Cases
In their decades of litigating cases for and against the Securities and Exchange Commission and other agencies, ICAN’s founders noticed some troubling patterns. The cost of litigation could be so high that people would have to settle with the SEC despite not having done anything wrong. That was true even in cases involving technical violations and not involving fraud. And often there was no suggestion of investor harm or investor complaints. In fact, sometimes an SEC lawsuit caused more harm to investors than the underlying technical issue the SEC was trying to enforce.
Cases involving precedent-setting legal issues in which defendants not accused of fraud or investor harm cannot afford representation are far too common. Parties accept unfair settlement terms, investors reap no benefits, and the SEC and other agencies accumulate litigation “wins” the agencies later point to in support of their interpretation of the law. For-profit law firms are not set up to handle these cases on a pro bono basis.
ICAN is here to help.
As a nonprofit, public interest law firm, ICAN identifies cases where it can have an impact and works to ensure that its clients have high quality representation at little or no cost.
SEC v Pac West
Eric Cannon, Brenda Barry, and Caleb Moody, worked for PacWest, a company selling an investment offering called life settlements. The SEC alleged the life settlements investment offering should have been registered and that Eric, Brenda, and Caleb should have been registered brokers. The SEC did not allege that any investor was harmed, that any investor complained, or that Eric, Brenda, or Caleb misled anyone about the investment. And the basis of the SEC’s complaint – that life settlements are securities requiring registration – is far from settled. At the very least Eric, Brenda, and Caleb (non-lawyers certified to sell investment products under California law) had no reason to believe they were violating any law. Nevertheless, the SEC sued in federal court seeking enormous amounts of money from Eric, Brenda, and Caleb.
SEC v Punch TV
Like many entrepreneurs, Joseph Collins looked to raise money for his company Punch TV. When equity crowdfunding was greatly expanded through the JOBS Act (Jumpstart Our Business Startups Act), Mr. Collins was one of the first to utilize a new regulatory exemption called a Tier 2 Regulation A, or Reg A+, offering, which allowed investments from ordinary, unaccredited investors. But as a result of what the SEC alleged were failures to comply with technical registration exemption requirements, in September 2021, the SEC filed a complaint in federal court.
Importantly, the SEC has never alleged that Mr. Collins or Punch TV ever committed fraud, harmed investors, or misused investor funds. Despite no allegations of fraud or harm, the SEC asked the federal judge to impose a financially ruinous $1.6 million amount in combined disgorgement, penalties, and interest.