![]() They were alleged to have arranged, through Garvin, U. It is alleged that Begole conspired with one Bourne and others to pay for this stock not out of their own funds, but with Manhattan's assets. It seems that Bankers Life & Casualty Co., one of the respondents, agreed to sell all of Manhattan's stock to one Begole for $5,000,000. The case is here on a petition for a writ of certiorari which we granted, 401 U.S. 1083, and the Court of Appeals affirmed, by a divided bench. ![]() The District Court dismissed the complaint, 300 F. § 77q(a), and of § 10(b) of the Securities Exchange Act of 1934, 48 Stat. Manhattan Casualty Co., now represented by petitioner, New York's Superintendent of Insurance, was, it is alleged, defrauded in the sale of certain securities in violation of § 17(a) of the Securities Act of 1933, 48 Stat. ![]() JUSTICE DOUGLAS delivered the opinion of the Court. 9-14.ĭOUGLAS, J., delivered the opinion for a unanimous Court. Section 10(b) prohibits the use of any deceptive device in the "sale" of any security by "any person," and it is irrelevant that Manhattan was a corporation, rather than an individual investor that the fraud was perpetrated by a corporate officer and his outside collaborators that the transaction was not conducted through a securities exchange or an organized market that the proceeds due the seller were misappropriated and that the creditors of the defrauded corporate seller may be the ultimate victims. The District Court dismissed the complaint and the Court of Appeals affirmed, finding that "no investor injured" and that the "purity of the security transaction and the purity of the trading process were unsullied." Held: Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful to use "in connection with the purchase or sale" of any security "any manipulative or deceptive device or contrivance" in contravention of the Securities and Exchange Commission's rules and regulations. The depletion of Manhattan's assets was concealed by the purported transfer to it, in exchange for the proceeds of the bond sale, of a certificate of deposit which, in fact, had been assigned by Manhattan's new president, a coconspirator, to another corporation, and by it used as collateral for a loan. Through a deceptive device, the bonds were sold and the proceeds used in the purchase of the stock. Begole conspired with others to use United States Treasury bonds owned by Manhattan to pay for the shares. Manhattan's sole stockholder agreed to sell all of its Manhattan stock to one Begole for $5 million. Petitioner, liquidator of Manhattan Casualty Co., alleged that the company was defrauded, in violation of federal securities laws, by a fraudulent sale of securities owned by it. 6 CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Syllabus Held: Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful to use "in connection with the purchase or sale" of any security "any manipulative or deceptive device or contrivance" in contravention of the Securities and Exchange Commission's rules and regulations. The District Court dismissed the complaint and the Court of Appeals affirmed, finding that "no investor injured" and that the "purity of the security transaction and the purity of the trading process were unsullied." ![]()
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