Daspin Death Star Battles SEC and Lone ALJ Jedi Knight Grimes

SIDE BAR:  Back in 2013, Daspin made it clear to the SEC that he was not going quietly into the federal regulator's good night. At first, he drew the line over his voluntary subpoena compliance. You want me to testify during your investigation? I don't want to. Go ahead and force me. In response to that challenge, SEC went to SDNY and by 2014, the federal courts appeared to have resolved the issue against Daspin. Notwithstanding this early victory, it should have been clear to all involved that the future held only a rocky road and that there would be many stops, delays, and detours on the route to wherever it was that the SEC hoped to take Daspin. One warning sign was Daspin's reference to his medical condition and his apparent difficulty handling stress. Daspin dared the SEC to freeze him in carbonite, and they did. But we likely haven't heard the end of him, have we?

SIDE BAR: Hey, me again, isn't that Star Trek Captain Jean-Luc Picard at about 2:34 into the above clip? What the hell is Captain Picard doing in Star Wars? Did he take a wrong turn when he came onto the studio lot that day? Is he dyslexic?

1. Daspin, Agostini, and Lux participated in the fraudulent unregistered offerings of the securities of Worldwide Mixed Martial Arts Sports, Inc. ("WMMA") and an affiliate, WMMA Distribution, Inc. ("WMMA Distribution"),1 start-up companies formed to establish an international league of mixed martial arts tournaments that would generate digital content and sell branded products.

2. From December 2010 through approximately June 2012 (the "relevant period"), WMMA and WMMA Distribution raised a total of $2.47 million from seven investors, of which at least $2 million was raised fraudulently. Daspin, who orchestrated the fraud, targeted unemployed professionals whom he lured in with offers of executive-level positions at the Companies. Typically it was only after prospects arrived for a "job interview" that they learned that they would be required to make a substantial investment as a condition of obtaining employment and receiving a salary.

. . .

10. Edward Michael Daspin, age 77, founded and for all practical purposes controlled the Companies. In 1978, Daspin was convicted of bankruptcy fraud for concealing from the bankruptcy trustee assets of a bankrupt company he had controlled; he was sentenced to eighteen months in prison. United States v. Edward Michael Daspin, 77 Crim. 00238 (D.N.J.) and United States v. Michael Daspin, 77 Crim. 0196 (S.D.N.Y.). Daspin resides in Boonton, New Jersey. Daspin has never been registered with the Commission as a broker-dealer or associated with a registered broker-dealer.

11. Luigi Agostini, 38, was a director and the executive chairman of the board of each of the Companies. Agostini resides in Jersey City, New Jersey.

12. Lawrence R. Lux, age 55, was a director and CEO of each of the Companies. Lux was briefly associated with a registered broker-dealer from December 2005 to April 2006, but otherwise has never been associated with a registered broker-dealer or registered with the Commission as a broker-dealer.

[T]he filings show that Daspin currently has a severe medical condition. The Motion analyzes Daspin's condition in light of seven factors that federal courts that have considered this issue have examined when deciding whether to continue indefinitely an action due to a party's medical condition: (1) the medical evidence and judgments; (2) the related evidence of his activities outside the courthouse; (3) the availability of measures to minimize the risks to his health in subjecting him to a hearing; (4) the temporary or permanent character of the physical problem; (5) his ability to participate in his defense; (6) whether the proceeding is likely to worsen his condition; and (7) the magnitude and seriousness of the case, or the degree of harm to the public interest as a result of the delay.

I therefore conclude that there is currently no authority to indefinitely continue this proceeding. This is especially so here, where Mr. Daspin's doctor estimates that it will be at least a year before he can determine whether Mr. Daspin will ever be able to participate in this proceeding. In other words, I lack the authority to indefinitely continue this matter.

Mr. Daspin's case, however, has been stayed for two months. It would be unfair to make him suddenly prepare for the hearing that is currently scheduled to take place on November 2, 2015. Taking account of the two months that Mr. Daspin's case has been stayed and the parties' desire not to hold separate hearings for Mr. Dapsin and Mr. Agostini, I ORDER that the hearing as to Mr. Daspin and Mr. Agostini will begin on January 4, 2016.

The orders regarding Mr. Daspin's medical status reports are MODIFIED. Mr. Daspin's counsel has stated that his next status report will report no change but that Mr. Daspin will consult with a specialist in late September. Mr. Daspin therefore need not file a status report on September 15, 2015, but shall report the results of his next consultation as soon as he is aware of those results, but no later than October 15, 2015. 3 If the Division chooses to retain a medical expert, Mr. Daspin shall submit to an examination by that expert, on reasonable notice by the Division.

A hearing in this matter is currently scheduled to begin on Monday, January 4, 2016. See Edward M. Daspin, Admin. Proc. Rulings Release No. 3183, 2015 SEC LEXIS 4001, at *1 (Sept. 30, 2015). Counsel for Respondent Edward M. Daspin withdrew effective September 28, 2015. Id. at *3 & n.2.

