SEC v. KERN, No. 1:20-cv-11092, District of Massachusetts (Oct. 21, 2022)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

__________________________________________
 )
SECURITIES AND EXCHANGE )
COMMISSION, )
 )
Plaintiff, ) Civil Action No.
 ) 20-11092-FDS
 v. )
 )
NELSON GOMES, MICHAEL  )
LUCKHOO-BOUCHE, SHANE SCHMIDT, )
DOUGLAS ROE, KELLY WARAWA, )
FFS CAPITAL LIMITED, PAIFANG )
TRADING LIMITED, ARTEFACTOR )
LIMITED, ATLANTEAN MANAGEMENT )
CORPORATION, MEADOW ASIA  )
LIMITED, and THYME INTERNATIONAL  )
LIMITED, )
 )
Defendants. )
__________________________________________)

MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR CIVIL PENALTIES
AGAINST DOUGLAS ROE AND ATLANTEAN MANAGEMENT CORPORATION

SAYLOR, C.J.

This case involves a “pump-and-dump” scheme to defraud investors through the sale of
unregistered stock.  The Court previously entered partial judgments against defendants Douglas
Roe and Atlantean Management Corporation.  The judgments left unresolved whether the Court
should impose civil penalties upon Roe and Atlantean, and, if so, in what amount.  Plaintiff
Securities and Exchange Commission now moves for entry of final judgments against Roe and
Atlantean incorporating the terms of the prior judgments and imposing civil penalties in the
amount of $300,000 against each defendant.
For the following reasons, the motion will be granted in part.

2

I. Background
A. Factual Background
Douglas Roe is a Canadian citizen and a resident of Vancouver, British Columbia.
(Compl. ¶ 16).  Roe was charged by the Commission in connection with a penny-stock scheme
in May 2017 and settled those charges in August 2018.  The settlement resolution included a
civil penalty of $50,000 and a penny-stock bar.  S.E.C. v. Roe et al., No. 17-cv-01293 (D. Md.
2017).
Atlantean Management Corporation is a Canadian company incorporated in November
2017.  (Compl. ¶ 20).  The company is 100% beneficially owned by Roe, and he is the president
and only director.
Between January 2018 and April 2020, Roe and Atlantean engaged in a scheme whereby
corporate control persons illegally sold stock of Sandy Steele Unlimited Inc. on the open market
without making the required disclosures.  (Compl. ¶ 1).  In conjunction with the sales, promoters
coordinated fraudulent campaigns—including false claims about Sandy Steele’s ability to
produce facemasks during the early phases of the COVID-19 pandemic—to boost stock sales.
(Id. ¶¶ 1, 3).
In January 2018, Atlantean was assigned the right to convert $3,000 of a fraudulently-
issued promissory note into shares of Sandy Steele stock.  (Compl. ¶ 40).  Atlantean converted
its note into 3,000,000 unrestricted shares in July 2019.  (Id. ¶¶ 42-48).  Atlantean (via Roe and
another associate) then transferred its shares to FFS Capital Limited, a Hong Kong company
beneficially owned and directed by Nelson Gomes.  (Compl. ¶ 48-49; Donelan Suppl. Decl. ¶ 9).
After the fraudulent promotional campaigns dramatically increased trading in Sandy Steele
stock, Gomes sold Atlantean shares (along with other shares), generating profits of at least $1.8
million overall.  (Compl. ¶¶ 60-61; Donelan Suppl. Decl. ¶ 9).  Gomes then caused FFS Capital

