TRANSCRIPT of Proceedings as to Owen Li re: Plea held on 12/16/2015 before Magistrate Judge Frank Maas. Court Reporter/Transcriber: Jerry Harrison, (212) 805-0300, Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 2/8/2016. Redacted Transcript Deadline set for 2/19/2016. Release of Transcript Restriction set for 4/18/2016. (Grant, Patricia)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x
UNITED STATES OF AMERICA,
v.
OWEN LI,
15 Cr. 870 FM RWS
Defendant.
------------------------------x
December 16, 2:27 p.m.
Before:
HON. FRANK MAAS,
U.S. Magistrate Judge
APPEARANCES
PREET BHARARA,
United States Attorney for the
Southern District of New York
MICHAEL FERRARA,
Assistant United States Attorney
SCOTT RESNIK,
Attorney for defendant Li
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Plea
(In open court)
(Case called)
THE COURT:
Do I understand correctly that your client wishes to
Be seated, please.
plead guilty to Counts 1 and 2 of the information in this case?
MR. RESNIK:
That is correct, your Honor.
THE COURT:
THE DEFENDANT:
THE COURT:
Is that what you wish to do, Mr. Li?
Yes, your Honor.
Do you understand that you have the right
to have all proceedings in this case, including your guilty
plea if you choose to plead guilty, or a trial if you choose to
go to trial, occur before the district judge assigned to this
case?
THE DEFENDANT:
Yes, your Honor.
THE COURT:
MR. FERRARA:
Just to flag for the court, Judge Sweet has referred
Who is that judge?
It is Judge Sweet, your Honor.
this for filing of the information and presentment at the
arraignment and guilty plea.
THE COURT:
MR. FERRARA:
I gather.
-- wanted to make sure you knew it.
This information has not yet been filed.
THE COURT:
MR. FERRARA:
I want to make --
Has he set a sentencing date?
Yes, your Honor, March 28th, 2016, at
4:00 o'clock.
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THE COURT:
I have in front of me a written Consent to
Proceed Before a United States Magistrate Judge on a Felony
Plea Allocution.
earlier today?
Did you and your counsel sign this form early
THE DEFENDANT:
THE COURT:
terms with Mr. Resnik?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
I also have a waiver of indictment form.
Did both you and Mr. Resnik sign this form as well?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Before you signed it, did you discuss its
Yes, your Honor.
Once again, did you discuss it with him
before you signed it?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that you're under no
obligation to waive indictment?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that if you didn't waive
indictment, in order to prosecute you on the two charges in the
superseding information, if you didn't waive indictment, in
order to prosecute you on the two charges in the information,
the government would have to present its case to a grand jury,
which might or might not indict you on these charges?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that by signing the
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waiver of indictment form, you have waived the right to have
your case presented to a grand jury?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Sir, do you understand what a grand jury
is?
THE DEFENDANT:
THE COURT:
Yes, I do, your Honor.
Now, to take your plea today, I need to
ask you a series of questions under oath.
raise your right hand.
(The defendant was duly sworn)
THE COURT:
Let me ask you to
Do you understand that now that I have
placed you under oath, if you knowingly make a false statement
to me concerning an important fact, that could be used against
you in the future in a prosecution for perjury or making false
statements?
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
Yes, your Honor.
Would you tell me your full name, sir.
Owen Li, your Honor.
How old are you, sir?
I am 29 years' old.
How far did you go in school?
I finished a bachelors degree, your
Honor.
THE COURT:
I take it you're a United States Citizen?
THE DEFENDANT:
Yes, that is correct, your Honor.
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THE COURT:
Are you currently or recently been under
the care of a doctor or psychiatrist for any reason?
THE DEFENDANT:
I have been seeing a therapist for the
last two and a half years, your Honor.
THE COURT:
THE DEFENDANT:
THE COURT:
Are you taking any medications?
No, I am not, your Honor.
Is there anything about the treatment that
you're receiving that interferes with your ability to
understand what is going on here today?
THE DEFENDANT:
THE COURT:
alcoholism or drug addiction?
THE COURT:
Have you had any alcohol in the last
hours?
THE DEFENDANT:
THE COURT:
your ability to comprehend what is going on here today?
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
THE COURT:
Approximately 48 hours ago, yes.
I take it not in quantities that affect
Part of the ongoing therapy over the
last two and a half years is for alcoholism, your Honor.
No, your Honor.
Have you ever been treated either for
THE DEFENDANT:
No, your Honor.
You're agreeing with me?
Yes, I do agree with you, your Honor.
As you sit before me today, do you feel
okay?
THE DEFENDANT:
Yes, I do your Honor.
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THE COURT:
Have you received and had an opportunity
to read the information?
THE DEFENDANT:
THE COURT:
Yes, I have, your Honor.
Do you understand what it alleges you did
in Counts 1 and 2?
THE DEFENDANT:
THE COURT:
Yes, I do, your Honor.
Have you had sufficient time to talk with
Mr. Resnik about these two charges and about how you wish to
plead with respect to them?
THE DEFENDANT:
THE COURT:
Yes, I have, your Honor.
Are you satisfied with the representation
and the advice that he has furnished to you?
THE DEFENDANT:
THE COURT:
Yes, I am, your Honor.
Are you ready to enter your plea at this
time?
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
THE COURT:
Yes, I am, your Honor.
What is your plea?
My plea is guilty, your Honor.
Even though you told me that you're
guilty, part of my job is to make sure that you're entering
that plea voluntarily and that you fully understand the two
charges against you and the consequences of pleading guilty to
those two charges, so I am going to review those subjects with
you in some detail.
