SEC v. ERIC J. WATSON

1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
-against-
ERIC J. WATSON, OLIVER-BARRET LINDSAY,
and GANNON GIGUIERE,
Defendants.
21-cv-5923 (ALC)
OPINION & ORDER
ANDREW L. CARTER JR., United States District Judge:
The Securities and Exchange Commission (“SEC”) alleges securities violations by Eric J.
Watson in connection with his role as a corporate insider and controlling shareholder of Long
Island Iced Tea Corp. (now known as Long Blockchain Corp.) (“LTEA”).  Following the SEC’s
numerous attempts to serve Watson, Watson eventually appeared in this action pro se.  Watson
now moves to dismiss the SEC’s Complaint, contending that the SEC’s claims are unfounded
and that service was insufficient.  Watson also brings forth an Amended Counterclaim against
the SEC.  The SEC opposes Watson’s motion and moves to dismiss Watson’s Amended
Counterclaim.
The Court addresses both pending motions in this opinion.  For the reasons set forth
below, Watson’s motion to dismiss the SEC’s Complaint is DENIED with prejudice, and the
SEC’s motion to dismiss Watson’s Amended Counterclaim is GRANTED with prejudice.
BACKGROUND
I.   Factual Allegations
On July 9, 2021, the SEC filed a Complaint alleging that Watson engaged in an insider
trading scheme in late 2017.  See ECF No. 1 (“Complaint”).  As a corporate insider and

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controlling shareholder of LTEA, Watson allegedly tipped a business associate, Oliver-Barret
Lindsay, with material nonpublic information about LTEA’s forthcoming announcement that it
would significantly pivot its business from soft drink manufacturing to blockchain technology.
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Id. ¶ 1.  The SEC alleges that Watson sought help from Lindsay in promoting LTEA and that
Lindsey served as a conduit between Watson and Gannon Giguiere—a stock promoter who
owned a stock promotion website—who agreed to use his website to promote LTEA.  See id. ¶¶
32–37.  As part of these efforts, Watson shared with Lindsay nonpublic draft announcements
about LTEA’s pivot, and Lindsay, in turn, provided the information to Giguiere.  See id. ¶¶ 67–
74.
On December 20, 2017, Giguiere purchased 35,000 LTEA shares at an average cost of
$2.42 per share.  Id. ¶ 78.  On December 21, 2017, LTEA publicly announced its pivot to the
blockchain business.  Id. ¶ 79.  Consequently, LTEA’s trading volume and share price
skyrocketed and closed that day at $6.91 per share.  Id. ¶ 80.  Less than two hours after the
announcement, Giguiere sold all the LTEA shares he purchased the previous day, purportedly
realizing $162,500 in illicit profits.  Id. ¶ 81.  The SEC alleges that Watson violated Section
10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and 17
C.F.R. § 240.10b-5.  Id. ¶ 6.
II. Service on Watson
Watson is a New Zealand citizen and was believed to have been residing in London,
United Kingdom, when the Complaint was filed.  Id. ¶ 13.  On July 16, 2021—a week after the
Complaint was filed—an article in The New Zealand Herald quoted Watson as saying, in part,

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 The Complaint also named Lindsay and another defendant, Gannon Giguiere, who were both alleged to have been
part of the insider trading scheme.  On December 28, 2023, and September 20, 2024, the Court entered final consent
judgments against Giguiere and Lindsay, respectively, resolving all the SEC’s claims against them.  See ECF Nos.
73, 99.  Watson is the only remaining defendant in this case.

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“Yes, it appears the SEC has filed a complaint . . . .”  ECF No. 27 ¶ 10, Ex. H, at 2.  On July 26,
2021, an individual named Mark Winters emailed the SEC claiming to represent Watson and
noting that Watson resided in Europe.  ECF No. 27 ¶ 12, Ex. J.  On July 29, 2021, counsel for
the SEC called Winters, who informed the SEC that Watson was aware of the Complaint and
requested evidence of the charges against Watson.  ECF No. 27 ¶ 13.  On August 12, 2021, after
SEC counsel asked Winters whether Watson would authorize Winters to accept service of the
Complaint on Watson, Winters informed the SEC that Watson would not authorize him to accept
service on his behalf and again iterated Watson’s request for evidence against him.  ECF No. 27
¶ 13, Ex. K.
On August 19, 2021, after finding an article in The New Zealand Herald regarding the
liquidation of a company associated with Watson, SEC counsel contacted a court-appointed
liquidator in New Zealand and asked for information as to Watson’s whereabouts.  ECF No. 27 ¶
3, Ex. C.  The liquidator provided an address for Watson in Ibiza, Spain.  Id.  In addition to this,
the SEC also found another article published on April 17, 2021 by The New Zealand Herald
which indicated that Watson was residing in Ibiza.  ECF No. 27 ¶ 6, Ex. E.
On October 18, 2021, the SEC notified the Court that Watson was apparently residing in
Spain.  ECF No. 12.  The SEC advised the Court that, on September 9, 2021, it had begun the
process of serving Watson pursuant to the Hague Convention by sending its request to Spain’s
Central Authority and providing it with Watson’s purported address in Ibiza.  Id.; see also ECF
No. 27 ¶ 4.  On February 2, 2022, the SEC’s New York office received notice from Spain’s
Central Authority that it had made two unsuccessful attempts to serve Watson at the address
provided.  ECF No. 27 ¶ 5.  The SEC also contacted three attorneys who represented Watson in a

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suit against him in the United Kingdom, but two of the attorneys disclaimed representation of
Watson and the other attorney did not respond.  ECF No. 27 ¶ 9, Ex. I.
On April 25, 2022, the SEC requested that the Court issue an order permitting service on
Watson by publication.  ECF Nos. 26–28.  On October 5, 2022, the Court granted the SEC’s
motion to serve Watson by publication and directed the SEC to publish a notice of the action in
The International New York Times once a week for four consecutive weeks.  ECF No. 42.  The
Court also ordered Watson to respond to the Complaint within twenty-one days from the date of
the last publication.  Id.  The SEC published the notice in The International New York Times on
October 28, November 3, November 9, and November 14, 2022.  ECF No. 45, Ex. A.  Watson
failed to timely respond to the Complaint by December 5, 2022 (twenty-one days after the last
publication in The International New York Times) and, on January 9, 2023 the SEC filed its
Certificate of Service on Watson.  See ECF No. 45.  On February 3, 2023, the SEC filed a
request for a Certificate of Default against Watson, and the Clerk of Court issued a Certificate of
Default against Watson that same day.  ECF Nos. 46, 48.
Following the issuance of the Certificate of Default and before Watson’s appearance in
this suit, two law firms contacted the SEC, indicating that they represented Watson and were
interested in settlement discussions.  See ECF No. 101 ¶ 5–16.  However, no law firm or counsel
for Watson ever appeared in this case.
III. Watson’s Appearance
On June 14, 2024, an attorney for Watson informed the SEC that Watson would represent
himself in the matter thereafter.  Id. ¶ 16.  That same day, Watson emailed SEC counsel and
advised that he would be proceeding pro se in this action.  Id. ¶ 17.  On June 18, 2024, the
parties discussed a possible settlement, but no agreement was reached.  Id. ¶ 19.  That same day,

