SEC v. ROGER KNOX; WINTERCAP S.A.; MICHAEL T. GASTAUER; WB21 US INC.; SILVERTON SA INC.; WB21 NA INC., et al., No. 1:18-cv-12058, District of Massachusetts (June 8, 2022) — Judgment

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

CIVIL ACTION NO. 18-12058-RGS

SECURITIES AND EXCHANGE COMMISSION,
Plaintiff

v.

ROGER KNOX, WINTERCAP S.A., MICHAEL T. GASTAUER, WB21 US
INC., SILVERTON SA INC., WB21 NA INC., C CAPITAL CORP.,
WINTERCAP SA INC., and B2 CAP INC.,
Defendants

and

RAIMUND GASTAUER, SIMONE GASTAUER FOEHR, B21 LTD.,
SHAMAL INTERNATIONAL FZE, and WB21 DMCC,
Relief Defendants

MEMORANDUM AND ORDER
ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

June 3, 2022

STEARNS, D.J.
The United   States   Securities   and   Exchange   Commission   (the
Commission or   SEC)   brought   this   case   against   the   perpetrators   of   a
transnational  securities  fraud  involving  the  sale  of  over  $150  million  of
unregistered penny stocks.    Before the court is the Commission’s motion for
summary  judgment  against  certain  of  the  defendants,  WB21 US  Inc.,
Silverton SA Inc., WB21 NA Inc., C Capital Corp., Wintercap SA Inc., and B2

2

Cap Inc. (the Entity Defendants),  and some of the alleged beneficiaries of the
scheme, Raimund   Gastauer,   B21   Ltd.,   and   WB21   DMCC   (the   Relief
Defendants).    The Commission accuses the Entity Defendants of aiding and
abetting  violations  of  Sections  5(a),  5(c),  and  17(a)  of  the  Securities  Act  of
1933 (Securities Act),  Section  10(b)  of  the  Securities  Exchange  Act  of  1934
(Exchange   Act),   and   Rule   10b-5   thereunder.      As   against   the   Relief
Defendants, the Commission seeks summary judgment on claims of unjust
enrichment.      The   only   defendant   to   oppose   the   motion   is   Raimund
Gastauer (Gastauer),  who  argues  that  he  is  not  a  proper  Relief  Defendant.
For the following reasons, the motion will be allowed in part and denied in
part.
BACKGROUND
Defendant Roger Knox orchestrated the scheme through Switzerland-
based  Wintercap  SA  (formerly  known  as  Silverton  SA).
1
    Wintercap  SA’s
platform allowed public company “control persons”   to make secret sales of
securities  in  violation  of  disclosure  and  registration  requirements.     The
control  persons  typically  hid ownership  of  the  shares  through  the  use  of

1
  The  court  will  refer  to  Knox  and  Wintercap  SA  collectively  as  the
Knox Defendants.

3

nominee entities.     They then transferred blocks of the shares to Wintercap
SA, which deposited them in omnibus brokerage accounts.   Investors who
purchased the  shares  were unaware  that  the  true sellers  were  corporate
insiders  dumping  shares  at  a  hyped-up  value.    Knox  earned  millions  of
dollars in fees from these sales from 2015 until his arrest in October of 2018.
Defendant Michael Gastauer owned the WB21 group, which included
the Entity Defendants.    WB21 Pte. managed the online money transmittal
service used by the Knox Defendants to launder the proceeds of the control
persons’ fraudulent  sales  through  bank  accounts  held  in  the  names  of  the
Entity   Defendants.        When   banks   became   suspicious   of   the   Entity
Defendants’ churning  of  the  accounts,   Michael  Gastauer  lied  about  the
reasons for the transfers.
Michael Gastauer also transferred money out of the Entity Defendants’
accounts for  the  benefit  of  the  Relief  Defendants.      According  to  the
Commission, Relief Defendant Raimund Gastauer received a net amount of
$3,315,305  in  illicit  funds,  while  $824,689 was  fraudulently  transferred to
B21 Ltd. and $554,460 to WB21 DMCC.   Raimund Gastauer disputes that
he received  the  lion’s  share  of  the  amount  the  SEC  identifies  and  that  the
transfers to him were proceeds of the fraud.

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DISCUSSION
Summary judgment is appropriate where “the movant shows that there
is  no  genuine  dispute  as  to  any  material  fact  and  the  movant  is  entitled  to
judgment as a matter of law.”    Fed R. Civ. P. 56(a).    A dispute is genuine
where the evidence, viewed in the light most flattering to the nonmovant, is
such that a reasonable jury could resolve the dispute in favor of either party.
See S.E.C.  v.  Ficken,  546  F.3d  45,  51  (1st  Cir.  2008).    A  fact  is  material
“when  it  has  potential  of  changing  a  case’s  outcome.”    Doe  v.  Trs.  Of  Bos.
Coll., 892 F.3d 67, 79 (1st Cir. 2018).    “To succeed, the moving party must
show that there is an absence of evidence to support the nonmoving party’s
position.”    Rogers v. Fair, 902 F.2d 140, 143 (1st Cir. 1990).    The burden
then  shifts  to  the  nonmoving  party  to  “adduce  specific,  provable  facts
demonstrating that there is a triable issue.”   Id.
Aiding and Abetting Liability of the Entity Defendants
To establish aiding and abetting liability under the securities laws, the
SEC must prove: (1) “a primary violation was committed”; (2) “the defendant
was  generally  aware  that  his  role  or  conduct  was  part  of  an  overall  activity
that  was  improper”;  and  (3)  “the  defendant  knowingly  and  substantially
assisted  in  the  primary  violation.”    S.E.C.  v.  Tambone,  550  F.3d  106,  144

5

(1st Cir. 2008), rev’d on other grounds, 597 F.3d 436 (1st Cir. 2010); see also
Graham v. S.E.C., 222 F.3d 994, 1000 (D.C. Cir. 2000).
(1) Aiding and Abetting: Fraud Violations
Section 17(a) of the Securities Act makes it unlawful “for any person in
the offer or sale of any securities” to “employ any device, scheme, or artifice
to defraud.”    15 U.S.C. § 77q(a)(1).    Similarly, Exchange Act Section 10(b)
provides  that  it  is  unlawful  “[t]o  use  or  employ,  in  connection  with  the
purchase or sale of any security registered on a national securities exchange
or any security not so registered . . . any manipulative or deceptive device or
contrivance.”    15  U.S.C.  §  78j(b).    Rule  10b-5 also prohibits fraud or deceit
“in  connection  with  the  purchase  or  sale  of  any  security.”      17   C.F.R.
§ 240.10b-5.      Liability  under  each  provision  also requires a  showing  of
materiality  and  scienter.    See Flannery  v.  S.E.C.,  810  F.3d  1,  9  (1st  Cir.
2015).
The Knox Defendants admitted that they engaged in securities fraud.
Knox pled guilty to violating Section 10(b) by operating Wintercap SA as  a
vehicle  to  disguise  the  sales  by public  company  control  persons  of  inflated
shares, thereby defrauding investors.   See Tr. of Rule 11 Hearing at 17-23,
United States v. Knox, No. 18-cr-10385 (Dkt # 102).