Do you understand in Count 1, sir, you are charged
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with the crime of securities fraud, in violation of Title 15,
United States Code, Sections 78 (j)(b), 78 (f)(f), and Title
of the Code of Federal Regulations, Section 240.10b-5?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that in Count 2, you're
charged with having made a materially false statement to the
Securities & Exchange Commission, in violation of Title 18,
United States Code, Section 1001?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that Count 1 carries a
maximum jail term of 20 years, and Count 2, a maximum jail term
of five years, such that you're exposing yourself to a total
maximum term of imprisonment of 25 years?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that under both Counts
and 2, you face a maximum supervised release term of three
years?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that under Count 1 you
face a maximum fine of $5 million, and under Count 2 you face a
maximum fine of the greatest of either $250,000 or twice the
amount of money that you and others obtained through these
crimes, or twice the amount of financial loss that may have
been caused to persons other than yourself as a result of these
crimes?
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THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that on each of these
counts, you face a $100.00 mandatory special assessment?
THE DEFENDANT:
THE COURT:
Yes, I do, your Honor.
Do you understand the court will be
required to order that you make restitution to any identifiable
victims of your crime?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand if you're placed on
supervised release, and you thereafter violate any condition of
that supervised release, Judge Sweet will be able to revoke the
term of supervised release that he previously had imposed and
then he could return you to prison without giving you any
credit for the time you previously had served on post-release
supervision?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Would the government set forth for the
record the elements of this crime.
MR. FERRARA:
As to Count 1, the government would have been required
to prove that during the time period alleged, the defendant, in
connection with the purchase or sale securities:
Yes, of course, your Honor.
A.
Employed a device, scheme or artifice to defraud;
B.
Made an untrue statement of material fact or
or
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omitted to state a material fact which made what was said under
the circumstances misleading; or
C.
Engaged in an act, practice or course of business
that operated or would operate as a fraud or deceit upon a
purchaser or seller, and that the defendant acted knowingly,
willfully and with the intent to defraud and that he used or
caused to be to be used any means or instruments of
transportation or communication in interstate commerce or use
of the mails in furtherance of the fraudulent conduct.
As to Count 2, the government would have been required
to prove that during the time period alleged, the defendant
knowingly and willfully made a materially false, fictitious or
fraudulent statement in relation to a matter within the
jurisdiction of a department or agency of the United States
with knowledge that it was false, fictitious or fraudulent.
THE COURT:
Do you understand that those are the elements of the
Thank you, Mr. Ferrara.
two crimes to which you're pleading guilty?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Have you discussed those elements of these
crimes with Mr. Resnik?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that you have the right
to plead not guilty and to have a jury trial with respect to
these charges?
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THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that if you do plead not
guilty and go to trial, the burden would be on the government
to establish each required element of these crimes beyond a
reasonable doubt before you could be found guilty?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that at such a trial you
would be presumed innocent unless and until the government
established your guilt beyond a reasonable doubt?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that at a trial and at
every other stage of your case, you would have the right to be
represented by an attorney, and that if need be, counsel would
be appointed for you?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that at a trial you'd
have the right to confront and question any witnesses who
testified against you and would also have the right not to be
forced to incriminate yourself, which means you would not have
to be a witness against yourself?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand at a trial you would be
entitled to testify and present evidence and would also have
the right to compel the attendance of witnesses to testify for
you?
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THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand if you plead guilty and
that plea of guilty is accepted, there will be no trial of any
kind, so that you're giving up your right to a trial and the
only step remaining will be for Judge Sweet to sentence you?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand the nature of the
charges to which you are pleading guilty and the range of
penalties, including the maximum sentence to which you
potentially are subjecting yourself through your plea?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Have you and Mr. Resnik talked about how
the Sentencing Commission Guidelines may apply to your case?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that Judge Sweet is not
bound by those guidelines, but nevertheless must consult the
guidelines and take them and other factors under a statute
known as Title 18, United States Code, Section 3553 (a) into
account when sentencing you?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that the court will not
be able to determine the guidelines that apply to your case
until after a presentence report has been prepared and both you
and the government have an opportunity to challenge the facts
that the probation officer reports?
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THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that even after it's
been determined what guidelines apply to a particular case, the
sentencing judge in certain circumstances can impose a sentence
that is even more severe or less severe than the one called for
by the guidelines?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that under certain
circumstances, either you or the government may have the right
to appeal from any sentence that is imposed?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you further understand that parole has
been abolished, so that if you are sentenced to prison, you
will not be released any early on parole?
THE DEFENDANT:
THE COURT:
Mr. Li?
Yes, your Honor.
Do you understand I have just told you,
Do you still wish to plead guilty?
THE DEFENDANT:
THE COURT:
Yes, I do, your Honor.
Am I correct your willingness to plead
guilty is at least in part of certain discussions you and Mr.
Resnik have had with representatives of the United States
Attorney's Office?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
I have a leter, dated November 9th, from
the U.S. Attorney's Office sent to Mr. Resnik.
Are you
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familiar with this letter?
THE DEFENDANT:
THE COURT:
Yes, I am, your Honor.
Looking at the last page, Page 6, did both
you and your counsel sign this letter agreement earlier today?
THE DEFENDANT:
THE COURT:
THE DEFENDANT:
THE COURT:
Before you signed it, sir, did you discuss its various
This was signed --
It was signed in November, I gather?
Correct, yes, your Honor.
Thank you.
terms and conditions with your counsel?
THE DEFENDANT:
THE COURT:
Yes, I did, your Honor.
Do you understand that the terms of this
plea agreement letter with respect to sentencing are in no way
binding upon Judge Sweet and that he could reject any
recommendations or calculations that may be made pursuant to
this letter agreement without permitting you to withdraw your
plea of guilty and then could impose a sentence more severe
than the letter may contemplate?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand in this letter agreement
you have agreed not to appeal from or otherwise challenge a
sentence of 97 months in jail or less?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand you have also agreed to
forfeit to the United States various funds and account proceeds
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including $690,000 in U.S. currency?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Do you understand that you have also
agreed to make restitution as directed by the court?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Apart from what is set forth in this
letter agreement that we've been discussing, have any promises
of any kind been made to you to influence you to plead guilty?
