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United States v. Wey

United States District Court, S.D. New York

January 18, 2017

United States of America,
v.
Benjamin Wey, Defendant.

          OPINION & ORDER

          ALISON J. NATHAN United States District Judge.

         Before the Court are several pretrial motions filed by Defendant Benjamin Wey. Wey seeks dismissal of all charges pending against him, a bill of particulars pursuant to Federal Rule of Criminal Procedure 7(f), immediate disclosure and identification of Brady and Giglio material, leave to depose co-Defendant Seref Dogan Erbek under Federal Rule of Criminal Rule 15(a), and removal from the indictment of references to Wey's alleged aliases.[1] For the reasons set forth below, the Court resolves these motions as follows: the motion to dismiss is DENIED in full; the motion for a bill of particulars is GRANTED in limited in part and otherwise DENIED; the motion for immediate disclosure of Brady/ Giglio material is DENIED; the motion for leave to depose Erbek is GRANTED; and the motion to strike surplusage from the indictment is DENIED.[2]

         I. Background

         Wey is charged in an eight-count indictment returned on September 8, 2015. Dkt. No. 2 (the "Indictment"). The Indictment alleges that between approximately 2007 and 2011 Wey, along with co-Defendant Seref Dogan Erbek (who remains at large) and unindicted coconspirators known and unknown, orchestrated a scheme whereby Wey - through various nonparty entities, family members, and associates (the "Nominees") - covertly amassed beneficial ownership of substantial portions of the equity stock of certain publicly traded companies (the "Issuers"), manipulated the market price of the Issuers' stock, liquidated his holdings at artificially inflated prices, and then laundered millions of dollars in ill-gotten proceeds. See, e.g., Indictment ¶¶ 7, 13, 18-22.

         Specifically, according to the Indictment, Wey secretly caused the Nominees to acquire, on his behalf, substantial portions of the shares of certain U.S.-based over-the-counter-traded shell companies and then, through his consulting firm New York Global Group, Inc. ("NYGG") and its alleged affiliate in Beijing, China, facilitated so-called "reverse merger" transactions by which China-based operating companies merged into those shell companies, thus forming new publicly traded corporations - the Issuers. Id. ¶¶ 8-12. The Government alleges that the Nominees acquired and retained, for Wey's benefit, stock in the Issuers by virtue of their ownership of the target shell companies, and that these holdings together constituted more than five percent of the Issuers' outstanding shares. Id. ¶¶ 7, 13. Because Wey, among other things, purportedly exercised investment authority over the shares held by the Nominees, he was required to disclose his beneficial ownership under Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-l promulgated thereunder within ten days of the acquisition of shares in excess of five percent. Id. ¶ 13. The Government alleges that Wey was "well aware" of this reporting requirement but intentionally failed to file the required disclosures in order to conceal his ownership from the investing public. Id. ¶ 14. Moreover, the Indictment asserts, Wey purposefully caused the Nominees' holdings to be structured such that no individual Nominee ever held more than five percent of the stock of any given Issuer, thus avoiding triggering Rule 13d-l's disclosure mandate. Wey enlisted the assistance of Erbek on this front, the Government alleges, instructing him to allocate Issuer shares among the Nominees to avoid any one of them accumulating sufficient stock to incur a reporting obligation. Id. The Government maintains that as a result of these efforts, and with the stock held by the Issuers' management subject to lockup agreements preventing disposition, Wey at times effectively controlled - through the Nominees - a "substantial portion of a given Issuer's public stock float" unbeknownst to the investing public. Id. ¶¶ 11-14.

         Wey also, according to the Indictment, caused several of the Issuers, including SmartHeat, Inc. ("SmartHeat"), Deer Consumer Products, Inc. ("Deer"), and CleanTech Innovations, Inc. ("CleanTech"), to apply for listings on the NASDAQ. Id. ¶ 15. In order to secure approval of these applications, Wey allegedly engaged in deception to artificially satisfy NASDAQ's so-called "round-lot" shareholder requirement - i.e., the requirement that every listed issuer has at least 300 shareholders each owning 100 or more shares of common stock. Id. ¶¶ 16-17. In particular, Wey purportedly facilitated deceptive transfers of shares of Issuer stock from Nominees to other Wey confederates, as well as issuances of round-lot blocks of shares in the names of individuals who never actually received such shares or were otherwise unaware of their ownership. Id. ¶¶ 15-17.

         After successfully getting the Issuers listed on NASDAQ, the Government alleges, Wey proceeded to manipulate the demand for and price of Issuer stock. This was purportedly accomplished by, among other things: (i) causing two Manhattan-based retail brokers to solicit their customers to purchase common stock of the Issuers, often on margin, while at the same time actively discouraging the sale of such stock; (ii) instructing Erbek to maintain the share prices of certain Issuers' stock held in various Nominees' accounts; and (iii) facilitating match trades in the Issuers' stock involving Nominees and/or other Wey confederates. Id. ¶¶ 18-19.

