In re Grand Jury Subpoena Duces Tecum Dated Mar. 25

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

MISC. NO.:

SECURITIES AND EXCHANGE
COMMISSION,

            Applicant,

v.

BRANDON CHARNAS,

            Respondent.
_____________________________________________/

SECURITIES AND EXCHANGE COMMISSION’S APPLICATION FOR
AN ORDER TO SHOW CAUSE AND FOR AN ORDER REQUIRING COMPLIANCE
WITH ADMINISTRATIVE SUBPOENA
AND INCORPORATED MEMORANDUM OF LAW

Russell Koonin
       Senior Trial Counsel
Michael J. Gonzalez
Senior Counsel
        Attorneys for Plaintiff
Securities and Exchange Commission
 801 Brickell Avenue, Suite 1950
                                                      Miami,      Florida      33131
                                                      Telephone:      (305)      982-6300

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TABLE OF CONTENTS

I. FACTUAL BACKGROUND ................................................................................................... 1

A. The Commission’s Authority for its Investigation .............................................................. 1
B.  The Commission’s Reason for its Investigation ................................................................. 3
C. Charnas Met and Communicated Frequently with Other ODP Traders
     Who Engaged in Similar Trading of ODP ........................................................................... 6

D. Charnas’ use of his Cell Phone to Communicate with Similarly Situated ODP Traders .... 7
E. The Commission’s Subpoena, Meet and Conferral, and Respondent’s Continued
     Failure to Comply ................................................................................................................ 8
i. The Subpoena to Respondent ........................................................................................... 8
ii. Meet and Conferral......................................................................................................... 9
iii. Continued Refusal to Comply with Subpoena ............................................................. 11
II. MEMORANDUM OF LAW .................................................................................................  11
A. The Court Has Jurisdiction and Venue Properly Lies In This District .............................. 11
B. The Court Should Conduct a Summary Proceeding .......................................................... 13
C. The Commission’s Subpoenas Satisfy All Requirements for Enforcement ...................... 13
i. The Commission’s Purpose is Lawful ............................................................................ 14
ii. The Commission Seeks Relevant Information............................................................... 15
iii. Charnas Possesses Information the Commission Lacks.............................................. 16
iv. The Commission Has Satisfied All Necessary Administrative Steps............................ 16
D.  Respondent Cannot Show the Subpoena is Unreasonable ................................................ 16
i. Act of Production Doctrine is Limited ........................................................................... 17
a. The Existence of Charnas’ Cell phone Messages is a Foregone Conclusion ..... 18
b. Revised Request No. 3 is Specific ........................................................................ 19
III. CONCLUSION .....................................................................................................................  20

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TABLE OF AUTHORITIES

CASES

Brown v. Caldwell, 2022 WL 2753243 (D. N.J. Jul. 14, 2022) .................................................... 19
EEOC v. Technocrest Sys., 448 F.3d 1035 (8th Cir. 2006) .......................................................... 14
EEOC v. Tire Kingdom, Inc., 80 F.3d 449 (11th Cir. 1996) ......................................................... 13
Fisher v. United States, 425 U.S. 391 (1976) ............................................................................... 18
FTC v. PointBreak Media, LLC, 343 F.Supp.3d 1282 (S.D. Fla. 2018)....................................... 19
In re Grand Jury Subpoena Duces Tecum Dated Mar. 25, 2011, 670 F.3d 1335 (11th Cir. 2012)
 ............................................................................................................................................. 17, 18
RNR Enterprises, Inc. v. SEC, 122 F.3d 93 (2d Cir. 1997)..................................................... 14, 16
Sallah v. Worldwide Clearing, LLC, 855 F.Supp.2d 1364 (S.D. Fla. 2012) .......................... 17, 20
SEC v. Arthur Young & Co., 584 F.2d 1018 (D.C. Cir. 1978) ..................................................... 15
SEC v. Brigadoon Scotch Dist. Co., 480 F.2d 1047 (2d Cir.1973)......................................... 14, 17
SEC v. Caramadre, 717 F. Supp. 2d 217 (D.R.I. 2010) ............................................................... 17
SEC v. Complete Business Solutions Group, Inc. d/b/a Par Funding, et al., 2022 WL 1288749 18
SEC v. Dresser Indus., Inc., 628 F.2d 1368 (D.C. Cir. 1980) ................................................ 12, 15
SEC v. Howatt, 525 F.2d 226 (1st Cir. 1975) ............................................................................... 14
SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735 (1984) ......................................................... 12, 15, 16
SEC v. Kimmel, 2020 WL 2800813 (D. Colo. May 29, 2020) ..................................................... 17
SEC v. Marin, 982 F.3d 1341 (11th Cir. 2020)................................................................. 13, 14, 16
SEC v. Sprecher, 594 F.2d 317 (2d Cir. 1979) ............................................................................. 13
State of Florida ex rel. Butterworth v. Southland Corp., 684 F. Supp. 292 (S.D. Fla. 1988) ...... 17
United States v. Elmes, 532 F. 3d 1138 (11th Cir. 2008) ............................................................. 13
United States v. Florida Azalea Specialists, 19 F.3d 620 (11th Cir. 1994) .................................. 15
United States v. Hubbell, 530 U.S. 27 (2000) ............................................................................... 18
United States v. Ponds, 454 F.3d 314 (D.C. Cir. 2006) ................................................................ 19
United States v. Powell, 379 U.S. 48 (1964) ................................................................................ 14
United States v. Teeple, 286 F.3d 1047 (8th Cir. 2002)................................................................ 19
STATUTES

Section 20(a) of the Securities Act, 15 U.S.C. § 77t(a) ................................................................ 14
Section 21(b) of the Exchange Act, 15 U.S.C. §78u(b) ................................................................ 15

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Section 21(c) of the Exchange Act, 15 U.S.C. § 78u(c) ......................................................... 12, 13
Sections 21(a) and (b) of the Exchange Act, 15 U.S.C. §§ 78u(a) and (b) ............................. 11, 14

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Applicant Securities and Exchange Commission (the “Commission”) applies for an order
to show cause and for an order compelling Respondent Brandon Charnas (“Charnas”) to comply
with  the  subpoena,  issued  to  Charnas  on  November  3,  2022,  as  modified  on  April  19,  2023
(“Subpoena”).  Charnas has improperly refused to comply with the Subpoena under the auspices
of the Fifth Amendment’s act of production doctrine.
 However, the doctrine is not applicable here given that the Commission can show, with
reasonable  particularly,  that  it  knows  of  the  existence  of  the  communications  it  seeks,  the
Subpoena is exacting in its request, and it does not require Charnas to exercise any judgment or
discretion in responding to it.  Therefore, Respondent must comply with the Subpoena or explain
to the Court why he should not be held in contempt for his failure to comply.  In support of this
application, the Commission states as follows:
I. FACTUAL BACKGROUND
A. The Commission’s Authority for its Investigation
1. The Commission has been investigating potential insider trading in the securities
of The ODP Corporation (“ODP”) d/b/a Office Depot, a Delaware corporation headquartered in
Boca  Raton,  Florida  (“Investigation”).    [Declaration  of  Commission  Attorney  Michael  J.
Gonzalez,  dated  July  24,  2023.  [(“Ex.  A”),  ¶  2].    ODP’s  common  stock  is  registered  with  the
Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”).
[Id.].  ODP’s common stock trades on the NASDAQ under the symbol ODP and its options trade

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on the Chicago Board Options Exchange, Boston Options Exchange, New York Stock Exchange
Arca
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 and the International Securities Exchange.  [Id.].
2. The  Commission  has  issued  a  Formal  Order  Directing  Private  Investigation  and
Designating  Officers  to  Take  Testimony  (“Formal  Order”)  in  the  Matter  of  Trading  in  the
Securities of The ODP Corporation, FL-4276. [Id., ¶ 3].
3. Under  the  Formal  Order,  members  of  the  Commission’s  staff  are  officers  of  the
Commission empowered to administer oaths, subpoena witnesses, compel their attendance, take
evidence, and require the production of any books, papers, correspondence, memoranda, or other
records  deemed  relevant  or  material  to  the  investigation.    [Id.,  ¶  4].    All  authorized  staff  are
employed at the Miami Regional Office of the SEC.  [Id.]
4. The Formal Order directs the Commission’s staff to conduct a private investigation
to determine whether persons or entities have engaged in the enumerated  potential  violations  of
the antifraud provisions of the federal securities laws, specifically, violations of Section 17(a) of
the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of
1934  (“Exchange  Act”) and  Rule  10b-5  thereunder.    [Id.,  ¶  5]  (collectively  the  “anti-fraud
provisions”).  The Investigation focuses on whether, in violation of the anti-fraud provisions of
the  federal  securities  laws  and  invocation  of  the  federal  courts’  jurisdiction  of  these  provisions,
persons or entities may have traded in the securities of ODP on the basis of material nonpublic
information, or disclosed to others material nonpublic information regarding ODP in breach of a
fiduciary duty or other duty arising out of a relationship of trust and confidence. [Id.].

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 The New York Stock Exchange (“NYSE”) Arca was formed in 2006 after the NYSE acquired
Archipelago,  an  electronic  exchange  network.    NYSE  Arca  differs  from  the  NYSE  in  that  the
NYSE  is  a  physical  and  electronic  stock  exchange,   while   NYSE   Arca   is   an   electronic
communications network used for matching orders.

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B.  The Commission’s Reason for its Investigation
5. The Commission has information that tends to show that from at least August 4,
2020,  individuals  and/or  entities  may  have  violated  the  anti-fraud  provisions  of  the  federal
securities laws based on insider trading in the securities of ODP. [Id., ¶ 6].
6. On December 14, 2020, Charnas began trading in ODP by purchasing 2,100 shares
through  his  Robinhood  Securities,  LLC  (“Robinhood”)  account,  which  he  opened  in  March  of
2020.  [Declaration of Market Surveillance Specialist Robert Nesbitt, dated July 24, 2023. [(“Ex.
B”), ¶ 4].  He continued to purchase securities in ODP through December 31, 2020.  [Id.].
7. On Monday, January 11, 2021, USR Parent, Inc. d/b/a Staples (“Staples”) publicly
announced, before the NASDAQ market opened that day, that it had sent a letter to ODP proposing
to acquire ODP for $40 per share in cash (“Staples’ Acquisition Offer”).  [Ex. A., ¶ 8].  ODP’s
stock price had closed at $36.96 on the previous Friday, January 8, 2021.  [Id.].
8. Throughout mid-December 2020 and through the date of the Staples’ Acquisition
Offer, Charnas purchased ODP stock and options while communicating frequently with multiple
other  individuals  who  traded  ODP  options  and/or  common  stock.    They  communicated  via  text
message,

iMessage, and/or WhatsApp, (“Cell phone Messages”)
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 as well as emails and telephone
calls.  [Id., ¶ 9].  The timing of Charnas’ trading and communications activity with other traders
ramped  up  in  advance  of  the  Staples’  Acquisition  Offer,  specifically  the  last  two  weeks  of
December 2020 when Staples was preparing to publicly approach ODP with an offer in the coming
weeks, but had not made a public announcement.  [Id.].

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 “Text messages” are standard SMS/MMS messages; iMessages are messages sent to and from
Apple’s own instant messaging service; and WhatsApp is a popular cell phone messaging service
owned by Meta Platforms, Inc., (formerly named Facebook, Inc.).

