United States Securities and Exchange Commission v. Bravata
2:09-cv-12950
E.D. Mich.Mar 6, 2014Background
- SEC filed an amended complaint alleging unregistered securities sales (BBC Equities, BBC Equities LLC, Bravata Financial Group) and a Ponzi-like scheme from 2006–2009 raising about $55 million from ~440 investors.
- BBC Equities and Bravata Financial solicited funds at seminars, with returns allegedly guaranteed and funded by new investor proceeds.
- Court issued a preliminary injunction; assets were frozen; a receiver was appointed to BBC Equities and Bravata Financial.
- Criminal cases led to convictions: John Bravata and Antonio Bravata were found guilty of conspiracy and multiple wire fraud counts; Trabulsy pleaded guilty.
- The SEC seeks disgorgement, civil penalties, and a permanent injunction; relief defendant Shari Bravata seeks no jury trial for disgorgement due to equitable relief.
- SEC moves for summary judgment, asserting collateral estoppel and no genuine disputes on liability and remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars civil fraud claims | Bravatas convicted of wire/mail fraud; findings preclude civil fraud elements | Convictions do not resolve all civil elements; potential factual disputes remain | Collateral estoppel applied; liability established on Counts II–IV |
| Whether BBC Equities securities were unregistered securities under the Act | BBC offerings fit Howey investment contract; no registration statements existed; exemptions not shown | Some disputes about how the investments were characterized | BBC securities were investments; registration required; Counts I and V supported |
| Whether Bravata defendants acted as unregistered brokers/dealers | Defendants engaged in selling securities for others without registration; not exempt | Argues about exemptions and role in offering | Counts V established as unregistered broker/dealer activity |
| Appropriateness of remedies (disgorgement, injunctive relief, penalties) | Disgorgement of ill-gotten gains; prejudgment interest; permanent injunction; tier-three penalties | Disgorgement amount and penalties should be limited; potential due-process concerns | Disgorgement awarded; joint and several liability; prejudgment interest awarded; permanent injunction granted; tier-three penalties imposed |
| Whether relief defendant Shari Bravata is entitled to a jury trial on disgorgement | Disgorgement equitable; no jury required | Requests jury on disgorgement | No jury trial; disgorgement ordered against Shari Bravata as relief defendant |
Key Cases Cited
- SEC v. Zandford, 535 U.S. 813 (U.S. 2002) (convergence of civil and criminal fraud theories where applicable)
- SEC v. Quinlan, 373 F. App’x 581 (6th Cir. 2010) (convictions support civil fraud liability; collateral estoppel urged)
- Palmisano, 135 F.3d 860 (2d Cir. 1998) (securities fraud and related conspiracy/claims context)
- Gruenberg, 989 F.2d 977 (8th Cir. 1993) (wire fraud and securities fraud considerations in fraud schemes)
- Howey Co. test, SEC v. Prof’l Associates, 731 F.2d 349 (6th Cir. 1984) (definition of investment contract under Howey)
- Allen v. McCurry, 449 U.S. 90 (1980) (collateral estoppel prerequisites and federal preclusion law)
- Hamilton’s Bogarts, 501 F.3d 644 (6th Cir. 2007) (four-factor test for collateral estoppel in this circuit)