SEC Investigation Into Ex-Informant Challenged in 11th Circuit

(CN) — A New York attorney fought in the 11th Circuit Tuesday to bat away subpoenas issued to her in the Securities and Exchange Commission’s long-running investigation into her client, a former government informant who says he is being targeted despite helping the federal agency prosecute “dozens of individuals.”

For more than three years, former informant Guy Gentile and his lawyer Carla Marin have declined to provide testimony in the SEC investigation, which is looking into whether Gentile’s Bahamian trading firm SureTrader aka Swiss America Securities failed to register in the U.S. before soliciting customers stateside.


The investigation was spawned at least in part from an old regulatory action brought against an outfit called Traders Cafe over its alleged misappropriation of investor funds. Traders Cafe’s owners pleaded guilty to criminal charges in the matter in 2014.

Gentile claims he had “no relationship to Traders Cafe, other than the company having an account” at his firm. He has maintained that the subpoenas were issued “solely for the purpose of harassment and to retaliate against [him] for stopping his full-time cooperation” as an informant with the SEC.

Gentile became an informant after he was arrested for allegedly engaging in a stock pump-and-dump scheme dating back to 2008. 

Between 2012 and 2015, he helped the SEC pursue multiple enforcement actions and issue millions of dollars in penalties, he claims. Refusing to plead out on New Jersey charges related to the alleged pump-and-dump scheme, he secured a dismissal of the criminal case against him, a move he claims enraged SEC agents and prompted them to subject him to never-ending regulatory scrutiny. 

He once made headlines in a Bloomberg profile that chronicled his road to being an informant and featured him rapping the lyrics: “The feds don’t know who they got, bro/I’m going rogue.”

During Tuesday’s hearing, a three-judge panel for the 11th Circuit took up an appeal that is challenging the subpoenas in the SEC’s pending investigation into Gentile. The appeal seeks to overturn a district court decision to uphold the subpoenas, which request documents and deposition testimony from Marin, Gentile’s lawyer in Putnam County, New York. 

Appellate counsel Lorne Berkeley told the panel that the subpoenas were a fishing expedition straying from the SEC’s formal order of investigation, and that the lower court erred in finding otherwise.

Berkeley claimed the SEC order focused on “Traders Cafe and whether their employees or officers violated the Securities Act” — not on activity by Gentile and SureTrader.

The SEC countered that Traders Cafe held its master account with SureTrader, and that a “direct trail of money” between the entities justified the subpoenas.

“The evidence showed and the commission explained that half of SureTrader’s clients were in the U.S. And as to Marin, U.S. customers’ funds had been transferred from SureTrader and Gentile to a U.S. bank account held by MintCustody, which was owned by Ms. Marin,” SEC attorney Matthew Ferguson told the panel.

Berkeley meanwhile attempted to convince the appellate panel that Marin’s Fifth Amendment rights to due process would be burdened if she were forced to comply with the subpoenas.  He suggested it would be unfair to “haul [Marin] into court” in Florida, a state to which she has no connection, he said.

Senior U.S. Circuit Judge Stanley Marcus appeared skeptical of the constitutional argument.

“I’m hard pressed to see how even getting on a plane in Westchester County or in Kennedy or LaGuardia and flying 2 hours … to Miami International Airport creates a constitutionally significant inconvenience,” said Marcus, a Bill Clinton appointee.

The Securities and Exchange Commission noted that it once gave Marin the opportunity to give testimony in New York but she did not oblige.

The appeal also concerns a second set of subpoenas issued to an entity called Mintrade Technology, which the SEC says has ties to Gentile. Berkeley told the panel Tuesday, among other arguments, that Mintrade Technology was deprived of an evidentiary hearing in lower court proceedings over the subpoenas. 

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