Court of Appeals Affirms Securities Fraud Convictions Upon Finding that Transactions Occurring "Primarily" or "Partially" in the U.S. Did Not Implicate Extraterritoriality Limitations

The World in U.S. Courts: Fall 2014 - Securities Law

United States v. Coffman, U.S. Court of Appeals for the Sixth Circuit, July 22, 2014

Two defendants were convicted of fraud and money laundering in connection with sales of interests in oil wells.  Among other challenges, they argued that their convictions for securities fraud and wire and mail fraud required an impermissible extraterritorial application of the relevant statutes.  At issue were transactions with defrauded investors of Global Energy Group, a corporation operated by the defendants that was domiciled in the Bahamas and had sales offices in Canada.

As regards the claim of securities fraud, the Court of Appeals acknowledged that the basic securities law antifraud provision, Section 10(b) of the Securities Act, was intended to apply only within the territorial jurisdiction of the U.S.  But it concluded that extraterritoriality was not at issue because the transactions giving rise to the convictions occurred "primarily" (or "partially") in the U.S., observing that the fraud was accomplished via money mailed and wired to the defendants in the United States, that Global held itself out as being headquartered in the U.S., and that the defrauded investors were encouraged to travel to the U.S. to visit subject oil wells.

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