United States District Court, C.D. California
Present: The Honorable CHRISTINA A. SNYDER
CIVIL MINUTES - GENERAL
(IN CHAMBERS) - PLAINTIFF'S MOTION FOR PRELIMINARY
INJUNCTION AGAINST STEVEN J. MUEHLER, CLAUDIA MUEHLER,
ALTAVISTA CAPITAL MARKETS, LLC, ALTAVISTA PRIVATE CLIENT,
LLC, AND ALTAVISTA SECURITIES, LLC (Dkt. 4, filed February
February 28, 2018, the Securities and Exchange Commission
(“SEC”) filed a civil enforcement action against
defendants Steven J. Muehler (“Muehler”), Claudia
Muehler (“C. Muehler”), Koorosh
“Danny” Rahimi (“Rahimi”), AltaVista
Capital Markets, LLC, AltaVista Private Client, LLC, and
AltaVista Securities, LLC (collectively, the “AltaVista
Companies”). Dkt. 1 (“Compl.”). The SEC
asserts claims against defendants for (1) violations of
Section 5(c) of the Securities Act of 1933, 15 U.S.C. §
77q(a) (the “Securities Act”), for (2) violations
of Sections 10(b), 15(a), and 20(e) of the Exchange Act of
1934, 15 U.S.C. § 78j(b), 78o, 78t (the “Exchange
Act”), and for (3) violations of Rule 10b-5 promulgated
thereunder, 17 C.F.R. § 240.10b-5.
gravamen of the SEC's complaint is that defendants have
been operating an unregistered broker-dealer and securities
fraud scheme in contravention of the securities laws and a
prior cease-and-desist order issued by the SEC against
Muehler for similar misconduct in 2016. Compl. Ex. B
(“SEC Order”). The SEC requests the Court to
issue a preliminary injunction enjoining defendants Muehler,
C. Muehler, and the AltaVista Companies from committing
further violations of federal securities laws and from
violating the cease-and-desist requirements of the SEC
Order. Dkts. 4-17 (“Motion”).
March 6, 2018, defendants were served summons, a copy of the
complaint, and a copy of the motion for preliminary
injunction. Dkts. 22-27. On March 19, 2018, the SEC filed a
notice of non-opposition to its motion for preliminary
injunction. Dkt. 28.
April 2, 2018, the Court held oral argument. Defendant
appeared and did not provide any opposition in response to
the tentative of the Court.
carefully considered the SEC's arguments, the Court finds
and concludes as follows.
alleges the following facts.
The AltaVista Companies and the Current Scheme
SEC alleges that Muehler and his wife, C. Muehler, co-founded
the AltaVista Companies in late 2015 and continue to operate
these companies out of their condominium in Marina Del Rey,
California. Compl. ¶¶ 12-17, 22-24, 36. Despite
Muehler disclaiming his ownership and management roles in the
AltaVista Companies, the SEC alleges that Muehler maintains
control of the AltaVista Companies and their operations,
often treating them “as interchangeable parts of a
single enterprise under his control.” Id.
SEC's primary allegation is that defendants have been
engaging in the business of a broker-dealer through the
instrumentalities of interstate commerce, offering
unregistered securities on an unregistered “alternative
trading system” (“ATS”) called the
“Nanocap Market, ” and are committing these
securities violations by making various false and misleading
statements about the AltaVista Companies' experience,
capabilities, and association with Muehler. Id.
¶¶ 4-8. Moreover, the SEC alleges that none of the
defendants have ever registered with the SEC in any
capacity. Id. ¶¶ 14, 17, 22-24,
84- 86. The SEC asserts that this “AltaVista
scheme” is virtually indistinguishable from
Muehler's previous scheme, the “Alternative
Securities Market Group” (“ASMG”) scheme,
which was the subject of the prior SEC Order. Compl. ¶
particular, the SEC alleges that Muehler, with substantial
assistance from his wife, C. Muehler, has been operating this
unregistered broker-dealer scheme through the AltaVista
Companies since November 2015, whereby the Companies solicit
small business owners and potential investors. Id.
¶¶ 8, 25-26, 89, 91-94. Muehler allegedly induced
customers into signing up for the AltaVista Companies'
services by marketing the Companies as a combination of
underwriting, broker-dealer, and ATS services that are
well-established players in the securities industry and have
connections to thousands of investors. Id.
¶¶ 43-44, 95. Since their inception, the AltaVista
Companies have allegedly signed “Issuer
Agreements” with more than 20 customers and have
collected approximately $100, 000 in fees for their unlawful
services. Id. ¶ 70.
the Issuer Agreements, defendants allegedly purport to offer
several services such as examining customers' financial
statements and business plans, preparing securities
offerings, identifying and screening potential investors, and
marketing securities to investors. Id. ¶ 57.
