1 Wayne W. Call, State Bar No. 56676 Chris C. …...1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19...

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DEFENDANTS’ OPPOSITION TO PLAINTIFF’S EX PARTE APPLICATION FOR TRO

Wayne W. Call, State Bar No. 56676 [email protected] Mark L. Eisenhut, State Bar No. 185039 [email protected] William P. Cole, State Bar No. 186772 [email protected] Chris C. Scheithauer, State Bar No. 184798 [email protected] CALL & JENSEN A Professional Corporation 610 Newport Center Drive, Suite 700 Newport Beach, CA 92660 Tel: (949) 717-3000 Fax: (949) 717-3100 Leonard L. Gordon (pro hac vice forthcoming) [email protected] VENABLE LLP Rockefeller Center 1270 Avenue of the Americas 24th Floor New York, New York 10020 Tel: (212) 307-5500 Fax: (212) 307-5598 J. Douglas Baldridge (pro hac vice forthcoming) [email protected] Eric S. Berman (pro hac vice pending) [email protected] Katherine Wright Morrone (pro hac vice pending) [email protected] VENABLE LLP 600 Massachusetts Ave. NW Washington, DC 20001 Tel: (202) 344-4000 Fax: (202) 344-4300 Attorneys for Defendants

Case 8:20-cv-00287-JVS-KES Document 37 Filed 02/18/20 of 44 Page ID #:9360

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Federal Trade Commission,

Plaintiff,

vs. OTA Franchise Corporation, et al.,

Defendants.

Case No. 8:20-cv-00287 JVS (KESx) DEFENDANTS’ OPPOSITION TO PLAINTIFF’S EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE WHY PRELIMINARY INJUNCTION SHOULD NOT ISSUE

Complaint Filed: February 12, 2020 Trial Date: None Set


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Table of Contents

Page

I. INTRODUCTION ........................................................................................... 1

II. OTA IS A LONG-TENURED BUSINESS WITH DEEP ROOTS IN THE COMMUNITIES IN WHICH IT OPERATES ............................................... 5

A. OTA IS HIGHLY REPUTABLE AND THERE IS NO EXCUSE FOR THE FTC’S OVER-AGGRESSIVE DEMAND TO PUT IT IMMEDIATELY OUT OF BUSINESS. .............................................. 5

B. THE FTC INVESTIGATED FOR OVER A YEAR AND OTA FULLY AND VOLUNTARILY COOPERATED. .............................. 6

III. OTA PROVIDES EXCEPTIONAL FINANCIAL EDUCATION TO CONSUMERS ................................................................................................. 9

A. OTA OFFERS NUMEROUS EDUCATIONAL OPTIONS TO CONSUMERS. ...................................................................................... 9

B. OTA INVESTS HEAVILY IN ITS STUDENTS. .............................. 11

C. OTA CLEARLY DISCLOSES THE RISKS OF TRADING. ........... 12

D. OTA TEACHES SOUND TRADING AND INVESTING CONCEPTS. ........................................................................................ 13

E. OTA INSTRUCTORS ARE EXPERIENCED AND CONSTANTLY EVALUATED. .................................................................................... 14

IV. FTC’S CHERRY-PICKED “EVIDENCE” DOES NOT PAINT AN ACCURATE OR CURRENT PICTURE OF DEFENDANTS’ BUSINESS ..................................................................................................... 15

A. OTA’S EDUCATION WORKS. ........................................................ 15

B. THE FTC HAS NOT IDENTIFIED ANY CURRENT OR ONGOING HARM. ................................................................................................ 17

C. “EVIDENCE” CITED BY THE FTC IS MISLEADING. ................ 18

V. THE FTC’S TEMPORARY RESTRAINING ORDER REQUEST BELONGS IN THE ILLINOIS VENUE OF THE FIRST-FILED CASE ... 20

VI. LEGAL STANDARD FOR TEMPORARY RESTRAINING ORDERS .... 21

VII. ARGUMENT ................................................................................................. 23

A. THE FTC HAS NOT MET ITS BURDEN TO SHOW THAT IT IS LIKELY TO SUCCEED ON THE MERITS. ..................................... 23


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1. THE FTC IS UNLIKELY TO SUCCEED ON THE MERITS OF COUNTS I AND II BECAUSE DEFENDANTS’ REPRESENTATIONS REGARDING OTA’S TRAINING ARE NOT FALSE. ................................................................... 23

A) DEFENDANTS’ CLAIMS THAT STUDENTS CAN EARN MONEY USING DEFENDANTS’ TRAINING ARE NOT MISLEADING. OTA’S METHODS WORK, AND, MANY CONSUMERS SUCCEED BY USING THE TRAINING THAT DEFENDANTS PROVIDE. .. 24

B) DEFENDANTS’ EARNINGS AND RELATED CLAIMS ABOUT OTA’S TRAINING ARE NOT MISLEADING BECAUSE DEFENDANTS ACTIVELY ENSURE THAT CONSUMERS UNDERSTAND THE TIME AND EFFORT IT TAKES TO BE SUCCESSFUL AS WELL AS THE RISKS ASSOCIATED WITH TRADING. ..................................................................... 25

2. THE FTC IS UNLIKELY TO SUCCEED ON THE MERITS OF COUNT III BECAUSE DEFENDANTS HAVE NOT VIOLATED THE CONSUMER REVIEW FAIRNESS ACT OF 2016. .................................................................................... 28

B. THE BALANCE OF EQUITIES STRONGLY FAVORS DEFENDANTS AND MANDATES THE DENIAL OF THE FTC’S REQUESTED RELIEF. ...................................................................... 29

1. THE FTC’S DELAY IN BRINGING THIS ACTION SQUARELY DEMONSTRATES THAT THERE IS NO URGENCY AND UNDERCUTS ITS CLAIM THAT THE PUBLIC INTEREST FAVORS THE IMMEDIATE RELIEF SOUGHT. .................................................................................. 30

2. THE FTC’S REQUEST TO FREEZE DEFENDANTS’ ASSETS AND APPOINT A RECEIVER IS INEQUITABLE AND OVERBROAD. ............................................................... 31


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Table of Authorities Page

Cases

Alltrade, Inc. v. Uniweld Prods., Inc.,

946 F.2d 622 (9th Cir. 1991) .............................................................................. 21

Califano v. Yamasaki,

442 U.S. 682 (1979) ............................................................................................ 23

Canada Life Assur. Co. v. LaPeter,

563 F.3d 837 (9th Cir. 2009) .............................................................................. 34

Carrera v. First Am. Home Buyers Prot. Co.,

11-CV-10242, 2012 U.S. Dist. LEXIS 199507 (C.D. Cal. Jan. 24, 2012) ......... 21

Church of Scientology v. United States Dep’t of the Army,

611 F.2d 738 (9th Cir. 1979) .............................................................................. 21

Compass Bank v. Baraka Holdings, LLC,

No. 17-CV-06563, 2017 WL 10378348 (C.D. Cal. Oct. 26, 2017) ................... 34

Federal Trade Commission v. Infinity Group Services. Inc.,

09-CV-977, 2009 WL 10672411 (C.D. Cal. Sept. 2, 2009) ............................... 34

Flynt Distributing Co v. Harvey,

734 F.2d 1389 (9th Cir. 1984) ............................................................................ 22

FTC v. Affordable Media, LLC,

179 F.3d 1228 (9th Cir. 1999) ............................................................................ 23

FTC v. BunZai Media Grp.,

No. CV-15-4527, 2015 WL 5305243 (C.D. Cal. Sep. 9, 2015) ......................... 23

FTC v. Consumer Def., LLC,

926 F.3d 1208 (9th Cir. 2019) ............................................................................ 22

FTC v. Digital Altitude, LLC,

No. 2:18-CV-0729 (C.D. Cal. Feb. 1, 2018) ...................................................... 23


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FTC v. DIRECTV, Inc.,

No. 15-CV-01129, 2018 WL 3911196 (N.D. Cal. Aug. 16, 2018) .................... 27

FTC v. John Beck Amazing Profits, LLC,

No. 2:09-CV-4719, 2009 WL 7844076 (C.D. Cal. Nov. 17, 2009) 22, 31, 32, 33

FTC v. Lakhany,

No. 12-CV0337, 2012 WL 12860115 (C.D. Cal. May 2, 2012) .................. 21, 22

FTC v. Merchant Services Direct, LLC,

No. 13-CV-0279, 2013 WL 4094394 (E.D. Wash. Aug. 13, 2013) ................... 24

FTC v. Millennium Telecard, Inc.,

No. 11-CV-2479, 2011 WL 2745963 (D.N.J. July 12, 2011) ............... 22, 31, 32

