SEC Fails to Destroy Daspin Death Star Over Cloud City of Bespin

December 18, 2015

A long time ago in a regulatory galaxy far away, the Securities and Exchange Commission Empire was engaged in a period of civil litigation. Okay, maybe not so, so long ago, but how about back in 2013? Although the relatively low-budget litigation that I am presenting to you may not actually involve a Hollywood blockbuster film with real Death Stars and Millenium Falcons, you do know that there aren't "real" Death Stars and Millenium Falcons, right? 

And, while we're at it, just what the hell was going on with that Darth Vader guy and his wheezing? I mean, you know, if they could zip around the universe and blow up planets, couldn't they just give that guy an antihistamine?  

After Luke Skywalker found out that Darth Vader was his father, Anakin Skywalker, did the kid ever send him a Father's Day card? Speaking of cards, does Hallmark  have one for a father who just cut off his kid's arm with a lightsaber, and would that card still cost more Canadian dollars than American? 

Okay, that's enough digression, sit back, give me a handful of popcorn, and enjoy today's Blog.

2013 SDNY Motion to Compel

This mess starts as most messes do, with a mess. On November 14, 2013, the SEC sought an order from the Southern District Of New York ("SDNY") compelling Edward M. Daspin to comply with an investigative subpoena demanding his testimony "into, among other possible violations of the securities laws, potential fraud in the offer and sale of securities of three related companies, Worldwide Mixed Martial Arts Sports, Inc., WMMA Distribution, Inc. and WMMA Holdings, Inc." Securities and Exchange Commission v. Edward M. Daspin, a/k/a "Edward Michael," a/k/a "Ed Michael," (SDNYCivil Action No. 13 Misc. 00389 /November 14, 2013;  SEC Lit.. Rel. No. 22871 / November 18, 2013). 

2013 SDNY Compulsion Order

On November 27, 2013, SDNY ordered Daspin to comply with the SEC investigative subpoena;  moreover,  the "court directed Daspin to appear for testimony despite his claimed heightened susceptibility to stress. Also, SDNY denied Daspin's cross-motion for a protective order to limit the SEC to examining Daspin through written questions, or, alternatively, to require the SEC to pay for the attendance of his personal physician during testimony. Securities and Exchange Commission v. Edward M. Daspin, a/k/a "Edward Michael," a/k/a "Ed Michael," (SDNYCivil Action No. 13 Misc. 00389 /November 27, 2013;  SEC Lit.. Rel. No. 22884/ December 4, 2013).

2014 2Cir Denial of Stay

On February 5, 2014, the United States Court of Appeals for the Second Circuit ("2Cir") denied Daspin's motion for a stay of SDNY's December 5, 2013 OrderSecurities and Exchange Commission v. Edward M. Daspin, a/k/a "Edward Michael," a/k/a "Ed Michael," (SDNYCivil Action No. 13 Misc. 00389 /November 27, 2013;  SEC Lit.. Rel. No. 22920/ February 6, 2014).

SIDE BAR:  Back in 2013, Daspin made it clear to the SEC that he was not going quietly into the federal regulator's good night. At first, he drew the line over his voluntary subpoena compliance. You want me to testify during your investigation? I don't want to. Go ahead and force me. In response to that challenge, SEC went to SDNY and by 2014, the federal courts appeared to have resolved the issue against Daspin. Notwithstanding this early victory, it should have been clear to all involved that the future held only a rocky road and that there would be many stops, delays, and detours on the route to wherever it was that the SEC hoped to take Daspin. One warning sign was Daspin's reference to his medical condition and his apparent difficulty handling stress. Daspin dared the SEC to freeze him in carbonite, and they did. But we likely haven't heard the end of him, have we?

SIDE BAR: Hey, me again, isn't that Star Trek Captain Jean-Luc Picard at about 2:34 into the above clip? What the hell is Captain Picard doing in Star Wars? Did he take a wrong turn when he came onto the studio lot that day? Is he dyslexic?