3

to remit $514,502 of those proceeds to Atlantean.  (Compl. ¶ 62; Donelan Suppl. Decl. ¶ 10).
Around the same time, Roe wired CAD $20,887.50 to an entity controlled by defendant Shane
Schmidt.  (Donelan Suppl. Decl. ¶ 11).  FFS Capital wired another $33,933 of proceeds from
trading in Sandy Steele stock to an entity controlled by Roe through his wife.  (Donelan Suppl.
Decl. ¶ 12).
The complaint alleges that Roe “knew, or was reckless in not knowing” that he was
prohibited from selling controlled shares publicly without complying with stock registration
requirements or sale restrictions.  (Compl. ¶ 67).  It further alleges that Roe “knew, or [was]
reckless in not knowing” that he was, along with other defendants, “dumping Sandy Steele
shares to unsuspecting investors” in coordination with a false and misleading promotional
campaign.  (Compl. ¶ 70).
The price of Sandy Steele stock dropped significantly after the promotions ceased.
(Compl. ¶ 63).  The SEC suspended trading in Sandy Steele on April 6, 2020.  (Compl. ¶ 4).  By
June 2020, Sandy Steele’s market capitalization was $134,618.  (Donelan Decl. ¶ 64).
B. Procedural Background
The Commission filed suit in June 2020 against Roe, Atlantean, and nine other
defendants who collectively held and sold shares of Sandy Steele.  The complaint charged Roe
and Atlantean with violating the antifraud provisions of Sections 17(a)(1) and (3) of the
Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77q(a)(1), (3); Section 10(b) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rules 10b-5(a) and
(c) promulgated thereunder, 17 C.F.R. §§ 240.10b-5(a), (c); and the securities registration
provisions of Sections 5(a) and (c) of the Securities Act, 15 U.S.C. §§ 77e(a), (c).  (Compl.
Counts 1, 2, 4).

4

The Court entered partial judgment by consent against Roe on March 30, 2022, enjoining
him from future securities violations and ordering him to pay $548,435 in disgorgement of
profits and $32,971 in prejudgment interest.  (Dkt. No. 106).  On the same day, the Court entered
partial judgment by consent against Atlantean, enjoining it from future securities violations,
imposing a five-year penny-stock bar, and ordering it to pay $514,502 in disgorgement and
$31,472 in prejudgment interest jointly and severally with Roe.  (Dkt. No. 107).
1
  The partial
judgments left open the issue of whether civil penalties should be imposed and, if so, in what
amount.  In the event that the Commission filed a motion for penalties, it agreed in each case
“that it [would] not seek a civil penalty from Defendant in excess of $300,000.” (Dkt. No. 106 at
¶ V; Dkt. No. 107 at ¶ VI).
The judgments also provided that for the purposes of the Commission’s motion for civil
penalties, (1) Roe and Atlantean “will be precluded from arguing that [they] did not violate the
federal securities laws as alleged in the Complaint;” (2) Roe and Atlantean may not challenge the
validity of the consents or the partial judgments; (3) “the allegations of the Complaint shall be
accepted as and deemed true by the Court;” and (4) the Court may consider evidence “without
regard to the standards for summary judgment contained in Rule 56(c) of the Federal Rules of
Civil Procedure.”  Id.
The Commission has now moved for civil penalties pursuant to Section 20(d)(1) of the
Securities Act, 15 U.S.C. § 77t(d)(1), and Section 21(d)(3)(A) of the Exchange Act, 15 U.S.C.
§ 78u(d)(3)(A).

1
 The $548,435 sum imposed on Roe reflects the $514,502 in proceeds Atlantean received plus an
additional $33,933 an entity controlled by his wife received from Gomes and FFS Capital.  (Def. Opp’n at 10;
Donelan Suppl. Decl. ¶¶ 10, 12).  Roe alone is responsible for the $33,933 sum.