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9. The  staff’s  investigation  has  uncovered  that  Charnas’  trading  activity  not  only
coincided  with  frequent  communications  with  other  traders  who  made  significant  profits  by
purchasing  ODP  options  and  common  stock  just  prior  to  the  Staples’  Acquisition  Offer,  but  at
times, Charnas traded while meeting with them in person to discuss ODP.  [Id., ¶ 10].  By way of
example,  on  December  23,  2020,  information  obtained  by  the  staff  shows  that  Charnas
communicated via Cell phone Message with Trader 1, who Charnas invited to a 1:00 p.m. lunch
in  Miami,  Florida  that  day  with  him  and  also  Trader  2  to  discuss  ODP.    [Id.]    During  (or
immediately thereafter) this lunch, at 2:21 p.m. Charnas both placed and executed trades in 200
out-of-the-money call options contracts of ODP.  The call options cost Charnas $31,000.  [Id.].
10. Each call option is a contract giving the purchaser the right (but not the obligation),
to buy 100 shares of a security at a fixed price within a specific period of time.  [Ex. B, ¶ 6].  The
end of the time period is the expiration date.  [Id.].  The fixed price set in the call option contract
is  called  the  strike  price.    [Id.].    A  call  option  is  “out-of-the-money”  if  the  underlying  price  is
trading below the strike price of the call.  [Id.]. Therefore, the purchaser of the out-of-the-money
call option is betting that the underlying price of the stock will increase.  [Id.].
11. The 200 out-of-the-money call option contracts that Charnas bought on December
23, 2020 had a strike price of $36 per share of ODP common stock and an expiration date of April
16, 2021.  [Id., ¶ 7].  The 200 call options gave Charnas the right to buy 20,000 shares of ODP
common stock for $36 per share on any date on or before April 16, 2021.  [Id.].  On December 23,
2020, ODP common stock opened the trading day with a stock price of $28.67 per share and at the
end of the trading day was stock price at $28.51 per share.  [Id.].
12. Purchasing out-of-the money call options is a risk given that the call options could
expire worthless. [Id., ¶ 8].  Specifically, if Charnas held the call option contracts that he bought

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on December 23, 2020 to maturity on April 16, 2021 and the price of ODP’s common stock did
not rise more than 25.5% (from $28.67 to $36 per share), the call options would expire worthless.
[Id.].  This expiration would result in not only Charnas’ failure to profit, but would also result in a
complete loss of the amount he paid for the ODP call options, here the $31,000.  [Id.].
13. ODP option volume was not very active in the months prior to January 2021. [Id.,
¶ 9].  The call options that Charnas bought on December 23, 2020 constituted 100% of ODP call
options  with  a  strike  price  of  $36  and  an  expiration  of  April  16,  2021  purchased  that  day  and
90.09% of overall volume of all ODP’s call option contract trading for that day. [Id.].
14. Further,  Charnas  was  the  sole  purchaser  of  ODP  call  option  series  with  a  strike
price of $36 and an expiration of April 16, 2021 prior to the date that Staple’s Acquisition Offer
was announced on January 11, 2021. [Id., ¶ 10].
15. On  January  12,  2021,  the  day  after  Staples’  Acquisition  Offer,  ODP  closed  at
$45.90  per  share  that  day  and  Charnas  sold  half  of  the  call  option  contracts  he  purchased  on
December 23, 2020 for approximately $114,000.  [Id., ¶ 11].  Charnas’ call option sales on January
12, 2021 resulted in a 635% return on investment for a security that he held for only 20 days.  [Id.].
Charnas  sold  the  other  half  of  the  call  option  contracts  on  April  16,  2021  for  approximately
$63,200, representing a 307% return on investment. [Id.].  ODP closed at $42.67 per share that
day.  [Id.].  Hence, all told, Charnas made a profit of approximately $146,200 from his ODP call
option contract trading.  [Id.].
16. Starting on December 14, 2020 and ending on December 31, 2020, Charnas also
bought  16,110  ODP  shares  for  $458,158  and  sold  500  ODP  shares  for  $13,899  resulting  in  net
purchase of 15,598 shares of ODP common stock for $444,807.57.  [Id., ¶ 12].  Charnas paid prices
ranging  from  $26.89  to  $29.39  per  share  for  the  stock  purchases.    [Id.].    After  the  Staples’

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Acquisition Offer of $40 per ODP share was made public on January 11, 2021, Charnas started
selling  ODP  common  stock  on  January  11,  2021  and  finished  selling  all  the  ODP  shares  on
February 12, 2021.  [Id.].  Charnas sold the shares at prices ranging from $42.15 to $47 per ODP
share, and made profits from these sales. [Id.].
17. Charnas’  trading  in  both  stock  and  options  resulted  in  him  generating  combined
profits of at least $385,000. [Id., ¶ 13].
C.   Charnas   Met   and   Communicated   Frequently   with   Other   ODP   Traders
Who Engaged in Similar Trading of ODP

18.  Charnas met and repeatedly communicated via Cell phone Message with Trader 1.
[Ex. A, ¶ 11].  Trader 1 bought two separate series of ODP call option contracts on December 28,
2020, one series with a strike price of $32 per ODP share and the other with a strike price of $35
per ODP share. [Ex. B., ¶ 14].  Trader 1 spent $199,131 on these call option contracts on December
28, 2020.  [Id.].  Trader 1’s purchases of the $32 strike price call options on December 28, 2020
represented about 93% of the series trade volume. [Id.].  Trader 1’s purchases of the $35 strike
price call options on December 28, 2020 represented 100% of the series trade volume.  [Id.]. Trader
1’s  options  purchases  represented  in  total  approximately  80%  of  the  call  options  purchases  on
December  28,  2020.    Trader  1  also  bought  $48,806  of  two  separate  series  of  ODP  call  option
contracts on January 4, 2021, also with strike prices of $32 and $35 per ODP share.  [Id.]
19. After the Staples’ Acquisition Offer of $40 per ODP share was made on January
11, 2021, Trader 1 sold all of the call option contracts for $438,455 which resulted in a profit of
$190,517.  [Id.,  ¶  15].    This  represents  a  return  on  investment  of  76.8%  that  Trader  1  only  held
between 8 and 13 days total. [Id.]  Starting on December 28, 2020 and ending on January 8, 2021,
Trader 1 also bought 32,800 shares of ODP common stock for approximately $1.1 million. [Id.].

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D. Charnas’  use  of  his  Cell  Phone  to  Communicate  with  Similarly  Situated  ODP
Traders

20. Through its investigation, the Commission’s staff has obtained certain Cell phone
Messages where Charnas communicated and discussed trades in ODP securities with other traders
who traded in and profited from the sale of ODP securities. [Ex. A., ¶ 11].  For example, Charnas
connected  and  introduced  Traders  2  and  3  on  December  22,  2023,  specifically  focusing  their
attention on ODP and another investment.  [Id.].  Later, on February 23, 2021, Charnas shared a
screenshot  of  his  Robinhood  trading  account  with  several  traders  the  staff  has  identified  in  its
investigation who participated in suspicious trading of ODP equities and options, where Charnas
shared the price of ODP on February 23, 2021 reflecting ODP’s appreciation in value since initial
discussions with fellow traders began the previous year.  [Id.].
21. Yet,  while  the  staff  has  received  certain  Cell  phones  Messages  from  certain
individuals  during  the  course  of  its  investigation,  the  staff  has  a  good-faith  reason  to  believe,
through its investigation, that Charnas possesses additional Cell phone Messages that are not in
the staff’s possession.  [Id., ¶ 12.].  This belief includes the staff’s possession of telephone call
logs indicating frequent conversations between Charnas and other individuals who traded in ODP
securities in similarly suspicious trades as Charnas, including at key moments leading to Staples’
Acquisition Offer and thereafter.  [Id.]. Further, in a recent sworn testimony, Trader 6 indicated
that Charnas was well aware of the staff’s Subpoena and that Charnas told him he was compiling
responsive communications, including from his cell phone as well as email account, in response
to the Subpoena. [Id.]
22. Obtaining  communications  between  potential  tippers  and  tippees  is  critical  to
determine whether material nonpublic information was disseminated between individuals, which

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in turn gives them an unfair advantage in the market and inured to their financial benefit. [Id., ¶
13].
E. The Commission’s Subpoena, Meet and Conferral, and Respondent’s Continued
Failure to Comply

i. The Subpoena to Respondent
23.  As  part  of  the  Investigation  and  pursuant  to  the  Formal  Order,  on  November  3,
2022,  the  Commission  issued  a  preservation  letter  and  the  Subpoena  to  Charnas.    It  required  the
production of the requested documents, itemized numbers 1 through 9, by November 24, 2022. [Id.,
¶  14].  The  relevant  time  period  of  the  Subpoena  for  responsive  information  was  August  1,  2020
through November 3, 2022 (“Relevant Period”).  [Id.].  The Subpoena requested items 1 through
9, which were:
1. Documents sufficient to identify the Charnas Accounts;

2. All account statements for all brokerage accounts (includes any account in
which any trading of securities occurred) identified in Request #1, above;

3. All Documents (including, but not limited to, correspondence, e-mails and
notes of conversations) Concerning Communications between you and any Person
Concerning “ODP” or “Office Depot”;

4. All Communications with any brokerage at which you had an account in
Request # 2.

5. All Documents Concerning trading in the securities of ODP;

6. All credit card statements for credit cards that were or are in your name, and/or
over which you have direct or indirect control;

7. Documents sufficient to disclose all telephone numbers and calling card
numbers in your name or which you regularly used during the Relevant Period,
including, but not limited to, all telephone numbers at your residences (regardless
of whose names they are listed under), all cell phone and facsimile numbers, and
all work-related telephone numbers used by you;

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8. Documents sufficient to identify all e-mail, text messaging and instant
messaging accounts you used, controlled, managed, maintained or opened at any
time during the Relevant Period;

9. All telephone bills and statements for all phone numbers identified in Request #
8 above.

Included in the definitions section of the Subpoena were the following definitions:
1. “ODP Corporation” means the entity doing business under the name “ODP” a/k/a “Office
Depot” including parents, subsidiaries, affiliates, predecessors, successors, officers,
directors, employees, agents, general partners, limited partners, partnerships and aliases,
code names, or trade or business names used by any of the foregoing.

6. “Document” shall include, but is not limited to, any written, printed, or typed matter
including, but not limited to all drafts and copies bearing notations or marks not found in
the original, letters and correspondence, interoffice communications, slips, tickets,
records, worksheets, financial records, accounting documents, bookkeeping documents,
memoranda, reports, manuals, telephone logs, facsimiles, messages of any type,
telephone messages, text messages, voice mails, tape recordings, notices, instructions,
minutes, summaries, notes of meetings, file folder markings, and any other organizational
indicia, purchase orders, information recorded by photographic process, including
microfilm and microfiche, computer printouts, spreadsheets, and other electronically
stored information, including but not limited to writings, drawings, graphs, charts,
photographs, sound recordings, images, and other data or data compilations that are
stored in any medium from which information can be retrieved, obtained, manipulated, or
translated.

7. “Communication” means any correspondence, contact, discussion, e-mail, instant
message, or any other kind of oral or written exchange or transmission of information (in
the form of facts, ideas, inquiries, or otherwise) and any response thereto between two or
more Persons or entities, including, without limitation, all telephone conversations, face-
to-face meetings or conversations, internal or external discussions, or exchanges of a
Document or Documents.