On October 2, 2015, Daspin sent an e-mail to this Office forwarding a request that the

Division of Enforcement sent him asking for certain medical records. Daspin asserts that the Division is harassing him through its e-mail to him. Daspin has evidently not filed the substance of his e-mails with the Office of the Secretary in compliance with Rules of Practice 151 through 153. See 17 C.F.R. §§ 201.151-.153. The same day, the Division e-mailed this Office a courtesy copy of a letter addressed to me. Among other things, the Division asks that I direct Daspin to comply with existing orders concerning disclosure of his medical records. See Edward M. Daspin, Admin. Proc. Rulings Release No. 3041, 2015 SEC LEXIS 3348 (Aug. 14, 2015); Admin. Proc. Rulings Release No. 2939, 2015 SEC LEXIS 2933 (July 17, 2015). Later on October 2, Daspin responded to the Division's letter with yet another e-mail to this Office, and again without evidently filing anything with the Office of the Secretary. Daspin has since sent this Office multiple further e-mails, either sent in a like manner or by copying this Office on his

e-mails with the Division.

A separate October 4, 2015, e-mail, sent purportedly on behalf of Daspin to this Office by "L.C. May," attached motions requesting dismissal of this proceeding or, alternatively, reconsideration of the August 14 scheduling order, a continuance, and my withdrawal from the proceeding.

As a convenience to all participants, parties to administrative proceedings are provided

with and permitted to use this Office's e-mail address. Use of this Office's e-mail address allows parties to serve each other and this Office with courtesy electronic copies of papers they file with the Office of the Secretary. This Office's e-mail address is not intended, however, to serve as a forum for the airing of grievances. Instead, parties should attempt to resolve disputes amongst themselves before raising disputes with me. And in raising a dispute with me, the parties must follow the Commission's rules that require papers to be filed with the Office of the Secretary. See 17 C.F.R. §§ 201.151-.153. Doing so ensures that everything that takes place during the course of a proceeding is preserved for the public record.

I therefore ORDER Daspin to CEASE sending this Office e-mails unless he is doing so in

response to a direct inquiry or request from this Office or is merely providing courtesy copies of documents properly filed with the Office of the Secretary, consistent with the Rules of Practice. He may also send this Office e-mails if he is genuinely seeking to clarify orders I have issued. Future attempts by e-mail to argue about or contest orders will not be considered.

Given Daspin's pro se status, I will consider his October 2 e-mails, together with the

Division's responsive letter. Daspin may file a combined reply to the Division's letter and response to its request for medical records within five business days after service of the Division's letter. See 17 C.F.R. § 201.154(b). Alternatively, he may simply supply the records the Division asserts he has omitted. . .

SIDE BAR: Progress, making not a lot, hell, is the SEC? Yeah, I know, that comes off as a bit of Yoda-speak but, hey, Star Wars just opened so go with it -- and may the Force be with you. In any event, added to the issue of Daspin's medical condition, we now see that he is proceeding pro se -- ever a complicating factor for adversaries and adjudicators -- and, on top of that, Daspin has a penchant for communicating with the ALJ via email. The ALJ has made it clear: Do or do not, there is no try! Emails with stop!.

Respondent shall pay disgorgement of $36,853.21 which represents profits gained as a result of the conduct described herein, and prejudgment interest of $4,061.05, but that payment of such amount is waived based upon Respondent's sworn representations in his Statement of Financial Condition dated August 17, 2015 and other documents submitted to the Commission. Also based upon Respondent's sworn representations in his Statement of Financial Condition dated August 17, 2015 and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondent.

SIDE BAR: Hey there, again, here, I it is, Yoda Singer. Looks like the ALJ's cease- immediately-emailing order of October 6 didn't quite penetrate Daspin's Death Star defenses and his Empire is striking back.  Additionally, Darth Daspin has unleashed a barrage of thousands of unmarked missiles that are evading the SEC's defense system and threatening to wreck havoc.

SIDE BAR: To see copies of the emails cited in the December 14th ALJ Order, read this Supplement

Respondent Edward M. Daspin a/k/a "Edward (Ed) Michael" founded several mixed martial arts companies and sold stock in them to a number of investors. He did so unlawfully, in unregistered offerings as an unregistered broker. He compounded this activity by deceiving investors with numerous lies and omissions about core aspects of the companies, which later failed. He also deceived them with schemes to hide his control and enable his fraud. And for many months, he attempted to derail this proceeding and evade responsibility. Because of Daspin's failure to appear at two scheduled hearings, I found him in default and deemed true as to him the allegations of the order instituting proceedings (OIP). In this initial decision, I impose on Daspin industry and penny stock bars and a cease-and-desist order. I further order him to pay disgorgement of $1,948,258.47, plus prejudgment interest, and civil penalties of $915,000.