         Contemporaneous with this market manipulation scheme, the Government alleges, Wey caused certain Nominees to sell shares of the Issuers' stock at artificially inflated prices. Id. ¶ 20. Wey then purportedly laundered the proceeds of these sales by causing them to be transferred from accounts located in the U.S. to Nominees' accounts located overseas, including in Switzerland and Hong Kong, before being repatriated back to the U.S. and into accounts controlled by Wey and his wife or otherwise held for Wey's benefit. Id. ¶¶ 20-22. At least some of these transfers were allegedly reported on tax returns filed in the name of Wey's wife as nontaxable gifts from foreign persons. Id. ¶ 22.

         Wey is charged with one count of conspiracy to commit securities fraud and wire fraud under 18 U.S.C. § 371 ("Count One"); one count of securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, 15 U.S.C. §§ 78j(b) & 78ff, 17 C.F.R. § 240.10b-5 ("Count Two"); one count of securities fraud under 18 U.S.C. § 1348 ("Count Three"); one count of wire fraud under 18 U.S.C. § 1343 ("Count Four"); two counts -concerning Deer and CleanTech stock, respectively - of failure to disclose ownership in excess of five percent of a covered class of equity securities under Section 13(d) of the Exchange Act and Rule 13d-l, 15 U.S.C. §§ 78m(d) & 78ff, 17 C.F.R. § 240.13d-l (as to Deer, "Count 5, " and as to CleanTech, "Count 6"); one count of money laundering under 18 U.S.C. § 1956(a)(1)(B)(i) ("Count 7"); and one count of money laundering under 18 U.S.C. § 1956(a)(2)(A) ("Count 8"). See Indictment ¶¶ 23-40.

         II. Discussion

         A. Dismissal

         Wey seeks dismissal of the charges against him on several grounds. First, he contends that the conspiracy, securities fraud, wire fraud, and money laundering counts are impermissibly duplicitous. Second, he argues that, for various reasons, all counts fail to sufficiently allege offenses. And third, he urges that the nearly four-year gap between the Government's searches of Wey's residence and offices and the return of the Indictment constitutes prejudicial pre-indictment delay in violation of the Due Process Clause of the Fifth Amendment. The Court will address each argument in turn.

         1. Counts 1-4, 7, and 8 Are Not Duplicitous

         Wey first argues that the conspiracy, securities fraud, wire fraud, and money laundering charges are duplicitous because each individual count actually contains multiple offenses.[3] In essence, Wey's position is that because the "the Government's case involves the alleged market manipulation of three separate securities" - SmartHeat, Deer, and CleanTech - it cannot charge any given offense (for example, securities fraud) in a single aggregate count that purports to cover all of the allegedly illegal conduct. Dismissal Br. at 64-66. Instead, Wey maintains, if the Government intends to implicate multiple securities, then it must charge multiple corresponding counts of any given offense (for example, three separate counts of securities fraud covering SmartHeat, Deer, and CleanTech, respectively). Id. The Court is not persuaded.

         "An indictment is impermissibly duplicitous where: 1) it combines two or more distinct crimes into one count in contravention of [Federal Rule of Criminal Procedure] 8(a)'s requirement that there be a separate count for each offense, and 2) the defendant is prejudiced thereby." United States v. Sturdivant, 244 F.3d 71, 75 (2d Cir. 2001) (internal quotation marks omitted). The Court of Appeals has long recognized that for the doctrine of duplicity '"to be more than an exercise in mere formalism, it must be invoked only when an indictment affects the policy considerations' that underlie that doctrine." United States v. Margiotta, 646 F.2d 729, 732-33 (2d Cir. 1981), cert, denied, 461 U.S. 913 (1983) (quoting United States v. Murray, 618 F.2d 892, 897 (2d Cir. 1980)). These policy considerations include:

avoiding the uncertainty of whether a general verdict of guilty conceals a finding of guilty as to one crime and a finding of not guilty as to another, avoiding the risk that the jurors may not have been unanimous as to any one of the crimes charged, assuring the defendant adequate notice, providing the basis for appropriate sentencing, and protecting against double jeopardy in a subsequent prosecution.

Margiotta, 646 F.2d at 733.

