USSEC v. Reven Holdings

majority opinion

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 1

FILED

United States Court of Appeals

Tenth Circuit

PUBLISH

October 14, 2026

UNITED STATES COURT OF APPEALS

Christopher M. Wolpert

FOR THE TENTH CIRCUIT Clerk of Court

UNITED STATES SECURITIES

AND EXCHANGE COMMISSION,

Plaintiff - Appellee,

v. No. 24-1235

REVEN HOLDINGS, INC., d/b/a

REVEN PHARMACEUTICALS;

REVEN PHARMACEUTICALS,

INC.; BRIAN D. DENOMME;

PETER B. LANGE; MICHAEL A.

VOLK,

Defendants - Appellants,

and

REVEN, LLC; REVEN IP HOLDCO,

LLC; REVEN ONCOLOGY

LICENSING, LLC; HEALTH

ANALYTICS AND RESEARCH

SERVICES, LLC,

Relief Defendants -Appellants.

UNITED STATES SECURITIES

AND EXCHANGE COMMISSION,

Plaintiff - Appellee,

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 2

v. No. 24-1309

REVEN HOLDINGS, INC., d/b/a

REVEN PHARMACEUTICALS;

REVEN PHARMACEUTICALS,

INC.; BRIAN D. DENOMME;

PETER B. LANGE; MICHAEL A.

VOLK,

Defendants - Appellants,

and

REVEN, LLC; REVEN IP HOLDCO,

LLC; REVEN ONCOLOGY

LICENSING, LLC; HEALTH

ANALYTICS AND RESEARCH

SERVICES, LLC,

Relief Defendants - Appellants.

Appeal from the United States District Court

for the District of Colorado

(D.C. No. 1:22-CV-03181-DDD-SBP)

John E. Schreiber, Winston & Strawn LLP, Los Angeles, California (Kevin P. Simpson, Winston & Strawn LLP, Los Angeles, California; Katherine A. Preston, Winston & Strawn LLP, Houston, Texas; and Dylan J. French, Winston & Strawn LLP, Dallas, Texas, with him on the briefs), for Defendants-Appellants.

Paul G. Álvarez, Senior Appellate Counsel (Daniel Staroselsky, Assistant General Counsel, with him on the brief), Securities and Exchange Commission, Office of the General Counsel, Washington, District of Columbia, for the Plaintiff-Appellee.

Before HOLMES, Chief Judge, KELLY, and FEDERICO, Circuit Judges.

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HOLMES, Chief Judge.

Reven Holdings, Inc., its affiliated companies, and its three

principals (collectively, “Appellants” or “Reven”) appeal from the district

court’s order granting a preliminary injunction (“PI”) and asset freeze

against them at the behest of the U.S. Securities and Exchange

Commission (“SEC”) for alleged securities fraud. Appellants contend that

the district court erred by preliminarily enjoining their business and

freezing their assets because (1) the SEC did not satisfy the PI standards,

including by failing to show evidence that Reven violated securities laws,

and because (2) the district court’s order destroyed the assets that it was

designed to preserve. They also contend that (3) the district court should

have at least held a hearing before deciding on the PI.

For the reasons that follow, we discern no error in the district court’s

decision to grant a PI and freeze Appellants’ assets, or in its choice to do

so without conducting a hearing. Exercising jurisdiction under 28 U.S.C.

§ 1292(a)(1), we therefore affirm the district court’s orders granting the

PI and maintaining the asset freeze. 1

1 Additionally, we grant Appellants’ unopposed motion for leave to file part of the appendix, Vol. XVI, under seal. The appendix contains confidential financial information about individuals and also business information that may plausibly be considered trade secrets. See, e.g., Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124, 1135–

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Our opinion proceeds as follows. First, we detail the factual

allegations upon which the SEC obtained the PI. Second, we summarize

the procedural history of this case. Third, we provide an overview of the

applicable legal standard of review. Fourth, we analyze Appellants’ three

challenges to the district court’s order on appeal. We conclude that those

challenges are unpersuasive: specifically, the district court was not

obligated to conduct a hearing given that Appellants asked it to vacate a

hearing that it had tried to schedule; the district court did not abuse its

discretion in concluding that the SEC satisfied all four PI factors; and the

district court imposed a reasonable and nuanced asset freeze.

We begin by describing the factual circumstances underlying the

district court’s PI determination. We note that, in doing so, we “have only

considered the record as it stands at this early stage of the proceedings.”

Fish v. Kobach, 840 F.3d 710, 750 (10th Cir. 2016). As is always true in

the PI context, “[f]urther discovery will presumably ensue,” and additional

“evidence [may] come[] to light.” Id.

36 (10th Cir. 2011) (sealing record containing confidential personal information); Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 831 n.4 (10th Cir. 1993) (sealing record containing trade secret information).

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 5

Brian Denomme, Peter Lange, and Michael Volk (collectively, the

“Reven principals”) manage the biotechnology company Reven Holdings,

Inc. and its affiliates. Since its founding, Reven has been attempting to

develop and commercialize a “cardiovascular intravenous drug treatment”

called RJX. Aplts.’ App., Vol. XV, at 2761 ¶ 4.a (Scheduling Order, Apr. 5,

2023). Prior to this litigation, Reven obtained patents and conducted

research and trials pertaining to RJX. RJX has not yet been approved by

the U.S. Food and Drug Administration (“FDA”).

This litigation concerns allegations by the SEC that Appellants

committed securities fraud by making materially misleading statements to

investors about three topics: (1) the Reven principals’ annual

compensation in 2019, 2020, and 2021; (2) the existence of audited

financial statements and Reven’s readiness to go public; and (3) Reven’s

involvement in other litigation. We provide the factual background and

summarize Appellants’ statements about each of those topics below, again

noting that these findings are only preliminary, as they are based on the

incomplete state of the litigation at the PI phase.

Appellants made multiple statements to investors representing the

compensation that the Reven principals received from 2019 to 2021.

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These communications primarily took the form of documents called

“private placement memoranda” (“PPMs”).

In a PPM that Appellants distributed to investors dated August 31,

2018, Appellants stated that Reven’s “General Administrative and Payroll

Operating costs” over the next eighteen months would be $2.5 million

every six months, or approximately $5 million for 2019. Aplts.’ App., Vol.

I, at 232 (Priv. Placement Mem., Aug. 31, 2018). Although this figure

included expenditures besides the compensation for the Reven principals,

SEC accountant Donna Walker reviewed Reven’s financial accounts and

determined that these other expenditures totaled $2,716,023 for 2019.

Another PPM dated July 6, 2020, stated that the three Reven

principals were paid $540,000 each (or $1.62 million total) for 2019 and

$660,000 each (or $1.98 million total) for 2020.

A third PPM, this one from January 1, 2021, stated that the Reven

principals were paid $600,000 each (or $1.8 million total) for 2020 and

$720,000 each (or $2.16 million total) for 2021.

According to the SEC’s accounting expert, Ms. Walker, a review of

Reven’s Wells Fargo banking records revealed that the Reven principals

actually received $5.35 million in compensation in 2019, $3.36 million in

2020, and $6.65 million in 2021.

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In their communications with investors, Appellants also made

representations regarding the status of an audit and their readiness to

take Reven public. The two topics are related because having audited

financial statements is a requirement of taking a company public. See

What is a Registration Statement?, explanation to Going Public, SEC,

https://www.sec.gov/resources-small-businesses/going-public/whatregistration-statement (Nov. 12, 2024) (“The prospectus must also include

audited financial statements.”).

On September 9, 2019, Mr. Lange emailed an investor named Leah

Schaatt a slide deck listing three possible “[e]xit [s]trategies,” for Reven,

the first “[s]cenario” being to “[o]rganize and execute a public offering on a

major financial exchange after October 1, 2020.” Aplts.’ App., Vol. IX, at

1129, 1224 (Email & Slide Deck sent from Peter Lange to Leah Schaatt,

Sept. 9, 2019). Under this scenario, the slide read, “The Company will

have the minimum required two years of audited financial statements

ending September 30, 2020[,] making it eligible to offer its shares for sale

in an Initial Public Offering [(“IPO”) 2] as early as October 2020.” Id.

2 An “IPO” is an Initial Public Offering, which is the opening offering of theretofore private securities of a company for sale to investors who are members of the public on a public securities exchange. See Going

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On December 9, 2019, Mr. Volk emailed investors, stating, “We are

currently undergoing our first audit now.” Aplts.’ App., Vol. VI, at 507

(Email from Michael Volk to Lyndall Demere, Tom North, & Sharon

Garber, Dec. 9, 2019).

On February 13, 2020, Mr. Lange emailed Ms. Schaatt and others

saying:

Well, we finally decided that we would comply with all the

(“super smart”) investment bankers and file an S1 (the

SEC filing to do an IPO), and announce to the world that

we were going public. We have since done that to allow

the “super smart” people to tick that box . . . .

Aplts.’ App., Vol. IX, at 1242 (Email from Peter Lange to Leah Schaatt,

Liz Leeds, & Michael Volk, Feb. 13, 2020).

On July 8, 2020, Mr. Lange emailed Ms. Schaatt and others saying,

“Our audit should be completed in mid-September early October[,] which will

allow us to file our S1 sometime before the end of the year and taking [sic]

next steps towards an IPO in 2021.” Aplts.’ App., Vol. IX, at 1244 (Email

from Peter Lange to Leah Schaatt, Liz Leeds, & Matthew Provencher, July 8,

2020).

On November 18, 2021, Mr. Lange emailed a family of investors,

including a woman named Lee-Ann Frost Corry, a slide deck that listed as

Public, SEC, https://www.sec.gov/resources-small-businesses/goingpublic/what-registration-statement (Nov. 12, 2024).

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one of three “paths & options going forward” the following route—

“Organize and execute an Initial Public Offering”—and it stated that

“[t]he Company has the minimum required two years of audited financial

statements ending August 2021.” Aplts.’ App., Vol. X, at 1416, 1437

(Email & Slide Deck sent from Peter Lange to Daniel Frost, John Frost,

Virginia Frost, & Lee-Ann Frost Corry, Nov. 18, 2021).

On December 6, 2021, Mr. Volk emailed an investment advisor a

slide deck containing the same statement—that Reven “has the minimum

required two years of audited financial statements ending August 2021”—

and listing as one of three possible “Strategic Paths Forward,” “Organize

and execute an Initial Public Offering.” Aplts.’ App., Vol. VIII, at 853, 948

(Email & Slide Deck sent from Michael Volk to Monica Ryan, Dec. 6,

2021). This investment advisor forwarded the slide deck to a group of

other investment advisors.

On December 16, 2021, Mr. Lange emailed Ms. Schaatt a new deck

that again listed “Going Public” as one of three “Strategic Paths Forward”

and stated, “[t]he Company has the minimum required two years of

audited financial statements ending August 2021.” Aplts.’ App., Vol. XIV,

at 2336, 2354 (Email & Slide Deck sent from Peter Lange to Leah Schaatt,

Dec. 16, 2021). On September 14, 2022, Mr. Lange sent Ms. Schaatt the

slide deck containing the same representation again.

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Despite these representations, the record demonstrates that Reven

never began an audit of its financial statements; indeed, it did not even

retain an auditing firm. It was therefore nowhere near ready to

undertake an IPO. See What is a Registration Statement?, explanation to

Going Public, SEC, https://www.sec.gov/resources-small-businesses/goingpublic/what-registration-statement (Nov. 12, 2024).

Finally, in their investor communications, Appellants also

represented that they were not engaged in litigation.

In his February 13, 2020, email to Ms. Schaatt, Mr. Lange stated,

“we have no lawsuits from shareholders.” Aplts.’ App., Vol. IX, at 1242.

