U.S. Securities and Exchange Commission v. Solomon RC Ali ( 2022 )

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[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-10984
Non-Argument Calendar
____________________
U.S. SECURITIES AND EXCHANGE COMMISSION,
Plaintiff-Counter Defendant
-Appellee,
versus
REVOLUTIONARY CONCEPTS, INC.,
Defendant,
SOLOMON RC ALI,
a.k.a. Richard M. Carter,
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2 Opinion of the Court 21-10984
Defendant-Third Party Plaintiff
-Counter Claimant-Appellant.
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:18-cv-01832-RWS
____________________
Before BRANCH and LUCK, Circuit Judges.∗
PER CURIAM:
The Securities and Exchange Commission sued Solomon
RC Ali—formerly known as Richard Carter—for issuing press re-
leases with materially false or misleading statements, in violation
of the Securities Act of 1933, the Exchange Act of 1934, and Com-
mission regulations. The district court entered summary judgment
for the Commission and enjoined Ali from either serving as an of-
ficer or director or from working in the “penny stock” industry for
ten years. The district court also imposed a six figure fine. After
careful review, we affirm.
∗ This opinion is being entered by a quorum pursuant to 28 U.S.C. § 46(d).
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21-10984 Opinion of the Court 3
FACTUAL BACKGROUND
The Ali Trusts
In 2009, Ali created seven irrevocable trusts and designated
his attorney, Ernest “Woody” DeLong, as the trustee for each. Six
of the seven trusts benefitted either Ali, his close relatives, or both.1
Rainco Holdings Trust, the trust most central to this case, listed Ali
as its primary beneficiary and his daughter as its secondary benefi-
ciary. Ali did not create the trusts with any assets in them. Be-
tween 2013 and 2015, the individual trusts’ ending monthly bal-
ances were less than $10,000 (at the highest) and usually less than
$1,000.
Ali created Rainco Industries, Inc. in 2011. His daughter was
a director, his girlfriend was the president of operations, his lawyer
(DeLong) was its general counsel, and its majority shareholder was
Rainco Holdings Trust. Ali lived at the same address as Rainco In-
dustries’s principal place of business. So, just to recap, Rainco
Holdings Trust, which benefitted Ali, owned Rainco Industries.
Revolutionary Concepts
In mid-2010, Ali became the senior vice president of investor
relations and a board member of a publicly traded company named
Revolutionary Concepts, Inc., also known as “REVO.” As a signing
bonus, Ali got almost three million shares of REVO stock. At the
time, REVO was a small company, with just two full-time
1 The seventh trust benefitted three charities picked by Ali.
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employees—Ronald Carter 2 and Ali. Although REVO owned pa-
tents for “smart camera” technology, it generated no revenue and
its stock traded at less than one cent per share.
Ali’s role was to “arrange capital” and “funding” for the com-
pany and to “increase REVO’s market capitalization.” He de-
scribed his job as “[introducing] Mr. Carter to various people, [and]
set[ing] up various conference calls with, uh, different private eq-
uity companies, companies that would loan [] money[.]” Ali
bragged about his experience and talent with mergers and acquisi-
tions: he said that he had done over one hundred and forty mergers
and acquisitions over the previous twenty-year period, and, in his
opinion, “there[] [was] nobody better.” REVO’s 2012 10-K filing
described Ali as having experience in “corporate valuation, capital-
ization structure . . . and managing the investment process with
securities attorneys and accountants[] for [the] SEC[.]” Ali also
wrote the press releases for REVO, including the ones for the four
transactions at issue in this case: (1) the acquisition of Greenwood
Finance; (2) the licensing agreement with EyeTalk; (3) the line of
credit from Rainco Industries; and (4) the loan from Universal Bio-
energy.
Greenwood Finance Transaction
In November 2012, DeLong created Greenwood Finance
Group, LLC, whose sole member was Rainco Industries. Green-
wood Finance was wholly owned by Rainco Industries (which was
2 No relation to Ali (formerly known as Richard Carter).
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21-10984 Opinion of the Court 5
owned by Rainco Holdings Trust, which benefitted Ali). Green-
wood Finance’s only assets were seven promissory notes issued by
the Ali trusts. Those promissory notes required the Ali trusts to
pay Greenwood Finance $7.1 million in principal and to make an-
nual interest payments of about $1 million.
A month after Greenwood Finance was created by Ali’s law-
yer, in December 2012, Ali—REVO’s senior vice president and
board member—proposed that REVO buy Greenwood Finance.
Ali did not do any diligence on Greenwood Finance either before
proposing the deal or before it was executed. REVO paid Rainco
Industries ten million shares of REVO stock in exchange for Green-
wood Finance. While REVO stock was then trading at a fraction
of a penny, Ali valued REVO’s stock at $1.80 per share; so, in total,
REVO purported to transfer $18 million worth of REVO stock and
an annual dividend of $1.8 million to Rainco Industries in exchange
for Greenwood Finance and its $7.1 million in promissory notes
(and annual million dollar interest payments).