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The  SEC  has  established,  and  the  Entity  Defendants  do  not  contend
otherwise, that they were aware of the fraud and knowingly and substantially
assisted in its execution.    See Statement of Material Facts (SOF) (Dkt # 232)
¶¶  38,  49,  57,  66,  78,  83,  90; see also SOF  ¶¶  91-96 (laying  out  Michael
Gastauer’s role directing the fraudulent activities of the Entity Defendants).
(2) Aiding and Abetting: Registration Violations
Second, the SEC has also established that the Entity Defendants aided
and abetted the Knox Defendants’ violations of Sections 5(a) and 5(c) of the
Securities Act, and again, the Entity Defendants do not contest their liability.
Section 5(a) makes it unlawful to sell or transport an unregistered security
through the mail or interstate commerce, see 15 U.S.C. § 77e(a), while Section
5(c) prohibits persons from offering to sell or buy unregistered securities, see
15 U.S.C. § 77e(c).    To establish a violation of Sections 5(a) and 5(c), the SEC
must show that “(1) no registration statement was in effect for the securities
in question at the time they were sold; (2) the defendant directly or indirectly
sold or offered to sell the securities; and (3) the sale or offer of sale was made
through  interstate  commerce.”    S.E.C.  v.  Jones,  300  F.  Supp.  3d  312,  315
(D. Mass. 2018), citing SEC v. CMKM Diamonds, Inc., 729 F.3d 1248, 1255
(9th Cir. 2013).

7

As  the  SEC’s  evidence  demonstrates,  the Knox  Defendants  were
primary  violators  of  Section  5.      Of  the  issuers  whose  securities  Wintercap
SA  traded  on  behalf  of  its  control  group  clients,  eighteen  did  not  file
registration   statements   disclosing   the   sales   through   Wintercap   SA’s
brokerage  accounts.   See SOF  ¶  30.      Further,  Knox  admitted  to  selling
unregistered penny stocks through the Wintercap SA platform, which took
advantage  of  interstate  wire  and  banking  systems.     See  id.  ¶¶  18,  25.
Accordingly, the Commission has shown that the Knox Defendants violated
Section  5.    It  is  undisputed  that the  Entity  Defendants  were  aware  of  the
Knox    Defendants’    registration    violations    and    provided    substantial
assistance.
Injunctive Relief, Civil Penalties, and Disgorgement Against the
Entity Defendants
(1) Injunctive Relief
 The  Commission  seeks  to  permanently  enjoin the  Entity  Defendants
from  engaging  in  further  violations  of  the  securities  laws.
2
    See 15  U.S.C.
§ 77t(b); 15 U.S.C. § 78u(d)(1).    Injunctive relief is appropriate when there
is a “reasonable likelihood of future violations,” which is assessed by looking

2
  The  court  previously  entered  a  preliminary  junction  against  the
Entity Defendants.   See Order (Dkt # 46) at 5-6.

8

at “the nature of the violation, including its egregiousness and its isolated or
repeated  nature,  as  well  as  whether  the  defendants  will,  owing  to  their
occupation,  be  in  a  position  to  violate  again .  .  .  .  [and]  whether  the
defendants  have  recognized  the  wrongfulness  of  their  conduct.”     S.E.C.  v.
Sargent, 329 F.3d 34, 39 (1st Cir. 2003).    The Entity Defendants, for their
part, do not contest the SEC’s request that permanent injunctions issue.
While no one factor is dispositive, the court agrees that the conduct of
the Entity Defendants was egregious.    They were integral participants in the
money laundering and have not acknowledged responsibility for the fraud,
as  evidenced  by  their  failure  to  respond  to  the  SEC’s  motion  for  summary
judgment.    The  court  will  issue  permanent  injunctions  against  the  Entity
Defendants.
(2) Civil Monetary Penalties
The Commission also seeks an order imposing a $1,035,909 third-tier
civil  monetary  penalty  against each  Entity  Defendant.     See 15  U.S.C.
§ 77t(d); 15 U.S.C. § 78u(d).   A  third-tier  penalty  requires  a  finding  that  a
defendant’s  violation  involved  fraud,  deceit,  or  manipulation,  and  resulted
in substantial losses or created a significant chance of substantial losses to
others.      See 15   U.S.C.   §   77t(d)(2)(B)-(C).        While   the   relevant   tier

9

determines  the  maximum  penalty  a  court  may  impose,  the  size  of  a  civil
monetary penalty is ultimately within the court’s discretion.   See S.E.C. v.
Lemelson, 2022 WL 952264, at *4 (D. Mass. Mar. 30, 2022).    The relevant
factors  courts  look  to  in  determining  an  appropriate  penalty  include  “the
egregiousness  of  the  violation,  the  willingness  to  admit  wrongdoing,  the
isolated or repeated nature of the violations, the degree of scienter involved,
the   defendant’s   willingness   to   cooperate   with   the   authorities   and   the
defendant’s  current  financial  situation.”    S.E.C.  v.  Weed,  315  F.  Supp.  3d
667, 677 (D. Mass. 2018), citing S.E.C. v. Esposito, 260 F. Supp. 3d 79, 93
(D. Mass. 2017).
The Commission argues that the Entity Defendants’ conduct qualifies
for  a  third-tier  penalty,  and  that  the  court  should  exercise  its  discretion  to
award  the  maximum  $1,035,909  penalty  against  each  Entity  Defendant.
See 17 C.F.R. § 201.1001(b).   After reviewing the relevant factors, the court
agrees  that  the  maximum  third-tier  penalty  is  warranted.     The  Entity
Defendants’  conduct  consisted  of  deceit  and  manipulation  (in  the  form  of
Michael Gastauer’s lies to banks) and was a necessary component of a fraud
that  resulted  in  significant  losses  to  investors.     The  Entity  Defendants’
violations were deliberate, egregious, and long-lasting.    They have neither

10

cooperated  nor  admitted  wrongdoing,  nor    have  they  produced  evidence
suggesting an inability to pay.   Accordingly, the court will award third-tier
civil monetary penalties of $1,035,909 against each Entity Defendant.
(3) Disgorgement and Prejudgment Interest
The  Commission  further  seeks  an order  of  disgorgement  against  the
Entity   Defendants.      See 15   U.S.C.   § 78u(d)(7).        Disgorgement   is   an
equitable  remedy  designed  to  benefit  investor  victims.     See  Liu  v.  S.E.C.,
140  S.  Ct.  1936,  1947  (2020).      Because  disgorgement  is  not  a  punitive
remedy, a disgorgement order must not exceed “a wrongdoer’s net unlawful
profits,” plus interest.   Id. at 1943.   The amount of disgorgement, however,
“need  only  be a  reasonable  approximation  of  profits  causally  connected  to
the  violation,”  and  “[t]he  risk  of  uncertainty  in  calculating  disgorgement
should fall on the wrongdoer whose illegal conduct created that uncertainty.”
S.E.C. v. Happ, 392 F.3d 12, 31 (1st Cir. 2004) (internal citations omitted).
Co-defendants  may  be  jointly  and  severally  liable  for  disgorgement  where
they  were  “partners  engaged  in  concerted  wrongdoing.”    Id.  at  1949;  see
also S.E.C.  v.  Esposito,  2018  WL  2012688,  at  *9  (D.  Mass.  Apr.  30,  2018)
(collecting  cases  and  holding  defendants  jointly  and  severally  liable  for
disgorgement because their violations were “closely intertwined”).