On April 20, 2020, Mr. Volk emailed a group of potential investors a

slide deck and the August 31, 2018, PPM. He stated that he was

attaching Reven’s “OLD Private Placement Memorandum,” but he noted,

“There is not a whole lot that will change so it will serve as appropriate

disclosure for compliance.” Aplts.’ App., Vol. VI, at 510 (Email & Slide

Deck sent from Michael Volk to Jim Ervin, Scott Russo, Randolph Russo,

John Anderson, Todd Brown, & Kenneth Easten, Apr. 20, 2020). The 2018

PPM contained the representation, “The Company is not currently the

subject of any litigation.” Id. at 574.

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On April 6, 2021, Mr. Volk emailed an investor with the July 6,

2020, PPM. In the email, Mr. Volk cautioned that “the PPM is definitely

outdated, but [it] gives good history and compliance information.” Aplts.’

App., Vol. VII, at 603 (Email & Slide Deck sent from Michael Volk to J.

Nicholas Shevillo, Apr. 6, 2021). The document stated, “As of the date of

this Memorandum we are not aware of potential dispute [sic] or pending

litigation and are not currently involved in a litigation proceeding or

governmental actions the outcome of which in management’s opinion

would be material to our financial condition or results of operations.” Id.

at 712.

Finally, in Mr. Volk’s December 6, 2021, email to an investment

advisor, he included the January 1, 2021, PPM, which stated, “As of the

date of this Memorandum we are not aware of potential dispute [sic] or

pending litigation and are not currently involved in a litigation proceeding

or governmental actions the outcome of which in management’s opinion

would be material to our financial condition or results of operations.”

Aplts.’ App., Vol. VIII, at 918.

Despite Appellants’ representations, however, they were engaged in

pending litigation. On August 8, 2016, the guardian of an elderly man

sued Reven Pharmaceuticals, Inc. and Mr. Lange in Florida state court for

fraudulently inducing his ward to invest in Reven. On December 26, 2019,

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the plaintiff in this Florida lawsuit amended his complaint to add Reven,

LLC; Reven Holdings, Inc.; and Mr. Volk as defendants. Appellants

ultimately settled the lawsuit for $2.75 million on October 5, 2021.

On approximately October 15, 2022, one investor, Ms. Schaatt,

emailed the SEC to initiate a conversation about concerns she and another

investor, Ms. Frost Corry, had regarding the management and finances of

Reven. From there, Ms. Schaatt and Ms. Frost Corry provided

information to the SEC about Reven.

On December 9, 2022, the SEC filed a sealed complaint and jury

demand against Appellants in the U.S. District Court for the District of

Colorado. The complaint alleged that Defendants were engaging in

“ongoing offering fraud and misappropriation of investor assets.” Aplts.’

App., Vol. I, at 20 (Compl. & Jury Demand, Dec. 9, 2022). It charged

Appellants with violating Section 17(a) of the Securities Act of 1933 (15

U.S.C. § 77q(a)) (“the Securities Act”) and Section 10(b) (and

corresponding Rule 10b-5) of the Securities Exchange Act of 1934 (15

U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5) (“the Exchange Act”).

Alongside its sealed complaint, the SEC filed an ex parte motion for

a temporary restraining order (“TRO”), an asset freeze, and other

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“emergency relief.” The SEC requested that the court enter an order (a)

restraining Appellants from violating parts of the Securities and Exchange

Acts; (b) prohibiting Appellants from participating in the issuance,

purchase, offer, or sale of any security; (c) preventing Appellants from

altering or destroying any relevant documents; (d) requiring an accounting

of Appellants’ assets; (e) permitting expedited discovery; (f) transforming

the TRO into a PI following a hearing; and (g) freezing Appellants’ assets.

On January 3, 2023, the district court granted the SEC’s motion,

issuing a TRO and freezing Appellants’ assets. The district court also

invited Appellants to file a response opposing the SEC’s requested PI and

set a PI hearing for January 13, 2023.

On January 11, 2023, the parties jointly moved to (1) extend the

TRO until the district court ruled on the PI and (2) vacate the PI hearing

set for January 13 “without prejudice to any future request by the [SEC],

the Defendants, and/or the Relief Defendants to reset such hearing.” See

Aplee.’s Suppl. App. at 27–29 (Jt. Mot. & Stipulation to Extend TRO &

Vacate PI Hr’g, Jan. 11, 2023). The parties made this request because

Appellants’ counsel had just been retained and needed “additional time to

learn the facts of the case.” Id. at 29.

That day, the district court granted the parties’ joint motion to

extend the TRO and vacate the PI hearing. To accommodate Appellants’

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counsel, the court extended the time permitted for Appellants to respond

to the motion for the PI. In granting the parties’ motion, the court stated,

“After reviewing the defendants’ and relief defendants’ response(s) and the

plaintiff’s reply, if any, I will determine whether to (a) reset a

preliminary-injunction hearing, (b) request supplemental briefing from

the parties on specific legal or factual questions, or (c) decide the motion

on the papers submitted.” Aplts.’ App., Vol. XV, at 2734 (Order, Jan. 11,

2023).

From January through April 2023, the district court granted

Appellants extensions of time to brief the PI motion.

The district court also granted Appellants’ unopposed motions to

modify the asset freeze provisions of the TRO to allow them to pay for

living expenses and to pay attorneys to maintain Reven’s intellectual

property assets “otherwise at risk of abandonment or expiration.” Aplts.’

App., Vol. XI, at 1651–53 (Order, Mar. 27, 2023).

On June 12, 2023, Appellants filed their brief opposing the SEC’s

motion for a PI. Appellants argued that the SEC had not met the PI

standard because (1) it had not shown that they had misappropriated

investor funds; (2) it had not shown that they had made material

misstatements with scienter about the Reven principals’ compensation,

the existence of an audit, or Reven’s involvement in other litigation; and

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(3) it had not shown that any violation of securities laws was likely to

recur.

On March 29, 2024, the district court granted the SEC’s motion and

issued a PI that extended the terms of the TRO, including the asset freeze.

The court first determined that the proper standard it needed to apply to

determine whether a PI was appropriate came from the Securities and

Exchange Acts, which called for “proof that a person is engaged in or is

about to engage in a substantive violation of either one of the Acts or of

the regulations promulgated thereunder.” Aplts.’ App., Vol. XIV, at 2410

(Order Granting Pl.’s Mot. for PI & Asset Freeze, Mar. 29, 2024) (quoting

Aaron v. SEC, 446 U.S. 680, 700–01 (1980)). The court believed that this

legislation-specific standard displaced the “traditional four-factor test for

a preliminary injunction.” Id. The court also determined that because the

particular PI that the SEC sought “mandate[d] action or alter[ed] the

status quo,” the SEC had to meet the additional requirement of showing

“(1) its likelihood of proving the alleged statutory violation, and (2) the

likelihood that a violation will occur again in the future.” Id. at 2411.

The court applied this legal standard and concluded that the SEC

had satisfied it with regard to each of the three categories of fraudulent

misrepresentations alleged.

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The court determined that the SEC “made a clear showing that it is

likely to prove the defendants made false and misleading statements or

omissions to investors regarding the Reven Principals’ annual

compensation.” Id. at 2414. The court credited the SEC’s preliminary

showing that between 2019 and 2021, the Reven principals were paid

$8.92 million to $9.78 million more than Appellants disclosed in their

PPMs, and even accommodating Appellants’ objections to the SEC’s

numbers, “the Reven Principals took in $4.89 to $5.75 million more than

they disclosed to investors” during this three-year period. Id. at 2415.

The court determined that the SEC had shown it was likely to prove that

Appellants made these misrepresentations “recklessly,” or, “at a minimum

negligently.” Id. at 2418.

Similarly, the court concluded that the SEC had “made a clear

showing that it is likely to prove the defendants made false and

misleading statements or omissions to investors regarding the existence of

audited financial statements and Reven’s readiness for an IPO or DPO[ 3],”

id. at 2420–21, and did so “recklessly and negligently,” id. at 2427.

3 A “DPO” is a Direct Public Offering, which is also sometimes known as a Direct Listing. It is similar to an IPO in that it is the process

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The court noted the following:

(1) Mr. Volk’s December 9, 2019, email to an investor

stating, “We are currently undergoing our first audit now,”

Aplts.’ App., Vol. VI, at 507;

(2) Mr. Lange’s November 18, 2021, emailed slide deck

stating, “[t]he Company has the minimum required two years of

audited financial statements ending August 2021,” Aplts.’ App.,

Vol. X, at 1437 (emphasis added)—which was a change from

language in the slide deck Mr. Lange emailed an investor on

September 9, 2019, that stated, “[t]he [C]ompany will have the

minimum required two years of audited financial statements

ending September 30, 2020,” Aplts.’ App., Vol. IX, at 1224

(emphasis added);

(3) Mr. Volk’s December 6, 2021, emailed slide deck

containing the same representation as the November 18, 2021,

email;

through which a previously privately held company becomes a public company. The difference is that in a DPO, the private company typically does not raise new funds but instead simply allows existing private shareholders to sell shares directly to the public. See Types of Registered Offerings, SEC, https://www.sec.gov/resources-small-businesses/capitalraising-building-blocks/types-registered-offerings (Dec. 17, 2024).

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(4) Mr. Lange’s December 16, 2021, emailed slide deck

containing the same representation;

(5) Mr. Lange’s September 14, 2022, emailed slide deck

containing the same representation; and

(6) the fact that Reven never even retained a firm to begin

an audit of its financial statements.

With regard to Reven’s readiness to go public and specifically with

regard to its filing of an SEC Form S-1—i.e., one of the documents

required to engage in a public offering—the court noted (1) Mr. Lange’s

February 13, 2020 email stating “we finally decided that we would comply

with all the (‘super smart’) investment bankers and file an S1 (the SEC

filing to do an IPO), and announce to the world that we were going public.

We have since done that . . . . ,” id. at 1242; in the face of (2) Reven’s

acknowledgement that it had not filed a Form S-1 at the time, which was

shown through Mr. Lange’s July 8, 2020, email to an investor stating,

“Our audit should be completed in mid-September early October which

will allow us to file our S1 sometime before the end of the year and taking

[sic] next steps towards an IPO in 2021,” id. at 1244.

Third, the court concluded that the SEC had “made a clear showing

that it is likely to prove the defendants made false and misleading

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statements or omissions to investors regarding a shareholder lawsuit,”

Aplts.’ App., Vol. XIV, at 2428—having done so “at a minimum recklessly,”

id. at 2431. The court determined that despite the pendency of the

Florida lawsuit by the guardian of the Reven shareholder from August 8,

2016, to October 5, 2021, which eventually ended in a settlement of $2.75

million, Reven had repeatedly told investors that the company was not

subject to any litigation.

The court noted the following:

(1) Mr. Lange’s February 13, 2020, email to investors

stating, “we have no lawsuits from shareholders,” Aplts.’ App.,

Vol. IX, at 1242;

(2) Mr. Volk’s April 20, 2020, email containing the August

31, 2018, PPM, which stated, “The Company is not currently the

subject of any litigation,” Aplts.’ App., Vol. VI, at 574;

(3) Mr. Volk’s April 6, 2021, email containing the July 6,

2020, PPM, which stated, “As of the date of this Memorandum

we are not aware of potential dispute [sic] or pending litigation

and are not currently involved in a litigation proceeding or

governmental actions the outcome of which in management’s

opinion would be material to our financial condition or results

of operations,” Aplts.’ App., Vol. VII, at 712; and

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(4) Mr. Volk’s December 6, 2021, email containing the

January 1, 2021, PPM, which contained the same

representation.

After evaluating each of the three alleged violations, the court

concluded that in light of the seriousness of the violations—which was

evinced by the “millions of dollars of misappropriated investor funds” at

issue—the “substantial evidence that the various misstatements were

made knowingly and with intent to hide material facts,” and the fact that

“the Reven Principals ha[d] not recognized their wrongful conduct,”—that

“the defendants w[ould] likely continue their statutory violations in the

future if they [we]re not enjoined.” Aplts.’ App., Vol. XIV, at 2432–33.