April 23, 2015 OIP

With its investigation completed and conclusions firmly in place, on April 23, 2015, the SEC filed an Order Instituting Administrative and Cease-And-Desisst Proceedings In the Matter of Edward M. Daspin a/k/a "Edward (Ed) Michael;" Luigi Agostini; and Lawrence R. Lux, Respondents (OIP, '33 Act Rel. 9755; '34 Act Rel. 74799; Admin. Proc. File 3-16509 / April 23, 2015). NOTE: The OIP contains allegations and respondents are presumed innocent unless and until proven guilty beyond a preponderance of the evidence. 

As set forth, in part,  in the "Summary" to the OIP:

1. Daspin, Agostini, and Lux participated in the fraudulent unregistered offerings of the securities of Worldwide Mixed Martial Arts Sports, Inc. ("WMMA") and an affiliate, WMMA Distribution, Inc. ("WMMA Distribution"),1 start-up companies formed to establish an international league of mixed martial arts tournaments that would generate digital content and sell branded products. 

2. From December 2010 through approximately June 2012 (the "relevant period"), WMMA and WMMA Distribution raised a total of $2.47 million from seven investors, of which at least $2 million was raised fraudulently. Daspin, who orchestrated the fraud, targeted unemployed professionals whom he lured in with offers of executive-level positions at the Companies. Typically it was only after prospects arrived for a "job interview" that they learned that they would be required to make a substantial investment as a condition of obtaining employment and receiving a salary.

. . .

10. Edward Michael Daspin, age 77, founded and for all practical purposes controlled the Companies. In 1978, Daspin was convicted of bankruptcy fraud for concealing from the bankruptcy trustee assets of a bankrupt company he had controlled; he was sentenced to eighteen months in prison. United States v. Edward Michael Daspin, 77 Crim. 00238 (D.N.J.) and United States v. Michael Daspin, 77 Crim. 0196 (S.D.N.Y.). Daspin resides in Boonton, New Jersey. Daspin has never been registered with the Commission as a broker-dealer or associated with a registered broker-dealer.

11. Luigi Agostini, 38, was a director and the executive chairman of the board of each of the Companies. Agostini resides in Jersey City, New Jersey. 

12. Lawrence R. Lux, age 55, was a director and CEO of each of the Companies. Lux was briefly associated with a registered broker-dealer from December 2005 to April 2006, but otherwise has never been associated with a registered broker-dealer or registered with the Commission as a broker-dealer. 

June 15, 2015 ALJ Order

On May 14, 2015, Respondent Daspin moved to dismiss or stay the SEC's proceeding against him, which Enforcement opposed. On June 15, 2015, ALJ Foelak characterized the status as follows:

[T]he filings show that Daspin currently has a severe medical condition. The Motion analyzes Daspin's condition in light of seven factors that federal courts that have considered this issue have examined when deciding whether to continue indefinitely an action due to a party's medical condition: (1) the medical evidence and judgments; (2) the related evidence of his activities outside the courthouse; (3) the availability of measures to minimize the risks to his health in subjecting him to a hearing; (4) the temporary or permanent character of the physical problem; (5) his ability to participate in his defense; (6) whether the proceeding is likely to worsen his condition; and (7) the magnitude and seriousness of the case, or the degree of harm to the public interest as a result of the delay. 

Augusts 14, 2015 ALJ Scheduling Order

By August 14, 2015, prior to which the procedural gamesmanship between the parties continued, ALJ Grimes issued a Scheduling Order in which he noted, in part:

I therefore conclude that there is currently no authority to indefinitely continue this proceeding. This is especially so here, where Mr. Daspin's doctor estimates that it will be at least a year before he can determine whether Mr. Daspin will ever be able to participate in this proceeding. In other words, I lack the authority to indefinitely continue this matter. 

Mr. Daspin's case, however, has been stayed for two months. It would be unfair to make him suddenly prepare for the hearing that is currently scheduled to take place on November 2, 2015. Taking account of the two months that Mr. Daspin's case has been stayed and the parties' desire not to hold separate hearings for Mr. Dapsin and Mr. Agostini, I ORDER that the hearing as to Mr. Daspin and Mr. Agostini will begin on January 4, 2016. 

