OPINION AND ORDER
JOHN E. STEELE, District Judge.
This matter comes before the Court on plaintiff's Motion for Default Final Judgment Against Relief Defendant Baron International, Inc. (Doc. #126) filed on November 1, 2012. No response has been filed and the time to respond has expired. The Court finds that an evidentiary hearing on the motion is not required in this case and will render a decision based on the documents submitted.
On October 19, 2012, the Court issued an Opinion and Order (Doc. #124) adopting the Magistrate Judge's Report and Recommendation (Doc. #122) recommending that the Securities and Exchange Commission's (SEC) motion for entry of Clerk's default for failure to comply with the Court's Orders and retain counsel be granted and that the Answer and Affirmative Defenses (Doc. #61) of Baron International, Inc. (Baron International) be stricken. A Clerk's Entry of Default (Doc. #127) was issued on November 27, 2012 against Baron International. Therefore, plaintiff has complied with the necessary prerequisite under Fed. R. Civ. P. 55(a) for a default judgment.
"A defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established. [ ] A default judgment is unassailable on the merits, but only so far as it is supported by well-pleaded allegations. [ ] A default defendant may, on appeal, challenge the sufficiency of the complaint, even if he may not challenge the sufficiency of the proof."
Deeming all the allegations in the Complaint (Doc. #1) as admitted, certain individuals implemented a "pump-and-dump" scheme involving the sale of unregistered shares of BIH Corporation's (BIH) stock to the investing public. BIH was a penny stock and claimed to be a holding company specializing in the restaurant and hospitality industry. BIH's website claimed that Galo, an "accomplished entrepreneur", was the president and CEO of BIH but Glao is an alter ego and never existed.
As part of the scheme, $1 million of the stock was dumped on "unwitting" investors and the illegally obtained sales proceeds split amongst companies, including relief defendant Baron International. Baron International builds restaurants and sells beverage systems and equipment. In 2008, Baron International became a subsidiary of BIH and received more than $90,000 in proceeds without any legitimate basis from defendants' securities fraud.
On June 25, 2008, and the day after, a press release was issued by BIH and individuals announcing that Baron International would sell for between 19 and 23 cents a share and if the sale was completed, BIH would pay a one time cash dividend of between 7 and 9 cents a share. On August 19, 2008, another press release was issued regarding the "pending sale" and claimed additional revenues Baron International generated would create a higher sales price. On November 11, 2008, a press release was issued quoting the fictitious Galo and claiming another purchase price increase. On November 13, 2008, a press release quoted the fictitious Galo and falsely reported that Baron International has signed a multi-million dollar renovation deal. The press releases were false and misleading. North Bay sold more than 21 million BIH shares for more than $110,000, and in turn wired more than $90,000 in sales proceeds to Baron International. No registration statement was filed or in effect with regard to the securities offered for sale by BIH and sold to North Bay.
Only Count I pertains to Baron International. Plaintiff alleges all defendants violated the Securities Act of 1933, the Securities Exchange Act of 1934, and/or Exchange Act Rule 10b-5. Count I (Sections 5(a) and 5(c) of the Securities Act) states that no registration statement was filed or in effect with the Commission and defendants sold securities, carried securities, or offered to sell or offered to buy securities through interstate commerce without a registration statement. In the Complaint, plaintiff sought declaratory relief that defendants violated federal securities laws, a permanent injunction against defendants from further violations, a disgorgement of all ill-gotten gains, including prejudgment interest, civil monetary penalties, and the retention of jurisdiction. Upon review, the Court finds that plaintiff has established that it is entitled to a default judgment against Baron International.
Accordingly, it is now
1. Plaintiff's Motion for Default Final Judgment Against Relief Defendant Baron International, Inc. (Doc. #126) is
2. The Clerk shall enter judgment accordingly, send a copy of this Opinion and Order to Mr. Ingala, and terminate Baron International as a pending defendant in this case.