11

The  court  agrees  that  the  Entity  Defendants  are  jointly  and  severally
liable to disgorge their ill-gotten profits.    Michael Gastauer interspersed the
proceeds  from  the  Knox  Defendants’  fraudulent  sales  of  securities  in  the
Entity Defendants’ various accounts before transferring them back to their
clients.    The interchangeable role the Entity Defendants played within the
scheme makes joint and several liability appropriate.   The Commission has
shown  that  the  Entity  Defendants  and  their  related  companies  are  holding
$11,264,415  in  proceeds  from  the  fraud,  see  Decl.  of  Trevor  T.  Donelan
(Donelan  Decl.)  (Dkt  #  233)  ¶  23,  and  seeks  disgorgement  of  that  amount
against  the  Entity  Defendants  with  two  exceptions.      According  to  the
Commission, Entity Defendants Wintercap SA Inc. and B2 Cap Inc. received
lesser proceeds  of  the  fraud  and  should  only  disgorge  the  amounts  that
passed through their accounts: $3,668,900 in the case of Wintercap SA Inc.,
and $2,346,728 in the case of B2 Cap Inc.   See id. ¶ 15.    The court agrees
and will order the Entity Defendants WB21 US Inc., WB21 NA Inc., Silverton
SA  Inc.,  and  C  Capital  Corp.,  jointly  and  severally  liable  to  disgorge
$11,264,415, Wintercap SA Inc. to disgorge $3,668,900, and B2 Cap Inc. to
disgorge $2,346,728.
Considering  the  Entity  Defendants’  retention  of  unlawful  gains,  the

12

court  also  exercises  its  discretion  to  award  prejudgment  interest.      See
Sargent, 329 F.3d at 40.    The court agrees with the Commission’s proposed
adoption of the Internal Revenue Service’s rate for tax underpayment (IRS
Underpayment  Rate),  which  other  courts  have  used  in  the  context  of
securities violations.   See, e.g., S.E.C. v. Druffner, 802 F. Supp. 2d 293, 298
(D. Mass. 2011).    The Commission submits, and the court agrees, that the
starting point for prejudgment interest should be August 14, 2018, when the
Entity Defendants ceased making transfers on behalf of the Knox Defendants
and retained  the  $11,264,415  in  fraudulent  proceeds.     See Donelan  Decl.
¶ 28.        The   Entity   Defendants’   total   joint   and   several   liability   for
disgorgement and prejudgment interest is as follows:
• B2   Cap   Inc.:   $2,708,507   total   ($2,346,728   disgorgement   and
$361,779 prejudgment interest);

• C Capital Corp.: $13,000,974 total ($11,264,415 disgorgement and
$1,736,559 prejudgment interest);

• Silverton SA Inc.: $13,000,974 total ($11,264,415 disgorgement and
$1,736,559 prejudgment interest);

• WB21  NA  Inc.:  $13,000,974  total  ($11,264,415  disgorgement  and
$1,736,559 prejudgment interest);

• WB21  US  Inc.:  $13,000,974  total  ($11,264,415  disgorgement  and
$1,736,559 prejudgment interest); and

• Wintercap SA Inc.: $4,252,418 total ($3,668,900 disgorgement and

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$583,518 prejudgment interest).

Liability of the Relief Defendants
Federal courts possess “broad equitable powers” to order relief against
“non-violating third parties who have received proceeds of others’ violations
to  which  the  third  parties  have  no  legitimate  claim.”      S.E.C.  v.  World
Capital  Mkt.,  Inc.,  864  F.3d  996,  1003  (9th  Cir.  2017);  accord  S.E.C.  v.
Tropikgadget FZE,  2017  WL  722573,  at  *5  (D.  Mass.  Feb.  23,  2017).    The
Commission  must  show  that  the  Relief  Defendants  “(1) ha[ve]  received  ill-
gotten  funds;  and  (2)  do[]  not  have  a  legitimate  claim  to  those  funds.”
S.E.C.  v.  Cavanagh,  155  F.3d  129,  136  (2d  Cir.  1998).    Whether  a  relief
defendant  has  a  legitimate  claim  to  funds  turns  on  whether  it  provided
services  or  value  in  exchange  for  the  funds,  or  whether  it  received  them
gratuitously.    See F.T.C. v. Direct Mktg. Concepts, Inc., 569 F. Supp. 2d 285,
311 (D. Mass. 2008); see also Cavanagh, 155 F.3d at 137 (holding that a relief
defendant did not have legitimate claim to stock she had received as gift).
(1) Unjust Enrichment Claims Against B21 Ltd. and WB21 DMCC
Relief  Defendants  B21  Ltd.  and  WB21  DMCC  do  not  contest  the
Commission’s unjust enrichment claims.    The Commission has shown that
various  Entity  Defendants  controlled  by  Michael  Gastauer  sent  B21  Ltd.

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$554,460,  and  WB21  DMCC  $824,689,  in  proceeds  from  the  fraud.    See
SOF  ¶¶ 98-106.      The  Commission  has  further  demonstrated  that  neither
Relief Defendant conducted business in the United States and thus, neither
performed any services that would have entitled them to these funds.   See
id.    The court will therefore enter summary judgment against B21 Ltd. and
WB21 DMCC on the Commission’s claims of unjust enrichment.
(2) Unjust Enrichment Claim Against Raimund Gastauer
Raimund Gastauer, for his part, denies having received any of the Knox
Defendant  funds  attributed  to  him.    The  Commission contends  that  its
evidence  shows  that  Gastauer  received  a  total  of  $3,315,305  in  fraudulent
proceeds: a December 26, 2017, transfer of $500,000 from Entity Defendant
WB21 US Inc., to a bank account in his name (December 26 Transfer), and
two February 27, 2018, transfers totaling $2,815,305 from Entity Defendant
C Capital Corp., to Grant Saw Solicitors LLP (February 27 Transfers).    The
February  27  Transfers  are  alleged  to  have  been  in  consideration  for  the
purchase of a  London  condominium  in  the  name  of  GFT  Investment
Holdings SA, of which Gastauer was the Trustee.   See Donelan Decl. ¶¶ 29-
30.
Gastauer  makes  two  arguments  in  opposition.      First,  because  the

