UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
UNITED STATES OF AMERICA § §
VS.
§ NO. 4:22-cr-00612-3 §
JOHN RYBARCZYK §
RYBARCZYK’S RESPONSE IN OPPOSITION TO THE GOVERNMENT’S MOTION TO STAY
TO THE HONORABLE ANDREW S. HANEN, UNITED STATES DISTRICT JUDGE:
COMES NOW JOHN RYBARCZYK, Defendant, joined by his Co-Defendants Deel, Matlock, Hrvatin, Cooperman, Constantinescu, and Hennessey, respectfully files this opposition to the Government’s motion (Dkt. 638) seeking a stayof this Court’s March 20, 2024, Order (Dkt. 628) (hereafter, “Decision”) dismissing the Indictment in this case without prejudice.
A. This Court Lacks Jurisdiction to Stay the Dismissal of an Indictment that Has Already Been Dismissed.
As an initial matter, it is entirely unclear from the Government’s motion how this Court could stay its decision to dismiss the Indictment days after the Indictment has been dismissed.
Upon dismissal, there are no longer any criminal charges pending against the defendants. See United States v. Hudson, 3 F. Supp. 3d 772, 789 (C.D. Cal. 2014) (once Indictment is dismissed, no longer any charges against the defendant); United States v. Sales, 13-CR-137-NT, 2014 WL 3728364 (D. Maine Jul. 25, 2014) (same). Thus, to stay a dismissal of already dismissed charges, this Court would have to first reinstate the charges against the Defendants, something that only a
grand jury can do
1 See, e.g., Stirone v. United States, 361 U.S. 212 (1960).
Thecases thatthe Government relies upon support Rybarczyk’s argument. In United States v. Schlor, No. CR-01-360-RHW, 2008 WL 4949037, at *6 (C.D. Cal. Nov. 14, 2008), the court granted the defendant’s motion to dismiss the indictment on speedy trial grounds, but in the decision doing so,stayed theexecutionoftheorder for approximatelysix days. Id.at *7. Likewise, in United States v. Olvis, 913 F. Supp. 451, 457 (E.D. Va. 1995), the court granted the motion to dismiss the indictment, but in that same order, stayed the order of dismissal pending appeal to the Fourth Circuit.2 Here, this Court did not stay the execution of its order, and there does not appear to be any rule of criminal procedure that allows this Court to go back and stay already dismissed charges. Cf. Fed. R. Crim. Pro. 38 (rule specifically authorizing the Court to stay a sentence of imprisonment, forfeiture or disability); see also Rule 12(b)(3) (nothing in rule authorizes a stay of dismissed charges).
Moreover, the circumstances here do not warrant that this Court exercise its discretion to grant a stay even if it could. The Government cannot claim to have been caught off guard by this Court’s decision. Extensive oral argument on Rybarczyk’s motion to dismiss was held on March 19 and 20th. At the conclusion of argument, this Court told all counsel: “All right, counselors. Let
1 Further confirming that the criminal charges have already been dismissed, Pre-Trial Services removed the GPS ankle monitors from all defendants, and told, at least Mr. Rybarczyk, that they are no longer under supervision. Thus, the Government’s assertion on page 5 of their motion, that they will consent to the “removal of GPS monitoring during the pendency of this stay,” is moot andinapplicable given that thereare nocriminal charges. Further,as set forth herein, chargesmustbepending before anyreleaseconditionscanbeimposedbythisCourt. See 18U.S.C. § 3142(a) (release conditions can only be imposed on a “person charged with an offense …”).
2 The final decision cited by the Government here, United States v. Titterington, 2003 WL 23924932, *2-3 (W.D. Tenn. 2003), is unclear as to its procedural posture. The motion to dismiss was granted on April 22, 2003, and the Court’s decision, issued on May 22, 2003, notes the existence of a “May 5, 2003, temporary stay order.” However, it is unclear as to whether that stay order followed a previous stay order issued at the time of the indictment dismissal.
me tell you what I’m going to do here. Since we made so much progress this morning. I’m going to do one of two things: I’m going to go back and draft and order dismissing the case or I’m going to go back and draft an order on optional completeness …” See March 20, 2024 Tr. at 146. Fully aware of the Court’s upcoming decision, the Government could have asked this Court, at that time, to stay any dismissal in the event that the Court granted Rybarczyk’s motion to dismiss. The Government did not do so.