THE DEFENDANT:
THE COURT:
No, your Honor.
More particularly, has anybody made a
promise to you concerning the actual sentence you will receive?
THE DEFENDANT:
THE COURT:
No, your Honor.
Has anybody threatened you, sir, in order
to influence you to plead guilty?
THE DEFENDANT:
THE COURT:
Are you entering your plea of guilty
voluntarily and of your own free will?
THE DEFENDANT:
THE COURT:
charged?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
Did you, in fact, commit the two crimes
No, your Honor.
Yes, I did, your Honor.
Can you please tell me in your own words
what it is you did that makes you guilty of this crime.
THE DEFENDANT:
Your Honor, the federal basis for my
plea is as follows:
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From 2013 to January 2015, I was the managing member
and majority owner of Canarsie Capital, LLC.
from an office in Manhattan New York and managed two hedge
funds which invested in stocks and options that traded on U.S.
stock exchanges.
Canarsie operated
In March and April of 2014, in order to conceal
certain trading losses incurred by the hedge funds, I reported
to Canarsie's prime broker a series of fictitious sell trades
that I later canceled before the trades actually settled.
By
booking and canceling these sell trades, I created the
temporary false appearance that the hedge funds' holdings in
the losing positions were smaller than they actually were.
doing this, Canarsie was able to avoid a margin call and obtain
greater leverage terms from its parent broker.
this time, I misrepresented to and tried to conceal from
certain investors the true performance of the fund.
By
Further, during
Beginning in late November and continuing through
December of 2014, I again concealed certain trading losses
incurred in the Canarsie funds by misreporting certain trades
to Canarsie's prime broker.
Canarsie's fund administrator from finalizing the funds'
November Net Asset Value report in order to hide from investors
the funds' true performance.
estimates of the funds' performance in November and December
that I knew were not accurate.
Further, I took steps to delay
I also gave certain investors
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In November and December of 2014, I also made false
statements to the SEC concerning questions they asked me about
fund operations and of canceled trades that were made in April.
In December of 2014 and January of 2015, in an effort
to earn back the funds' losses for the year, I made a series of
very risky index options trades.
risk parameters allowed by the funds' offering memorandum.
mid-January of 2015, the index option prices moved against
Canarsie's positions.
These trades exceeded the
In
As a result, Canarsie funds lost
substantially all of its assets.
Your Honor, I stand before the court today to plead
guilty to the crimes I've just described.
these acts, I knew they were wrong, but I did them anyway.
The
responsibility for this misconduct is mine and mine alone.
I
have always tried to live and conduct myself, both personally
and professionally, in a manner that I could be proud of; with
honor, modesty, dignity and integrity.
When I engaged in
I recognize the conduct I have just described betrayed
all of these aspirations.
I take full responsibility for my
actions and I will spend every day for the rest of my life
living with the consequences of my actions and working to
repair the damage I've caused to others, to my family and to
myself.
Thank you, your Honor.
THE COURT:
Thank you, Mr. Li.
Mr. Ferrara, are there further questions you believe
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need be asked?
MR. FERRARA:
Your Honor, I think there are just three
areas, nothing significant, nothing lengthy.
the parties will stipulate that the omissions and statements
Mr. Li made would have been material to investors had they
known the true information.
MR. RESNIK:
THE COURT:
THE DEFENDANT:
First, I think
Yes, we stipulate to that, your Honor.
And do you agree with that, Mr. Li?
THE COURT:
MR. FERRARA:
Yes, I do, your Honor.
Second?
Second, your Honor, the intent to
defraud, in my reading of the cases, requires both deceit with
the intent to get money.
statement by Mr. Li that the omissions and misstatements were
to prevent, for instance, investors, to prevent them from
withdrawing monies, for instance.
Here I just think one question or
Finally, the false statements he made to the SEC were
made in Manhattan.
THE COURT:
Let's take the last of those first.
Is that correct?
Is it correct
that the misstatements were made to the SEC in Manhattan?
THE DEFENDANT:
THE COURT:
Yes, your Honor.
I take it the goal of the
misrepresentations you were making and falsely reported trades
was, as Mr. Ferrara indicated, so that investors in the hedge
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funds would not wish to withdraw their money?
THE DEFENDANT:
THE COURT:
(Pause)
MR. FERRARA:
THE COURT:
Yes, your Honor.
Bear with me just one second.
Sorry, your Honor?
In the course of falsely reporting these
trades, were you you using telephones or other means of wire
communication?
THE DEFENDANT:
THE COURT:
interstate?
one.
Yes, your Honor.
Were some of those communications
Let me withdraw that question and ask a defense
Did you also use the mails --
THE DEFENDANT:
THE COURT:
Ah --
-- either in the course of reporting
information concerning the trades or in the course of getting
trade confirmations back?
THE DEFENDANT:
MR. FERRARA:
Everything was electronic, your Honor.
The parties can stipulate some of
Mr. Li's electronic communications crossed state lines.
MR. RESNIK:
Agreed, your Honor.
MR. FERRARA:
Finally, your Honor, in the stipulation
of the statements to the SEC, the government would have proven
they would have been material to the SEC exam team.
MR. RESNIK:
THE COURT:
Agreed.
Is there any dispute as to that, Mr. Li?
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THE DEFENDANT:
MR. FERRARA:
THE COURT:
No, your Honor.
Nothing further.
Thank you.
I take it, Mr. Ferrara, the government is
not aware of any reason that Mr. Li should not plead guilty?
MR. FERRARA:
THE COURT:
MR. RESNIK:
THE COURT:
I know of none.
Nor are you, Mr. Resnik?
Correct, your Honor.
Having heard from Mr. Li, I am satisfied
he understands the nature of the two charges of which he is
pleading guilty and the consequences of pleading guilty
potentially to those charges.