         "A conspiracy indictment, " of the sort at issue here, "presents 'unique issues' in the duplicity analysis because 'a single agreement may encompass multiple illegal objects.'" United States v. Aracri, 968 F.2d 1512, 1518 (2d Cir. 1992) (quoting Murray, 618 F.2d at 896). "As a result, an indictment is not duplicitous merely because it alleges a conspiracy to commit multiple crimes." United States v. Berger, 22 F.Supp.2d 145, 150 (S.D.N.Y. 1998); see also Aracri, 968 F.2d at 1518 ("In this Circuit, it is well established that the allegation in a single count of a conspiracy to commit several crimes is not duplicitous, for the conspiracy is the crime and that is one, however diverse its objects.") (internal quotation marks and brackets omitted). Along similar lines, "acts that could be charged as separate counts of an indictment may instead be charged in a single count if those acts could be characterized as part of a single continuing scheme." United States v. Tutino, 883 F.2d 1125, 1141 (2d Cir. 1989), cert, denied, 493 U.S. 1081 (1990).

         Indeed, "[a]s long as the essence of the alleged crime is carrying out a single scheme to defraud, then aggregation is permissible." Id. In general, "[w]hether the government has proven the existence of the conspiracy charged in the indictment... or, instead, has proven several independent conspiracies is a question of fact for a properly instructed jury." United States v. Johansen, 56 F.3d 347, 350 (2d Cir. 1995).

         In light of these principles, the Court is satisfied that the Counts 1-4, 7, and 8 are not impermissibly duplicitous. While the offenses charged may have targeted the securities of three distinct issuers, they are, as alleged by the Government, unmistakably part of and in furtherance of a single overarching scheme by Wey to amass substantial, undisclosed equity ownership of publicly traded companies and then manipulate the price of those companies' securities to his own economic benefit. See, e.g., United States v. Rigas, 281 F.Supp.2d 660, 664-65 (S.D.N.Y. 2003) ("the pursuit of multiple illegal objects does not automatically divide a single conspiracy into multiple conspiracies"). Indeed, the Indictment alleges that Wey obtained beneficial ownership of the three Issuers, sought to inflate and support their stock prices, and then liquidated his positions and laundered his gains all through a "pattern" of substantially "similar and interwoven contrivances" and across roughly the same period of time. See Berger, 22 F.Supp.2d at 151-52 (finding no duplicity despite allegations that defendants conspired to defraud multiple different federal agencies because indictment "sufficiently charge[d] defendants with a single integrated and continuing conspiracy").

         For example, Wey allegedly pursued these objectives with respect to all three Issuers by discreetly arranging (often through Erbek) for the Nominees to acquire blocks of stock in over-the-counter-traded U.S.-based shell companies, orchestrating reverse mergers by which Chinese operating companies acquired these shell companies, and facilitating the surviving companies' listing on NASDAQ through similarly deceptive circumvention of shareholder-base requirements. He then purportedly manipulated the prices of all three stocks by orchestrating match trades and causing the same two retail brokers to actively solicit purchases among their customers. After artificially inflating the stock prices, Wey allegedly caused the sell-off of shares held in Nominees' brokerage accounts and then transferred proceeds held in U.S.-based accounts to overseas accounts before facilitating their repatriation back into the U.S. and ultimately into Wey-controlled accounts.

         These undeniable commonalities in purpose and execution across Wey's alleged offenses amply support the conclusion that the conspiracy, securities fraud, wire fraud, and money laundering counts each charge conduct that may be considered part of one integrated fraudulent scheme, notwithstanding the involvement of three different issuers. See, e.g., United States v. Walker, 254 Fed App'x 60, 61-63 (2d Cir. 2007) (Summary Order) (single bank fraud charge not duplicitous despite allegations that defendant engaged in schemes "to defraud two banks" through "multiple executions" because indictment "on its face charged a single scheme and ... the [G]overnment argued as such"); United States v. Cuti, 08-cr-972, 2009 WL 3154310, at *3-4 (S.D.N.Y. Sept. 24, 2009) (single conspiracy and securities fraud charges not duplicitous because properly charged jury could reasonably find "that a single conspiracy underlies the entire course of conduct of Defendants, " regardless of whether "there were multiple schemes to accomplish the goals of the overall conspiracy"); United States v. Vilar, 5-cr-621, 2008 WL 4298545, at * 1-2 (S.D.N.Y. Sept. 5, 2008) (singular conspiracy charge not duplicitous because while "the Defendants employed a variety of means to carry out their conspiracy, " the "overarching scheme alleged was a unified one: to defraud ... clients by inducing them, on the basis of similar misrepresentations, to invest in a variety of investment products").