FTC v. Verity Int’l, Ltd.,

124 F. Supp. 2d 193 (S.D.N.Y. 2000) ................................................................ 34

FutureLogic, Inc. v. Transact Technologies Inc.,

No. 05-CV-03754, 2006 WL 8432105 (C.D. Cal. Jan. 20, 2006) ...................... 21

Herb Reed Enters., LLC v. Fla. Entm’t Mgmt.,

736 F.3d 1239 (9th Cir. 2013) ............................................................................ 22

Home Box Office, Inc. v. Showtime/The Movie Channel Inc.,

832 F.2d 1311 (2d Cir. 1987) ............................................................................. 27

In re Adelphia Commc’ns Corp.,

No. 04-CV-2817, 2004 WL 2186582 (S.D.N.Y. Sept. 27, 2004) ...................... 31

In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust

Litigation, 782 F. Supp. 481 (C.D. Cal. 1991) ................................................... 29

Jennings v. Rodriguez,

138 S. Ct. 830 (2018) .......................................................................................... 23

Johnson v. Couturier,

572 F.3d 1067 (9th Cir. 2009) ................................................................ 22, 31, 32


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Kemp v. Peterson,

940 F.2d 110 (4th Cir. 1991) .............................................................................. 31

Lamb-Weston, Inc. v. McCain Foods, Ltd.,

941 F.2d 970 (9th Cir. 1991) .............................................................................. 22

Los Angeles Memorial Coliseum Commission v. Nat’l Football League,

634 F.2d 1197, 1200 (9th Cir. 1980) ................................................................. 21

Madsen v. Women’s Health Ctr., Inc.,

512 U.S. 753 (1994) ............................................................................................ 23

Mission Power Eng’g Co. v. Continental Cas. Co.,

883 F. Supp. 488 (C. D. Cal. 1995) ............................................................1, 3, 22

Newby v. Enron Corp.,

188 F. Supp. 2d 684 (S.D. Tex. 2002) ................................................................ 32

OTA Franchise Corp., et al, v. Federal Trade Commission,

No. 1:20-cv-802 (N.D. Ill. filed February 4, 2020) ............................................ 21

POM Wonderful LLC v. FTC,

777 F.3d 478 (D.C. Cir. 2015) ............................................................................ 26

POM Wonderful LLC,

No. 9344, 2013 FTC Lexis 6 (F.T.C. Jan. 10, 2013) .......................................... 26

Rodriguez v. Robbins,

715 F.3d 1127 (9th Cir. 2013) ............................................................................ 23

Winter v. Nat. Res. Def. Council, Inc.,

555 U.S. 7 (2008) ................................................................................................ 22

Statutes

15 U.S.C. § 45b ........................................................................................................ 28

15 U.S.C. § 45b(a)(3) ............................................................................................... 28

Fed. R. Civ. P. 65(b)(1)(A) ...................................................................................... 22


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Miscellaneous

Advertising FAQ’s: A Guide for Small Business, FTC.gov,

https://www.ftc.gov/tips-advice/business-center/guidance/advertising-

faqs-guide-small-business (last visited Feb. 13, 2020) ....................................... 27


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I. INTRODUCTION

Online Trading Academy’s education “provides significant utility to

students and would enable students who follow the principles and use the

techniques taught by OTA to make money through trading and investing.”

So concludes Dr. Jeff Harris, Ph.D., former SEC and CFTC Chief Economist and current

chair of American University’s Finance and Real Estate Department.

“OTA’s financial education is truly outstanding. I am a more

knowledgeable and confident trader because of OTA’s education. I believe

the OTA strategy works.”

This is what over 3360 (and counting) currently active OTA students stated in an online

petition in just the last several days. Also submitted with this Opposition are the

declarations of over 100 OTA students, each of whom testify uniquely but consistently

about the positive and valuable experiences they have had at OTA. Simply put, the

principles and techniques taught by OTA work.

On the other hand, the FTC’s ex parte application for “emergency” draconian relief

does not work.

“Ex parte applications are solely for extraordinary relief and should be used with

discretion.” (This Court’s Order, Doc. 24, at 3 (citing Mission Power Eng’g Co. v.

Continental Cas. Co., 883 F. Supp. 488 (C. D. Cal. 1995)). The FTC asks this Court to

throw that discretion to the wind. The FTC ignored and bypassed an earlier-filed case in

Illinois that addresses these identical issues,1 and stormed into this Court demanding

catastrophic relief within 24 hours on meritless claims. The FTC initially attacked OTA

over a year ago by secretly contacting and spooking its bank, causing a sudden and

harmful end to that relationship. The FTC then investigated, with OTA’s full

cooperation, for another year; it “negotiated” last minute with OTA by demanding

nothing less than OTA’s voluntary demise; and it now submits nearly 9,000 pages of

documents for which it desires an immediate and dramatic ruling. On top of that, upon 1 Defendants will be filing a Motion to Dismiss and/or Motion to Transfer this action to the Northern District of Illinois—the location of the first-filed action.


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filing, the FTC immediately disseminated a press release and then a blog casting

numerous false aspersions at OTA, hoping to win by destroying sales before having to

prove its baseless case.

The FTC’s desired “emergency” ruling would put a sudden and tragic end to a

twenty-two-year-old business, with an incredible track record acknowledged by

numerous awards, run by very good people, with extraordinarily satisfied customers, and

with a track record of student success—the vast majority of whom would be devastated

to learn that the lifelong learning they fully paid for is no longer available to them. The

FTC has cherry-picked “evidence” to try to tell an off-base and outdated story. Given a

fair opportunity, Defendants2 will bring the truth into focus.

The FTC seeks extraordinary, and unwarranted, relief. But the FTC is not entitled

to emergency relief because it does not belong in this Court and there is no emergency

here. Indeed, throughout its Memorandum in Support of its Application for a Temporary

Restraining Order (“TRO Mem.”),3 the FTC fails to identify any current, ongoing activity

that would warrant such relief. Rather, the Memorandum is littered with advertising

claims and isolated statements from 2018 and 2019 (and even earlier) and citations to a

mere seven consumer declarations, the majority of which were signed several months

ago and reference conduct occurring years ago.

Defendants learned of the FTC’s investigation a year ago. Upon learning of the

FTC’s inquiries, OTA’s counsel immediately notified staff that Defendants would

preserve assets and cooperate with the FTC’s investigation. OTA did cooperate, making

twenty-four written submissions to the FTC and producing over 28,000 documents, all

without receiving a Civil Investigative Demand (CID) from the FTC. Defendants also

2 The FTC has sued three corporate entities and three individuals, all of whom vehemently deny the allegations hurled at them. “Online Trading Academy” or “OTA” is used as a catch-all throughout this Opposition. By filing this Opposition, OTA does not agree to and is not conceding that venue in this Court is proper. 3 The FTC filed its Application for a Temporary Restraining Order on Wednesday February 12, 2020. See Doc. 12. On Friday February 14, 2020, FTC filed a “Revised” Memorandum of Law in Support of its Application for a Temporary Restraining Order. See Doc. 32. Cites to the “TRO Mem.” are therefore to the Revised Memorandum.


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participated in two in-person meetings with FTC staff. Eight OTA instructors, who in

November 2019 received CIDs, complied fully and promptly. Despite OTA’s

cooperation with the FTC, on January 28, 2020, FTC staff informed OTA’s counsel that

it had drafted a Complaint and sent it to the full Commission for approval to file. The

FTC made clear in that phone call that only after it filed its Complaint and only after

OTA was placed under a preliminary Order, would staff be willing to negotiate a final

settlement. Left with no other option to combat the FTC’s overreach, OTA filed a lawsuit

in the Northern District of Illinois (where one of the individual named Defendants

resides) on February 4, 2020, challenging the action that the FTC has now taken in this

Court.

Now, over a week after OTA filed its lawsuit, the FTC ignores that pending

action—which it admits raises the same issues as in this case—and comes to this Court

seeking “emergency” relief that would effectively put the company out of business,

without any basis to do so. The FTC has utterly failed to meet its burden to show that it

is entitled to the draconian injunctive relief it seeks. Incredibly, despite requesting an

asset freeze of the corporate assets, there is not a single allegation that Defendants are

dissipating any assets or that there will otherwise be an inability to recover monetary

damages. That is because there is no basis to make such allegations. In fact, in February

2019, after learning of the FTC’s investigation, counsel for Defendants made clear to the

FTC that counsel would advise OTA to preserve its financial assets immediately. In

addition, OTA, with Mr. Shachar at the helm, has been around for over twenty-two years.