Ali was on both sides of the deal. For REVO, he was a direc-
tor, senior vice president, and a shareholder. For Rainco Industries,
he was the beneficiary of Rainco Holdings Trust, which owned a
fifty-five percent stake in Rainco Industries. Ali’s mother owned
another eleven percent of Rainco Industries. And, of course, Ali’s
trusts provided the promissory notes which constituted Green-
wood Finance’s only assets.
While REVO’s board of directors—including Ali—approved
REVO’s acquisition of Greenwood Finance from Rainco
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Industries, Ali never disclosed either that he benefitted from REVO
buying Greenwood Finance or that he and his family benefitted
from whatever Rainco Holdings received. Rainco Industries’s
board of directors also approved the deal; Ali’s daughter signed as
secretary, his girlfriend signed as a director, and “Richard Carter”—
Ali’s former name—signed as a director. The agreement was
signed on December 7, 2012.
Ali wrote three press releases for REVO that were published
to the market and boasted about acquiring Greenwood Finance.
The first, published the day before the deal was signed, claimed, in
a quote attributed to Ali, that REVO believed “the acquisition
could be valued at greater than $15 million. The company being
evaluated has a current EBITDA[3] in excess of $1 million.” The
second, published a few weeks later on January 4, 2013, was even
rosier—it said that Greenwood Finance had an EBITDA “in excess
of [$]3.5 million for 2012 and assets of $7 million with total liabili-
ties of less than $3 million.” And the third, released on January 9,
2013, claimed that Greenwood Finance had “[$]3 million in profits
from 2012” and was “set to exceed its 2012 funding revenue.”
At no point, though, did Ali disclose that Greenwood Fi-
nance’s ability to generate revenue depended on receipt of funds
from the promissory notes and that the trusts had no ability to
3 This stands for “Earnings Before Interest, Taxes, Depreciation, and Amorti-
zation”—a common accounting measure. Cox Enter., Inc. v. News-Journal
Corp., 794 F.3d 1259, 1264 n.11 (11th Cir. 2015).
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make the payments—in fact, Greenwood Finance had no revenue
in 2012. Ali did not know the amount of the trusts’ assets at the
time of the transaction and made no attempt to find out. Nor did
he disclose that he was the beneficiary of the trust which received
the REVO stock.
In June 2014, Ali issued two more press releases stating that
Greenwood Finance (now owned by REVO) was meeting with its
“original investors” to collect on the “seven million dollars in re-
ceivables.” Ali did not disclose (again) that the “original investors”
were his trusts.
EyeTalk Licensing Agreement
In February 2014, Ali had another idea—to license REVO’s
patents to a newly-formed company named EyeTalk365, LLC.
EyeTalk was incorporated in September 2013 for the purpose of
licensing REVO’s patents. Ali’s trusts and Rainco Industries owned
a little less than forty percent of EyeTalk when it was created. Eye-
Talk’s founding members were supposed to provide one million
dollars in assets but never did.
Ultimately, EyeTalk paid 4 REVO $900,000 to license
REVO’s patents. Ali was on both sides of this deal too. He was
4 It is more complicated than that—in reality, REVO issued $500,000 and
$400,000 in promissory notes to Ali and Ronald Carter as payment. Ali then
donated the note to one of his trusts, which in turn gave the notes to EyeTalk
in exchange for a 19% ownership stake. Ronald Carter did the same. Then,
REVO cancelled the $900,000 in notes as consideration for the license
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REVO’s senior vice president and a director, and one of his trusts
partially owned EyeTalk.
On February 12, 2014, Ali drafted and issued a press release
announcing the deal and boasting that REVO “project[ed] the
transaction could generate millions in long-term revenues”
through licensing and that it would receive an “up-front sign-up fee
or pre-commercialization fee of $900,000 in consideration.” That
same day, REVO published another press release forecasting $20
million to $30 million in total estimated annual revenues—of
which forty percent (or eight to twelve million dollars) would go
back to REVO.
When asked, Ali admitted that he had no documents to sup-
port the valuation. Ali’s justification was that the relevant industry
was “84 billion dollars” and “if we’re lucky, we will get about .001
to .005 percent” of the industry. In fact, the deal earned nothing in
2014 and only $77,000 in 2015. Ali didn’t mention in either press
release that the transaction was not arms-length. After announcing
the deal, REVO’s stock almost tripled in value—rising 182 percent.
Rainco Industries Line of Credit
In June 2014, Greenwood Finance—through Ali—negoti-
ated a ten-million dollar line of credit from Rainco Industries. Ali
did not do any diligence to see if Rainco Industries had any money
(let alone ten million dollars) to lend. Nor did Greenwood Finance
agreement. But for our purposes, the deal was that EyeTalk gave REVO
$900,000 for a license, although no money actually changed hands.
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have any assets (other than the promissory notes from the Ali
trusts) to offer as collateral.
Ali wrote a press release for REVO trumpeting that the
agreement would “fund its revitalized investment operations” and
“position[ed] Greenwood [Finance] for a joint venture opportunity
with a firm seeking a private equity partnership with a strong data
base.” A few weeks later, on July 2, 2014, Ali wrote and published
a second press release which quoted him as estimating “$5 million
in annual profits” from the new credit line and saying that it would
“generate returns of 100% or more” and forecasted annual reve-
nues “in the $10 to $20 million range.” Ali didn’t disclose that he
was a beneficiary of the lender or that the lender had no capital to
loan.