Defendants also assist customers in obtaining qualification
from the SEC under Regulation A of the Securities Act, and
allegedly offer to underwrite customers' offerings of
Customer Preferred Stock. Id. ¶¶ 58, 61.
Qualified customers' securities are then listed on the
Nanocap Market that was created, developed, and operated by
Muehler. Id. ¶¶ 45, 59. The Issuer
Agreements also allegedly include a Minimum Investment
Commitment guarantee that falsely promises that defendants
can raise minimum levels of capitalization from investors,
or, in the alternative, an AltaVista Investment Fund will
purchase enough Customer Preferred Stock to meet the Minimum
Investment Commitment. Id. ¶ 62-64. The SEC
alleges that defendants falsely claim to have millions of
dollars on hand in the “AltaVista Investment
Funds;” however, the AltaVista Investment Funds
allegedly have minimal assets and no investors. Id.
¶¶ 44, 63-64, 94. The SEC further alleges that as
compensation for these purported services, defendants have
received upfront fees ranging from $10, 000 to $20, 000;
monthly fees ranging from $400 to $1, 500 per month;
“Broker-Dealer Fees” equal to a certain
percentage of the funds raised from investors; and, an equity
interest in each issuer customer upon the occurrence of
certain milestones in the process of successful
capitalization. Id. ¶¶ 67, 69.
asserts that Muehler has been personally involved with
providing services to customers by structuring proposed
offerings of customers' securities, drafting and
submitting Regulation A offering statements to the SEC,
preparing Nanocap Market “listing pages, ”
soliciting investors by purchasing leads on the Internet, and
screening each investor that expresses interest. Id.
¶¶ 71-77. The SEC claims that C. Muehler has
substantially assisted Muehler in the scheme and in violating
the terms of the SEC Order by helping Muehler formally
organize the AltaVista Companies, funding the companies'
expenses, identifying potential customers, collecting and
depositing customer fees, and allowing Muehler to sign
agreements using her name. Id. ¶ 263. Moreover,
C. Muehler has actively participated in convincing customers
to sign up for services and facilitating agreements.
Id. ¶¶ 263-67.
motion and a supporting declaration by counsel, the SEC
asserts that the AltaVista scheme is ongoing, and that
defendants have defrauded a married couple, referred to as
Mr. and Mrs. A, as recently as February 2018, by advertising
a fraudulent fixed income bond offering on the Internet.
Motion at 11; Jasper Decl. ¶¶ 99-100. The SEC has
also attached 95 exhibits in support of its motion, including
sworn investigative testimony, e-mails strings, Issuer
Agreements, and press releases.
The SEC Order and Muehler's Past Schemes
alleges that defendants' current scheme is a
reincarnation of the prior ASMG scheme. Compl. ¶ 5, 27.
The ASMG scheme took place between August 2013 and September
2015. Id. ¶ 27. In this scheme, Muehler and
entities under his control made false and misleading
statements to induce small business owners to sign up for
broker-dealer services. Id. ¶ 28. Muehler also
attempted to sell securities on behalf of his customers, but
was unable to consummate any transactions before the SEC
instituted enforcement proceedings against him. Id.
reached a settlement with the SEC, whereby he consented to
the entry of the SEC Order. Id. ¶ 29. Under the
terms of the settlement, Muehler admitted that he and his
companies held themselves out as broker-dealers, offered to
effect securities transactions for customers pursuant to
Regulation A, and made false and misleading statements to
persuade customers to sign up for his services. Id.
¶¶ 29-31. Muehler acknowledged that this conduct
violated the federal securities laws. Id. ¶ 32.
The SEC now asserts that Muehler has also been the subject of
cease-and-desist orders from Minnesota and California for
similar conduct, which were issued prior to the SEC's
proceedings and which he concealed from prospective
customers. Id. ¶ 34.
addition to ordering Muehler to cease-and-desist from future
violation of sections 10(b) and 15(a) of the Exchange Act and
Rule 10b-5, the SEC Order barred Muehler from associating
with a broker or dealer, participating in penny stock or ATS
offerings, or acting as an officer or director of a public
company. Id. ¶ 33. Muehler was also ordered to
pay over $410, 000 in disgorgement and civil penalties.
Id. The SEC alleges that Muehler is currently
violating the SEC Order, and has provided customers with
false explanations of the order. Id. ¶¶ 4,
88, 98. The SEC alleges that contrary to Muehler's