Securities & Exchange Commission v. CR Intrinsic Investors, LLC
2014 U.S. Dist. LEXIS 83876
S.D.N.Y.2014Background
- SEC sought civil penalties, disgorgement, and injunctions in six proposed consent judgments with CR Intrinsic and four relief defendants alleged to have profited from insider trading.
- Each proposed judgment stated the defendant consented to entry of judgment without admitting or denying the allegations.
- The Court previously conditioned approval on the Second Circuit’s decision in Citigroup IV and considered concerns about the 'neither admit nor deny' provisions.
- Citigroup IV (Second Circuit) later clarified the standard for reviewing such settlements and identified four factors focusing on procedural propriety and public interest.
- Post-Conditional Order developments included the Martoma criminal trial conviction and a global forfeiture/settlement involving CR Intrinsic and SAC entities.
- Those developments led the Court to find that a wait-and-see approach strengthened the SEC’s position and supported approval of the judgments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Citigroup IV governs review of the proposed judgments | CR Intrinsic argues Citigroup IV requires approval despite no admission. | Intrinsic asserts Citigroup IV permits entry if fair and reasonable. | Citigroup IV controls the disposition; judgments approved. |
| Whether the four Citigroup IV factors support approval | Judgments are fair, legal, and resolve claims. | No timely admission risks fairness and public interest. | Each judgment fair, reasonable, and not tainted by collusion; approval warranted. |
| Impact of parallel criminal cases on civil settlements | Parallel criminal outcomes strengthen the civil settlement's posture. | Unchanged; settlements should stand on SEC’s terms without new criminal input. | Criminal convictions and forfeiture proceedings inform scrutiny and support approval. |
| Whether to delay approval pending criminal outcomes | Waiting aligns with public interest given extraordinary circumstances. | Immediate approval unnecessary if terms are fair. | Delay was appropriate; circumstances favor approving under Citigroup IV. |
Key Cases Cited
- S.E.C. v. Citigroup Global Markets, Inc. (Citigroup IV), 752 F.3d 285 (2d Cir. 2014) (standard: fair and reasonable with public interest not disserved; four factors)
- S.E.C. v. Citigroup Global Markets, Inc., 673 F.3d 158 (2d Cir. 2012) (discretionary policy decisions and deference to SEC in settlements)
- Kashi v. Gratsos, 790 F.2d 1050 (2d Cir. 1986) (stay of civil proceedings pending criminal outcomes when justice requires)
- S.E.C. v. CR Intrinsic Investors, LLC, None (S.D.N.Y. 2013) (reported in decision; not included due to lack of official reporter citation)
- S.E.C. v. Cioffi, 868 F. Supp. 2d 65 (E.D.N.Y. 2012) (global disposition with concurrent criminal cases and forfeiture)
- S.E.C. v. Vitesse Semiconductor Corp., 771 F. Supp. 2d 304 (S.D.N.Y. 2011) (approval of consent judgment in light of related criminal case)