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McCaffrey v. Leontakianakos

United States District Court, S.D. New York

December 31, 2019

TIMOTHY ANDREW MCCAFFREY, Plaintiff,
v.
A. JOHN LEONTAKIANAKOS, JOHN SEETOO Defendants.

          ORDER

          VERNON S. BRODERICK, UNITED STATES DISTRICT JUDGE

         I held a conference with the parties via telephone on December 30, 2019, to discuss the issues relating to service of Plaintiff's motion for summary judgment. Upon consideration of the issues raised at the conference it is hereby:

         ORDERED that Defendants' opposition, if any, to Plaintiff's motion for summary judgment (Doc. 252) is due on February 9, 2020, and Plaintiff's reply, if any, is due on March 2, 2020. I have attached a copy of Plaintiff's summary judgment papers to this Order, which will be sufficient for service upon the Defendants.

         The Clerk of Court is respectfully directed to mail a copy of this Order and its attachments to the pro se Plaintiff and Defendants.

         SO ORDERED.

         NOTICE OF MOTION

         Please Take Notice, upon the accompanying memorandum of law in support of plaintiffs motion for summary judgment, plaintiff declaration, attached appendix of exhibits, and statement of undisputed fact, plaintiff Timothy Andrew McCaffrey moves this Court and the Honorable Vernon S. Broderick on October 14, 2019 or as soon thereafter as may be heard for entry of order pursuant to FDRCP 56 and Local 56.1 granting plaintiffs motion for summary judgment, and awarding plaintiff the award sought in this matter and such other relief deemed just and proper by the Court.

         Dated: New York, New York August 26, 2019 Respectfully submitted, By Timothy Andrew McCaffrey, Pro Se CERTIFICATE of SERVICE I hereby certify that Plaintiffs Notice, Memorandum, Statement of Fact and the Declaration with Appendix, were filed electronically and served on defendants by email.

         New York August 26, 2019

         Respectfully submitted, By: Timothy Andrew McCaffrey, Pro Se

         STATEMENT OF FACT PURSUANT TO LOCAL RULES 56.1

         1. In or about July 2011, Gatekeeper began offering shares of its common stock for sale in private transactions, stating “only from ‘accredited investors' who satisfy the suitability standards” under federal securities regulations (App. A p.2).

         2. In or about early 2012, Seetoo approached plaintiff with the intention of inducing plaintiff to invest in Gatekeeper (App. B p.1). In an email, Seetoo included subscription documents, business and marketing literature, and a proof of concept (POC) report (App. B pp.3-8).

         3. In a subsequent email to plaintiff Seetoo sent the PPM dated July 2011 (App. B p.3).

         4. Seetoo told plaintiff “the recent market price is $2.75-$3.25” but that plaintiff could buy through “ [the Company's] Private Placement…at $1” a share (App B pp.1-10).

         5. Seetoo also offered to Plaintiff the same sorts of compensation that Seetoo was receiving for enlisting other investors (App. B p.10, App. G LeonSEC).

         6. Seetoo also told Plaintiff of the opportunity for a short squeeze and indicated that there was opportunity for returns greater than 1000% (App. B pp.14, 33).

         7. Seetoo knew at the time but did not disclose to plaintiff that the public price was being kept artificially high through the buying activities of (among others) a Minnesota financial advisor named Howard Richards, working in concert with the defendants (App. C pp.4-6).

         8. In addition to Seetoo, the two controlling officers of Gatekeeper, Leontakianakos and Gatekeeper CEO Wishart, each had knowledge of Mr. Richards' manipulation of the market in Gatekeeper shares (App. C Id.).

         9. Seetoo further represented that the Company was “in the midst of closing out the balance of a $10M Reg-D private placement with some institutional sized investors . . . [and that] $4M has already been Patriot Act cleared and allocated to a designated account” (App. B pp.1-12).

         10. Plaintiff was told and it was outlined in the PPM that capitalization of the Company meant large scale production of a device called CAMS (App. B pp.1-10) (App. A pp.2-35).

         11. The CAMS device does not exist (App. G LeonSEC). No. one associated with Gatekeeper has ever seen or touched it (Id. Leon. Wish. Seetoo).

         12. Seetoo and Asgard further represented through a hyperlink at the Asgard website to the website of Development Solutions that Gatekeeper was already “Funded $10M” (App. M pp.1-4).

         13. No such deal or deals were ever consummated.

         14. Seetoo represented that Gatekeeper was “about to get listed on the NASDAQ, ” (App B pp. 13, 18, 34, 38).

         15. The same claims were made publicly as far back as at least 2009 by Gatekeeper CFO John Leontakianakos and Gatekeeper as instructed by CEO Wishart (App. F pp.6, 46) (App. G LeonSEC).