There are forty-eight brick and mortar locations, including in Irvine, California and

throughout the world, many with deep ties to their communities. This is not a fly by night

“boiler room” and OTA is not going anywhere. There is no basis for the FTC to claim

that it must receive an “emergency” TRO against these Defendants, which would be

against this Court’s rules and the law. See Mission Power Eng’g Co., 883 F. Supp. at

490-92.


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OTA is a lawful company that provides something of real value to consumers and

that is a positive contributor to its communities—throughout the United States and

around the world. FTC’s reckless aggression has already inflicted significant harm on

Defendants: the FTC’s contact with OTA’s bank during the infancy of its investigation

resulted in the termination of OTA’s long-term relationship, and the freezing of its credit

line (contrary to the FTC’s specious dissipation of assets argument, the individual

defendant Mr. Shachar has since invested millions of dollars back into the company to

secure jobs and provide the promised services to OTA’s customers). OTA survived this

initial attack by the FTC. Now, without sufficient evidence, the FTC once again attempts

to deliver a death blow without giving OTA the opportunity for a fair fight. The Court

cannot allow this.

The FTC has not, and cannot, meet any of the required elements of providing this

extraordinary emergency relief. First, this dispute belongs in the first-filed venue of

Illinois. Second, as to its Section 5 claims, the FTC’s primary allegation is that

“Defendants’ earnings claims are false or unsubstantiated” and that “OTA’s strategy does

not work as advertised.” The evidence says otherwise. Defendants are submitting over

100 declarations from OTA students attesting to the fact that OTA’s education does work

as advertised. Moreover, Defendants submitted to the FTC in December 2019, and

include here, the expert report of Dr. Harris, quoted in part above. While the FTC chooses

to ignore this evidence, the Court should not.

Student declarations also make clear that OTA clearly discloses the risks inherent

in trading and investing, and that consumers were not told that making money trading

would be quick, easy and without risk. Indeed, the FTC dedicates several pages of its

Complaint to acknowledging the lengthy and unavoidable disclosures OTA provides to

consumers in class, but then inexplicably ignores them and alleges in conclusory fashion

that the disclaimers “do not cure” Defendants’ alleged misdeeds.

Third, the FTC is also unlikely to succeed on the merits of its CRFA claims. The

refund agreements that form the basis of that count are not “form contracts” and were not


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offered to consumers “in the course of selling” OTA’s services (both of which are

requirements for a CRFA claim). Quite the opposite. These agreements memorialized

OTA’s refunding money to consumers well after the consumers’ contractual

cancellation period (often after students had consumed large amounts of OTA’s

education). Students were also given the opportunity to negotiate these agreements, as

several declarations attached to this Opposition show. They are not covered by the CRFA

and thus, not only is the FTC not entitled to emergency relief, but it has failed to state a

CRFA claim as a matter of law.

Finally, the balance of equities strongly favors Defendants. The imposition of

FTC’s requested relief—including an asset freeze and the appointment of a receiver—

would cripple the company and deprive thousands of students of education they sincerely

value. Such an order may well be fatal. The lives of OTA, its employees, its franchisees,

and its students should not be decided in the cavalier manner and on incomplete and out

-of-context evidence as the FTC urges. In contrast, should the TRO be denied, the FTC

will still have its day in court, but on a level playing field. Accordingly, the Court should

reject the FTC’s attempt to short-circuit this case and deny the FTC’s application for a

temporary restraining order.

II. OTA IS A LONG-TENURED BUSINESS WITH DEEP ROOTS IN THE COMMUNITIES IN WHICH IT OPERATES

A. OTA is Highly Reputable and There is No Excuse for the FTC’s Over-Aggressive Demand to Put it Immediately Out of Business.

OTA was founded in 1997 and has been in business for over twenty-two years.4

Mr. Shachar, OTA’s owner and CEO, has been with the company since its founding.5 In

addition to Mr. Shachar, many members of OTA’s executive team are long-tenured

employees with deep roots in the financial education community.6 OTA has forty-eight

4 Exhibit G, February 18, 2020 Declaration of Eyal Shachar (“Shachar Decl.”) ¶¶ 3, 4. Exhibits A – MMMMM are attached to the February 18, 2020 Declaration of Mark Eisenhut. 5 Shachar Decl. ¶ 4. 6 Id. ¶ 5.


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brick-and-mortar locations worldwide.7 The majority of these locations are franchise-

owned locations.8 Franchisees typically have strong ties to the local communities where

they operate and have invested heavily in their facilities and businesses.9

OTA has an A+ rating with the Better Business Bureau.10 It is also a certified B-

Corporation, a prestigious certification provided to a “community of leaders, driving a

global movement of people using business as a force of good.”11 OTA takes this

commitment extremely seriously and strives to be a good actor in the global business

world.12

OTA has received a number of accolades and best-place-to-work awards over the

years. For example, OTA’s headquarters in Irvine, California is a seven-time recipient

of the Orange County Best Workplaces award.13 OTA has received a number of other

awards, including the Bronze Stevie Award in 2019 in the Technical Innovation of the

Year category at the 16th annual International Business Awards; Best Global Forex

Education at the 2019 Global Forex Awards; and was named a 2018, 2019, and 2020 top

fifty franchise by Franchise Business Review.14 OTA has also earned a “Great Place to

Work® Award” in 2018 and 2019.15

B. The FTC Investigated for Over a Year and OTA Fully and Voluntarily Cooperated.

In early 2019, OTA discovered that the FTC was looking into its business after

OTA’s bank abruptly severed ties with OTA.16 OTA’s sudden loss of its long-established

banking relationship was a severe blow, but at the time, it was not fatal.17 OTA was

informed that the government led the bank to believe that OTA would not survive the

7 Id. ¶ 6. 8 Id. ¶ 6. 9 Id. ¶ 6; see also Exhibit JJJJJ, Motisi Decl. ¶ 8. 10 Shachar Decl. ¶ 7. 11 Id. ¶ 7; https://bcorporation.net/. 12 Shachar Decl. ¶ 7. 13 Id. ¶ 8. 14 Id.; https://www.tradingacademy.com/about-us/press-releases/2019-10-21.aspx 15 Shachar Decl. ¶ 8 16 Exhibit F, February 17, 2020 Declaration of Eric S. Berman (“Berman Decl.”) ¶ 6. 17 Shachar Decl. ¶ 35.


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investigation. After making various inquiries, OTA learned that it was the FTC that had

contacted OTA’s bank, purportedly to gather information that OTA would have

voluntarily provided the FTC. Having survived the FTC’s initial contact with OTA’s

bank, OTA proactively reached out to the FTC and committed to working with the

government throughout the FTC’s investigatory process. Moreover, OTA’s counsel

informed the FTC that OTA was instructed “to suspend its normal document destruction

policies and to preserve its financial assets” in February 2019—a full year ago.18 There

is clearly no need for “emergency” relief such as an asset freeze now, after a year has

elapsed and the FTC cannot allege any threat of dissipation or destruction.

Throughout FTC’s investigation, the FTC never needed to issue a CID to OTA.

Instead, OTA voluntarily responded to a series of access letters and follow-on requests

from the FTC. OTA cooperated in order to show the FTC that OTA is a good actor and

that the FTC’s investigation was ill-founded.

In total, OTA provided twenty-four written submissions, over 28,000 pages of

documents, and met with FTC staff on two occasions, on April 11, 2019 and June 5,

2019, respectively.19 At the June 5 meeting, OTA flew in three company executives to

dialogue with FTC staff about how OTA knows its strategy works.20 OTA met with FTC

staff for over two hours and answered all of its questions regarding the efficacy of OTA’s

strategy. Additionally, as noted above, in December 2019, OTA submitted an expert

report from Dr. Harris who opined that OTA’s educational materials and the principles

underlying them are based on “sound economic theories,” provide “significant utility to

students,” and “enable students who follow the principles and use the techniques taught

by OTA to make money through trading and investing.”21

18 Exhibit D, February 20, 2019 Letter from Leonard Gordon to L. Greisman; see also Berman Decl. ¶ 6. 19 Berman Decl. ¶ 7. 20 Id. 21 See Exhibit A, December 19, 2019 Expert Report of Jeffrey H. Harris, Ph.D. (“Harris Report”) ¶¶ 4(a), 4(j), 122.


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In November 2019, the FTC issued CIDs to eight OTA instructors, including

Messrs. Kimoto and Seiden. All of them provided fulsome responses and accompanying

documents to the FTC.