The court therefore determined that all of the terms in the TRO,

including the asset freeze, were appropriate measures to preserve the

status quo, and it incorporated them into the PI. However, the court

invited Appellants to “file a motion addressing the scope of the

preliminary equitable relief in light of this Order, including whether a

more narrow preliminary remedy or lifting of the asset freeze in whole or

in part is appropriate.” Id. at 2435.

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On April 12, 2024, Appellants moved to narrow the PI by lifting the

asset freeze. Appellants argued that, rather than “protecting existing and

potential investors,” the asset freeze was having “the exact opposite effect,

threatening Reven’s ability to maintain its existing intellectual property

and other assets, wasting valuable patent life, and blocking the

Company’s ability to move forward with critical drug trials, thereby

decimating (not preserving) investor assets.” Aplts.’ App., Vol. XIV, at

2438–39 (Defs.’ & Relief Defs.’ Mot. to Narrow PI to Lift Asset Freeze,

Apr. 12, 2024). The SEC opposed the motion, arguing that lifting the

asset freeze would “give [Appellants] a blank check to deplete the frozen

assets, incur mountains of debt, and resume paying themselves with

investor proceeds without any review by th[e] Court.” Aplts.’ App., Vol.

XIV, at 2450 (Pl. U.S. SEC’s Opp’n to Defs.’ Mot. to Narrow PI to Lift

Asset Freeze, April 26, 2024).

On May 10, 2024, Ms. Schaatt and Ms. Frost Corry moved to

intervene in the case “to seek appointment of a General Receiver to

marshal and sell the assets of Reven for the benefit of all of the 175

innocent investors who were harmed.” See Aplts.’ App., Vol. XIV, at 2476–

77 (Intervenor Investor Grp.’s Mot. to Intervene, May 10, 2024). They

later narrowed their request to seek the appointment of a liquidation

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agent rather than a general receiver. The SEC did not object to this

narrower request.

On May 17, 2024, the district court preliminarily denied Appellants’

motion to narrow the PI by lifting the asset freeze. The court stated that

it was “[a]t present[,] . . . not persuaded by the defendants’ arguments

that it [wa]s appropriate to lift the asset freeze in its entirety.” Aplts.’

App., Vol. XV, at 2562 (Order, May 17, 2024). The court noted that it

would entertain “a more specific plan regarding the amount of funds or

particular assets as to which the asset freeze should be lifted,” if

Appellants had one to offer alongside their response to Ms. Schaatt and

Ms. Frost Corry’s motion to intervene. See id.

On May 24, 2024, Appellants filed a notice that they were appealing

to this Court “(1) the Order Granting Plaintiff’s Motion for Preliminary

Injunction and Asset Freeze entered on March 29, 2024 (ECF No. 122) and

(2) the Order re: Defendants and Relief Defendants’ Motion to Narrow

Preliminary Injunction to Lift Asset Freeze entered on May 17, 2024.”

Aplts.’ App., Vol. XV, at 2564–65 (Notice of Appeal, May 24, 2024). They

also filed a motion for a stay pending the appeal. The appeal was received

in our Court on May 28, 2024, as case number 24-1235.

Back in the district court, on May 31, Appellants filed their response

opposing Ms. Schaatt and Ms. Frost Corry’s motion to intervene and

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 23

supplying a narrower proposal for partially lifting the asset freeze as the

court requested in its May 17 order. The proposal called for the court to

partially lift the asset freeze to permit third parties to pay expenses on

behalf of Reven, permit the Reven principals to earn new individual

income unrelated to Reven, permit the Reven principals to incur new debt

(including for the purpose of funding the maintenance of Reven’s

intellectual property), and unfreeze individual bank accounts not

containing funds attributable to Appellants.

On June 17, 2024, we abated Appellants’ first appeal (24-1235)

because we determined that, while the district court “appear[ed] to have

partially ruled on” Appellants’ April 12 motion to narrow the PI by lifting

the asset freeze in the court’s May 17 order, “it d[id] not appear that the

motion ha[d] been fully decided.” Order, No. 24-1235, at *1–2 (10th Cir.,

filed June 17, 2024).

On July 26, 2024, the district court ruled on several of the pending

motions. The district court denied Ms. Schaatt and Ms. Frost Corry’s

motion to intervene because it determined that the SEC adequately

represented the investors’ interests. 4 However, because the SEC

4 No party challenges the district court’s decision on this matter, so it is not before us on appeal.

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 24

supported the would-be-intervenors’ narrowed proposal for the

appointment of a liquidation agent, the district court considered the

request to appoint a liquidation agent as attributed to the SEC. The court

refused to appoint a liquidation agent to sell Reven’s assets because it

determined that such a remedy “would effectively put [Reven] out of

business entirely,” which would be “quite harsh” relative to its

“preliminary findings” in the case. 5 Aplts.’ App., Vol. XV, at 2696–97

(Order Lifting Asset Freeze in Part, July 26, 2024). The court also refused

to lift the asset freeze in its entirety because it determined that it would

not be “appropriate” to “restore [Appellants’] free reign [sic] over Reven’s

assets based only on a vague plan” given that the court had preliminarily

found that “the Reven Principals made a number of material

misstatements or omissions to prospective investors.” Id. at 2697.

However, the court did partially grant Appellants’ second proposal to

lift parts of the asset freeze. Specifically, it permitted the following:

(1) “third parties to pay expenses on behalf of Reven and its

affiliates,”

(2) Reven to “license their intellectual property” with notice to the

SEC and the court’s approval if the SEC were to object,

5 No party challenges the district court’s decision on this matter, so it is not before us on appeal.

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 25

(3) “the Reven Principals to earn new individual income unrelated

to Reven and the other defendants and use such income to pay

for costs incurred by Reven and its affiliates” for intellectual

property maintenance and legal fees,

(4) “the Reven Principals to incur new debt on an individual basis”

with the court’s approval to pay for intellectual property

maintenance and legal fees, and

(5) a “motion to the Court to unfreeze individual bank accounts

that do not contain funds attributable to the defendants, after

conferral with the [SEC] to identify such accounts.”

Id. at 2699–70.

Finally, the district court denied Appellants’ motion to stay the asset

freeze pending their appeal of the PI. The court also added a footnote

explaining that its previous determination that the relevant PI standard

was a unique securities-statute-based test had since been “called into

question by the Supreme Court’s recent decision in Starbucks Corp. v.

McKinney, [602 U.S. 339 (2024)].” Id. at 2702 n.12. Accordingly, the court

performed a brief alternative analysis under the traditional four-factor

standard required for most PIs and concluded that the PI was proper

under this alternative standard as well.

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 26

On August 6, 2024, Appellants filed a second notice of appeal,

initiating case no. 24-1309. This time, they appealed the district court’s

July 26 order lifting the asset freeze in part.

On August 9, 2024, we lifted the abatement of 24-1235 (Appellants’

premature first appeal) and consolidated it with their second appeal (24-1309). As the case stands before us, Appellants appeal from the district

court’s March 29, 2024, order granting the PI and the asset freeze and the

part of the district court’s July 26, 2024, order that denied their motion to

eliminate the asset freeze in its entirety.

III

We review a district court’s grant of a PI, including an asset freeze,

as well as a court’s order modifying or refusing to modify a PI, for an

abuse of discretion. See Flood v. ClearOne Commc’ns, Inc., 618 F.3d 1110,

1117 (10th Cir. 2010). “A court abuses its discretion if its decision is

‘arbitrary, capricious, or whimsical.’” Cablevision of Tex. III, L.P. v. Okla.

W. Tel. Co., 993 F.2d 208, 210 (10th Cir. 1993) (quoting Cox v. Sandia

Corp., 941 F.2d 1124, 1125 (10th Cir. 1991)). “An abuse of discretion

occurs where a decision is premised on an erroneous conclusion of law or

where there is no rational basis in the evidence for the ruling.” SEC v.

GenAudio Inc., 32 F.4th 902, 944 (10th Cir. 2022) (quoting Planned

Parenthood of Kan. v. Andersen, 882 F.3d 1205, 1223 (10th Cir. 2018)).

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 27

We will not disturb the district court’s ruling unless the court “made a

clear error of judgment or exceeded the bounds of permissible choice in the

circumstances.” United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir.

2009) (quoting Dodge v. Cotter Corp., 328 F.3d 1212, 1223 (10th Cir.

2003)). Similarly, we review a district court’s decision not to hold an

evidentiary hearing for an abuse of discretion. See Robinson v. City of

Edmond, 160 F.3d 1275, 1286 (10th Cir. 1998).

We now evaluate Appellants’ three challenges on appeal. Appellants

first argue that the district court abused its discretion by ruling on the

SEC’s PI motion without conducting an evidentiary hearing. Second,

Appellants contend that the district court’s decision to grant the PI was an

abuse of discretion because the SEC did not satisfy the conditions for

obtaining such an injunction. Third, Appellants argue that the district

court’s imposition of the asset freeze was an abuse of discretion. We are

not persuaded by Appellants’ arguments and conclude that the district

court did not abuse its discretion at any point.

Appellants first argue that the district court committed a procedural

error by deciding the SEC’s motion for a PI without conducting an

evidentiary hearing. We quickly dispense with this argument because

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Appellants requested the district court cancel the PI hearing it had

scheduled, and Appellants chose not to request that the district court

schedule a new hearing.

The Federal Rules of Civil Procedure provide that “[a] court may

establish regular times and places for oral hearings on motions.” Fed. R.

Civ. P. 78(a). It is common practice for courts to hold hearings about

whether to grant PIs. See, e.g., Dominion Video Satellite, Inc. v. EchoStar

Satellite Corp., 269 F.3d 1149, 1153–54 (10th Cir. 2001). However, the

Federal Rules of Civil Procedure also provide that “[b]y rule or order, the

court may provide for submitting and determining motions on briefs,

without oral hearings.” Fed. R. Civ. P. 78(b) (emphasis added).

Appellants argue that the district court should have at least

conducted a hearing before deciding whether to issue the PI and maintain

the asset freeze given the fact-intensive credibility determinations at

issue. Appellants describe the district court as “revers[ing] course” on its

plan to hold a hearing and “sua sponte stat[ing] in an order” that it would

evaluate the parties’ written submissions on the PI before deciding

whether to reschedule the hearing. Aplts.’ Opening Br. at 63. Appellants

also argue that the court’s choice to decide the issue on the briefing

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occurred “during [a] period [in which] Reven inquired with the court about

a possible hearing and ultimately made a supplemental submission.” Id.

at 63.

On the other hand, the SEC contends that the court “acted within its

discretion” when it opted not to hold a hearing on the PI. Aplee.’s Resp.

Br. at 63 (bold-face font omitted). The SEC disagrees with Appellants’

account of the proceedings: it contends that both Appellants and the SEC

jointly requested that the court vacate the hearing originally and that

after the court granted that request, Appellants never requested to

reschedule the hearing.

In their Reply Brief, Appellants insist that they did inquire with the

court about holding a hearing after the first hearing was cancelled; they

point to an email exchange with the district court that they seek, in a

separate motion discussed infra, to add to their appendix.

To support their hearing argument, Appellants move to supplement

their appendix by adding an email exchange with the district court. The

SEC opposes the motion.

In the email exchange at issue, counsel for Appellants sent the district

court the following message:

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We wanted to inquire whether the Court has everything it

needs concerning the pending motion for preliminary

injunction, as we understood Your Honor’s earlier order . . .

to mean that the Court may request supplemental briefing

or other follow-up from the parties after the submission of

response and reply briefs.

If our understanding is incorrect and/or the Court has

everything it needs, please disregard our request and forgive

the intrusion.

