United States Securities & Exchange Commission v. Markusen, 143 F. Supp. 3d 877

Markusen is the sole owner/CEO of Archer Advisors LLC, which managed two private funds and charged management, performance, and reimbursed expenses.
Cope, Archer’s former COO, was an Archer insider and unregistered; Archer paid him as if for independent research, masking his role.
From 2008–2013 Archer reimbursed nearly $500,000 for ‘research’ expenses that were not paid to Cope or others, funding Markusen’s use of funds.
Archer used soft dollars to divert funds to Cope and others, disguising payments as research fees and kickbacks.
Beginning in 2010–2013, Markusen and Cope engaged in marking the close of CYBE to inflate fund performance and fees.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Liability under 10b-5 and 17(a) for fake research expenses	Markusen/Archer engaged in fraud via fake research expenses.	Defendants contest misrepresentation/scienter requirements.	Liability established for both under disclosure and scheme provisions.
Control-person liability under 20(a)	Markusen controlled Archer and caused the violations.	No separate liability argued for control person.	Markusen liable as Archer’s controlling person.
Manipulative trading: marking the close	Markusen/Archer manipulated CYBE closing prices to inflate returns.	Challenge to the characterization of closing trades as manipulation.	Violation established; marking the close found fraudulent.
Remedies: disgorgement, prejudgment interest, and civil penalties	Disgorgement of ill-gotten gains plus interest and penalties appropriate.	Challenge to magnitude and ability to pay.	Disgorgement, prejudgment interest, and $100,000 penalties awarded; injunction issued.
Injunction and continuation of litigation posture	Permanent injunction necessary to prevent future violations.	Not addressed; default status limits defenses.	Permanent injunction granted; judgment withheld pending Cope resolution.

Santa Fe Indus., Inc. v. Green, 430 U.S. 462 (U.S. (1977)) (definition of market manipulation under 10b-5)
Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (U.S. 2011) (ultimate authority over statements; misstatements liability)
SEC v. Montana, 464 F. Supp. 2d 772 (S.D. Ind. 2006) (imputation of scienter from control and pattern of deception)
Pfanenstiel Architects, Inc. v. Chouteau Petroleum Co., 978 F.2d 430 (8th Cir. 1992) (stay of damages when co-defendants present; avoid inconsistency)
SEC v. Comserv Corp., 908 F.2d 1407 (8th Cir. 1990) (standard for permanent injunction in securities actions)