Securities & Exchange Commission v. Uboh
1:21-cv-02049
| E.D.N.Y | Jun 4, 2024Background
- The SEC filed a civil enforcement action against Ubong Uboh and Tyler Crockett for securities fraud, alleging fraudulent solicitation of senior citizens to purchase shares in microcap issuers and misappropriation of investor funds.
- On the same day, a federal indictment was unsealed against Uboh based on similar conduct; he later pleaded guilty to conspiracy to commit securities fraud and related charges and was sentenced to prison, restitution, and forfeiture.
- In the civil case, Uboh consented to a judgment that included permanent injunctions barring him from violating securities laws, participating in penny stock offerings, and allowed for potential disgorgement and civil penalties.
- After the SEC proposed finalizing financial remedies and received no response from Uboh, he filed a pro se motion to dismiss the SEC’s final judgment, arguing it violated Double Jeopardy and that the permanent penny stock bar was improper.
- The SEC opposed, arguing no Double Jeopardy violation occurs since remedies are civil, not criminal, and Uboh had waived such arguments by his consent.
- The court viewed Uboh's motion as a Rule 60(b) motion to vacate the consent judgment and denied the motion, finding no exceptional circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether civil sanctions (disgorgement, penalties, injunctions) violate Double Jeopardy after criminal conviction | Civil remedies do not constitute criminal punishment and do not trigger Double Jeopardy; Uboh waived Double Jeopardy claims in his consent | SEC's proposed sanctions constitute double punishment for the same conduct already punished criminally | No Double Jeopardy violation; such SEC sanctions are civil and not criminal, and explicit waiver applies |
| Validity and scope of SEC’s permanent penny stock bar | Permanent bar is justified by the egregiousness, scienter, and likelihood of recurrence | Permanent bar improperly restricts Uboh’s post-release employment and is excessive | Bar is appropriate given Uboh’s conduct, prior offenses, scienter, and risk of future violations |
| Whether Uboh’s consent to judgment was voluntary and knowing | Uboh explicitly consented and knowingly waived defenses and rights | No showing that consent was involuntary or invalid | Consent is valid and binding; no grounds to vacate |
| Grounds for vacatur of consent judgment under Rule 60(b) | No exceptional circumstances, motion procedurally and substantively deficient | Extraordinary circumstances warrant relief due to Double Jeopardy and impact on employment | No exceptional circumstances shown; motion denied |
Key Cases Cited
- Hudson v. United States, 522 U.S. 93 (1997) (sets framework for distinguishing civil from criminal penalties in Double Jeopardy analysis)
- S.E.C. v. Palmisano, 135 F.3d 860 (2d Cir. 1998) (SEC civil penalties and disgorgement are not criminal punishment for Double Jeopardy purposes)
- Liu v. Securities & Exchange Commission, 591 U.S. 71 (2020) (SEC disgorgement must not exceed net profits and must benefit victims)
- Kokesh v. Securities and Exchange Commission, 581 U.S. 455 (2017) (disgorgement in SEC enforcement is a penalty for statute of limitations purposes)
- Kennedy v. Mendoza–Martinez, 372 U.S. 144 (1963) (sets civil/criminal sanction factors)