5

II. Legal Standard
Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act authorize
the assessment of civil penalties against those who violate federal securities laws.  15 U.S.C.
§ 77t(d); 15 U.S.C. § 78u(d)(3).  The statutes “authorize the Court to determine the amount of
the penalty ‘in light of the facts and circumstances.’”  S.E.C. v. Esposito, 260 F. Supp. 3d 79, 92
(D. Mass. 2017) (quoting 15 U.S.C. §§ 78u(d)(3)(B)(i), 77t(d)(2)(A)).  Both statutes set out three
tiers of penalties addressing violations of increasing severity.  “Tier I penalties are generally
applicable, Tier II penalties require fraud, deceit, manipulation, or a deliberate or reckless
disregard of a regulatory requirement, and Tier III penalties require the Tier II elements plus
substantial losses or . . . significant risk of substantial losses to other persons.”  S.E.C. v. Kern,
425 F.3d 143, 153 (2d Cir. 2005) (internal citations and quotation marks omitted).  “In
determining the appropriate fine, courts have considered factors including the egregiousness of
the violation, the defendant’s willingness or failure to admit wrongdoing, the isolated or repeated
nature of the violations, the degree of scienter involved, the defendant’s cooperation or lack
thereof with authorities, and the defendant’s current financial condition.”  Esposito, 260 F. Supp.
3d at 93.
A civil penalty may not exceed the larger of (1) a defendant’s gross pecuniary gain or (2)
the maximum amount fixed by regulation.  See 15 U.S.C. §§ 77t(d)(2); 78u(d)(3)(B).  According
to the SEC, for Roe, the maximum first-tier penalty is $10,360 per violation, the maximum
second-tier penalty is $103,591 per violation, and the maximum third-pier penalty is $207,183
per violation.  (Plaintiff’s Mem. at 11-12 (citing 17 C.F.R. § 201.1001(b)).  For Atlantean, the
maximum first-tier penalty is $103,591 per violation, the maximum second-tier penalty is
$517,955 per violation, and the maximum third-tier penalty is $1,035,909 per violation.  Id.

6

III. Analysis
The SEC contends that defendants should each be assessed a third-tier penalty of
$300,000 because their violations “facilitated a fraud that directly or indirectly resulted in
substantial losses or created a significant risk of substantial losses to other persons who decided
to buy the microcap securities dumped into the market by the Initial Sandy Steele Shareholders
and the Gomes Group.”  (Plaintiff’s Mem. at 13).
Defendants oppose the civil penalty assessment on the basis that it “effectively seeks a
double recovery” given Roe’s disgorgement of $548,435 plus interest on behalf of both
defendants.  (Defs. Opp’n at 1).  Defendants also contend that Atlantean consented to joint and
several liability with Roe and should not receive a separate penalty.  And they assert that the
proposed penalty is disproportionate to their role in the securities scheme.  Instead, defendants
request a civil penalty of $100,000 against Roe individually or divided between Roe and
Atlantean.  (Id. at 2).
Under the terms of the partial judgments previously entered, defendants are “precluded
from arguing that [they] did not violate the federal securities laws” and “the allegations of the
Complaint shall be accepted as and deemed true by the Court.”  (Dkt. No. 106 at ¶ V; Dkt. No.
107 at ¶ VI).  The predicate requirement for the imposition of civil penalties—that a securities
violation occurred—has therefore been established.  15 U.S.C. § 77t(d)(1); 15 U.S.C.
§ 78u(d)(3)(A).
A third-tier penalty is appropriate here because the evidence shows that defendants did in
fact facilitate a fraud that at a minimum “created a significant risk of substantial losses to other
persons.” See 15 U.S.C. §§ 77t(d)(2)(C), 78u(d)(3)(B)(iii).  By participating in a scheme to
artificially inflate the value of Sandy Steele stock, defendants ran the risk of harming innocent

7

investors who were misled by the fraudulent promotional campaign and whose share value
plummeted when defendants and those they worked with cashed out.  See, e.g., Esposito, 260 F.
Supp. 3d at 93 (third-tier penalty of $775,000 appropriate where defendant “caused investors to
suffer substantial losses when the [] shares they had bought became worthless after the
conversion of [] debt and the dumping of millions of [] shares into the public markets”).
Applying the factors generally considered by courts in assessing civil penalties leads to
the same conclusion.  While Roe and Atlantean have consented to judgments admitting
violations of the securities statutes, the securities violations were egregious, generating at least
$1.8 million in proceeds at the expense of unsuspecting investors.  Defendants’ misconduct was
prolonged, lasting for more than a year.  And Roe was sanctioned $50,000 in 2018 for playing a
similar role in another securities-fraud scheme.  Given defendants’ history of involvement with
other members of the Sandy Steele control group and Roe’s prior involvement in SEC
enforcement proceedings, defendants were at the very least reckless in not knowing that they
were engaged in the illegal sale of unregistered stocks and the defrauding of investors.
2
  Finally,
neither defendant has submitted a statement of financial condition indicating that they lack assets
to pay the penalty.
Comparing the Commission’s proposed penalty to that imposed upon other participants
in the scheme supports that result.  Gomes received a civil penalty of $390,094 in addition to
disgorgement of $1,153,058 in net profits plus prejudgment interest.  (Dkt. No. 80 at ¶ VII).
While defendants Roe and Atlantean participated in fewer transactions and received fewer
financial benefits, they were nevertheless active and necessary participants in the Sandy Steele
scheme and a comparable, if not quite equal, penalty is justified.

