SECURITIES AND EXCHANGE COMMISSION v. RODRIGUEZ (2025)

ORDER

On this day, the Court considered Plaintiff Securities and Exchange Commission's (“SEC”) Motion for Remedies, ECF No. 18. For the reasons set forth below, the Motion is GRANTED.

I. BACKGROUND

This is a civil enforcement action, in which the SEC alleges that Defendant Jesus Rodriguez misappropriated at least $3.4 million from at least ten people between March 2014 and July 2021. Compl. ¶¶ 1, 16, ECF No. 1. On December 20, 2023, Rodriguez was indicted on wire fraud, identity theft, and other criminal charges stemming from the conduct at issue in this case. See generally Indictment, United States v. Rodriguez, No. 3:23-cr-2507-KC (W.D. Tex. Dec. 20, 2023), ECF No. 3. Rodriguez was arrested on January 12, 2024. Arrest Warrant Executed, United States v. Rodriguez, No. 3:23-cr-2507-KC (W.D. Tex. Jan. 16, 2024), ECF No. 9. The SEC initiated this civil enforcement action just over a week later, on January 24. See generally Compl. The SEC brought two civil claims against Rodriguez: (1) for violating Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and the related Rule 10b-5, 17 C.F.R. § 240.10b-5; and (2) for violating Section 206 of the Advisers Act, 15 U.S.C. § 80b-6(1)–(2). Compl. ¶¶ 71–77. In November 2024, Rodriguez pleaded guilty in his criminal case. Order Accepting Plea, United States v. Rodriguez, No. 3:23-cr-2507-KC (W.D. Tex. Nov. 6, 2024), ECF No. 66.

But Rodriguez failed to appear in this civil case, and the Court entered default judgment as to liability in favor of the SEC on January 3, 2025. Jan. 3, 2025, Order, ECF No. 13. Because the SEC did not submit evidence in support of its request for injunctive relief and Rodriguez was due to be sentenced in March, the Court deferred determination of the scope of relief until after his sentencing. Id. at 14.

On May 23, the SEC filed its Motion and accompanying Memorandum in Support, ECF No. 19, in which it requests the Court enjoin Rodriguez from further violations of the Securities Exchange Act of 1934 and Investment Advisers Act of 1940. See generally Mot.; Mem. In support of its request, the SEC submits a Declaration from its Counsel, Decl. Nicholas Flath (“Flath Decl.”), ECF No. 20, as well as (1) copies of the Judgment in Rodriguez's Criminal Case, Flath Decl. Ex. A, ECF No. 20-1; (2) Rodriguez's Second Amended Plea Agreement, Flath Decl. Ex. B (“2d Am. Plea Agreement”), ECF No 20-2; (3) the Sentencing Transcript from Rodriguez's Criminal Case, Flath Decl. Ex. C (“Sentencing Transcript”), ECF No. 20-3; (4) a Financial Industry Regulatory Authority Letter of Acceptance, Waiver, and Consent completed by Rodriguez, Flath Decl. Ex. D, ECF No. 20-4; and (5) the Indictment in Rodriguez's Criminal Case, Flath Decl. Ex. E, ECF No. 20-5. The Second Amended Plea Agreement shows that Rodriguez pleaded guilty to operating a fraudulent scheme between May 2018 and August 2021 that involved multiple victims and led to a total loss of $5,554,968.10. 2d. Am. Plea Agreement 4–6. Further, it details Rodriguez's use of deceptive tactics to defraud his victims, such as falsified documentation and fake email addresses. Id.

II. DISCUSSION

A. Standard

The SEC is authorized by statute “to seek and direct the courts to enter permanent restraining orders upon a ‘proper showing’ that the defendant ‘is engaged or is about to engage’ in violations of the securities laws.” SEC v. Zale Corp., 650 F.2d 718, 720 (5th Cir. 1981); see also SEC v. Farias, No. 5:20-cv-885-XR, 2022 WL 3031082, at *6 (W.D. Tex. Aug. 1, 2022). “[T]he Commission is entitled to prevail when the inferences flowing from the defendant's prior illegal conduct, viewed in light of present circumstances, betoken a ‘reasonable likelihood’ of future transgressions.” SEC v. Helms, No. 1:13-cv-1036-ML, 2015 WL 5010298, at *18 (W.D. Tex. Aug. 21, 2015) (quoting Zale, 650 F.2d at 720), adhered to on reconsideration, 2015 WL 6438872 (Oct. 20, 2015).