I am also satisfied he is entering his plea
voluntarily and knowingly and that there is a sufficient
factual basis for the plea.
recommend to Judge Sweet that your plea of guilty be accepted.
So for all those reasons, I will
We have discussed the fact that he set March 28th as a
sentencing date.
prepared, that the government furnish its prosecution case
summaries to the Probation Department within two weeks, and
that you, Mr. Resnik, make arrangements to have Mr. Li
interviewed by the Probation Department within that same
two-week period, which leaves the question of bail pending
sentencing.
counsel have both seen the report?
I will direct that a presentence report be
I have the Pretrial Services Report, and I take it
MR. FERRARA:
Yes.
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THE COURT:
Is there some recommendation as to a a
proposed agreed package?
MR. FERRARA:
Yes, your Honor.
Mr. Li has known that this day was coming for some
time, for a significant amount of time, and he has been sort of
complying in every way with us.
and, of course, did not.
think he is a very good candidate for bail.
He could have fled may times
He surrendered this morning.
We
Largely the parties' proposal largely tracks
Pretrial's recommendation with I think maybe one exception.
would ask for -- pardon me, your Honor.
(Off-the-record discussion)
MR. FERRARA:
We
A $250,000 personal recognizance bond
co-signed by two financially-responsible people, regular
Pretrial supervision.
to the Southern and Eastern Districts.
to the Continental United States.
Mr. Li's passport here today, and I believe is prepared to turn
it over to the Pretrial officer before they leave court, which
we would ask that the court order them to do.
THE COURT:
MR. FERRARA:
Pretrial recommended travel restrictions
We have no objections
I understand Mr. Resnik has
And are the co-signers here?
We are happy with two weeks for
co-signers.
THE COURT:
Okay.
MR. FERRARA:
And that again largely tracks the rest
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of the recommendations.
continue the counseling he described to the court earlier.
THE COURT:
I want to flag for the court Mr. Li
Yes.
All of that seems perfectly
acceptable under the circumstances.
(Pause)
THE COURT:
THE DEFENDANT:
THE COURT:
Is mr. Li employed at the moment?
No, your Honor.
With minor modifications, I am going to
accept the recommendation and fix bail in the amount of a
$250,000 personal recognizance bond, to be co-signed by two
financially-responsible persons.
restricted to the Continental United States.
surrender all travel documents and not seek new ones.
Mr. Li's travel will be
He is to
I have provided not for regular Pretrial Services
supervision, but Pretrial supervision as directed.
indicated that he is to have mental health treatment, mainly
continue the present counseling he is undergoing.
I have
I further direct he is to seek employment and to be
drug-tested within 60 days and to undergo further drug testing
and treatment should he test positive for illegal drugs.
He is to be released today once he signs the bond and
surrenders his passport and will remain out on bail provided
that the remaining conditions are met by December 30.
Mr. Li, as you heard, you're going to be released
today, and provided the co-signers are seen within two weeks
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and you comply with the other conditions of the bond, you will
remain out on bail pending the sentencing on March 28th.
If you violate any of the conditions of the bond, you
and your co-signers would each become liable for the full
$250,000 amount of the bond.
required, you can be charged with the crime of bail jumping.
So that even if the securities fraud case were to be dismissed,
you could be prosecuted on that charge.
Do you understand all of that, sir?
THE DEFENDANT:
THE COURT:
If you fail to appear as
Yes, your Honor.
Is there anything further concerning Mr.
Li today?
MR. FERRARA:
MR. RESNIK:
THE COURT:
(Court adjourned)
Not from the government.
None from the defense, your Honor.
Thank you.
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x
3
UNITED STATES OF AMERICA,
4
v.
1
5
OWEN LI,
6
7
15 Cr. 870 FM RWS
Defendant.
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8
9
December 16, 2015
2:27 p.m.
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11
12
13
Before:
HON. FRANK MAAS,
14
U.S. Magistrate Judge
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16
APPEARANCES
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18
19
20
PREET BHARARA,
United States Attorney for the
Southern District of New York
MICHAEL FERRARA,
Assistant United States Attorney
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22
SCOTT RESNIK,
Attorney for defendant Li
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24
25
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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(In open court)
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(Case called)
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THE COURT:
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Do I understand correctly that your client wishes to
5
2
Be seated, please.
plead guilty to Counts 1 and 2 of the information in this case?
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MR. RESNIK:
That is correct, your Honor.
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THE COURT:
8
THE DEFENDANT:
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THE COURT:
Is that what you wish to do, Mr. Li?
Yes, your Honor.
Do you understand that you have the right
10
to have all proceedings in this case, including your guilty
11
plea if you choose to plead guilty, or a trial if you choose to
12
go to trial, occur before the district judge assigned to this
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case?
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THE DEFENDANT:
Yes, your Honor.
15
THE COURT:
16
MR. FERRARA:
17
Just to flag for the court, Judge Sweet has referred
Who is that judge?
It is Judge Sweet, your Honor.
18
this for filing of the information and presentment at the
19
arraignment and guilty plea.
20
THE COURT:
21
MR. FERRARA:
22
I gather.
-- wanted to make sure you knew it.
This information has not yet been filed.
23
THE COURT:
24
MR. FERRARA:
25
I want to make --
Has he set a sentencing date?
Yes, your Honor, March 28th, 2016, at
4:00 o'clock.
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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THE COURT:
I have in front of me a written Consent to
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Proceed Before a United States Magistrate Judge on a Felony
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Plea Allocution.
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earlier today?
Did you and your counsel sign this form early
5
THE DEFENDANT:
6
THE COURT:
7
terms with Mr. Resnik?
THE DEFENDANT:
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THE COURT:
Yes, your Honor.
I also have a waiver of indictment form.
Did both you and Mr. Resnik sign this form as well?
11
THE DEFENDANT:
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THE COURT:
13
Yes, your Honor.