Attach. to Aplts.’ Opposed Mot. to Amend the R., No. 24-1235, at *7 (10th

Cir., filed Jan. 24, 2025) (moving to supplement the record on appeal with

email exchange).

The court replied: “The Court will issue an order or contact the parties

if it believes supplemental briefing or a preliminary-injunction hearing is

necessary or would be helpful.” Id.

We deny Appellants’ motion to supplement their appendix with this

exchange for two reasons.

First, this document is not part of the record on appeal, so it could not

have been properly considered even if it had been timely filed with

Appellants’ appendix to begin with. Federal Rule of Appellate Procedure

10(a) unambiguously states, “The following items constitute the record on

appeal: (1) the original papers and exhibits filed in the district court; (2) the

transcript of proceedings, if any; and (3) a certified copy of the docket entries

prepared by the district clerk.” An email with the district court that is not

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 31

part of the docket is not one of these items, so it is not part of the record on

appeal. The appendix is designed to be a subset of the record on appeal that

is “sufficient for considering and deciding the issues on appeal.” MilliganHitt v. Bd. of Trs. of Sheridan Cnty. Sch. Dist. No. 2, 523 F.3d 1219, 1231

(10th Cir. 2008) (quoting 10th Cir. R. 30.1(A)(1)). Accordingly, it must

include the items listed in Rule 28.2(A)(1) of the Tenth Circuit rules: “copies

of all pertinent written findings, conclusions, opinions, or orders of a district

judge.” Informal email correspondence with the court is outside the scope of

these rules.

Second, even if this email could be considered part of the record on

appeal, we deny the motion because it should have been submitted by

Appellants in the original appendix. Rule 30.1(B)(3) of our rules states that

we “need not remedy any failure of counsel to provide an adequate appendix.”

In WildEarth Guardians v. U.S. Fish & Wildlife Service, 784 F.3d 677 (10th

Cir. 2015), we denied a litigant’s motion to file a supplemental appendix

under this rule because we concluded that the documents that the party

wanted to add in the supplemental appendix “could and should have been

included in their original appendix if they wanted to rely upon them.”

WildEarth, 784 F.3d at 702. If Appellants had wanted to rely on the email on

appeal, they should have tried to include it in their original appendix. For

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 32

these two independent reasons, we deny Appellants’ opposed motion to

supplement their appendix with the email exchange.

Appellants cannot show that the district court abused its discretion

by declining to hold a hearing on the SEC’s PI motion because they

themselves (along with the SEC) requested that the district court cancel

the PI hearing that the court had scheduled, and Appellants never

requested that the court schedule a new PI hearing.

The court initially scheduled a hearing to evaluate the necessity of a PI

for January 13, 2023. Appellants (along with the SEC) then requested that

the court “vacate the preliminary injunction hearing currently set for 9:30

a.m. on January 13, 2023, without prejudice to any future request by the

[SEC], the Defendants, and/or the Relief Defendants to reset such hearing.”

Aplee.’s Suppl. App. at 28. Appellants did not state that they would submit a

future request, nor did they seek a delay. Accordingly, the court merely

granted the parties’ joint motion when it vacated the PI hearing scheduled for

January 13. From that point on, Appellants never requested that the district

court reschedule an evidentiary hearing.

Although Appellants assert in their Opening Brief that during the

seven months prior to the district court’s ruling on the PI, “Reven inquired

with the court about a possible hearing,” Aplts.’ Opening Br. at 63, this claim

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is unsupported. See United States v. Abdenbi, 361 F.3d 1282, 1288 (10th Cir.

2004) (declining to credit a litigant’s assertion of a fact in his brief because

“there is absolutely no record support for [the] assertion”). The inquiry that

Appellants are referring to is the email exchange that Appellants sought to

supplement their appendix with, which, as explained supra, we will not

consider.

What’s more, even if we were to consider the email exchange, its actual

text reveals that Appellants did not request that the court hold an

evidentiary hearing or even inquire about whether the court would hold one.

Rather, the email shows Appellants merely asking whether the court had

everything it needed to make a decision. In the email, Appellants only allude

to supplemental briefing, not a hearing. Appellants certainly did not request

that the court hold an evidentiary hearing. “Ordinarily, a district court does

not abuse its discretion in deciding not to hold an evidentiary hearing when

no such request is ever made.” Robinson v. City of Edmond, 160 F.3d 1275,

1286 (10th Cir. 1998). Accordingly, the court did not abuse its discretion by

not electing, sua sponte, to hold a hearing after the parties requested that it

vacate the first one.

Appellants’ primary argument on appeal is that the district court

abused its discretion by concluding that the SEC had satisfied the conditions

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for a PI. Our analysis of this argument proceeds as follows. In the first

subsection, we discuss the correct legal standard for granting PIs based on

allegations of securities-law violations. As we will explain, this test involves

peering into the likely merits of the SEC’s allegations of securities-law

violations, which we undertake in the second subsection. In the third

subsection, we analyze the district court’s evaluation of the remaining factors

that comprise the applicable PI standard. We conclude that the district court

applied the correct PI standard and permissibly determined that the SEC

had satisfied that standard.

This first subsection explains the applicable legal standard to obtain a

PI under the Securities Act and the Exchange Act.

The standard for an ordinary PI in a typical civil suit that preserves

the status quo is well-established:

To succeed on a typical preliminary-injunction motion, the

moving party needs to prove four things: (1) that [it is]

“substantially likely to succeed on the merits[;]” (2) that [it

will] “suffer irreparable injury” if the court denies the

injunction; (3) that [its] “threatened injury” (without the

injunction) outweighs the opposing party’s under the

injunction[;] and (4) that the injunction isn’t [“]adverse to the

public interest.”

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Mrs. Fields Franchising, LLC v. MFGPC, 941 F.3d 1221, 1232 (10th Cir.

2019) (quoting Free the Nipple—Fort Collins v. City of Fort Collins, 916 F.3d

792, 797 (10th Cir. 2019)). These four factors come from the Supreme Court’s

opinion in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7

(2008). We refer to these four factors as the Winter factors.

However, the Securities and Exchange Acts also provide their own

terms for when courts may grant PIs in cases involving probable securitieslaw violations. Under Section 20 of the Securities Act, a district court may

grant a PI “upon a proper showing” that “any person is engaged or about to

engage in any acts or practices which constitute or will constitute a violation

of the provisions of this subchapter, or of any rule or regulation prescribed

under authority thereof.” 15 U.S.C. § 77t(b). Similarly, under Section 21 of

the Exchange Act, a district court may grant a PI “upon a proper showing”

that “any person is engaged or is about to engage in acts or practices

constituting a violation of any provision of this chapter, [or] the rules or

regulations thereunder.” 15 U.S.C. § 78u(d)(1).

Appellants contend that the proper standard for evaluating whether to

grant a PI under securities laws includes six total factors: the four Winter

factors and two securities-specific factors, which it defines as “(1) a ‘clear

showing’ that a violation of the federal securities laws has occurred, and (2) a

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‘substantial showing’ that the violation is likely to occur again.” Aplts.’

Opening Br. at 26. Furthermore, Appellants contend that because the PI at

issue “alters the status quo,” the SEC’s burden is “heightened” in that the

SEC must make a “‘strong showing’ regarding both the likelihood of success

on the merits and the balance of harms resulting from the requested

injunction”—two of the Winter factors. Id. at 27–28.

The SEC agrees with Appellants that it must establish the four Winter

factors. However, it argues that the two securities-related factors Appellants

propound are not additional requirements for a securities-fraud-related PI.

Additionally, it contends that the asset freeze component of the PI preserves

the status quo rather than altering it, so the type of PI at issue is “not

‘historically disfavored’” and does not trigger a heightened burden. Aplee.’s

Resp. Br. at 31.

The traditional four-factor test from Winter, rather than the six-factor

test posited by Appellants, remains the applicable PI standard for this case.

Appellants cite two Tenth Circuit cases as the source of the two

securities-related factors it believes the SEC must prove on top of the four

equitable factors of Winter. The first case, SEC v. Scoville, 913 F.3d 1204

(10th Cir. 2019), merely quotes Winter for the proposition that “[b]ecause the

grant of a preliminary injunction is ‘an extraordinary remedy,’ the movant

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must make a ‘clear showing’ that he is entitled to the injunction.” Scoville,

913 F.3d at 1213. Scoville does not establish that, as a fifth PI factor, a

plaintiff must make a “‘clear showing’ that a violation of the federal securities

laws has occurred.” Aplts.’ Opening Br. at 26. Nor does it establish that a

plaintiff must make a “‘substantial showing’ that the violation is likely to

occur again.” Id.

The second Tenth Circuit case Appellants cite, SEC v. Curshen, 372 F.

App’x 872 (10th Cir. 2010), is an unpublished order and judgment, and so it

cannot establish a legal standard for our court. Curshen does cite to a

published opinion, SEC v. Pros International, Inc., 994 F.2d 767 (10th Cir.

1993), in which we stated, “An injunction based on the violation of securities

laws is appropriate if the SEC demonstrates a reasonable and substantial

likelihood that the defendant, if not enjoined, will violate securities laws in

the future.” Pros Int’l, 994 F.2d at 769. However, Pros International and

Curshen both concerned permanent injunctions following definitive

determinations of liability, not preliminary injunctions.

Regardless, the recent Supreme Court case Starbucks Corp. v.

McKinney, 602 U.S. 339 (2024), definitively clarifies that a PI, even one used

to enforce securities laws, is governed by the traditional four-factor Winter

test. In Starbucks Corp., the Supreme Court evaluated the validity of a twofactor test the Sixth Circuit had established for PIs pertaining to a particular

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kind of labor dispute, which the Sixth Circuit had gleaned from language in

the National Labor Relations Act (“NLRA”) that provided for such PIs “as [a

district court] deems just and proper.” Starbucks Corp., 602 U.S. at 343.

Working from the notion that “[w]hen Congress empowers courts to

grant equitable relief, there is a strong presumption that courts will exercise

that authority in a manner consistent with traditional principles of equity,”

the Supreme Court determined that “[f]or preliminary injunctions, the four

criteria identified in Winter encompass the relevant equitable principles.” Id.

at 345. The Court explained that “absent a clear command from Congress,

courts must adhere to the traditional four-factor test.” Id. at 346. Looking to

the language in the NLRA, the Court decided that “[n]othing in [the relevant

part of the NLRA] displaces the presumption that . . . traditional principles

govern” adjudication of equitable relief. Id. at 345. Accordingly, the Court

concluded “that district courts must use the traditional four-part test when

evaluating [a] request for a preliminary injunction under [the relevant part of

the NLRA],” not the court-created two-factor test. Id. at 345.

Starbucks Corp. shows that the relevant PI standard here also consists

of the four equitable factors from Winter. Starbucks Corp. directs us to look

for “a clear command from Congress” in the statute authorizing the PI at

issue that would “overcome[] the presumption that the four traditional

criteria govern.” Id. at 346. Neither of the relevant sections—Section 20 of

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the Securities Act or Section 21 of the Exchange Act—contains such a clear

command. They merely state the first equitable Winter factor—that is, a

clear showing that the plaintiff is likely to succeed on the merits—with

specificity, by stating what success on the merits means (i.e., a showing that

“any person is engaged or about to engage in any acts or practices which

constitute or will constitute a violation of the provisions of this subchapter, or

of any rule or regulation prescribed under authority thereof”). See 15 U.S.C.

§ 77t(b); 15 U.S.C. § 78u(d)(1). While they also permit PIs upon a showing

that a person is “about to engage” in violations of the securities laws, see id.;

15 U.S.C. § 77t(b), they do not set out a requirement that the SEC

demonstrate “a reasonable and substantial likelihood that the defendant, if

not enjoined, will violate securities laws in the future,” Pros Int’l, Inc., 994

F.2d at 769.

This conclusion is bolstered by the Supreme Court’s opinion in Hecht

Co. v. Bowles, 321 U.S. 321 (1944), which the Court cited in Starbucks Corp.

