SEC Obtains Default Judgments Against San Diego Broker and Colorado Trust in Fraudulent Offering Scheme

Litigation Release No. 25027 / February 9, 2021

Securities and Exchange Commission v. Daniel Dirk Coddington, et al., No. 1:13-cv-03363-CMA-KMT (D. Colo. filed December 12, 2013)

The U.S. District Court for the District of Colorado has entered final default judgments against defendant Seth A. Leyton and relief defendant Coddington Family Trust in connection with a prime bank scheme orchestrated by Daniel Dirk Coddington.

The SEC's complaint filed on December 12, 2013, alleged that Coddington defrauded investors by soliciting investments in a purported trading program involving Collateralized Mortgage Obligations (CMOs) that Coddington told investors would produce annual returns ranging from 250% to 475%. In fact, the complaint alleged, the trading program did not exist, and the majority of investor money was misappropriated. The complaint further alleged that Leyton, the owner of a securities brokerage firm, assisted Coddington by opening brokerage accounts that enabled Coddington to misappropriate investors' CMOs. Specifically, the complaint alleged that Leyton opened brokerage accounts at his brokerage firm to enable investors to transfer their CMOs to the defendants, delayed the return of the CMOs to investors, and sold or assisted in the selling of the CMOs contrary to the terms of the investment agreements with investors. The complaint also alleged that Coddington transferred funds illegally obtained from investors through the fraudulent scheme to the Coddington Family Trust. The SEC charged the Coddington Family Trust as a relief defendant in the 2013 action.

Leyton and the Coddington Family Trust did not answer or otherwise respond to the SEC's complaint. In its orders entering the default judgments, the court found that Leyton aided and abetted violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and permanently enjoined him from future violations. The court also ordered Leyton to pay disgorgement of $176,964, prejudgment interest of $69,374, and a civil penalty of $176,964. Finally, the court ordered the Coddington Family Trust to pay disgorgement of $1,591,962 and prejudgment interest of $665,220.

The SEC also sought, and the court granted, dismissal of its claims against defendant Stonerock Capital Group LLC and its president, relief defendant Joanna I. Columbia, because the disgorgement that the SEC sought from Stonerock (which is now defunct) and Ms. Columbia was included in a judgment against her former husband, defendant Michael B. Columbia.

The SEC previously obtained judgments against Merlyn Curt Geisler, Marshall D. Gunn, Jr., and Michael B. Columbia in connection with their roles in the alleged prime bank scheme, and dismissed its claims against Coddington (who passed away in January 2019) and others, including several entities that are now defunct. The SEC's case is continuing against Jesse W. Erwin, Jr., Lewis P. Malouf, and Daniel Scott Coddington. The litigation is being led by Leslie J. Hughes and Stephen C. McKenna, and supervised by Gregory A. Kasper.