[Id.].  The Subpoena also required Charnas to appear before officers of the Commission via video
teleconference on WebEx for sworn testimony on November 17, 2022 at 9:30 a.m. [Id.].
ii. Meet and Conferral
24. The subpoena was issued on November 3, 2022 and was delivered to Charnas on
November  9,  2022.    [Id. ¶ 15].    Charnas’  counsel  contacted  the  staff  on  November  16,  2022,

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indicating he had been retained and requested an adjournment of the testimony so he could assess
the Subpoena.  [Id.].
25. On  January  24,  2023,  Commission  staff  inquired  of  Charnas’  counsel  as  to  the
status of Charnas’ expected production.  [Id., ¶ 16].  Counsel responded the following day saying
that  he  needed  until  the  following  week  to  get  back  to  the  staff  to  discuss  Charnas’  Subpoena
response.  [Id.].  The staff once again provided an extension and Charnas’ counsel agreed to contact
the staff on January 31, 2023.  [Id.].
26. Having not heard from Charnas’ counsel and extending him additional professional
courtesies, the staff again reached out on February 3, 2023 to inquire as to the status of the response
to the Subpoena. [Id., ¶ 17].
27. The staff then spoke to Charnas’ counsel on February 6, 2023 whereupon counsel
informed that Charnas would be invoking his Fifth Amendment rights as to sworn testimony when
it occurs and as well in response to any (and all) documents and communications called on to be
produced  pursuant  to  the  Subpoena.  [Id., ¶  18].    Charnas’  counsel  did  not  thereafter  provide  a
formal written affirmation of his verbal assertions. [Id.].
28. On  April  17,  2023,  the  staff  requested  that  Charnas’  counsel  provide  a  formal
response to the Subpoena and requested a privilege log be produced.  [Id., ¶ 19].  Later that same
day on April 17, 2023, Charnas’ counsel reiterated via email that his client would be invoking his
Fifth Amendment rights regarding any response to the November 3, 2022 Subpoena.  [Id.].
29. The staff  responded  to  Charnas’  counsel  on  April  19,  2023,  and  explained  that
Charnas’ written communications related to ODP contained within his cell phone were not subject
to constitutional protection because staff is aware of the existence of those communications with
reasonable particularity and the location of the communications—Charnas’ cell phone.  [Id., ¶ 20].

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The staff made it abundantly clear that, without waiving any rights, it only sought Charnas’ cell
phone communications relating to ODP during the Relevant Period.  [Id.].
30. Nonetheless,  in  an  abundance  of  caution,  and  for  the  avoidance  of  doubt,  and  in
light  of  the  potential  expansive  definitions  of  “Documents”  and  “Communications”  in  the
Subpoena, the staff amended Request No. 3 as follows:
3.  [Provide]  all  text  messages,  iMessages,  and  WhatsApp  messages  (collectively  “Cell
phone Messages”) between You and any Person Concerning “ODP” or “Office Depot.”
(“Revised Subpoena Request No. 3”)

[Id., ¶ 21].
iii. Continued Refusal to Comply with Subpoena

31. In  late  April  and  early  May  2023,  the  parties  exchanged  email  communications
asserting their positions.  [Id., ¶ 22].  This exchange was followed by a meet and confer telephone
call on May 1, 2023 in a final attempt to resolve the disagreement.  [Id.].  A resolution could not
be reached.  [Id.].  Counsel continues to assert the Fifth Amendment on behalf of Charnas with
respect to Revised Subpoena Request No. 3. [Id.].
32. Given the staff’s knowledge, with reasonable particularly, of the existence of some
of these communications Charnas had during the Relevant Period with other ODP traders via Cell
phone Messages, the Commission thus seeks Court intervention to obtain them from Charnas. [Id.,
¶ 23].
II. MEMORANDUM OF LAW
A. The Court Has Jurisdiction and Venue Properly Lies In This District
            Congress            gave            the            Commission            broad            authority  to  conduct  investigations  and  require
production of evidence and testimony relevant to those investigations.  See, e.g., Sections 21(a)
and  (b)  of  the  Exchange  Act,  15  U.S.C.  §§  78u(a)  and  (b)  (“For  the  purpose  of  any  such
investigation, or any other proceeding under this chapter, any member of the Commission or any

12
officer  designated  by  it  is  empowered  to...require  the  production  of  any  books,  papers,
correspondence, memoranda, or other records which the Commission deems relevant or material
to the inquiry.”); see also SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735, 745 (1984) (“It appears, in
short, that Congress intended to vest the SEC with considerable discretion in determining when
and how to investigate possible violations of the statutes administered by the Commission.”); SEC
v.  Dresser  Indus.,  Inc.,  628  F.2d  1368,  1380  (D.C.  Cir.  1980)  (given  the  Commission’s  broad
statutory mandate to investigate, there was “virtually no possibility” the Commission exceeded its
authority in issuing an investigative subpoena).
When  parties  refuse  to  comply  with  lawful  Commission  demands  for  documents  and
testimony issued pursuant to the Commission’s broad statutory authority to investigate, Congress
has  authorized  the  Commission  to  seek,  and  the  federal  courts  to  issue,  orders  compelling
production  or  testimony.    “In  case  of...refusal  to  obey  a  subpoena  issued  to,  any  person,  the
Commission may invoke the aid of any court of the United States within the jurisdiction of which
such investigation or proceeding is carried on, or where such person resides or carries on business,
in  requiring  the  attendance  and  testimony  of  witnesses  and  the  production  of  books,  papers,
correspondence, memoranda, and other records.”  Section 21(c) of the Exchange Act, 15 U.S.C. §
78u(c).    That  language  also  provides  that  venue  lies  in  the  Southern  District  of  Florida,  as  it
provides  the  Commission  may  seek  a  court  order  “within  the  jurisdiction  of  which  such
investigation or proceeding is carried on, or where such person resides or carries on business....”
Id.
Here,  venue  is  proper  in  this  district  because  the  investigation  is  being  carried  on  in  the
Southern District of Florida, nonpublic information may have been misappropriated from ODP,
which  is  headquartered  in  Boca  Raton,  FL,  and  all  authorized  staff  in  the  Formal  Order  are

13
employed at the Miami Regional Office of the SEC.  [Ex. A., ¶ 4].  There is personal jurisdiction
over Charnas because Charnas’ company, Current Real Estate Advisors, LLC, is located in Miami-
Dade County within the Southern District of Florida, [Id., ¶ 10], and, based upon information and
belief, Charnas met with multiple people on multiple occasions in this district, including in Miami-
Dade County, who traded in ODP during the Relevant Period. [Id., ¶¶ 9, 10, and 11].
B. The Court Should Conduct a Summary Proceeding
Subpoena  enforcement  actions  are  generally  summary  in  nature  and  the  Court  may
therefore  hear  them  in  summary  fashion  without  strict  adherence  to  the  Federal  Rules  of  Civil
Procedure.    United  States  v.  Elmes,  532  F.  3d  1138,  1142  (11th  Cir.  2008)  (“This  court  has
described the scope of Rule 81(a)(3) in broad terms, saying that its effect is to ‘make application
of the rules of civil procedure in subpoena enforcement proceedings discretionary with the district
court.’”)  (internal  citation  omitted);  SEC  v. Sprecher,  594  F.2d  317,  319-20  (2d  Cir.  1979)
(upholding right of district court to enforce subpoenas in summary proceedings without the filing
of a complaint pursuant to Section 22(b) of the Securities Act, 15 U.S.C. § 77v(b), which allows a
district court to enforce a subpoena “upon application by the Commission”).
Accordingly,  the  Commission  asks  the  Court  to  promptly  set  an  Order  to  Show  Cause
Hearing so that Respondent’s failure to comply with the Subpoena is not allowed to continue. SEC
v. Marin, 982 F.3d 1341, 1355 (11th Cir. 2020) (“SEC may invoke the aid of a district court to
enforce  a  subpoena,  and  the  court  may  order  production  of  records  or  testimony  ‘touching  the
matter under investigation or in question.’”) (quoting 15 U.S.C. § 78u(c)).
C. The Commission’s Subpoenas Satisfy All Requirements for Enforcement
“‘A district court’s role in a proceeding to enforce an administrative subpoena is limited.’”
Marin, 982 F.3d at 1352 (quoting EEOC v. Tire Kingdom, Inc., 80 F.3d 449, 450 (11th Cir. 1996)).

14
Under that limited review, a court should enforce an administrative subpoena if the information
sought  by  the  subpoena  is  reasonably  relevant  to  an  authorized  investigation.    Id.;  EEOC  v.
Technocrest Sys., 448 F.3d 1035, 1040 (8th Cir. 2006) (same).
Courts have generally looked at four criteria to determine whether to enforce a Commission
subpoena: (1) the investigation is being conducted pursuant to a legitimate purpose; (2) the inquiry
is  relevant  to  that  purpose;  (3)  the  information  the  Commission  seeks  is  not  already  in  its
possession; and (4) the Commission has fulfilled the necessary administrative steps.  United States
v. Powell, 379 U.S. 48, 57-58 (1964); RNR Enterprises, Inc. v. SEC, 122 F.3d 93, 96-97 (2d Cir.
1997); SEC  v.  Howatt,  525  F.2d  226,  229  (1st  Cir.  1975).    “All  the  agency  must  do  in  the  first
instance is make out a prima facie showing that the Powell criteria are met.”  Marin, 982 F.3d at
1352.    Thereafter,  the  burden  shifts  to  a  respondent  to  demonstrate  that  enforcement  would  be
unreasonable.    Id.; SEC  v.  Brigadoon  Scotch  Dist.  Co.,  480  F.2d  1047,  1056  (2d  Cir.1973).
However, the burden of showing unreasonableness “is not easily met” as long as the Commission’s
inquiry is legally authorized and the information it seeks is relevant to the inquiry.  Id.
i. The Commission’s Purpose is Lawful
As  discussed  above,  Congress  has  given  the  Commission  broad  authority  to  investigate
whether the federal securities laws, rules, and regulations “have been or are about to be violated...”
Section  20(a)  of  the  Securities  Act,  15  U.S.C.  §  77t(a);  Sections  21(a)  and  (b)  of  the  Exchange
Act,  15  U.S.C.  §§  78u(a)  and  (b)(“  The  Commission  may,  in  its  discretion,  make  such
investigations as it deems necessary to determine whether any person has violated...any provision
of  this  chapter,  [or]  the  rules  or  regulations  thereunder...)    Pursuant  to  that  authority,  the
Commission issued the Formal Order authorizing designating officers to conduct an investigation
into possible violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange

15
Act and Rule 10b-5 thereunder by ODP, its officers, directors, employees, partners, subsidiaries,
and/or affiliates, and/or other persons or entities. [Id., ¶ 3].
Pursuant   to   the   authority   conferred   under   the   Formal   Order,   the   Commission’s
investigative team issued the Subpoena to Charnas.  The Subpoena is within the parameters of the
Commission’s broad discretion to investigate:
For  the  purpose  of  any  such  investigation,  or  any  other  proceeding  under  this
chapter,  any  member  of  the  Commission  or  any  officer  designated  by  it  is
empowered to administer oaths and affirmations, subpoena witnesses, compel their
attendance,  take  evidence,  and  require  the  production  of  any  books,  papers,
correspondence,  memoranda,  or  other  records  which  the  Commission  deems
relevant or material to the inquiry.