         United States v. Kearney, the case on which Wey primarily relies, Dismissal Br. at 66, is not to the contrary. In Kearney, a former FBI agent was charged with, among other things, aiding and abetting the obstruction of correspondence and unlawful wiretapping in connection with the interception of several individuals' mail and wire transmissions in an attempt to obtain leads as to the whereabouts of certain fugitives. Kearney, 451 F.Supp. 33, 34-37 (S.D.N.Y. 1978). In concluding that the charges were duplicitous, Judge Duffy relied in large measure on the text of the statutes under which the defendant was charged, determining that neither "contemplate[d] that several separate transactions may form a single, continuing scheme" but instead targeted singular instances of prohibited conduct. Id. at 36-37 (noting, for example, that the obstruction of correspondence statute supported a prosecutorial theory of "one letter one count" (internal quotation marks omitted)). By contrast, each of the offenses with which Wey is charged "contemplates a prohibited scheme." Cf. Id. at 36. Indeed, the applicable securities fraud and wire fraud provisions expressly criminalize "scheme[s]" to "defraud." .See 15 U.S.C. § 78j(b); 17 C.F.R. § 240 10b-5; 18 U.S.C. § 1343; 18 U.S.C. § 1348. And, as the Government correctly notes, the Court of Appeals has squarely held that "a single money laundering count can encompass multiple acts provided that each act is part of a unified scheme, " such as an "extended sequence[] of acts designed to obscure the provenance of dirty money." United States v. Moloney, 287 F.3d 236, 241 (2d Cir. 2002) (also noting the "Second Circuit's general rule allowing multiple acts that are part of a single scheme to be charged as a single count"), abrogated on other grounds by United States v. Cotton, 535 U.S. 625 (2002); cf. United States v. Kurniawan, 627 Fed.App'x 24, 27 (2d Cir. 2015) (Summary Order) (recognizing that a "string of mailings" forming basis of mail fraud charge "could be characterized as part of a single continuing scheme" for purposes of duplicity analysis) (internal quotation marks omitted).

         Having concluded that Counts 1-4, 7, and 8 do not run afoul of Rule 8(a), the Court need not consider the issue of prejudice to Wey. Nevertheless, the Court notes that to the extent that Wey raises concerns that the Government's charging decisions may increase the risk of ambiguity in any eventual jury verdict, the parties will have a full opportunity to ameliorate any such risk through their proposed jury instructions and verdict forms.

         For the foregoing reasons, Wey's motion to dismiss on duplicity grounds is DENIED.

         2. The Indictment Sufficiently Alleges All Charged Offenses

         Wey next contends that the Indictment should be dismissed for failure to sufficiently allege the charged offenses. Principally, he argues: that Count 2 fails to allege a "deceptive act" because it purportedly relies on Wey's failure to file Rule 13d-l disclosures; that Count 3 insufficiently alleges a "scheme or artifice to defraud" because the Indictment purportedly lacks allegations of fraudulent intent; that Count 4 is infirm for the same reason as Count 3 and, independently, because the Indictment fails to identify specific fraudulent wire transmissions; that Counts 5 and 6 fail to allege "willfulness"; and that Counts 1, 7, and 8 fail because the Indictment does not successfully allege underlying object and predicate offenses. For the following reasons, the Court will DENY Wey's motion to dismiss on these grounds.

         Federal Rule of Criminal Procedure Rule 7(c)(1) requires an indictment to contain "a plain, concise, and definite written statement of the essential facts constituting the offense charged." In order to satisfy those requirements "[a]n indictment 'need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime.'" United States v. Rajaratnam, 13-cr-211, 2014 WL 1554078, at *1 (S.D.N.Y. Apr. 17, 2014) (quoting United States v. Stringer, 730 F.3d 120, 124 (2d Cir. 2013)). Furthermore, "[t]he Supreme Court has 'identified two constitutional requirements for an indictment: first, that it contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, that it enables him to plead an acquittal or conviction in bar of future prosecutions of the same offense.'" United States v. Lee, 833 F.3d 56, 69 (2d Cir. 2016) (internal quotation marks and brackets omitted) (quoting United States v. Resendiz-Ponce, 549 U.S. 102, 108 (2007)).

         An indictment does not, however, "have to specify evidence or details of how the offense was committed." United States v. Coffey, 361 F.Supp.2d 102, 111 (E.D.N.Y. 2005) (citing United States v. Carrier, 672 F.2d 300, 303-04 (2d Cir. 1982), cert, denied, 457 U.S. 1139 (1982)). That is because "the validity of an indictment is tested by its allegations, not by whether the Government can prove its case." Id. (citing Costello v. United States, 350 U.S. 359, 363 (1956)). When considering a motion to dismiss, the Court must treat the indictment's allegations as true. See, e.g., United States v. Velastegui, 199 F.3d 590, 592 n.2 (2d Cir. 1999), cert, denied, 531 U.S. 823(2000).