2
 Roe’s scienter can be attributed to Atlantean, as Roe is the owner and sole director.  See Esposito, 260 F.
Supp. 3d at 91.

8

Defendants’ contention that the partial judgments against Roe and Atlantean imposed a
joint cap at $300,000 is inconsistent with the language of the agreements.   Each judgment states:
“The Commission agrees that it will not seek a civil penalty from Defendant in excess of
$300,000.”  (Dkt. No. 106 at ¶ V; Dkt. No. 107 at ¶ VI).  The use of the singular “defendant”
makes clear that the $300,000 cap applies to each defendant individually, not jointly.
Furthermore, civil penalties may not be ordered jointly and severally and should be assessed
separately.  See S.E.C . v. Pentagon Capital Mgmt. PLC, 725 F.3d 279, 287-88 (2d Cir. 2013);
S.E.C. v. DFRF Enterprises LLC, 384 F. Supp. 3d 129, 130 n.1 (D. Mass 2019).
Finally, defendants’ argument that Atlantean should not be subject to a separate penalty
because Roe has disgorged all profits received by Atlantean overlooks the fact that disgorgement
and civil penalties serve entirely different purposes.  While “[d]isgorgement is an equitable
remedy designed to benefit investor victims,” S.E.C. v. Knox, 2022 WL 1912877, at *3 (D. Mass.
June 3, 2022), “[t]he imposition of civil penalties is intended to ‘penalize the defendant for
illegal conduct’ and deter future securities violations,” S.E.C. v. Weed, 315 F. Supp. 3d 667, 677
(D. Mass. 2018) (internal alterations omitted) (quoting S.E.C. v. Sargent, 329 F.3d 34, 41 (1st
Cir. 2003)).  While the purpose of disgorgement may be satisfied by either Atlantean or Roe
forfeiting the profits illegally obtained, deterrence of future violations—by the defendants or
other actors—is best achieved by imposing a penalty upon both.
There remains the question of the amount of the penalty.  The SEC does not indicate how
it arrived at the proposed penalty of $300,000 for Roe, which exceeds the $207,183 Tier 3
maximum for each violation by a natural person set by the regulation.
  3
   Although the proposed
amount as to Roe does not exceed the total pecuniary gain he received ( $548,435), the SEC seeks

3
 Atlantean’s penalty does not exceed the Tier 3 maximum for “other persons” ($1,035,909).

9

a $300,000 penalty against both Roe and Atlantean, which as a practical matter would result in a
$600,000 total penalty on a $548,435 total gain.  Although perhaps not required by law, under
the circumstances, the Court will impose a penalty as to Roe in the amount of $248,435, which it
finds to be reasonable and appropriate.
IV. Conclusion
For the foregoing reasons, the motion of plaintiff Securities and Exchange Commission is
GRANTED in part.  Final judgments will be entered against Douglas Roe and Atlantean
Management Corporation incorporating the terms of the prior judgments and imposing civil
penalties in the amount of $248,435 against Roe and $300,000 against Atlantean.
So Ordered.

 /s/  F. Dennis Saylor IV_____________
 F. Dennis Saylor IV
Dated:  October 20, 2022 Chief Judge, United States District Court

UNITED STATES DISTRICT COURT 
DISTRICT OF MASSACHUSETTS 

 
__________________________________________ 
 ) 
SECURITIES AND EXCHANGE ) 
COMMISSION, ) 
 ) 

Plaintiff, ) Civil Action No. 
 ) 20-11092-FDS 

 v. ) 
 ) 
NELSON GOMES, MICHAEL  ) 
LUCKHOO-BOUCHE, SHANE SCHMIDT, ) 
DOUGLAS ROE, KELLY WARAWA, ) 
FFS CAPITAL LIMITED, PAIFANG ) 
TRADING LIMITED, ARTEFACTOR ) 
LIMITED, ATLANTEAN MANAGEMENT ) 
CORPORATION, MEADOW ASIA  ) 
LIMITED, and THYME INTERNATIONAL  ) 
LIMITED, ) 
 ) 

Defendants. ) 
__________________________________________) 
 
 
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR CIVIL PENALTIES 

AGAINST DOUGLAS ROE AND ATLANTEAN MANAGEMENT CORPORATION 
 
SAYLOR, C.J.  