15 U.S.C. §78u(b); see also O’Brien, 467 U.S. at 745 (“It appears, in short, that Congress
intended to vest the SEC with considerable discretion in determining when and how to investigate
possible violations of the statutes administered by the Commission.”); Dresser Indus., 628 F.2d at
1379-80 (given the Commission’s broad statutory mandate to investigate, there was “virtually no
possibility” the  Commission  exceeded  its  authority  in  issuing  an  investigative  subpoena).
Accordingly, the Commission’s purpose in issuing the subpoena was lawful.
ii. The Commission Seeks Relevant Information
The measure of relevance used in subpoena enforcement actions is “quite broad.”  United
States  v.  Florida  Azalea  Specialists,  19  F.3d  620,  624  (11th  Cir.  1994).    A  district  court  may
enforce a subpoena so long as “the materials sought are not clearly irrelevant or immaterial.”  SEC
v. Arthur Young & Co., 584 F.2d 1018, 1029 (D.C. Cir. 1978) (upholding district court’s use of
that  language  as  standard  for  relevance)  (emphasis  added).    The  Subpoena  issued  to  Charnas  is
more than sufficient to meet this broad standard.
The Cell phone Messages as defined in Revised Request No. 3 requested for production
from Charnas are highly relevant to the Commission’s investigation and Revised Request No. 3 is

16
narrowly  tailored.    This  is  an  insider  trading  investigation  where  communications  between
potential tippers and tippees are critical to determination whether material nonpublic information
was  disseminated  between  individuals  which  gave  them  an  unfair  advantage  in  the  market  and
inured to their financial benefit.
3

iii. Charnas Possesses Information the Commission Lacks
Charnas  possesses  information  the  Commission  lacks.    The  Commission  does  not  have
access  to  Charnas’  cell  phone  nor  does  it  have  access  to  his  Cell  phone  Messages.    While  the
Commission does have certain of his Cell phone Messages from other sources, the staff has reason
to believe this is not the entire universe of Charnas’ responsive Cell phone Messages.
iv. The Commission Has Satisfied All Necessary Administrative Steps
The  Commission  issued  the  Subpoena  in  accordance  with  all  applicable  administrative
requirements.  Section 19(b) of the Securities Act, 15 U.S.C. § 77s(b), and Section 21(b) of the
Exchange  Act,  15  U.S.C.  §  78u(b),  empower  the  Commission  to  subpoena  documents  and
testimony in the course of investigations.  Here, Drew D. Panahi, an attorney for the Division of
Enforcement,  designated  as  an  officer  of  the  Commission  in  the  Formal  Order,  issued  the
Subpoena to Charnas. [Id., ¶ 14].
D.  Respondent Cannot Show the Subpoena is Unreasonable

As set forth above, the Commission has satisfied all requirements for enforcement of the
Subpoena.   Accordingly,   Respondent   would   have   to   demonstrate   that   the   Subpoena   is

3
 The  SEC’s  investigative  powers  are  not  limited  to  the  specific  entities  named  in  a  formal
order.  Marin, 982 F.3d at 1353, citing O'Brien, Inc., 467 U.S. at 749 (“The SEC often undertakes
investigations into suspicious securities transactions without any knowledge of which of the parties
involved  may  have  violated  the  law.”); RNR  Enters.,  Inc.,122  F.3d  at  98    (noting  statutes  and
regulations governing the SEC do not “require that the order authorizing the investigation target
by name a specific company or person suspected of violating securities laws”).

17
unreasonable.  Brigadoon Scotch, 480 F.2d at 1056.  Because the Commission’s inquiry is legally
authorized  and  the  Commission  seeks  information  relevant  to  the  Investigation,  Respondent’s
burden “is not easily met.”  Id.
The  only  objection  Charnas  has  raised  for  refusing  to  provide  a  response  to  Revised
Request No. 3 is the act of production privilege under the Fifth Amendment.
4
  However, it does
not apply to Revised Request No. 3.
i. Act of Production Doctrine is Limited
A defendant has the right to raise his Fifth Amendment privilege in “any proceeding, civil
or  criminal,  administrative  or  judicial,  investigatory  or  adjudicatory;  and  it  protects  against  any
disclosures that the witness reasonably believes could be used in a criminal prosecution or could
lead to other evidence that might be so used.” In re Grand Jury Subpoena Duces Tecum Dated
Mar. 25, 2011, 670 F.3d 1335 1342 (11th Cir. 2012).  However, a defendant is not permitted to
make a “blanket objection to testifying or producing records.”  Sallah v. Worldwide Clearing, LLC,
855  F.Supp.2d  1364,  1371  (S.D.  Fla.  2012).    A  defendant  “cannot  avoid  compliance  with  [a]

4
 While Charnas’ counsel has also asserted Charnas will invoke his Fifth Amendment rights when
providing sworn testimony, counsel correctly does not dispute that Charnas must still appear for
sworn testimony and personally assert his own constitutional rights.  See, e.g., SEC v. Kimmel, No.
19-mc-00113-CMA,  Order  Compelling  Compliance  with  Administrative  Subpoena,  2020  WL
2800813 at *3 (D. Colo. May 29, 2020) (quoting SEC v. Caramadre, 717 F. Supp. 2d 217, 222
(D.R.I. 2010)) (“Although ‘the Fifth Amendment protects a party from self-incrimination; it does
not  protect  someone  from  having  to  invoke  the  right  to  avoid  self-incrimination  in  the  first
place.’”); State of Florida ex rel. Butterworth v. Southland Corp., 684 F. Supp. 292, 294-95 (S.D.
Fla.  1988)  (“A  witness  must  state  the  specific  basis  for  objection  on  the  record,  e.g.,  ‘Fifth
Amendment privilege against self-incrimination.’  Furthermore, the witness must assert any claim
of  privilege  on  a  question-by-question  basis,  rather  than  assert  a  blanket  privilege  as  to  all
questions.”).

18
subpoena merely by asserting that the item of evidence which he is required to produce contains
incriminating writing, whether his own or that of someone else.”  Fisher v. United States, 425 U.S.
391, 410 (1976).
For a disclosure to fall within the ambit of the Fifth Amendment privilege, an individual
must show each of the following three things: (1) compulsion; (2) a testimonial communication
or act; and (3) incrimination. Id. at 1341 (emphasis added).
[A]n act of production can be testimonial when that act conveys some explicit or
implicit  statement  of  fact  that  certain  materials  exist,  are  in  the  subpoenaed
individual’s possession or control, or are authentic.” In re Grand Jury Subpoena,
670 F.3d at 1345–46. There are two specific ways in which an act of production is
not testimonial. Id.  First, when it is merely a physical act that is compelled—i.e.,
“where the individual is not called upon to make use of the contents of his or her
mind.” Id.  And  second,  under  the  “foregone  conclusion”  doctrine,  “an  act  of
production is not testimonial—even if the act conveys a fact regarding existence or
location,   possession,   or   authenticity   of   the   subpoenaed   materials—if   the
Government can show with ‘reasonable particularity’ that at the time it sought to
compel the act of production, it already knew of the materials, thereby making any
testimonial  aspect  a  ‘foregone  conclusion.’” Id. at  1345-46.    Further,  “case  law
from the Supreme Court does not demand that the Government identify exactly the
documents it seeks, but it does require some specificity in its requests—categorical
requests for documents the Government anticipates are likely to exists simply will
not suffice.”  Id. at 1347-48 (citing United States v. Hubbell, 530 U.S. 27, 36 (2000).

SEC v. Complete Business Solutions Group, Inc. d/b/a Par Funding, et al., No. 9:20-cv-81205-
RAR, 2022 WL 1288749, *2 (S.D. Fla. Apr. 29, 2022) (emphasis added).
a. The   Existence   of   Charnas’   Cell   phone   Messages   is   a   Foregone
Conclusion

It is axiomatic that Charnas’ Cell phone Messages are contained on his cell phone.
Further, the staff has specific evidence from other sources that Charnas used his cell phone to
message other individuals during the Relevant Period about ODP and Charnas’ own admission
that he was compiling ODP communications from his phone and email account responsive to the
Subpoena. [Id., ¶ 14].  The existence of responsive Cell phone Messages on Charnas’ phone is a

19
“foregone conclusion,” and therefore the privilege does not apply.  See, e.g., Brown v. Caldwell,
No. 1:20-cv-07907-NLH-AMD, 2022 WL 2753243, *3 (D. N.J. Jul. 14, 2022) (holding act of
production defense inapplicable to requirement to turn over cell phone for imaging because the
parties already knew that [jail official] owned a cell phone and that it contained pertinent
information); United States v. Teeple, 286 F.3d 1047, 1050 (8th Cir. 2002) (“[W]here the
government already possesses the knowledge that would otherwise be communicated, the
question is not of testimony, but of surrender” and the privilege would not apply); United States
v. Ponds, 454 F.3d 314, 325 (D.C. Cir. 2006).
5

b. Revised Request No. 3 is Specific
Revised  Request  No.  3  of  the  Subpoena  limits  the  request  specifically  to  only  Charnas’
Cell phone Messages during the Relevant Period relating to ODP.
The original Request No. 3 was as follows:
3. All Documents (including, but not limited to, correspondence, e-mails and notes of
conversations) Concerning Communications between you and any Person Concerning
“ODP” or “Office Depot”;

This original request incorporated the definitions of “Documents” and “Communications,”
which are far wider in scope that Revised Request No. 3, which is as follows:
2. [Provide] all text messages, iMessages, and WhatsApp messages (collectively “Cell phone
Messages”)  between  You  and  any  Person  Concerning  “ODP”  or  “Office  Depot.”
(“Revised Subpoena Request No. 3”)

Therefore any risk of invoking the act of production, such as searching for or producing
“Documents” has been completely eliminated.  So too have “Communications” which incorporates

5
 Notably, and in addition, the Fifth Amendment privilege against self-incrimination does not
apply to incriminating evidence that was generated prior to the demand that the evidence be
produced.  FTC v. PointBreak Media, LLC, 343 F.Supp.3d 1282, 1293 (S.D. Fla. 2018).

20
“Documents”  and  also  requests  methods  of  communications  beyond  Cell  phone  Messages.
Furthermore, the Commission is prepared to provide Charnas designated search terms.  Therefore,
in no way will Charnas have to “employ the contents of his mind” to provide responsive Cell phone
Messages.    Sallah, 855  F.Supp.2d  at  1373  (holding  that  Receiver’s  request  for  defendant’s
communications did not trigger act of production doctrine protection under the Fifth Amendment).
Revised Request No. 3 is specific, and the Commission is not currently challenging Respondent’s
Fifth Amendment assertion as to the remainder of the requests in the Subpoena.
III. CONCLUSION

The  Commission  has  satisfied  all  the  requirements  for  enforcement  of  the  Subpoena.
Accordingly,  for  the  foregoing  reasons,  the  Commission  respectfully  requests  this  Court  order
Respondent to show cause why he should not comply with the Subpoena issued to him, and, after
a hearing, order him to comply fully with Revised Request No. 3 of the Subpoena, lest he be held
in contempt of court.
Dated:            July            25,            2023                                                            Respectfully            submitted,

                                                                                                ________________________
        Russell Koonin
       Senior Trial Counsel
Fla. Bar No. 474479
Direct Dial: (305) 982-6390
                                                                                    E-mail:            [email protected]

Michael J. Gonzalez
Senior Counsel
Florida Bar No. 110598
Direct Dial:  (305) 982-6318
Email: [email protected]

        Attorneys for Plaintiff
Securities and Exchange Commission
 801 Brickell Avenue, Suite 1950
                                                      Miami,      Florida      33131
                                                      Telephone:      (305)      982-6300
RUSSELL KOONIN
Digitally signed by RUSSELL
KOONIN
Date: 2023.07.25 11:01:49 -04'00'

i 
 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

 
MISC. NO.:  

 
SECURITIES AND EXCHANGE  
COMMISSION, 
 
 Applicant, 
 
v. 
 