In Hecht, the Court evaluated the language in the Emergency Price Control

Act of 1942, which, in almost identical language to the operative sections of

the Securities and Exchange Acts, provided that courts can and should grant

an injunction if the regulator “shows that a defendant ‘has engaged or is

about to engage’ in a prohibited act.” Starbucks Corp., 602 U.S. at 347

(quoting Hecht, 321 U.S. at 322). The Supreme Court determined that this

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language did not “create such ‘a major departure from th[e] long tradition’ of

equity” that it displaced the four-factor PI standard from Winter. Id.

(alteration in original) (quoting Hecht, 321 U.S. at 330). Accordingly, the

nearly identical language in the Securities and Exchange Acts similarly does

not displace the four-factor PI standard from Winter.

Starbucks Corp. makes clear that courts must apply the four Winter

factors when deciding whether to grant a PI absent a “clear command from

Congress” to the contrary. 602 U.S. at 346. The securities laws at issue

contain no such clear command, so the traditional four-factor test applies.

However, Appellants are correct that a heightened PI standard for

status quo-altering PIs applies in this case. As a matter of law, “courts

‘disfavor’ some preliminary injunctions and so require more of the parties

who request them.” Mrs. Fields Franchising, LLC, 941 F.3d at 1232 (quoting

Free the Nipple—Fort Collins, 916 F.3d at 797). For such injunctions, “the

moving party faces a heavier burden on the likelihood-of-success-on-themerits and the balance-of-harms factors: [it] must make a ‘strong showing’

that these tilt in [its] favor.” Free the Nipple—Fort Collins, 916 F.3d at 797

(quoting Fish, 840 F.3d at 724). “[A] disfavored injunction may exhibit any of

three characteristics: (1) it mandates action (rather than prohibiting it), (2) it

changes the status quo, or (3) it grants all the relief that the moving party

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could expect from a trial win.” Mrs. Fields Franchising, LLC, 941 F.3d at

1232 (quoting Free the Nipple—Fort Collins, 916 F.3d at 797).

The PI at issue falls into the second category. Although the asset

freeze here is designed to preserve the status quo, that is not the only

component of the district court’s PI. Persuasive authority from the Second

Circuit establishes that a “prohibition against future securities law violations

. . . . accomplishes significantly more than preservation of the status quo.”

SEC v. Unifund SAL, 910 F.2d 1028, 1040 (2d Cir. 1990). The PI at issue

includes this forward-looking prohibition. It therefore alters the status quo

and triggers the heighted PI standard. Consequently, the SEC “faces a

heavier burden on the likelihood-of-success-on-the-merits and the balance-ofharms factors: [it] must make a ‘strong showing’ that these tilt in [its] favor.”

Free the Nipple—Fort Collins, 916 F.3d at 797 (quoting Fish, 840 F.3d at

724).

In sum, the proper standard for evaluating whether a PI to enforce the

securities laws at issue is merited remains the four equitable factors

articulated in Winter. These factors are: a showing that the plaintiff “is likely

to succeed on the merits, that [it] is likely to suffer irreparable harm in the

absence of preliminary relief, that the balance of equities tips in [its] favor,

and that an injunction is in the public interest.” Winter, 555 U.S. at 20.

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Because the first Winter factor requires the plaintiff to show that it is

likely to succeed on the merits, we now summarize the relevant securities laws

that the SEC accuses Appellants of violating.

First, the SEC alleges that Appellants violated Section 17(a) of the

Securities Act. This section provides that:

It shall be unlawful for any person in the offer or sale of

any securities (including security-based swaps) or any

security-based swap agreement . . . by the use of any

means or instruments of transportation or communication

in interstate commerce or by use of the mails, directly or

indirectly—(1) to employ any device, scheme, or artifice to

defraud, or (2) to obtain money or property by means of

any untrue statement of a material fact or any omission to

state a material fact necessary in order to make the

statements made, in light of the circumstances under

which they were made, not misleading; or (3) to engage in

any transaction, practice, or course of business which

operates or would operate as a fraud or deceit upon the

purchaser.

15 U.S.C. § 77q(a).

The SEC also alleges that Appellants violated Section 10(b) of the

Exchange Act. This section provides that:

It shall be unlawful for any person, directly or indirectly,

by the use of any means or instrumentality of interstate

commerce or of the mails, or of any facility of any national

securities exchange— . . . (b) To use or employ, in

connection with the purchase or sale of any security

registered on a national securities exchange or any

security not so registered, or any securities-based swap

agreement[,] any manipulative or deceptive device or

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contrivance in contravention of such rules and regulations

as the [SEC] may prescribe as necessary or appropriate in

the public interest or for the protection of investors.

15 U.S.C. § 78j(b).

Finally, Rule 10b-5, which the SEC enacted pursuant to the

Exchange Act, provides:

It shall be unlawful for any person, directly or indirectly,

by the use of any means or instrumentality of interstate

commerce, or of the mails or of any facility of any national

securities exchange, (a) To employ any device, scheme, or

artifice to defraud, (b) To make any untrue statement of a

material fact or to omit to state a material fact necessary

in order to make the statements made, in the light of the

circumstances under which they were made, not

misleading, or (c) To engage in any act, practice, or course

of business which operates or would operate as a fraud or

deceit upon any person, in connection with the purchase

or sale of any security.

17 C.F.R. § 240.10b-5 (2024).

“The scope of Rule 10b-5 is coextensive with the coverage of

[Exchange Act] § 10(b).” SEC v. Wolfson, 539 F.3d 1249, 1256 n.11 (10th

Cir. 2008) (quoting SEC v. Zandford, 535 U.S. 813, 816 n.1 (2002)).

“To establish a § 10(b) or Rule 10b-5 violation, the SEC must prove

that [the defendant] made: (1) ‘a misrepresentation or omission (2) of

material fact, (3) with scienter, (4) in connection with the purchase or sale

of securities, and (5) by [means of interstate commerce].” SEC v. Smart,

678 F.3d 850, 856 (10th Cir. 2012) (second alteration in original) (footnote

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 44

omitted) (quoting Wolfson, 539 F.3d at 1256). “Section 17(a)(1)–(3)

requires substantially similar proof with respect to the offer or sale of

securities.” Id. at 857.

“The primary ‘difference between § 17(a) and § 10(b) lies in the

element of scienter.’” Id. (quoting Wolfson, 539 F.3d at 1256). We have

said that “Section 10(b) and § 17(a)(1) require the SEC to establish at

least recklessness, whereas negligence is sufficient for § 17(a)(2) and

§ 17(a)(3).” 6 Id. In the securities law context, recklessness means

“conduct that is an extreme departure from the standards of ordinary

care, and which presents a danger of misleading buyers or sellers that is

either known to the defendant or is so obvious that the actor must have

been aware of it.” 7 GenAudio, 32 F.4th at 923 (quoting City of

Philadelphia v. Fleming Cos., Inc., 264 F.3d 1245, 1258 (10th Cir. 2001)).

6 By the language of its complaint, the SEC alleges that Appellants violated § 17(a)(1), § 17(a)(2), and § 17(a)(3). See Aplts.’ App., Vol. I, at 48–49.

7 The district court assessed that the SEC had shown it would likely be able to prove that Appellants made their statements recklessly. Because we agree, we do not further examine whether the SEC made a sufficient showing of probable negligence. In other words, we assess the SEC’s ability to establish the five elements listed in SEC v. Smart for a violation of Section 10(b), including recklessness. A sufficient showing on this more exacting test is sufficient to satisfy the lower test for negligence.

Appellate Case: 24-1235 Document: 73-1 Date Filed: 10/14/2026 Page: 45

“A statement or omission is only material if a reasonable investor

would consider it important in determining whether to buy or sell stock.”

Grossman v. Novell, Inc., 120 F.3d 1112, 1119 (10th Cir. 1997). “Whether

information is material also depends on other information already

available to the market; unless the statement ‘significantly altered the

“total mix” of information’ available, it will not be considered material.”

Id. (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).

The district court reasonably determined that the SEC had made a

strong showing that the first Winter factor tilted in its favor. More

specifically, the district court did not abuse its discretion in concluding that

the SEC was likely to succeed on the merits of its claims that Appellants

committed securities fraud by making material omissions or

misrepresentations with the requisite mens rea about three topics: (1)

executive compensation, (2) the existence of audited financial statements and

Reven’s readiness to go public, and (3) Reven’s involvement in other

litigation. 8

8 We again emphasize that because we are evaluating the case at the PI stage, we are not reaching binding conclusions about Appellants’ conduct. Such conclusions are appropriate for the fact-finder in the district court to make in the first instance during the actual merits litigation of the SEC’s enforcement action, which may come at a later date. Accordingly, our preceding discussion should not be taken as authoritative

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First, we examine the district court’s conclusion that the SEC

had “made a clear showing that it is likely to prove the defendants made false

and misleading statements or omissions to investors regarding the Reven

Principals’ annual compensation,” Aplts.’ App., Vol. XIV, at 2414, and that it

also is “likely to prove that the misrepresentations in the PPMs regarding the

Reven Principals’ compensation were made recklessly,” and that, in any

event, the SEC had made “a clear showing that those misrepresentations

were made at a minimum negligently,” id. at 2418.

More specifically, the district court found that the SEC was likely to

prove that, in PPMs dated August 2018, July 2020, and January 2021,

Appellants disclosed to investors that the Reven principals received $4.89 to

$9.78 million less in compensation than they actually received. We see no

abuse of discretion in the court’s determination that the SEC had shown that

it was likely to prove on the merits that Appellants recklessly made false and

pronouncements of Appellants’ liability. We merely analyze whether the first cut of the evidence presented by the SEC could support the district court’s conclusion that the SEC was likely to be able to show at a future time that Appellants violated securities laws.

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misleading material statements to investors about the Reven principals’

compensation from 2019 to 2021.

Appellants’ argument on appeal is that the compensation the Reven

principals received was correctly reflected in the principals’ employment

agreements, which would have been made available to investors if the

investors had asked for them. Appellants argue that because the principals’

actual compensation was in line with their employment agreements, the

compensation statements in the PPMs were not, in context, (1) “false or

misleading” or (2) “material.” Appellants further argue that executive

compensation in any amount was not material to investors. Appellants

additionally argue that the district court had no basis to conclude that any

misrepresentations were made with scienter.

The SEC responds that Appellants’ statements in the PPMs were both

false and material. It contends that Appellants’ reliance on the employment

contracts is “a meritless distraction” and that the contracts do not affect the

falsity of the PPM statements. Aplee.’s Resp. Br. at 34–35. It also points to

evidence that compensation is material to investors. Finally, the SEC argues

that Appellants’ arguments against scienter are “a series of irrelevant

assertions that do not undermine the court’s findings.” Id. at 40.

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The SEC presented a sufficient showing of the statements’ falsity.

Appellants’ false statements in the PPMs were not made true by the

existence of the employment agreements. Appellants reported to investors

through their PPMs that the Reven principals were compensated $1.62

million for 2019, $1.98 million for 2020, and $2.16 million for 2021. These

figures are significantly smaller than the actual compensation the Reven

principals received those three years. The figures in the PPMs were

therefore false representations of the Reven principals’ compensation. That

other documents that investors could have asked for stated that the

principals could have been compensated at a higher rate does not change the

false nature of the PPMs.

iii

Second, the SEC presented sufficient evidence that would likely prove

that these misrepresentations were material.

Appellants are correct that other information available in the market

alongside misrepresentations is relevant to our analysis of the materiality of

the misrepresentations. See Grossman, 120 F.3d at 1119 (“Whether

information is material also depends on other information already available

to the market . . . .”). In this regard, we assume without deciding that the

employment agreements are relevant to the materiality determination.