 
This case involves a “pump-and-dump” scheme to defraud investors through the sale of 

unregistered stock.  The Court previously entered partial judgments against defendants Douglas 

Roe and Atlantean Management Corporation.  The judgments left unresolved whether the Court 

should impose civil penalties upon Roe and Atlantean, and, if so, in what amount.  Plaintiff 

Securities and Exchange Commission now moves for entry of final judgments against Roe and 

Atlantean incorporating the terms of the prior judgments and imposing civil penalties in the 

amount of $300,000 against each defendant.  

For the following reasons, the motion will be granted in part. 

Case 1:20-cv-11092-FDS   Document 130   Filed 10/20/22   Page 1 of 9



 
2 

 

I. Background 

A. Factual Background 

Douglas Roe is a Canadian citizen and a resident of Vancouver, British Columbia.  

(Compl. ¶ 16).  Roe was charged by the Commission in connection with a penny-stock scheme 

in May 2017 and settled those charges in August 2018.  The settlement resolution included a 

civil penalty of $50,000 and a penny-stock bar.  S.E.C. v. Roe et al., No. 17-cv-01293 (D. Md. 

2017). 

Atlantean Management Corporation is a Canadian company incorporated in November 

2017.  (Compl. ¶ 20).  The company is 100% beneficially owned by Roe, and he is the president 

and only director.   

Between January 2018 and April 2020, Roe and Atlantean engaged in a scheme whereby 

corporate control persons illegally sold stock of Sandy Steele Unlimited Inc. on the open market 

without making the required disclosures.  (Compl. ¶ 1).  In conjunction with the sales, promoters 

coordinated fraudulent campaigns—including false claims about Sandy Steele’s ability to 

produce facemasks during the early phases of the COVID-19 pandemic—to boost stock sales.  

(Id. ¶¶ 1, 3). 

In January 2018, Atlantean was assigned the right to convert $3,000 of a fraudulently-

issued promissory note into shares of Sandy Steele stock.  (Compl. ¶ 40).  Atlantean converted 

its note into 3,000,000 unrestricted shares in July 2019.  (Id. ¶¶ 42-48).  Atlantean (via Roe and 

another associate) then transferred its shares to FFS Capital Limited, a Hong Kong company 

beneficially owned and directed by Nelson Gomes.  (Compl. ¶ 48-49; Donelan Suppl. Decl. ¶ 9).  

After the fraudulent promotional campaigns dramatically increased trading in Sandy Steele 

stock, Gomes sold Atlantean shares (along with other shares), generating profits of at least $1.8 

million overall.  (Compl. ¶¶ 60-61; Donelan Suppl. Decl. ¶ 9).  Gomes then caused FFS Capital 

Case 1:20-cv-11092-FDS   Document 130   Filed 10/20/22   Page 2 of 9



 
3 

 

to remit $514,502 of those proceeds to Atlantean.  (Compl. ¶ 62; Donelan Suppl. Decl. ¶ 10).  

Around the same time, Roe wired CAD $20,887.50 to an entity controlled by defendant Shane 

Schmidt.  (Donelan Suppl. Decl. ¶ 11).  FFS Capital wired another $33,933 of proceeds from 

trading in Sandy Steele stock to an entity controlled by Roe through his wife.  (Donelan Suppl. 

Decl. ¶ 12).   

The complaint alleges that Roe “knew, or was reckless in not knowing” that he was 

prohibited from selling controlled shares publicly without complying with stock registration 

requirements or sale restrictions.  (Compl. ¶ 67).  It further alleges that Roe “knew, or [was] 

reckless in not knowing” that he was, along with other defendants, “dumping Sandy Steele 

shares to unsuspecting investors” in coordination with a false and misleading promotional 

campaign.  (Compl. ¶ 70). 

