2024-10-28 sec-litreleases pdf 168 KB 6,537 chars

SEC v. Fruit Street Health, P.B.C., No. 1:24-mc-00494, Southern District of New York (Oct. 28, 2024)

raw: In re Fruit Street Health

In re Fruit Street Health, No. 1:24-mc-00494 (Oct. 28, 2024)

Caption: SEC v. Fruit Street Health, P.B.C

summary

The SEC has filed an application in the Southern District of New York to compel Fruit Street Health, P.B.C. to comply with a subpoena regarding an investigation into unregistered securities offerings.

paragraph

The SEC is investigating whether Fruit Street Health, P.B.C. engaged in an unregistered securities offering and made material misstatements to investors. Although the company produced 922 pages of documents, it has failed to provide critical records concerning investor agreements and the use of funds. The SEC is now seeking a court order to compel full compliance with the October 2023 subpoena.

narrative

The Securities and Exchange Commission (SEC) has filed an application in the Southern District of New York to compel Fruit Street Health, P.B.C. to comply with an administrative subpoena issued on October 27, 2023. The SEC's investigation is focused on whether the company engaged in an unregistered securities offering and made material misstatements to investors regarding revenue growth and the use of funds. While Fruit Street has produced 922 pages of documents, the SEC alleges the production is incomplete and lacks critical categories, such as investor agreements. The respondent's counsel has refused full compliance, arguing that the subpoena is constitutionally infirm under the Appointments and Take Care Clauses. This non-compliance has significantly delayed the SEC's investigation into potential securities law violations. The SEC is now requesting an Order to Show Cause to force the production of all responsive documents.

Enriched metadata

Scheme: unregistered-securities (95%)
Court: Southern District of New York
Case No.: 1:24-mc-00494

Classified unregistered-securities(confidence 95%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →

Extracted insights

Entities 10

person formal order
person fruit street
agency individuals who work in the sec's denver regional office
person new counsel
person order directing private investigation
agency sec administrative subpoena
agency sec staff
agency sec staff conduct a private investigation
agency sec staff that it would not produce documents
agency Securities and Exchange Commission

Triples 15

Securities And Exchange Commission submits Application
Fruit Street Health P.B.C. refused to comply SEC administrative subpoena
Subpoena was issued October 27 2023
Subpoena requires Fruit Street to produce ten categories of documents
SEC issued Order Directing Private Investigation
Formal Order directs SEC Staff conduct a private investigation
Formal Order designates individuals who work in the SEC's Denver Regional Office
SEC Staff sent Fruit Street a subpoena
Subpoena required production of documents by November 10 2023
Subpoena seeks documents relevant to its investigation
Fruit Street agreed to produce documents on a rolling basis
Fruit Street made production of 19 documents
Respondent retained new counsel
Counsel informed SEC Staff that it would not produce documents
Counsel expressed view that the Subpoena violated Article II of the Constitution

PDF

In re Fruit Street Health · Source

Text layers

Extracted body text (6,537c)

SHARAN E. LIEBERMAN (SL-6623)
Attorney for the Applicant
SECURITIES AND EXCHANGE COMMISSION
Denver Regional Office
1961 Stout Street, Suite 1700
Denver, CO 80294
(303) 844-1000 (Main)
(303) 844-1036 (Lieberman)
Email: [email protected]

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------------x
:
SECURITIES AND EXCHANGE COMMISSION, :
:
Applicant, :
: 24-mc-494
-against- : ECF Case
:
FRUIT STREET HEALTH, P.B.C. :
:
Respondent. :
:
------------------------------------------------------------------------x

SECURITIES AND EXCHANGE COMMISSION’S APPLICATION
FOR AN ORDER TO SHOW CAUSE AND FOR AN
ORDER COMPELLING COMPLIANCE WITH
SUBPOENA

The Securities and Exchange Commission (“the SEC”) respectfully submits this
Application for an Order to Show Cause and for an Order Requiring Compliance with Subpoena
(“ Application”), together with a proposed order to show cause, a memorandum in support, the
Declaration of John Dwyer (“Dwyer Decl.”), and the Exhibits thereto, based on the following:
1. Respondent Fruit Street Health, P.B.C. (“Fruit Street”), which does business in
and maintains its principal place of business in New York, New York, has refused to comply
with a lawfully served SEC administrative subpoena (“the Subpoena”). The Subpoena was
issued on October 27, 2023, and requires Fruit Street to produce ten categories of documents