At no point during the its investigation did the FTC complain about any lack of

cooperation or transparency on OTA’s part. Despite OTA’s continued cooperation with

the FTC during its investigation, on January 28, 2020, in response to OTA’s counsel’s

request for a status update, FTC staff informed OTA’s counsel that it had drafted a

Complaint and had recommended that the Commission approve the filing of that

Complaint in court.22 The FTC staff informed OTA counsel that, contrary to standard

FTC practice when a company has cooperated with the FTC in an investigation, the FTC

was not providing OTA with the opportunity to engage in pre-suit negotiations over a

potential resolution with either staff or the Director of the Bureau of Consumer

Protection. When OTA’s counsel inquired about a negotiated resolution, FTC staff made

clear that while they felt that this case “can and should settle,” staff was willing to

negotiate only after its Complaint was on file and an injunction entered.23

On January 29, 2020, the FTC provided counsel with a draft Complaint, laying out

its theories of harm for the first time. Then, on January 31, 2020, FTC staff outlined the

contours of its proposed preliminary injunctive relief that would be a necessary condition

for negotiations to ensue—including the imposition of a monitor over OTA and strict

asset preservation provisions.24 During the same January 31 call, FTC staff explained

that the ultimate relief it would seek would include a complete and permanent ban

preventing OTA from providing financial education to consumers and full disgorgement

of all sales the Defendants ever made—even sales to satisfied students.25 Given staff’s

unwillingness to even discuss a settlement or other resolution until after it had filed suit,

and the irreparable harm that such a meritless lawsuit would undoubtedly cause

22 See Berman Decl. ¶ 8. 23 See id. 24 Id. ¶ 9. 25 Id. ¶ 10.


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Defendants, Defendants were left with no other choice but to affirmatively sue the FTC

to attempt to negate its overreach. On February 4, 2020, Defendants filed a lawsuit in

the Northern District of Illinois against the FTC.26 As the FTC admits in its Notice of

Pendency of Other Action, the Northern District of Illinois action “involves a material

part of the subject matter” of this case.27

III. OTA PROVIDES EXCEPTIONAL FINANCIAL EDUCATION TO CONSUMERS

When Mr. Shachar created OTA in 1997, his goal was to provide exceptional

financial education, focusing on risk management, to everyday investors.28 He made it

his life mission to fulfill this goal.29 Today, OTA has over 70,000 students.30 All of them

are provided lifetime learning and access to OTA’s in-center classes and online education

and materials.31 On numerous metrics, OTA students are overwhelmingly satisfied with

the financial education that OTA provides.

A. OTA Offers Numerous Educational Options to Consumers.

OTA provides a broad range of educational courses to consumers.32 While every

consumer’s journey is different, typically, a prospective student will start with a half-day

free Preview event (the “Preview”), where an OTA presenter introduces the company

and provides basic financial and economic concepts relevant to trading, such as supply

and demand, the role of institutional traders, leverage, and risk management.33 Then, a

consumer wishing to get further information typically attends a three-day Market Timing

Orientation (“MTO”) class—generally for no more than $300—where an OTA instructor

expands upon the concepts introduced at the Preview and introduces the training OTA

provides in each of the asset classes OTA teaches, including stocks, futures, options, and

26 See OTA Franchise Corp., et al. v. FTC, 1:20-cv-00802 (N.D. Ill.). 27 Doc. 5 at 2. 28 Shachar Decl. ¶ 9. 29 Id. 30 Id. ¶ 22. 31 Id. 32 Id. ¶ 12. 33 Id.; see also Exhibit A, Harris Report ¶ 26.


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forex.34 After the MTO, consumers have a wide range of financial education courses to

pick and choose from.35 Typically, a consumer will first take OTA’s Core Strategy

course—a seven-day immersive course where students are introduced to OTA’s core

concepts and strategies.36 After the Core Strategy course, students often will take an

extended learning track (XLT) online course.37 The Core Strategy XLT reinforces the

underlying principles behind Core Strategy and provides experiential learning

opportunities to the students.38 OTA also offers courses in stocks, futures, options, and

forex—all of which have accompanying XLTs for continued learning and practice.39

OTA students are provided with a number of options for taking these classes—OTA

teaches classes via live, in-person sessions, as well as online in both live and on-demand

formats.40 OTA students are members for life with unlimited access to repeat their asset

classes and other resources, without any additional charge, at any center around the world

or online.41

In addition to classes, OTA also provides students with a number of tools to

enhance their training. These include, but are not limited to: trade plans, where students

lay out their personal rules and risk parameters; access to “MyOTA,” OTA’s online

student portal that contains numerous resources and additional education; daily examples

of high-probability trading zones; and more.42 Over 50,000 students have been active

and logged into the MyOTA portal in the past twenty-four months, including students

who have been taking OTA courses for sixteen years or more.43

34 Shachar Decl. ¶ 12; see also Exhibit A, Harris Report ¶¶ 26-28. 35 Shachar Decl. ¶ 12. 36 Id. 37 Id. 38 Id. 39 Id. 40 Id. ¶ 13. 41 Id. ¶ 21. 42 Id. ¶ 16. 43 Id.


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For students who wish to enhance their learning even further, OTA provides

advanced education in its Mastermind Community.44 Students in the Mastermind

Community gain access to advanced classes and obtain additional educational resources

from OTA, including “The Supply and Demand Grid,” which is a tool that identifies

potential trades and helps identify profit potential, and a Daily Market Overview, which

compliments the Supply and Demand Grid by providing commentary on important news,

announcements, and events that will transpire over the upcoming days and weeks.45

Mastermind members also gain access to a community clubhouse and private trade

rooms.46 Less than 10% of OTA students are part of the Mastermind Community.47

B. OTA Invests Heavily in its Students.

OTA continually reinvests in innovation to further the student experience. To that

end, OTA invests a significant amount each year to research and development.48 For

example, in 2018, OTA invested millions of dollars in research and development.49 Most

recently, OTA has developed a proprietary trading and investing platform, called CliK,

to enhance the student learning journey.50 CliK is a first-of-its-kind trading platform that

builds in many of the risk management and other concepts that OTA teaches. It is

designed to help investors avoid mistakes and achieve greater trading success. This

multi-million-dollar investment was first introduced in May 2019 and is being

progressively rolled out, with new features constantly being developed and provided to

students.51 All OTA students in XLT asset classes receive CliK free of charge for life.52

44 Id. ¶ 17. 45 Id. 46 Id. 47 Id. ¶ 18. 48 Id. ¶ 19. 49 Id. 50 Id. ¶ 20. 51 Id. 52 Id.


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Additionally, Mr. Shachar, personally, invests in the company. In 2019, he invested

millions of dollars of his own money into the company.53

C. OTA Clearly Discloses the Risks of Trading.

The foundation of OTA’s education is its “Core Strategy”—a trading and investing

methodology, strategy, system, and process to educate retail investors how to trade with,

not against, financial institutions.54 Integral to the Core Strategy curriculum is risk

management, which is at the forefront of all the education OTA provides.55 OTA

includes multiple disclaimers at all stages of the sales and education process, including

in the student enrollment agreements,56 in nearly all written material, as well as verbally

and via slides during its presentations to consumers, that trading involves risk and that

students will lose money.57 OTA reinforces this message in its course materials,

including in the 2019 Course Workbook for OTA’s Market Timing Orientation which

expressly states the following: “All trading involves high risk; past performance is

not necessarily indicative of future results. There have been no promises,

guarantees or warranties suggesting that any trading – training will result in a profit

or will not result in a loss.”58 (emphasis in original). OTA also provides clear rules and

strategies designed to ensure that losses are minimized, and that students effectively

manage their risk.59 The FTC well knows these disclosures are provided to students—it

quotes them over several pages in its Complaint—but then, with no supporting evidence,

states that they are inadequate. 60

53 Id. ¶ 34. 54 Id. ¶ 11. 55 Id. ¶ 14; see also Exhibit A, Harris Report ¶¶ 47–48, 65 (noting OTA “focus on risk management” and describing CliK’s reinforcement of same for benefit of students). 56 See Exhibit C, Sample OTA Enrollment Agreement. 57 Shachar Decl. ¶ 14; see also Compl., Doc. 1 at 31-33 (quoting pages of disclosures provided at the MTO). 58 FTC Exhibit 13 at 1743, 2019 MTO Course Workbook. 59 Shachar Decl. ¶ 14. 60 Complaint, Doc 1 at 31-34.


