Broker-Dealer Litigation - Greenberg Traurig LLP

treatment. The partner had felony convictions and was permanently barred by the SEC from
trading securities or raising investment capital. Defendant’s research had proven that the cancer
treatment was ineffective. Nevertheless, defendant and his partner marketed the cancer treatment
as effective. Defendant was convicted of conspiracy to commit securities fraud, three counts of
wire fraud, and one count of securities fraud. On appeal, defendant challenged the district
court’s denial of his motion for judgment of acquittal due to insufficient evidence for his
conspiracy conviction. The appellate court reasoned that defendant’s relations with one investor
were sufficient to prove his conviction. Defendant falsely represented to the potential investor
that he was a doctor and a medical director for the company marketing the cancer treatment,
falsely represented to the investor that drug trials in Mexico with the cancer treatment had been
successful, misrepresented the success of the cancer treatments in the company’s business plan,
and did not disclose that his partner had been convicted of securities fraud and was barred from
selling securities. The appellate court reasoned that defendant knew none of this information
was correct, but succeeded in obtaining $10,000 from the investor. Accordingly, the appellate
court held there was sufficient evidence for a rational jury to find, beyond reasonable doubt, that
defendant knowingly entered into a conspiracy with his partner to make false material
representations and omissions in order to solicit money from would-be investors.
U.S. v. Rajaratnam, 2011 U.S. Dist. LEXIS 91365 (S.D.N.Y. Aug. 16, 2011).
On May 11, 2011, a jury found defendant guilty on five counts of conspiracy to commit
securities fraud and nine counts of securities fraud. Defendant moved for acquittal on all counts
pursuant to Federal Rule of Criminal Procedure 29 arguing that there was insufficient evidence
to sustain his convictions. The evidence at trial included testimony from various witnesses,
numerous e-mail and telephone communications with tippers, and trading records all tending to
establish that defendant made the trades after receiving material, non-public information.
Accordingly, the court held that there was sufficient evidence to convict defendant of all five
counts of conspiracy to commit securities fraud.
Wu v. Tang, 2011 WL 145259 (N.D. Tex. Jan. 14, 2011).
Plaintiff investors claimed that defendants operated a Ponzi-like scheme targeting
members of the Chinese-American community to obtain direct and indirect investments in the
Overseas Chinese Fund (“OCF”). Defendants allegedly raised capital for the OCF from U.S.
investors by selling interests in a partnership managed by a limited liability company that was
not registered with the Securities and Exchange Commission. The limited liability company was
registered with the Texas Securities Board. Plaintiffs and other investors were told that the
limited liability company was managing their investments when, in fact, the investment
management duties were transferred to a third-party individual. Plaintiffs alleged that the limited
liability company was aware of the third-party individual’s Ponzi-scheme and, therefore,
defrauded investors through their actions in promoting the underlying partnership investment.
Among the plaintiffs’ fraud-based claims was a claim for civil conspiracy. As to two codefendants,
the court found that the plaintiffs failed to meet the heightened pleading
H.4
H.4
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