Judge Hanen Dismisses Large Securities Fraud Indictment

Big news coming out of the Houston courthouse. Judge Andrew Hanen dismissed a multi count indictment in a high-profile securities fraud case. When this indictment was initially returned, United States Attorney Al Hamdani praised the prosecution and promised to be on the “cutting edge” of prosecuting fraud in the Southern District of Texas. Apparently, the indictment may have been too “cutting edge” for Judge Hanen’s taste.

The Allegations and Result

The case involved social media influencers who posted about securities on Twitter and Discord. According to the government, the Defendants used their large social media following to falsely boast certain securities only to later sell them. Essentially, a pump and dump scheme. The government alleged that the Defendants made over $100 million dollars from the scheme.

The issues were complex but the Defense boiled down their arguments to the fact that the indictment “failed to state an offense” as required by the Federal Rules of Criminal Procedure. The Defendants argued that the indictment was faulty because the government’s theory of fraud had been stricken down by binding Fifth Circuit and Supreme Court precedent.

Judge Hanen agreed and dismissed the securities fraud indictment without prejudice. The government is likely to appeal. Indeed, they have asked Judge Hanen to stay his order to give the government time to appeal to the Fifth Circuit. This is not a routine process. The government must seek permission from the Solicitor General of the United States prior to seeking an appeal.

The Case Became Highly Contentious

This was a big deal. I had been following the case closely and can say that the animosity between the government and the Defendants was palpable. Judge Hanen was flooded with motions before trial. And the substance of those motions became hostile and petty from both sides. We will see where this case goes but it is unlikely to go anywhere anytime soon.

Judge Hanen gets a lot of unfair bad press sometimes. He is the Judge who essentially ended DACA so that draws a lot of rage from the press. But I have always thought of Judge Hanen as a thoughtful and considerate jurist. As this decision shows, he is not afraid of making hard decisions. He is a fine jurist.

We are adjourned until next week.