Whether a stay can be issued is critical to the outcome of this motion as the Government seeks to reimpose some bond conditions on the Defendants i.e. continued retention of passports. But given that the charges have been dismissed, it is well-settled that this Court has no ability to impose any conditions of release. See 18 U.S.C. § 3142(a) (authorizing conditions only for “a person charged with an offense …”); see Sales, 2014 WL 3728364 (ruling, after a full analysis of Section 3142, that the Government cannot impose restrictions or detention when there is no operative indictment)3; Hudson, 3 F. Supp. 3d at 789 (same, court held that “since there is no longer an operative indictment., there is no possible way for the Court to further restrain [the defendant’s] liberty …”); United States v. Arteaga-Centeno, 360 F. Supp. 3d 1022, 1024 (N.D. Cal. 2019) (same).
For this reason alone, the Government’s motion to stay should be denied, and any previously imposed conditions of bond vacated pursuant to Section 3142.
B. The Government Fails to Meet Even Two of the Four Factors Justifying A Stay.
In seeking a stay, the Government cites Thomas v. Bryant, 919 F.3d 298, 303 (5th Cir.
3 Sales is applicable here for another reason. In Sales, the Court dismissed the Indictment, and did not stay the execution of that order. The court then issued an order releasing the defendant from custody. It was the detention order that the Government in that case moved to stay pending appeal, and not the order dismissing the Indictment. See Sales, 2014 WL 3728364 at *1-2 and also Dkts. 83 and 85.
2019), which makes clear that even if this Court could grant a stay (to be clear, it cannot), a stay is “an extraordinary remedy” committed to the “court’s discretion.” Id. In determining whether a stay is merited, courts typically evaluate four factors: whether the applicant can demonstrate success on the merits; whether the Government can demonstrate irreparable harm absent a stay; whether a stay will substantially injure other interested parties; and where the public interest lies.
Id.; see also United States v. Fluitt, 2022 WL 3098734, *1 (5th Cir. 2022). The Government’s motion only attempts to address two of those four factors, and succeeds in neither
1. The Government Fails to Show Irreparable Harm.
Here, the Government does not even attempt to show irreparable harm. At best, the Government argues that it maysuffer ordinary “harm” if the Defendants’ passports are returned to them and a defendant “choose[s] to flee,” which would force the United States to “initiate extradition proceedings.” 4 Accordingly, even under the Government’s worst-case scenario, the Government will not face irreparable harm but merely a delay while extradition proceedings take place. However, the motion does not identify any prior attempt by any defendant to flee the country. This concern, therefore, is not based on any actual evidence; it is speculative, at best.
But even so, the Government’s speculation regarding what could happen if passports are returned to the Defendants falls far short of meeting the high standard meriting a stay pending appeal. See Fluitt, 2022 WL 3098734, *2 (“speculative injury is not sufficient; there must be more than an unfounded fear on the part of the applicant [for a stay]” to be issued) (citing Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir. 1985)). For nearly 16 months, while under felony indictment, not a single defendant did anything to even suggest the suspicion he may
4Although the Government’s references motions by various Defendants seeking the return of their respective passports, none of those or any other post-dismissal motion filed by any Defendant has yet been granted.
flee the country. As the Court likely observed, many of the defendants came to numerous pre-trial hearings they were not required to attend, including Mr. Cooperman the defendant that the Government complains of for being an Israeli citizen who was present on both the 19th and 20th.5 Acknowledging their presence on the 19th, the Court even reminded counsel that the defendants were not required to attend. Many remained. While undersigned counsel only represents Rybarczyk, upon information and belief, all seven remaining defendants eagerly awaited their chance to vindicate themselves at trial. It makes little sense, now that the Indictment has been dismissed, that any would flee the country. The Government’s speculation bears little resemblance to reality and certainly not irreparable harm. This, too, dictates denial of the motion.
2. The Government Shows No Likelihood of Success on the Merits.
The Government’s assertion that this Court’s Order at Dkt. 628 was “plainly contrary to the law” is meritless.
First, to arguethatit has a significant likelihoodof success, theGovernment creates astraw man argument that did not form the basis for this Court’s opinion. See Dkt. 638 at 3. In that regard, the Government cites to multiple paragraphs in the Indictment, including 1, 13, 14 94, and 105, to claim that this Court’s ruling was flawed because these paragraphs show that the Indictment properly alleges that the Defendants “intended to deprive their followers of money or property.” Id. But the Government misses the point.
As the Court held in its ruling, and as the Ciminelli, Kelly and Greenlaw decisions also make clear, it is insufficient to allege only that certain individuals are deprived of money or property. Rather, those who are deprived of money or property must also be victims of any
5 It is ironic that the Government fears that Mr. Cooperman might flee to Israel when it is well known that Mr. Cooperman is highly motivated to stay in the United States (and defeat the Government at any trial) given that his wife and newborn baby are United States citizens.
underlying deceit. They must be cheated out of their money, meaning, inter alia, that a defendant must cause “some harm to result from the deceit.” See Decision at 6-7 (cheating requires an “intent to deprive the victim of money or property by means of deception.”). In claiming error, the Government ignores that distinction, a distinction specifically explained by the Court at length in the Decision.