         16. Plaintiff told Seetoo his participation was dependent on a distribution from a property sale (App. B pp.1-10), and in an email to Seetoo he expressed doubt that he would able to participate in time for the closing of the Private Placement because he had no funds (App B p.10).

         17. Seetoo offered to “get [plaintiff] an extension of 3 weeks or so after the close” and told plaintiff that plaintiff could “pre submit signed docs” and that plaintiff could “pay later” (App B pp.9-10).

         18. Seetoo also stated that a company called Ares would be handling the sale of smaller lots for Gatekeeper during the private placement. (App B pp.14, 15, 21, 22, 25).

         19. Defendants presented plaintiff with subscription documents that included the Private Placement Memorandumpresented to plaintiff, dated July 1, 2011(App B pp.6-7).

         20. Defendant Seetoo also presented Gatekeeper business plans, financials, and related promotional documents to plaintiff (Id.) which had been created for the Company by Gatekeeper CEO James Wishart (App. C p.9) (App. G LeonSEC).

         21. Wishart had provided these materials for Gatekeeper by email to Seetoo and Leontakianakos for distribution to potential investors in the Company just days prior to their being delivered to plaintiff (App. C p.9)

         22. Seetoo assured plaintiff that closings, filings, and tradability of shares was imminent (App B pp.29, 33). Plaintiff insisted that everything Seetoo said must be true or he could not afford to participate (App B p.27).

         23. Wishart was also responsible for coordinating and directing publicity activity for Gatekeeper and directed both Leontakianakos and Seetoo in this regard (App. C p.41 Following) and (App. G LeonSEC).

         24. Plaintiff was proffered a stock transfer agreement by email by Seetoo and instructed to wire his funds for the purchase of the shares to Ares (App. B).

         25. Relying on Seetoo's assurances and on the accuracy of the materials presented to him, plaintiff signed the stock transfer agreement and wired $50, 000 to Ares (App. B).

         26. The stock transfer agreement stated that Ares was a “corporation” “in good standing” and organized in “the State of Nevada.” Plaintiff understood GateKeeper to be a Nevada Company.

         27. Unbeknownst to plaintiff Ares was owned by Leontakianakos, the Executive Vice President of GateKeeper.

         28. Unbeknownst to plaintiff, Ares was not a “corporation” “in good standing”.

         29. Unbeknownst to plaintiff, Ares was not organized in Nevada but was organized in New York.

         30. Leontakianakos personally generated the Ares stock transfer agreement (App. G LeonSEC).

         31. On or about September 2013, Plaintiff approached Gatekeeper to propose a settlement to include return of the purchase price.

         32. Defendants disclosed to plaintiff that his purchase had not been, as he had been led to believe by defendants, from the Company, but from an unidentified third party.

         33. The money that plaintiff wired to Ares was spent by Leontakianakos for his personal use (App. G LeonSEC).

         34. At various time, Leontakianakos has used the proceeds from sales of GateKeeper shares by Ares for both his personal use and to pay the expenses of GateKeeper (App. G LeonSEC).

         35. Seetoo received compensation for directing plaintiff to purchase shares in GateKeeper through Ares. (App. G LeonSEC).

         36. The third party was in fact Angelica Leontakianakos, the wife of defendant Leontakianakos. (App. M pp.95-108).

         37. From at least 2008 to 2012, Gatekeeper issued a series of press releases at the Gatekeeper website and elsewhere, written by Leontakianakos and Wishart and “signed off on” by Wishart (App. F) (App. G LeonSEC).

         38. Prior to his purchase of shares of GateKeeper plaintiff read these press releases at the GateKeeper website and elsewhere.

         39. Press releases, and promotional literature distributed to plaintiff and others, represented Gatekeeper as a viable company with a viable technology ready for market and in some cases already on the market (App. F)

         40. In truth, Gatekeeper's was a dire financial situation. CEO Wishart and the defendants took part in email discussions pertaining to the floundering Company's gloomy prospects within 4 weeks of their decision to sell plaintiff shares (App. C pp.2123). This was less than 10 days after circulating a new PPM dated May 31, 2012 (App. D), and about two weeks before circulating a third dated July 30, 2012 (App. E), and was in addition to ongoing circulation of Ares purchase agreements (App. E pp.1-10).

         41. Gatekeeper had sought out loans from shareholders to pay for OTC filings, CEO James Wishart's insurance, legal retainers, and other common fees as well as personal loans for themselves (App C) (App. G LeonSEC). They did not disclose lawsuits to Plaintiff that were ongoing and would affect their ability to address their public statements about Gatekeeper (App. C p.27).

         42. The defendants participated in and were privy to email exchanges in which the lack of capital and the lack of progress and the likelihood of failure were acknowledged and discussed openly (App. C pp.1-3, 8, 10-12, 21-23, 38-).