         As a preliminary matter, the Court rejects Wey's suggestion, see Dismissal Br. at 68, that the Indictment must satisfy the arguably more stringent sufficiency standard set forth by the Supreme Court in Russell v. United States, 369 U.S. 749, 765 (1962) - a "50 year-old precedent" that "arose out of the controversial McCarthy-era hearings of the Committee on Un-American Activities, " Stringer, 730 F.3d at 125 (distinguishing Russell). It is true, as Wey highlights, that the Russell Court deemed insufficient an indictment that tracked the pertinent statutory language and furnished relevant dates, and concluded that due to the statute's inclusion of "generic terms, " the indictment was required to "descend to particulars." Russell, 369 U.S. at 764-772 (internal quotation marks omitted). But as the Court of Appeals has recently recognized at some length, more recent Supreme Court precedent makes clear that the Russell decision is a "very rare" case that "must be seen as addressed to the special nature of a charge of refusal to answer questions in a congressional inquiry and not as a broad requirement applicable to all criminal charges that the indictment specify how each essential element is met? Stringer, 730 F.3d at 126 (emphasis added) (citing Resendiz-Ponce, 549 U.S. at 107-10). In the Court of Appeals' view, Russell today stands only for the proposition that "for certain statutes specification of how a particular element of a criminal charge will be met (as opposed to categorical recitation of the element) is of such importance to the fairness of the proceeding that it must be spelled out in the indictment, but there is no such universal requirement." Stringer, 730 F.3d at 126 (emphasis added) (citing Hamling v. United States, 418 U.S. 87, 118 (1974)). Wey cites no authority - and the Court is aware of none - to support application of Russell to the statutes under which Wey is charged. See Stringer, 730 F.3d at 126-127 (collecting cases applying Russell to limited number of specific statutes). Accordingly, the Court sees no basis to depart from the usual sufficiency framework set forth above.

         The Court will now consider Wey's Count-specific contentions in turn.

         a. Count 2: Securities Fraud Under Exchange Act Section 10(b) and Rule 10b-5

         Count 2 of the Indictment charges Wey with violations of Section 10(b) of the Exchange Act and Rule 10b-5. Section 10(b) makes it a crime to:

use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

         15 U.S.C. § 78j(b). Rule 10b-5 in turn provides that:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5.

         The Indictment alleges that Wey's conduct violated all three prongs of Rule 10b-5. See Indictment ¶ 28. "The three prongs are disjunctive, however, such that the government can obtain a conviction by proving any one of them." United States v. Bongiorno, 05-cr-390, 2006 WL 1140864, at *5 (S.D.N.Y. May 1, 2006).

         Wey makes essentially one argument with respect to Count 2. Relying on the Court of Appeals' decision in United States v. Finnerty, 533 F.3d 143 (2d Cir. 2008), he contends that Count 2 is infirm because "the Government must allege that [Wey] committed a deceptive act" under Section 10(b) and Rule 10b-5, which it purportedly has not done. Dismissal Br. at 68-69; Reply Memorandum of Law in Further Support of Defendant Benjamin Wey's Motion to Suppress, to Dismiss the Indictment, and for Other Relief, Dkt. No. 62 ("Dismissal Reply"), at 47-48. The Court disagrees.

         In Finnerty, the defendant was a specialist on the floor of the New York Stock Exchange ("NYSE") whose job was to match executable orders from public customers. 533 F.3d at 145. He was accused of engaging in the practice of "'interpositioning' - the arbitrage of the gap between customers' orders to buy and sell stock - to the benefit of his firm's account and (via compensation) himself." Id. The Government contended that because this practice violated NYSE rules and the defendant's customers "would have expected [him] to comply with the rules" and "refrain from interpositioning, " the defendant had implicitly deceived them in violation of Section 10(b). Id. at 149-50 (internal quotation marks omitted). The Government having abandoned claims of market manipulation or express misstatements, the "sole issue on appeal" was whether the Government had proven at trial that Finnerty's conduct was "deceptive" within the meaning of Section 10(b). Id. at 145, 148. The Court of Appeals held that it had not, reasoning that Finnerty, in engaging in interpositioning, had not "communicated anything to his customers, let alone anything false" and that his customers' purported expectations that he would not engage in the practice was not "based on a statement or conduct by Finnerty." Id. at 149-50. The Court emphasized that Section 10(b) prohibits only conduct "involving manipulation or deception" and that to establish a violation "there must be some proof of manipulation or a false statement, breach of a duty to disclose, or deceptive communicative conduct." Id. at 148, 150 (internal quotation marks omitted).

         Wey extracts from Finnerty, by analogy, the principle that "a charge of securities fraud cannot be premised on ... alleged violation of [Rule 13d-l's] disclosure requirements, without more, because that cannot constitute a deceptive or fraudulent act." Dismissal Br. at 69-70. Because, Wey continues, Count 2 relies exclusively on precisely such alleged violations, it fails to state an offense of securities fraud. Id. at 68-69. Even setting aside that Finnerty concerned the sufficiency of the Government's trial evidence and not the sufficiency of the indictment, Wey's argument fails for at least two reasons.