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However, ultimately, the agreements do not lessen the material impact

of the (false) representations in the PPMs. The employment agreements

prospectively provided that the Reven principals would receive certain

amounts of compensation. As Appellants describe in their Opening Brief, the

agreements established that “the Reven Principals had contractual rights to

the money they received.” Aplts.’ Opening Br. at 34. However, the

agreements did not purport to convey the actual recorded compensation that

the Reven principals received, as the PPMs did. The employment

agreements provided no reason for an investor to doubt that the Reven

principals were being compensated the amounts reported in the PPMs.

Appellants’ argument that executive compensation as a whole is not

material is unpersuasive. Appellants presented evidence that at least one

investor did not consider the Reven principals’ compensation material to his

decision to invest. However, the SEC presented evidence that another

investor did consider the Reven principals’ compensation material to her

decision to invest. Therefore, we cannot say that it was an abuse of

discretion for the court—after assessing the merits of these dueling

evidentiary showings—to determine that executive compensation statements

were material to Reven’s investors. Cf. United States v. McComb, 519 F.3d

1049, 1053 (10th Cir. 2007) (observing in the context of applying the abuse of

discretion standard of review that “we recognize that in many cases there will

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be a range of possible outcomes the facts and law at issue can fairly support;

rather than pick and choose among them ourselves, we will defer to the

district court's judgment so long as it falls within the realm of these

rationally available choices”).

Moreover, Appellants have not identified any cases in which

statements about the amount of executive compensation have been found

immaterial. On the other hand, as the district court accurately found, several

cases from outside our circuit have found that misstatements about executive

compensation are material. See, e.g., Aplts.’ App., Vol. XIV, at 2417–18

(citing SEC v. Rsch. Automation Corp., 585 F.2d 31, 35 (2d Cir. 1978) (“What

reasonable investor would not wish to know that the money raised by stock

sales would not be used for working capital but be diverted to [the company]’s

officers?”)). Additionally, at least one precedential case, Smart, confirms that

“it would be material to a reasonable investor that his or her money was not

being used as represented,” i.e., to pay the principals rather than for other

productive purposes. 678 F.3d at 857.

Finally, the district court reasonably concluded that the SEC made a

sufficient showing that it is likely to prove scienter for these statements. As

the SEC accurately points out, Appellants only offer “a series of irrelevant

assertions” regarding the court’s conclusion that Appellants possessed the

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requisite scienter when making the compensation-related

misrepresentations. Aplee.’s Resp. Br. at 40–42. Appellants reiterate that

“the Reven Principals were indisputably entitled to—and just as importantly

for purposes of this appeal, believed they were entitled to—far more in

compensation under their employment agreements” than they actually

received. Aplts.’ Opening Br. at 49. And they reemphasize that “the Reven

Principals also frequently put their own funds into the Company to pay

employees and fulfill staffing agreements.” Id.

Neither of these two statements provides a reason to depart from the

district court’s commonsensical finding that the Reven principals knew how

much compensation they were receiving and knew the content of the PPMs

they were providing to investors. See Aplts.’ App., Vol. XIV, at 2418–20; City

of Philadelphia, 264 F.3d at 1258 (explaining that scienter can be satisfied

for securities fraud when the defendant’s conduct presents a danger of

misleading buyers that is “so obvious that the actor must have been aware of

it” (quoting Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1232 (10th Cir.

1996))); GenAudio, 32 F.4th at 924 (“The securities laws impose a personal

obligation on corporate executives . . . to sufficiently ground their

communications in facts.”).

In conclusion, the district court properly concluded that the SEC was

likely to be able to show, through three PPMs that Appellants made

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misrepresentations about the amount of compensation the Reven principals

received from 2019 to 2021; that these misrepresentations were material to

investors; and that these misrepresentations were made with the requisite

scienter.

Next, we examine the district court’s determination that the SEC had

shown that it was likely to prove that Appellants made material

misstatements with scienter about the status of audited financial statements

and Appellants’ readiness to go public. Here too we see no abuse of discretion

in the district court’s assessment.

Appellants contend that the district court’s analysis of their

representations about audited financial statements and their

preparedness to go public went awry on three elements: falsity,

materiality, and scienter. Appellants argue that their statements about

obtaining an audit were understood to be prospective rather than

contemporaneously descriptive. They also contend that these statements

“did not influence investors’ decisions” and that investors “understood that

a public offering was possible, but by no means guaranteed,” making those

statements not material. Aplts.’ Opening Br. at 42. Finally, Appellants

contend that the statements were, “[a]t the absolute most,” negligent

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rather than reckless misrepresentations because Appellants did not intend

to mislead or know that they were misleading investors. Id. at 50.

The SEC defends the district court’s reasoning on all three elements.

The SEC contends that there was “nothing ambiguous” in Appellants’

clear representations that they were “‘currently undergoing’ [their] first

audit” and that they “ha[d]” audited financial statements. Aplee.’s Resp.

Br. at 44. The SEC also argues that Appellants’ intentional decision to

change the tense of the key statements from “will have” (as in, Appellants

will have audited financial statements in the future) in the September 9,

2019, email to “has” (as in, Reven has audited financial statements now)

in later emails proves scienter.

What’s more, the SEC argues that characterizing Appellants’

statements about an upcoming IPO as prospective cannot protect those

statements because Appellants knew the plans communicated lacked “a

sufficient factual basis” in reality. Id. at 45–46 (citing GenAudio, 32 F.4th

at 930–31). On materiality, the SEC argues that readiness and plans for a

public offering are plainly material to investors, as proven by several

investors’ statements.

In their Reply Brief, Appellants home in on scienter and attempt to

distinguish their prospective statements about the company’s readiness to go

public from the Panglossian representations in GenAudio on the basis that

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they had taken multiple steps towards going public. They also reiterate their

argument that the Reven principals’ declarations and subsequent clarifying

statements show the absence of an intent to mislead.

We are unpersuaded by Appellants’ arguments. First, the district

court reasonably concluded that the SEC sufficiently showed that it was

likely to prove Appellants’ statements about the audit were clearly false

because no audit ever occurred. In multiple emails, Appellants

distributed a slide deck stating, “The Company has the minimum required

two years of audited financial statements ending August 2021.” See

Aplts.’ App., Vol. VIII, at 948; Aplts.’ App., Vol. X, at 1368, 1437; Aplts.’

App., Vol. XIV, at 2354. Similarly, on December 9, 2019, Mr. Volk emailed

an investor stating, “We are currently undergoing our first audit now.”

Aplts.’ App., Vol. VI, at 507. Yet, the evidence shows—and Appellants do

not refute—that Appellants never even retained a firm to begin an audit

of Reven’s financial statements.

Appellants’ only counterargument is that the statements were

meant to be prospective. However, the plain meaning of these statements

belies this argument. Consider Mr. Volk’s December 9, 2019, email—“We

are currently undergoing our first audit now.” Id. (emphasis added). A

prospective reading of this statement is simply not possible.

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It is true that the slide decks contained a “[d]isclaimer” stating that

“[c]ertain statements in this presentation deck constitute ‘forward-looking

statements.’” See, e.g., Aplts.’ App., Vol. VIII, at 934. However, the

disclaimer itself likely proves, by linguistic contrast, that the key

statements, which are unambiguous, were not prospective. The disclaimer

explains that the “forward-looking statements” in the slide deck “can be

identified by the use of forward-looking terminology, such as the words

‘will,’ ‘anticipate,’ ‘believe,’ ‘estimate,’ ‘expect’ and similar expressions.”

Id. The key statements at issue contain no such “forward-looking

terminology.” In fact, Appellants removed such forward-looking

terminology (“will have”) from the statement in the period between the

September 2019 slide deck distribution, Aplts.’ App., Vol. IX, at 1224, and

the November 2021 slide deck distribution, Aplts.’ App., Vol. X, at 1437

(changing the tense to “has”).

The SEC will likely show that Appellants’ representation about

filing a Form S-1 was also false. On February 13, 2020, Mr. Lange

emailed Ms. Schaatt that Reven had “finally decided that we would

comply with all the (‘super smart’) investment bankers and file an

S1 . . . . We have since done that . . . .” Aplts.’ App., Vol. IX, at 1242

(emphasis added). Appellants unambiguously represented to an investor

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that they had filed an S-1. However, the evidence shows that Appellants

had not done so.

iii

The district court reasonably determined that the SEC will also

likely be able to show that these misrepresentations were material. They

concern Reven’s ability to conduct a public offering, which Appellants do

not dispute is one of the most impactful events on the status and financial

health of a company. See GenAudio, 32 F.4th at 933 (favorably citing the

Second Circuit’s assertion in SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833,

849 (2d Cir. 1968), that “[m]aterial facts include not only information

disclosing the earnings and distributions of a company but also those facts

which affect the probable future of the company and those which may

affect the desire of investors to buy, sell, or hold the company’s

securities”). The SEC has also presented persuasive caselaw showing the

importance to investors of audited financial statements specifically. See

Aplee.’s Resp. Br. at 42–43 (first citing McCurdy v. SEC, 396 F.3d 1258,

1261 (D.C. Cir. 2005); then citing United States v. Arthur Young & Co.,

465 U.S. 805, 819 n.15 (1984); and then citing New Eng. Carpenters

Guaranteed Annuity & Pension Funds v. DeCarlo, 122 F.4th 28, 53 (2d

Cir. 2023), as amended (Oct. 31, 2024)).

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Appellants offer two retorts. First, they claim that they brought out

evidence that investors did not rely on the representations in the slide

deck. Second, they claim that investors confirmed that they understood a

public offering was not guaranteed. The SEC correctly responds to

Appellants’ first counterargument by pointing out that actual reliance by

specific investors is not part of the materiality inquiry. See GenAudio, 32

F.4th at 953 (quoting Wolfson, 539 F.3d at 1256).

And Appellants’ second argument is inapposite. The alleged

misrepresentation was not that Reven was about to engage in a public

offering, so investors’ statements that they understood a public offering

was not guaranteed are simply beside the point. Rather, Appellants’

misrepresentation pertained to more granular and concrete matters—

specifically, matters relating to Reven’s ability to go public: viz.,

information conveying that Reven had the pieces in place, including

audited financial statements, to imminently go public if it decided to do so.

And there is evidence that investors were influenced in making their

investment decisions by Reven’s ability to go public. See, e.g., Aplts.’ App.,

Vol. XIII, at 1978 ¶ 7 (Decl. of Geoff Leopold, June 10, 2023) (“An

important part of my view of Reven and my decision to invest was the

potential exit strategy in the form of a Direct Public Offering (‘DPO’) or

Initial Public Offering (‘IPO’).”); Aplts.’ App., Vol. XIV, at 2308, Tr. 117:6–

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9 (“[I]f I had known that they were not doing all of the things that they

told me that they were doing to prepare for a DPO, I would not have made

the investment.”).

In sum, the evidence supports a showing that Appellants’

misrepresentations about the status of audited financial statements and

their readiness to conduct a public offering were material.

Third and finally, the district court reasonably determined that the

SEC will likely be able to show that Appellants’ misrepresentations were

made with scienter. Appellants rely on Mr. Volk’s declaration stating that

he did not intend to mislead investors and on subsequent statements

Appellants made to investors showing that an audit clearly was not

completed. But, as the district court found, these points are simply not

enough to overcome the conclusion that Appellants made

misrepresentations recklessly. There is no ambiguity in the

representations, particularly those about the audit, so it was “not

reasonable to expect an investor to think” that the statements “didn’t

mean what [they] said.” Aplts.’ App., Vol. XIV, at 2427–28. In other

words, despite Appellants’ purported intent to represent the prospective

state of affairs, the risk of misleading a reasonable investor was “so

obvious that the actor must have been aware of it.” City of Philadelphia,

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264 F.3d at 1260 (quoting Anixter, 77 F.3d at 1232); see GenAudio, 32

F.4th at 924 (“The securities laws impose a personal obligation on

corporate executives . . . to sufficiently ground their communications in

facts.”).

