Tag: 11 usc 523(a)(19)

E.D.N.C.: McKinny v. Allison- Denial of Summary Judgment for Securities Fraud based on Consent Judgment

Summary:

In 2005, David Allison approached Elizabeth McKinny with an investment opportunity in Venture Capital In Motion (“VCIM”), wherein McKinny would, as an “approved investor”, obtain irrevocable bank guarantees for her $500,000 investment. When VCIM failed and the funds were lost, McKinny brought suit against Allison alleging claims for breach of the promissory note, common law fraud, and securities fraud, alleging violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b- 5. In November 2009, the action was settled with Allison agreeing to may six installment payments totaling $650,000. The Settlement specifically stipulated both that it would “not be deemed an admission of any wrongdoing or liability” by Allison and that, if Allison filed bankruptcy, the Settlement would be void ab initio, reviving all of McKinny’s claims.… Read More

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Bankr. M.D.N.C.: In re Gilley- Dischargablity of SEC Settlements under 11 U.S.C. § 523(a)(19)

Summary:

The SEC filed a complaint against the Debtor and two other individuals in 2005 alleging they had engaged in a $60 million Ponzi scheme, specifically alleging that the Debtor unlawfully sold unregistered securities, was not registered as a broker-dealer when selling certain billboards, and failed to disclose material information to investors. In 2006, the Debtor and the SEC filed a consent judgment wherein the Debtor agreed to, among other terms, disgorge nearly $2 million. In 2008, the district court imposed a $5,000 civil penalty against the Debtor as his “violations were not particularly reprehensible or egregious.”

After filing bankruptcy, the Debtor brought an adversary proceeding seeking a determination that the $2 million was dischargeable, as he had neither admitted nor denied the allegations of fraud made by the SEC.… Read More

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