United States District Court, S.D. Florida
ORDER DENYING PLAINTIFF'S MOTION TO STRIKE RELIEF
DEFENDANT GOLD 7'S FIFTH AFFIRMATIVE DEFENSE
L. ROSENBERG UNITED STATES DISTRICT JUDGE
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.
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.
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
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
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.
doctrine of unclean hands is a longstanding equitable
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