Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Securities and Exchange Commission v. Natural Diamonds Investment Co.

United States District Court, S.D. Florida

January 7, 2020

SECURITIES AND EXCHANGE COMMISION, Plaintiff,
v.
NATURAL DIAMONDS INVESTMENT CO., EAGLE FINANCIAL DIAMOND GROUP INC. a/k/a DIAMANTE ATERLIER, ARGYLE COIN, LLC, JOSE ANGEL AMAN, HAROLD SEIGEL, JONATHON H. SEIGEL, Defendants, H.S. MANAGEMENT GROUP LLC, GOLD 7 OF MIAMI, LLC, WINNERS CHRUCH INTERNATIONAL INC. OF WEST PALM BEACH, FLORIDA, FREDERICK D. SHIPMAN, WHITNEY SHIPMAN, Relief Defendants.

          Reinhart Judge.

          ORDER DENYING PLAINTIFF'S MOTION TO STRIKE RELIEF DEFENDANT GOLD 7'S FIFTH AFFIRMATIVE DEFENSE

          ROBIN L. ROSENBERG UNITED STATES DISTRICT JUDGE

         THIS CAUSE is before the Court on Plaintiff Securities and Exchange Commission's Motion to Strike Relief Defendant Gold 7's Fifth Affirmative Defense. DE 143. The Court has considered the parties' briefing and the pleadings, and is otherwise fully advised in the premises. For the reasons below, the motion is DENIED.

         I. BACKGROUND

         This is an enforcement action against numerous individuals and entities alleged to have played a role in a Ponzi scheme involving colored diamonds. Defendant Jose Angel Aman is an officer of three entities: Natural Diamonds Investment Co. (“Natural Diamonds”), Eagle Financial Diamond Group Inc, a/k/a Diamante Atelier (“Eagle”), and Argyle Coin, LLC (“Argyle Coin”). The Complaint alleges that Aman solicited investments in Natural Diamonds, promising investors that the funds would be used to procure raw colored diamonds, which would be processed and sold for returns of 24 percent and a full return of investors' principal within two years. The offering was allegedly a Ponzi scheme, in which existing investors' returns were funded by new investors.

         As funds in the Natural Diamonds offering depleted, Aman and other Defendants commenced a second offering of investment contracts in Eagle. New investments in this offering funded existing Natural Diamonds and Eagle investors' returns. When the Natural Diamonds and Eagle bank accounts lacked funds to continue the scheme, Aman created Argyle Coin, commencing a cryptocurrency offering purportedly backed by the same diamonds as the Natural Diamonds and Eagle investments.

         Relief Defendant Gold 7 of Miami, LLC (“Gold 7”) is a pawn shop in Miami, Florida. Aman and Gold 7 entered into consignment agreements, under which Gold 7 allegedly received approximately 40 diamonds belonging to Natural Diamonds and Eagle. Aman used the proceeds of the consignment to obtain personal loans. The Complaint seeks disgorgement of the diamonds from Gold 7 on the basis that they represent ill-gotten gains from the alleged Ponzi scheme. Gold 7 answered the complaint and raised as an affirmative defense, among others, the following:

As its Fifth Affirmative Defense, Gold 7 states that the Plaintiff comes to Court with unclean hands. Specifically, Plaintiff knew about the alleged Ponzi scheme in 2018, yet it took no actions to stop it thereby allowing Gold 7 to purchase diamonds from Aman that it now claims were stolen. Plaintiff contacted a witness in 2018 and advised said witness that the Plaintiff was aware of the Ponzi scheme and that it was going to take action related to same in 2018. This never materialized. Moreover, each diamond purchased by Gold 7 pursuant to a Secondhand Dealer's Property Form Bill of Sales was reported to the Department of Law Enforcement. If the Plaintiff notified the Department of Law Enforcement of the diamonds they would have been reported stolen by the Department and Gold 7 would not have been able to purchase the diamonds from Aman. The Plaintiff, by failing to do so, is in effect attempting to compensate the alleged victims of the Ponzi Scheme-at the expense of Gold 7- since the SEC is attempting to disgorge diamonds and monies that Gold 7 has an ownership interest in and legitimate claim to under both state and Federal law, where its own actions (or inactions) were a contributing cause to the ability of Aman to sell diamonds that it now claims were stolen from the alleged investors. [citations omitted] In this regard, the SEC sues Gold 7 with unclean hands and it should not be permitted in equity to recover against Gold 7 when Gold 7 would never have purchased the diamonds has [sic] the SEC not failed to act in 2018 when it was advising potential persons with information that it was about to file claims against Aman and/or his companies.

DE 77 at 30. Plaintiff now moves the Court to strike this affirmative defense pursuant to Federal Rule of Civil Procedure 12(f).

         II.LEGAL STANDARD

         “The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “A defense is insufficient as a matter of law if, on the face of the pleadings, it is patently frivolous, or if it is clearly invalid as a matter of law.” Romero v. S. Waste Sys., LLC, 619 F.Supp.2d 1357, 1358 (S.D. Fla. 2009) (quoting Morrison v. Exec. Aircraft Refinishing, Inc., 434 F.Supp.2d 1314, 1318 (S.D. Fla. 2005)). However, striking a pleading is disfavored and is generally considered “a drastic remedy resorted to only when required for the purposes of justice.” Augustus v. Bd. of Pub. Instruction, 306 F.2d 862, 868 (5th Cir. 1962).

         III.ANALYSIS

         The doctrine of unclean hands is a longstanding equitable defense:

The governing principle is that whenever a party who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.