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The message that OTA sends to its students about the risks involved in trading is

not lost on those students. In fact, numerous OTA students acknowledge the emphasis

that OTA places on risk management:

“OTA teaches and focuses on risk management.”61

“OTA tells you about risk management right up front, and it was the #1 thing I learned.”62

“OTA emphasized risk management … OTA is really good at that.”63

“There are disclosures everywhere at OTA. The risk is on the person that trades – they choose to take that risk. OTA has reinforced that message. You have to accept the risk that you might not win and could lose money.”64

OTA “stressed the importance of managing risk diligently to ensure you don’t create problems for yourself.65

“The second most important thing I learned was risk management, something I had never considered. I got killed a couple times before in 2000 and 2008. At OTA we talked a lot about risk management, and it was a big deal.”66

“A lot of time in class was spent on risk management and understanding my potential losses and gains.”67

“Risk management is essential. It’s highlighted everywhere. You have to manage your risk size every time you set a trade.”68

D. OTA Teaches Sound Trading and Investing Concepts.

OTA’s trading techniques and concepts are based on years of experience on the

trading room floor and investing in the markets. However, the Court need not take OTA’s

word for it; instead, the Court should credit the expert testimony of Dr. Harris, the chair

of American University’s Finance Department.69 Dr. Harris experienced and opined on

the majority of OTA’s educational offerings, including the Preview, MTO, Core Strategy

61 Exhibit N, Bailey Decl. ¶ 12. 62 Exhibit HHH, Blackwell Decl. ¶ 17. 63 Exhibit O, Patry Decl. ¶ 8. 64 Exhibit P, Teebo Decl. ¶ 12. 65 Exhibit BB, P. Carroll Decl. ¶ 6. 66 Exhibit CCC, Loyer Decl. ¶ 9. 67 Exhibit R, French Decl. ¶ 9. 68 Exhibit FFF, Peck Decl. ¶ 11. 69 See Exhibit A, Harris Report.


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course, each of the asset classes OTA provides—stocks, options, futures, and forex—and

associated XLTs with the Core Strategy and asset classes.70 In his report, Dr. Harris

concluded that “OTA’s educational materials and principles underlying these courses are

based on sound economic theories.”71 He also found that the “education provided by

OTA provides significant utility to students and would enable students who follow the

principles and use the techniques taught by OTA to make money through trading and

investing.”72 On December 19, 2019, OTA’s counsel submitted Dr. Harris’s report to the

FTC.73 Yet nowhere in the voluminous TRO filing does the FTC ever mention Dr.

Harris’s report, or put forth any evidence to rebut his conclusions.

E. OTA Instructors are Experienced and Constantly Evaluated.

Instructors at OTA have many years of experience in the financial markets and

trading following OTA’s methodology.74 Before teaching any class, OTA instructors are

put through a four-phase training and onboarding process over a period of three to six

months.75 Once in the classroom, students constantly provide feedback on the

effectiveness of OTA instructors through post-class surveys, which OTA uses to monitor

instructor quality. Every post-asset-class student survey score is posted online; currently,

the results of over 197,000 such scores with an overall satisfaction rate of over 94%, are

shown on OTA’s website.76 Students also provide feedback on the effectiveness of OTA

instructors, and the overall session, at the end of XLT classes. These surveys have been

provided since 2013 and over 250,000 have been completed.77 Notably, both the average

session score and average instructor score have increased over time. For example, in

70 Id. ¶¶ 3, 18. Dr. Harris’s analysis and report, covering many different facets of OTA’s course offerings, stands in stark contrast to the FTC’s expert, Kapil Jain, who limited his review to a Preview transcript, attendance at one MTO, and a “Core Strategy workshop.” FTC Exhibit 11 at 212. Mr. Jain did not evaluate asset-class-specific XLTs. 71 Exhibit A, Harris Report at 2. 72 Id. at 3. 73 See Exhibit B, Dec. 19, 2019 Letter from E. Berman to T. Biesty. 74 Shachar Decl. ¶ 23. 75 Id. 76 Id. ¶ 24; see also https://www.tradingacademy.com/reviews/default2.aspx. 77 Shachar Decl. ¶ 25.


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2013, the average session score was 88.8 and the average instructor score was 89.0. By

2019, the average session score had increased to 92.5 and the average instructor score

increased to 92.7.78

IV. FTC’S CHERRY-PICKED “EVIDENCE” DOES NOT PAINT AN ACCURATE OR CURRENT PICTURE OF DEFENDANTS’ BUSINESS

A. OTA’s Education Works.

Contrary to the many stale, out of context, and cherry-picked statements that the

FTC cites in its TRO papers, Defendants’ representations are neither false nor

unsubstantiated. Rather, students who follow the rules and techniques that OTA teaches

can, and do, make money. The enclosed student declarations support this:

“My first year at OTA, I think I made about $300,000 in the market. It was a good year. I’d never made money or had achieved returns like that before in the market. . . . I made about $180,000 the following year, and last year I made about $160,000.”79

“Since coming to OTA, I have done very well and had great success trading oil. I was able to make $1,500 a day within a short amount of time.” 80

“I consider myself to be a successful trader as long as I follow the rules. . . . I have made more money than paid for my classes at OTA with the results of my trading.” 81

“I’m trading more equities and options and I’m quite successful at that.”82

“I live in an estate home and pay 100% of the household bills with the money I make from trading. I withdraw $7,500 monthly from the profits in my Roth IRA to pay bills.”83

“I am 100% profitable on all my trades. . . . In six months I made approximately $18,000.”84

“I consider myself profitable. I’ve hit every one of my goals that I was shooting for. I wanted to replace my $280,000/ year salary and I have done

78 Id. Attendees of XLT courses include students who first purchased OTA education sixteen or more years ago, and the overall rating of XLT courses and instructors increases as the average student tenure increases. Id. 79 Exhibit QQQ, T. Damaskinos Decl. ¶ 6. 80 Exhibit N, Bailey Decl. ¶ 13. 81 Exhibit H, Polyakov Decl. ¶¶ 13, 15. 82 Exhibit I, Welch Decl. ¶ 12; see id. ¶ 13 (student attests that he has been able to fund his living expenses for past three years from trading and drawing from his account). 83 Exhibit J, Owen Decl. ¶ 18. 84 Exhibit KKKK, Rick Decl. ¶¶ 10, 17.


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that…Currently, I’m drawing almost $260,000 a year in dividends, which I could live on.”85

“I am currently making $2,000/week just trading the Core stocks.”86

“For the month of October 2019, I made $7,000 in profits. My consistent average has been around $2,000 a month profit…I have consistently been profitable since learning at OTA, and have already paid off the cost of my education through trading.”87

“Since stating OTA, I have made a profit of approximately $40,000 from our investments.”88

The disclaimers included in OTA’s course materials also emphasize that

“individual performance depends upon the individual skills, time availability and

dedication of each Student in the training program.”89 The declarations from OTA’s

students confirm that OTA is up front about the fact that learning to trade will take time

and is not a “quick and easy” endeavor:

OTA’s “instructors do a very good job making sure students don’t expect too much and that they understand it’s going to take a while to become successful. It takes commitment.”90

“OTA was very upfront with me and honest. They didn’t claim that I would be making a certain dollar amount or that I was guaranteed to be profitable at all.”91

“I wasn’t looking to get rich quick. OTA did a great job letting us know that this is not get rich quick.”92

“The most important things I learned is that this isn’t easy. There is work to be done and OTA delineates that very clearly in the courses. You have to work at it.”93

85 Exhibit DDD, Patrick Decl. ¶ 12. 86 Exhibit Q, Lang Decl. ¶ 13. 87 Exhibit FF, Aubakirova Decl. ¶ 10. 88 Exhibit HH, Callanan Decl. ¶ 11. 89 FTC Exhibit 13, 2019 MTO Course Workbook. 90 Exhibit K, Zidek Decl. ¶ 11. 91 Exhibit EE, Bull Decl. ¶ 7; see also Exhibit L, Daneshrad Decl. ¶ 20 (OTA does not “make promises of making money . . . They teach you how to trade.”). 92 Exhibit O, Patry Decl. ¶ 9; see also Exhibit BB, P. Carroll Decl. ¶ 4 (OTA “mentioned trading was not a quick way to make money or something you can learn quickly, as it takes time and discipline.”); Exhibit QQQ, T. Damaskinos Decl. ¶ 13 (“No one at OTA ever led me to believe that learning their curriculum was going to be easy. . . . They never said you’re going to get rich quick.”); Exhibit I, Welch Decl. ¶ 5. 93 Exhibit O, Patry Decl. ¶ 13 (emphasis added); see Exhibit HHH, Blackwell Decl. ¶ 9.