Universal Bioenergy Loan
In January 2015, the Ali trusts had not made their required
interest payments to Greenwood Finance and owed around one
million dollars. For funds, Ali arranged for his trusts to transfer
convertible promissory notes issued by Universal Bioenergy, Inc.—
a separate company in which he was the senior vice president for
finance and investor relations and also a director—to Greenwood
Finance in lieu of cash. Although the notes had a face value of
$200,000—which was less than the $1,000,000 the Ali trusts owed—
REVO never collected any revenue from the notes because Univer-
sal Bioenergy had less than $15,000 in assets and less than $500 in
cash on hand.
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Ali wrote and published another press release shortly after
the transaction proclaiming that REVO could “announce early in-
come and revenue recognition for the first month of the first quar-
ter [of] 2015. Income from a series of transactions recorded this
month have a cash value that may well exceed one million dollars.”
Ali—through REVO—did not disclose his relationship with Uni-
versal Bioenergy.
PROCEDURAL HISTORY
Eventually, the Securities and Exchange Commission began
investigating Ali and his co-defendants but wanted more time to
reach a settlement. On August 1, 2017, Ali signed a six-month toll-
ing agreement with the Commission excluding the time between
July 24, 2017 and January 23, 2018 from the five-year time period
to file suit.
After settlement talks collapsed, the Commission brought
an eleven-count complaint in April 2018 alleging that Ali had vio-
lated the Securities Act of 1933, the Exchange Act of 1934, and
Commission regulations. Only five counts are at issue here. 5
Count one charged Ali with violating section 17(a)(1) of the Secu-
rities Act for “acting with scienter . . . in the offer or sale of securi-
ties” by making misrepresentations and omissions regarding the
four transactions. Count two similarly alleged that Ali violated sec-
tion 17(a)(2)–(3) of the Securities Act by “acting knowingly,
5 The other counts were either directed at different defendants or were dis-
missed by the Commission.
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recklessly, or negligently in the offer or sale of securities” by mak-
ing material misstatements. Count three alleged that Ali violated
section 10(b) of the Exchange Act and rules 10b-5(a)–(c) by making
material misstatements and omissions in connection with the of-
fering of securities. Count five charged Ali with aiding and abetting
the other violations. And count nine claimed that Ali had violated
the beneficial ownership reporting requirements of section 16(a) of
the Exchange Act and rule 16a-3.
Ali initially proceeded pro se in the district court. After an-
swering, he filed two motions to dismiss—one of which argued
that the statute of limitations had run on his alleged misstatements.
Before the district court ruled on the motions, the Commission
moved for partial summary judgment on liability, arguing that
there was no genuine dispute that Ali violated the Securities Act,
the Exchange Act, and Commission regulations.
The district court granted summary judgment for the Com-
mission on the five counts and denied Ali’s motions to dismiss as
moot. The district court found no genuine dispute that Ali’s state-
ments were “material”—likely to mislead a reasonable investor—
and false. The district court also concluded that there was no dis-
pute of fact that Ali had acted with the required mental state—“sci-
enter”—because there was no factual basis for his press releases.
The Commission asked the district court to permanently bar
Ali from violating the securities laws, from serving as an officer or
director of a publicly traded company, and from participating in the
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offering of a penny stock. It also asked the court to fine Ali $150,000
for the press releases and $7,500 for the reporting violations.
The district court declined to award all the relief requested.
Instead, it: (1) permanently enjoined Ali from engaging in future
securities law violations (which Ali consented to); (2) banned Ali
for ten years from serving as an officer or director of a publicly
traded company and from working in the penny stock business;
and (3) fined Ali $107,500. The district court explained that Ali was
a “key player” in the fraud and “lack[ed] contrition” but balanced
those facts with the mitigating factors that Ali had no prior securi-
ties law violations, was older (fifty-seven years old at the time), and
had worked in the securities industry for many years.
STANDARD OF REVIEW
We review de novo the district court’s grant of summary
judgment, viewing the evidence and all factual inferences in the
light most favorable to the nonmoving party. Mize v. Jefferson
City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996). A district court
should grant summary judgment only when “there is no genuine
dispute as to any material fact and the movant is entitled to judg-
ment as a matter of law.” Fed. R. Civ. P. 56(a). We review consti-
tutional challenges de novo. United States v. Bajakajian, 524 U.S.
321, 336 (1998). And we review the district court’s choice of reme-
dies for a securities law violation for an abuse of discretion. SEC v.
Calvo, 378 F.3d 1211, 1216 (11th Cir. 2004) (injunctive relief); SEC
v. Warren, 534 F.3d 1368, 1369 (11th Cir. 2008) (monetary relief).
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“Ordinarily an appellate court does not give consideration
to issues not raised below” but, “[i]n an exceptional civil case, we
might entertain the objection by noticing plain error. Under the
civil plain error standard, we will consider an issue not raised in the
district court if it involves a pure question of law, and if refusal to
consider it would result in a miscarriage of justice.” Burch v. P.J.
Cheese, Inc., 861 F.3d 1338, 1352 (11th Cir. 2017).
DISCUSSION
Ali makes five arguments on appeal. First, he argues that
the complaint was time-barred because the five-year limitations pe-
riod was a statute of repose and could not be tolled by agreement.
