United States District Court, D. Nevada
REPORT AND RECOMMENDATION MOTION TO DISMISS [ECF NO.
FERENBACH UNITED STATES MAGISTRATE JUDGE
the Court is Defendant Sean Finn's Motion to Dismiss
Counts 6-10. (ECF No. 447). For the reasons discussed
below, Defendant's motion should be denied.
is charged with several counts of wire fraud and securities
fraud, and one count of conspiracy to commit wire fraud and
securities fraud. (ECF No. 1). The indictment alleges that
Defendant, and several other Defendants,
provided investors with investment contracts titled
“joint venture agreements” or “financial
services agreements” and induced investor to part with
money by promising that Malom Group AG would contribute its
own money to profitable “joint ventures” with
investors, when in fact the defendants did not intend to
contribute any of Malom Group AG's money to a joint
(Id. at 5-6).
now moves to dismiss the securities fraud charges against
him. (ECF No. 447 at 3). Defendant argues that the joint
venture agreements were not investment contracts because
“the money paid by the clients was a fee for services
and not an investment. The fee was to be paid in exchange for
access to Malom's funds, network, and for the opportunity
to pitch future investment ideas to Malom.”
(Id. at 5). “[T]here was no expectation of
profit in the contract between [Defendant] and the clients
because the money paid to [Defendant] was a fee for services
rendered, and not an investment.” (Id. at 7).
In response, the Government asserts that “defendant and
his co-conspirators induced the victims to sign investment
contracts called ‘joint-venture agreements' in
which they misrepresented that Malom had large account
balances abroad that it would contribute towards the
purported joint venture.” (ECF No. 460 at 2). The
Government argues that the indictment contains adequate
detail for the securities fraud charges and the question of
whether the joint venture agreements are investment contracts
should be decided by a jury. (Id. at 4, 7-11).
judging the sufficiency of the indictment we look to
‘whether the indictment adequately alleges the elements
of the offense and fairly informs the defendant of the
charge, not whether the Government can prove its
case.'” United States v. Kaplan, 836 F.3d
1199, 1216 (9th Cir. 2016) (quoting United States v.
Buckley, 689 F.2d 893, 897 (9th Cir. 1982)). “A
motion to dismiss the indictment cannot be used as a device
for a summary trial of the evidence.” United States
v. Jensen, 93 F.3d 667, 669 (9th Cir. 1996) (internal
18 U.S.C. § 78j(b), it is unlawful to use “any
manipulative or deceptive device” “in connection
with the purchase or sale of any security.”
“Security” is defined to include investment
contracts. 18 U.S.C. § 78c(a)(10). The definition for
investment contracts requires “(1) an investment of
money (2) in a common enterprise (3) with an expectation of
profits produced by the efforts of others.”
Warfield v. Alaniz, 569 F.3d 1015, 1020 (9th Cir.
2009) (quoting SEC v. Rubera, 350 F.3d 1084, 1090
(9th Cir. 2003).
Court finds that the indictment adequately alleges securities
fraud charges against Defendant. The indictment alleges that
Defendant “provided investors with investment contracts
titled ‘joint venture agreements' or
‘financial services agreements'…promising
that Malom Group AG would contribute its own money to
profitable ‘joint ventures' with investors.”
(ECF No. 1 at 5-6). These allegations fulfill the elements
required for an investment contract. The indictment gives
specific examples of these alleged investment contracts.
(Id. at 12-14). Defendant's argument would
require the Court to definitively interpret the language of
the joint venture agreements, which is not appropriate during
a motion to dismiss. “[T]he question whether a given
investment opportunity constitutes a security is ordinarily a
question for the jury.” United States v.
Morse, 785 F.2d 771, 775-76 (9th Cir. 1986); see
also United States v. Carman, 577 F.2d 556, 562-63 (9th
Cir. 1978) (“characterization of a transaction raises
questions of both law and fact… as resolved by the
and for good cause, IT IS RECOMMENDED that Defendant's
Motion to Dismiss Counts 6-10 (ECF No. 447) be DENIED.