15

WB21  group  of  companies  pooled  users’  funds  in  omnibus  accounts,  he
contends  that  the  Commission  cannot  prove  that the  Knox  Defendants
owned the WB21 funds transferred to him at the time of the transfers.   He
maintains that all of the funds at issue were either transferred to the control
persons  or  remained  in  WB21  Pte.  accounts (which  records  show  contain
$11,264,415).    Second, Gastauer argues that he did not have an interest in
GFT Investment Holdings when C Capital Corp. transferred the $2,815,305
to  Grant  Saw  that were  used  to  purchase the London  condominium  on  its
behalf.    The  court  rejects  the  first  argument  but  acknowledges the  second
for purposes of summary judgment.
With respect to the disputed Transfers, the undisputed declaration of
Commission   forensic   accountant   Trevor   Donelan establishes   that   the
December 26 Transfer originated with WB21 US Inc., which received 87.4%
of  its  total  deposits  from  Wintercap  SA  accounts  or  from the  accounts  of
other  Entity  Defendants  (with an  additional  6% coming from  accounts  of
nominee entities affiliated with the fraud).   See Donelan Decl. ¶¶ 9-10.    In
similar fashion, the February 27 Transfers originated with C Capital Corp.,
which  received  99.4%  of  its  total  deposits  from  Wintercap  SA  accounts  or
from the accounts of other Entity Defendants.   See id. ¶ 9.

16

Gastauer does not present evidence disputing the forensic accounting
evidence.    Rather, he makes a “netting” argument — that the WB21 group’s
use of omnibus accounts precludes any certainty that the funds he received
were proceeds of the fraud.    This  is a creative theory, and nothing more, in
search of proof.   Conjecture standing alone does not create a disputed issue
of material fact.
Moreover,  the  fact  that  WB21  Pte.  allegedly  has  $11,264,415  of  the
Knox  Defendants’  proceeds  on  hand is  of  no  consequence.    See Donelan
Decl. ¶ 23.    Gastauer argues that WB21 Pte. ledgers — which do not list the
December  26  and  February  27  Transfers —  account  for  all  proceeds  of  the
fraud  except  for  the  $11,264,415  amount,  which  WB21  Pte.  still  holds.
Gastauer does not dispute that the December 26 and February 27 Transfers
took place, and that the Commission has shown by a preponderance of the
evidence that they consisted of proceeds of the fraud.    The court need not
speculate as  to  why  the  December  26  and  February  27  Transfers  were  not
recorded  in  WB21  Pte’s  ledgers;  it  is  enough  that  the  only  evidence  in  the
record shows that the transfers contained proceeds from the fraud, with no
proof to the contrary.
There is, however, a genuine dispute of fact whether the February 27

17

Transfers used to purchase the London condominium were for the benefit of
Gastauer.    The parties agree  that  on  February  27,  2018,  C  Capital  Corp.,
transferred  $2,815,305  to  a  client  account  of  Grant  Saw  in  London.    See
Opp’n  (Dkt  #  242)  at  8.      The  parties further  agree  that  GFT  Investment
Holdings  used  the  proceeds  to  purchase  the  condominium at  3  Dollar  Bay
Place, London.   See id.    However, the parties differ over whether Gastauer
retained an interest in GFT Investment Holdings at the time of the transfer.
Gastauer maintains that  he  had  divested  himself  of  his  interest  in  GFT
Investment Holdings on February 27, 2018, before the Dollar Bay purchase
took place.
The Commission has produced evidence showing that Gastauer signed
the lease and sale contract for the Dollar Bay Property.   See Reply Exs. 131-
133  (Dkt  #  250-6,  250-7,  250-8).    The  Commission  has  also  shown  that
Michael Gastauer sent Grant Saw documents stating that Raimund Gastauer
was  the  sole  director  and  shareholder  of  GFT  Investment  Holdings.     See
Reply Ex. 127 (Dkt # 250-2) at 6-7.    What the Commission has not shown is
that Gastauer ever possessed the funds from the February 27 Transfers, that
he  controlled  GFT  Investment  Holdings at  the  time  of  the  Dollar  Bay
Property purchase, that he controls the Dollar Bay Property now, or that it

18

was purchased for his benefit.   Gastauer for his part has submitted a sworn
declaration that by the time of the purchase of Dollar Bay Property, he was
no  longer  the  sole  director  and  shareholder  of  GFT  Investment  Holdings.
See Gastauer Decl. (Dkt # 244-6) ¶ 6.    While Gastauer’s litigating position
raised issues of credulity, these cannot be resolved on the existing summary
judgment record.
3

The  Commission,  on  the other  hand,  has  established  that  Gastauer
received $500,000 in fraudulent proceeds from the December 26 Transfer.
Gastauer does  not  dispute  that  he  has  no legitimate  claim  to  these  funds.

3
    Gastauer failed produce in discovery some of his evidence in support
of the argument that he was not a director or shareholder of GFT Investment
Holdings at the time of the Dollar Bay purchase.    The court may sanction a
party  that  uses  evidence  it  did  not  produce  in  discovery  unless  the  failure
“was  substantially  justified  or  is  harmless.”      Fed.  R.  Civ.  P.  37(c)(1).
Gastauer equivocates at best over his purported justification that he did not
possess  the  relevant  documents  during  discovery  and  thus  could  not  have
produced them.   See Second Decl. of Raimund Gastauer (Dkt # 254-1) ¶ 5
(stating  that  Gastauer  did  not  “to  the  best  of  [his]  memory”  possess  the
relevant documents, he “believe[s]” he had never seen them before, and that
he  “did  not  recall  any  of  these  documents”  when  he  received  discovery
requests).     Gastauer  states  he  obtained  the  documents  outside  of  the
discovery  process  while  preparing  to  oppose  the  Commission’s  motion  for
summary judgment.   See Sur-reply (Dkt # 254) at 2.    His failure to gather
and produce relevant evidence during the discovery period – which ended in
September  of  2020  –  does  not  justify  surprising  the  Commission  with the
new  documents  now.    As  a  remedy  for  Gastauer’s  discovery  violation,  the
court will  allow  the  Commission  to  conduct  additional  discovery  into
Gastauer’s interest in the Dollar Bay Property and to resubmit its motion for
summary judgment as to that issue or move for a bench trial on the issue.