         43. Gatekeeper leadership and the defendants represented themselves as industry professionals with special knowledge of the financing of publically traded companies. But other industry professionals they approached complained in emails and communications delivered to the defendants that Gatekeeper's model for financing was not viable and would never receive the sought after funding in its current state. Some even questioned the legitimacy of the Company and the existence of the technology itself (App. C).

         44. In spite of knowing that these questions loomed, the defendants arranged for plaintiff to purchase GateKeeper shares.

         45. Press releases in 2012 and about imminent SEC audits and filings parroted similar Press releases in 2009 and 2010. Each of them coinciding with PPMs and share sales and market manipulation.

         46. In 2007 or 2008 Gatekeeper put out a Request for Proposals (RFP), to which they received one (1) response (App. G Leon). This response was from CSL the owner of the CAMS device. CSL is an alias for Richard Sowden. Sowden is a friend and associate of defendants known prior to the RFP (App. G Seetoo. Wishart. Leon). This is not acknowledged in press releases put out by the company, nor is the fact the CSL is not a legitimate company (App. J pp.1-6).

         47. Beginning around 2008 or 2009, Gatekeeper began the promotion of Private Placement Offerings and the distribution of Promotional Materials including Business Plans, Marketing Documents, and PPMs (App. F) (App. H). Distribution of these materials continued each year following until at least May 2015 (App F pp.50-51), nearly 18 months after this action commenced, and a year after the SEC acted against Howard Richards, an action which included the deposition of Leontakianakos affixed in App. G of this document.

         48. Gatekeeper also began to make public statements about Gatekeeper's activities, prospects and plans, including the purchase of companies, SEC auditing services, and forthcoming moves from the Pink Sheets to the NASDAQ (App. F)

         49. These public statements included press releases about the CAMS device and the developer of the CAMS device, CSL, a company James Wishart characterized as “world class team of experts” (App. F pp.1-5, 14), and which he indicated would “immediately” “accelerate” manufacture of the CAMS device (Id.).

         50. There is no “world class tea of experts” affiliated with CSL developing security technology for GateKeeper.

         51. Press releases also announced the purchase of a Company called Bio Avenge, about which purchase Wishart is quoted saying “This transaction has significantly increased shareholder value as it has added a war chest of viable assets.” (Id. pp.4-6).

         52. Statements such coincided with market activity in the publicly traded shares of GateKeeper and the distribution of the PPMs (Id. pp.7, 12).

         53. Gatekeeper also issued press releases about purchase orders made by an organization called BACO, the value of which could be in excess of “$300, 000, 000” and exclaimed that the first “draw down” could take place “within the next 30 days.” (Id. p.9).

         54. Statements on Twitter and elsewhere by Gatekeeper further stated that the CAMS technology was already on the market (Id.pp.14, 41-46) and was aiding in the fight against terrorism within the American Homeland (Id.).

         55. By 2010 Gatekeeper had accumulated multiple promissory letters and wire transfer confirmation documents which showed incoming investments totaling tens of millions of dollars (App. K). And OTC filings in 2010 (App. K) and again in 2012 confirm this (App. K). In 2011, Gatekeeper even issued a press release announcing the completion of $8 Million in funding (Id. p.17) similar to the one in 2009 (App. F p.12).

         56. Gatekeeper continued issuing press releases and making public statements about their activities, hiring Phoenix Partners to pursue financing and arranging to conduct a Proof of Concept (POC) for the purpose of attracting further investment in Gatekeeper (App. F) In the press release, Gatekeeper CEO James Wishart stated that Phoenix has an “impeccable reputation as does its principal []” (App F pp.17-28, 42)

         57. And again, in 2011 these same activities continued in an updated and current iteration for that year, complete with Business Plans, Marketing Materials an a new PPM (App A). At that time, the Company represented that it would accept share subscriptions “only from ‘accredited investors' who satisfy the suitability standards” under federal securities regulations and that upon completion of the funding round all restricted legends on shares would be removed and market liquidity would follow (App A.) Clearly plaintiff was an unsophisticated investor, or he would have taken one look at the last 5 years of PRs and asked “where's the money?”

         58. BACO is defunct in Texas, the state of its original incorporation, and in Florida (App J pp.7-8), and was at the time of Plaintiff's purchase despite the 2008 press release touting the deal worth hundreds of millions remaining at the Gatekeeper website for the public to see. When asked about Larry Mael, the CEO of BACO, Gatekeeper CEO James Wishart, who issued thepress release related to the $300, 000, 000 purchase order, did not even know Mael was (App. G Wishart).

         59. By 2010, Phoenix had been administratively dissolved by the California Secretary of State for failure to pay taxes and its principal, rather than having an “impeccable” reputation, had previously been convicted of bank fraud and served time in a Federal Penitentiary, facts withheld by defendants from the public and the plaintiff (App J ...


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