Fifth Circuit Court of Appeals Upholds District Court’s Decision in Case Against Penny Stock Company Owners Accused of Fraud

In 2008, Ronald Blackburn founded a small oil and gas company, Treaty Energy Corporation. Shares for the company were traded over the counter through penny stocks. Earlier this year, the Securities and Exchange Commission (SEC) charged Blackburn, Bruce Gwyn, Michael Mulshine, and others with selling unregistered securities and misleading investors. A district court found the defendants liable on several claims presented by the SEC and disgorgement of the defendants’ fraud proceeds. The decision was appealed to the Fifth Circuit Court of Appeals to determine if summary judgment was warranted in the SEC’s favor concerning liability and if the disgorgement award was to the benefit of investors as Liu  v.  SEC,  140  S.  Ct.  1936, 1949 requires. Learn why the Fifth Circuit affirmed both decisions.


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