19

See Gastauer’s Responsive Statement of Material Facts (GSOF) (Dkt # 243)
¶ 108.    Thus, he is a proper relief defendant subject to disgorgement as to
the December 26 Transfer.
Disgorgement Against the Relief Defendants
 The  court  will  order  disgorgement  against  Relief  Defendants  WB21
DMCC and B21 Ltd. in the amount of their undisputed ill  -gotten gains from
the fraud.    The court further orders prejudgment interest as calculated by
the  SEC  using  the  IRS  Underpayment Rate.      Appropriately,  Donelan
calculated  prejudgment  interest  using  the  final  date  each  Relief  Defendant
received  the  relevant  transfers  as  the  starting  date.     See Donelan  Decl.  ¶¶
36-38.    The court orders disgorgement and prejudgment interest as follows:
• WB21 DMCC: $634,645 total ($554,460 disgorgement and $80,185
prejudgment interest); and

• B21  Ltd.:  $943,955  total  ($824,689  disgorgement  and  $119,266
prejudgment interest).
ORDER
For  the  foregoing  reasons,  the  Commission’s  motion  for  summary
judgment  is  ALLOWED  IN  PART  and DENIED  IN  PART.      The  clerk  will
enter judgment against the Entity Defendants and Relief Defendants WB21
DMCC  and  B21  Ltd.    The  court  will  set  a  schedule  for  the  Commission’s

20

additional   discovery   on   Gastauer’s   relationship   with GFT   Investment
Holdings at the time of the Dollar Bay Property purchase.
SO ORDERED.

/s/ Richard G. Stearns  ___________
UNITED STATES DISTRICT JUDGE

UNITED STATES DISTRICT COURT 
DISTRICT OF MASSACHUSETTS 

 
CIVIL ACTION NO. 18-12058-RGS 

 
SECURITIES AND EXCHANGE COMMISSION,  

Plaintiff 
 

v. 
 

ROGER KNOX, WINTERCAP S.A., MICHAEL T. GASTAUER, WB21 US 
INC., SILVERTON SA INC., WB21 NA INC., C CAPITAL CORP., 

WINTERCAP SA INC., and B2 CAP INC.,  
Defendants 

 
and 

 
RAIMUND GASTAUER, SIMONE GASTAUER FOEHR, B21 LTD., 

SHAMAL INTERNATIONAL FZE, and WB21 DMCC,  
Relief Defendants 

 
 

MEMORANDUM AND ORDER  
ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT 

 
June 3, 2022 

 
STEARNS, D.J. 

The United States Securities and Exchange Commission (the 

Commission or SEC) brought this case against the perpetrators of a 

transnational securities fraud involving the sale of over $150 million of 

unregistered penny stocks.  Before the court is the Commission’s motion for 

summary judgment against certain of the defendants, WB21 US Inc., 

Silverton SA Inc., WB21 NA Inc., C Capital Corp., Wintercap SA Inc., and B2 

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2 
 

Cap Inc. (the Entity Defendants), and some of the alleged beneficiaries of the 

scheme, Raimund Gastauer, B21 Ltd., and WB21 DMCC (the Relief 

Defendants).  The Commission accuses the Entity Defendants of aiding and 

abetting violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 

1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 

(Exchange Act), and Rule 10b-5 thereunder.  As against the Relief 

Defendants, the Commission seeks summary judgment on claims of unjust 

enrichment.  The only defendant to oppose the motion is Raimund 

Gastauer (Gastauer), who argues that he is not a proper Relief Defendant.  

For the following reasons, the motion will be allowed in part and denied in 

part.   

BACKGROUND 

Defendant Roger Knox orchestrated the scheme through Switzerland-

based Wintercap SA (formerly known as Silverton SA).1  Wintercap SA’s 

platform allowed public company “control persons” to make secret sales of 

securities in violation of disclosure and registration requirements.  The 

control persons typically hid ownership of the shares through the use of 

 
1 The court will refer to Knox and Wintercap SA collectively as the 

Knox Defendants.  

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nominee entities.  They then transferred blocks of the shares to Wintercap 

SA, which deposited them in omnibus brokerage accounts.  Investors who 

purchased the shares were unaware that the true sellers were corporate 

insiders dumping shares at a hyped-up value.  Knox earned millions of 

dollars in fees from these sales from 2015 until his arrest in October of 2018. 

Defendant Michael Gastauer owned the WB21 group, which included 

the Entity Defendants.  WB21 Pte. managed the online money transmittal 

service used by the Knox Defendants to launder the proceeds of the control 

persons’ fraudulent sales through bank accounts held in the names of the 

Entity Defendants.  When banks became suspicious of the Entity 

Defendants’ churning of the accounts, Michael Gastauer lied about the 

reasons for the transfers. 

Michael Gastauer also transferred money out of the Entity Defendants’ 

accounts for the benefit of the Relief Defendants.  According to the 

Commission, Relief Defendant Raimund Gastauer received a net amount of 

$3,315,305 in illicit funds, while $824,689 was fraudulently transferred to 

B21 Ltd. and $554,460 to WB21 DMCC.  Raimund Gastauer disputes that 

he received the lion’s share of the amount the SEC identifies and that the 

transfers to him were proceeds of the fraud. 

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DISCUSSION   

Summary judgment is appropriate where “the movant shows that there 

is no genuine dispute as to any material fact and the movant is entitled to 

judgment as a matter of law.”  Fed R. Civ. P. 56(a).  A dispute is genuine 

where the evidence, viewed in the light most flattering to the nonmovant, is 

such that a reasonable jury could resolve the dispute in favor of either party.  

See S.E.C. v. Ficken, 546 F.3d 45, 51 (1st Cir. 2008).  A fact is material 

“when it has potential of changing a case’s outcome.”  Doe v. Trs. Of Bos. 

Coll., 892 F.3d 67, 79 (1st Cir. 2018).  “To succeed, the moving party must 

show that there is an absence of evidence to support the nonmoving party’s 

position.”  Rogers v. Fair, 902 F.2d 140, 143 (1st Cir. 1990).  The burden 

then shifts to the nonmoving party to “adduce specific, provable facts 

demonstrating that there is a triable issue.”  Id.   

Aiding and Abetting Liability of the Entity Defendants 

To establish aiding and abetting liability under the securities laws, the 

SEC must prove: (1) “a primary violation was committed”; (2) “the defendant 

was generally aware that his role or conduct was part of an overall activity 

that was improper”; and (3) “the defendant knowingly and substantially 

assisted in the primary violation.”  S.E.C. v. Tambone, 550 F.3d 106, 144 

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(1st Cir. 2008), rev’d on other grounds, 597 F.3d 436 (1st Cir. 2010); see also 

Graham v. S.E.C., 222 F.3d 994, 1000 (D.C. Cir. 2000). 

(1) Aiding and Abetting: Fraud Violations 

Section 17(a) of the Securities Act makes it unlawful “for any person in 

the offer or sale of any securities” to “employ any device, scheme, or artifice 

to defraud.”  15 U.S.C. § 77q(a)(1).  Similarly, Exchange Act Section 10(b) 

provides that it is unlawful “[t]o use or employ, in connection with the 

purchase or sale of any security registered on a national securities exchange 

or any security not so registered . . . any manipulative or deceptive device or 

contrivance.”  15 U.S.C. § 78j(b).  Rule 10b-5 also prohibits fraud or deceit 

“in connection with the purchase or sale of any security.”  17 C.F.R. 