The orders regarding Mr. Daspin's medical status reports are MODIFIED. Mr. Daspin's counsel has stated that his next status report will report no change but that Mr. Daspin will consult with a specialist in late September. Mr. Daspin therefore need not file a status report on September 15, 2015, but shall report the results of his next consultation as soon as he is aware of those results, but no later than October 15, 2015. 3 If the Division chooses to retain a medical expert, Mr. Daspin shall submit to an examination by that expert, on reasonable notice by the Division.

October 6, 2015 ALJ Order

In the Matter of Edward M. Daspin a/k/a "Edward (Ed) Michael;" Luigi Agostini; and Lawrence R. Lux, Respondents (ALJ Order, Admin. Proc. Ruling Rel. 3202; Admin. Proc. File 3-16509 / October 6, 2015), SEC Administrative Law Judge Grimes offers this insight into the status of the case:

A hearing in this matter is currently scheduled to begin on Monday, January 4, 2016. See Edward M. Daspin, Admin. Proc. Rulings Release No. 3183, 2015 SEC LEXIS 4001, at *1 (Sept. 30, 2015). Counsel for Respondent Edward M. Daspin withdrew effective September 28, 2015. Id. at *3 & n.2.

On October 2, 2015, Daspin sent an e-mail to this Office forwarding a request that the
Division of Enforcement sent him asking for certain medical records. Daspin asserts that the Division is harassing him through its e-mail to him. Daspin has evidently not filed the substance of his e-mails with the Office of the Secretary in compliance with Rules of Practice 151 through 153. See 17 C.F.R. §§ 201.151-.153. The same day, the Division e-mailed this Office a courtesy copy of a letter addressed to me. Among other things, the Division asks that I direct Daspin to comply with existing orders concerning disclosure of his medical records. See Edward M. Daspin, Admin. Proc. Rulings Release No. 3041, 2015 SEC LEXIS 3348 (Aug. 14, 2015); Admin. Proc. Rulings Release No. 2939, 2015 SEC LEXIS 2933 (July 17, 2015). Later on October 2, Daspin responded to the Division's letter with yet another e-mail to this Office, and again without evidently filing anything with the Office of the Secretary. Daspin has since sent this Office multiple further e-mails, either sent in a like manner or by copying this Office on his
e-mails with the Division.

A separate October 4, 2015, e-mail, sent purportedly on behalf of Daspin to this Office by "L.C. May," attached motions requesting dismissal of this proceeding or, alternatively, reconsideration of the August 14 scheduling order, a continuance, and my withdrawal from the proceeding.

As a convenience to all participants, parties to administrative proceedings are provided
with and permitted to use this Office's e-mail address. Use of this Office's e-mail address allows parties to serve each other and this Office with courtesy electronic copies of papers they file with the Office of the Secretary. This Office's e-mail address is not intended, however, to serve as a forum for the airing of grievances. Instead, parties should attempt to resolve disputes amongst themselves before raising disputes with me. And in raising a dispute with me, the parties must follow the Commission's rules that require papers to be filed with the Office of the Secretary. See 17 C.F.R. §§ 201.151-.153. Doing so ensures that everything that takes place during the course of a proceeding is preserved for the public record.

I therefore ORDER Daspin to CEASE sending this Office e-mails unless he is doing so in
response to a direct inquiry or request from this Office or is merely providing courtesy copies of documents properly filed with the Office of the Secretary, consistent with the Rules of Practice. He may also send this Office e-mails if he is genuinely seeking to clarify orders I have issued. Future attempts by e-mail to argue about or contest orders will not be considered.

Given Daspin's pro se status, I will consider his October 2 e-mails, together with the
Division's responsive letter. Daspin may file a combined reply to the Division's letter and response to its request for medical records within five business days after service of the Division's letter. See 17 C.F.R. § 201.154(b). Alternatively, he may simply supply the records the Division asserts he has omitted. . .