The price of Sandy Steele stock dropped significantly after the promotions ceased.  

(Compl. ¶ 63).  The SEC suspended trading in Sandy Steele on April 6, 2020.  (Compl. ¶ 4).  By 

June 2020, Sandy Steele’s market capitalization was $134,618.  (Donelan Decl. ¶ 64).   

B. Procedural Background 

The Commission filed suit in June 2020 against Roe, Atlantean, and nine other 

defendants who collectively held and sold shares of Sandy Steele.  The complaint charged Roe 

and Atlantean with violating the antifraud provisions of Sections 17(a)(1) and (3) of the 

Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77q(a)(1), (3); Section 10(b) of the 

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rules 10b-5(a) and 

(c) promulgated thereunder, 17 C.F.R. §§ 240.10b-5(a), (c); and the securities registration 

provisions of Sections 5(a) and (c) of the Securities Act, 15 U.S.C. §§ 77e(a), (c).  (Compl. 

Counts 1, 2, 4).   

Case 1:20-cv-11092-FDS   Document 130   Filed 10/20/22   Page 3 of 9



 
4 

 

The Court entered partial judgment by consent against Roe on March 30, 2022, enjoining 

him from future securities violations and ordering him to pay $548,435 in disgorgement of 

profits and $32,971 in prejudgment interest.  (Dkt. No. 106).  On the same day, the Court entered 

partial judgment by consent against Atlantean, enjoining it from future securities violations, 

imposing a five-year penny-stock bar, and ordering it to pay $514,502 in disgorgement and 

$31,472 in prejudgment interest jointly and severally with Roe.  (Dkt. No. 107).1  The partial 

judgments left open the issue of whether civil penalties should be imposed and, if so, in what 

amount.  In the event that the Commission filed a motion for penalties, it agreed in each case 

“that it [would] not seek a civil penalty from Defendant in excess of $300,000.” (Dkt. No. 106 at 

¶ V; Dkt. No. 107 at ¶ VI).     

The judgments also provided that for the purposes of the Commission’s motion for civil 

penalties, (1) Roe and Atlantean “will be precluded from arguing that [they] did not violate the 

federal securities laws as alleged in the Complaint;” (2) Roe and Atlantean may not challenge the 

validity of the consents or the partial judgments; (3) “the allegations of the Complaint shall be 

accepted as and deemed true by the Court;” and (4) the Court may consider evidence “without 

regard to the standards for summary judgment contained in Rule 56(c) of the Federal Rules of 

Civil Procedure.”  Id. 

The Commission has now moved for civil penalties pursuant to Section 20(d)(1) of the 

Securities Act, 15 U.S.C. § 77t(d)(1), and Section 21(d)(3)(A) of the Exchange Act, 15 U.S.C. 

§ 78u(d)(3)(A).   

 
1 The $548,435 sum imposed on Roe reflects the $514,502 in proceeds Atlantean received plus an 

additional $33,933 an entity controlled by his wife received from Gomes and FFS Capital.  (Def. Opp’n at 10; 
Donelan Suppl. Decl. ¶¶ 10, 12).  Roe alone is responsible for the $33,933 sum. 

Case 1:20-cv-11092-FDS   Document 130   Filed 10/20/22   Page 4 of 9



 
5 

 

II. Legal Standard 

Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act authorize 

the assessment of civil penalties against those who violate federal securities laws.  15 U.S.C. 

§ 77t(d); 15 U.S.C. § 78u(d)(3).  The statutes “authorize the Court to determine the amount of 

the penalty ‘in light of the facts and circumstances.’”  S.E.C. v. Esposito, 260 F. Supp. 3d 79, 92 

(D. Mass. 2017) (quoting 15 U.S.C. §§ 78u(d)(3)(B)(i), 77t(d)(2)(A)).  Both statutes set out three 

tiers of penalties addressing violations of increasing severity.  “Tier I penalties are generally 

applicable, Tier II penalties require fraud, deceit, manipulation, or a deliberate or reckless 

disregard of a regulatory requirement, and Tier III penalties require the Tier II elements plus 

substantial losses or . . . significant risk of substantial losses to other persons.”  S.E.C. v. Kern, 

425 F.3d 143, 153 (2d Cir. 2005) (internal citations and quotation marks omitted).  “In 

determining the appropriate fine, courts have considered factors including the egregiousness of 

the violation, the defendant’s willingness or failure to admit wrongdoing, the isolated or repeated 

nature of the violations, the degree of scienter involved, the defendant’s cooperation or lack 

thereof with authorities, and the defendant’s current financial condition.”  Esposito, 260 F. Supp. 