Second, he contends that the district court violated his due process
(Fifth Amendment) and jury trial (Seventh Amendment) rights by
finding him liable at summary judgment instead of after a jury trial.
Third, he maintains that the Commission’s burden to prove the vi-
olations should have been by clear and convincing evidence rather
than a mere preponderance of the evidence. Fourth, he argues that
there was a genuine issue of material fact as to whether he had the
scienter required for liability on counts one, three, and five. And
fifth, he says that the district court abused its discretion by banning
him for ten years from working as an officer or director or offering
penny stocks and in fining him $107,500. As to the fine, Ali argues
that it violated his Eighth Amendment right to be free of excessive
fines.
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Statute of Limitations
First, Ali argues that the Commission’s complaint was un-
timely. In his view, the five-year limitations period to file suit—28
U.S.C. section 2462—is a statute of repose and not subject to toll-
ing. Therefore, he says, the Commission had only five years from
when the claims accrued—January 9, 2013—to file suit because his
signed “tolling agreement” couldn’t toll a statute of repose. Be-
cause the Commission filed suit on April 27, 2018—more than five
years later—Ali argues that it was untimely. The Commission re-
sponds that section 2462 is a statute of limitations, which can be
tolled, and so Ali’s tolling agreement made its complaint timely.
We agree with the Commission.
The Supreme Court has differentiated between statutes of
limitations—which are an affirmative defense and are subject to
forfeiture and waiver—and statutes of repose, which are jurisdic-
tional and not subject to waiver. John R. Sand & Gravel Co. v.
United States, 552 U.S. 130, 133–34 (2008). A statute of limitations,
the Court has said, is based on the date “when the claim accrued,”
which usually means “when the injury occurred or was discov-
ered.” CTS Corp. v. Waldburger, 573 U.S. 1, 7–8 (2014) (cleaned
up). A statute of repose, on the other hand, “is measured not from
the date on which the claim accrues but instead from the date of
the last culpable act or omission of the defendant . . . even if this
period ends before the plaintiff has suffered a resulting injury.” Id.
at 8 (cleaned up). There is a presumption that time limitations are
statutes of limitations, and not repose, absent a “clear indication
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that Congress wanted the rule to be jurisdictional.” Henderson ex
rel. Henderson v. Shinseki, 562 U.S. 428, 435–36 (2011) (cleaned
up).
Section 2462 provides that “an action, suit or proceeding for
the enforcement of any civil fine, penalty, or forfeiture, pecuniary
or otherwise shall not be entertained unless commenced within
five years from the date when the claim first accrued,” as long as
“the offender or the property is found within the United States in
order that proper service may be made thereon.” 28 U.S.C. § 2462. 6
For two reasons, we conclude that section 2462 is a statute of limi-
tations and not a statute of repose.
First, section 2462 refers to the date that the claim accrues.
28 U.S.C. § 2462 (“[A]n action . . . shall not be entertained unless
commenced within five years from the date when the claim first
accrued[.]”) (emphasis added). This strongly suggests that section
2462 is a statute of limitations. See CTS Corp., 573 U.S. at 8 (“In
the ordinary course, a statute of limitations creates ‘a time limit for
suing in a civil case, based on the date when the claim accrued.’”
(quoting Black’s Law Dictionary 1546 (9th ed. 2009)); see Nat’l
Cred. Union Admin. Bd. v. Barclays Cap., Inc., 785 F.3d 387, 394
(10th Cir. 2015) (“Second, and dispositively, the Extender Statute
6 Because this statute applies only to penalties, not injunctions, this argument
applies only to Ali’s civil penalty. Kokesh v. SEC, 137 S. Ct. 1635, 1643 (2017);
SEC v. Graham, 823 F.3d 1357, 1360 (11th Cir. 2016).
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16 Opinion of the Court 21-10984
repeatedly refers to the date a claim accrues. This is consistent with
a statute of limitations but not a statute of respose[.]”).
Second, a statute of repose is jurisdictional and the Supreme
Court has “emphasized—repeatedly—that statutory limitations
periods and other filing deadlines are ordinarily not jurisdictional
and that a particular time bar should be treated as jurisdictional
only if Congress has clearly stated that it is.” Sec’y, U.S. Dep’t of
Labor v. Preston, 873 F.3d 877, 881 (11th Cir. 2017) (internal quo-
tations omitted). Congress knows how to indicate a statute of re-
pose when it wants to, and absent a clear indication that section
2462 was intended to be jurisdictional, we won’t construe it that
way. See United States v. Wong, 575 U.S. 402, 409 (2015) (describ-
ing the “high bar” to establish a time limitation as jurisdictional).
There is no such evidence here.
