The U.S. Court of Appeals for the First Circuit heard appeals from five defendants challenging their convictions in a Securities and Exchange Commission enforcement action involving alleged securities fraud manipulation. The case, *SEC v. Veldhuis*, involves defendants Zhiying Yvonne Gasarch, Mike K. Veldhuis, Paul Sexton, Courtney Kelln, and Jackson T. Friesen, who are appealing a ruling from the U.S. District Court for the District of Massachusetts.
The appeals, numbered 24-1770 through 24-1774, were heard by a three-judge panel consisting of Circuit Judges Gelpí, Thompson, and Montecalvo. The original case was decided by Hon. William G. Young, U.S. District Judge for the District of Massachusetts.
According to the February 19, 2026 opinion authored by Circuit Judge Thompson, the case involves what the court characterized as a scheme designed to manipulate the securities market. The court noted that while investors have long been attracted to the prospect of buying stocks at low prices before they increase dramatically, not every startup becomes successful and not every investment generates significant profits.
The appeals court opinion states that rather than taking legitimate investment risks, the defendants allegedly chose to "rig the system in their favor" and profit from what the court described as "pure speculation that they deceitfully conjure up." The court indicated that the defendants "participated in a scheme to do just that before they ran headfirst into federal securities" laws, though the complete text of the opinion was not available.
Each defendant is represented by separate counsel in the appeals process. Zhiying Yvonne Gasarch is represented by Karen A. Pickett of Pickett Law Offices, P.C. Mike K. Veldhuis is represented by Katie Renzler, along with Michael Tremonte and Sher Tremonte LLP. Paul Sexton's legal team includes Robert S. Silverblatt, Stephen G. Topetzes, Neil T. Smith, and K&L Gates LLP.
Courtney Kelln is represented by Frank Scaduto, Kevin B. Muhlendorf, and Wiley Rein LLP, while Jackson T. Friesen's counsel includes Maranda Fritz, Timothy J. Fazio, and MG+M The Law Firm. The SEC is represented by Senior Appellate Counsel Kerry J. Dingle, along with Jeffrey B. Finnell, Acting General Counsel, Tracey A. Hardin, Solicitor, and Daniel Staroselsky, Assistant General Counsel.
The case also involves four additional defendants who are not part of the current appeals: Frederick L. Sharp, William T. Kaitz, Avtar S. Dhillon, and Graham R. Taylor. The record does not indicate whether these defendants reached settlements with the SEC or are pursuing separate legal proceedings.
SEC enforcement actions involving securities fraud typically focus on violations of federal securities laws designed to protect investors from deceptive practices in the financial markets. The agency has authority to pursue both civil and administrative enforcement actions against individuals and entities that violate securities regulations.
The First Circuit's review of this case reflects the ongoing federal effort to combat securities fraud and protect investors from market manipulation schemes. Securities fraud cases often involve complex financial transactions and require courts to analyze sophisticated investment structures and trading patterns.
The appeals process allows defendants to challenge various aspects of the district court's ruling, including factual findings, legal interpretations, and procedural decisions. Appeals courts review district court decisions for legal errors and, in some cases, whether factual findings were clearly erroneous.
The timing of the appeals, with case numbers from 2024 and an opinion date of February 19, 2026, suggests the appeals process has been ongoing for approximately two years since the original district court proceedings concluded.
The outcome of these appeals could have implications for future SEC enforcement actions and may provide guidance on how courts interpret federal securities laws in cases involving alleged market manipulation schemes. The First Circuit's decision will be binding precedent for federal courts within its jurisdiction, which includes Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island.
The case demonstrates the SEC's continued focus on pursuing enforcement actions against individuals alleged to have engaged in securities fraud, particularly schemes that involve deceptive practices designed to manipulate stock prices or mislead investors about investment opportunities.
As the appeals process continues, the defendants await the First Circuit's decision on their challenges to the district court's ruling. The court's final opinion will determine whether the lower court's findings and legal conclusions will be affirmed, reversed, or remanded for further proceedings.