Thread by @propelforward

Court affirms terminating sanctions & default (aka, case over, you lose) against Ringgold for submiting false declarations to defend against the SEC’s case, finding the dec's were false, they were submitted willfully and that terminating sanctions were appropriate under Malone /1

Ringgold and #Blockvest marketed an #ICO selling BLV tokens falsely marketing them as “registered” and/or “approved” by the SEC, CFTC, NFA, and touting “partner[ship]” with Deloitte, and createda fictitious regulatory agency, the #Blockchain Exchange Commission

Defendants filed declarations in opposition to govt's motion for preliminary injunction; in later discovery, it was revealed that declarations were forged, included misrepresentations and false statements were made in Dorsey and Vaculik’s declarations.

SEC moved for terminating sanctions seeking default judgment against Defendant for his fraudulent conduct in submitting these forged and false declarations; Ringgold opposed without offering contradicting evidence presents denials and argument in his opposition and Objections.

Court granted terminating sanctions, entered default; on appeal court affirmed Russell dec was forged, misreps were made in Wartanian’s declaration, and false statements were made in Dorsey & Vaculik’s decs

here's where it's v. interesting, in light of the similar motion pending in the #craigwright case: the court notes that termination may occur without violating the 7th amendent and discusses the standard for terminating sanctions for discovery misconduct under 9th cir law:

the 11th Cir doesn't follow Malone; the 11th appears to follow Betty K Agencies, Ltd. v. M/V MONADA, which holds that a dismissal w/prejudice is appropriate: (1) a party engages in a clear pattern of delay or willful contempt (contumacious conduct); and

(2) the district court specifically finds that lesser sanctions would not suffice.” anf id “thought to be more appropriate in a case where a party, as distinct from counsel, is culpable.” Requires a clear record of delay or willful conduct and that lesser sanctions are inadequate

Court found Ringgold's actions were willful /in bad faith; found an interest in expeditious litigation, & that the Court docket management(when would these factors NOT be present?)& found the "fraudulent conduct" caused meaningful & lasting prejudice to the SEC & investors

CRITICAL: the court has to find that the misconduct impacts more than just the time & expense of discovery; it has to cause prejudice to "the [opposing party’s] ability to go to trial or threaten to interfere with the rightful decision of the case.”

Court found that Ringgold's fraud prejudiced the SEC's ability to ascertain facts to support its claims, & protracted the length of discovery as the SEC had to prove the falsity of the claims, found it pertinent as to the issue of disgorgement as a remedy &thus central to claims.

The last material issue is whether dismissal was the least drastic sanction avaialble. SEC argued lesser sanction would encourage more fraudulent behavior; Ringgold argues otherwise, cites to Malone that asks re: the availability of lesser sanctions; (2) the use of lesser

sanctions before termination; and (3) the adequate warning of the possibility of termination. But in egregious cases such an inquiry is not necessary, especially if the discovery violations ‘threaten to interfere with the rightful decision of the case.’

The crux of the Court's analysis is whether the “pattern of deception and discovery abuse made it impossible” for the district court to conduct a trial “with any reasonable assurance that the truth would be available.” Id. at 1057-58 (quoting Anheuser–Busch, Inc., 69 F.3d at 352)

This court concluded that "given his pattern of artifice, the Court anticipates that Ringgold will not be truthful in upcoming court proceedings as he has failed to explain the inconsistencies in his deposition testimony and declarations [and in the declarations and testimony]."

The court found that the pattern of willful misconduct supported terminating sanctions, & that a lesser sanction "will...place Ringgold in the same position in which he was before he filed the false declarations ...[no lesser sanction] will deter Defendant’s continued misconduct.

Although these arguments may play out similarly in litigation involving #CraigWright, a few caveats: while the law may be similar, #blockvest is an SEC enforcement action, not a private claim, & Defendants here didn't have counsel to defend them.