3d at 93. 

A civil penalty may not exceed the larger of (1) a defendant’s gross pecuniary gain or (2) 

the maximum amount fixed by regulation.  See 15 U.S.C. §§ 77t(d)(2); 78u(d)(3)(B).  According 

to the SEC, for Roe, the maximum first-tier penalty is $10,360 per violation, the maximum 

second-tier penalty is $103,591 per violation, and the maximum third-pier penalty is $207,183 

per violation.  (Plaintiff’s Mem. at 11-12 (citing 17 C.F.R. § 201.1001(b)).  For Atlantean, the 

maximum first-tier penalty is $103,591 per violation, the maximum second-tier penalty is 

$517,955 per violation, and the maximum third-tier penalty is $1,035,909 per violation.  Id.     

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6 

 

III. Analysis  

The SEC contends that defendants should each be assessed a third-tier penalty of 

$300,000 because their violations “facilitated a fraud that directly or indirectly resulted in 

substantial losses or created a significant risk of substantial losses to other persons who decided 

to buy the microcap securities dumped into the market by the Initial Sandy Steele Shareholders 

and the Gomes Group.”  (Plaintiff’s Mem. at 13).   

Defendants oppose the civil penalty assessment on the basis that it “effectively seeks a 

double recovery” given Roe’s disgorgement of $548,435 plus interest on behalf of both 

defendants.  (Defs. Opp’n at 1).  Defendants also contend that Atlantean consented to joint and 

several liability with Roe and should not receive a separate penalty.  And they assert that the 

proposed penalty is disproportionate to their role in the securities scheme.  Instead, defendants 

request a civil penalty of $100,000 against Roe individually or divided between Roe and 

Atlantean.  (Id. at 2). 

Under the terms of the partial judgments previously entered, defendants are “precluded 

from arguing that [they] did not violate the federal securities laws” and “the allegations of the 

Complaint shall be accepted as and deemed true by the Court.”  (Dkt. No. 106 at ¶ V; Dkt. No. 

107 at ¶ VI).  The predicate requirement for the imposition of civil penalties—that a securities 

violation occurred—has therefore been established.  15 U.S.C. § 77t(d)(1); 15 U.S.C. 

§ 78u(d)(3)(A). 

A third-tier penalty is appropriate here because the evidence shows that defendants did in 

fact facilitate a fraud that at a minimum “created a significant risk of substantial losses to other 

persons.” See 15 U.S.C. §§ 77t(d)(2)(C), 78u(d)(3)(B)(iii).  By participating in a scheme to 

artificially inflate the value of Sandy Steele stock, defendants ran the risk of harming innocent 

Case 1:20-cv-11092-FDS   Document 130   Filed 10/20/22   Page 6 of 9



 
7 

 

investors who were misled by the fraudulent promotional campaign and whose share value 

plummeted when defendants and those they worked with cashed out.  See, e.g., Esposito, 260 F. 

Supp. 3d at 93 (third-tier penalty of $775,000 appropriate where defendant “caused investors to 

suffer substantial losses when the [] shares they had bought became worthless after the 

conversion of [] debt and the dumping of millions of [] shares into the public markets”). 

Applying the factors generally considered by courts in assessing civil penalties leads to 

the same conclusion.  While Roe and Atlantean have consented to judgments admitting 

violations of the securities statutes, the securities violations were egregious, generating at least 

$1.8 million in proceeds at the expense of unsuspecting investors.  Defendants’ misconduct was 

prolonged, lasting for more than a year.  And Roe was sanctioned $50,000 in 2018 for playing a 

similar role in another securities-fraud scheme.  Given defendants’ history of involvement with 

other members of the Sandy Steele control group and Roe’s prior involvement in SEC 

enforcement proceedings, defendants were at the very least reckless in not knowing that they 

were engaged in the illegal sale of unregistered stocks and the defrauding of investors.2  Finally, 

neither defendant has submitted a statement of financial condition indicating that they lack assets 

to pay the penalty. 