§ 240.10b-5.  Liability under each provision also requires a showing of 

materiality and scienter.  See Flannery v. S.E.C., 810 F.3d 1, 9 (1st Cir. 

2015). 

The Knox Defendants admitted that they engaged in securities fraud. 

Knox pled guilty to violating Section 10(b) by operating Wintercap SA as a 

vehicle to disguise the sales by public company control persons of inflated 

shares, thereby defrauding investors.  See Tr. of Rule 11 Hearing at 17-23, 

United States v. Knox, No. 18-cr-10385 (Dkt # 102). 

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6 
 

The SEC has established, and the Entity Defendants do not contend 

otherwise, that they were aware of the fraud and knowingly and substantially 

assisted in its execution.  See Statement of Material Facts (SOF) (Dkt # 232) 

¶¶ 38, 49, 57, 66, 78, 83, 90; see also SOF ¶¶ 91-96 (laying out Michael 

Gastauer’s role directing the fraudulent activities of the Entity Defendants).   

(2) Aiding and Abetting: Registration Violations 

Second, the SEC has also established that the Entity Defendants aided 

and abetted the Knox Defendants’ violations of Sections 5(a) and 5(c) of the 

Securities Act, and again, the Entity Defendants do not contest their liability.  

Section 5(a) makes it unlawful to sell or transport an unregistered security 

through the mail or interstate commerce, see 15 U.S.C. § 77e(a), while Section 

5(c) prohibits persons from offering to sell or buy unregistered securities, see 

15 U.S.C. § 77e(c).  To establish a violation of Sections 5(a) and 5(c), the SEC 

must show that “(1) no registration statement was in effect for the securities 

in question at the time they were sold; (2) the defendant directly or indirectly 

sold or offered to sell the securities; and (3) the sale or offer of sale was made 

through interstate commerce.”  S.E.C. v. Jones, 300 F. Supp. 3d 312, 315 

(D. Mass. 2018), citing SEC v. CMKM Diamonds, Inc., 729 F.3d 1248, 1255 

(9th Cir. 2013).   

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7 
 

As the SEC’s evidence demonstrates, the Knox Defendants were 

primary violators of Section 5.  Of the issuers whose securities Wintercap 

SA traded on behalf of its control group clients, eighteen did not file 

registration statements disclosing the sales through Wintercap SA’s 

brokerage accounts.  See SOF ¶ 30.  Further, Knox admitted to selling 

unregistered penny stocks through the Wintercap SA platform, which took 

advantage of interstate wire and banking systems.  See id. ¶¶ 18, 25.  

Accordingly, the Commission has shown that the Knox Defendants violated 

Section 5.  It is undisputed that the Entity Defendants were aware of the 

Knox Defendants’ registration violations and provided substantial 

assistance. 

Injunctive Relief, Civil Penalties, and Disgorgement Against the 
Entity Defendants 

(1) Injunctive Relief 

 The Commission seeks to permanently enjoin the Entity Defendants 

from engaging in further violations of the securities laws.2  See 15 U.S.C. 

§ 77t(b); 15 U.S.C. § 78u(d)(1).  Injunctive relief is appropriate when there 

is a “reasonable likelihood of future violations,” which is assessed by looking 

 
2  The court previously entered a preliminary junction against the 

Entity Defendants.  See Order (Dkt # 46) at 5-6. 

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8 
 

at “the nature of the violation, including its egregiousness and its isolated or 

repeated nature, as well as whether the defendants will, owing to their 

occupation, be in a position to violate again . . . . [and] whether the 

defendants have recognized the wrongfulness of their conduct.”  S.E.C. v. 

Sargent, 329 F.3d 34, 39 (1st Cir. 2003).  The Entity Defendants, for their 

part, do not contest the SEC’s request that permanent injunctions issue. 

While no one factor is dispositive, the court agrees that the conduct of 

the Entity Defendants was egregious.  They were integral participants in the 

money laundering and have not acknowledged responsibility for the fraud, 

as evidenced by their failure to respond to the SEC’s motion for summary 

judgment.  The court will issue permanent injunctions against the Entity 

Defendants. 

(2) Civil Monetary Penalties 

The Commission also seeks an order imposing a $1,035,909 third-tier 

civil monetary penalty against each Entity Defendant.  See 15 U.S.C. 

§ 77t(d); 15 U.S.C. § 78u(d).  A third-tier penalty requires a finding that a 

defendant’s violation involved fraud, deceit, or manipulation, and resulted 

in substantial losses or created a significant chance of substantial losses to 

others.  See 15 U.S.C. § 77t(d)(2)(B)-(C).  While the relevant tier 

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9 
 

determines the maximum penalty a court may impose, the size of a civil 

monetary penalty is ultimately within the court’s discretion.  See S.E.C. v. 

Lemelson, 2022 WL 952264, at *4 (D. Mass. Mar. 30, 2022).  The relevant 

factors courts look to in determining an appropriate penalty include “the 

egregiousness of the violation, the willingness to admit wrongdoing, the 

isolated or repeated nature of the violations, the degree of scienter involved, 

the defendant’s willingness to cooperate with the authorities and the 

defendant’s current financial situation.”  S.E.C. v. Weed, 315 F. Supp. 3d 

667, 677 (D. Mass. 2018), citing S.E.C. v. Esposito, 260 F. Supp. 3d 79, 93 

(D. Mass. 2017). 

The Commission argues that the Entity Defendants’ conduct qualifies 

for a third-tier penalty, and that the court should exercise its discretion to 

award the maximum $1,035,909 penalty against each Entity Defendant.  

See 17 C.F.R. § 201.1001(b).  After reviewing the relevant factors, the court 

agrees that the maximum third-tier penalty is warranted.  The Entity 

Defendants’ conduct consisted of deceit and manipulation (in the form of 

Michael Gastauer’s lies to banks) and was a necessary component of a fraud 

that resulted in significant losses to investors.  The Entity Defendants’ 

violations were deliberate, egregious, and long-lasting.  They have neither 

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10 
 

cooperated nor admitted wrongdoing, nor have they produced evidence 

suggesting an inability to pay.  Accordingly, the court will award third-tier 

civil monetary penalties of $1,035,909 against each Entity Defendant. 

(3) Disgorgement and Prejudgment Interest 

The Commission further seeks an order of disgorgement against the 

Entity Defendants.  See 15 U.S.C. § 78u(d)(7).  Disgorgement is an 

equitable remedy designed to benefit investor victims.  See Liu v. S.E.C., 

140 S. Ct. 1936, 1947 (2020).  Because disgorgement is not a punitive 

remedy, a disgorgement order must not exceed “a wrongdoer’s net unlawful 

profits,” plus interest.  Id. at 1943.  The amount of disgorgement, however, 

“need only be a reasonable approximation of profits causally connected to 

the violation,” and “[t]he risk of uncertainty in calculating disgorgement 

should fall on the wrongdoer whose illegal conduct created that uncertainty.”  