Our conclusion is consistent with the Supreme Court’s de-
scription of section 2462 as a statute of limitations. See Kokesh, 137
S. Ct. at 1642 (“The statute of limitations at issue here—28 U.S.C.
[section] 2462 . . .”). It also is consistent our description of section
2462 as a statute of limitations. See Nat’l Parks and Conservation
Ass’n v. Tenn. Valley Auth., 502 F.3d 1316, 1332 (11th Cir. 2007)
(“Legal claims brought under the Clean Air Act are subject to the
general federal five-year statute of limitations established by 28
U.S.C. [section] 2462, wherein the claim is barred if suit is not
brought within five years of the date the claim first accrues.” (em-
phasis added)). And it is consistent with what every other circuit
to consider the issue has said. See, e.g., United States v. Core Labs.,
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Inc., 759 F.2d 480, 484 (5th Cir. 1985) (describing section 2462 as
subject to equitable tolling); Arch Mineral Corp. v. Babbitt, 104
F.3d 660, 669 (4th Cir. 1997) (describing section 2462 as a statute of
limitations which may be raised or waived as an affirmative de-
fense); Fed. Elec. Comm’n. v. Williams, 104 F.3d 237, 240 (9th Cir.
1997) (noting that section 2462 is subject to equitable tolling); SEC
v. Fowler, 6 F.4th 255, 262 (2d Cir. 2021) (“[Section] 2462 is a non-
jurisdictional statute of limitations.”).
Ali’s arguments to the contrary are not persuasive. First, Ali
argues that section 2462 provides an exception to its five-year limit:
when the offender or property is not “found within the United
States.” But Ali doesn’t explain why this would be relevant to
whether the provision is a statute of repose. It’s not.
Second, he argues that when the Commission files a civil ac-
tion seeking a civil penalty, “it is functionally the equivalent of a
private plaintiff.” Therefore, he says, the five-year time period in
section 2462 should be construed similarly to the time period for
the private cause of action for securities violations in section
1658(b)(2), which is a statute of repose.
But Ali’s premise is wrong. “When the SEC sues to enforce
the securities laws, it is vindicating public rights and furthering pub-
lic interests, and therefore is acting in the United States’s sovereign
capacity.” SEC v. Diversified Corp. Consulting Grp., 378 F.3d
1219, 1224 (11th Cir. 2004), abrogated on other grounds by Kokesh,
137 S. Ct. at 1645. His attempt to analogize section 2462 to the
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18 Opinion of the Court 21-10984
corresponding time limitations period for private actions is thus un-
availing.
Because section 2462 is nonjurisdictional, Ali’s tolling agree-
ment extended the time to file suit. Under the tolling agreement,
the complaint here was timely.
Summary Judgment
Ali next argues that the district court’s summary judgment
violated his Fifth Amendment due process rights and his Seventh
Amendment right to a trial by jury. Because Ali did not make these
arguments to the district court, we review only for plain error.
Fifth Amendment Due Process Claim
Due process “is flexible and calls for such procedural protec-
tions as the particular situation demands.” Mathews v. Eldridge,
424 U.S. 319, 334 (1976) (cleaned up). The nature of the process
required “is shaped by the risk of error inherent in the truthfinding
process as applied to the generality of cases, not the rare excep-
tions.” Califano v. Yamasaki, 442 U.S. 682, 696 (1979) (internal ci-
tations omitted). “The essential requirements of due process . . .
are notice and an opportunity to respond.” Cleveland Bd. of Educ.
v. Loudermill, 470 U.S. 532, 546 (1985). We’ve held that due pro-
cess does not require more than the summary judgment rule re-
quires. See Oglesby v. Terminal Transport Co., Inc., 543 F.2d 1111,
1113 (5th Cir. 1976) (“Rule 56 requires due notice of the invocation
of its procedures and outlines the type of response required to
avoid its strictures. [Appellant] does not dispute that he got this
notice. Indeed, his counsel prepared a response supported by a
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21-10984 Opinion of the Court 19
brief and [appellant’s] unsworn statement. Due process does not
require more.”).
Ali complains that he did not get “assistance of counsel” or
“an oral hearing.” But neither are required for due process in this
case. “A plaintiff in a civil case has no constitutional right to coun-
sel.” Bass v. Perrin, 170 F.3d 1312, 1320 (11th Cir. 1999). And,
while a court may appoint counsel, Ali never requested pro bono
counsel and instead elected to proceed pro se until the remedy
phase.
As to Ali’s demand for an oral hearing, the Supreme Court
has explained that “[t]he opportunity to present reasons, either in
person or in writing, why proposed action should not be taken is a
fundamental due process requirement.” Loudermill, 470 U.S. at
545 (emphasis added); Erco Indus., Ltd. v. Seaboard Coast Line
R.R. Co., 644 F.2d 424, 431 (5th Cir. Unit B. May 1981) (“Although
Rule 56 requires notice to an adverse party and a hearing, the hear-
ing need not be an oral or formal evidentiary hearing.”); Mathews,
424 U.S. at 348 (“The judicial model of an evidentiary hearing is
neither a required, nor even the most effective, method of deci-
sionmaking in all circumstances.”). Here, Ali had the opportunity
to—and did—respond to the Commission’s summary judgment
motion in writing. Nothing about the summary judgment proce-
dure violated Ali’s due process rights.