SIDE BAR: Progress, making not a lot, hell, is the SEC? Yeah, I know, that comes off as a bit of Yoda-speak but, hey, Star Wars just opened so go with it -- and may the Force be with you. In any event, added to the issue of Daspin's medical condition, we now see that he is proceeding pro se -- ever a complicating factor for adversaries and adjudicators -- and, on top of that, Daspin has a penchant for communicating with the ALJ via email. The ALJ has made it clear: Do or do not, there is no try! Emails with stop!.

Lux Settles

Respondent Lux settled on October 16, 2015, and pursuant to an Order Making Findings and Imposing Remedial Sanctions and a Cease-And-Desist, Lux was ordered to Cease-And-Desist from further securities laws violations and was Barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and barred from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock. As noted in the Lux Order: 

Respondent shall pay disgorgement of $36,853.21 which represents profits gained as a result of the conduct described herein, and prejudgment interest of $4,061.05, but that payment of such amount is waived based upon Respondent's sworn representations in his Statement of Financial Condition dated August 17, 2015 and other documents submitted to the Commission. Also based upon Respondent's sworn representations in his Statement of Financial Condition dated August 17, 2015 and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondent.

In the Matter of Edward M. Daspin a/k/a "Edward (Ed) Michael;" Luigi Agostini; and Lawrence R. Lux, Respondents (Lux Order Making Findings/Imposing Sancctions, '33 Act Rel. 9963; '34 Act Rel. 76178; Admin. Proc. File 3-16509 / October 16, 2015)

December 4, 2015 ALJ Order

On December 4, 2015, ALJ Grimes issued an Order in which he noted, in part, that:

Separately, Mr. Daspin forwarded by e-mail on December 1 what appears to be a motion concerning several issues. It is not clear whether he properly filed and served this motion. Although Mr. Daspin has been warned not to forward substantive requests by e-mail alone without properly serving and filing his requests, see Edward M. Daspin, Admin. Proc. Rulings Release No. 3202, 2015 SEC LEXIS 4103 (Oct. 6, 2015), because Mr. Daspin discusses a number of issues that are likely to arise during the hearing, I address the issues herein.
 . . .

Mr. Daspin also asks that I allow him "to use any of the 150,000 documents given at the request of the SEC[']s subpoena request." It is unclear what relief Mr. Daspin seeks. As with any respondent, he is permitted to use any relevant and material documents that are not unduly repetitive. 17 C.F.R. § 201.320. If, however, Mr. Daspin is asking for permission to submit exhibits without numbering or marking them, his request is denied. Numbering or marking exhibits in a coherent fashion is required. It is the only way for litigants, judges, and appellate authorities to identify exhibits. Without a coherent numbering system and exhibit list, a litigant will find it impossible to locate a document when he or she needs it. That is why I ordered that copies of exchanged exhibits be pre-marked. See Edward M. Daspin, 2015 SEC LEXIS 3348, at *11. To the extent electronic versions of these exhibits are exchanged, they necessarily need to
be pre-marked so they can be electronically displayed in a coherent fashion.

SIDE BAR: Hey there, again, here, I it is, Yoda Singer. Looks like the ALJ's cease- immediately-emailing order of October 6 didn't quite penetrate Daspin's Death Star defenses and his Empire is striking back.  Additionally, Darth Daspin has unleashed a barrage of thousands of unmarked missiles that are evading the SEC's defense system and threatening to wreck havoc.

December 14, 2015, ALJ Order

In the Matter of Edward M. Daspin a/k/a "Edward (Ed) Michael;" Luigi Agostini; and Lawrence R. Lux, Respondents (ALJ Order, Admin. Proc. Ruling Rel. 3393; Admin. Proc. File 3-16509 / December 14, 2015), we come across this Order issued by SEC Administrative Law Judge Grimes: 

Respondent Edward M. Daspin has repeatedly been warned, both by me and by members of this office's staff, not to e-mail this office or its staff with arguments not properly filed with the Commission. See Edward M. Daspin, Admin. Proc. Rulings Release No. 3202, 2015 SEC LEXIS 4103 (Oct. 6, 2015). He has repeatedly and consistently failed to heed those warnings. Recently, he sent this office a number of argumentative e-mails and copied this office on several e-mails directing abusive comments to counsel for the Division of Enforcement. For example, on December 10, 2015, he forwarded a document by e-mail to this office, members of this office's staff, counsel for the Division, and Respondent Luigi Agostini. In the body of the e-mail, Daspin stated:

