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by Mike Caswell

California resident Imran Husain has won an appeal ruling against the U.S. Securities and Exchange Commission, with a panel of judges reversing a $1.75-million judgment against him. (All figures are in U.S. dollars.) The SEC claimed that Mr. Husain was behind a shell factory scheme, creating nine public companies with nominee officers and directors. The SEC said that the companies, which included a listing with a Toronto address, had fake business plans, allowing them to bypass the normal requirements for shells.

The SEC initially won the case, with a federal judge in California handing down a summary judgment on March 25, 2021. The judge found that it was clear Mr. Husain's conduct was illegal. Among other things, the judge called Mr. Husain's actions "fraudulent, deceitful and criminal," amounting to a "how-to" guide on how to run an illegal shell factory scheme.

The victory was short-lived, however. Mr. Husain filed an appeal shortly after, complaining about the size of his fine. He said that the $1.75-million amount exceeded his gains from the scheme. In particular, he claimed that a lawyer who worked on the shell sales had withheld some of the money, using it to cover expenses.

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