Seventh Amendment Jury Trial Right Claim
Ali contends that granting the Commission’s motion for
summary judgment deprived him of his right to a jury trial as
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20 Opinion of the Court 21-10984
guaranteed by the Seventh Amendment. But the Supreme Court
“made clear long ago” that a jury trial is unnecessary “when the
pertinent facts are obvious and indisputable from the record and
the only remaining truly debatable matters are legal questions that
a court is competent to address.” Jefferson v. Sewon Am., Inc., 891
F.3d 911, 920 (11th Cir. 2018) (cleaned up). In other words, if the
district court views the evidence in the light most favorable to the
nonmoving party, it “does not intrude on the constitutional role of
the jury when it considers whether a complaint fails as a matter of
law.” Id.Burden of Proof
Ali also argues that the Commission should be held to a
higher burden of proof in civil enforcement actions. According to
Ali, because the punishments imposed—the ten year bans and a
$107,500 fine—were so severe, they were “quasi-criminal” and the
Commission should have to prove the violations by clear and con-
vincing evidence. Because Ali did not make this argument to the
district court, we review only for a miscarriage of justice. See
Burch, 861 F.3d at 1352.
There was no miscarriage of justice in applying the prepon-
derance of the evidence standard. The Supreme Court has “re-
quired proof by clear and convincing evidence where particularly
important individual interests or rights are at stake.” See Herman
& MacLean v. Huddleston, 459 U.S. 375, 389 (1983). But “imposi-
tion of even severe civil sanctions that do not implicate such inter-
ests” do not require the heightened level of proof. Id. The
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21-10984 Opinion of the Court 21
Supreme Court has, thus, affirmed using the preponderance of the
evidence standard for violations of the Securities Act and the Ex-
change Act. See Huddleston, 459 U.S. at 390 (section 10(b)); SEC
v. C.M. Joiner Leasing, 320 U.S. 344, 355 (1943) (section 17(a)).
In response, Ali falls back on the policy argument that, be-
cause the proceeding was civil and he received neither appointed
counsel nor a jury, “the minimally acceptable course would be to
elevate the burden of proof[.]” But that route is foreclosed by Su-
preme Court precedent.
Scienter
Ali next argues that there is a genuine issue of material fact
as to his scienter. Ali was found liable for violating section 17(a)(1)
of the Securities Act (count one), section 10(b) of the Exchange Act
and its corresponding rule 10b-5 (count three), and aiding and abet-
ting violations of the two statutes and the rule (count five). All
three counts require a showing of “scienter.” SEC v. Merch. Cap.,
LLC, 483 F.3d 747, 766 (11th Cir. 2007). 7
“Scienter is ‘a mental state embracing the intent to deceive,
manipulate, or defraud.’” ZPR Inv. Mgmt., Inc. v. SEC, 861 F.3d
1239, 1252 (11th Cir. 2017) (quoting Matrixx Initiatives, Inc. v.
7 Ali concedes there were no genuine issues of material fact as to the other
elements—just scienter. Ali also doesn’t dispute that he was negligent as re-
quired for liability for counts two or nine: violating section 17(a)(2)–(3) by
negligently making misstatements in connection with the offering of securities
and violating section 16(a) by failing to disclose beneficial ownership of stock
as required by regulation.
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22 Opinion of the Court 21-10984
Siracusano, 563 U.S. 27, 48 (2011)). “Scienter may be established
by a showing of knowing misconduct or severe recklessness.” SEC
v. Monterosso, 756 F.3d 1326, 1335 (11th Cir. 2014) (quoting SEC
v. Carriba Air, Inc., 681 F.2d 1318, 1324 (11th Cir. 1982)).
“Proof of recklessness requires a showing that the defend-
ant’s conduct was an extreme departure from the standards of or-
dinary care, which presents a danger of misleading buyers or sellers
that is either known to the defendant or is so obvious that the actor
must have been aware of it.” Id. (alterations adopted). “Severe
recklessness is limited to those highly unreasonable omissions or
misrepresentations that involve not merely simple or even inexcus-
able negligence, but an extreme departure from the standards of
ordinary care.” Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238
(11th Cir. 2008) (quoting Bryant v. Avado Brands, Inc., 187 F.3d
1271, 1282 n.18 (11th Cir. 1999)). And “while scienter is an issue
ordinarily left to a trier of fact, there are cases where summary
judgment is appropriate”—where there is no genuine dispute that
the defendant intended to deceive or was severely reckless. See
Montessorsso, 756 F.3d at 1335.
The district court correctly granted summary judgment be-
cause there was no genuine dispute that Ali intended to deceive or
was severely reckless in publishing the nine false and misleading
press releases pumping up the four REVO transactions. For exam-
ple, Ali issued press releases stating that Greenwood Finance had
an EBITDA of $3.5 million for 2012. But Greenwood Finance was
created in November 2012 and the summary judgment evidence
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21-10984 Opinion of the Court 23
showed that it had no revenue in 2012. Nor did Ali make any at-
tempt to find out what Greenwood Finance’s revenue was before
telling the market it was millions of dollars. No rational jury could
conclude that was anything other than severely reckless.
And Ali described the Greenwood Finance line of credit with
Rainco Industries as a “$10 million line of credit” and that it would
“generate returns of 100% or more” with annual revenues “in the
$10 to $20 million range.” But Ali did not disclose that (i) Rainco
Industries did not actually have any money to lend to Greenwood
Finance, (ii) Greenwood Finance was not actually engaging in any
business, and that (iii) Ali was on both sides of the non-arms-length
transaction. The failure to tell the public about these material facts
shows an intent to deceive.
