United States Securities & Exchange Commission v. Radical Bunny LLC

MEMORANDUM

Defendants-Appellants Tom Hirsch, Berta Walder, Howard Walder, and Harish P. Shah appeal from the district court’s summary judgment in favor of the Securities and Exchange Commission (“SEC”), and denial of Appellants’ cross-motion for summary judgment. Appellants were officers (called “Member Managers”) in Radical Bunny, LLC (“Radical Bunny”). Between January 2006 and June 2008, Appellants raised more than $189,500,000.00 from investors and used that money to make loans to another com pany called Mortgages Limited. Mortgages Limited was in turn to make loans to developers and real estate buyers, who were to secure the repayment of the loans by deeds of trust on the land the borrowers developed or bought. The investors in Radical Bunny were to be named as beneficiaries of such deeds of trust. Appellants challenge the district court’s determination that they were selling “securities” or “notes,” and the district court’s determination that they acted with the requisite scienter to constitute fraud when Appellants told investors their loans would be secured by Deeds of Trust or Mortgages, even though the loans were not so secured. Appellants also challenge the district…