Over the past year, the U.S. Securities and Exchange Commission (SEC) has shifted its approach to enforcement, but it’s not prepared to revisit prior cases that are already settled in light of its new stance toward discipline.
The SEC denied a motion from a respondent that settled allegations against him from the SEC back in 2024, who was seeking to vacate that settlement.
In 2024, the regulator settled with Evan Katz, chief operating officer and general counsel at Crawford Ventures Absolute Return Fund, LP, a currency-trading fund that had raised US$16 million from investors, to resolve allegations that he violated federal securities laws by providing forged audit materials to prospective investors, and not taking reasonable steps to confirm the legitimacy of an audit that was provided to him by the fund’s managers.
In the settlement, without admitting or denying the SEC’s allegations, Katz agreed to cease and desist, and to pay more than US$200,000 in disgorgement, interest and penalties.
After he failed to pay the sanctions in full, the SEC obtained a court order against him, and they later agreed to a payment plan to satisfy the judgment. Then, earlier this year, Katz filed a motion seeking to vacate the settlement order altogether.
According to the regulator’s order, Katz asked the commission to vacate the order against him, because “he claims, it ‘represents one of the last matters from a prior enforcement regime,’ and he points to the commission’s recent dismissal of certain civil enforcement actions that the commission had brought ‘in the digital assets area,’ against dealers, and involving a cyberattack.”
However, the SEC ruled that the fact that other, unrelated cases have been dismissed isn’t a compelling reason to vacate this settlement.
While there are circumstances when the regulator may interfere with a past settlement that would only involve cases where the law has changed significantly, enforcement would harm the public interest, or where there are significant new facts, among other things.
“None of those circumstances is present here,” the SEC said. “… voluntary dismissals in unrelated matters represent neither a change in law nor a factual development that renders a settlement unworkable, substantially more onerous, or contrary to the public interest.”
Additionally, the regulator noted that the SEC and the courts have historically rejected efforts to modify or vacate settlements to reflect the outcome of other cases.
“Katz agreed to the settled order voluntarily, with the assistance of counsel. Katz thus entered into the settled order ‘with his eyes wide open’,” the commission said, adding that, if it vacated his settlement simply because it has dropped other cases, it would likely be inundated with requests to revisit past enforcement deals.
It also rejected arguments that Katz now views the terms of the settlement as too severe.
“Katz is precluded from making such a collateral attack on the settled order,” it said. “By consenting to the order, Katz forfeited any challenge to the commission’s factual findings or legal conclusions. He cannot avoid the consequences of that decision now.”
Ultimately, the commission concluded that “Katz has not demonstrated compelling circumstances that justify vacating the settled order to which he agreed” and denied the motion.