And, as to the loan from Universal Bioenergy, Ali told the
public that “income from a series of transactions recorded this
month have a cash value that may well exceed one million dollars.”
Ali also told the Commission in a public filing that “[t]he subsidiary
[Greenwood Finance] collected payments consisting of cash equiv-
alents valued at approximately $1.2 million dollars.” But, in reality,
the “cash equivalents” were convertible promissory notes from
Universal Bioenergy, a company with $342 in cash and $13,453 in
assets at that time. The Commission’s unrebutted expert evidence
showed that the $1.2 million dollar valuation was “speculative and
unreliable” considering Universal Bioenergy’s assets and trading
activity. The expert also testified that the press release was mis-
leading because Ali failed to disclose that he was a board member
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24 Opinion of the Court 21-10984
of both companies and therefore conflicted from valuing the notes.
Because Ali was a board member of both companies, he knew (or
should have known) that Universal Bioenergy didn’t have the
money to lend. No reasonable jury could believe that Ali acted
with anything less than severe recklessness.
Ali makes three arguments in response. First, he says that
his statements, rather than being attempts to defraud, were just
overly optimistic projections. But Ali wasn’t sanctioned for being
wrong in projecting the future. He was held liable because he lied
to—or was severely reckless in reporting to—the public that
Greenwood Finance and Universal Bioenergy had more money
than he knew they did.
Second, Ali argues that the fact that he didn’t profit from the
four transactions is circumstantial proof that he lacked the intent
to defraud investors. But “[t]he fact that [Ali] did not intend to
harm investors does not negate a finding of scienter.” See SEC v.
Caterinicchia, 613 F.2d 102, 106 n.7 (5th Cir. 1980). Instead “inten-
tional deception clearly satisfies the scienter requirement which
this court has applied to SEC injunctive actions.” Id. Scienter can
be found in the deliberate decision not to disclose a material fact.
ZPR Inv. Mgmt., 861 F.3d at 1254–55.
Here, Ali made the deliberate decision not to disclose mate-
rial facts. He knew that he was on both sides of the four transac-
tions. He didn’t disclose that. He knew that his projections were
not supported by any documentary evidence. He didn’t disclose
that. He also made objectively false statements to investors—for
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21-10984 Opinion of the Court 25
example, making up, out of whole cloth, Greenwood Finance’s
EBITDA, or saying that REVO had received a $900,000 “up-front
sign-up fee” from EyeTalk when he knew no money had changed
hands. In sum, that Ali didn’t intend to harm investors is wholly
separate from the fact that—as the undisputed summary judgment
evidence makes plain—he intended to deceive them.
Finally, Ali argues that his failure to disclose the related-
party nature of the transactions is not “per se” evidence of scienter.
But failure to do so is “classic”—even if not per se—“evidence of
scienter.” See Aldridge v. A.T. Cross Corp., 284 F.3d 72, 83 (1st Cir.
2002) (“[T]he fact that the defendants published statements when
they knew facts suggesting the statements were inaccurate or mis-
leadingly incomplete is classic evidence of scienter.”).
Because the summary judgment evidence shows that Ali
made knowingly false—and admittedly material—misrepresenta-
tions to the public, the district court did not err in entering sum-
mary judgment against him.
Penalties
Finally, Ali challenges both (1) his ten-year bars from work-
ing as an officer or director and from working for “penny stock”
companies and (2) his monetary penalty of $107,500. He also con-
tends that the penalty was an excessive fine in violation of the
Eighth Amendment.
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26 Opinion of the Court 21-10984
Time Bars
As to his time bars, Ali argues that the district court abused
its discretion because it was his first time violating securities laws
and he “now understands that his beliefs [about the law] were mis-
taken.” The district court, he says, ignored the mitigating factors
that he didn’t benefit from the fraud and that all four transactions
were related to a single “two-year” campaign to maintain investor
interest in REVO. And he contends that the court should have im-
posed a five-year bar like those imposed on his co-defendants and
“more culpable” defendants in other cases.
The district court did not abuse its discretion. “A district
court abuses its discretion if it applies an incorrect legal standard,
follows improper procedures in making the determination, or
makes findings of fact that are clearly erroneous.” United States v.
Harris, 989 F.3d 908, 911 (11th Cir. 2021) (citation omitted). In the
context of injunctive relief—like a time bar—a court should weigh
the likelihood that the wrong will be repeated. Calvo, 378 F.3d at
1216. Factors to consider are: “[1] [the] egregiousness of the de-
fendant’s actions, [2] the isolated or recurrent nature of the infrac-
tion, [3] the degree of scienter involved, [4] the sincerity of the de-
fendant’s assurances against future violations, [and 5] the defend-
ant’s recognition of the wrongful nature of the conduct, and the
likelihood that the defendant’s occupation will present opportuni-
ties for future violations.” Id.