Before you signed it, did you discuss its
8
10
3
Yes, your Honor.
Once again, did you discuss it with him
before you signed it?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that you're under no
16
obligation to waive indictment?
17
THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that if you didn't waive
19
indictment, in order to prosecute you on the two charges in the
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superseding information, if you didn't waive indictment, in
21
order to prosecute you on the two charges in the information,
22
the government would have to present its case to a grand jury,
23
which might or might not indict you on these charges?
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THE DEFENDANT:
25
THE COURT:
Yes, your Honor.
Do you understand that by signing the
SOUTHERN DISTRICT REPORTERS, P.C.
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waiver of indictment form, you have waived the right to have
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your case presented to a grand jury?
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THE DEFENDANT:
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THE COURT:
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4
Yes, your Honor.
Sir, do you understand what a grand jury
is?
6
THE DEFENDANT:
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THE COURT:
Yes, I do, your Honor.
Now, to take your plea today, I need to
8
ask you a series of questions under oath.
9
raise your right hand.
10
(The defendant was duly sworn)
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THE COURT:
Let me ask you to
Do you understand that now that I have
12
placed you under oath, if you knowingly make a false statement
13
to me concerning an important fact, that could be used against
14
you in the future in a prosecution for perjury or making false
15
statements?
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THE DEFENDANT:
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THE COURT:
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THE DEFENDANT:
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THE COURT:
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THE DEFENDANT:
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THE COURT:
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THE DEFENDANT:
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Yes, your Honor.
Would you tell me your full name, sir.
Owen Li, your Honor.
How old are you, sir?
I am 29 years' old.
How far did you go in school?
I finished a bachelors degree, your
Honor.
24
THE COURT:
I take it you're a United States Citizen?
25
THE DEFENDANT:
Yes, that is correct, your Honor.
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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THE COURT:
Are you currently or recently been under
the care of a doctor or psychiatrist for any reason?
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THE DEFENDANT:
I have been seeing a therapist for the
last two and a half years, your Honor.
5
THE COURT:
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THE DEFENDANT:
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THE COURT:
Are you taking any medications?
No, I am not, your Honor.
Is there anything about the treatment that
8
you're receiving that interferes with your ability to
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understand what is going on here today?
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THE DEFENDANT:
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THE COURT:
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alcoholism or drug addiction?
13
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THE COURT:
Have you had any alcohol in the last 72
hours?
THE DEFENDANT:
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THE COURT:
your ability to comprehend what is going on here today?
THE DEFENDANT:
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THE COURT:
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THE DEFENDANT:
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THE COURT:
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Approximately 48 hours ago, yes.
I take it not in quantities that affect
20
24
Part of the ongoing therapy over the
last two and a half years is for alcoholism, your Honor.
17
19
No, your Honor.
Have you ever been treated either for
THE DEFENDANT:
15
16
5
No, your Honor.
You're agreeing with me?
Yes, I do agree with you, your Honor.
As you sit before me today, do you feel
okay?
THE DEFENDANT:
Yes, I do your Honor.
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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THE COURT:
Have you received and had an opportunity
to read the information?
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THE DEFENDANT:
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THE COURT:
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Yes, I have, your Honor.
Do you understand what it alleges you did
in Counts 1 and 2?
6
THE DEFENDANT:
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THE COURT:
Yes, I do, your Honor.
Have you had sufficient time to talk with
8
Mr. Resnik about these two charges and about how you wish to
9
plead with respect to them?
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THE DEFENDANT:
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THE COURT:
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Yes, I have, your Honor.
Are you satisfied with the representation
and the advice that he has furnished to you?
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THE DEFENDANT:
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THE COURT:
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6
Yes, I am, your Honor.
Are you ready to enter your plea at this
time?
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THE DEFENDANT:
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THE COURT:
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THE DEFENDANT:
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THE COURT:
Yes, I am, your Honor.
What is your plea?
My plea is guilty, your Honor.
Even though you told me that you're
20
guilty, part of my job is to make sure that you're entering
21
that plea voluntarily and that you fully understand the two
22
charges against you and the consequences of pleading guilty to
23
those two charges, so I am going to review those subjects with
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you in some detail.
25
Do you understand in Count 1, sir, you are charged
SOUTHERN DISTRICT REPORTERS, P.C.
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with the crime of securities fraud, in violation of Title 15,
2
United States Code, Sections 78 (j)(b), 78 (f)(f), and Title 17
3
of the Code of Federal Regulations, Section 240.10b-5?
4
THE DEFENDANT:
5
THE COURT:
Yes, your Honor.
Do you understand that in Count 2, you're
6
charged with having made a materially false statement to the
7
Securities & Exchange Commission, in violation of Title 18,
8
United States Code, Section 1001?
9
THE DEFENDANT:
10
THE COURT:
Yes, your Honor.
Do you understand that Count 1 carries a
11
maximum jail term of 20 years, and Count 2, a maximum jail term
12
of five years, such that you're exposing yourself to a total
13
maximum term of imprisonment of 25 years?
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THE DEFENDANT:
15
THE COURT:
Yes, your Honor.
Do you understand that under both Counts 1
16
and 2, you face a maximum supervised release term of three
17
years?
18
THE DEFENDANT:
19
THE COURT:
Yes, your Honor.
Do you understand that under Count 1 you
20
face a maximum fine of $5 million, and under Count 2 you face a
21
maximum fine of the greatest of either $250,000 or twice the
22
amount of money that you and others obtained through these
23
crimes, or twice the amount of financial loss that may have
24
been caused to persons other than yourself as a result of these
25
crimes?
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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THE DEFENDANT:
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THE COURT:
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Yes, your Honor.
Do you understand that on each of these
counts, you face a $100.00 mandatory special assessment?
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THE DEFENDANT:
5
THE COURT:
Yes, I do, your Honor.