         First, assuming arguendo that Wey were correct in reading Finnerty to preclude a violation of Rule 13d-l from forming the basis of a Section 10(b) charge, Wey's assertion that Count 2 of the Indictment is premised entirely on his alleged 13d-l violations is simply incorrect. To the contrary - unlike in Finnerty - Count 2 is expressly based in part on Wey's alleged manipulation of the market for SmartHeat, Deer, and CleanTech securities. See Indictment ¶ 28 (noting in "to wit" clause of charging paragraph that Wey violated Section 10(b) when he "secretly amassed and concealed a beneficial ownership interest in excess of five percent of the common stock of each of SmartHeat, Deer, and CleanTech, and manipulated and caused to be manipulated the market price and demand for the common stock of those public companies'") (emphasis added); cf. Finnerty, 533 F.3d at 148 ("The government has abandoned on appeal any claim of market manipulation."). Because it is beyond dispute that market manipulation may form the basis of a violation of Section 10(b), that alone would be enough for Count 2 to survive. See, e.g., United States v. Royer, 549 F.3d 886, 899-900 (2d Cir. 2008) (affirming conviction under Section 10(b) when defendants "sought to artificially affect the prices of various securities" by directing others to "trade and to disclose the negative information at times and in manners orchestrated by the defendants that were dictated not by market forces, but by defendants' desire to manipulate the market for their own benefit"); see also Levy v. United States, 626 Fed.App'x 319, 322 (2d Cir. 2015) (Summary Order) (affirming convictions under Rule 10b-5 for market manipulation); United States v. Regan, 937 F.3d 823, 829-39 (2d Cir. 1991) (same); In re Initial Pub. Offering Sees. Litig, 241 F.Supp.2d 281, 297-98 & n.9 (S.D.N.Y. 2003) (among other things, "Section 10(b) was designed to prohibit any intentional conduct that deceives or defrauds investors by controlling or artificially affecting the price of securities") (emphasis in original) (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976))[4]; id. at 380-82 (explaining that market manipulation may give rise to liability under all three subsections of Rule 10b-5).

         More fundamentally, however, nothing in Finnerty suggests that violations of Rule 13d-l may not support criminal liability under Section 10(b) and Rule 10b-5. Rule 13d-l, promulgated under Section 13(d) of the Exchange Act, provides in pertinent part that any person who becomes "directly or indirectly the beneficial owner of more than five percent of [a covered class of equity security] shall, within 10 days after the acquisition, file with the Commission, a statement containing the information required by Schedule 13D." See 17 C.F.R. § 240.13d-l(a). As the Court of Appeals has recognized, "Section 13(d)'s purpose is to alert investors to potential changes in corporate control so that they can properly evaluate the company in which they had invested or were investing." United States v. Bilzerian, 926 F.2d 1285, 1297 (2d Cir. 1991) (internal brackets omitted) (internal quotation marks omitted); accord GAF Corp. v. Milstein, 453 F.2d 709, 717 (2d Cir. 1971), cert, denied, 406 U.S. 910 (1972)) ("the purpose of section 13(d) is to alert the marketplace to large, rapid aggregation or accumulation of securities, regardless of technique employed, which might represent a potential shift in corporate control").

         Thus, in sharp contrast to the NYSE rules at issue in Finnerty - which only prohibited certain conduct (i.e., interpositioning) - Rule 13d-l imposes affirmative disclosure obligations. See, e.g., Bilzerian, 926 F.2d at 1298 ("A duty to file under § 13(d) creates the duty to file truthfully and completely"); SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978) ("Because [S]ection 13(d) was designed, in part, to allow investors an opportunity to know of potential changes in corporate control and to evaluate the situation, and because disclosure that is not accurate subverts this purpose, it is plain that [S]ection 13(d) requires the making of a completely truthful statement."). As such, while Finnerty's violation of the prohibition on interpositioning may not have "communicated" anything in particular to investors, Wey's purported intentional failure to disclose beneficial ownership information when disclosure was expressly required was, as alleged in the Indictment, both a communicative and deceptive act: it signaled falsely to investors that there was no such ownership to disclose.[5]