BRANDON CHARNAS, 
 
 Respondent. 
_____________________________________________/ 
 

SECURITIES AND EXCHANGE COMMISSION’S APPLICATION FOR 
AN ORDER TO SHOW CAUSE AND FOR AN ORDER REQUIRING COMPLIANCE 

WITH ADMINISTRATIVE SUBPOENA  
AND INCORPORATED MEMORANDUM OF LAW 

 
 
 

 
 
 
 
 
 
Russell Koonin 

       Senior Trial Counsel 
Michael J. Gonzalez 
Senior Counsel 

        Attorneys for Plaintiff 
Securities and Exchange Commission 

 801 Brickell Avenue, Suite 1950 
         Miami, Florida 33131 
         Telephone: (305) 982-6300 
          
 
  

Case 1:23-mc-22764-XXXX   Document 1   Entered on FLSD Docket 07/25/2023   Page 1 of 24



ii 

TABLE OF CONTENTS 
 

I. FACTUAL BACKGROUND ................................................................................................... 1 

A. The Commission’s Authority for its Investigation .............................................................. 1 

B.  The Commission’s Reason for its Investigation ................................................................. 3 

C. Charnas Met and Communicated Frequently with Other ODP Traders 

     Who Engaged in Similar Trading of ODP ........................................................................... 6 

D. Charnas’ use of his Cell Phone to Communicate with Similarly Situated ODP Traders .... 7 

E. The Commission’s Subpoena, Meet and Conferral, and Respondent’s Continued  

     Failure to Comply ................................................................................................................ 8 

i. The Subpoena to Respondent ........................................................................................... 8 

ii. Meet and Conferral......................................................................................................... 9 

iii. Continued Refusal to Comply with Subpoena ............................................................. 11 

II. MEMORANDUM OF LAW ................................................................................................. 11 

A. The Court Has Jurisdiction and Venue Properly Lies In This District .............................. 11 

B. The Court Should Conduct a Summary Proceeding .......................................................... 13 

C. The Commission’s Subpoenas Satisfy All Requirements for Enforcement ...................... 13 

i. The Commission’s Purpose is Lawful ............................................................................ 14 

ii. The Commission Seeks Relevant Information............................................................... 15 

iii. Charnas Possesses Information the Commission Lacks.............................................. 16 

iv. The Commission Has Satisfied All Necessary Administrative Steps............................ 16 

D.  Respondent Cannot Show the Subpoena is Unreasonable ................................................ 16 

i. Act of Production Doctrine is Limited ........................................................................... 17 

a. The Existence of Charnas’ Cell phone Messages is a Foregone Conclusion ..... 18 

b. Revised Request No. 3 is Specific ........................................................................ 19 

III. CONCLUSION ..................................................................................................................... 20 

 
  

Case 1:23-mc-22764-XXXX   Document 1   Entered on FLSD Docket 07/25/2023   Page 2 of 24



iii 

TABLE OF AUTHORITIES 
 
CASES 

Brown v. Caldwell, 2022 WL 2753243 (D. N.J. Jul. 14, 2022) .................................................... 19 

EEOC v. Technocrest Sys., 448 F.3d 1035 (8th Cir. 2006) .......................................................... 14 

EEOC v. Tire Kingdom, Inc., 80 F.3d 449 (11th Cir. 1996) ......................................................... 13  

Fisher v. United States, 425 U.S. 391 (1976) ............................................................................... 18 

FTC v. PointBreak Media, LLC, 343 F.Supp.3d 1282 (S.D. Fla. 2018)....................................... 19 

In re Grand Jury Subpoena Duces Tecum Dated Mar. 25, 2011, 670 F.3d 1335 (11th Cir. 2012)

 ............................................................................................................................................. 17, 18 

RNR Enterprises, Inc. v. SEC, 122 F.3d 93 (2d Cir. 1997)..................................................... 14, 16 

Sallah v. Worldwide Clearing, LLC, 855 F.Supp.2d 1364 (S.D. Fla. 2012) .......................... 17, 20 

SEC v. Arthur Young & Co., 584 F.2d 1018 (D.C. Cir. 1978) ..................................................... 15 

SEC v. Brigadoon Scotch Dist. Co., 480 F.2d 1047 (2d Cir.1973)......................................... 14, 17 

SEC v. Caramadre, 717 F. Supp. 2d 217 (D.R.I. 2010) ............................................................... 17 

SEC v. Complete Business Solutions Group, Inc. d/b/a Par Funding, et al., 2022 WL 1288749 18 

SEC v. Dresser Indus., Inc., 628 F.2d 1368 (D.C. Cir. 1980) ................................................ 12, 15 

SEC v. Howatt, 525 F.2d 226 (1st Cir. 1975) ............................................................................... 14 

SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735 (1984) ......................................................... 12, 15, 16 

SEC v. Kimmel, 2020 WL 2800813 (D. Colo. May 29, 2020) ..................................................... 17 

SEC v. Marin, 982 F.3d 1341 (11th Cir. 2020)................................................................. 13, 14, 16 

SEC v. Sprecher, 594 F.2d 317 (2d Cir. 1979) ............................................................................. 13 

State of Florida ex rel. Butterworth v. Southland Corp., 684 F. Supp. 292 (S.D. Fla. 1988) ...... 17 

United States v. Elmes, 532 F. 3d 1138 (11th Cir. 2008) ............................................................. 13 

United States v. Florida Azalea Specialists, 19 F.3d 620 (11th Cir. 1994) .................................. 15 

United States v. Hubbell, 530 U.S. 27 (2000) ............................................................................... 18 

United States v. Ponds, 454 F.3d 314 (D.C. Cir. 2006) ................................................................ 19 

United States v. Powell, 379 U.S. 48 (1964) ................................................................................ 14 

United States v. Teeple, 286 F.3d 1047 (8th Cir. 2002)................................................................ 19 

STATUTES 

Section 20(a) of the Securities Act, 15 U.S.C. § 77t(a) ................................................................ 14 

Section 21(b) of the Exchange Act, 15 U.S.C. §78u(b) ................................................................ 15 

Case 1:23-mc-22764-XXXX   Document 1   Entered on FLSD Docket 07/25/2023   Page 3 of 24



iv 

Section 21(c) of the Exchange Act, 15 U.S.C. § 78u(c) ......................................................... 12, 13 

Sections 21(a) and (b) of the Exchange Act, 15 U.S.C. §§ 78u(a) and (b) ............................. 11, 14 

Case 1:23-mc-22764-XXXX   Document 1   Entered on FLSD Docket 07/25/2023   Page 4 of 24



1 

 
Applicant Securities and Exchange Commission (the “Commission”) applies for an order 

to show cause and for an order compelling Respondent Brandon Charnas (“Charnas”) to comply 

with the subpoena, issued to Charnas on November 3, 2022, as modified on April 19, 2023 

(“Subpoena”).  Charnas has improperly refused to comply with the Subpoena under the auspices 

of the Fifth Amendment’s act of production doctrine.  

 However, the doctrine is not applicable here given that the Commission can show, with 

reasonable particularly, that it knows of the existence of the communications it seeks, the 

Subpoena is exacting in its request, and it does not require Charnas to exercise any judgment or 

discretion in responding to it.  Therefore, Respondent must comply with the Subpoena or explain 

to the Court why he should not be held in contempt for his failure to comply.  In support of this 

application, the Commission states as follows: 

I. FACTUAL BACKGROUND 

A. The Commission’s Authority for its Investigation 

1. The Commission has been investigating potential insider trading in the securities 

of The ODP Corporation (“ODP”) d/b/a Office Depot, a Delaware corporation headquartered in 

Boca Raton, Florida (“Investigation”).  [Declaration of Commission Attorney Michael J. 

Gonzalez, dated July 24, 2023. [(“Ex. A”), ¶ 2].  ODP’s common stock is registered with the 

Commission pursuant to Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”).  

[Id.].  ODP’s common stock trades on the NASDAQ under the symbol ODP and its options trade 

Case 1:23-mc-22764-XXXX   Document 1   Entered on FLSD Docket 07/25/2023   Page 5 of 24



2 

on the Chicago Board Options Exchange, Boston Options Exchange, New York Stock Exchange 

Arca1 and the International Securities Exchange.  [Id.]. 

2. The Commission has issued a Formal Order Directing Private Investigation and 

Designating Officers to Take Testimony (“Formal Order”) in the Matter of Trading in the 

Securities of The ODP Corporation, FL-4276. [Id., ¶ 3]. 

3. Under the Formal Order, members of the Commission’s staff are officers of the 

Commission empowered to administer oaths, subpoena witnesses, compel their attendance, take 

evidence, and require the production of any books, papers, correspondence, memoranda, or other 

records deemed relevant or material to the investigation.  [Id., ¶ 4].  All authorized staff are 

employed at the Miami Regional Office of the SEC.  [Id.] 

4. The Formal Order directs the Commission’s staff to conduct a private investigation 

to determine whether persons or entities have engaged in the enumerated potential violations of 

the antifraud provisions of the federal securities laws, specifically, violations of Section 17(a) of 

the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 

1934 (“Exchange Act”) and Rule 10b-5 thereunder.  [Id., ¶ 5] (collectively the “anti-fraud 

provisions”).  The Investigation focuses on whether, in violation of the anti-fraud provisions of 

the federal securities laws and invocation of the federal courts’ jurisdiction of these provisions, 

persons or entities may have traded in the securities of ODP on the basis of material nonpublic 

information, or disclosed to others material nonpublic information regarding ODP in breach of a 

fiduciary duty or other duty arising out of a relationship of trust and confidence. [Id.].  

  

                                                           
1 The New York Stock Exchange (“NYSE”) Arca was formed in 2006 after the NYSE acquired 
Archipelago, an electronic exchange network.  NYSE Arca differs from the NYSE in that the 
NYSE is a physical and electronic stock exchange, while NYSE Arca is an electronic 
communications network used for matching orders. 

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B.  The Commission’s Reason for its Investigation  

5. The Commission has information that tends to show that from at least August 4, 

2020, individuals and/or entities may have violated the anti-fraud provisions of the federal 

securities laws based on insider trading in the securities of ODP. [Id., ¶ 6]. 

6. On December 14, 2020, Charnas began trading in ODP by purchasing 2,100 shares 

through his Robinhood Securities, LLC (“Robinhood”) account, which he opened in March of 

2020.  [Declaration of Market Surveillance Specialist Robert Nesbitt, dated July 24, 2023. [(“Ex. 

B”), ¶ 4].  He continued to purchase securities in ODP through December 31, 2020.  [Id.].   

7. On Monday, January 11, 2021, USR Parent, Inc. d/b/a Staples (“Staples”) publicly 

announced, before the NASDAQ market opened that day, that it had sent a letter to ODP proposing 

to acquire ODP for $40 per share in cash (“Staples’ Acquisition Offer”).  [Ex. A., ¶ 8].  ODP’s 

stock price had closed at $36.96 on the previous Friday, January 8, 2021.  [Id.].   

