Securities and Exchange Commission v. Costello et al, No. 2:2022cv01388 - Document 19 (W.D. Wash. 2023)
Court Description: FINAL JUDGMENT as to Defendant David Ferraro. Defendant is permanently restrained and enjoined from violating, directly or indirectly, sections of the Securities Exchange Act as described herein. Defendant is liable for disgorgement of $142,724. 97, representing net profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $11,704.92, for a total of $154,429.89. Defendant shall satisfy this obligation by paying $154,429.89 to the Securities and Exchange Commission within 30 days after entry of this Final Judgment. Signed by Judge Ricardo S. Martinez. (SB)
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Securities and Exchange Commission v. Costello et al Doc. 19 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 1 of 7 1 2 3 4 The Honorable Ricardo S. Martinez 5 6 7 8 UNITED STATES DISTRICT COURT 9 WESTERN DISTRICT OF WASHINGTON 10 SEATTLE DIVISION 11 12 13 14 15 16 17 SECURITIES AND EXCHANGE COMMISSION, Plaintiff, CASE NO. 22-cv-01388 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO v. JUSTIN COSTELLO and DAVID FERRARO Defendants. 18 The Securities and Exchange Commission having filed a Complaint and Defendant David 19 Ferraro having entered a general appearance; consented to the Court’s jurisdiction over 20 Defendant and the subject matter of this action; consented to entry of this Final Judgment 21 without admitting or denying the allegations of the Complaint (except as to jurisdiction and 22 except as otherwise provided herein in paragraph VI); waived findings of fact and conclusions of 23 law; and waived any right to appeal from this Final Judgment: 24 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Dockets.Justia.com Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 2 of 7 I. 1 2 IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is 3 permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the 4 Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or instrumentality of 6 interstate commerce, or of the mails, or of any facility of any national securities exchange, in 7 connection with the purchase or sale of any security: 8 (a) to employ any device, scheme, or artifice to defraud; 9 (b) to make any untrue statement of a material fact or to omit to state a material fact 10 necessary in order to make the statements made, in the light of the circumstances 11 under which they were made, not misleading; or 12 13 14 (c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 15 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 16 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 17 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 18 participation with Defendant or with anyone described in (a). 19 II. 20 IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant 21 is permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 22 (the “Securities Act”) [15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any 23 24 2 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 3 of 7 1 means or instruments of transportation or communication in interstate commerce or by use of the 2 mails, directly or indirectly: 3 (a) to employ any device, scheme, or artifice to defraud; 4 (b) to obtain money or property by means of any untrue statement of a material fact 5 or any omission of a material fact necessary in order to make the statements 6 made, in light of the circumstances under which they were made, not misleading; 7 or 8 9 10 (c) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 11 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 12 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 13 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 14 participation with Defendant or with anyone described in (a). III. 15 16 IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant 17 is permanently barred from participating in an offering of penny stock, including engaging in 18 activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or 19 attempting to induce the purchase or sale of any penny stock. A penny stock is any equity 20 security that has a price of less than five dollars, except as provided in Rule 3a51-1 under the 21 Exchange Act [17 C.F.R. § 240.3a51-1]. IV. 22 23 24 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for disgorgement of $142,724.97, representing net profits gained as a result of the conduct 3 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 4 of 7 1 alleged in the Complaint, together with prejudgment interest thereon in the amount of 2 $11,704.92, for a total of $154,429.89. The Court finds that sending the disgorged funds to the 3 United States Treasury, as ordered below, is consistent with equitable principles. Defendant 4 shall satisfy this obligation by paying $154,429.89 to the Securities and Exchange Commission 5 within 30 days after entry of this Final Judgment. 