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“Nobody at OTA gave me the impression that this was going to be easy or that I would be successful . . .. Along the way I learned to take it slowly, practice, and not try to make a bunch of money all at once.”94

“Neither the education counselors nor the instructors set any expectation that we would get this quickly. It was clear from the beginning that it would take time and practice to improve our trading.”95

“There were no promises or trading income guarantees made to me to cause me to go ahead with the purchase. Quite the opposite. I was told that the market can be a stern teacher and that I would have to work hard in order to become successful.”96

Notably, nothing in the student declarations the FTC attached to its Application

contradicts these students’ statements. In fact, the student declarations submitted by the

FTC confirm the accuracy of the statements made by OTA that it takes time to learn the

skills OTA teaches. For example, Greg Busche, “lost patience” after “a couple weeks”

and abandoned the OTA program.97 And Koroush Ramez “never tried to use OTA’s

strategy.”98 In fact, the FTC has not identified a single student who has confirmed that

he or she followed the rules and methods OTA teaches, put in the time OTA makes clear

is necessary to practice those rules and methods, and nevertheless claims to be unhappy

with OTA’s education or is not making money. While the FTC ignores this gaping hole

in its proof, the Court should not.

B. The FTC Has Not Identified Any Current or Ongoing Harm.

Despite investigating OTA for over a year, the FTC fails to put forth any evidence

of current or ongoing harm. For example, the FTC points to statements made to

clandestine FTC staffers who attended MTOs in March 2019 in California, June 2019 in

New York, and November 2019 in Virginia, as supporting its request for immediate,

emergency relief.99 Even the most recent transcript, from November 2019, is nearly three

months old. Moreover, the FTC omits the facts that the November 2019 MTO had only

94 Exhibit M, Franz Decl. ¶ 11. 95 Exhibit N, Bailey Decl. ¶ 11. 96 Exhibit BBBB, King Decl. ¶ 7. 97 FTC Exhibit 1 at 3, 5. 98 FTC Exhibit 6 at 113. 99 See, e.g., TRO Mem. at 5, 8, 11-13, 22.


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four attendees, two of which were undercover FTC staffers, and not a single attendee

decided to purchase further education with OTA.100 Moreover, within a week of the FTC

providing the November 2019 MTO transcript to OTA, OTA fired the MTO instructor

who made the statements with which the FTC takes issue because his statements were

not consistent with OTA’s compliance policies.101

Similarly, the FTC points to New York radio ads that “ran . . . in 2018” and “played

. . in 2018” (more than a year ago).102 It also quotes from a 2018 infomercial and cites to

a transcript of a short radio broadcast that ran one time in February 2019 in Fargo, North

Dakota.103 Even as to the few student declarations the FTC was able to obtain (seven in

total), over half of them are over four months old and many relate to alleged activity from

years ago.104 And, the person cited frequently throughout the TRO Application to support

some of the FTC’s most inflammatory allegations, Keeley Hubbard, states that she

stopped working at OTA in 2017.105

C. “Evidence” Cited by the FTC is Misleading.

The lengths to which the FTC was willing to go in its TRO papers to make OTA

look unseemly cannot be ignored. For example, the FTC attempts to characterize results

of a mid-2018 survey as “disastrous” and states the when the results of that survey were

presented to Mr. Shachar, he “forbid anyone in the meeting from taking a copy out of the

room.”106 However, the FTC’s only support for this statement is double hearsay via Ms.

Hubbard’s investigational hearing in which the FTC itself acknowledges that Ms.

100 Shachar Decl. ¶ 30. 101 Id. ¶ 31. 102 TRO Mem. at 3. 103 Id. at 3, 4 & FTC Exhibit 13, Attachment A. The FTC also complains about a statement made by an OTA student named Bill Avery in an August 16, 2017 YouTube video. Doc 1 at 14; FTC Exhibit 13 at 290. Yet, the FTC admits that this video has been taken down and is not available to the public. See FTC Exhibit 13 at 290 (“As of the present date, the above video is not available for viewing by the public on YouTube.”). 104 See, e.g., FTC Exhibit 1 at 7 (signed August 2019); FTC Exhibit 3 (signed July 2019); FTC Exhibit 6 (signed October 2019); FTC Exhibit 7 (signed August 2019). 105 See FTC Exhibit 9 at 191 (Declaration of Keeley Hubbard). 106 TRO Mem. at 18.


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Hubbard was not present at the meeting during which the purported statements were

made and in fact, was not even employed by OTA at the time:

“Q. (BY MR. BIESTY) Understanding again that you are not an employee when this survey was conducted and the results came out, do you know what the reaction inside of Online Trading Academy was to -- to this result?

A. From what I was told . . .”107

The blatantly unreliable and inadmissible statements made by Ms. Hubbard, a disgruntled

former employee, about events that occurred after her departure from OTA, certainly do

not warrant the extraordinary relief sought by the FTC.

Moreover, the FTC omits that this survey was a test-run with a very small sample

size.108 The use of a preliminary survey, with very few responses, shows nothing. In

reality, upon receiving the results of that small sample, it became clear that the money-

making-related questions were worded in such a way that they would include people in

the results who were not actively trading.109 Clearly, if a student is not actively trading,

he or she is not making money. Later in 2018, after corrections were made to only ask

active traders whether they were making money trading and investing in the markets, the

majority said that they were.110 The FTC also omits that this later survey (“Wave 2”)

showed a 71.4% customer satisfaction rating, and that 77% of students felt OTA was a

good value investment.111 The FTC’s mischaracterization of the Wave 2 survey’s results

as “bleak”112 proves nothing.

Similarly, in its attempt to show that OTA “silences” consumer complaints when

it enters into settlement agreements giving consumers refunds, the FTC boldly states that

“OTA will not negotiate these provisions.”113 However, the one student declaration the

107 FTC Exhibit 13 at 7715 (emphasis added). 108 Shachar Decl. ¶ 26. 109 Id. 110 Id. 111 Exhibit E, Wave 2 Survey Information, at 17, 20. OTA provided this document to the FTC during its investigation; tellingly, the FTC omitted it from its submission in this Court. 112 TRO Mem. at 18. 113 TRO Mem. at 22.


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FTC cited as support completely belies the FTC’s statement as that declaration actually

says that OTA did negotiate the terms of his settlement agreement and made multiple

rounds of “changes” to drafts of the agreement.114 Moreover, OTA consumers directly

rebut these assertions by the FTC. See infra at Section VII.A.2.

Additionally, the FTC points solely to its own analyst’s review of loan servicing

data from Universal Guarding Acceptance Corporation to purportedly support the FTC’s

position that “very few” borrowers repay their loans in full before the six-month no

interest financing option offered by OTA expires.115 OTA has not yet obtained access to

UGA’s data and therefore has had no opportunity to meaningfully rebut the FTC analyst’s

work. However, it is clear from the face of the analyst’s Declaration that there are flaws

with his calculations. For example, the analyst included loans with the status of

“Refusal” or “Closed Refusal” as part of his subset of consumers who had an “Inability

to Pay.”116 However, a consumer’s “Refusal” to pay does not mean the consumer has an

inability to pay and the FTC had no basis to make this leap in its analysis. Similarly, it

appears that the FTC is basing its conclusions on a literal “six month period” instead of

considering UGA’s actual contractual term of 200 days. To the extent consumers paid

the remaining balance at the end of the 200-day period, those payments are not

encompassed in the FTC analyst’s calculations and his default percentages are over-

inflated.117

V. THE FTC’S TEMPORARY RESTRAINING ORDER REQUEST BELONGS IN THE ILLINOIS VENUE OF THE FIRST-FILED CASE

This is a quintessential case for the application of the first-to-file rule. Pursuant to

this rule, “a court may dismiss, transfer, or stay an action ‘when a complaint involving

114 See FTC Exhibit 6 at 112, 133 (OTA’s employee “sent a revised version of the contract, making some . . . of my requested changes” and “[a]fter further correspondence, [the OTA employee] emailed me a new contract”). 115 TRO Mem. at 17 & n.56; FTC Exhibit 10 (Geiran Decl.) at 194-199. 116 FTC Exhibit 10 (Geiran Decl.) at 195-197, 117 OTA anticipates identifying similar and additional errors in the Gieran Declaration related to his analysis of TradeStation data. See FTC Exhibit 10 (Gieran Decl.) at 199-204. Moreover, OTA students trade on a variety of platforms other than TradeStation. The FTC has identified nothing to account for student outcomes on those other platforms.


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the same parties and issues has already been filed in another district.’” FutureLogic, Inc.

v. Transact Technologies Inc., No. 05-CV-03754, 2006 WL 8432105, at *3 (C.D. Cal.