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Watson sent an email to [email protected] asking that SEC counsel provide the Court with
Watson’s motion to set aside the entry of default, contending mainly that he was improperly
served.  Id. ¶ 20; see also ECF No. 79, Ex. A.  The SEC consented to Watson’s application and
his being provided an opportunity to answer or otherwise respond to the Complaint.  See ECF
No. 79.
IV. Recent Procedural History
On July 1, 2024, Watson filed a Counterclaim, requesting dismissal for improper service,
as well as monetary damages for violations for reputational damage and losses incurred as a
result of the SEC’s claims against him, which he alleges are unfounded.  See ECF No. 82.  On
August 13, 2024, the SEC filed a letter requesting a premotion conference ahead of its
anticipated motion to dismiss Watson’s Counterclaim, primarily on the basis that Section 21(g)
of the Exchange Act bars the consolidation of counterclaims in SEC enforcement actions when
the SEC does not consent.  See ECF No. 90.  On August 26, 2024, the Court granted Watson
leave to amend his Counterclaim by September 20, 2024 and also set forth a briefing schedule
for (1) the SEC’s motion to dismiss Watson’s Amended Counterclaim and (2) Watson’s motion
to dismiss the SEC’s Complaint.  ECF No. 94.  On September 10, 2024, Watson emailed the
motion to dismiss the SEC’s Complaint and the Amended Counterclaim to the Court in a single
document that was docketed on September 13, 2024.  ECF No. 98.  The Amended Counterclaim
consisted of four claims alleging that the SEC violated his due process rights, negligently
investigated and prosecuted Watson, abused process, and violated the Federal Tort Claims Act.
Id.
On October 11, 2024, the SEC filed its motion to dismiss the Amended Counterclaim as
well as a declaration and memorandum of law in support of its motion to dismiss the Amended

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Counterclaim and its opposition to Watson’s motion to dismiss the Complaint.  ECF Nos. 100–
02.  On October 31, 2024, Watson filed his opposition to the SEC’s motion to dismiss the
Amended Counterclaim and his reply in further support of his motion to dismiss the SEC’s
Complaint.  ECF Nos. 104-1 (sealed), 105-1 (redacted).  On November 15, 2024, the SEC filed
its reply in further support of its motion to dismiss the Amended Counterclaim.  ECF No. 108.
On November 18, 2024, Watson submitted a proposed surreply in opposition to the SEC’s
motion to dismiss the Amended Counterclaim and requested leave of Court to file the surreply.
ECF No. 110-1.  On November 20, 2024, the Court accepted Watson’s proposed surreply.  ECF
No. 111.
LEGAL STANDARD
In deciding a motion to dismiss a complaint under Federal Rule of Civil Procedure
12(b)(6), the allegations in the complaint are accepted as true, and all reasonable inferences are
drawn in the plaintiff’s favor.  McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
2007); SEC v. Lyon, 529 F.Supp.2d 444, 449 (S.D.N.Y. 2008).  To survive a motion to dismiss, a
plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.”  Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009) (“[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.”)
For the pleadings to state a plausible claim to relief, a complaint’s “[f]actual allegations must be
enough to raise a right to relief above the speculative level.”  Twombly, 550 U.S. at 555.  The
Court’s function in resolving a motion to dismiss is not to “weigh the evidence that might be
presented at trial but merely to determine whether the complaint itself is legally sufficient.”
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985).  Moreover, a court's “consideration is
limited to facts stated on the face of the complaint, in documents appended to the complaint or

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incorporated in the complaint by reference, and to matters of which judicial notice may be
taken.”  McKenzie v. Gibson, No. 07 -CV- 6714, 2008 WL 3914837, at *2 (S.D.N.Y. Aug. 25,
2008) (quoting Allen v. WestPoint–Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991)).
Federal Rule of Civil Procedure 12(b)(5) permits a party to move for dismissal of a
complaint based on inadequate service of process.  Fed. R. Civ. P. 12(b)(5).  “In considering a
Rule 12(b)(5) motion to dismiss for insufficient service of process, a court must look[ ] to
matters outside the complaint to determine whether it has jurisdiction.”  Cassano v. Altshuler,
186 F.Supp.3d 318, 320 (S.D.N.Y. 2016).  “Once a defendant challenges the sufficiency of
service of process, the burden of proof is on the plaintiff to show the adequacy of service.”
Vantone Grp. Ltd. Liab. Co. v. Yangpu Ngt Indus. Co., No. 13-CV-7639, 2016 WL 3926449, at
*2 (S.D.N.Y. July 15, 2016) (citation omitted); accord Khan v. Khan, 360 Fed. Appx. 202, 203
(2d Cir. 2010) (summary order).  To resolve a motion made under Rule 12(b)(5), the Court must
“look to matters outside the complaint.”  Koulkina v. City of New York, 559 F. Supp. 2d 300, 311
(S.D.N.Y. 2008).  Even if a district court finds that a defendant was not properly served, such a
finding “does not [ ] require dismissal of [the] action, since . . . proper service may still be
obtained.”  SEC v. Gilbert, 82 F.R.D. 723, 727 (S.D.N.Y. 1979) (citing Grammenos v. Lemos,
457 F.2d 1067, 1070 (2d Cir. 1972)).
Additionally, “[a] document filed pro se is to be liberally construed and a pro se
complaint, however inartfully pleaded, must be held to less stringent standards than formal
pleadings drafted by lawyers.”  Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citation omitted)
(internal quotations omitted).  In particular, “the pleadings of a pro se plaintiff . . . should be
interpreted to raise the strongest arguments that they suggest.”  Graham v. Henderson, 89 F.3d
75, 79 (2d Cir. 1996) (internal quotations omitted).  Pro se status, however, “does not exempt a

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party from compliance with relevant rules of procedural and substantive law.”  Triestman v. Fed.
Bureau of Prisons, 470 F.3d 471, 477 (2d Cir. 2006) (citations omitted).
DISCUSSION
Although Watson does not explicitly move to dismiss the complaint on the basis that the
SEC’s Complaint fails to state a claim, he notes the SEC’s purported withholding of exculpatory
evidence against him, including the existence of a marketing contract and non-disclosure
agreement (NDA) between Lindsay’s firm and LTEA.  The Court construes this as an attempt by
Watson to raise factual issues at the motion to dismiss stage, thereby challenging the sufficiency
of the SEC’s claims against him.  As the Court explains, these arguments are unripe at this
juncture.
The remaining motions can be decided by the close application of regulations and
procedural rules, all of which bear heavily on this action.  Watson’s motion to dismiss the
Complaint contends that the SEC’s attempts at service of the Complaint were so insufficient that
they violated his due process rights.  But the record shows that the SEC’s service conformed
with Federal Rule of Civil Procedure 4.  With respect to its motion to dismiss Watson’s
Amended Counterclaim, the SEC posits that any counterclaims in this action are precluded by
Section 21(g) of the Exchange Act, which bars the consolidation of a defendant’s counterclaims
in an SEC proceeding unless the SEC consents to their consolidation.  The Court concludes that
the SEC’s action must proceed as against Watson and that Watson’s Amended Counterclaim
against the SEC in these proceedings must necessarily be dismissed.
I. Watson’s Arguments as to the SEC’s Evidence Against Him Are Irrelevant in
Resolving the Motions

