Securities and Exchange Commission v. Goulding, No. 20-1689 (7th Cir. 2022)Annotate this Case
Goulding, an accountant and lawyer, has a history of mail fraud and tax fraud. Goulding formed 15 funds that hired Nutmeg’s advisory services, which he managed. The funds invested in illiquid securities, many of which were close to insolvent. Gould wrote all of the disclosure documents, which overvalued the funds. Goulding made baseless statements about increases in value. Goulding did not use outside advisors and engaged in commingling, holding some securities in his own name.
The Securities and Exchange Commission charged Goulding under the Investment Advisers Act of 1940, 15 U.S.C. 80b, with running Nutmeg through a pattern of fraud, including touting his supposed financial expertise while failing to disclose his crimes, in addition to violating the Act’s technical rules. The district court issued an injunction removing Goulding from the business and appointing a receiver. A magistrate judge enjoined Goulding from violating the securities laws, required him to disgorge $642,422 (plus interest), and imposed a $642,422 civil penalty. The Seventh Circuit affirmed the finding of liability and the financial awards. The extent of Goulding’s wrongdoing makes it hard to determine his net unjustified withdrawals; as the wrongdoer, he bears the consequence of uncertainty. The restitution reflects a conservative estimate of Goulding’s ill-got gains. Nor did the judge err by declining to trace funds from their source to Goulding’s pocket.