As Rybarczyk argued, and as set forth in the Decision, the Government’s Indictment does not, when read in its entirety, explain how the Defendants conspired to cheat their followers out of money. Decision at 10. Certainly, the Defendants wanted to make money as does every stock trader but the Government’s Indictment fails to allege that this money was made (or even intended to be made) by cheating other investors. Thus, the Government’s straw man argument that the Indictment properly pled that the Defendants intended to deprive their followers of money or property must be rejected. See Decision at 3.
Second, the Government, citing pages 10-12 of the Court’s decision, alleges that the Court “plainly” erred by requiring the United States to allege that the defendants “obtained money from the Defendants’ followers …”. See Dkt. 638 at 4. It is unclear why the Government makes this argument given that United States v. Greenlaw, 84 F.4th 325 (5th Cir. 2023), controlling law in this Circuit, states “plainly” that a scheme to defraud is “any false or fraudulent pretenses or representations intended to deceive others in order to obtain something of value, such as money, from the [entity] to be deceived.” Greenlaw at 339 (citing United States v. Evans, 892 F.3d 692, 711-12 (5th Cir. 2018)). This Court, in its opinion, explicitly cited to that exact page in Greenlaw, see Decision at 9. This Court even asked Government counsel about this issue at oral argument (March 20, 2024, Tr. at 134 – Court: “What do I do with Greenlaw that says money or property
6
from the victim?”)
But rather than addressing this binding caselaw, the Government, in now asserting otherwise, relies upon either older Fifth Circuit cases with citations that are inapplicable see, e.g., United States v. Swenson, 25 F.4th 309, 319 n.5 (5th Cir. 2022) (“If a person suffers a loss due to deception, it is fraud, even if the fraudster does not actually see a profit.”) or out of circuit cases such as United States v. Gatto, 986 F.3d 103 (2d Cir. 2021). The Government cannot now pretend that Greenlaw does not exist, and certainly cannot prove “plain[ ]” error by this Court for following Greenlaw.
Third, the Government, taking Greenlaw out of context, contends that the Court erred at pages 10-12 of its Order in “evaluating the success of the scheme and whether the Defendants’ followers “made money” ….”. See Dkt. 638 at 4. But the Government’s argument makes little sense in the context of this case. In Greenlaw, which cites the Supreme Court’s Shaw decision, the issue was whether a defendant had to intend to cause investors actual “financial loss” (in addition to the deprivation of money or property). That issue was important in Greenlaw because, apparently, the loan portfolio that investors were buying into was sufficiently collateralized by other loan portfolios. 84 F.4th at 346. Of course, as the Court explained, that investors could ultimately be made whole in the end was not determinative of whether a crime had been committed. Regardless of whether theyintended to cause financial harm, the Greenlaw defendants had intended to obtain money from the victims through false and fraudulent representations. Likewise, in Shaw, the Supreme Court did not hold that no crime had been committed because the
6 In response, Government counsel did not deny that the Government was required, under Greenlaw, to allege that money or property came from the victim. To the contrary, Mr. Armstrong responded, “I think that we have that also alleged in the indictment.” See 03/20/2024 Tr. at 134. Thus, this argument, although legally incorrect, has also been waived.
bank in Shaw could have potentially been reimbursed for any losses suffered as a result of the defendant’s fraud Shaw v. United States, 580 U.S. 63 (2016)
But those circumstances where the victims could be reimbursed or made whole from any monetary loss are not at issue here, and certainly, no facts supporting such an inference had been pled in the Indictment. Moreover, Rybarczyk has not, and does not, intend to argue that no crime could havebeen committedifanindividualvictimwas somehowreimbursedforhis losses. Indeed, later reimbursements for already suffered no losses are immaterial.
Butperhapsmoreimportantly,whiletheGovernmentnowargues thattheCourterredwhen “evaluating the success of the scheme” and whether followers “made money,” this Court, to the extent that it did so, only did so arguendo because the Government itself alleged in the Indictment that losses to the victims occurred. See Decision at 10 (citing Dkt. 134 ¶ 12).7 It was not the basis of this Court’s ruling.
At oral argument the Government unequivocally argued that Paragraph 12 of the Indictment the same paragraph this Court analyzed in determining whether the pled scheme was sufficient saved the Indictment because it showed that the victims here lost money.
Mr. Rosen: I just keep going through the indictment. And I just fail to see where they allege that money and property came from the victim. It doesn’t say –
Mr. Liolos: Paragraph 12.
