A three judge panel in the Eleventh Circuit issued a ruling last Thursday in Securities and Exchange Commission v. Barry Graham et al., Case No. 14-13562, holding—contrary to several other circuits—that the remedy of disgorgement was effectively a forfeiture, and therefore subject to the standard five-year statute of limitations. The SEC brought this case in 2013, seeking injunctive relief, disgorgement, and civil penalties against a group of individuals allegedly involved in a $300 million Ponzi scheme that ended in 2008. The SEC’s complaint was initially dismissed by a Florida District Court as entirely time barred under the applicable statute of limitations (28 U.S.C. § 2462). The Eleventh Circuit panel overturned the district court’s dismissal and reinstated the case, but only in part: the SEC could proceed with its claim for injunctive relief, but not for disgorgement or declaratory relief.
Supreme Court Clarifies That Untainted Assets Cannot Be Frozen Pre-Trial By The Government
Last week the Supreme Court further clarified the procedures and limits regarding the government’s ability to freeze assets in connection with criminal prosecutions. Following the 2014 decision in Kaley v. United States, where the Court ruled (in the government’s favor) that a defendant could not challenge the legality of a pre-trial asset seizure by contesting the grand jury’s determination of probable cause, last week the Court added to the body of law on asset forfeiture by siding with defendants and limiting the government’s ability to freeze “untainted” assets. The Court’s March 30, 2016 decision in Luis v. U.S. holds that the government’s pre-trial freeze of “untainted” assets (meaning money not connected to the alleged crimes) violates the Sixth Amendment right to counsel by choice.