Watson effectively asks the Court to consider the evidence in this case and find that the
SEC improperly brought the claims against him, but this request is premature.  The Court’s job

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right now is to determine whether the SEC’s Complaint is sufficiently pleaded as a matter of law
and it cannot “weigh the evidence that might be presented at trial” when resolving this motion.
See Goldman, 754 F.2d at 1067.  Indeed, in connection with a prior motion to dismiss the
Complaint filed by Defendant Guguiere in this action, the Court has previously concluded that
the SEC sufficiently alleged that Watson engaged in insider tipping.  See SEC v. Watson, 659 F.
Supp. 3d 409, 416–17 (S.D.N.Y. 2023).  In resolving that motion, the Court considered only the
sufficiency of the SEC’s pleadings.  The same pleadings are in question here and the Court
concludes once again that they are sufficient.
The Court nonetheless addresses the question of alleged exculpatory evidence.  Watson
notes in his Amended Counterclaim that the SEC failed to disclose potentially exculpatory
evidence to the Court in its Complaint against him, which he argues runs afoul of the Supreme
Court’s decision in Brady v. Maryland, 373 U.S. 83 (1963).  But this invocation is misapplied.
The Brady Rule requires the disclosure to a criminal defendant of any exculpatory evidence
possessed by the government, but Brady is inapplicable where, as here, the SEC’s claims are
brought in a civil suit brought by the SEC in federal court.  See SEC v. Pentagon Cap. Mgmt.
PLC, No. 08-CV-3324, 2010 WL 4608681, at *1 (S.D.N.Y. Nov. 12, 2010) (citation omitted)
(“In this district, the application of Brady to SEC enforcement actions has been flatly rejected.”).
It is possible that Watson may gather evidence in discovery to defeat the claims against him, but
the Court cannot render any factual determinations at this stage.  See id. at *2. (“In light of the
right to conduct extensive pretrial discovery afforded [to] defendants in SEC civil enforcement
actions, and the extensive discovery that Defendants have been able to conduct in this
proceeding, there is no basis for extending Brady or Giglio to this proceeding.”).

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This is true even in light of a document submitted by Watson, which he purports to be a
marketing contract between Chedwick Marketing (a firm controlled by Defendant Lindsay) and
LTEA, and which incorporates an NDA clause.  See ECF No. 104-2.  Watson argues that this
evidence shows that Lindsay was authorized to receive confidential information, thereby
contradicting the SEC’s allegations against Watson.  He also maintains that the SEC must have
been aware of this contract given the discovery in this case thus far.  At this stage, however, a
court may only consider extrinsic documents if they are “incorporated by reference” into the
complaint or “the complaint ‘relies heavily upon [their] terms and effect,’ which makes the
document[s] ‘integral’ to the complaint.”  DeLuca v. AccessIT Group, Inc., 695 F. Supp. 2d 54,
59–60 (S.D.N.Y. 2010) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.
2002)).  The Complaint does not rely upon or even reference the contract between Chedwick
Marketing and LTEA.  More importantly, while it remains to be seen whether Plaintiff can prove
his claims, “courts cannot resolve factual disputes when deciding a 12(b)(6) motion” and the
Court therefore cannot dismiss the Complaint on this basis.  See Cyber Apps World, Inc. v. EMA
Fin., LLC, 645 F. Supp. 3d 281, 289 (S.D.N.Y. 2022).
II. The SEC’s Complaint Survives Because There Is a Showing of Sufficient Process
on Watson

Watson also argues that the SEC’s Complaint against him should be dismissed because
he was never properly served.  The Court construes Watson’s defense against the SEC’s
Complaint as a motion asserting insufficient service of process under Federal Rule of Civil
Procedure 12(b)(5).  “In deciding a Rule 12(b)(5) motion, a Court must look to Rule 4, which
governs the content, issuance, and service of a summons.”  DeLuca, 695 F. Supp. 2d at 64 (citing
Fed. R. Civ. P. 4).  Here, where a foreign party is to be served, Federal Rule of Civil Procedure
4(f) governs the methods of service:

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(1) by any internationally agreed means of service that is reasonably calculated to
give notice, such as those authorized by the Hague Convention on the Service
Abroad of Judicial and Extrajudicial Documents;

(2) if there is no internationally agreed means, or if an international agreement
allows but does not specify other means, by a method that is reasonably calculated
to give notice...; or

(3) by other means not prohibited by international agreement, as the court orders.

Fed. R. Civ. P. 4(f).  “When a defendant challenges service of process, ‘the burden of proof is on
the plaintiff to show the adequacy of service.’”  DeLuca, 695 F. Supp. 2d at 64.  Unlike the
analysis in the previous section, the Court can—indeed, must—“look to matters outside the
complaint” to resolve questions of improper service.  Koulkina v. City of New York, 559 F. Supp.
2d 300, 311 (S.D.N.Y. 2008).  Moreover, the method of service must “comport[] with
constitutional notions of due process.”  SEC v. Anticevic, No. 05-CV-6991, 2009 WL 361739, at
*3 (S.D.N.Y. Feb. 13, 2009).
Courts in this district consider may order alternative service under Rule 4(f)(3) upon a
plaintiff’s showing that “‘[(1) it] has reasonably attempted to effectuate service on defendant,
and (2) . . . that the circumstances are such that the court’s intervention is necessary.’”
Convergen Energy LLC v. Brooks, No. 20-CV-3746, 2020 WL 4038353, at *4 (S.D.N.Y. July
17, 2020) (quoting Baliga ex rel. Link Motion Inc. v. Link Motion Inc., 385 F. Supp. 3d 212, 220
(S.D.N.Y. 2019)).  However, this does not require that a plaintiff exhaust any other efforts
prescribed by Rule 4(f).  See Advanced Aerofoil Techs., AG v. Todaro, No.-CV-9505, 2012 WL
299959, at *1 (S.D.N.Y. Jan. 31, 2012) (“Service under subsection (3) is neither a last resort nor
extraordinary relief.  It is merely one means among several which enables service of process on
an international defendant.”) (internal quotations omitted).

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Here, the SEC met its burden of showing that it reasonably attempted to serve Watson by
other means and that such attempts—made over the course of a few years—were so unavailing
that the Court’s involvement was necessary.  The SEC pointed to its attempts to find Watson’s
present address through open-source information, which yielded a possible address in Ibiza,
Spain.  What followed was a request by the SEC to the Spanish Central Authority to serve
Watson at this address, which resulted in two unsuccessful attempts to serve Watson at that
address.  The SEC also communicated with Watson’s purported counsel, who stated that they
were not authorized to accept service on Watson’s behalf.
Watson objects to the reasonableness of these efforts, but his objections are unavailing.
According to Watson, the SEC had various pieces of contact information that they could have
used to contact him, and he also argues that the SEC failed to verify his address.  He concludes
that due to these shortcomings, the service fails to meet the due process standards pursuant to the
Hague Convention.  But the SEC was not required to exhaust all efforts before seeking
alternative service.  See In re BRF S.A. Secs. Litig., No. 18-CV-2213, 2019 WL 257971, at *2
(S.D.N.Y. Jan. 18, 2019) (“However, those considerations guide the exercise of discretion, and
are not akin to an exhaustion requirement.”).  Here, the Court found that alternative service was
necessary and Watson asserts no grounds warranting the Court’s reconsideration of its position.
See Hardin v. Tron Found., No. 20-CV-2804, 2020 WL 5236941, at *1, 2 (S.D.N.Y. Sept. 1,
2020) (finding that plaintiff made reasonable attempts to effect service after they requested
service from the Chinese Central Authority and received no response, thereby requiring the
district court’s intervention).
Watson also contends that service by publication fails to meet the standards for due
process set forth in the Hague Convention, but this argument also falls short.  First, the Hague

