Securities and Exchange Commission v. Afriyie

19-17-cv
Securities and Exchange Commission v. Afriyie
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 17th day of December, two thousand nineteen.
PRESENT: JOSÉ A. CABRANES,
CHRISTOPHER F. DRONEY,
Circuit Judges,
CHRISTINA REISS,
District Judge. *
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff-Appellee,
UNITED STATES ATTORNEY’S OFFICE FOR THE
SOUTHERN DISTRICT OF NEW YORK 19-17-cv
Intervenor,
v.
JOHN AFRIYIE,
Defendant-Appellant,
*
Judge Christina Reiss, of the United States District Court for the District of Vermont, sitting
by designation.
1
LAWRENCIA AFRIYIE,
Relief Defendant.
FOR PLAINTIFF-APPELLEE: Daniel E. Matro, Senior Counsel (David
D. Lisitza, Senior Litigation Counsel, and
John W. Avery, Deputy Solicitor, on the
brief) for Robert B. Stebbins, General
Counsel, Securities and Exchange
Commission, Washington, D.C.
FOR DEFENDANT-APPELLANT: Jonathan I. Edelstein, Edelstein &
Grossman, New York, NY.
Appeal from a November 27, 2018 judgment of the United States District Court for the
Southern District of New York (Jed S. Rakoff, Judge).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the District Court be and hereby is
AFFIRMED.
Defendant-Appellant John Afriyie (“Afriyie”) appeals from a November 27, 2018 judgment
entered in favor of Plaintiff-Appellee Securities and Exchange Commission (“SEC”) that
permanently enjoined Afriyie from violating § 10(b) of the Exchange Act and SEC Rule 10b-5. The
District Court’s judgment ordered Afriyie to disgorge his profits, with prejudgment interest, in the
amount of $1,670,483.98, to be deemed satisfied if the forfeiture and restitution orders in his
criminal case (United States v. Afriyie, No. 1:16-cr-377-PAE (S.D.N.Y.)) are satisfied, and to pay a civil
penalty of $1,576,445.98. The District Court granted summary judgment in favor of the SEC after
concluding that Afriyie’s criminal conviction and the jury’s forfeiture verdict collaterally estopped
Afriyie from contesting his civil liability in the instant case. We assume the parties’ familiarity with
the underlying facts, the procedural history of the case, and the issues on appeal.
“We review a district court’s grant of summary judgment de novo.” Trikona Advisers Ltd. v.
Chugh, 846 F.3d 22, 29 (2d Cir. 2017) (citation omitted). We will affirm the district court’s decision
only after “resolving all ambiguities and drawing all reasonable inferences against the moving party”
and determining “there is no genuine dispute as to any material fact and . . . the movant is entitled to
judgment as a matter of law.” Pippins v. KPMG, LLP, 759 F.3d 235, 239 (2d Cir. 2014) (internal
quotation marks and citation omitted). “The district court’s judgment may be affirmed on any
ground fairly supported by the record.” Trikona, 846 F.3d at 29 (internal quotation marks omitted).
2
The parties’ central dispute revolves around: (1) whether the jury’s forfeiture verdict against
Afriyie constitutes a “sentencing finding[ ],” to which the application of the doctrine of collateral
estoppel “should be presumed improper” under S.E.C. v. Monarch Funding Corp., 192 F.3d 295, 306
(2d Cir. 1999); and, if so, (2) whether the Monarch presumption should be overcome because it is
“clearly fair and efficient” to give preclusive effect to the sentencing finding, id. This disagreement
raises “an issue rarely considered by this or any other Circuit: the applicability of collateral estoppel
based upon earlier sentencing findings,” United States v. U.S. Currency in Amount of $119,984.00, More
or Less, 304 F.3d 165, 171 (2d Cir. 2002), with the added consideration of whether a forfeiture
determination—admittedly, a necessary component of a criminal defendant’s sentence, see Libretti v.
United States, 516 U.S. 29, 38–39 (1995)—raises the same concerns that underlie the Monarch
presumption against applying collateral estoppel to sentencing findings.
The District Court held that Afriyie’s “forfeiture verdict was not a sentencing finding”
because it was the result of “a trial on the merits of the forfeiture allegations.” Special App’x at 14.
Accordingly, the District Court did not address the applicability of the Monarch presumption and
whether, under Monarch’s analytical framework, it would be “efficient” to extend preclusive effect to
the forfeiture verdict.
We note that this Court has yet to define the precise contours of the Monarch presumption—
specifically, whether the presumption extends to a forfeiture determination, particularly one that
results from a jury verdict after a merits trial on the forfeiture allegations and also constitutes an
element of the criminal sentence imposed.1 We agree with the SEC, however, that this question need
not be resolved here because, regardless of the doctrine of collateral estoppel, the SEC presented
unrebutted evidence in support of the civil judgment entered against Afriyie—evidence that this
Court deemed “overwhelming” in affirming the criminal conviction and forfeiture order against
Afriyie. United States v. Afriyie, 929 F.3d 63, 70 (2d Cir. 2019).
The record in this case consists of, among other things, the SEC’s unopposed statement of
undisputed material facts, witness testimony and exhibits from the criminal and forfeiture trials, and
the jury’s forfeiture verdict against Afriyie. The evidence demonstrates that Afriyie’s trades were
based on his misappropriation of material nonpublic information and supports the specific amount
of profits earned from his option trading. Recognizing that his criminal conviction precludes him
from contesting civil liability for insider trading in the instant case, Afriyie focuses exclusively on
1
In Riley v. United States, we affirmed by summary order a district court’s decision to give collateral
estoppel effect to a forfeiture determination. 78 F. App’x 774, 775–76 (2d Cir. 2003) (holding that a
criminal forfeiture determination by the Eastern District of Virginia precluded relitigation of a
defendant’s right to a property in a subsequent federal suit in the Eastern District of New York).
Putting aside the fact that Riley was not a precedential opinion, we note that the question of whether
the Monarch presumption extends to a forfeiture determination was not raised in that case.
3
arguing that the civil monetary relief ordered against him is excessive because some of his trades
were lawful. But Afriyie has had ample opportunities to proffer evidence in support of his
contention that some of the trades were lawful or to show that there is a genuine issue of material
fact precluding the District Court from granting summary judgment in favor of the SEC. Afriyie has
done neither. Similarly, Afriyie has made no effort to dispute the SEC’s calculation of his illegal
profits.
On the basis of the record before us, we conclude that the SEC introduced unrebutted
evidence establishing that all of Afriyie’s trades were unlawful. Moreover, in the absence of any
challenge to the civil monetary relief ordered by the District Court, we hold that the District Court
properly granted summary judgment in favor of the SEC.
CONCLUSION
We have reviewed all of the remaining arguments raised by Afriyie on appeal and find them
to be without merit. For the foregoing reasons, we AFFIRM the November 27, 2018 judgment of
the District Court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
4