Here, the district court identified the correct legal standard
and considered the defendant’s conduct. The district court found
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21-10984 Opinion of the Court 27
that Ali had issued not one but nine false and misleading press re-
leases, played a significant personal role in the scheme, found sci-
enter, and noted that Ali had failed to accept responsibility for his
conduct. It also considered that Ali was a first time offender and
that Ali was fifty-seven. Under an abuse of discretion review, we’re
not going to reweigh the district court’s consideration of the aggra-
vating and mitigating factors. Ultimately, when we review for
abuse of discretion, it “means that the district court had a ‘range of
choice’ and that we cannot reverse just because we might have
come to a different conclusion had it been our call to make.” Har-
ris, 989 F.3d at 912.
Civil Fine
As to the fine, the district court could fine Ali $5,000 for a
“first tier” violation of a securities law. 15 U.S.C. §§ 77t(d)(2),
78u(d)(3). For a second tier violation—if the violation involved
fraud, deceit, manipulation, or deliberate or reckless disregard—
then the penalty increases to $50,000 per violation. Id. For a third
tier penalty of up to $100,000, the court must find a second tier vi-
olation and that the violation “resulted in substantial losses or cre-
ated a significant risk of substantial losses to other persons.” Id. §§
77t(d)(2)(C), 78u(d)(3)(B)(iii). Here, the district court found four
“Tier 3” violations—one for each of the four transactions—and
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28 Opinion of the Court 21-10984
noted that it could likely punish Ali for all nine press releases, but
chose not to. The district court imposed a $107,500 civil penalty. 8
Ali argues that the district court abused its discretion be-
cause it did not consider the fact that he hadn’t caused investors
any actual loss. But actual loss isn’t required. The district court
could assess a third tier fine even if it found “a significant risk of
substantial losses.” 15 U.S.C. § 77t(d)(2)(C)(ii). That’s what the
district court found here.
Ali also argues that his misleading press releases didn’t create
a risk of harm to investors because investors “cannot be presumed
to place [] faith and reliance” on them. But Ali conceded that his
misstatements were material—that “a reasonable investor, in the
exercise of due care, would have been misled” by them. See Car-
velli v. Ocwen Fin. Corp., 934 F.3d 1307, 1317 (11th Cir. 2019) (ci-
tation omitted). And investors were misled by the misleading press
releases. After announcing the EyeTalk deal, for example, REVO’s
stock soared 182 percent. In short, we see no reason why the dis-
trict court abused its discretion in choosing and imposing the third
tier monetary penalty.
Eighth Amendment Challenge
Lastly, Ali argues that the monetary penalty—and the ten
year bars—violate the Eighth Amendment because they are dispro-
portionate and “wholly arbitrary” as applied in his case. Because
8 A small portion—$7,500—is for Ali’s violation of his reporting requirements
which Ali doesn’t challenge on appeal.
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21-10984 Opinion of the Court 29
Ali did not make this argument to the district court, we review it
for plain error. See Burch, 861 F.3d at 1352. Here, there was no
error, plain or otherwise.
A fine is excessive “if it is grossly disproportional to the grav-
ity of a defendant’s offense.” Bajakajian, 524 U.S. at 334. “Given
that excessiveness is a highly subjective judgment, the courts
should be hesitant to substitute their opinion for that of the peo-
ple.” United States v. 817 N.E. 29th Drive, Wilton Manors, Fla.,
175 F.3d 1304, 1309 (11th Cir. 1999).
Ali says only that his fine is excessive because no investor
was harmed and he didn’t benefit from his misconduct. But that is
not the end of the story. Whether a fine is excessive is relative to
the wrongdoer’s culpability, the harm to the victim, and sanctions
for comparable misconduct by other defendants. Bajakajian, 524
U.S. at 336–39.
Here, Ali was the most culpable of his co-conspirators be-
cause he was the one who made the false and misleading misstate-
ments to the public. Ali was a principal driver of the fraud: the
transactions at issue were, as he admitted at his deposition, his idea.
The victims were harmed when they bought REVO’s stock based
on Ali’s misrepresentations. And similar fines are routinely af-
firmed for similar violations of the Securities Act and the Exchange
Act. See, e.g., Collins v. SEC, 736 F.3d 521 (D.C. Cir. 2013) (affirm-
ing $310,000 fine for violating section 15(b) of the Exchange Act
against an Excessive Fines Clause challenge); ACAP Fin., Inc. v.
SEC, 783 F.3d 763, 766 (10th Cir. 2015) (Gorsuch, J.) (affirming
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30 Opinion of the Court 21-10984
$100,000 fine and noting that “the agency has in the past approved
sanctions that greatly exceed[ed] any profit earned by the party to
be disciplined”). On this record, we will not substitute our judg-
ment for that of Congress when it set the fine for $100,000 for each
misleading press release and, here the district court imposed a
$100,000 fine for all nine.
Ali’s contention that his time-bar injunctions violate the
Eighth Amendment is frivolous. We’ve already said that injunc-
tions are “equitable, forward-looking remedies and are not penal-
ties” subject to the Eighth Amendment. Graham, 823 F.3d at 1362.
See Gabelli v. SEC, 568 U.S. 442, 451–52 (“[T]his case involves pen-
alties, which go beyond compensation, are intended to punish, and
label defendants wrongdoers.”); Tull v. United States, 481 U.S. 412,
422 (1987) (holding that penalties are “intended to punish culpable
individuals,” not “to extract compensation or restore the status
quo.”).
AFFIRMED.