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Convention does not prohibit service by publication.  Moreover, due process requires that service
be “reasonably calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.”  Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).  It is reasonably calculated that
Watson, who has significant business experience, read The International New York Times.  In
SEC v. Tome, the Second Circuit affirmed service by publication in The International Herald
Tribune (the same publication now published as The International New York Times
2
) upon a
finding that the publication was “widely read by the international financial community in
Europe.”  833 F.2d 1086, 1091, 1094 (2d. Cir. 1987).
Moreover, Courts have also found that where a defendant has actual knowledge of the
suit against them and the defendant is served by publication, due process is met.  See Tome, 833
F.2d at 1094 (concluding that defendants—who were aware of the SEC’s investigation—had an
opportunity to be heard but ignored the action); see also SEC v. Shehyn, No. 04-CV-2003, 2008
WL 6150322, at *4 (S.D.N.Y. Nov. 26, 2008) (finding service by publication permissible where
service through the Hague Convention in Spain was unsuccessful and where the record indicated
the defendant’s apparent awareness of the lawsuits, as well as his efforts to resist service).  The
Court similarly finds that Watson’s knowledge of the SEC’s lawsuit—when viewed in
conjunction with the valid alternative service already ordered by the Court—means that
Watson’s due process rights were not violated and that he was properly served in this action.
The Court therefore concludes that the Complaint survives as against Watson.

2
 See Christine Haugney & Eric Pfanner, At 125 Years, a Rechristening for The Herald Tribune, N.Y. Times, Feb.
25, 2013), https://www.nytimes.com/2013/02/26/business/media/herald-tribune-to-be-renamed-the-international-
new-york-times.html.

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III. Watson’s Amended Counterclaim Fails Because it Is Precluded by Section 21(g)
of the Exchange Act

The Court now considers whether Watson’s Amended Counterclaim can survive.  Section
21(g) of the Exchange Act states:
Notwithstanding the provisions of section 1407(a) of title 28, or any other
provision of law, no action for equitable relief instituted by the Commission
pursuant to the securities laws shall be consolidated or coordinated with other
actions not brought by the Commission, even though such other actions may
involve common questions of fact, unless such consolidation is consented to by
the Commission.

15 U.S.C. § 78u(g)).  “[T]his provision bars ‘claims for damages by non-SEC parties . . .
(without the SEC’s consent) in the enforcement action to which they purport to relate.’”  SEC v.
Ripple Labs, Inc., No. 20-CV-10832, 2021 WL 4555352, at *2 (S.D.N.Y. Oct. 4, 2021) (citing
SEC v. Caledonian Bank, Ltd., 317 F.R.D. 358, 367–68 (S.D.N.Y. 2016)).  The moving papers
and the record indicate that the SEC has not consented to the integration of Watson’s Amended
Counterclaim in this suit.  See ECF No. 102 at 22 (“Section 21(g) thus functions as an absolute
bar against the consolidation of counterclaims in Commission enforcement proceedings when the
Commission does not consent to such consolidation, as it does not here.”) (emphasis added).
Watson construes the SEC’s reliance on Section 21(g) as a “shield,” one which is
improper and misplaced because the “SEC’s actions in this case clearly demonstrate selective
enforcement and misconduct.”  See ECF No. 105-1 at 1, 4.  Watson concedes that the purpose of
Section 21(g) is to prevent delays in enforcement actions, but he argues that the SEC itself has
protracted the litigation given its “failure to properly serve [him], their lack of communication,
and their withholding of exculpatory evidence[.]”  See id. at 4.  Watson also notes that the SEC
stated to him that “nobody, not you or anyone, is by law allowed to counter-sue the SEC[,]”
which he construes as “an unjustified and overly broad interpretation of the law, aimed at

15
intimidating Watson and discouraging him from pursuing his legal rights.”  ECF No. 98 ¶ 42.
However, the Court’s obligation in deciding the SEC’s motion to dismiss Watson’s Amended
Counterclaim is not to opine upon the wisdom of Rule 21 (g) or determine whether discovery
may reveal favorable evidence to Watson.  Rather, the Court must decide in the first instance
whether Watson can include his Amended Counterclaim in this proceeding.
To show that he can raise his counterclaims in this action, Watson cites in his opposition
a case, SEC v. Sprecher, which purportedly stands for the proposition that “counterclaims should
be allowed where there are serious due process violations.”  Id.  Watson does not provide a full
citation in his opposition, but cites SEC v. Sprecher, 594 F.2d 317 (2d Cir. 1979) in his Amended
Counterclaim for the proposition that “in exceptional circumstances, counterclaims against the
SEC might be permitted where they are ‘inextricably intertwined’ with the SEC’s claim.”  ECF
No. 98 ¶ 13.  The Court can neither identify the quoted language nor find any support for
Watson’s position, nor even a discussion of Section 21(g) in this case.  To the extent Watson
may be referring to an identically titled case that in fact deals with Section 21(g), SEC v.
Sprecher, No. 92-CV-2860, 1993 WL 544306 (D.D.C. Dec. 16, 1993), the case is equally
unhelpful.  In that case, the court granted the SEC’s motion to dismiss the defendant’s
counterclaim precisely because Section 21(g) barred it and, more importantly, the court did not
outline any exceptions to this prohibition.  Sprecher, 1993 WL 544306, at *3.  Similarly here,
where the SEC has not consented to the integration of Watson’s counterclaims, Watson’s
Amended Counterclaim must be dismissed.  Moreover, because any further amendment would
be futile, Watson is denied leave to file any further counterclaims in this action.
CONCLUSION
For the reasons stated above, Watson’s motion to dismiss the Complaint is DENIED with
prejudice and the SEC’s motion to dismiss the Amended Counterclaim is GRANTED with

16
prejudice.  Because Watson’s motion to dismiss the Complaint was a pre-answer motion, Watson
is ORDERED to file an Answer to the SEC’s Complaint twenty-one (21) days following the
entry of this order and opinion.
In a separate order, the Court will refer this case to Magistrate Judge Valerie Figueredo
for all general pretrial and settlement purposes.  The Clerk of Court is respectfully directed to
terminate the SEC’s pending motion docketed at ECF No. 100.
SO ORDERED.
Dated:          June 30, 2025
New York, NY      _______________________________
     ANDREW L. CARTER, JR.
United States District Judge

1 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION,  

Plaintiff, 

-against-

ERIC J. WATSON, OLIVER-BARRET LINDSAY, 
and GANNON GIGUIERE, 

Defendants. 

21-cv-5923 (ALC)

OPINION & ORDER 

ANDREW L. CARTER JR., United States District Judge: 

The Securities and Exchange Commission (“SEC”) alleges securities violations by Eric J. 