         Although the Court of Appeals does not appear to have squarely addressed this issue, it has held, on similar reasoning, that a jury may reasonably find that a defendant engaged in a "fraudulent scheme to avoid the disclosure requirements of § 13(d)" based on mischaracterizations of sources of purchase funds made in Section 13(d) filings. See Bilzerian, 926 F.2d at 1299 (upholding Section 10(b) conviction premised on defendant's erroneous description of source of funds used to purchase blocks of shares). And several courts outside of this Circuit have recognized more generally that failure to file required Section 13(d) disclosures, or other similar forms, in the first place may be actionable under Section 10(b). See, e.g., Burt v. Maasberg, No. 12-0464, 2013 WL 1314160, at *16 (D. Md. Mar. 31, 2013) ("[T]he failure to file or amend a Schedule 13D, as required, serves as a predicate for liability under § 10(b) and Rule 10b-5(b). If a duty to disclose was imposed ... the failure to file or disclose information in a Schedule 13D is actionable.") (internal citations omitted); SEC v. First City Fin. Corp., Ltd., 688 F.Supp. 705, 724 (D.D.C. 1988), aff'd, 890 F.2d 1215 (D.C. Cir. 1989) (stock "parking arrangement" in which defendant attempted to delay filing Section 13(d) disclosures by beneficially holding shares through broker constituted "surreptitious effort to accumulate a block of shares" in a public issuer - the "precise type of evil to which Section 13(d) was directed to prevent"); Cf. SEC v. Brown, 740 F.Supp.2d 148, 172 (D.D.C. 2010) (concluding that allegations that corporate officer failed to file required stock ownership disclosures under Section 16(a) of the Exchange Act stated claim for scheme liability under Rule 10b-5(a) and (c)). The Court sees no basis to disagree.

         Of course, the Government alleges that Wey did more than decline to file Rule 13d-l disclosures. Notwithstanding Wey's focus on that issue, Count 2 incorporates by reference allegations that Wey, among other things, engaged in substantial affirmative conduct designed specifically to circumvent Rule 13d-l's reporting requirements and to "obscure" his beneficial ownership and control of Deer, Smart Heat, and Clean Tech from the investing public, including "purposefully caus[ing] the Nominees' holdings to be structured in such a way as to ensure that no single one of the Nominees held a greater-than-five percent beneficial ownership in any of the Issuers." See Indictment ¶ 14. The Indictment also alleges that Wey orchestrated a scheme to artificially inflate the Issuers' shareholder bases in order to satisfy NASDAQ listing requirements and gain access to more liquid markets. Id. ¶¶ 15-17. Such conduct may not constitute "garden variety" securities fraud, but it is well-settled that "[n]ovel or atypical methods should not provide immunity from the securities laws." United States v. Russo, 74 F.3d 1383, 1390 (2d Cir. 1996) (internal quotation marks omitted); see also VanCook 653 F.3d at 138 ("Section 10(b) was designed as a catch-all clause to prevent fraudulent practices, including not just garden type varieties of fraud but also unique forms of deception involving novel or atypical methods.") (internal quotation marks, citation, and brackets omitted); In re Alstom SA Sec. Litig., 406 F.Supp.2d 433, 474 n.37 (S.D.N.Y. 2005) ("[S]ubsections (a) and (c) of Rule 10b-5 encompass a wide range of activities and are not limited to the prohibition of market manipulation."). Especially given the Supreme Court's longstanding directive that courts should interpret "Section 10(b) and Rule 10b-5 flexibly and broadly, rather than technically or restrictively, " the Court sees nothing that would preclude the Government from attempting to prove at trial that these additional acts were "deceptive" within the meaning of Section 10(b). VanCook 653 F.3d at 138 (internal quotation marks and brackets omitted).

         Accordingly, Wey's argument that Count 2 should be dismissed on the basis of the Government's failure to allege a "deceptive act" is without merit and is hereby DENIED.

         b. Count 3: Securities Fraud under 18 U.S.C. § 1348

         18 U.S.C. § 1348 makes it a crime to, in pertinent part, "knowingly execute[], or attempt[] to execute, a scheme or artifice" to:

(1) "defraud any person in connection with" the securities of a publicly traded company; or
(2) "obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of the securities of a publicly traded company.

         As with Rule 10b-5, the Government "need only prove a violation of subsection (1) or subsection (2), but not both for there to be a violation of Section 1348." United States v. Mahaffy, 05-cr-613, 2006 WL 2224518, at *11 (E.D.N.Y. Aug. 2, 2006). "In order to prove a violation of 13 U.S.C. 1348, the Government must show: (1) fraudulent intent; (2) a scheme or artifice to defraud; and (3) a nexus with a security." United States v. Motz, 652 F.Supp.2d 284, 295 (E.D.N.Y. 2009).

         Wey argues principally that Count 3 is infirm because the Indictment fails to allege that he possessed fraudulent intent. Dismissal Br. at 70-71. More specifically, relying on case law from the analogous mail fraud and wire fraud contexts, [6] Wey contends that to demonstrate fraudulent intent, the Government must show that he "contemplated some actual harm or injury to [his] victims." Id., at 71 (internal quotation marks omitted) (citing, inter alia, United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987); United States v. D'Amato, 39 F.3d 1249, 1256 2d Cir. 1994)). Because, Wey continues, "the Indictment is devoid of any allegation concerning how he intended to cause harm to the investing public, " it "fails to allege the essential elements of securities fraud." Id. at 70-71. This argument is unpersuasive.