6 Based on Defendant’s sworn representations in his Statement of Financial Condition 7 dated March 20, 2023, and other documents and information submitted to the Commission, 8 however, the Court is not ordering Defendant to pay a civil penalty. The determination not to 9 impose a civil penalty is contingent upon the accuracy and completeness of Defendant’s 10 Statement of Financial Condition. If at any time following the entry of this Final Judgment the 11 Commission obtains information indicating that Defendant’s representations to the Commission 12 concerning his assets, income, liabilities, or net worth were fraudulent, misleading, inaccurate, or 13 incomplete in any material respect as of the time such representations were made, the 14 Commission may, at its sole discretion and without prior notice to Defendant, petition the Court 15 for an order requiring Defendant to pay the maximum civil penalty allowable under the law. In 16 connection with any such petition, the only issue shall be whether the financial information 17 provided by Defendant was fraudulent, misleading, inaccurate, or incomplete in any material 18 respect as of the time such representations were made. In its petition, the Commission may 19 move this Court to consider all available remedies, including, but not limited to, ordering 20 Defendant to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt 21 of this Final Judgment. The Commission may also request additional discovery. Defendant may 22 not, by way of defense to such petition: (1) challenge the validity of the Consent or this Final 23 Judgment; (2) contest the allegations in the Complaint filed by the Commission; (3) assert that 24 payment of disgorgement, pre-judgment and post-judgment interest or a civil penalty should not 4 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 5 of 7 1 be ordered; (4) contest the amount of disgorgement and pre-judgment and post-judgment 2 interest; (5) contest the imposition of the maximum civil penalty allowable under the law; or (6) 3 assert any defense to liability or remedy, including, but not limited to, any statute of limitations 4 defense. Defendant shall also pay post-judgment interest on any delinquent amounts pursuant to 5 28 U.S.C. § 1961. 6 Defendant may transmit payment electronically to the Commission, which will provide 7 detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly 8 from a bank account via Pay.gov through the SEC website at 9 http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified check, bank 10 cashier’s check, or United States postal money order payable to the Securities and Exchange 11 Commission, which shall be delivered or mailed to 12 13 Enterprise Services Center Accounts Receivable Branch 6500 South MacArthur Boulevard Oklahoma City, OK 73169 14 and shall be accompanied by a letter identifying the case title, civil action number, and name of 15 this Court; Ferraro as a defendant in this action; and specifying that payment is made pursuant to 16 this Final Judgment. 17 Defendant shall simultaneously transmit photocopies of evidence of payment and case 18 identifying information to the Commission’s counsel in this action. By making this payment, 19 Defendant relinquishes all legal and equitable right, title, and interest in such funds and no part 20 of the funds shall be returned to Defendant. The Commission shall send the funds paid pursuant 21 to this Final Judgment to the United States Treasury. 22 23 24 5 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 6 of 7 1 The Commission may enforce the Court’s judgment for disgorgement and prejudgment 2 interest by using all collection procedures authorized by law, including, but not limited to, 3 moving for civil contempt at any time after 30 days following entry of this Final Judgment. 4 5 Defendant shall pay post judgment interest on any amounts due after 30 days of the entry of this Final Judgment pursuant to 28 U.S.C. § 1961. 6 V. 7 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent is 8 incorporated herein with the same force and effect as if fully set forth herein, and that Defendant 9 shall comply with all of the undertakings and agreements set forth therein. VI. 10 11 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes of 12 exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. § 523, the 13 allegations in the complaint are true and admitted by Defendant, and further, any debt for 14 disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under this 15 Final Judgment or any other judgment, order, consent order, decree or settlement agreement 16 entered in connection with this proceeding, is a debt for the violation by Defendant of the federal 17 securities laws or any regulation or order issued under such laws, as set forth in Section 18 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19). 19 20 21 VII. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. 22 23 24 6 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100 Case 2:22-cv-01388-RSM Document 19 Filed 07/11/23 Page 7 of 7 VIII. 1 2 3 There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Clerk is ordered to enter this Judgment forthwith and without further notice. 4 DATED this 11th day of July, 2023. 5 6 A 7 8 RICARDO S. MARTINEZ UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 7 FINAL JUDGMENT AS TO DEFENDANT DAVID FERRARO SEC V. COSTELLO ET AL. (NO. 22-CV-01388) Securities and Exchange Commission 100 Pearl Street, Suite 20-100 New York, NY 10004-2616 (212) 336-1100
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