Jan. 20, 2006) (quoting Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 625 (9th Cir.

1991)); see also Alltrade, 946 F.2d at 628–29 (discussing ability of district court to

dismiss, stay, or transfer an action pursuant to the first-to-file rule). The rule “should not

be disregarded lightly.’” Alltrade, 946 F.2d at 625 (quoting Church of Scientology v.

United States Dep’t of the Army, 611 F.2d 738, 750 (9th Cir. 1979)). In considering

whether to apply the first-to-file rule, courts look to: “(1) the chronology of the two

actions, (2) the similarity of the parties, and (3) the similarity of the issues.” Carrera v.

First Am. Home Buyers Prot. Co., 11-CV-10242, 2012 U.S. Dist. LEXIS 199507, at *7

(C.D. Cal. Jan. 24, 2012). In this case, all three first-to-file factors are present. (1)

Defendants in this action filed the Illinois Action on February 4, 2020—eight days before

the FTC filed this Action on February 12, 2020; (2) all parties are identical; and (3) the

issues are essentially identical—a fact the FTC admits.118

VI. LEGAL STANDARD FOR TEMPORARY RESTRAINING ORDERS

It is axiomatic that enjoining conduct prior to a full and fair trial on the merits is

an “extraordinary and drastic remedy.” FTC v. Lakhany, No. 12-CV0337, 2012 WL

12860115, at *1 (C.D. Cal. May 2, 2012) (denying the FTC’s ex parte application for a

TRO and order to show cause). “[T]he basic function of a preliminary injunction is to

preserve the status quo ante litem pending a determination of the action on the merits.”

Los Angeles Memorial Coliseum Commission v. Nat’l Football League, 634 F.2d 1197,

1200 (9th Cir. 1980). The purpose is not, as the FTC seeks here, to disturb the status quo

and destroy a defendant before the case starts. Federal Rule of Civil Procedure 65

provides that a federal district court may issue a temporary restraining order only if

118 See FTC Notice of Pendency of Other Action, Doc. 5 at 2 (“it is FTC counsel’s understanding that this case involves a material part of the subject matter of another action now pending in another federal court: OTA Franchise Corp., et al, v. Federal Trade Commission, No. 1:20-cv-802 (N.D. Ill. filed February 4, 2020). That action is brought by the parties named as defendants in the FTC’s complaint in this action. . . .”).


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“specific facts in an affidavit or a verified complaint clearly show that immediate and

irreparable injury, loss, or damages will result to the movant before the adverse party can

be heard in opposition…” Fed. R. Civ. P. 65(b)(1)(A). However, ex parte applications

are solely for extraordinary relief and should be used with discretion. See Mission Power

Eng’g Co., 883 F. Supp. at 490-92. “The standard for issuing a TRO is substantially

identical to that for issuing a preliminary injunction.” Lakhany, 2012 WL 12860115, at

*1-2 (internal quotation omitted). A plaintiff seeking a TRO or preliminary injunction

bears the burden of demonstrating that it is likely to succeed on the merits, that consumers

are likely to suffer irreparable harm in the absence of a preliminary injunction, that the

balance of equities tips in the movant’s favor, and that an injunction is in the public

interest. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). In cases where

the government is acting under a statute authorizing injunctive relief, while irreparable

harm may be presumed, the government is still required to demonstrate a likelihood of

success on the merits and that the balance of the equities favors the injunctive relief

sought.119 FTC v. Consumer Def., LLC, 926 F.3d 1208, 1212 (9th Cir. 2019). Moreover,

when the injunctive relief sought includes an asset freeze, the FTC “must show a

likelihood of dissipation of the claimed assets, or other inability to recover monetary

damages, if relief is not granted.” FTC v. John Beck Amazing Profits, LLC, No. 2:09-CV-

4719, 2009 WL 7844076, at *15 (C.D. Cal. Nov. 17, 2009) (quoting Johnson v.

Couturier, 572 F.3d 1067, 1085 (9th Cir. 2009)); see also FTC v. Millennium Telecard,

Inc., No. 11-CV-2479, 2011 WL 2745963, at *11 (D.N.J. July 12, 2011) (applying the

same standard).

Injunctive relief must be narrowly tailored to remedy the specific and redressable

harms shown by a plaintiff. Lamb-Weston, Inc. v. McCain Foods, Ltd., 941 F.2d 970,

974 (9th Cir. 1991). In the Ninth Circuit, “[a]n overbroad injunction is an abuse of

119 In evaluating whether the standard has been met, a Court may consider evidence that may otherwise be inadmissible. See Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., 736 F.3d 1239, 1250 n.5 (9th Cir. 2013); Flynt Distributing Co v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984).


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discretion.” Rodriguez v. Robbins, 715 F.3d 1127, 1133 (9th Cir. 2013), rev’d on other

grounds, Jennings v. Rodriguez, 138 S. Ct. 830 (2018). The United States Supreme Court

has cautioned that injunctive relief should be no more burdensome to the defendant than

necessary to provide complete relief to the plaintiffs before the court. Madsen v.

Women’s Health Ctr., Inc., 512 U.S. 753, 765 (1994) (quoting Califano v. Yamasaki, 442

U.S. 682, 702 (1979)).

VII. ARGUMENT

The FTC is not entitled to the relief it seeks. It must prove both, but cannot

establish either: (1) that the FTC is likely to succeed on the merits, and (2) that the balance

of equities is in its favor.120

A. The FTC Has Not Met Its Burden to Show That it is Likely to Succeed on the Merits.

1. The FTC is unlikely to succeed on the merits of Counts I and II because Defendants’ representations regarding OTA’s training are not false.

In Counts I and II of its Complaint, the FTC baldly alleges that, in violation of the

FTC Act, Defendants made false or unsubstantiated earnings claims, and other

misrepresentations, in connection with the advertising, marketing, promotion, offering

for sale, or sale of OTA training. The FTC, however, is unlikely to succeed on the merits

of these claims because the evidence demonstrates that (1) what OTA teaches works; (2)

many students who utilized Defendants’ teachings have been successful; and (3)

Defendants repeatedly explained to consumers that trading takes time and effort and

involves risk. Accordingly, the FTC is unlikely to demonstrate that Defendants made

deceptive earnings and other claims about the value of their services.

120 The cases cited by the FTC in support of its request are distinguishable. See FTC v. Digital Altitude, LLC, No. 2:18-CV-0729 (C.D. Cal. Feb. 1, 2018) (limited evidence of satisfied customers); FTC v. BunZai Media Grp., No. CV-15-4527, 2015 WL 5305243 (C.D. Cal. Sep. 9, 2015) (defendants may dispose of assets) FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999) (defendants “spiriting…commissions away”).


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a) Defendants’ claims that students can earn money using Defendants’ training are not misleading. OTA’s methods work, and, many consumers succeed by using the training that Defendants provide.

As explained above, Defendants have provided the FTC with a report from an

expert and professor of finance, explaining that OTA’s methods are sound and enable

consumers to make money if they follow the rules that OTA teaches. In his report, Dr.

Harris concluded that “OTA’s educational materials and principles underlying these

courses are based on sound economic theories.”121 He also found that the “education

provided by OTA provides significant utility to students and would enable students who

follow the principles and use the techniques taught by OTA to make money through

trading and investing.”122

And indeed they do. Defendants have compiled sworn statements from over 100

students, many of whom have achieved financial success using Defendants’ education

and training programs.123 These declarations rebut the FTC’s unsupported assertions that

Defendants’ earnings claims were false or misleading.124 As these declarations

demonstrate, OTA students who follow and use the rules and lessons taught by OTA can

and do make money and learn valuable financial knowledge. Likewise, after the FTC

filed its Complaint, OTA students were given the opportunity to review and sign a

petition that said, among other things: “OTA’s financial education is truly outstanding. I

am a more knowledgeable and confident trader because of OTA’s education. I believe

OTA’s strategy works.” In just a few short days, over 3360 students signed.125 In fact,

as demonstrated above, many students earned a profit by utilizing the skills taught at

Defendants’ courses and introduced at their educational workshops and seminars. Put

121 Exhibit A, Harris Report at 2. 122 Id. at 3. 123 See Exhibits H – IIIII. 124 The FTC’s outdated customer declarations do nothing to support the FTC’s request for injunctive relief. See FTC v. Merchant Services Direct, LLC, No. 13-CV-0279, 2013 WL 4094394, at *3, *5 (E.D. Wash. Aug. 13, 2013) (denying FTC’s motion for a TRO because (1) FTC’s evidence was stale; (2) FTC complaints did not indicate widespread deception, and (3) defendants sought to improve customer satisfaction). 125 See Shachar Decl. ¶ 22 and Exhibit 1.