relevant to the SEC’s non-public investigation entitled In re Fruit Street Health, P.B.C. (the
“Investigation”).
2. On March 28, 2023, the SEC issued an Order Directing Private Investigation and
Designating Officers to Take Testimony (the “Formal Order”) in the Fruit Street Investigation.
Among other things, the Formal Order directs, pursuant to Section 20(a) of the Securities Act of
1933 (“Securities Act”) 15 U.S.C. § 77t(a) and Section 21(a) of the Securities Exchange Act of
1934 (“Exchange Act”) 15 U.S.C.§ 78u(a), that the SEC Staff conduct a private investigation to
determine whether any persons or entities had engaged in acts or practices in violation of various
provisions of the securities laws.
3. The Formal Order also designates, pursuant to Section 19(c) of the Securities Act
15 U.S.C § 77s(c) and Section 21(b) of the Exchange Act 15 U.S.C. § 78u(b), certain individuals
who work in the SEC’s Denver Regional Office as officers of the SEC 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 deemed
relevant or material to the investigation.
4. On October 27, 2023, SEC Staff sent Fruit Street a subpoena (“the Subpoena”),
signed by SEC Staff, requiring production of documents in ten categories. The Subpoena
required the production of documents by November 10, 2023.
5. The Subpoena seeks documents relevant to its investigation of whether Fruit
Street engaged in an unregistered securities offering and whether it made material misstatements
to investors and potential investors in connection with the sale of its securities.
6. After some initial discussion with Respondent’s first set of counsel, Fruit Street
agreed to produce documents on a rolling basis. One such production was made on November

20, 2023 of 19 documents, totaling 264 pages.
7. Thereafter, in December 2023, Respondent retained new counsel (“Counsel”).
Counsel proceeded to inform SEC Staff that it would not produce documents pursuant to the
Subpoena. Counsel expressed its view that the Subpoena violated Article II of the Constitution,
specifically the Appointments Clause and the Take Care Clause. Counsel explained that it would
produce documents on a voluntary basis.
8. The SEC sent Respondent several letters requesting compliance with the
Subpoena and certification that the document production is complete, and informing Counsel
that if it did not produce responsive documents and certify the completion of its production, the
SEC would file a subpoena enforcement action.
9. Over the next six months, Counsel made a total of three productions totaling 922
pages. That production appears to be incomplete.
10. Fruit Street has not produced any additional documents since June 14, 2024.
11. As of the date of this filing, almost a year has passed since the SEC first served
the subpoena. Yet, Fruit Street has failed to produce a single document responsive to critical
categories such as documents concerning agreements with investors and use and location of
investor funds, and has produced only a few documents in the remaining categories. Rather than
complying with the SEC’s lawfully-issued Subpoena, Fruit Street asserts that the Subpoena is
constitutionally infirm, relying on discredited constitutional arguments.
12. The SEC believes the relevant documents are in Fruit Street’s possession because
the SEC has obtained some documents responsive to the Subpoena from other sources – such as
an email from Fruit Street soliciting investments and attaching a pitch deck, and an Investor
Deck outlining revenue growth figures and use of investor funds. Fruit Street should have these

documents (and others like it) in its possession. Such documents are responsive to the categories
sought in the Subpoena, and Fruit Street has not produced them.
13. The information the Subpoena seeks is critical to the SEC’s investigation and
Fruit Street’s non-compliance has significantly delayed this investigation.
14. WHEREFORE, the Commission respectfully requests:
I.
That the Court enter an Order to Show Cause, directing Respondent Fruit Street to show
cause why this Court should not enter an order requiring Respondent to produce documents in
response to the Subpoena.
II.

That the Court enter an order requiring Respondent to comply fully with the Subpoena
within thirty (30) days from the date of the Order.
III.

That the Court order such other and further relief as may be necessary and appropriate to
achieve compliance with the Subpoena within the time set forth in the proposed Order to Show
Cause.

Dated: October 25, 2024

Denver, Colorado

Respectfully Submitted,
Sharan E. Lieberman

_s/ Sharan E. Lieberman______________________
By: Sharan E. Lieberman
Trial Attorney (SL-6623)
ATTORNEY FOR THE APPLICANT
SECURITIES AND EXCHANGE COMMISSION
1961 Stout Street, Suite 1700
Denver, CO 80294
303-844-1036
[email protected]

OCR text (7,147c · tika · 95% conf)

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

ORDER COMPELLING COMPLIANCE WITH SUBPOENA

The Securities and Exchange Commission (“the SEC”) respectfully submits this

Application for an Order to Show Cause and for an Order Requiring Compliance with Subpoena

(“Application”), together with a proposed order to show cause, a memorandum in support, the

Declaration of John Dwyer (“Dwyer Decl.”), and the Exhibits thereto, based on the following:

1. Respondent Fruit Street Health, P.B.C. (“Fruit Street”), which does business in

and maintains its principal place of business in New York, New York, has refused to comply

with a lawfully served SEC administrative subpoena (“the Subpoena”). The Subpoena was

issued on October 27, 2023, and requires Fruit Street to produce ten categories of documents

Case 1:24-mc-00494 Document 1 Filed 10/25/24 Page 1 of 5

relevant to the SEC’s non-public investigation entitled In re Fruit Street Health, P.B.C. (the

“Investigation”).