Do you understand the court will be
6
required to order that you make restitution to any identifiable
7
victims of your crime?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand if you're placed on
10
supervised release, and you thereafter violate any condition of
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that supervised release, Judge Sweet will be able to revoke the
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term of supervised release that he previously had imposed and
13
then he could return you to prison without giving you any
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credit for the time you previously had served on post-release
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supervision?
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THE DEFENDANT:
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THE COURT:
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Yes, your Honor.
Would the government set forth for the
record the elements of this crime.
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MR. FERRARA:
20
As to Count 1, the government would have been required
21
to prove that during the time period alleged, the defendant, in
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connection with the purchase or sale securities:
23
24
25
Yes, of course, your Honor.
A.
Employed a device, scheme or artifice to defraud;
B.
Made an untrue statement of material fact or
or
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omitted to state a material fact which made what was said under
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the circumstances misleading; or
3
C.
Engaged in an act, practice or course of business
4
that operated or would operate as a fraud or deceit upon a
5
purchaser or seller, and that the defendant acted knowingly,
6
willfully and with the intent to defraud and that he used or
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caused to be to be used any means or instruments of
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transportation or communication in interstate commerce or use
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of the mails in furtherance of the fraudulent conduct.
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As to Count 2, the government would have been required
11
to prove that during the time period alleged, the defendant
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knowingly and willfully made a materially false, fictitious or
13
fraudulent statement in relation to a matter within the
14
jurisdiction of a department or agency of the United States
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with knowledge that it was false, fictitious or fraudulent.
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THE COURT:
17
Do you understand that those are the elements of the
18
Thank you, Mr. Ferrara.
two crimes to which you're pleading guilty?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Have you discussed those elements of these
21
crimes with Mr. Resnik?
22
THE DEFENDANT:
23
THE COURT:
Yes, your Honor.
Do you understand that you have the right
24
to plead not guilty and to have a jury trial with respect to
25
these charges?
SOUTHERN DISTRICT REPORTERS, P.C.
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THE DEFENDANT:
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THE COURT:
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Yes, your Honor.
Do you understand that if you do plead not
3
guilty and go to trial, the burden would be on the government
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to establish each required element of these crimes beyond a
5
reasonable doubt before you could be found guilty?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that at such a trial you
8
would be presumed innocent unless and until the government
9
established your guilt beyond a reasonable doubt?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that at a trial and at
12
every other stage of your case, you would have the right to be
13
represented by an attorney, and that if need be, counsel would
14
be appointed for you?
15
THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that at a trial you'd
17
have the right to confront and question any witnesses who
18
testified against you and would also have the right not to be
19
forced to incriminate yourself, which means you would not have
20
to be a witness against yourself?
21
THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand at a trial you would be
23
entitled to testify and present evidence and would also have
24
the right to compel the attendance of witnesses to testify for
25
you?
SOUTHERN DISTRICT REPORTERS, P.C.
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THE DEFENDANT:
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THE COURT:
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Yes, your Honor.
Do you understand if you plead guilty and
3
that plea of guilty is accepted, there will be no trial of any
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kind, so that you're giving up your right to a trial and the
5
only step remaining will be for Judge Sweet to sentence you?
6
THE DEFENDANT:
7
THE COURT:
Yes, your Honor.
Do you understand the nature of the
8
charges to which you are pleading guilty and the range of
9
penalties, including the maximum sentence to which you
10
potentially are subjecting yourself through your plea?
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THE DEFENDANT:
12
THE COURT:
13
Yes, your Honor.
Have you and Mr. Resnik talked about how
the Sentencing Commission Guidelines may apply to your case?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that Judge Sweet is not
16
bound by those guidelines, but nevertheless must consult the
17
guidelines and take them and other factors under a statute
18
known as Title 18, United States Code, Section 3553 (a) into
19
account when sentencing you?
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THE DEFENDANT:
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THE COURT:
Yes, your Honor.
Do you understand that the court will not
22
be able to determine the guidelines that apply to your case
23
until after a presentence report has been prepared and both you
24
and the government have an opportunity to challenge the facts
25
that the probation officer reports?
SOUTHERN DISTRICT REPORTERS, P.C.
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THE DEFENDANT:
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THE COURT:
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Yes, your Honor.
Do you understand that even after it's
3
been determined what guidelines apply to a particular case, the
4
sentencing judge in certain circumstances can impose a sentence
5
that is even more severe or less severe than the one called for
6
by the guidelines?
7
THE DEFENDANT:
8
THE COURT:
9
10
Yes, your Honor.
Do you understand that under certain
circumstances, either you or the government may have the right
to appeal from any sentence that is imposed?
11
THE DEFENDANT:
12
THE COURT:
Yes, your Honor.
Do you further understand that parole has
13
been abolished, so that if you are sentenced to prison, you
14
will not be released any early on parole?
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THE DEFENDANT:
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THE COURT:
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Mr. Li?
Yes, your Honor.
Do you understand I have just told you,
Do you still wish to plead guilty?
18
THE DEFENDANT:
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THE COURT:
Yes, I do, your Honor.
Am I correct your willingness to plead
20
guilty is at least in part of certain discussions you and Mr.
21
Resnik have had with representatives of the United States
22
Attorney's Office?
23
THE DEFENDANT:
24
THE COURT:
25
Yes, your Honor.
I have a leter, dated November 9th, from
the U.S. Attorney's Office sent to Mr. Resnik.
Are you
SOUTHERN DISTRICT REPORTERS, P.C.
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familiar with this letter?
2
THE DEFENDANT:
3
THE COURT:
4
13
Yes, I am, your Honor.
Looking at the last page, Page 6, did both
you and your counsel sign this letter agreement earlier today?
5
THE DEFENDANT:
6
THE COURT:
7
THE DEFENDANT:
8
THE COURT:
9
Before you signed it, sir, did you discuss its various
10
This was signed --
It was signed in November, I gather?
Correct, yes, your Honor.