8. Throughout mid-December 2020 and through the date of the Staples’ Acquisition 

Offer, Charnas purchased ODP stock and options while communicating frequently with multiple 

other individuals who traded ODP options and/or common stock.  They communicated via text 

message, iMessage, and/or WhatsApp, (“Cell phone Messages”) 2 as well as emails and telephone 

calls.  [Id., ¶ 9].  The timing of Charnas’ trading and communications activity with other traders 

ramped up in advance of the Staples’ Acquisition Offer, specifically the last two weeks of 

December 2020 when Staples was preparing to publicly approach ODP with an offer in the coming 

weeks, but had not made a public announcement.  [Id.]. 

                                                           
2 “Text messages” are standard SMS/MMS messages; iMessages are messages sent to and from 
Apple’s own instant messaging service; and WhatsApp is a popular cell phone messaging service 
owned by Meta Platforms, Inc., (formerly named Facebook, Inc.). 
 

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9. The staff’s investigation has uncovered that Charnas’ trading activity not only 

coincided with frequent communications with other traders who made significant profits by 

purchasing ODP options and common stock just prior to the Staples’ Acquisition Offer, but at 

times, Charnas traded while meeting with them in person to discuss ODP.  [Id., ¶ 10].  By way of 

example, on December 23, 2020, information obtained by the staff shows that Charnas 

communicated via Cell phone Message with Trader 1, who Charnas invited to a 1:00 p.m. lunch 

in Miami, Florida that day with him and also Trader 2 to discuss ODP.  [Id.]  During (or 

immediately thereafter) this lunch, at 2:21 p.m. Charnas both placed and executed trades in 200 

out-of-the-money call options contracts of ODP.  The call options cost Charnas $31,000.  [Id.]. 

10. Each call option is a contract giving the purchaser the right (but not the obligation), 

to buy 100 shares of a security at a fixed price within a specific period of time.  [Ex. B, ¶ 6].  The 

end of the time period is the expiration date.  [Id.].  The fixed price set in the call option contract 

is called the strike price.  [Id.].  A call option is “out-of-the-money” if the underlying price is 

trading below the strike price of the call.  [Id.]. Therefore, the purchaser of the out-of-the-money 

call option is betting that the underlying price of the stock will increase.  [Id.].  

11. The 200 out-of-the-money call option contracts that Charnas bought on December 

23, 2020 had a strike price of $36 per share of ODP common stock and an expiration date of April 

16, 2021.  [Id., ¶ 7].  The 200 call options gave Charnas the right to buy 20,000 shares of ODP 

common stock for $36 per share on any date on or before April 16, 2021.  [Id.].  On December 23, 

2020, ODP common stock opened the trading day with a stock price of $28.67 per share and at the 

end of the trading day was stock price at $28.51 per share.  [Id.].   

12. Purchasing out-of-the money call options is a risk given that the call options could 

expire worthless. [Id., ¶ 8].  Specifically, if Charnas held the call option contracts that he bought 

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on December 23, 2020 to maturity on April 16, 2021 and the price of ODP’s common stock did 

not rise more than 25.5% (from $28.67 to $36 per share), the call options would expire worthless.  

[Id.].  This expiration would result in not only Charnas’ failure to profit, but would also result in a 

complete loss of the amount he paid for the ODP call options, here the $31,000.  [Id.].   

13. ODP option volume was not very active in the months prior to January 2021. [Id., 

¶ 9].  The call options that Charnas bought on December 23, 2020 constituted 100% of ODP call 

options with a strike price of $36 and an expiration of April 16, 2021 purchased that day and 

90.09% of overall volume of all ODP’s call option contract trading for that day. [Id.].  

14. Further, Charnas was the sole purchaser of ODP call option series with a strike 

price of $36 and an expiration of April 16, 2021 prior to the date that Staple’s Acquisition Offer 

was announced on January 11, 2021. [Id., ¶ 10].   

15. On January 12, 2021, the day after Staples’ Acquisition Offer, ODP closed at 

$45.90 per share that day and Charnas sold half of the call option contracts he purchased on 

December 23, 2020 for approximately $114,000.  [Id., ¶ 11].  Charnas’ call option sales on January 

12, 2021 resulted in a 635% return on investment for a security that he held for only 20 days.  [Id.].  

Charnas sold the other half of the call option contracts on April 16, 2021 for approximately 

$63,200, representing a 307% return on investment. [Id.].  ODP closed at $42.67 per share that 

day.  [Id.].  Hence, all told, Charnas made a profit of approximately $146,200 from his ODP call 

option contract trading.  [Id.]. 

16. Starting on December 14, 2020 and ending on December 31, 2020, Charnas also 

bought 16,110 ODP shares for $458,158 and sold 500 ODP shares for $13,899 resulting in net 

purchase of 15,598 shares of ODP common stock for $444,807.57.  [Id., ¶ 12].  Charnas paid prices 

ranging from $26.89 to $29.39 per share for the stock purchases.  [Id.].  After the Staples’ 

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Acquisition Offer of $40 per ODP share was made public on January 11, 2021, Charnas started 

selling ODP common stock on January 11, 2021 and finished selling all the ODP shares on 

February 12, 2021.  [Id.].  Charnas sold the shares at prices ranging from $42.15 to $47 per ODP 

share, and made profits from these sales. [Id.].   

17. Charnas’ trading in both stock and options resulted in him generating combined 

profits of at least $385,000. [Id., ¶ 13]. 

C. Charnas Met and Communicated Frequently with Other ODP Traders  
Who Engaged in Similar Trading of ODP 

 
18.  Charnas met and repeatedly communicated via Cell phone Message with Trader 1.  

[Ex. A, ¶ 11].  Trader 1 bought two separate series of ODP call option contracts on December 28, 

2020, one series with a strike price of $32 per ODP share and the other with a strike price of $35 

per ODP share. [Ex. B., ¶ 14].  Trader 1 spent $199,131 on these call option contracts on December 

28, 2020.  [Id.].  Trader 1’s purchases of the $32 strike price call options on December 28, 2020 

represented about 93% of the series trade volume. [Id.].  Trader 1’s purchases of the $35 strike 

price call options on December 28, 2020 represented 100% of the series trade volume.  [Id.]. Trader 

1’s options purchases represented in total approximately 80% of the call options purchases on 

December 28, 2020.  Trader 1 also bought $48,806 of two separate series of ODP call option 

contracts on January 4, 2021, also with strike prices of $32 and $35 per ODP share.  [Id.]    

19. After the Staples’ Acquisition Offer of $40 per ODP share was made on January 

11, 2021, Trader 1 sold all of the call option contracts for $438,455 which resulted in a profit of 

$190,517. [Id., ¶ 15].  This represents a return on investment of 76.8% that Trader 1 only held 

between 8 and 13 days total. [Id.]  Starting on December 28, 2020 and ending on January 8, 2021, 

Trader 1 also bought 32,800 shares of ODP common stock for approximately $1.1 million. [Id.].  

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D. Charnas’ use of his Cell Phone to Communicate with Similarly Situated ODP 
Traders 

 
20. Through its investigation, the Commission’s staff has obtained certain Cell phone 

Messages where Charnas communicated and discussed trades in ODP securities with other traders 

who traded in and profited from the sale of ODP securities. [Ex. A., ¶ 11].  For example, Charnas 

connected and introduced Traders 2 and 3 on December 22, 2023, specifically focusing their 

attention on ODP and another investment.  [Id.].  Later, on February 23, 2021, Charnas shared a 

screenshot of his Robinhood trading account with several traders the staff has identified in its 

investigation who participated in suspicious trading of ODP equities and options, where Charnas 

shared the price of ODP on February 23, 2021 reflecting ODP’s appreciation in value since initial 

discussions with fellow traders began the previous year.  [Id.].   

21. Yet, while the staff has received certain Cell phones Messages from certain 

individuals during the course of its investigation, the staff has a good-faith reason to believe, 

through its investigation, that Charnas possesses additional Cell phone Messages that are not in 

the staff’s possession.  [Id., ¶ 12.].  This belief includes the staff’s possession of telephone call 

logs indicating frequent conversations between Charnas and other individuals who traded in ODP 

securities in similarly suspicious trades as Charnas, including at key moments leading to Staples’ 

Acquisition Offer and thereafter.  [Id.]. Further, in a recent sworn testimony, Trader 6 indicated 

that Charnas was well aware of the staff’s Subpoena and that Charnas told him he was compiling 

responsive communications, including from his cell phone as well as email account, in response 

to the Subpoena. [Id.]   

22. Obtaining communications between potential tippers and tippees is critical to 

determine whether material nonpublic information was disseminated between individuals, which 

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in turn gives them an unfair advantage in the market and inured to their financial benefit. [Id., ¶ 

13]. 

E. The Commission’s Subpoena, Meet and Conferral, and Respondent’s Continued 
Failure to Comply 

 
i. The Subpoena to Respondent 

23. As part of the Investigation and pursuant to the Formal Order, on November 3, 

2022, the Commission issued a preservation letter and the Subpoena to Charnas.  It required the 

production of the requested documents, itemized numbers 1 through 9, by November 24, 2022. [Id., 

¶ 14]. The relevant time period of the Subpoena for responsive information was August 1, 2020 

through November 3, 2022 (“Relevant Period”).  [Id.].  The Subpoena requested items 1 through 

9, which were: 

1. Documents sufficient to identify the Charnas Accounts;  
 
2. All account statements for all brokerage accounts (includes any account in 
which any trading of securities occurred) identified in Request #1, above; 
 
3. All Documents (including, but not limited to, correspondence, e-mails and 
notes of conversations) Concerning Communications between you and any Person 
Concerning “ODP” or “Office Depot”; 
 
4. All Communications with any brokerage at which you had an account in 
Request # 2. 
 
5. All Documents Concerning trading in the securities of ODP; 
 
6. All credit card statements for credit cards that were or are in your name, and/or 
over which you have direct or indirect control; 
 
7. Documents sufficient to disclose all telephone numbers and calling card 
numbers in your name or which you regularly used during the Relevant Period, 
including, but not limited to, all telephone numbers at your residences (regardless 
of whose names they are listed under), all cell phone and facsimile numbers, and 
all work-related telephone numbers used by you; 
 

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8. Documents sufficient to identify all e-mail, text messaging and instant 
messaging accounts you used, controlled, managed, maintained or opened at any 
time during the Relevant Period; 
 
9. All telephone bills and statements for all phone numbers identified in Request # 
8 above. 

 
Included in the definitions section of the Subpoena were the following definitions: 

1. “ODP Corporation” means the entity doing business under the name “ODP” a/k/a “Office 
Depot” including parents, subsidiaries, affiliates, predecessors, successors, officers, 
directors, employees, agents, general partners, limited partners, partnerships and aliases, 
code names, or trade or business names used by any of the foregoing. 
 

