevent future violations (recidivism risk).	Too broad—barred otherwise lawful conduct without sufficient showing of necessity.	Overbroad; district court abused discretion in imposing the ban.

SEC v. Calvo, 378 F.3d 1211 (11th Cir. 2004) (sets standards for injunctions and disgorgement)
SEC v. Ginsburg, 362 F.3d 1292 (11th Cir. 2004) (discusses egregiousness and injunctive relief)
SEC v. Ridenour, 913 F.2d 515 (8th Cir. 1990) (distinguishes trader from dealer based on activity level)
Eastside Church of Christ v. Nat’l Plan, Inc., 391 F.2d 357 (5th Cir. 1968) (defines “dealer” under securities law)
SEC v. Carriba Air, Inc., 681 F.2d 1318 (11th Cir. 1982) (articulates injunction factors)
SEC v. Blatt, 583 F.2d 1325 (5th Cir. 1978) (framework for assessing injunctive relief for securities violations)