Watson in connection with his role as a corporate insider and controlling shareholder of Long 

Island Iced Tea Corp. (now known as Long Blockchain Corp.) (“LTEA”).  Following the SEC’s 

numerous attempts to serve Watson, Watson eventually appeared in this action pro se.  Watson 

now moves to dismiss the SEC’s Complaint, contending that the SEC’s claims are unfounded 

and that service was insufficient.  Watson also brings forth an Amended Counterclaim against 

the SEC.  The SEC opposes Watson’s motion and moves to dismiss Watson’s Amended 

Counterclaim. 

The Court addresses both pending motions in this opinion.  For the reasons set forth 

below, Watson’s motion to dismiss the SEC’s Complaint is DENIED with prejudice, and the 

SEC’s motion to dismiss Watson’s Amended Counterclaim is GRANTED with prejudice. 

BACKGROUND 

I. Factual Allegations

On July 9, 2021, the SEC filed a Complaint alleging that Watson engaged in an insider 

trading scheme in late 2017.  See ECF No. 1 (“Complaint”).  As a corporate insider and 

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controlling shareholder of LTEA, Watson allegedly tipped a business associate, Oliver-Barret 

Lindsay, with material nonpublic information about LTEA’s forthcoming announcement that it 

would significantly pivot its business from soft drink manufacturing to blockchain technology.1  

Id. ¶ 1.  The SEC alleges that Watson sought help from Lindsay in promoting LTEA and that 

Lindsey served as a conduit between Watson and Gannon Giguiere—a stock promoter who 

owned a stock promotion website—who agreed to use his website to promote LTEA.  See id. ¶¶  

32–37.  As part of these efforts, Watson shared with Lindsay nonpublic draft announcements 

about LTEA’s pivot, and Lindsay, in turn, provided the information to Giguiere.  See id. ¶¶ 67–

74.  

On December 20, 2017, Giguiere purchased 35,000 LTEA shares at an average cost of 

$2.42 per share.  Id. ¶ 78.  On December 21, 2017, LTEA publicly announced its pivot to the 

blockchain business.  Id. ¶ 79.  Consequently, LTEA’s trading volume and share price 

skyrocketed and closed that day at $6.91 per share.  Id. ¶ 80.  Less than two hours after the 

announcement, Giguiere sold all the LTEA shares he purchased the previous day, purportedly 

realizing $162,500 in illicit profits.  Id. ¶ 81.  The SEC alleges that Watson violated Section 

10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and 17 

C.F.R. § 240.10b-5.  Id. ¶ 6. 

II. Service on Watson 

Watson is a New Zealand citizen and was believed to have been residing in London, 

United Kingdom, when the Complaint was filed.  Id. ¶ 13.  On July 16, 2021—a week after the 

Complaint was filed—an article in The New Zealand Herald quoted Watson as saying, in part, 

 
1 The Complaint also named Lindsay and another defendant, Gannon Giguiere, who were both alleged to have been 
part of the insider trading scheme.  On December 28, 2023, and September 20, 2024, the Court entered final consent 
judgments against Giguiere and Lindsay, respectively, resolving all the SEC’s claims against them.  See ECF Nos. 
73, 99.  Watson is the only remaining defendant in this case.  

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“Yes, it appears the SEC has filed a complaint . . . .”  ECF No. 27 ¶ 10, Ex. H, at 2.  On July 26, 

2021, an individual named Mark Winters emailed the SEC claiming to represent Watson and 

noting that Watson resided in Europe.  ECF No. 27 ¶ 12, Ex. J.  On July 29, 2021, counsel for 

the SEC called Winters, who informed the SEC that Watson was aware of the Complaint and 

requested evidence of the charges against Watson.  ECF No. 27 ¶ 13.  On August 12, 2021, after 

SEC counsel asked Winters whether Watson would authorize Winters to accept service of the 

Complaint on Watson, Winters informed the SEC that Watson would not authorize him to accept 

service on his behalf and again iterated Watson’s request for evidence against him.  ECF No. 27 

¶ 13, Ex. K.  

On August 19, 2021, after finding an article in The New Zealand Herald regarding the 

liquidation of a company associated with Watson, SEC counsel contacted a court-appointed 

liquidator in New Zealand and asked for information as to Watson’s whereabouts.  ECF No. 27 ¶ 

3, Ex. C.  The liquidator provided an address for Watson in Ibiza, Spain.  Id.  In addition to this, 

the SEC also found another article published on April 17, 2021 by The New Zealand Herald 

which indicated that Watson was residing in Ibiza.  ECF No. 27 ¶ 6, Ex. E. 

On October 18, 2021, the SEC notified the Court that Watson was apparently residing in 

Spain.  ECF No. 12.  The SEC advised the Court that, on September 9, 2021, it had begun the 

process of serving Watson pursuant to the Hague Convention by sending its request to Spain’s 

Central Authority and providing it with Watson’s purported address in Ibiza.  Id.; see also ECF 

No. 27 ¶ 4.  On February 2, 2022, the SEC’s New York office received notice from Spain’s 

Central Authority that it had made two unsuccessful attempts to serve Watson at the address 

provided.  ECF No. 27 ¶ 5.  The SEC also contacted three attorneys who represented Watson in a 

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suit against him in the United Kingdom, but two of the attorneys disclaimed representation of 

Watson and the other attorney did not respond.  ECF No. 27 ¶ 9, Ex. I. 

On April 25, 2022, the SEC requested that the Court issue an order permitting service on 

Watson by publication.  ECF Nos. 26–28.  On October 5, 2022, the Court granted the SEC’s 

motion to serve Watson by publication and directed the SEC to publish a notice of the action in 

The International New York Times once a week for four consecutive weeks.  ECF No. 42.  The 

Court also ordered Watson to respond to the Complaint within twenty-one days from the date of 

the last publication.  Id.  The SEC published the notice in The International New York Times on 

October 28, November 3, November 9, and November 14, 2022.  ECF No. 45, Ex. A.  Watson 

failed to timely respond to the Complaint by December 5, 2022 (twenty-one days after the last 

publication in The International New York Times) and, on January 9, 2023 the SEC filed its 

Certificate of Service on Watson.  See ECF No. 45.  On February 3, 2023, the SEC filed a 

request for a Certificate of Default against Watson, and the Clerk of Court issued a Certificate of 

Default against Watson that same day.  ECF Nos. 46, 48.   

Following the issuance of the Certificate of Default and before Watson’s appearance in 

this suit, two law firms contacted the SEC, indicating that they represented Watson and were 

interested in settlement discussions.  See ECF No. 101 ¶ 5–16.  However, no law firm or counsel 

for Watson ever appeared in this case. 

III. Watson’s Appearance 

On June 14, 2024, an attorney for Watson informed the SEC that Watson would represent 

himself in the matter thereafter.  Id. ¶ 16.  That same day, Watson emailed SEC counsel and 

advised that he would be proceeding pro se in this action.  Id. ¶ 17.  On June 18, 2024, the 

parties discussed a possible settlement, but no agreement was reached.  Id. ¶ 19.  That same day, 

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Watson sent an email to [email protected] asking that SEC counsel provide the Court with 

Watson’s motion to set aside the entry of default, contending mainly that he was improperly 

served.  Id. ¶ 20; see also ECF No. 79, Ex. A.  The SEC consented to Watson’s application and 

his being provided an opportunity to answer or otherwise respond to the Complaint.  See ECF 

No. 79.  