DEAR Gentleman ,
Enclosed is My cover page and service list to Mr Fields.
How in the world di you men get involved in this disingenuous case!
Im surprised that each of you had the balls to file a complaint which the evidence
shows was completely fraudulent in the first place.
You went after the good guys.!!
Merry Xmas
EM Daspin Pro Se

Over the past weekend, Mr. Daspin sent multiple e-mails containing substantive commentary about his case. Relevant examples are attached to this Order.

In light of Daspin's consistent and repeated failure to heed multiple warnings and the increasingly discourteous and unprofessional nature of his e-mails, I order the following. Except to forward courtesy copies of his filings properly made with the Office of the Secretary, Daspin is prohibited from using this office's e-mail address or the e-mail address of any member of this office's staff. Going forward, e-mails from Daspin containing any language going beyond simply indicating that a courtesy copy is attached will be deleted upon receipt and will not be considered, as will any of his e-mails that do not attach a courtesy copy.

SIDE BAR: To see copies of the emails cited in the December 14th ALJ Order, read this Supplement

After failing to destroy the Daspin Death Star, the SEC rebels are in retreat and have fallen back to planet Dagobah for training by Jedi Master Yoda. Darth Daspin continues to attempt to turn the ALJ and his office to the Dark Side and has lured a number of regulators into a trap in the cloud City of Daspin. Darth Daspin overwhelms ALJ Grimes and mocks his prisoner with the boast that he is his father, not in genetic terms but in the sense of former Boston Red Sox pitcher Pedro Martinez's lament after another defeat at the hands of the New York Yankees. In a future episode, Martinez joined the ranks of the rebels and defeated the Empire, you have to buy the action figures for that movie separately. 

August 17, 2015 ALJ Order

As the curtain falls on the last assemblage of scenery and actors, we realize that the dimming of the theater lights does not herald the end of the performance but, to the contrary, the onset of yet another scene. In the Matter of Edward M. Daspin a/k/a "Edward (Ed) Michael;" Luigi Agostini; and Lawrence R. Lux, Respondents (ALJ Order, Admin. Proc. Ruling Rel. 3409 Admin. Proc. File 3-16509 / December 17, 2015), we confronted with yet another Order issued by SEC ALJ Grimes, which states, in part: 

Considering Daspin's filings as a combined whole, there are several problems with his motion. First, motions for summary disposition were due October 19, 2015. Edward M. Daspin, Admin. Proc. Rulings Release No. 3041, 2015 SEC LEXIS 3348, at *10-11 (Aug. 14, 2015). Without seeking leave, Daspin filed his motion over six weeks late and only one month before the hearing. This fact alone is sufficient to deny the motion. 

Even putting aside the untimeliness of the motion, in ruling on summary disposition, I must take as true the allegations in the OIP. 17 C.F.R. § 201.250(a). At most, Daspin has shown that material facts alleged in the OIP are in dispute. But if material facts are in dispute, a motion for summary disposition must be denied. See 17 C.F.R. § 201.250(b) 

To the extent Daspin asks me to dismiss this proceeding based on his allegation of prosecutorial misconduct, his motion is denied. At most, Daspin has alleged that the evidence does not support the Division's case. But that allegation, without more, cannot be determined based on arguments concerning Daspin's view of the evidence. Standing alone, Daspin's speculative belief is not sufficient to warrant summary disposition. Daspin's motion to stay and his motion for summary disposition are DENIED. 

Bill Singer's Comment

You're simply going to have to trust me when I tell you that the above list of motions, orders, rulings, queries, emails, and the like is not a complete rendering of the Daspin file. For a better sense of the breadth and depth of this matter, VISIT

Regardless, the SEC has awakened the Force. The fight continues. The struggle goes on.