6. “Document” shall include, but is not limited to, any written, printed, or typed matter 
including, but not limited to all drafts and copies bearing notations or marks not found in 
the original, letters and correspondence, interoffice communications, slips, tickets, 
records, worksheets, financial records, accounting documents, bookkeeping documents, 
memoranda, reports, manuals, telephone logs, facsimiles, messages of any type, 
telephone messages, text messages, voice mails, tape recordings, notices, instructions, 
minutes, summaries, notes of meetings, file folder markings, and any other organizational 
indicia, purchase orders, information recorded by photographic process, including 
microfilm and microfiche, computer printouts, spreadsheets, and other electronically 
stored information, including but not limited to writings, drawings, graphs, charts, 
photographs, sound recordings, images, and other data or data compilations that are 
stored in any medium from which information can be retrieved, obtained, manipulated, or 
translated. 
 

7. “Communication” means any correspondence, contact, discussion, e-mail, instant 
message, or any other kind of oral or written exchange or transmission of information (in 
the form of facts, ideas, inquiries, or otherwise) and any response thereto between two or 
more Persons or entities, including, without limitation, all telephone conversations, face-
to-face meetings or conversations, internal or external discussions, or exchanges of a 
Document or Documents. 

 
[Id.].  The Subpoena also required Charnas to appear before officers of the Commission via video 

teleconference on WebEx for sworn testimony on November 17, 2022 at 9:30 a.m. [Id.].  

ii. Meet and Conferral 

24. The subpoena was issued on November 3, 2022 and was delivered to Charnas on 

November 9, 2022.  [Id. ¶ 15].  Charnas’ counsel contacted the staff on November 16, 2022, 

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indicating he had been retained and requested an adjournment of the testimony so he could assess 

the Subpoena.  [Id.]. 

25. On January 24, 2023, Commission staff inquired of Charnas’ counsel as to the 

status of Charnas’ expected production.  [Id., ¶ 16].  Counsel responded the following day saying 

that he needed until the following week to get back to the staff to discuss Charnas’ Subpoena 

response.  [Id.].  The staff once again provided an extension and Charnas’ counsel agreed to contact 

the staff on January 31, 2023.  [Id.]. 

26. Having not heard from Charnas’ counsel and extending him additional professional 

courtesies, the staff again reached out on February 3, 2023 to inquire as to the status of the response 

to the Subpoena. [Id., ¶ 17].   

27. The staff then spoke to Charnas’ counsel on February 6, 2023 whereupon counsel 

informed that Charnas would be invoking his Fifth Amendment rights as to sworn testimony when 

it occurs and as well in response to any (and all) documents and communications called on to be 

produced pursuant to the Subpoena. [Id., ¶ 18].  Charnas’ counsel did not thereafter provide a 

formal written affirmation of his verbal assertions. [Id.].  

28. On April 17, 2023, the staff requested that Charnas’ counsel provide a formal 

response to the Subpoena and requested a privilege log be produced.  [Id., ¶ 19].  Later that same 

day on April 17, 2023, Charnas’ counsel reiterated via email that his client would be invoking his 

Fifth Amendment rights regarding any response to the November 3, 2022 Subpoena.  [Id.].  

29. The staff responded to Charnas’ counsel on April 19, 2023, and explained that 

Charnas’ written communications related to ODP contained within his cell phone were not subject 

to constitutional protection because staff is aware of the existence of those communications with 

reasonable particularity and the location of the communications—Charnas’ cell phone.  [Id., ¶ 20].  

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The staff made it abundantly clear that, without waiving any rights, it only sought Charnas’ cell 

phone communications relating to ODP during the Relevant Period.  [Id.].   

30. Nonetheless, in an abundance of caution, and for the avoidance of doubt, and in 

light of the potential expansive definitions of “Documents” and “Communications” in the 

Subpoena, the staff amended Request No. 3 as follows: 

3. [Provide] all text messages, iMessages, and WhatsApp messages (collectively “Cell 
phone Messages”) between You and any Person Concerning “ODP” or “Office Depot.” 
(“Revised Subpoena Request No. 3”)  

 
[Id., ¶ 21]. 

iii. Continued Refusal to Comply with Subpoena 
 
31. In late April and early May 2023, the parties exchanged email communications 

asserting their positions.  [Id., ¶ 22].  This exchange was followed by a meet and confer telephone 

call on May 1, 2023 in a final attempt to resolve the disagreement.  [Id.].  A resolution could not 

be reached.  [Id.].  Counsel continues to assert the Fifth Amendment on behalf of Charnas with 

respect to Revised Subpoena Request No. 3. [Id.]. 

32. Given the staff’s knowledge, with reasonable particularly, of the existence of some 

of these communications Charnas had during the Relevant Period with other ODP traders via Cell 

phone Messages, the Commission thus seeks Court intervention to obtain them from Charnas. [Id., 

¶ 23].   

II. MEMORANDUM OF LAW 

A. The Court Has Jurisdiction and Venue Properly Lies In This District 

 Congress gave the Commission broad authority to conduct investigations and require 

production of evidence and testimony relevant to those investigations.  See, e.g., Sections 21(a) 

and (b) of the Exchange Act, 15 U.S.C. §§ 78u(a) and (b) (“For the purpose of any such 

investigation, or any other proceeding under this chapter, any member of the Commission or any 

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officer designated by it is empowered to…require the production of any books, papers, 

correspondence, memoranda, or other records which the Commission deems relevant or material 

to the inquiry.”); see also SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735, 745 (1984) (“It appears, in 

short, that Congress intended to vest the SEC with considerable discretion in determining when 

and how to investigate possible violations of the statutes administered by the Commission.”); SEC 

v. Dresser Indus., Inc., 628 F.2d 1368, 1380 (D.C. Cir. 1980) (given the Commission’s broad 

statutory mandate to investigate, there was “virtually no possibility” the Commission exceeded its 

authority in issuing an investigative subpoena).  

When parties refuse to comply with lawful Commission demands for documents and 

testimony issued pursuant to the Commission’s broad statutory authority to investigate, Congress 

has authorized the Commission to seek, and the federal courts to issue, orders compelling 

production or testimony.  “In case of…refusal to obey a subpoena issued to, any person, the 

Commission may invoke the aid of any court of the United States within the jurisdiction of which 

such investigation or proceeding is carried on, or where such person resides or carries on business, 

in requiring the attendance and testimony of witnesses and the production of books, papers, 

correspondence, memoranda, and other records.”  Section 21(c) of the Exchange Act, 15 U.S.C. § 

78u(c).  That language also provides that venue lies in the Southern District of Florida, as it 

provides the Commission may seek a court order “within the jurisdiction of which such 

investigation or proceeding is carried on, or where such person resides or carries on business….”  

Id.  

Here, venue is proper in this district because the investigation is being carried on in the 

Southern District of Florida, nonpublic information may have been misappropriated from ODP, 

which is headquartered in Boca Raton, FL, and all authorized staff in the Formal Order are 

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employed at the Miami Regional Office of the SEC.  [Ex. A., ¶ 4].  There is personal jurisdiction 

over Charnas because Charnas’ company, Current Real Estate Advisors, LLC, is located in Miami-

Dade County within the Southern District of Florida, [Id., ¶ 10], and, based upon information and 

belief, Charnas met with multiple people on multiple occasions in this district, including in Miami-

Dade County, who traded in ODP during the Relevant Period. [Id., ¶¶ 9, 10, and 11].    

B. The Court Should Conduct a Summary Proceeding 

Subpoena enforcement actions are generally summary in nature and the Court may 

therefore hear them in summary fashion without strict adherence to the Federal Rules of Civil 

Procedure.  United States v. Elmes, 532 F. 3d 1138, 1142 (11th Cir. 2008) (“This court has 

described the scope of Rule 81(a)(3) in broad terms, saying that its effect is to ‘make application 

of the rules of civil procedure in subpoena enforcement proceedings discretionary with the district 

court.’”) (internal citation omitted); SEC v. Sprecher, 594 F.2d 317, 319-20 (2d Cir. 1979) 

(upholding right of district court to enforce subpoenas in summary proceedings without the filing 

of a complaint pursuant to Section 22(b) of the Securities Act, 15 U.S.C. § 77v(b), which allows a 

district court to enforce a subpoena “upon application by the Commission”). 

Accordingly, the Commission asks the Court to promptly set an Order to Show Cause 

Hearing so that Respondent’s failure to comply with the Subpoena is not allowed to continue. SEC 

v. Marin, 982 F.3d 1341, 1355 (11th Cir. 2020) (“SEC may invoke the aid of a district court to 

enforce a subpoena, and the court may order production of records or testimony ‘touching the 

matter under investigation or in question.’”) (quoting 15 U.S.C. § 78u(c)).  

C. The Commission’s Subpoenas Satisfy All Requirements for Enforcement 

“‘A district court’s role in a proceeding to enforce an administrative subpoena is limited.’” 

Marin, 982 F.3d at 1352 (quoting EEOC v. Tire Kingdom, Inc., 80 F.3d 449, 450 (11th Cir. 1996)).  

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Under that limited review, a court should enforce an administrative subpoena if the information 

sought by the subpoena is reasonably relevant to an authorized investigation.  Id.; EEOC v. 

Technocrest Sys., 448 F.3d 1035, 1040 (8th Cir. 2006) (same). 

Courts have generally looked at four criteria to determine whether to enforce a Commission 

subpoena: (1) the investigation is being conducted pursuant to a legitimate purpose; (2) the inquiry 

is relevant to that purpose; (3) the information the Commission seeks is not already in its 

possession; and (4) the Commission has fulfilled the necessary administrative steps.  United States 

v. Powell, 379 U.S. 48, 57-58 (1964); RNR Enterprises, Inc. v. SEC, 122 F.3d 93, 96-97 (2d Cir. 

1997); SEC v. Howatt, 525 F.2d 226, 229 (1st Cir. 1975).  “All the agency must do in the first 

instance is make out a prima facie showing that the Powell criteria are met.”  Marin, 982 F.3d at 

1352.  Thereafter, the burden shifts to a respondent to demonstrate that enforcement would be 

unreasonable.  Id.; SEC v. Brigadoon Scotch Dist. Co., 480 F.2d 1047, 1056 (2d Cir.1973).  

However, the burden of showing unreasonableness “is not easily met” as long as the Commission’s 

inquiry is legally authorized and the information it seeks is relevant to the inquiry.  Id. 

i. The Commission’s Purpose is Lawful 

As discussed above, Congress has given the Commission broad authority to investigate 

whether the federal securities laws, rules, and regulations “have been or are about to be violated…”  

Section 20(a) of the Securities Act, 15 U.S.C. § 77t(a); Sections 21(a) and (b) of the Exchange 

Act, 15 U.S.C. §§ 78u(a) and (b)(“ The Commission may, in its discretion, make such 

investigations as it deems necessary to determine whether any person has violated…any provision 

of this chapter, [or] the rules or regulations thereunder…)  Pursuant to that authority, the 

Commission issued the Formal Order authorizing designating officers to conduct an investigation 

into possible violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange 

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Act and Rule 10b-5 thereunder by ODP, its officers, directors, employees, partners, subsidiaries, 

and/or affiliates, and/or other persons or entities. [Id., ¶ 3]. 

Pursuant to the authority conferred under the Formal Order, the Commission’s 

investigative team issued the Subpoena to Charnas.  The Subpoena is within the parameters of the 

Commission’s broad discretion to investigate:  

For the purpose of any such investigation, or any other proceeding under this 
chapter, any member of the Commission or any officer designated by it is 
empowered to administer oaths and affirmations, subpoena witnesses, compel their 
attendance, take evidence, and require the production of any books, papers, 
correspondence, memoranda, or other records which the Commission deems 
relevant or material to the inquiry.   
 