Mr. Armstrong: But at the stage that we’re at now, where we have alleged that they did this in paragraph 12 at the expense of their followers, and we have the specific allegations that they were robbing idiots for their money,
7 Paragraph 12 of the Indictment provides: (“The defendants used their credibility to maximize their own trading profits through their tweets and posts in Atlas Trading Discord, often at the expense of their Twitter followers and members of Atlas Trading Discord.”).
those allegations have to be taken as true at this stage.
See March 20, 2024, Tr. at 140-142.
It was preciselybecause of the Government’s own allegations in paragraph 12, specifically cited to by this Court in its opinion, that this Court analyzed the “success” of the Defendants’ alleged scheme, finding that any losses were incidental to rather than the object of the alleged scheme See Decision at 10. The Government cannot have it both ways. The Government cannot set forth allegations in its own Indictment allegations repeatedly relied on at oral argument in opposition to a motion to dismiss and then claim that this Court “plainly” erred in analyzing those very same allegations in determining whether the Indictment properly pled a scheme to defraud sufficient to survive Ciminelli v. United States, 598 U.S. 306 (2023).
And further, it was the Ciminelli analysis, not the “success of the scheme” or whether “followers made money,” that was determinative. Directly after writing that many of the alleged victims “mayhave actuallymademoney,”theCourtwrote: “even acceptingas truethat thealleged victim ultimately lost money on the stock market because the value of their shares went down, the Defendants did not obtain something of value from the entity to be deceived.” Decision at 10. Rather, “[t]he property right of the investors that the Defendants conduct harmed was their right to control their assets…their right to make an informed discretionary decision.” Id. As the Court held, this describes a scheme like that in Ciminelli. Id. at 11.
Fourth, the Government contends that this Court committed “clear error” when it “impermissibly weighed those allegations and looked beyond the four corners of the Superseding Indictment,” and failed to accept the Indictment’s allegations as true. But of course, this Court explicitly wrote in its order that it was required to accept the allegations as true, and it did accept the allegations as true. Decision at 1.
Further,to the extentthat this Courtdid not explicitlystatethatit was relyingon allegations contained within the four corners of the Indictment, that matters little. It is not the law in this Circuit that this Court must stick to the four corners of an Indictment, and the Government cites no case law to the contrary. In the Fifth Circuit, as this Court made clear in its decision, district courts can resolve a “legal question in a pre-trial motion to dismiss the indictment,” which is exactly what this Court correctly did here. See United States v. Flores, 404 F.3d 320, 325 (5th Cir. 2005); see also United States v. Fontenot, 665 F.3d 640, 644 (5th Cir. 2011). And in deciding that legal question, courts are entitled to consider all undisputed facts, whether pled in the Indictment or not. Id. Thus, to the extent that the Court did stray beyond the four corners of the Indictment undersigned counsel does not believe that the Court did so that is immaterial under binding Fifth Circuit law.
Finally, it is important to note that the Government’s motion does not directly take issue with this Court’s determination that the Government’s Indictment was predicated on a “right-tocontrol” theory of fraud that was explicitly prohibited by the Supreme Court’s decision in Ciminelli, a decision rendered after the Government superseded here. Indeed, the motion does not even cite to or use the word Ciminelli. But it was because of Ciminelli that this Court, in large part, dismissed the Indictment. See Decision at 11. For this reason too, the failure to dispute the rightto-control theoryset forth within the Indictment, the Government is not likely to succeed in getting the Fifth Circuit to reverse this Court’s decision.
CONCLUSION
For all these reasons the Government’s motion to stay should be denied.
Respectfully submitted,
/s/ Q. Tate Williams
Q. Tate Williams
Texas Bar No.: 24013760
Philip H. Hilder
Texas Bar No. 09620050
Stephanie K. McGuire
Texas Bar No. 11100520
Hilder & Associates, P.C.
819 Lovett Blvd.
Houston, Texas 77006
Tel.: (713) 655-9111
Fax: (713) 655-9112
philip@hilderlaw.com
tate@hilderlaw.com
stephanie@hilderlaw.com
Eric S. Rosen
Eric Samuel Rosen
Dynamis, LLP
225 Franklin Street, 26th Floor
Boston, MA 02110
Tel: (617) 977-4163
erosen@dynamisllp.com
ATTORNEYS FOR DEFENDANT
JOHN RYBARCZYK
CERTIFICATE OF SERVICE
I herebycertify that on March 24, 2024, a true and correct copy of the above and foregoing was served on all counsel of record via ECF, certified mail, return receipt requested, facsimile, electronically, or hand delivery.
/s/ Q. Tate Williams
Q. Tate Williams