In conclusion, the district court did not abuse its discretion when it

concluded that the SEC was likely to be able to show that Appellants made

multiple material misrepresentations about a nonexistent audit and about

Reven’s readiness to go public with the requisite scienter.

The final category of representations that the district court concluded

the SEC would likely show were fraudulent pertain to Reven’s involvement in

litigation. We discern no abuse of discretion in the district court’s findings

that the SEC made a sufficient showing as to these statements.

Appellants argue that the court’s conclusion improperly penalized

them for a “perfectly understandable, if incorrect” understanding of the

law. Aplts.’ Opening Br. at 44–45. Appellants explain that they did not

believe the Florida lawsuit qualified as the type of litigation that they

claimed they were not engaged in because until December 26, 2019, the

Florida lawsuit was only against Reven Pharmaceuticals, Inc. and Mr.

Lange. They claim they had no reason to know that Reven Holdings, Inc.

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and Reven, LLC—that is, the entities that submitted the 2018 PPM—were

liable for Reven Pharmaceuticals, Inc.’s litigation. Similarly, they defend

Mr. Lange’s February 13, 2020, statement that Reven had “no lawsuits

from shareholders” by saying that Mr. Lange did not understand that a

suit by the guardian of a shareholder counted. See id. at 45–46. Finally,

they defend their 2021 statements that management did not believe there

was any pending litigation that was material by arguing that the district

court incorrectly assessed materiality based on the final settlement

amount of the lawsuit rather than the conditions existing at the time; the

latter, they claim, supported management’s belief that the lawsuit was

baseless.

The SEC defends the “reasonabl[eness]” of the district court’s

conclusions regarding the Florida litigation. See Aplee.’s Resp. Br. at 48–

50. The SEC underscores the district court’s assessment that Mr. Lange’s

“hair-splitting” statement that there were no pending suits by

shareholders was, in fact, evidence that he was intentionally trying to hide

the suit. See id. at 49. It also points out that Reven Holdings, Inc. had

assumed the liabilities of Reven Pharmaceuticals, Inc. ten days before the

first PPM, so the Reven principals should have known that Reven

Holdings, Inc. had assumed responsibility for the litigation. And the SEC

echoes the court’s conclusion that Appellants’ justification for their 2021

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statements (that they did not believe the litigation was material) is not

credible given how long the litigation had been going on and the final

settlement amount of the litigation.

The district court’s conclusion regarding Appellants’

misrepresentations about litigation was not an abuse of discretion.

Appellants acknowledge that Reven Pharmaceuticals, Inc. “transferred all

its asset[s] and liabilities to Reven Holdings[, Inc.] 10 days prior to the

issuance of the [first] PPM.” Aplts.’ Opening Br. at 45. Therefore, even

though Reven Holdings, Inc. was not a party to the lawsuit from the suit’s

inception, throughout all of the PPMs, as well as during Mr. Lange’s

February 13, 2020, email, Reven Holdings, Inc. was liable for the lawsuit.

Therefore, the SEC will likely be able to show that Appellants’ statements

that the Reven Holdings, Inc. was not facing litigation were materially

misleading.

Additionally, it was reasonable for the court to conclude that Reven’s

executives, presumably the individuals who decided to transfer all of

Reven Pharmaceuticals, Inc.’s assets and liabilities to Reven Holdings,

Inc., would have known that they were not off the hook from the lawsuit.

See GenAudio, 32 F.4th at 924 (“The securities laws impose a personal

obligation on corporate executives . . . to sufficiently ground their

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communications in facts. . . . Thus, . . . corporate executives . . . cannot

make material representations to shareholders in disregard or

contravention of obvious facts, nor can they find absolution in the failures

of others to disabuse them of their magical thinking regarding obvious

facts.”).

Additionally, Appellants are correct that the final amount of the

settlement is of limited relevance, but in the initial suit the plaintiff

sought damages for his charge’s entire investment in the company, which

was over $2.83 million. Consequently, millions of dollars were at stake in

the litigation from the beginning of the suit, not just during settlement

talks at the suit’s conclusion.

Putting these facts together, it was not an abuse of discretion for the

court to conclude that the SEC was likely to be able to show that

Appellants’ repeated statements that they were not subject to litigation

that could have a material impact on the company “present[ed] a danger of

misleading buyers or sellers that [was] . . . so obvious that the actor must

have been aware of it.” GenAudio, 32 F.4th at 923 (quoting City of

Philadelphia, 264 F.3d at 1258).

***

Based upon the record as found by the district court at the PI stage,

the district court did not abuse its discretion when it determined that the

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SEC had made a sufficient showing on the first Winter factor—viz., a

likelihood of success on the merits of its securities fraud claims against

Appellants.

In this subsection, we turn to the district court’s evaluation of the

remaining three Winter factors. Those three factors require the SEC to

show that it “is likely to suffer irreparable harm in the absence of

preliminary relief, that the balance of equities tips in [its] favor, and that

an injunction is in the public interest.” Winter, 555 U.S. at 20. Although

our analysis is somewhat hindered by the brevity of the district court’s

reasoning, 9 we determine that the district court’s conclusion that the SEC

9 In its initial order granting the PI, the district court did not use the four-factor standard from Winter. However, in its subsequent order denying the motion to lift the asset freeze in its entirety, the district court noted that its previous approach from the initial order had since been “called into question by the Supreme Court’s recent decision in Starbucks Corp. v. McKinney, [602 U.S. 339 (2024)].” Aplts.’ App., Vol. XV, at 2702 n.12. The district court therefore performed a brief alternative analysis under the four traditional Winter factors, finding that they were all satisfied by the SEC. Because we agree that Starbucks directs courts to apply the four-factor Winter standard to evaluate if a PI is merited, the district court’s later analysis under the Winter test is the basis for our evaluation. The court’s analysis is not as fulsome as it could be, but it is sufficient here, particularly given that the Winter factors overlap significantly with the test the district court applied when it first granted the PI.

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had shown all three of these remaining Winter factors was not an abuse of

discretion.

We first determine that the district court’s conclusion that the

second Winter factor was satisfied was not an abuse of discretion.

The district court offered two reasons to conclude that the second

Winter factor, a showing that the SEC, acting on investors’ behalf, was

“likely to suffer irreparable harm in the absence of preliminary relief,” 555

U.S. at 20, had been satisfied. First, the court stated, “Absent a

prohibition against the offer and sale of securities by the Reven

Principals, statutory violations are likely to recur, which could irreparably

harm current and prospective investors.” Aplts.’ App., Vol. XV, at 2702

n.12. Second, the court assessed that “absent some kind of asset freeze,

dissipation of the defendants’ assets could irreparably harm existing

investors and the availability of funds to pay any disgorgement or other

future judgment.” Id.

Appellants argue that the court’s conclusion that violations were

likely to recur was based on the court’s belief that the alleged preexisting

violations had been committed with scienter, and Appellants contend that

this belief was incorrect. Appellants also argue that the asset freeze could

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not be justified by a desire to protect the assets because it had the

opposite effect.

The SEC responds that the district court properly granted the PI to

preserve Appellants’ assets for the court’s jurisdiction. The SEC contends

that the court appropriately found that, absent the freeze, Reven’s assets

would be dissipated, which would deprive investors of the value of their

investments and remove the funds from the court’s jurisdiction.

The court’s conclusion that the SEC had shown it was likely to suffer

irreparable harm in the absence of preliminary relief was not an abuse of

discretion. Appellants rest their challenge on their criticism of the court’s

finding of probable scienter, but, for the reasons explained supra, there

was sufficient record evidence for the court to find probable scienter.

Accordingly, the court’s assessment that violations were likely to recur

unless it enjoined Appellants was supported by the PI record. The

necessity of the asset freeze is discussed further infra, but we similarly

conclude that it was a reasonable determination supported by the district

court’s preliminary factual findings. We therefore accept the court’s

conclusion that the second Winter factor was satisfied. Stated otherwise,

the district court did not abuse its discretion in reaching this conclusion.

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Second, we believe that the district court’s determination that the

third Winter factor was satisfied also did not evince an abuse of discretion.

The district court determined that the balance of equities favored

the PI because the proposed PI entailed a modified asset freeze that

protected investors and the SEC while mitigating, to the extent

reasonable, harm to Appellants.

Appellants argue that the balance of equities did not support the PI.

Their central argument is that the asset freeze was diminishing the value

of Reven’s assets because it was preventing Reven from maintaining its

intellectual property and continuing to develop its invention, thereby

damaging the interests of Reven’s investors. Essentially, Appellants’

argument is that the PI hurt those on both sides, so it was not supported

by the balance of the parties’ equities.

The SEC responds that the district court appropriately created a

narrowly tailored asset freeze that properly balanced the need to maintain

Reven’s assets and the need for the individual Appellants to maintain

their living expenses, with the need to protect Reven’s shareholders.

The district court did not abuse its discretion by determining that

the third Winter factor favored the PI. The district court granted the PI,

including the asset freeze, to “facilitate enforcement of any remedy that

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might be ordered.” Aplts.’ App., Vol. XIV, at 2434. The freeze protected

the assets of the investors because it prevented Appellants from

dispersing those assets during the pendency of the litigation. Other

components of the PI did the same. For example, as the court explained,

the “prohibition against offering or selling Reven Holdings securities will

protect existing investors and potential new investors from being subject

to additional fraudulent activities while the litigation is pending.” Id.

Therefore, the PI clearly benefited the equities of the SEC (and the public

whose interests it was charged with protecting).

However, the district court also narrowed the asset freeze in ways

that protected the equities of Appellants. Upon a second submission by

Appellants (at the court’s invitation), the court narrowed the asset freeze

to permit “third parties to pay expenses on behalf of Reven and its

affiliates,” Reven to “license their intellectual property,” “the Reven

Principals to earn new individual income unrelated to Reven and the other

defendants and use such income to pay for costs incurred by Reven and its

affiliates” for intellectual property maintenance and legal fees, “the Reven

Principals to incur new debt on an individual basis” with the court’s

approval to pay for intellectual property maintenance and legal fees, and

to “motion to the Court to unfreeze individual bank accounts that do not

contain funds attributable to the defendants, after conferral with the

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[SEC] to identify such accounts.” Aplts.’ App., Vol. XV, at 2699–70. The

PI also continued the exception in the TRO that permitted funds to be

used to pay “necessary and reasonable living expenses” for Appellants.

Aplts.’ App., Vol. X, at 1465. Appellants have not shown that these

measures were insufficient to protect their equities to the extent required

by law given the SEC’s showing that they likely violated securities laws.

Accordingly, the district court adequately balanced the interests of all the

parties involved.

Finally, because it does not evince an abuse of discretion, the district

court’s decision that the fourth Winter factor supported the PI also should

be upheld.

The district court determined that the fourth Winter factor was

established because the PI was “not adverse to the public interest.” Aplts.’

App., Vol. XV, at 2702 n.12.

Appellants challenge the court’s conclusion by arguing that the PI

was a “disservice to the public interest” because it “prevented—or at least

severely hindered—the development and commercialization of RJX,

denying the public of a breakthrough treatment for several lifethreatening health conditions.” Aplts.’ Opening Br. at 53.

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The SEC responds that the district court correctly considered the

public interest. It argues that the PI was specifically designed to protect

the integrity of the securities markets and investments in Reven.

Additionally, the SEC contends that the carve-outs the district court built

into the asset freeze enabled the continued development of RJX and so did

not harm the public interest by stopping progress on the drug, and that

any financial shortfalls were a result of Appellants’ financial shortcomings

prior to the asset freeze.

The district court did not abuse its discretion when it concluded that

the public interest weighed in favor of granting the PI, including the asset

freeze. Given its conclusion that the SEC was likely to be able to show

that Appellants had violated securities laws, the court reasonably

concluded that Appellants’ control over the companies’ assets and abilities

to further engage with the securities markets should be halted.

