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SEC isnt saying that anyone is stealing or embezzling money. They are saying that there was no registration that would give him the green light to do everythin

SEC isnt saying that anyone is stealing or embezzling money. They are saying that there was no registration that would give him the green light to do everything they are accusing him of. The SEC merely wants registration and fine print disclaimers. All the actions they outlined are just rationalizing to the judge why they want jurisdiction under securities laws - where misleading statements without contradictory disclaimers are sanctionable through civil court, instead of the consumer protection framework where blatant marketing lies are okay. They also need to describe how this was done knowingly, in order to leave room for the DOJ to charge him under criminal securities laws, where ignorance actually is a defense, so they have to prove he was knowingly violating securities laws. Moving money he collected isnt the issue at all here.

elliekelly 7y ago
I was careful in both my reading of the documents and in the words I chose when commenting. I said "accusing" and not "charging" for good reason. But make no mistake, the SEC is absolutely accusing him of embezzlement (see paragraph 6 of the complaint), securities fraud (paragraphs 2-3), market manipulation (paragraphs 2, 5 & 7), running a Ponzi scheme (paragraph 9), and an unregistered securities offering, as you mentioned. You'll notice all of those accusations carry the potential for criminal charges - except one: an unregistered securities offering. The SEC is an administrative regulatory agency, not a law enforcement agency. That means the SEC brings civil actions to enforce securities laws and then works closely with the Department of Justice to recommend criminal charges against those same defendants. The SEC gathers all of the evidence, brings the civil charges, and then hands the file over to the DOJ for criminal enforcement. I will absolutely, positively, unequivocally guarantee that the DOJ will follow up with criminal charges. And the SEC's charging document is a sneak preview of what those charges will be. The process is usually more coordinated than this but it sounds like Middleton is a particularly stupid defendant. Typically a defendant's attorney would be made aware of forthcoming charges from the SEC (as happened here) and then negotiate a simultaneous plea deal (with the DOJ) and settlement (with the SEC). Instead, the SEC sought an _emergency_ injunction to prevent him from continuing to move the money because he started moving money around when he learned of the forthcoming charges. His moving the funds was the impetus for the SEC filing. If the SEC "merely wants registration and fine print disclaimers" an emergency injunction to freeze client funds would be entirely unnecessary.
- rolltiide 7y ago
  > I said "accusing" and not "charging" for good reason. Thats not the issue, its just not embezzlement. I'll debate the finest points of embezzlement with you. They accept that people gave him money for the widest discretion of use, like in every other token sale, or securities offering, so "embezzlement" is impossible. They don't like that it was unregistered, and if it was a registered offering there would have liked disclosures that contradicted his statements. The only similarity to embezzlement is that the agency is trying to recover a fraction of money on behalf of investors. Yes, his moving the funds was the impetus for the complaint, we don't disagree there.
  - elliekelly 7y ago
    I wasn't debating, I was explaining. I'm a securities attorney so I'm quite familiar with the "finest points" of federal securities laws.
    - rolltiide 7y ago
      Embezzlement isn't a word mentioned in the complaint, and not paragraph 6, embezzlement has a specific meaning in federal criminal law. Why are you being so familiar in one area, and using hyperbole in another? Perhaps I misunderstand: Do you think embezzlement is a charge something the SEC will refer to the DOJ as well, or are we still unproductively debating semantics. If not semantics, which particular action do you consider embezzlement? The moving $2,000,000 upon notice of a potential charge? The actions in Paragraph 6 of selling something to an using the revenue to pay employees, debts and personal things? You make it seem like its just an accounting nuance, as if he should have paid himself a greater salary from company coffers to then pay for personal things.

elliekelly 7y ago

I was careful in both my reading of the documents and in the words I chose when commenting. I said "accusing" and not "charging" for good reason. But make no mistake, the SEC is absolutely accusing him of embezzlement (see paragraph 6 of the complaint), securities fraud (paragraphs 2-3), market manipulation (paragraphs 2, 5 & 7), running a Ponzi scheme (paragraph 9), and an unregistered securities offering, as you mentioned. You'll notice all of those accusations carry the potential for criminal charges - except one: an unregistered securities offering. The SEC is an administrative regulatory agency, not a law enforcement agency. That means the SEC brings civil actions to enforce securities laws and then works closely with the Department of Justice to recommend criminal charges against those same defendants. The SEC gathers all of the evidence, brings the civil charges, and then hands the file over to the DOJ for criminal enforcement. I will absolutely, positively, unequivocally guarantee that the DOJ will follow up with criminal charges. And the SEC's charging document is a sneak preview of what those charges will be. The process is usually more coordinated than this but it sounds like Middleton is a particularly stupid defendant. Typically a defendant's attorney would be made aware of forthcoming charges from the SEC (as happened here) and then negotiate a simultaneous plea deal (with the DOJ) and settlement (with the SEC). Instead, the SEC sought an _emergency_ injunction to prevent him from continuing to move the money because he started moving money around when he learned of the forthcoming charges. His moving the funds was the impetus for the SEC filing. If the SEC "merely wants registration and fine print disclaimers" an emergency injunction to freeze client funds would be entirely unnecessary.

rolltiide 7y ago
> I said "accusing" and not "charging" for good reason. Thats not the issue, its just not embezzlement. I'll debate the finest points of embezzlement with you. They accept that people gave him money for the widest discretion of use, like in every other token sale, or securities offering, so "embezzlement" is impossible. They don't like that it was unregistered, and if it was a registered offering there would have liked disclosures that contradicted his statements. The only similarity to embezzlement is that the agency is trying to recover a fraction of money on behalf of investors. Yes, his moving the funds was the impetus for the complaint, we don't disagree there.
- elliekelly 7y ago
  I wasn't debating, I was explaining. I'm a securities attorney so I'm quite familiar with the "finest points" of federal securities laws.
  - rolltiide 7y ago
    Embezzlement isn't a word mentioned in the complaint, and not paragraph 6, embezzlement has a specific meaning in federal criminal law. Why are you being so familiar in one area, and using hyperbole in another? Perhaps I misunderstand: Do you think embezzlement is a charge something the SEC will refer to the DOJ as well, or are we still unproductively debating semantics. If not semantics, which particular action do you consider embezzlement? The moving $2,000,000 upon notice of a potential charge? The actions in Paragraph 6 of selling something to an using the revenue to pay employees, debts and personal things? You make it seem like its just an accounting nuance, as if he should have paid himself a greater salary from company coffers to then pay for personal things.