IV. Recent Procedural History 

On July 1, 2024, Watson filed a Counterclaim, requesting dismissal for improper service, 

as well as monetary damages for violations for reputational damage and losses incurred as a 

result of the SEC’s claims against him, which he alleges are unfounded.  See ECF No. 82.  On 

August 13, 2024, the SEC filed a letter requesting a premotion conference ahead of its 

anticipated motion to dismiss Watson’s Counterclaim, primarily on the basis that Section 21(g) 

of the Exchange Act bars the consolidation of counterclaims in SEC enforcement actions when 

the SEC does not consent.  See ECF No. 90.  On August 26, 2024, the Court granted Watson 

leave to amend his Counterclaim by September 20, 2024 and also set forth a briefing schedule 

for (1) the SEC’s motion to dismiss Watson’s Amended Counterclaim and (2) Watson’s motion 

to dismiss the SEC’s Complaint.  ECF No. 94.  On September 10, 2024, Watson emailed the 

motion to dismiss the SEC’s Complaint and the Amended Counterclaim to the Court in a single 

document that was docketed on September 13, 2024.  ECF No. 98.  The Amended Counterclaim 

consisted of four claims alleging that the SEC violated his due process rights, negligently 

investigated and prosecuted Watson, abused process, and violated the Federal Tort Claims Act.  

Id. 

On October 11, 2024, the SEC filed its motion to dismiss the Amended Counterclaim as 

well as a declaration and memorandum of law in support of its motion to dismiss the Amended 

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Counterclaim and its opposition to Watson’s motion to dismiss the Complaint.  ECF Nos. 100–

02.  On October 31, 2024, Watson filed his opposition to the SEC’s motion to dismiss the 

Amended Counterclaim and his reply in further support of his motion to dismiss the SEC’s 

Complaint.  ECF Nos. 104-1 (sealed), 105-1 (redacted).  On November 15, 2024, the SEC filed 

its reply in further support of its motion to dismiss the Amended Counterclaim.  ECF No. 108.  

On November 18, 2024, Watson submitted a proposed surreply in opposition to the SEC’s 

motion to dismiss the Amended Counterclaim and requested leave of Court to file the surreply.  

ECF No. 110-1.  On November 20, 2024, the Court accepted Watson’s proposed surreply.  ECF 

No. 111. 

LEGAL STANDARD 

In deciding a motion to dismiss a complaint under Federal Rule of Civil Procedure 

12(b)(6), the allegations in the complaint are accepted as true, and all reasonable inferences are 

drawn in the plaintiff’s favor.  McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 

2007); SEC v. Lyon, 529 F.Supp.2d 444, 449 (S.D.N.Y. 2008).  To survive a motion to dismiss, a 

plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.”  Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 679 

(2009) (“[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.”) 

For the pleadings to state a plausible claim to relief, a complaint’s “[f]actual allegations must be 

enough to raise a right to relief above the speculative level.”  Twombly, 550 U.S. at 555.  The 

Court’s function in resolving a motion to dismiss is not to “weigh the evidence that might be 

presented at trial but merely to determine whether the complaint itself is legally sufficient.” 

Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985).  Moreover, a court's “consideration is 

limited to facts stated on the face of the complaint, in documents appended to the complaint or 

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incorporated in the complaint by reference, and to matters of which judicial notice may be 

taken.”  McKenzie v. Gibson, No. 07 -CV- 6714, 2008 WL 3914837, at *2 (S.D.N.Y. Aug. 25, 

2008) (quoting Allen v. WestPoint–Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991)). 

Federal Rule of Civil Procedure 12(b)(5) permits a party to move for dismissal of a 

complaint based on inadequate service of process.  Fed. R. Civ. P. 12(b)(5).  “In considering a 

Rule 12(b)(5) motion to dismiss for insufficient service of process, a court must look[ ] to 

matters outside the complaint to determine whether it has jurisdiction.”  Cassano v. Altshuler, 

186 F.Supp.3d 318, 320 (S.D.N.Y. 2016).  “Once a defendant challenges the sufficiency of 

service of process, the burden of proof is on the plaintiff to show the adequacy of service.”  

Vantone Grp. Ltd. Liab. Co. v. Yangpu Ngt Indus. Co., No. 13-CV-7639, 2016 WL 3926449, at 

*2 (S.D.N.Y. July 15, 2016) (citation omitted); accord Khan v. Khan, 360 Fed. Appx. 202, 203 

(2d Cir. 2010) (summary order).  To resolve a motion made under Rule 12(b)(5), the Court must 

“look to matters outside the complaint.”  Koulkina v. City of New York, 559 F. Supp. 2d 300, 311 

(S.D.N.Y. 2008).  Even if a district court finds that a defendant was not properly served, such a 

finding “does not [ ] require dismissal of [the] action, since . . . proper service may still be 

obtained.”  SEC v. Gilbert, 82 F.R.D. 723, 727 (S.D.N.Y. 1979) (citing Grammenos v. Lemos, 

457 F.2d 1067, 1070 (2d Cir. 1972)). 

Additionally, “[a] document filed pro se is to be liberally construed and a pro se 

complaint, however inartfully pleaded, must be held to less stringent standards than formal 

pleadings drafted by lawyers.”  Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citation omitted) 

(internal quotations omitted).  In particular, “the pleadings of a pro se plaintiff . . . should be 

interpreted to raise the strongest arguments that they suggest.”  Graham v. Henderson, 89 F.3d 

75, 79 (2d Cir. 1996) (internal quotations omitted).  Pro se status, however, “does not exempt a 

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party from compliance with relevant rules of procedural and substantive law.”  Triestman v. Fed. 

Bureau of Prisons, 470 F.3d 471, 477 (2d Cir. 2006) (citations omitted).   

DISCUSSION 

Although Watson does not explicitly move to dismiss the complaint on the basis that the 

SEC’s Complaint fails to state a claim, he notes the SEC’s purported withholding of exculpatory 

evidence against him, including the existence of a marketing contract and non-disclosure 

agreement (NDA) between Lindsay’s firm and LTEA.  The Court construes this as an attempt by 

Watson to raise factual issues at the motion to dismiss stage, thereby challenging the sufficiency 

of the SEC’s claims against him.  As the Court explains, these arguments are unripe at this 

juncture. 

The remaining motions can be decided by the close application of regulations and 

procedural rules, all of which bear heavily on this action.  Watson’s motion to dismiss the 

Complaint contends that the SEC’s attempts at service of the Complaint were so insufficient that 

they violated his due process rights.  But the record shows that the SEC’s service conformed 

with Federal Rule of Civil Procedure 4.  With respect to its motion to dismiss Watson’s 

Amended Counterclaim, the SEC posits that any counterclaims in this action are precluded by 

Section 21(g) of the Exchange Act, which bars the consolidation of a defendant’s counterclaims 

in an SEC proceeding unless the SEC consents to their consolidation.  The Court concludes that 

the SEC’s action must proceed as against Watson and that Watson’s Amended Counterclaim 

against the SEC in these proceedings must necessarily be dismissed. 

I. Watson’s Arguments as to the SEC’s Evidence Against Him Are Irrelevant in 
Resolving the Motions 
 

Watson effectively asks the Court to consider the evidence in this case and find that the 

SEC improperly brought the claims against him, but this request is premature.  The Court’s job 

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right now is to determine whether the SEC’s Complaint is sufficiently pleaded as a matter of law 

and it cannot “weigh the evidence that might be presented at trial” when resolving this motion.  