Thank you.
terms and conditions with your counsel?
11
THE DEFENDANT:
12
THE COURT:
Yes, I did, your Honor.
Do you understand that the terms of this
13
plea agreement letter with respect to sentencing are in no way
14
binding upon Judge Sweet and that he could reject any
15
recommendations or calculations that may be made pursuant to
16
this letter agreement without permitting you to withdraw your
17
plea of guilty and then could impose a sentence more severe
18
than the letter may contemplate?
19
THE DEFENDANT:
20
THE COURT:
Yes, your Honor.
Do you understand in this letter agreement
21
you have agreed not to appeal from or otherwise challenge a
22
sentence of 97 months in jail or less?
23
THE DEFENDANT:
24
THE COURT:
25
Yes, your Honor.
Do you understand you have also agreed to
forfeit to the United States various funds and account proceeds
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including $690,000 in U.S. currency?
2
THE DEFENDANT:
3
THE COURT:
4
14
Yes, your Honor.
Do you understand that you have also
agreed to make restitution as directed by the court?
5
THE DEFENDANT:
6
THE COURT:
Yes, your Honor.
Apart from what is set forth in this
7
letter agreement that we've been discussing, have any promises
8
of any kind been made to you to influence you to plead guilty?
9
THE DEFENDANT:
10
11
THE COURT:
No, your Honor.
More particularly, has anybody made a
promise to you concerning the actual sentence you will receive?
12
THE DEFENDANT:
13
THE COURT:
No, your Honor.
Has anybody threatened you, sir, in order
14
to influence you to plead guilty?
15
THE DEFENDANT:
16
THE COURT:
17
Are you entering your plea of guilty
voluntarily and of your own free will?
18
THE DEFENDANT:
19
THE COURT:
20
charged?
THE DEFENDANT:
22
THE COURT:
24
25
Yes, your Honor.
Did you, in fact, commit the two crimes
21
23
No, your Honor.
Yes, I did, your Honor.
Can you please tell me in your own words
what it is you did that makes you guilty of this crime.
THE DEFENDANT:
Your Honor, the federal basis for my
plea is as follows:
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From 2013 to January 2015, I was the managing member
2
and majority owner of Canarsie Capital, LLC.
3
from an office in Manhattan New York and managed two hedge
4
funds which invested in stocks and options that traded on U.S.
5
stock exchanges.
6
Canarsie operated
In March and April of 2014, in order to conceal
7
certain trading losses incurred by the hedge funds, I reported
8
to Canarsie's prime broker a series of fictitious sell trades
9
that I later canceled before the trades actually settled.
By
10
booking and canceling these sell trades, I created the
11
temporary false appearance that the hedge funds' holdings in
12
the losing positions were smaller than they actually were.
13
doing this, Canarsie was able to avoid a margin call and obtain
14
greater leverage terms from its parent broker.
15
this time, I misrepresented to and tried to conceal from
16
certain investors the true performance of the fund.
By
Further, during
17
Beginning in late November and continuing through
18
December of 2014, I again concealed certain trading losses
19
incurred in the Canarsie funds by misreporting certain trades
20
to Canarsie's prime broker.
21
Canarsie's fund administrator from finalizing the funds'
22
November Net Asset Value report in order to hide from investors
23
the funds' true performance.
24
estimates of the funds' performance in November and December
25
that I knew were not accurate.
Further, I took steps to delay
I also gave certain investors
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In November and December of 2014, I also made false
2
statements to the SEC concerning questions they asked me about
3
fund operations and of canceled trades that were made in April.
4
In December of 2014 and January of 2015, in an effort
5
to earn back the funds' losses for the year, I made a series of
6
very risky index options trades.
7
risk parameters allowed by the funds' offering memorandum.
8
mid-January of 2015, the index option prices moved against
9
Canarsie's positions.
10
These trades exceeded the
In
As a result, Canarsie funds lost
substantially all of its assets.
11
Your Honor, I stand before the court today to plead
12
guilty to the crimes I've just described.
13
these acts, I knew they were wrong, but I did them anyway.
The
14
responsibility for this misconduct is mine and mine alone.
I
15
have always tried to live and conduct myself, both personally
16
and professionally, in a manner that I could be proud of; with
17
honor, modesty, dignity and integrity.
18
When I engaged in
I recognize the conduct I have just described betrayed
19
all of these aspirations.
I take full responsibility for my
20
actions and I will spend every day for the rest of my life
21
living with the consequences of my actions and working to
22
repair the damage I've caused to others, to my family and to
23
myself.
Thank you, your Honor.
24
THE COURT:
Thank you, Mr. Li.
25
Mr. Ferrara, are there further questions you believe
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need be asked?
MR. FERRARA:
Your Honor, I think there are just three
3
areas, nothing significant, nothing lengthy.
4
the parties will stipulate that the omissions and statements
5
Mr. Li made would have been material to investors had they
6
known the true information.
7
MR. RESNIK:
8
THE COURT:
9
THE DEFENDANT:
First, I think
Yes, we stipulate to that, your Honor.
And do you agree with that, Mr. Li?
10
THE COURT:
11
MR. FERRARA:
Yes, I do, your Honor.
Second?
Second, your Honor, the intent to
12
defraud, in my reading of the cases, requires both deceit with
13
the intent to get money.
14
statement by Mr. Li that the omissions and misstatements were
15
to prevent, for instance, investors, to prevent them from
16
withdrawing monies, for instance.
17
18
Here I just think one question or
Finally, the false statements he made to the SEC were
made in Manhattan.
19
THE COURT:
20
Let's take the last of those first.
21
Is that correct?
Is it correct
that the misstatements were made to the SEC in Manhattan?
22
THE DEFENDANT:
23
THE COURT:
Yes, your Honor.
I take it the goal of the
24
misrepresentations you were making and falsely reported trades
25
was, as Mr. Ferrara indicated, so that investors in the hedge
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funds would not wish to withdraw their money?