I have considered the parties' properly filed submissions and reconsidered the record. The short of this case is that Daspin failed to appear at the merits hearing and then failed to appear at a hearing held solely to allow him to show why he missed the merits hearing. Daspin also prevented a witness -- his wife -- from testifying at the second hearing. A default order followed Daspin's failure to attend both hearings. I deemed true the facts alleged against Daspin and imposed sanctions.

In a series of post-remand filings, Daspin has raised a host of factual and legal arguments. A fair number of his factual assertions lack any evidentiary support. And his legal arguments proceed as if he legitimately missed two hearings and is the innocent victim of a vast conspiracy. None of Daspin's arguments have merit. For the reasons discussed below, I revise portions of two orders and otherwise ratify all actions I have taken in this proceeding and nearly all actions taken by my predecessor.

By e-mail sent on October 1, 2015, Daspin submitted a declaration signed by Dr. Puzino (Second Puzino Decl.), in support of motions to continue or dismiss, which, given its content and style, was also written by Daspin. The declaration asserted that I:

put[ ] Mr. Daspin in the incomprehensible position that regardless of his medical circumstances he must either default or die trying to save his reputation. The man cannot defend himself and the dissolution of the protections puts our legal system at risk, as unless something is done to restore the postponement Mr. Daspin will be facing a death penalty, for a crime that he advises he did not commit.27

In support of its opposition to Daspin's motions, the Division submitted a letter from Dr. Stanley J. Schneller, M.D., a professor of cardiology at Columbia University since 1985. 28 Dr. Schneller refuted Dr. Puzino's assertions about Daspin's health and asserted that Daspin's then-recent REDACTED test showed "no evidence that Mr. Daspin is at risk of a REDACTED  or other adverse outcome from stress." 29 Dr. Schneller further stated that there was no evidence Daspin REDACTED during his deposition and characterized Dr. Puzino's opinions as "without medical foundation," "medically unfounded," and "inconsistent with Dr. Puzino's failure to take medial steps to diagnose and treat Mr. Daspin's condition." 30 Indeed, he was struck by the contrast between Dr. Puzino's dire warning about Daspin's health and "the leisurely pace with which he has addressed" Daspin's alleged problem, given that patients win Daspin's supposed circumstance would normally be seen within days. 31 He also stated that Dr. Puzino misleadingly omitted certain test results, "misrepresented the key finding" of Daspin's REDACTED  test, and misinterpreted another test. 32 In conclusion, Dr. Schneller opined that there is no reason Daspin could not participate in this proceeding. 33

Consistent with the order I issued on January 8, the Division attempted to schedule Daspin's interview with its expert. Because Daspin did not cooperate, the Division scheduled the interview and notified Daspin of the time and place.69 Instead of appearing for the interview, Daspin sent an e-mail saying that he was ill and confined to his home.70

During the evening of February 10, 2016, Daspin sent an e-mail informing my office and the Division that he had taken affirmative steps to prevent his wife from testifying at the next day's hearing.71 And in fact, neither Daspin nor his wife appeared.72

Because Daspin failed to appear, the Division's evidence about the reason for his absence from the January hearing was unrebutted. That evidence, including the report and testimony of Dr. Harold J. Bursztajn, M.D., who has practiced clinical and forensic neuropsychiatry since 1982, demonstrated that Daspin concocted his alleged REDACTED .73 In short, Dr. Bursztajn explained that Daspin staged his REDACTED to manipulate this proceeding to obtain a narcissistic benefit. 74 Dr. Bursztajn also opined that Daspin engages in a "pattern of grandiosity" that involves humiliating others and portraying himself as a hero.75

This brings us to Daspin's alleged medical evidence and his claim that REDACTED caused his REDACTED and his absence from the January hearing. In his declaration in support of his motion for a restraining order, Daspin says that he presented "incontrovertible evidence . . . that it was the side effects" of the medicine Dr. Puzino gave him that caused his REDACTED.145 There are a number of problems with this assertion.

For starters, Daspin's history of concocting false medical excuses, together with his penchant for inventing facts, would give anyone pause. That is particularly the case with Dr. Puzino's declarations, the last five of which Daspin prepared. Daspin repeatedly used the declarations to present argument and criticism of my decisions. The invective and legal observations contained in Dr. Puzino's declarations raise doubts about their reliability or usefulness. 146

Moreover, Dr. Puzino's conclusion that REDACTED caused Daspin's REDACTED is contrary to objective evidence. Although Dr. Puzino says that he gave Daspin REDACTED samples in mid-December 2015, Daspin's contemporaneous medical records contain no mention of REDACTED before January 24, 2016. 147. As Dr. Bursztajn explained, either Dr. Puzino failed to document dispensing REDACTED and the advice he gave Daspin, thereyb behaving "in an extraordinary haphazard manner . . . well below the standard of care," or there are serious reasons to think that Dr. Puzino's declarations are inaccurate. 148

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