To determine whether to grant the SEC an injunction based on a defendant's history of previous violations of securities law, courts within the Fifth Circuit have traditionally applied the five factors propounded by the Fifth Circuit in Securities and Exchange Commission v. Blatt, 583 F.2d 1325, 1334 & n.29 (5th Cir. 1978). See, e.g., SEC v. Arcturus Corp., No. 13-cv-4861, 2025 WL 333787, at *8 (N.D. Tex. Jan. 28, 2025) (citing SEC v. Gann, 565 F.3d 932, 940 (5th Cir. 2009)); SEC v. Jaitley, No. 1:21-cv-832-DAE, 2024 WL 5088389, at *5 (W.D. Tex. Dec. 12, 2024) (citing Gann, 565 F.3d at 940). The five Blatt factors are: (1) the egregiousness of the defendant's conduct; (2) the degree of scienter; (3) the isolated or recurrent nature of the violation; (4) the sincerity of the defendant's recognition of his transgression; and (5) the likelihood of the defendant's job providing opportunities for future violations. Helms, 2015 WL 5010298, at *18 (first citing Gann, 565 F.3d at 940, and then citing Blatt, 583 F.2d at 1334).

But in Starbucks Corp. v. McKinney, 602 U.S. 339, 345–46, 144 S.Ct. 1570, 219 L.Ed.2d 99 (2024), the Supreme Court indicated that the four factors articulated in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 32, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) should be applied to all requests for injunctions, “absent a clear command from Congress.” And although the Fifth Circuit has not explicitly abrogated its previous SEC injunction jurisprudence, it has appeared to disclaim courts' reliance on “Commission-specific test[s]” for preliminary injunctions in favor of the Winter factors. See SEC v. Barton, 135 F.4th 206, 226 (5th Cir. 2025) (applying the Winter factors to an SEC request for injunctive relief to freeze assets under the Securities and Exchange Act); cf. also SEC v. Chappell, 107 F.4th 114, 126–27 (3d Cir. 2024) (“District courts in this Circuit must apply the normal four-factor preliminary injunction test when considering the SEC's application for a preliminary injunction.”). The Court therefore analyzes the SEC's request for injunctive relief with reference to the four Winter factors: (1) whether the SEC has succeeded on the merits; (2) whether the SEC is likely to experience irreparable harm absent an injunction; (3) whether the balance of the equities tip in the SEC's favor; and (4) whether an injunction for the SEC is in the public interest. See Barton, 135 F.4th at 226; see also Amoco Prod. Co. v. Vill. of Gambell, 480 U.S. 531, 546 n.12, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987) (“The standard for a preliminary injunction is essentially the same as for a permanent injunction with the exception that the plaintiff must show a likelihood of success on the merits rather than actual success.” (citation omitted)).

B. Analysis

1. Success on the Merits

Because the SEC has obtained a default judgment against Rodriguez as to his liability, it has achieved success on the merits. See, e.g., Chevron Intell. Prop., L.L.C. v. Allen, No. 08-cv-98, 2009 WL 2596610, at *3 (N.D. Tex. Aug. 24, 2009) (“Courts have acknowledged that default against a defendant is tantamount to actual success on the merits.” (citing Twist & Shout Music v. Longneck Xpress, N.P., 441 F. Supp. 2d 782, 785 (E.D. Tex. 2006))); T-Mobile USA Inc. v. Shazia & Noushad Corp., No. 08-cv-341, 2009 WL 2003369, at *4 (N.D. Tex. July 10, 2009) (same). Accordingly, this factor weighs in favor of an injunction.

