United States District Court, District of Columbia
U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
ANALYTICA BIO-ENERGY CORP., et al. Defendants.
D. BATES UNITED STATES DISTRICT JUDGE
the Court is  the Securities and Exchange
Commission's (the “SEC”) motion for default
judgment against defendant Analytica Bio-Energy Corp.
(“Analytica”) and for monetary relief and final
judgment against defendant Douglas Murdock. For the reasons
described below, the Court will grant the SEC's motion.
purpose of resolving this motion, the Court assumes that all
allegations in the well-pleaded complaint are true. See
Thomson v. Wooster, 114 U.S. 104, 111 (1885)
(plaintiff's claims taken as true after entry of
default); Adkins v. Teseo, 180 F.Supp.2d 15, 17
(D.D.C. 2001) (“A defaulting defendant is deemed to
admit every well-pleaded allegation in the
complaint.”). As alleged, Analytica is a Delaware
corporation with shares listed on the over-the-counter
market. Compl. [ECF No. 1] ¶ 10. Although Analytica was
ostensibly managed by defendant Luiz Brasil, he was president
in name only. Id. ¶¶ 19, 21. In reality,
Brasil had ceded control to Murdock, who acted as a de
facto officer of Analytica from at least July 2013
through October 2014. Id. ¶¶ 19, 21-22.
Murdock's previous forays into corporate management had
not gone well, however, and he was already permanently
enjoined by the Ontario Securities Commission from trading in
securities and from acting as an officer or director of any
issuer. Id. ¶ 11.
under Murdock's stewardship, Analytica filed with the SEC
between September 2013 and October 2014 eighteen periodic
reports that Brasil and Murdock knew contained material false
statements and omissions. Id. ¶¶ 24, 31.
The filings falsely conveyed that Brasil had an active-indeed
the “sole”-management role in the company, and
that he had evaluated and disclosed weaknesses in
Analytica's financial reporting and disclosure controls.
Id. ¶¶ 25-27. Perhaps unsurprisingly, the
filings did not disclose Murdock's own status as a de
facto officer and manager of Analytica. Id.
Murdock used his control of Analytica to engage in a
fraudulent scheme in which he sold unregistered Analytica
shares in the public market. In July 2013, he fraudulently
obtained for his own companies 1.5 million Analytica shares
which he falsely claimed his companies were due as payment
for work they were contracted to perform. Id.
¶¶ 35-41. Due to this fraud, the unregistered
shares were provided without a restrictive legend warning
that they could not be resold on the public market.
Id. ¶ 41. He also caused Analytica's
transfer agent to remove improperly the restrictive legend
from an additional 1.15 million Analytica shares he held in
his name by falsely claiming he was not affiliated with
Analytica. Id. ¶¶ 43-46.
April 2014, Murdock transferred these and other Analytica
shares to an associate, who set up a brokerage account
dedicated to holding the shares. Id. ¶¶
47-48. Between June and August 2014, more than a half million
shares were sold to the public at prices ranging from $1.00
to $1.18 per share. Id. ¶¶ 51-53; Decl. of
Kevin Guerrero (“Guerrero Decl.”) [ECF No. 14-2]
¶ 2(f). At least $340, 369.57 of the proceeds were then
transferred to Murdock. Compl. ¶¶ 51-52; Decl. of
Nima Besharat [ECF No. 14-3] ¶¶ 5-9. By March 2018,
Analytica's shares were traded at a price of $0.008 per
share. Ex. 6 to Guerrero Decl. at 2.
February 28, 2018, the SEC brought a complaint against
Analytica and Murdock for violations of Section 10(b) of the
Securities Exchange Act of 1934 (the “Exchange
Act”), 15 U.S.C. § 78j(b), and Rule 10b-5, 17
C.F.R. § 240.10b-5. [ECF No. 1] ¶ 5. The complaint
also alleges Murdock violated Sections 5(a), 5(c), and 17(a)
of the Securities Act of 1933 (the “Securities
Act”), 15 U.S.C. §§ 77e(a), 77e(c), 77q(a).
Id. A consent judgment was entered as to Murdock,
who waived findings of fact and conclusions of law and agreed
that this Court would determine whether “to order
disgorgement of ill-gotten gains and/or a civil
penalty”; that for the purposes of such determination,
the allegations in the complaint would be accepted as true;
and that the determination may be made on the basis of
affidavits, declarations, and documentary evidence. Consent
of Def. Douglas G. Murdock [ECF No. 2] ¶¶ 4-5;
Consent J. [ECF No. 8] at 1, 5. Analytica failed to appear or
respond to the SEC's complaint, and the clerk entered
default against it pursuant to Federal Rule of Civil
Procedure 55(a). Clerk's Entry of Default [ECF No. 13].
The SEC now moves for entry of final default judgment against
Analytica enjoining it from violating Section 10(b) of the
Exchange Act and Rule 10b-5. See Mem. of P. & A.
in Supp. of Pl.'s Mot. for Final J . by Defa ult Against
Def. Analytica Bio-Energy Corp. and for Monetary Relief and
Final J. Against Def. Douglas G. Murdock (“Pl.'s
Mot.”) [ECF No. 14] at 13-24. At the same time, it also
moves for entry of final judgment against Murdock ordering
him to pay disgorgement of $340, 369.57, plus prejudgment
interest of $49, 009.26, and a civil monetary penalty of
$160, 000. Id. at 24-34. Neither Analytica nor
Murdock has opposed the motion.
Default Judgment as to Analytica
Rule of Civil Procedure 55(a) provides for entry of default
“[w]hen a party against whom a judgment for affirmative
relief is sought has failed to plead or otherwise defend, and
that failure is shown by affidavit or otherwise.” After
entry of default by the clerk, the Court may enter a default
judgment against the party pursuant to Rule
55(b). Default establishes the liability of the
defaulting party, Adkins, 180 F.Supp.2d at 17, but
the Court must independently determine whether the plaintiff
is entitled to injunctive relief, see SEC v. E-Smart
Techs., Inc., 139 F.Supp.3d 170, 177 (D.D.C. 2015).
filed a complaint alleging Analytica violated Section 10(b)
of the Exchange Act and Rule 10b-5, which prohibits the
making of “any untrue statement of a material
fact” or omission of material fact “in connection
with the purchase or sale of any security.” 17 C.F.R.
§ 240.10b-5. Analytica failed to respond to the
complaint or otherwise defend against the action after it was
served, and therefore default was appropriately entered
against it. See Fed.R.Civ.P. 55(a). This default
constitutes an admission by Analytica of liability for the
well-pleaded allegations in the complaint, see
Adkins, 180 F.Supp.2d at 17, including that Analytica,
through Murdock and Brasil, knowingly made material
misrepresentations and omissions in SEC filings that were
connected with its sale of securities, see Compl.
¶¶ 1-2, 5, 21-22, 24-33, 59-63. Accordingly, the
Court finds that the well-pleaded allegations establish