Atlas Trading: Appeal Stayed Pending Resolution of Kousisis v. United States in the Supreme Court.
Its now been 7 months since the district court granted our motion to dimiss the Indictment in the “Atlas Trading” “pump and dump” securities fraud case. As described in other blog posts, Judge Hanen of the Southern District of Texas dismissed the Indictment charging the Atlas traders with securities fraud based on their Twitter posts discussing a number of different tickers. What was happened since? Well, the case is now on ice because the Supreme Court, just a week after the Government filed its opening brief, granted certiorari to hear Kousisis v. United States, a case that could have profound effects here as well as in many other fraud cases.
The Appellate Process
On June 10, 2024, the Government filed their opening brief in the 5th Circuit, seeking to reverse the district court’s decision.
On September 9, 2024, the defense, led by Eric Rosen, filed its reply brief, urging the 5th CIrcuit to uphold Judge Hanen’s decision.
On October 10, 2024, the Government filed this reply brief.
The Motion to Stay the Appeal
Approximately one week after the Government filed their opening brief, the Supreme Court granted certiorari in the Third Circuit’s case of Kousisis v. United States.
United States v. Kousisis, 82 F.4th 230 (3d Cir. 2023), cert. granted, 144 S.Ct. 2655 (2024), is a case where the Pennsylvania Department of Transportation (“PennDOT”) was fraudulently induced to award painting contracts (and money) to the defendant’s company. Br. at 21. The fraud was that Kousisis intentionally skirted PennDOT’s requirement that a certain percentage of his company’s sub-contracts go to disadvantaged business enterprises (“DBE”). Otherwise, the work contracted for was completed. TThe Third Circuit affirmed Kousisis on the theory that fraudulently inducing an agency to distribute contract money was wire fraud even where the main goals of the contract (in this case, painting work) were not frustrated. The “property” that was the object of the scheme was the contract money.
The Kousisis case will be very important because Kousisis’ facts are nearly identical to those of Ciminelli, a case the Supreme Court unanimously reversed. The primary difference between the two is that Ciminelli was pled as a “right-to-control” case, while Kousisis was pled as one of “fraudulent inducement.” In Atlas Trading, the Government’s primary argument was that the case was not pled as a “right-to-control” case, and therefore Ciminelli does not apply. Our response is that regardless of its wording, CIminelli controlled because there was no deprivation of property from a victim. Moreover, the defendant and the victim in Kousisis were in privity of contract, where the victim had the right, under the contract, to expect complete performance of the material terms. In Atlas, there was no alleged contract, agreement, or transaction between Defendants and any alleged victim. Thus, the Atlas facts are even stronger than those of Kousisis.
If the Supreme Court overturns Kousisis, that could insulate our case here from appellate review, resulting in the affirmation of Judge Hanen’s decision.
In our opening brief, we dropped a footnote stating: “Although the Kousisis decision could have significant ramifications for this case, Defendants are not formally requesting a stay. Defendants believe, however, that any decision rendered by this Court could benefit from waiting until after the Supreme Court issues its decision in Kousisis, as supplemental brief most likely will be needed.
The Government, in their reply brief, largely agreed, writing, also in a footnote: “The Government generally agrees with the defendants (Br. 47-48 & n.12) that the Supreme Court’s upcoming decision in Kousisis v. United States, No. 23-909 (cert. granted June 17, 2024), may elaborate on these principles in a relevant way, and the Government would not object if this Court were to hold this case in abeyance pending the Supreme Court’s decision. “
As a result of this agreement, just last week we filed a motion to stay the appeal pending resolution of Kousisis, which the Fifth Circuit granted the very next day. This will delay resolution of the case for at least another year, and hopefully, the Supreme Court will rule favorably in Kousisis. Click on the links below for copies of the motion and the order staying the case. Do not hesitate to reach out to Eric Rosen for more insight on the Atlas Trading case.