2. On March 28, 2023, the SEC issued an Order Directing Private Investigation and

Designating Officers to Take Testimony (the “Formal Order”) in the Fruit Street Investigation.

Among other things, the Formal Order directs, pursuant to Section 20(a) of the Securities Act of

1933 (“Securities Act”) 15 U.S.C. § 77t(a) and Section 21(a) of the Securities Exchange Act of

1934 (“Exchange Act”) 15 U.S.C.§ 78u(a), that the SEC Staff conduct a private investigation to

determine whether any persons or entities had engaged in acts or practices in violation of various

provisions of the securities laws.

3. The Formal Order also designates, pursuant to Section 19(c) of the Securities Act

15 U.S.C § 77s(c) and Section 21(b) of the Exchange Act 15 U.S.C. § 78u(b), certain individuals

who work in the SEC’s Denver Regional Office as officers of the SEC 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 deemed

relevant or material to the investigation.

4. On October 27, 2023, SEC Staff sent Fruit Street a subpoena (“the Subpoena”),

signed by SEC Staff, requiring production of documents in ten categories. The Subpoena

required the production of documents by November 10, 2023.

5. The Subpoena seeks documents relevant to its investigation of whether Fruit

Street engaged in an unregistered securities offering and whether it made material misstatements

to investors and potential investors in connection with the sale of its securities.

6. After some initial discussion with Respondent’s first set of counsel, Fruit Street

agreed to produce documents on a rolling basis. One such production was made on November

Case 1:24-mc-00494 Document 1 Filed 10/25/24 Page 2 of 5

20, 2023 of 19 documents, totaling 264 pages.

7. Thereafter, in December 2023, Respondent retained new counsel (“Counsel”).

Counsel proceeded to inform SEC Staff that it would not produce documents pursuant to the

Subpoena. Counsel expressed its view that the Subpoena violated Article II of the Constitution,

specifically the Appointments Clause and the Take Care Clause. Counsel explained that it would

produce documents on a voluntary basis.

8. The SEC sent Respondent several letters requesting compliance with the

Subpoena and certification that the document production is complete, and informing Counsel

that if it did not produce responsive documents and certify the completion of its production, the

SEC would file a subpoena enforcement action.

9. Over the next six months, Counsel made a total of three productions totaling 922

pages. That production appears to be incomplete.

10. Fruit Street has not produced any additional documents since June 14, 2024.

11. As of the date of this filing, almost a year has passed since the SEC first served

the subpoena. Yet, Fruit Street has failed to produce a single document responsive to critical

categories such as documents concerning agreements with investors and use and location of

investor funds, and has produced only a few documents in the remaining categories. Rather than

complying with the SEC’s lawfully-issued Subpoena, Fruit Street asserts that the Subpoena is

constitutionally infirm, relying on discredited constitutional arguments.

12. The SEC believes the relevant documents are in Fruit Street’s possession because

the SEC has obtained some documents responsive to the Subpoena from other sources – such as

an email from Fruit Street soliciting investments and attaching a pitch deck, and an Investor

Deck outlining revenue growth figures and use of investor funds. Fruit Street should have these

Case 1:24-mc-00494 Document 1 Filed 10/25/24 Page 3 of 5

documents (and others like it) in its possession. Such documents are responsive to the categories

sought in the Subpoena, and Fruit Street has not produced them.

13. The information the Subpoena seeks is critical to the SEC’s investigation and

Fruit Street’s non-compliance has significantly delayed this investigation.

14. WHEREFORE, the Commission respectfully requests:

That the Court enter an Order to Show Cause, directing Respondent Fruit Street to show

cause why this Court should not enter an order requiring Respondent to produce documents in

response to the Subpoena.

II.

That the Court enter an order requiring Respondent to comply fully with the Subpoena

within thirty (30) days from the date of the Order.

III.

That the Court order such other and further relief as may be necessary and appropriate to

achieve compliance with the Subpoena within the time set forth in the proposed Order to Show

Cause.

Dated: October 25, 2024

Case 1:24-mc-00494 Document 1 Filed 10/25/24 Page 4 of 5

Denver, Colorado

Respectfully Submitted,
Sharan E. Lieberman

_s/ Sharan E. Lieberman______________________
By: Sharan E. Lieberman
Trial Attorney (SL-6623)
ATTORNEY FOR THE APPLICANT
SECURITIES AND EXCHANGE COMMISSION

1961 Stout Street, Suite 1700
Denver, CO 80294
303-844-1036
[email protected]

Case 1:24-mc-00494 Document 1 Filed 10/25/24 Page 5 of 5