The SEC brought a civil enforcement action against Charles Scoville, a resident of Utah, and his company, Traffic Monsoon, alleging that they ran a Ponzi scheme which raked in tens of millions of dollars. About 90% of his customers were located in relatively poor countries. The SEC obtained a TRO freezing the defendants’ assets and preventing them from continuing to operate the business.
Mr. Scoville argued that the federal securities laws did not reach his sales to customers outside the United States. The Tenth Circuit, in SEC v. Scoville (written by Judge Ebel) rejected this claim, and held that under the 2010 Dodd-Frank Act, Mr. Scoville’s conduct fell within the scope of the federal securities laws because he engaged in “significant conduct” within the United States to make the overseas sales. The court thus affirmed the district court’s preliminary orders.
Judge Briscoe filed a concurring opinion. In her view, the court did not need to address the extraterritorial application of the securities laws because defendants’ sales — even to foreign customers — also constituted sales within the United States.