See Goldman, 754 F.2d at 1067.  Indeed, in connection with a prior motion to dismiss the 

Complaint filed by Defendant Guguiere in this action, the Court has previously concluded that 

the SEC sufficiently alleged that Watson engaged in insider tipping.  See SEC v. Watson, 659 F. 

Supp. 3d 409, 416–17 (S.D.N.Y. 2023).  In resolving that motion, the Court considered only the 

sufficiency of the SEC’s pleadings.  The same pleadings are in question here and the Court 

concludes once again that they are sufficient. 

The Court nonetheless addresses the question of alleged exculpatory evidence.  Watson 

notes in his Amended Counterclaim that the SEC failed to disclose potentially exculpatory 

evidence to the Court in its Complaint against him, which he argues runs afoul of the Supreme 

Court’s decision in Brady v. Maryland, 373 U.S. 83 (1963).  But this invocation is misapplied.  

The Brady Rule requires the disclosure to a criminal defendant of any exculpatory evidence 

possessed by the government, but Brady is inapplicable where, as here, the SEC’s claims are 

brought in a civil suit brought by the SEC in federal court.  See SEC v. Pentagon Cap. Mgmt. 

PLC, No. 08-CV-3324, 2010 WL 4608681, at *1 (S.D.N.Y. Nov. 12, 2010) (citation omitted) 

(“In this district, the application of Brady to SEC enforcement actions has been flatly rejected.”).  

It is possible that Watson may gather evidence in discovery to defeat the claims against him, but 

the Court cannot render any factual determinations at this stage.  See id. at *2. (“In light of the 

right to conduct extensive pretrial discovery afforded [to] defendants in SEC civil enforcement 

actions, and the extensive discovery that Defendants have been able to conduct in this 

proceeding, there is no basis for extending Brady or Giglio to this proceeding.”). 

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This is true even in light of a document submitted by Watson, which he purports to be a 

marketing contract between Chedwick Marketing (a firm controlled by Defendant Lindsay) and 

LTEA, and which incorporates an NDA clause.  See ECF No. 104-2.  Watson argues that this 

evidence shows that Lindsay was authorized to receive confidential information, thereby 

contradicting the SEC’s allegations against Watson.  He also maintains that the SEC must have 

been aware of this contract given the discovery in this case thus far.  At this stage, however, a 

court may only consider extrinsic documents if they are “incorporated by reference” into the 

complaint or “the complaint ‘relies heavily upon [their] terms and effect,’ which makes the 

document[s] ‘integral’ to the complaint.”  DeLuca v. AccessIT Group, Inc., 695 F. Supp. 2d 54, 

59–60 (S.D.N.Y. 2010) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 

2002)).  The Complaint does not rely upon or even reference the contract between Chedwick 

Marketing and LTEA.  More importantly, while it remains to be seen whether Plaintiff can prove 

his claims, “courts cannot resolve factual disputes when deciding a 12(b)(6) motion” and the 

Court therefore cannot dismiss the Complaint on this basis.  See Cyber Apps World, Inc. v. EMA 

Fin., LLC, 645 F. Supp. 3d 281, 289 (S.D.N.Y. 2022).   

II. The SEC’s Complaint Survives Because There Is a Showing of Sufficient Process 
on Watson 
 

Watson also argues that the SEC’s Complaint against him should be dismissed because 

he was never properly served.  The Court construes Watson’s defense against the SEC’s 

Complaint as a motion asserting insufficient service of process under Federal Rule of Civil 

Procedure 12(b)(5).  “In deciding a Rule 12(b)(5) motion, a Court must look to Rule 4, which 

governs the content, issuance, and service of a summons.”  DeLuca, 695 F. Supp. 2d at 64 (citing 

Fed. R. Civ. P. 4).  Here, where a foreign party is to be served, Federal Rule of Civil Procedure 

4(f) governs the methods of service:   

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(1) by any internationally agreed means of service that is reasonably calculated to 
give notice, such as those authorized by the Hague Convention on the Service 
Abroad of Judicial and Extrajudicial Documents; 
 
(2) if there is no internationally agreed means, or if an international agreement 
allows but does not specify other means, by a method that is reasonably calculated 
to give notice…; or 
 
(3) by other means not prohibited by international agreement, as the court orders. 

 
Fed. R. Civ. P. 4(f).  “When a defendant challenges service of process, ‘the burden of proof is on 

the plaintiff to show the adequacy of service.’”  DeLuca, 695 F. Supp. 2d at 64.  Unlike the 

analysis in the previous section, the Court can—indeed, must—“look to matters outside the 

complaint” to resolve questions of improper service.  Koulkina v. City of New York, 559 F. Supp. 

2d 300, 311 (S.D.N.Y. 2008).  Moreover, the method of service must “comport[] with 

constitutional notions of due process.”  SEC v. Anticevic, No. 05-CV-6991, 2009 WL 361739, at 

*3 (S.D.N.Y. Feb. 13, 2009).   

Courts in this district consider may order alternative service under Rule 4(f)(3) upon a 

plaintiff’s showing that “‘[(1) it] has reasonably attempted to effectuate service on defendant, 

and (2) . . . that the circumstances are such that the court’s intervention is necessary.’”  

Convergen Energy LLC v. Brooks, No. 20-CV-3746, 2020 WL 4038353, at *4 (S.D.N.Y. July 

17, 2020) (quoting Baliga ex rel. Link Motion Inc. v. Link Motion Inc., 385 F. Supp. 3d 212, 220 

(S.D.N.Y. 2019)).  However, this does not require that a plaintiff exhaust any other efforts 

prescribed by Rule 4(f).  See Advanced Aerofoil Techs., AG v. Todaro, No.-CV-9505, 2012 WL 

299959, at *1 (S.D.N.Y. Jan. 31, 2012) (“Service under subsection (3) is neither a last resort nor 

extraordinary relief.  It is merely one means among several which enables service of process on 

an international defendant.”) (internal quotations omitted). 

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Here, the SEC met its burden of showing that it reasonably attempted to serve Watson by 

other means and that such attempts—made over the course of a few years—were so unavailing 

that the Court’s involvement was necessary.  The SEC pointed to its attempts to find Watson’s 

present address through open-source information, which yielded a possible address in Ibiza, 

Spain.  What followed was a request by the SEC to the Spanish Central Authority to serve 

Watson at this address, which resulted in two unsuccessful attempts to serve Watson at that 

address.  The SEC also communicated with Watson’s purported counsel, who stated that they 

were not authorized to accept service on Watson’s behalf.   

Watson objects to the reasonableness of these efforts, but his objections are unavailing.  

According to Watson, the SEC had various pieces of contact information that they could have 

used to contact him, and he also argues that the SEC failed to verify his address.  He concludes 

that due to these shortcomings, the service fails to meet the due process standards pursuant to the 

Hague Convention.  But the SEC was not required to exhaust all efforts before seeking 

alternative service.  See In re BRF S.A. Secs. Litig., No. 18-CV-2213, 2019 WL 257971, at *2 

(S.D.N.Y. Jan. 18, 2019) (“However, those considerations guide the exercise of discretion, and 

are not akin to an exhaustion requirement.”).  Here, the Court found that alternative service was 

necessary and Watson asserts no grounds warranting the Court’s reconsideration of its position.  