         First, in relying on Starr and its progeny, Wey conflates the standard for sufficiency of the Government's proof at trial with the categorically less demanding standard for sufficiency of the Indictment's allegations. Wey may well be correct that the Government will need to introduce evidence of contemplated harm to carry its burden on Count 3 at trial. But this is a pretrial motion to dismiss the Indictment, and the adequacy of the Government's evidentiary case is simply not at issue. See, e.g., United States v. Alfonso, 143 F.3d 772, 776-77 (2d Cir. 1998) (unless government has made "a full proffer of the evidence it intends to present at trial, " the "sufficiency of the evidence is not appropriately addressed on a pretrial motion to dismiss an indictment"). Indeed, recognizing as much, other courts in this Circuit have rejected arguments substantially identical to Wey's in the related context of the wire fraud statute. See, e.g., United States v. Martin, 411 F.Supp.2d 370, 373 (S.D.N.Y. 2006) (rejecting argument that indictment failed to allege "intended harm, " and thus the fraudulent intent element of the offense, because "the sufficiency of the government's evidence of... fraudulent intent is not considered on a motion to dismiss the indictment"). United States v. Ashley, 905 F.Supp. 1146, 1155-56 (E.D.N.Y. 1995) (while Government might need to "prove" at trial that defendants contemplated damage to victim in order to show fraudulent intent in support of wire fraud charge, "the indictment at issue [was] not insufficient for failure to specifically allege fraudulent intent on the part of [d]efendants") (emphasis in original). The Court is aware of no authority suggesting that the Government is required to specifically allege contemplated harm in an indictment to sufficiently state a violation of Section 1348, and it will impose no such requirement here.

         Rather, Count 3 is sufficient if the Government has charged a violation of Section 1348 by "track[ing] the language of the statute, " "stat[ing] the time place (in approximate terms) of the alleged crime, " and including "a plain, concise, and definite written statement of the essential facts constituting the offense charged." United States v. Yannotti, 541 F.3d 112, 127 (2d Cir. 2008) (internal quotation marks and citations omitted). And that the Government has done. With respect to the fraudulent intent element specifically, Count 3 itself alleges that Wey acted "knowing and intentionally" in executing "a scheme and artifice to ... defraud, " and other sections of the Indictment (incorporated into Count 3 by reference) repeatedly allege, for example, that Wey sought to "defraud the investing public" and to "obscure from the investing public" his ownership and control over the Issuers' stock. Indictment ¶¶ 7, 14, 30. At this stage, such allegations are sufficient.

         And even assuming that more were required, the Court of Appeals has recognized that "[w]hen the necessary result of the actor's scheme is to injure others, fraudulent intent may be inferred from the scheme itself." D'Amato, 39 F.3d at 1257 (internal quotation marks omitted); see also Motz, 652 F.Supp.2d at 296 (inferring fraudulent intent from nature of scheme described in indictment); Martin, 411 F.Supp.2d at 373 (same). The alleged "pump and dump" scheme that the Government attributes to Wey purportedly involved, among other things, encouraging investors to purchase Issuer stock on margin and then discouraging its disposition, all with the aim of artificially inflating the price at which Wey could eventually liquidate his own holdings. That sort of scheme is, by its very nature, designed to generate economic benefits "at the expense of unwary consumers." See, e.g., United States v. Ageloff, 809 F.Supp.2d 89, 91-92 (E.D.N.Y. 2011) (internal quotation marks and emphasis omitted); see also Levy, 626 Fed.App'x at 322 ("The gravamen of [market] manipulation is deception of investors into believing that prices at which they purchase and sell securities are determined by the natural interplay of supply and demand, not rigged by manipulators") (internal quotation marks omitted). Based on the Indictment's allegations as to this manipulation scheme, the Court has no difficulty inferring fraudulent intent.

         What remains of Wey's argument as to Count 3 may fairly be characterized as an unvarnished attack on the Government's anticipated evidence. Essentially, Wey contests the Indictment's characterizations of certain acts and statements as aimed at market manipulation and seeks to recast them in legitimate terms. Such factual disputes are simply not matters that the Court may consider at this stage. See, e.g., United States v. Goldberg,756 F.2d 949, 950 (2d Cir. 1985) (on motion to dismiss, "we accept as true all of the allegation of the indictment" and "[c]ontrary assertions of fact by the defendants will not be considered"); see also United States v. Corbin,729 F.Supp.2d 607, 611 (S.D.N.Y. 2010) ("fact ...


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