SEC Wins Summary Judgment Against Crypto Traders Management, Disgorgement and Injunction Imposed

On Monday, March 4, 2024, the US District Court for the District of Idaho issued a memorandum decision and order in the case of United States Securities and Exchange Commission v. Crypto Traders Management, LLC et al.

The SEC had filed a lawsuit in 2021 against Shawn C. Cutting and various relief defendants associated with his cryptocurrency investment company Crypto Traders Management (CTM) for violations of federal securities laws. Cutting was accused of using false representations to raise millions of dollars from over 450 investors for purported crypto trading by CTM. However, he allegedly misappropriated the funds for personal expenses instead.

The court had previously granted summary judgment in favor of the SEC, finding that Cutting violated anti-fraud and registration provisions of federal securities statutes. This prompted the SEC to file a motion seeking various remedies against Cutting and the relief defendants.

In its latest ruling, the court granted the SEC’s motion. It ordered Cutting to disgorge over $5.2 million in ill-gotten gains plus $127,000 in prejudgment interest. Crypto Traders Management was also made jointly and severally liable for the disgorgement amount. Several relief defendants associated with Cutting – including his wife Janine Cutting, two family trusts, and another company he had ties to – were instructed to disgorge amounts ranging from around $58,000 to $446,000 which they had received from Cutting’s scheme.

The court further imposed a permanent injunction prohibiting Cutting from any future violations of key anti-fraud and registration statutes. A maximum ‘third-tier’ civil penalty of nearly $6.9 million was levied against Cutting, equal to his calculated gross pecuniary gain from the fraudulent conduct.

In its thorough written decision, the court analyzed applicable case law and considered factors such as the degree of scienter, repetitive nature of violations, lack of responsibility taken, and the likelihood of re-offending in concluding remedies were warranted against Cutting and associated defendants. The SEC is expected to distribute disgorged funds to the myriad victims of the cryptocurrency investment scam.

Please contact BlockTribune for access to a copy of this filing.