OPINION AND ORDER The Securities and Exchange Commission (“SEC”) has brought this civil enforcement action against Ruless Pierre, a/k/a “Rules Pierre” (“Pierre”), alleging that he orchestrated fraudulent investment schemes that entailed promising investors unrealistically high returns from securities trading and ownership in fast-food restaurants and diverting some of the invested funds to finance redemption payments to investors. The SEC alleges violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §77q(a); Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §78j(b), and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5; and Section 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”), 15 U.S.C. §80b-6(4), and SEC Rule 206(4)-8 promulgated thereunder, 17 C.F.R. §275.206(4)-8. The SEC also has named R. Pierre Consulting Group LLC as Relief Defendant for allegedly holding proceeds of the fraud. In addition to this civil action, the U.S. Department of Justice brought a criminal prosecution in this District against Pierre arising from, inter alia, the same alleged conduct. In May 2021, Pierre was found guilty after a jury trial of two counts of securities fraud, one count of wire fraud, and one count of structuring financial transactions to evade reporting requirements. Pierre subsequently was sentenced to eighty-four months’ imprisonment, followed by three years of supervised release, and ordered to pay $2,030,337.32 in restitution (with $1,708,227.32 of that amount to be paid to the victims of the two securities fraud counts) and $3,701,893.91 in forfeiture (with $3,379,783.91 representing proceeds traceable to Pierre’s securities fraud violations). The Second Circuit affirmed Pierre’s conviction by summary order on February 20, 2024. Before this Court is the SEC’s motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(a), in which the SEC urges this Court to apply collateral estoppel to grant judgment against Pierre on its causes of action under Section 17(a) of the Securities Act and under Section 10(b) of the Exchange Act and Rule 10b-5. As relief, the SEC seeks a permanent injunction enjoining Pierre from future violations of these securities laws and an order that Pierre pay disgorgement with prejudgment interest, with those amounts deemed satisfied by the restitution and forfeiture imposed in his criminal case. Pierre does not oppose summary judgment. For the reasons that follow, the SEC’s motion for summary judgment is granted. In addition, R. Pierre Consulting Group LLC is dismissed as Relief Defendant, as is the third cause of action under Section 206(4) of the Advisers Act and Rule 206(4)-8. The Court further orders a permanent injunction, enjoining Pierre from future violations of Section 17(a) and of Section 10(b) and Rule 10b-5, and orders disgorgement of Pierre’s illgotten profits in the amount of $1,708.227.32 plus prejudgment interest in the amount of $339,733.58. I. Background A. Factual Background1 The SEC’s allegations concern Pierre’s operation of two fraudulent investment schemes. The first, referred to herein as the “Amongst Friends Investment Scheme,” involved Pierre’s formation of an investment club, with promises to investors of unrealistic investment returns. The second, referred to herein as the “Franchise Investment Scheme,” entailed Pierre inducing some of the same investors, as well as new investors, to invest in fast-food restaurants, once again promising unrealistic investment returns. Each scheme is laid out below. 1. The Amongst Friends Investment Scheme Beginning in or about 2016, Pierre established an informal investment club whose membership consisted of his siblings and several friends. SEC 56.1 Stmt. 2. The investment club was formalized in 2017 under the name Amongst Friends, expanding its membership beyond the initial group of Pierre’s family and friends. Id. Pierre issued notes to Amongst Friends investors (the “Notes”), promising “exceptionally high rates of return, from 20 percent interest every 60 days to as high as 40 percent interest every 60 days.” Id. 3; see Dkt. 48 (“SEC Br.”) at 1. Pierre further personally guaranteed investors the return of their principal; some Notes even memorialized that the investment was guaranteed by Pierre himself and/or was collateralized by property that he owned. SEC 56.1 Stmt. 4. While Pierre did indeed trade equities on behalf of Amongst Friends investors, he began to incur significant losses starting in 2017, suffering over $1.4 million in losses by March 2019. Id.
5-6; see id. 38 (“At Pierre’s trial, the Government introduced Mr. Pierre’s testimony taken during the [SEC]‘s investigation that he lost money in his trading accounts in 2017 and 2018.”) (citing Trial Tr. at 900)). Notwithstanding these staggering losses and the obvious consequence that the ongoing payments to investors of their promised returns would not be possible, Pierre continued to issue the Notes with assurances of the same inflated rates of returns. Id. 7. He did so despite knowing, or being reckless in not knowing, that the promised returns could not be paid. Id. Rather than disclosing the reality, Pierre deceived his investors by concealing the sizable trading losses. Id.