2. Likelihood of Irreparable Harm Absent Injunction

The SEC asserts that the second Winter element is met by showing that Rodriguez will likely commit future violations absent injunctive relief. Mem. 6–7 (citations omitted). And it argues that the Court should apply the Blatt factors in determining the likelihood of Rodriguez committing future violations. Id.; Blatt, 583 F.2d at 1334 n.29; see also Gann, 565 F.3d at 940. Courts have found that a risk of future harm, “demonstrated by evidence of past, recurrent violations” of securities laws, can constitute a likelihood of irreparable harm weighing in favor of granting an injunction. See SEC v. Guess, No. 24-cv-172, 2025 WL 1866044, at *7 (D. Neb. July 7, 2025) (citations omitted). And given that the Blatt factors have consistently been used by courts to assess the likelihood of future violations, the Court agrees that they have continued relevance in determining the likelihood of irreparable harm here. See Blatt, 583 F.2d at 1334 (“The critical question in issuing the injunction and also the ultimate test on review is whether defendant's past conduct indicates that there is a reasonable likelihood of further violations in the future.”); see also Zale, 650 F.2d at 720;SEC v. Sargent, 329 F.3d 34, 39 (1st Cir. 2003) (considering similar factors to those in Blatt to determine the “reasonable likelihood of future violations”).

Applying the first of the Blatt factors, Rodriguez's actions were egregious given the scale of the scheme and the total loss of over $5.5 million. See 2d. Am. Plea Agreement 4–6; see Jaitley, 2024 WL 5088389, at *4 (reasoning the defendant's actions were egregious when the loss was “in excess of $800,000”); Farias, 2022 WL 3031082, at *6–7; SEC v. Gordon, No. 21-cv-1642, 2021 WL 5086556, at *9 (N.D. Tex. Nov. 1, 2021). Second, his tactics in lying to his clients and his employer, creating fake email addresses, and falsifying documentation to carry out his fraud all demonstrate a high degree of scienter. 2d. Am. Plea Agreement 4–6; see Jaitley, 2024 WL 5088389, at *4; Helms, 2015 WL 5010298, at *18; SEC v. Provident Royalties, LLC, No. 09-cv-1238, 2013 WL 5314354, at *6 (N.D. Tex. Sept. 23, 2013). Third, Rodriguez's conduct occurred over a period of more than three years and involved multiple victims: It was therefore recurrent rather than isolated. 2d. Am. Plea Agreement 4–6; see Jaitley, 2024 WL 5088389, at *4 (defendant's fraudulent conduct was recurrent when it occurred over two years and involved multiple victims); Farias, 2022 WL 3031082, at *6; see also SEC v. Stack, No. 1:21-cv-51-LY, 2023 WL 1325495, at *7 (W.D. Tex. Jan. 31, 2023) (series of fraudulent misrepresentations over six months was recurrent), adopted, 2023 WL 3069764 (Mar. 8, 2023), rev'd and remanded on other grounds, No. 23-50327, 2024 WL 4199017 (5th Cir. Sept. 16, 2024). Fourth, although Rodriguez pleaded guilty in his criminal case, he has failed to appear in this civil matter, which “shows a lack of remorse.” Gordon, 2021 WL 5086556, at *9 (citation omitted). The Court also notes that it was only at the Court's prompting that Rodriguez spoke about the potential impact of his actions on his victims during his sentencing. Sentencing Transcript 8–9. Finally, Rodriguez will still be of working age once he has finished serving his sentence, meaning that he “would still have the opportunity to engage in new investment ventures at that time,” and therefore potentially engage in further fraud. Farias, 2022 WL 3031082, at *6.

This factor thus weighs in favor of granting an injunction.

3. Balance of Equities

Third, the balance of the equities favors the SEC given the likelihood of Rodriguez committing future violations and the “minimal” burden to Rodriguez of requiring him to obey the law. T-Mobile, 2009 WL 2003369, at *4. This factor therefore weighs in favor of entering a permanent injunction.

4. Public Interest

Finally, “seeking to protect the interests of defrauded investors and uphold federal securities law is in the public interest.” See Barton, 135 F.4th at 227 (citation omitted). Accordingly, the Court finds this factor also favors an injunction.

In sum, all four factors weigh in favor the Court granting the SEC's request for injunctive relief.

III. CONCLUSION

For the foregoing reasons, the SEC's Motion for Remedies, ECF No. 18, is GRANTED.

IT IS ORDERED that Defendant Jesus Rodriguez is permanently RESTRAINED and ENJOINED from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5].

IT IS FURTHER ORDERED that Defendant Jesus Rodriguez is permanently RESTRAINED and ENJOINED from violating, while acting as an investment adviser, Section 206(1), (2) of the Investment Advisers Act of 1940 (the “Advisers Act”) [15 U.S.C. § 80b-6(1), (2)].

SO ORDERED.

Kathleen Cardone, Judge