Corporate : Investment Agreement – Escrow Funds Released – SEC Violations

Where an investor sued a company in which he had invested claiming that the company had breached the investment agreement by releasing escrow funds before raising the minimum amount of capital required by the offering, the district court properly found that the investment offer was an “all or nothing” agreement under Rule 10b-9 of the Securities Exchange Act, and summary judgment for the investor is affirmed because the company violated the rule by breaking escrow without have received the amount required in bona fide investments, and the same evidence supported a finding that the company violated Rule 10b-5, which generally prohibits securities fraud and misrepresentations.

Judgment is affirmed.

Doud v. Toy Box Development Co. (MLW No. 68218/Case No. 14-2588 – 9 pages) (U.S. Court of Appeals, 8^th Circuit, Bye, J.) Appealed from U.S. District Court, Southern District of Iowa, Jarvey, J. (Peter Craig Riley, Cedar Rapids, Iowa, argued for appellant) (Sean P. Moore, Des Moines, Iowa, argued for appellee; Jonathan Gallagher appeared on the brief).

Read the full text of this opinion. (PDF)