S.E.C. v. Happ, 392 F.3d 12, 31 (1st Cir. 2004) (internal citations omitted).   

Co-defendants may be jointly and severally liable for disgorgement where 

they were “partners engaged in concerted wrongdoing.”  Id. at 1949; see 

also S.E.C. v. Esposito, 2018 WL 2012688, at *9 (D. Mass. Apr. 30, 2018) 

(collecting cases and holding defendants jointly and severally liable for 

disgorgement because their violations were “closely intertwined”). 

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11 
 

The court agrees that the Entity Defendants are jointly and severally 

liable to disgorge their ill-gotten profits.  Michael Gastauer interspersed the 

proceeds from the Knox Defendants’ fraudulent sales of securities in the 

Entity Defendants’ various accounts before transferring them back to their 

clients.  The interchangeable role the Entity Defendants played within the 

scheme makes joint and several liability appropriate.  The Commission has 

shown that the Entity Defendants and their related companies are holding 

$11,264,415 in proceeds from the fraud, see Decl. of Trevor T. Donelan 

(Donelan Decl.) (Dkt # 233) ¶ 23, and seeks disgorgement of that amount 

against the Entity Defendants with two exceptions.  According to the 

Commission, Entity Defendants Wintercap SA Inc. and B2 Cap Inc. received 

lesser proceeds of the fraud and should only disgorge the amounts that 

passed through their accounts: $3,668,900 in the case of Wintercap SA Inc., 

and $2,346,728 in the case of B2 Cap Inc.  See id. ¶ 15.  The court agrees 

and will order the Entity Defendants WB21 US Inc., WB21 NA Inc., Silverton 

SA Inc., and C Capital Corp., jointly and severally liable to disgorge 

$11,264,415, Wintercap SA Inc. to disgorge $3,668,900, and B2 Cap Inc. to 

disgorge $2,346,728. 

Considering the Entity Defendants’ retention of unlawful gains, the 

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12 
 

court also exercises its discretion to award prejudgment interest.  See 

Sargent, 329 F.3d at 40.  The court agrees with the Commission’s proposed 

adoption of the Internal Revenue Service’s rate for tax underpayment (IRS 

Underpayment Rate), which other courts have used in the context of 

securities violations.  See, e.g., S.E.C. v. Druffner, 802 F. Supp. 2d 293, 298 

(D. Mass. 2011).  The Commission submits, and the court agrees, that the 

starting point for prejudgment interest should be August 14, 2018, when the 

Entity Defendants ceased making transfers on behalf of the Knox Defendants 

and retained the $11,264,415 in fraudulent proceeds.  See Donelan Decl. 

¶ 28.  The Entity Defendants’ total joint and several liability for 

disgorgement and prejudgment interest is as follows: 

• B2 Cap Inc.: $2,708,507 total ($2,346,728 disgorgement and 
$361,779 prejudgment interest); 
 

• C Capital Corp.: $13,000,974 total ($11,264,415 disgorgement and 
$1,736,559 prejudgment interest); 

 
• Silverton SA Inc.: $13,000,974 total ($11,264,415 disgorgement and 

$1,736,559 prejudgment interest); 
 

• WB21 NA Inc.: $13,000,974 total ($11,264,415 disgorgement and 
$1,736,559 prejudgment interest); 

 
• WB21 US Inc.: $13,000,974 total ($11,264,415 disgorgement and 

$1,736,559 prejudgment interest); and 
 

• Wintercap SA Inc.: $4,252,418 total ($3,668,900 disgorgement and 

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13 
 

$583,518 prejudgment interest). 
 
Liability of the Relief Defendants 

Federal courts possess “broad equitable powers” to order relief against 

“non-violating third parties who have received proceeds of others’ violations 

to which the third parties have no legitimate claim.”  S.E.C. v. World 

Capital Mkt., Inc., 864 F.3d 996, 1003 (9th Cir. 2017); accord S.E.C. v. 

Tropikgadget FZE, 2017 WL 722573, at *5 (D. Mass. Feb. 23, 2017).  The 

Commission must show that the Relief Defendants “(1) ha[ve] received ill-

gotten funds; and (2) do[] not have a legitimate claim to those funds.”  

S.E.C. v. Cavanagh, 155 F.3d 129, 136 (2d Cir. 1998).  Whether a relief 

defendant has a legitimate claim to funds turns on whether it provided 

services or value in exchange for the funds, or whether it received them 

gratuitously.  See F.T.C. v. Direct Mktg. Concepts, Inc., 569 F. Supp. 2d 285, 

311 (D. Mass. 2008); see also Cavanagh, 155 F.3d at 137 (holding that a relief 

defendant did not have legitimate claim to stock she had received as gift).   

(1) Unjust Enrichment Claims Against B21 Ltd. and WB21 DMCC 

Relief Defendants B21 Ltd. and WB21 DMCC do not contest the 

Commission’s unjust enrichment claims.  The Commission has shown that 

various Entity Defendants controlled by Michael Gastauer sent B21 Ltd. 

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14 
 

$554,460, and WB21 DMCC $824,689, in proceeds from the fraud.  See 

SOF ¶¶ 98-106.  The Commission has further demonstrated that neither 

Relief Defendant conducted business in the United States and thus, neither 

performed any services that would have entitled them to these funds.  See 

id.  The court will therefore enter summary judgment against B21 Ltd. and 

WB21 DMCC on the Commission’s claims of unjust enrichment.  

(2) Unjust Enrichment Claim Against Raimund Gastauer 

Raimund Gastauer, for his part, denies having received any of the Knox 

Defendant funds attributed to him.  The Commission contends that its 

evidence shows that Gastauer received a total of $3,315,305 in fraudulent 

proceeds: a December 26, 2017, transfer of $500,000 from Entity Defendant 

WB21 US Inc., to a bank account in his name (December 26 Transfer), and 

two February 27, 2018, transfers totaling $2,815,305 from Entity Defendant 

C Capital Corp., to Grant Saw Solicitors LLP (February 27 Transfers).  The 

February 27 Transfers are alleged to have been in consideration for the 

purchase of a London condominium in the name of GFT Investment 

Holdings SA, of which Gastauer was the Trustee.  See Donelan Decl. ¶¶ 29-

30.   

Gastauer makes two arguments in opposition.  First, because the 

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15 
 

WB21 group of companies pooled users’ funds in omnibus accounts, he 

contends that the Commission cannot prove that the Knox Defendants 

owned the WB21 funds transferred to him at the time of the transfers.  He 

maintains that all of the funds at issue were either transferred to the control 

persons or remained in WB21 Pte. accounts (which records show contain 

$11,264,415).  Second, Gastauer argues that he did not have an interest in 

GFT Investment Holdings when C Capital Corp. transferred the $2,815,305 

to Grant Saw that were used to purchase the London condominium on its 

behalf.  The court rejects the first argument but acknowledges the second 

for purposes of summary judgment. 