2
THE DEFENDANT:
3
THE COURT:
4
(Pause)
5
MR. FERRARA:
6
THE COURT:
Yes, your Honor.
Bear with me just one second.
Sorry, your Honor?
In the course of falsely reporting these
7
trades, were you you using telephones or other means of wire
8
communication?
9
THE DEFENDANT:
10
THE COURT:
11
interstate?
12
one.
Yes, your Honor.
Were some of those communications
Let me withdraw that question and ask a defense
Did you also use the mails --
13
THE DEFENDANT:
14
THE COURT:
Ah --
-- either in the course of reporting
15
information concerning the trades or in the course of getting
16
trade confirmations back?
17
THE DEFENDANT:
18
MR. FERRARA:
19
18
Everything was electronic, your Honor.
The parties can stipulate some of
Mr. Li's electronic communications crossed state lines.
20
MR. RESNIK:
Agreed, your Honor.
21
MR. FERRARA:
Finally, your Honor, in the stipulation
22
of the statements to the SEC, the government would have proven
23
they would have been material to the SEC exam team.
24
MR. RESNIK:
25
THE COURT:
Agreed.
Is there any dispute as to that, Mr. Li?
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THE DEFENDANT:
2
MR. FERRARA:
3
THE COURT:
4
No, your Honor.
Nothing further.
Thank you.
I take it, Mr. Ferrara, the government is
not aware of any reason that Mr. Li should not plead guilty?
5
MR. FERRARA:
6
THE COURT:
7
MR. RESNIK:
8
THE COURT:
9
I know of none.
Nor are you, Mr. Resnik?
Correct, your Honor.
Having heard from Mr. Li, I am satisfied
he understands the nature of the two charges of which he is
10
pleading guilty and the consequences of pleading guilty
11
potentially to those charges.
12
19
I am also satisfied he is entering his plea
13
voluntarily and knowingly and that there is a sufficient
14
factual basis for the plea.
15
recommend to Judge Sweet that your plea of guilty be accepted.
16
So for all those reasons, I will
We have discussed the fact that he set March 28th as a
17
sentencing date.
18
prepared, that the government furnish its prosecution case
19
summaries to the Probation Department within two weeks, and
20
that you, Mr. Resnik, make arrangements to have Mr. Li
21
interviewed by the Probation Department within that same
22
two-week period, which leaves the question of bail pending
23
sentencing.
24
counsel have both seen the report?
25
I will direct that a presentence report be
I have the Pretrial Services Report, and I take it
MR. FERRARA:
Yes.
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
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2
THE COURT:
Is there some recommendation as to a a
proposed agreed package?
3
MR. FERRARA:
Yes, your Honor.
4
Mr. Li has known that this day was coming for some
5
time, for a significant amount of time, and he has been sort of
6
complying in every way with us.
7
and, of course, did not.
8
think he is a very good candidate for bail.
9
He could have fled may times
He surrendered this morning.
We
Largely the parties' proposal largely tracks
10
Pretrial's recommendation with I think maybe one exception.
11
would ask for -- pardon me, your Honor.
12
(Off-the-record discussion)
13
MR. FERRARA:
We
A $250,000 personal recognizance bond
14
co-signed by two financially-responsible people, regular
15
Pretrial supervision.
16
to the Southern and Eastern Districts.
17
to the Continental United States.
18
Mr. Li's passport here today, and I believe is prepared to turn
19
it over to the Pretrial officer before they leave court, which
20
we would ask that the court order them to do.
21
THE COURT:
22
MR. FERRARA:
23
Pretrial recommended travel restrictions
We have no objections
I understand Mr. Resnik has
And are the co-signers here?
We are happy with two weeks for
co-signers.
24
THE COURT:
Okay.
25
MR. FERRARA:
And that again largely tracks the rest
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of the recommendations.
2
continue the counseling he described to the court earlier.
3
4
THE COURT:
I want to flag for the court Mr. Li
Yes.
All of that seems perfectly
acceptable under the circumstances.
5
(Pause)
6
THE COURT:
7
THE DEFENDANT:
8
THE COURT:
9
Is mr. Li employed at the moment?
No, your Honor.
With minor modifications, I am going to
accept the recommendation and fix bail in the amount of a
10
$250,000 personal recognizance bond, to be co-signed by two
11
financially-responsible persons.
12
restricted to the Continental United States.
13
surrender all travel documents and not seek new ones.
14
Mr. Li's travel will be
He is to
I have provided not for regular Pretrial Services
15
supervision, but Pretrial supervision as directed.
16
indicated that he is to have mental health treatment, mainly
17
continue the present counseling he is undergoing.
18
21
I have
I further direct he is to seek employment and to be
19
drug-tested within 60 days and to undergo further drug testing
20
and treatment should he test positive for illegal drugs.
21
He is to be released today once he signs the bond and
22
surrenders his passport and will remain out on bail provided
23
that the remaining conditions are met by December 30.
24
25
Mr. Li, as you heard, you're going to be released
today, and provided the co-signers are seen within two weeks
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1
and you comply with the other conditions of the bond, you will
2
remain out on bail pending the sentencing on March 28th.
3
If you violate any of the conditions of the bond, you
4
and your co-signers would each become liable for the full
5
$250,000 amount of the bond.
6
required, you can be charged with the crime of bail jumping.
7
So that even if the securities fraud case were to be dismissed,
8
you could be prosecuted on that charge.
9
Do you understand all of that, sir?
10
THE DEFENDANT:
11
THE COURT:
12
If you fail to appear as
Yes, your Honor.
Is there anything further concerning Mr.
Li today?
13
MR. FERRARA:
14
MR. RESNIK:
15
THE COURT:
16
(Court adjourned)
Not from the government.
None from the defense, your Honor.
Thank you.
17
18
19
20
21
22
23
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300