15 U.S.C. §78u(b); see also O’Brien, 467 U.S. at 745 (“It appears, in short, that Congress 

intended to vest the SEC with considerable discretion in determining when and how to investigate 

possible violations of the statutes administered by the Commission.”); Dresser Indus., 628 F.2d at 

1379-80 (given the Commission’s broad statutory mandate to investigate, there was “virtually no 

possibility” the Commission exceeded its authority in issuing an investigative subpoena).  

Accordingly, the Commission’s purpose in issuing the subpoena was lawful. 

ii. The Commission Seeks Relevant Information 

The measure of relevance used in subpoena enforcement actions is “quite broad.”  United 

States v. Florida Azalea Specialists, 19 F.3d 620, 624 (11th Cir. 1994).  A district court may 

enforce a subpoena so long as “the materials sought are not clearly irrelevant or immaterial.”  SEC 

v. Arthur Young & Co., 584 F.2d 1018, 1029 (D.C. Cir. 1978) (upholding district court’s use of 

that language as standard for relevance) (emphasis added).  The Subpoena issued to Charnas is 

more than sufficient to meet this broad standard. 

The Cell phone Messages as defined in Revised Request No. 3 requested for production 

from Charnas are highly relevant to the Commission’s investigation and Revised Request No. 3 is 

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narrowly tailored.  This is an insider trading investigation where communications between 

potential tippers and tippees are critical to determination whether material nonpublic information 

was disseminated between individuals which gave them an unfair advantage in the market and 

inured to their financial benefit.3     

iii. Charnas Possesses Information the Commission Lacks 

Charnas possesses information the Commission lacks.  The Commission does not have 

access to Charnas’ cell phone nor does it have access to his Cell phone Messages.  While the 

Commission does have certain of his Cell phone Messages from other sources, the staff has reason 

to believe this is not the entire universe of Charnas’ responsive Cell phone Messages.  

iv. The Commission Has Satisfied All Necessary Administrative Steps 

The Commission issued the Subpoena in accordance with all applicable administrative 

requirements.  Section 19(b) of the Securities Act, 15 U.S.C. § 77s(b), and Section 21(b) of the 

Exchange Act, 15 U.S.C. § 78u(b), empower the Commission to subpoena documents and 

testimony in the course of investigations.  Here, Drew D. Panahi, an attorney for the Division of 

Enforcement, designated as an officer of the Commission in the Formal Order, issued the 

Subpoena to Charnas. [Id., ¶ 14]. 

D.  Respondent Cannot Show the Subpoena is Unreasonable 
    
As set forth above, the Commission has satisfied all requirements for enforcement of the 

Subpoena. Accordingly, Respondent would have to demonstrate that the Subpoena is 

                                                           
3 The SEC’s investigative powers are not limited to the specific entities named in a formal 
order.  Marin, 982 F.3d at 1353, citing O'Brien, Inc., 467 U.S. at 749 (“The SEC often undertakes 
investigations into suspicious securities transactions without any knowledge of which of the parties 
involved may have violated the law.”); RNR Enters., Inc.,122 F.3d at 98  (noting statutes and 
regulations governing the SEC do not “require that the order authorizing the investigation target 
by name a specific company or person suspected of violating securities laws”). 
 

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unreasonable.  Brigadoon Scotch, 480 F.2d at 1056.  Because the Commission’s inquiry is legally 

authorized and the Commission seeks information relevant to the Investigation, Respondent’s 

burden “is not easily met.”  Id.   

The only objection Charnas has raised for refusing to provide a response to Revised 

Request No. 3 is the act of production privilege under the Fifth Amendment.4  However, it does 

not apply to Revised Request No. 3.   

i. Act of Production Doctrine is Limited 

A defendant has the right to raise his Fifth Amendment privilege in “any proceeding, civil 

or criminal, administrative or judicial, investigatory or adjudicatory; and it protects against any 

disclosures that the witness reasonably believes could be used in a criminal prosecution or could 

lead to other evidence that might be so used.” In re Grand Jury Subpoena Duces Tecum Dated 

Mar. 25, 2011, 670 F.3d 1335 1342 (11th Cir. 2012).  However, a defendant is not permitted to 

make a “blanket objection to testifying or producing records.”  Sallah v. Worldwide Clearing, LLC, 

855 F.Supp.2d 1364, 1371 (S.D. Fla. 2012).  A defendant “cannot avoid compliance with [a] 

                                                           
4 While Charnas’ counsel has also asserted Charnas will invoke his Fifth Amendment rights when 
providing sworn testimony, counsel correctly does not dispute that Charnas must still appear for 
sworn testimony and personally assert his own constitutional rights.  See, e.g., SEC v. Kimmel, No. 
19-mc-00113-CMA, Order Compelling Compliance with Administrative Subpoena, 2020 WL 
2800813 at *3 (D. Colo. May 29, 2020) (quoting SEC v. Caramadre, 717 F. Supp. 2d 217, 222 
(D.R.I. 2010)) (“Although ‘the Fifth Amendment protects a party from self-incrimination; it does 
not protect someone from having to invoke the right to avoid self-incrimination in the first 
place.’”); State of Florida ex rel. Butterworth v. Southland Corp., 684 F. Supp. 292, 294-95 (S.D. 
Fla. 1988) (“A witness must state the specific basis for objection on the record, e.g., ‘Fifth 
Amendment privilege against self-incrimination.’  Furthermore, the witness must assert any claim 
of privilege on a question-by-question basis, rather than assert a blanket privilege as to all 
questions.”). 

 

 

  

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subpoena merely by asserting that the item of evidence which he is required to produce contains 

incriminating writing, whether his own or that of someone else.”  Fisher v. United States, 425 U.S. 

391, 410 (1976).  

For a disclosure to fall within the ambit of the Fifth Amendment privilege, an individual 

must show each of the following three things: (1) compulsion; (2) a testimonial communication 

or act; and (3) incrimination. Id. at 1341 (emphasis added).   

[A]n act of production can be testimonial when that act conveys some explicit or 
implicit statement of fact that certain materials exist, are in the subpoenaed 
individual’s possession or control, or are authentic.” In re Grand Jury Subpoena, 
670 F.3d at 1345–46. There are two specific ways in which an act of production is 
not testimonial. Id.  First, when it is merely a physical act that is compelled—i.e., 
“where the individual is not called upon to make use of the contents of his or her 
mind.” Id. And second, under the “foregone conclusion” doctrine, “an act of 
production is not testimonial—even if the act conveys a fact regarding existence or 
location, possession, or authenticity of the subpoenaed materials—if the 
Government can show with ‘reasonable particularity’ that at the time it sought to 
compel the act of production, it already knew of the materials, thereby making any 
testimonial aspect a ‘foregone conclusion.’” Id. at 1345-46.  Further, “case law 
from the Supreme Court does not demand that the Government identify exactly the 
documents it seeks, but it does require some specificity in its requests—categorical 
requests for documents the Government anticipates are likely to exists simply will 
not suffice.”  Id. at 1347-48 (citing United States v. Hubbell, 530 U.S. 27, 36 (2000). 

 
SEC v. Complete Business Solutions Group, Inc. d/b/a Par Funding, et al., No. 9:20-cv-81205-

RAR, 2022 WL 1288749, *2 (S.D. Fla. Apr. 29, 2022) (emphasis added). 

a. The Existence of Charnas’ Cell phone Messages is a Foregone 
Conclusion  
 

It is axiomatic that Charnas’ Cell phone Messages are contained on his cell phone.  

Further, the staff has specific evidence from other sources that Charnas used his cell phone to 

message other individuals during the Relevant Period about ODP and Charnas’ own admission 

that he was compiling ODP communications from his phone and email account responsive to the 

Subpoena. [Id., ¶ 14].  The existence of responsive Cell phone Messages on Charnas’ phone is a 

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“foregone conclusion,” and therefore the privilege does not apply.  See, e.g., Brown v. Caldwell, 

No. 1:20-cv-07907-NLH-AMD, 2022 WL 2753243, *3 (D. N.J. Jul. 14, 2022) (holding act of 

production defense inapplicable to requirement to turn over cell phone for imaging because the 

parties already knew that [jail official] owned a cell phone and that it contained pertinent 

information); United States v. Teeple, 286 F.3d 1047, 1050 (8th Cir. 2002) (“[W]here the 

government already possesses the knowledge that would otherwise be communicated, the 

question is not of testimony, but of surrender” and the privilege would not apply); United States 

v. Ponds, 454 F.3d 314, 325 (D.C. Cir. 2006).5 

b. Revised Request No. 3 is Specific 

Revised Request No. 3 of the Subpoena limits the request specifically to only Charnas’ 

Cell phone Messages during the Relevant Period relating to ODP.  

The original Request No. 3 was as follows: 

3. All Documents (including, but not limited to, correspondence, e-mails and notes of 
conversations) Concerning Communications between you and any Person Concerning 
“ODP” or “Office Depot”; 

 
This original request incorporated the definitions of “Documents” and “Communications,” 

which are far wider in scope that Revised Request No. 3, which is as follows: 

2. [Provide] all text messages, iMessages, and WhatsApp messages (collectively “Cell phone 
Messages”) between You and any Person Concerning “ODP” or “Office Depot.” 
(“Revised Subpoena Request No. 3”)  
 
Therefore any risk of invoking the act of production, such as searching for or producing 

“Documents” has been completely eliminated.  So too have “Communications” which incorporates 

                                                           
5 Notably, and in addition, the Fifth Amendment privilege against self-incrimination does not 
apply to incriminating evidence that was generated prior to the demand that the evidence be 
produced.  FTC v. PointBreak Media, LLC, 343 F.Supp.3d 1282, 1293 (S.D. Fla. 2018).  
 

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“Documents” and also requests methods of communications beyond Cell phone Messages.  

Furthermore, the Commission is prepared to provide Charnas designated search terms.  Therefore, 

in no way will Charnas have to “employ the contents of his mind” to provide responsive Cell phone 

Messages.  Sallah, 855 F.Supp.2d at 1373 (holding that Receiver’s request for defendant’s 

communications did not trigger act of production doctrine protection under the Fifth Amendment).  

Revised Request No. 3 is specific, and the Commission is not currently challenging Respondent’s 

Fifth Amendment assertion as to the remainder of the requests in the Subpoena.  

III. CONCLUSION 
 

The Commission has satisfied all the requirements for enforcement of the Subpoena.  

Accordingly, for the foregoing reasons, the Commission respectfully requests this Court order 

Respondent to show cause why he should not comply with the Subpoena issued to him, and, after 

a hearing, order him to comply fully with Revised Request No. 3 of the Subpoena, lest he be held 

in contempt of court.  

Dated: July 25, 2023     Respectfully submitted, 
 
        ________________________ 
        Russell Koonin 
       Senior Trial Counsel 

Fla. Bar No. 474479 
Direct Dial: (305) 982-6390 

       E-mail: [email protected] 
 

Michael J. Gonzalez 
Senior Counsel 
Florida Bar No. 110598 
Direct Dial:  (305) 982-6318 
Email: [email protected] 
 

        Attorneys for Plaintiff 
Securities and Exchange Commission 

 801 Brickell Avenue, Suite 1950 
         Miami, Florida 33131 
         Telephone: (305) 982-6300 

RUSSELL KOONIN
Digitally signed by RUSSELL 
KOONIN 
Date: 2023.07.25 11:01:49 -04'00'

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