With respect to the disputed Transfers, the undisputed declaration of 

Commission forensic accountant Trevor Donelan establishes that the 

December 26 Transfer originated with WB21 US Inc., which received 87.4% 

of its total deposits from Wintercap SA accounts or from the accounts of 

other Entity Defendants (with an additional 6% coming from accounts of 

nominee entities affiliated with the fraud).  See Donelan Decl. ¶¶ 9-10.  In 

similar fashion, the February 27 Transfers originated with C Capital Corp., 

which received 99.4% of its total deposits from Wintercap SA accounts or 

from the accounts of other Entity Defendants.  See id. ¶ 9. 

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16 
 

Gastauer does not present evidence disputing the forensic accounting 

evidence.  Rather, he makes a “netting” argument — that the WB21 group’s 

use of omnibus accounts precludes any certainty that the funds he received 

were proceeds of the fraud.  This is a creative theory, and nothing more, in 

search of proof.  Conjecture standing alone does not create a disputed issue 

of material fact.   

Moreover, the fact that WB21 Pte. allegedly has $11,264,415 of the 

Knox Defendants’ proceeds on hand is of no consequence.  See Donelan 

Decl. ¶ 23.  Gastauer argues that WB21 Pte. ledgers — which do not list the 

December 26 and February 27 Transfers — account for all proceeds of the 

fraud except for the $11,264,415 amount, which WB21 Pte. still holds.  

Gastauer does not dispute that the December 26 and February 27 Transfers 

took place, and that the Commission has shown by a preponderance of the 

evidence that they consisted of proceeds of the fraud.  The court need not 

speculate as to why the December 26 and February 27 Transfers were not 

recorded in WB21 Pte’s ledgers; it is enough that the only evidence in the 

record shows that the transfers contained proceeds from the fraud, with no 

proof to the contrary. 

There is, however, a genuine dispute of fact whether the February 27 

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17 
 

Transfers used to purchase the London condominium were for the benefit of 

Gastauer.  The parties agree that on February 27, 2018, C Capital Corp., 

transferred $2,815,305 to a client account of Grant Saw in London.  See 

Opp’n (Dkt # 242) at 8.  The parties further agree that GFT Investment 

Holdings used the proceeds to purchase the condominium at 3 Dollar Bay 

Place, London.  See id.  However, the parties differ over whether Gastauer 

retained an interest in GFT Investment Holdings at the time of the transfer. 

Gastauer maintains that he had divested himself of his interest in GFT 

Investment Holdings on February 27, 2018, before the Dollar Bay purchase 

took place.  

The Commission has produced evidence showing that Gastauer signed 

the lease and sale contract for the Dollar Bay Property.  See Reply Exs. 131-

133 (Dkt # 250-6, 250-7, 250-8).  The Commission has also shown that 

Michael Gastauer sent Grant Saw documents stating that Raimund Gastauer 

was the sole director and shareholder of GFT Investment Holdings.  See 

Reply Ex. 127 (Dkt # 250-2) at 6-7.  What the Commission has not shown is 

that Gastauer ever possessed the funds from the February 27 Transfers, that 

he controlled GFT Investment Holdings at the time of the Dollar Bay 

Property purchase, that he controls the Dollar Bay Property now, or that it 

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18 
 

was purchased for his benefit.  Gastauer for his part has submitted a sworn 

declaration that by the time of the purchase of Dollar Bay Property, he was 

no longer the sole director and shareholder of GFT Investment Holdings.  

See Gastauer Decl. (Dkt # 244-6) ¶ 6.  While Gastauer’s litigating position 

raised issues of credulity, these cannot be resolved on the existing summary 

judgment record.3   

The Commission, on the other hand, has established that Gastauer 

received $500,000 in fraudulent proceeds from the December 26 Transfer.  

Gastauer does not dispute that he has no legitimate claim to these funds.  

 
3  Gastauer failed produce in discovery some of his evidence in support 

of the argument that he was not a director or shareholder of GFT Investment 
Holdings at the time of the Dollar Bay purchase.  The court may sanction a 
party that uses evidence it did not produce in discovery unless the failure 
“was substantially justified or is harmless.”  Fed. R. Civ. P. 37(c)(1).  
Gastauer equivocates at best over his purported justification that he did not 
possess the relevant documents during discovery and thus could not have 
produced them.  See Second Decl. of Raimund Gastauer (Dkt # 254-1) ¶ 5 
(stating that Gastauer did not “to the best of [his] memory” possess the 
relevant documents, he “believe[s]” he had never seen them before, and that 
he “did not recall any of these documents” when he received discovery 
requests).  Gastauer states he obtained the documents outside of the 
discovery process while preparing to oppose the Commission’s motion for 
summary judgment.  See Sur-reply (Dkt # 254) at 2.  His failure to gather 
and produce relevant evidence during the discovery period – which ended in 
September of 2020 – does not justify surprising the Commission with the 
new documents now.  As a remedy for Gastauer’s discovery violation, the 
court will allow the Commission to conduct additional discovery into 
Gastauer’s interest in the Dollar Bay Property and to resubmit its motion for 
summary judgment as to that issue or move for a bench trial on the issue. 

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See Gastauer’s Responsive Statement of Material Facts (GSOF) (Dkt # 243) 

¶ 108.  Thus, he is a proper relief defendant subject to disgorgement as to 

the December 26 Transfer. 

Disgorgement Against the Relief Defendants 

 The court will order disgorgement against Relief Defendants WB21 

DMCC and B21 Ltd. in the amount of their undisputed ill-gotten gains from 

the fraud.  The court further orders prejudgment interest as calculated by 

the SEC using the IRS Underpayment Rate.  Appropriately, Donelan 

calculated prejudgment interest using the final date each Relief Defendant 

received the relevant transfers as the starting date.  See Donelan Decl. ¶¶ 

36-38.  The court orders disgorgement and prejudgment interest as follows: 

• WB21 DMCC: $634,645 total ($554,460 disgorgement and $80,185 
prejudgment interest); and 

 
• B21 Ltd.: $943,955 total ($824,689 disgorgement and $119,266 

prejudgment interest). 

ORDER 

For the foregoing reasons, the Commission’s motion for summary 

judgment is ALLOWED IN PART and DENIED IN PART.  The clerk will 

enter judgment against the Entity Defendants and Relief Defendants WB21 

DMCC and B21 Ltd.  The court will set a schedule for the Commission’s 

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20 
 

additional discovery on Gastauer’s relationship with GFT Investment 

Holdings at the time of the Dollar Bay Property purchase.  

SO ORDERED. 
 

/s/ Richard G. Stearns ___________  
UNITED STATES DISTRICT JUDGE 

Case 1:18-cv-12058-RGS   Document 263   Filed 06/03/22   Page 20 of 20