Comparing the Commission’s proposed penalty to that imposed upon other participants 

in the scheme supports that result.  Gomes received a civil penalty of $390,094 in addition to 

disgorgement of $1,153,058 in net profits plus prejudgment interest.  (Dkt. No. 80 at ¶ VII).  

While defendants Roe and Atlantean participated in fewer transactions and received fewer 

financial benefits, they were nevertheless active and necessary participants in the Sandy Steele 

scheme and a comparable, if not quite equal, penalty is justified.  

 
2 Roe’s scienter can be attributed to Atlantean, as Roe is the owner and sole director.  See Esposito, 260 F. 

Supp. 3d at 91. 

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Defendants’ contention that the partial judgments against Roe and Atlantean imposed a 

joint cap at $300,000 is inconsistent with the language of the agreements.  Each judgment states: 

“The Commission agrees that it will not seek a civil penalty from Defendant in excess of 

$300,000.”  (Dkt. No. 106 at ¶ V; Dkt. No. 107 at ¶ VI).  The use of the singular “defendant” 

makes clear that the $300,000 cap applies to each defendant individually, not jointly.  

Furthermore, civil penalties may not be ordered jointly and severally and should be assessed 

separately.  See S.E.C. v. Pentagon Capital Mgmt. PLC, 725 F.3d 279, 287-88 (2d Cir. 2013); 

S.E.C. v. DFRF Enterprises LLC, 384 F. Supp. 3d 129, 130 n.1 (D. Mass 2019). 

Finally, defendants’ argument that Atlantean should not be subject to a separate penalty 

because Roe has disgorged all profits received by Atlantean overlooks the fact that disgorgement 

and civil penalties serve entirely different purposes.  While “[d]isgorgement is an equitable 

remedy designed to benefit investor victims,” S.E.C. v. Knox, 2022 WL 1912877, at *3 (D. Mass. 

June 3, 2022), “[t]he imposition of civil penalties is intended to ‘penalize the defendant for 

illegal conduct’ and deter future securities violations,” S.E.C. v. Weed, 315 F. Supp. 3d 667, 677 

(D. Mass. 2018) (internal alterations omitted) (quoting S.E.C. v. Sargent, 329 F.3d 34, 41 (1st 

Cir. 2003)).  While the purpose of disgorgement may be satisfied by either Atlantean or Roe 

forfeiting the profits illegally obtained, deterrence of future violations—by the defendants or 

other actors—is best achieved by imposing a penalty upon both.   

There remains the question of the amount of the penalty.  The SEC does not indicate how 

it arrived at the proposed penalty of $300,000 for Roe, which exceeds the $207,183 Tier 3 

maximum for each violation by a natural person set by the regulation. 3   Although the proposed 

amount as to Roe does not exceed the total pecuniary gain he received ($548,435), the SEC seeks 

 
3 Atlantean’s penalty does not exceed the Tier 3 maximum for “other persons” ($1,035,909). 

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a $300,000 penalty against both Roe and Atlantean, which as a practical matter would result in a 

$600,000 total penalty on a $548,435 total gain.  Although perhaps not required by law, under 

the circumstances, the Court will impose a penalty as to Roe in the amount of $248,435, which it 

finds to be reasonable and appropriate. 

IV. Conclusion 

For the foregoing reasons, the motion of plaintiff Securities and Exchange Commission is 

GRANTED in part.  Final judgments will be entered against Douglas Roe and Atlantean 

Management Corporation incorporating the terms of the prior judgments and imposing civil 

penalties in the amount of $248,435 against Roe and $300,000 against Atlantean.  

So Ordered. 
 
 /s/ F. Dennis Saylor IV_____________ 
 F. Dennis Saylor IV 
Dated:  October 20, 2022 Chief Judge, United States District Court 
 

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	I. Background
	A. Factual Background
	B. Procedural Background

	II. Legal Standard
	III. Analysis
	IV. Conclusion