See Hardin v. Tron Found., No. 20-CV-2804, 2020 WL 5236941, at *1, 2 (S.D.N.Y. Sept. 1, 

2020) (finding that plaintiff made reasonable attempts to effect service after they requested 

service from the Chinese Central Authority and received no response, thereby requiring the 

district court’s intervention).   

Watson also contends that service by publication fails to meet the standards for due 

process set forth in the Hague Convention, but this argument also falls short.  First, the Hague 

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Convention does not prohibit service by publication.  Moreover, due process requires that service 

be “reasonably calculated, under all the circumstances, to apprise interested parties of the 

pendency of the action and afford them an opportunity to present their objections.”  Mullane v. 

Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).  It is reasonably calculated that 

Watson, who has significant business experience, read The International New York Times.  In 

SEC v. Tome, the Second Circuit affirmed service by publication in The International Herald 

Tribune (the same publication now published as The International New York Times2) upon a 

finding that the publication was “widely read by the international financial community in 

Europe.”  833 F.2d 1086, 1091, 1094 (2d. Cir. 1987).   

Moreover, Courts have also found that where a defendant has actual knowledge of the 

suit against them and the defendant is served by publication, due process is met.  See Tome, 833 

F.2d at 1094 (concluding that defendants—who were aware of the SEC’s investigation—had an 

opportunity to be heard but ignored the action); see also SEC v. Shehyn, No. 04-CV-2003, 2008 

WL 6150322, at *4 (S.D.N.Y. Nov. 26, 2008) (finding service by publication permissible where 

service through the Hague Convention in Spain was unsuccessful and where the record indicated 

the defendant’s apparent awareness of the lawsuits, as well as his efforts to resist service).  The 

Court similarly finds that Watson’s knowledge of the SEC’s lawsuit—when viewed in 

conjunction with the valid alternative service already ordered by the Court—means that 

Watson’s due process rights were not violated and that he was properly served in this action.  

The Court therefore concludes that the Complaint survives as against Watson. 

 

 
2 See Christine Haugney & Eric Pfanner, At 125 Years, a Rechristening for The Herald Tribune, N.Y. Times, Feb. 
25, 2013), https://www.nytimes.com/2013/02/26/business/media/herald-tribune-to-be-renamed-the-international-
new-york-times.html. 

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III. Watson’s Amended Counterclaim Fails Because it Is Precluded by Section 21(g) 
of the Exchange Act 
 

The Court now considers whether Watson’s Amended Counterclaim can survive.  Section 

21(g) of the Exchange Act states:   

Notwithstanding the provisions of section 1407(a) of title 28, or any other 
provision of law, no action for equitable relief instituted by the Commission 
pursuant to the securities laws shall be consolidated or coordinated with other 
actions not brought by the Commission, even though such other actions may 
involve common questions of fact, unless such consolidation is consented to by 
the Commission. 
 

15 U.S.C. § 78u(g)).  “[T]his provision bars ‘claims for damages by non-SEC parties . . . 

(without the SEC’s consent) in the enforcement action to which they purport to relate.’”  SEC v. 

Ripple Labs, Inc., No. 20-CV-10832, 2021 WL 4555352, at *2 (S.D.N.Y. Oct. 4, 2021) (citing 

SEC v. Caledonian Bank, Ltd., 317 F.R.D. 358, 367–68 (S.D.N.Y. 2016)).  The moving papers 

and the record indicate that the SEC has not consented to the integration of Watson’s Amended 

Counterclaim in this suit.  See ECF No. 102 at 22 (“Section 21(g) thus functions as an absolute 

bar against the consolidation of counterclaims in Commission enforcement proceedings when the 

Commission does not consent to such consolidation, as it does not here.”) (emphasis added).   

Watson construes the SEC’s reliance on Section 21(g) as a “shield,” one which is 

improper and misplaced because the “SEC’s actions in this case clearly demonstrate selective 

enforcement and misconduct.”  See ECF No. 105-1 at 1, 4.  Watson concedes that the purpose of 

Section 21(g) is to prevent delays in enforcement actions, but he argues that the SEC itself has 

protracted the litigation given its “failure to properly serve [him], their lack of communication, 

and their withholding of exculpatory evidence[.]”  See id. at 4.  Watson also notes that the SEC 

stated to him that “nobody, not you or anyone, is by law allowed to counter-sue the SEC[,]” 

which he construes as “an unjustified and overly broad interpretation of the law, aimed at 

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intimidating Watson and discouraging him from pursuing his legal rights.”  ECF No. 98 ¶ 42.  

However, the Court’s obligation in deciding the SEC’s motion to dismiss Watson’s Amended 

Counterclaim is not to opine upon the wisdom of Rule 21 (g) or determine whether discovery 

may reveal favorable evidence to Watson.  Rather, the Court must decide in the first instance 

whether Watson can include his Amended Counterclaim in this proceeding. 

To show that he can raise his counterclaims in this action, Watson cites in his opposition 

a case, SEC v. Sprecher, which purportedly stands for the proposition that “counterclaims should 

be allowed where there are serious due process violations.”  Id.  Watson does not provide a full 

citation in his opposition, but cites SEC v. Sprecher, 594 F.2d 317 (2d Cir. 1979) in his Amended 

Counterclaim for the proposition that “in exceptional circumstances, counterclaims against the 

SEC might be permitted where they are ‘inextricably intertwined’ with the SEC’s claim.”  ECF 

No. 98 ¶ 13.  The Court can neither identify the quoted language nor find any support for 

Watson’s position, nor even a discussion of Section 21(g) in this case.  To the extent Watson 

may be referring to an identically titled case that in fact deals with Section 21(g), SEC v. 

Sprecher, No. 92-CV-2860, 1993 WL 544306 (D.D.C. Dec. 16, 1993), the case is equally 

unhelpful.  In that case, the court granted the SEC’s motion to dismiss the defendant’s 

counterclaim precisely because Section 21(g) barred it and, more importantly, the court did not 

outline any exceptions to this prohibition.  Sprecher, 1993 WL 544306, at *3.  Similarly here, 

where the SEC has not consented to the integration of Watson’s counterclaims, Watson’s 

Amended Counterclaim must be dismissed.  Moreover, because any further amendment would 

be futile, Watson is denied leave to file any further counterclaims in this action. 

CONCLUSION 

For the reasons stated above, Watson’s motion to dismiss the Complaint is DENIED with 

prejudice and the SEC’s motion to dismiss the Amended Counterclaim is GRANTED with 

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prejudice.  Because Watson’s motion to dismiss the Complaint was a pre-answer motion, Watson 

is ORDERED to file an Answer to the SEC’s Complaint twenty-one (21) days following the 

entry of this order and opinion.  

In a separate order, the Court will refer this case to Magistrate Judge Valerie Figueredo 

for all general pretrial and settlement purposes.  The Clerk of Court is respectfully directed to 

terminate the SEC’s pending motion docketed at ECF No. 100. 

SO ORDERED. 

Dated:  June 30, 2025  
New York, NY      _______________________________ 

     ANDREW L. CARTER, JR. 
United States District Judge 

Case 1:21-cv-05923-ALC-VF     Document 113     Filed 06/30/25     Page 16 of 16