In any event, Appellants’ only argument on this point is that the asset

freeze stopped the development of RJX, which hurt the public’s ability to

access this allegedly beneficial drug at some point in the future. The SEC

does not dispute Appellants’ claim that RJX could benefit the public.

However, ultimately Appellants’ argument does not prevail regardless

because the modifications to the asset freeze sufficiently enabled Appellants

to continue developing RJX to the best of their ability. Short of arguing that

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the asset freeze as a whole should be done away with, Appellants never

requested additional modifications that could have better facilitated the

drug’s development. In sum, the district court did not abuse its discretion

when it concluded that the PI, including numerous modifications to protect

Appellants and facilitate the continued progress of RJX, was in the public

interest.

***

In sum, the district court did not abuse its discretion when it

concluded that the SEC had made a sufficient showing on all four Winter

factors and awarded the SEC a PI on that basis. This is so even though,

as Appellants have alleged, a heightened PI standard for status quoaltering PIs applies in this case.

Appellants’ final argument is that the district court abused its

discretion when it decided to maintain the asset freeze. The court did not

abuse its discretion here, however, because it modified the asset freeze, at

Appellants’ request, to avoid damaging the assets. It was not obligated to

completely lift the freeze because its modifications sufficiently protected

the assets.

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Federal courts are permitted to freeze a defendant’s assets as part of

a PI during a pending securities enforcement action. See, e.g., Scoville,

913 F.3d at 1209. “A freeze of assets is designed to preserve the status

quo by preventing the dissipation and diversion of assets.” SEC v. Infinity

Grp. Co., 212 F.3d 180, 197 (3d Cir. 2000); see also SEC v. Young, Nos. 21-1061, 21-1075, & 21-1322, 2022 WL 2977080, at *2 (10th Cir. July 28,

2022) (unpublished) 10 (acknowledging that “protecting the victims of that

fraud is the primary purpose of the asset freeze”).

The thrust of Appellants’ challenge is that the freeze was destroying

their assets, which contravened its supposed purpose (to preserve the

assets so that the district court could utilize them to grant relief at a later

date). Appellants contend that the modifications the court made to the

asset freeze “were too little and too late to have any meaningful effect.”

10 See, e.g., United States v. Engles, 779 F.3d 1161, 1163 n.1 (10th Cir. 2015) (“Although unpublished orders and opinions generally are not considered binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel, such an order or opinion may be relied on for the purpose of disposing of the issue presented if it has persuasive value with respect to a material issue in a case and would assist the court in its disposition.”).

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Aplts.’ Opening Br. at 57. Appellants argue that their assets should have

been completely freed so they could be put to work continuing the

development of RJX, which, they argue, would “present[] a highly

lucrative reward if successful.” Id. at 61.

The SEC defends the district court’s “measured approach” to the

asset freeze, including its multiple modifications. Aplee.’s Resp. Br. at

58–63. The SEC explains that the asset freeze was justified by the court’s

finding that injunctive relief was necessary to “preserve the status quo

and protect Reven’s assets from further dissipation,” which, in turn, was

supported by the court’s valid findings that Appellants made multiple

material misstatements to investors. Id. at 59. It also defends the

modifications by arguing that Appellants are the ones who proposed those

modifications.

We do not appear to have confronted a challenge to an asset freeze

on this basis—viz., on the theory that the asset freeze is diminishing the

value of the assets rather than preserving them. Neither Appellants nor

the SEC cite a single Tenth Circuit case, published or unpublished, during

their analyses of the asset freeze. We must therefore look to persuasive

authority from our sister circuits (and the animating principles from our

doctrine that align with that authority) as well as the facts of this dispute

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in order to evaluate Appellants’ argument. This approach confirms that

the district court’s nuanced asset freeze was appropriate rather than

“arbitrary, capricious, or whimsical.” Cablevision of Tex. III, L.P., 993

F.2d at 210 (quoting Cox, 941 F.2d at 1125).

The court modified the asset freeze in several significant ways at the

request of Appellants: it permitted third parties to pay expenses on behalf

of Reven, it permitted Appellants to license their intellectual property, it

permitted the Reven principals to earn new individual income (which it

allowed them to use for legal expenses, business expenses, and personal

expenses with approval), and it permitted the Reven principals to incur

new debt on an individual basis. In other words, the court permitted

Appellants to use all means at their disposal—short of enticing other

investors with securities—to obtain new financing and continue to fund

the maintenance of Reven’s intellectual property. The court therefore

went to significant lengths to address the harms Appellants alleged and to

protect the assets subject to the asset freeze. It did not release those

assets to Appellants because, based on its findings of Appellants’

securities violations, the court reasonably concluded that doing so would

have risked dispersing them.

One of Appellants’ criticisms of the court’s modifications is that they

require incremental court approval for specific expenditures, which

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“wastes precious time” when Appellants are faced with “rapidly

approaching deadlines.” Aplts.’ Opening Br. at 56. However, Appellants

have provided no reason to believe that ad hoc court approval will be too

slow to be effective. To the contrary, the record reveals that the district

court has granted Appellants’ ad hoc motions to release funds in an

extremely prompt manner, sometimes even on the same day the request

has been submitted. Therefore, we are not persuaded that the court’s ad

hoc approval process reflects a “clear error of judgment or exceed[s] the

bounds of permissible choice.” Nacchio, 555 F.3d at 1241 (quoting Dodge,

328 F.3d at 1223).

A Second Circuit case that Appellants discuss in their brief, SEC v.

Unifund SAL, bolsters our affirmance of the district court’s approach. In

Unifund, the Second Circuit modified a district court’s asset freeze

because it found that the freeze was broader than necessary to achieve its

purpose of “assur[ing] that any funds that may become due can be

collected.” 910 F.2d at 1041. The circuit court found that a restriction in

the freeze order that prevented the appellants from any trading in

accounts without the SEC’s approval was too broad; instead, the court

reasoned, the PI should only prevent the appellants from trading that

would lower their accounts’ balances to below the maximum penalty that

they could be expected to pay. See id. at 1042.

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Although Appellants seek to rely on Unifund, the case offers them

no support. First, as a point of distinction, in Unifund, the Second Circuit

found that the SEC had not even presented “sufficient evidence to warrant

a preliminary injunction of traditional scope.” Id. at 1041. Here, by

contrast, as explained supra, the SEC has presented evidence that

supports a traditional PI. In other words, there is evidence here that

Appellants likely committed fraud, whereas in Unifund, the Second

Circuit was not yet convinced that the defendants had committed such

conduct. Therefore, the court’s greater skepticism of the asset freeze in

that case does not counsel greater skepticism here.

However, despite the case’s distinction, the underlying principle in

Unifund supports the court’s modified approach here. In Unifund, the

Second Circuit wanted to preserve the assets that were at stake in the

litigation but found that additional restrictions on income above the value

of those assets were unmerited. Here, by contrast, the district court

implicitly concluded (and Appellants do not refute) that all Appellants’

assets may be at stake in the litigation. Yet Appellants nevertheless want

to lift the asset freeze to spend those assets, for example on patent

prosecutions, research, and salaries. Therefore, like the Second Circuit’s

modification in Unifund, which ensured the base value of the assets and

lifted a restriction on assets above that value, the district court’s freeze

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order here merely ensures that the base value of the assets is preserved.

Indeed, the district court’s conditions here, like permitting Appellants to

earn additional income to spend, echo the extra trading that the Second

Circuit permitted in Unifund. Therefore, Unifund does not counsel that

we reverse the district court’s determination.

A case the district court relied upon and Appellants attempt to

distinguish, SEC v. Current Financial Services, Inc., 783 F. Supp. 1441

(D.D.C. 1992), also confirms that the district court’s approach here was

correct. In Current Financial Services, the court decided to maintain a

broad asset freeze of a company based on three factors:

First, Current has not maintained accounting records

sufficient to evidence its financial condition. . . . Second,

to the extent Current’s financial condition can be

determined, the SEC has demonstrated that it is on the

brink of insolvency. Third, Current’s underlying business

involves a high level of risk, and therefore resuming

operations would jeopardize whatever assets Current now

has.

783 F. Supp. at 1444. The first factor is not apparently present in the

instant case, although Appellants’ failure to have audited financial

statements and the inconsistencies in their documentation about executive

compensation suggest that their financial records are hardly in optimal

condition. Regardless, the second factor is present in the instant case.

Although Appellants properly respond that effects on Reven’s finances

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caused by the asset freeze cannot retroactively be used to justify the asset

freeze, as the SEC points out, the district court correctly found that Reven

was “in dire financial straits” before the SEC brought its suit. Aplts.’

App., Vol. XV, at 2699 n.10 (quoting id. at 2582).

The third factor is also present in the instant case. Appellants

acknowledge in their Opening Brief that “there is an inherent risk with

bringing any new drug to market.” Aplts.’ Opening Br. at 61. At bottom,

Appellants’ business is a gamble (albeit one with conceivable public

benefits if the gamble pays off). The court reasonably could conclude that

investors’ remaining assets should not be freed up to continue staking

Appellants’ gamble.

Therefore, although we do not adopt the Current Financial Services

factors as authoritative conditions for an asset freeze, the case provides

yet another reason to believe that the asset freeze here was within the

“bounds of permissible choice” available to the district court “in the

circumstances.” Nacchio, 555 F.3d at 1241 (quoting Dodge, 328 F.3d at

1223).

Our unpublished decision in SEC v. Young further bolsters our

conclusion that the district court did not abuse its discretion by taking a

nuanced approach to modifying the asset freeze. In Young, we held that

the district court did not abuse its discretion when it denied the

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appellants’ motion for partial relief from an asset freeze following the

SEC’s allegation of fraud. See 2022 WL 2977080, at *5–6. The appellants

argued that the asset freeze included funds that had not been tainted by

their alleged fraud, and they claimed they needed some of those nontainted funds to pay for counsel of their choosing. See id. We determined

that even if we credited their argument that the district court was

required to take these assertions at face value, they had not shown that

their request “for a six-figure sum” “bore [an] obvious connection to their

preceding assertions about their assets and future needs.” Id. at *6. We

ultimately decided that we “c[ould not] say, in such circumstances, that

the district court was constrained to exercise its discretion to give the

movants what they asked for.” Id.

Even though the appellants in Young mounted a different kind of

challenge to the asset freeze in that case, the animating rationale of our

reasoning is applicable to the instant dispute. Appellants’ lament that the

district court’s order does not permit them to maintain their intellectual

property or act on their research results before those results become

unusably dated. Yet to remedy these supposed errors, they request relief

of a staggering quantity—viz., the complete unfreezing of all their assets,

business and personal.

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The district court here found that, even crediting Appellants’

concerns, the significant relief they requested was not sufficiently

supported by those concerns. Therefore, the court’s basis for denying

Appellants’ motion was similar to the rationale we affirmed in Young:

namely, that there was a mismatch between the appellants’ specific

concerns and their request for a large, unspecified amount of money to be

released. We therefore conclude that here too the district court did not

abuse its discretion when it concluded that Appellants’ concerns did not

justify returning control over all their assets to the same individuals who

likely committed fraud.

In conclusion, the district court did not abuse its discretion when it

refused to completely eliminate the asset freeze, and its measures to allow

Appellants to maintain the value of the frozen assets were within “the

bounds of permissible choice in the circumstances.” Nacchio, 555 F.3d at

1241 (quoting Dodge, 328 F.3d at 1223).

Based on the foregoing, we AFFIRM the district court’s grant of the

preliminary injunction, including the asset freeze and REMAND the case

for further proceedings consistent with this opinion. We DENY

Appellants’ opposed motion to supplement their appendix with an email

exchange between their counsel and the district court.

USSEC v. Reven Holdings

Authorities cited

Opinion · public domain