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simply, the Defendants told consumers that they could earn money if they applied the

training they purchased and stuck with it. That representation was and is true.

b) Defendants’ earnings and related claims about OTA’s

training are not misleading because Defendants actively ensure that consumers understand the time and effort it takes to be successful as well as the risks associated with trading.

Contrary to the FTC’s assertions, Defendants do not represent to students that

attending their educational workshops and training programs will make success in

financial investment and trading easy or will require little effort. While an individual

instructor or education counselor might misstep on occasion, Defendants frequently

caution instructors and other team members not to make such claims in their

presentations.126

Moreover, Defendants include multiple disclaimers at all stages of the sales and

education process, including in the student enrollment agreements,127 nearly all written

material, and verbally and via slides during their presentations to consumers. OTA makes

it clear to students, starting at the Preview, continuing at the MTO, and expanded upon

in all courses and XLTs, that trading involves risk and that students may lose money.128

Indeed, Defendants ensure their materials disseminated to consumers contain disclaimers

to ensure that each potential customer understands that risk as well as the level of work

necessary to achieve success. As noted above, one of the disclaimers quoted in the FTC’s

Complaint clearly demonstrates that Defendants expressly warn consumers about the

risks involved in investment and trading: “All trading involves high risk; past

performance is not necessarily indicative of future results. There have been no

promises, guarantees or warranties suggesting that any trading – training will result

in a profit or will not result in a loss.”129 The disclaimers also emphasize that

126 Shachar Decl. ¶ 32. 127 See Exhibit C, Sample OTA Enrollment Agreement. 128 See Shachar Decl. ¶ 14; see supra Section III.B. 129 Complaint, Doc 1 at 33 (emphasis in original).


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“individual performance depends upon the individual skills, time availability and

dedication of each Student in the training program.”130

These disclaimers—like the other disclaimers provided by Defendants—make it

clear that Defendants’ educational programs are not offering students a get rich quick

scheme, and instead convey that trading carries risk, and consumers should not view any

one person’s success as typical of what a student could achieve after attending

Defendants’ training programs. Instead, these disclaimers demonstrate that Defendants

clearly and repeatedly disclosed that success in trading will take hard work and that

success is not guaranteed. The declarations provided by OTA consistently confirm that

students were told that success was not easy or guaranteed, took hard work, and had

risk.131 Similarly, the nearly 3,300 signers of the Petition referenced throughout,

confirmed that “OTA never promised me quick and easy earnings – I know I have to put

in the effort.”132

In an attempt to minimize the overwhelming evidence of Defendants’ good faith

efforts to educate consumers regarding the risks of trading, the FTC attempts to allege in

conclusory form in its Complaint that the “disclaimers do not cure the impression created

by Defendants’ extensive use of earnings and related claims that the purchasers of OTA

Training are likely to earn substantial income.”133 Disclaimers, however, are an effective

means to cure potentially misleading statements, and the FTC has not, and cannot,

explain why Defendants’ repeated clear and conspicuous disclaimers are inadequate.

Government agencies including the FTC have consistently held that a disclaimer

can remedy a potentially misleading statement. See POM Wonderful LLC, No. 9344,

2013 FTC Lexis 6, at *1-2 (F.T.C. Jan. 10, 2013); POM Wonderful LLC v. FTC, 777 F.3d

478, 493 (D.C. Cir. 2015) (affirming FTC decision and reiterating that “[t]he

130 Id. at 32. 131 See Exhibits H – IIIII. 132 See Shachar Decl. ¶ 22 and Exhibit 1. 133 See Complaint, Doc 1 ¶ 117.


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Commission noted, though, that it might reach a different result if an ad were to

incorporate an effective disclaimer”).

Courts have also found that disclaimers can be effective to alleviate potential

consumer confusion. See, e.g., Home Box Office, Inc. v. Showtime/The Movie Channel

Inc., 832 F.2d 1311, 1315 (2d Cir. 1987) (noting that “the use of disclaimers [is] an

adequate remedy when they are sufficient to avoid substantially the risk of consumer

confusion.”) (citation omitted). These cases all underscore that disclaimers are effective

where they seek to clarify any potential claims being made. Defendants’ repeated

disclaimers accomplish precisely this goal—they inform consumers that success is not

easy or guaranteed. Consequently, Defendants’ disclaimers help explain what the

Defendants are offering and make their advertising accurate.

Notably, the FTC itself has issued guidance regarding how to ensure that a

disclaimer is effective. In the FTC’s “Advertising FAQ’s: A Guide for Small Business,”

the FTC explains that “[a]lthough there is no hard-and-fast rule about the size of type in

a print ad or the length of time a disclosure must appear on TV, the FTC often has taken

action when a disclaimer or disclosure is too small, flashes across the screen too quickly,

is buried in other information, or is otherwise hard for consumers to understand.”

Advertising FAQ’s: A Guide for Small Business, FTC.gov, https://www.ftc.gov/tips-

advice/business-center/guidance/advertising-faqs-guide-small-business (last visited Feb.

13, 2020).134

Accordingly, based on the FTC’s own guidance, a disclaimer is sufficient if it is

clearly and conspicuously disclosed. Here, while the FTC describes Defendants’

disclaimers as “dense and wordy,” the FTC has not alleged that Defendants’ disclaimers

are hidden, too small, or hard for consumers to understand, and nor could it, as

Defendants have ensured that their disclaimers are easily seen, read, and heard by each

consumer multiple times. Thus, Defendants have clearly followed the FTC’s guidance

134 Courts have looked to the FTC’s guides in reviewing advertising materials. See FTC v. DIRECTV, Inc., No. 15-CV-01129, 2018 WL 3911196, at *8 (N.D. Cal. Aug. 16, 2018) (citing language from FTC “.com disclosures”).


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on effective disclaimers, and the FTC has failed to point to any true deficiencies in

Defendants’ disclaimers.

Consequently, with their numerous disclaimers—during the presentations, at

enrollment, during classes, and repeatedly in its course materials—Defendants create the

“impression” that success in training is obtainable but requires discipline and entails risk.

Accordingly, the FTC is unlikely to succeed on the merits of its claims as set forth in

Counts I and II of the Complaint, and its Application for a Temporary Restraining Order

should be denied.

2. The FTC is unlikely to succeed on the merits of Count III because Defendants have not violated the Consumer Review Fairness Act of 2016.

In Count III, the FTC attempts to hold Defendants liable for violations of the

Consumer Review Fairness Act of 2016 (“CRFA”), 15 U.S.C. § 45b, for purportedly

conditioning refunds on the consumer signing a document barring the consumer from

posting negative reviews about OTA. The FTC, however, is unlikely to succeed on the

merits of this claim—and indeed has failed to even state a claim—because the evidence

clearly demonstrates that, under the plain language of the statute, the settlement

agreements do not violate the CRFA.

For the CRFA to be triggered, an accused party must enter into a “form contract”

with a consumer. The term “form contract” means “a contract with standardized terms

(i) used by a person in the course of selling or leasing the person’s goods or services; and

(ii) imposed on an individual without a meaningful opportunity for such individual to

negotiate the standardized terms.” 15 U.S.C. § 45b(a)(3).

The contracts that the FTC alleges violate the CRFA are clearly not “form

contracts” as defined in the CRFA because they are not used in the course of selling or

leasing OTA’s services. Rather, these contracts are settlement agreements in which OTA

provides a refund of money previously paid by the consumer. Often, such refunds are

provided even though they are outside the contractual three-day cancellation window and


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the consumer has consumed the education from OTA.135 Providing a refund to a

consumer is plainly not an act taken “in the course of selling or leasing” OTA’s

services.136

Additionally, OTA’s settlement agreements involving refunds are not “form

contracts” subject to the CRFA because they are not imposed on any individual without

a meaningful opportunity to negotiate the terms. Rather, they are negotiated instruments

between OTA and the consumer, sometimes including the consumer’s attorney.137 The

FTC has not provided even two agreements that are alike. This is because they are not

contracts “with standardized terms,” nor are consumers deprived of a meaningful

opportunity to negotiate the terms.

Consumers who have obtained refunds and signed the types of agreements the FTC

takes issue with, confirm as much. Specifically, they “are given time to review the

Agreement and ask questions regarding its terms.”138 They are also given a “meaningful

opportunity to negotiate the Agreement’s terms with OTA.”139

Accordingly, the FTC is unlikely to succeed on the merits of its claim in Count III

of the Complaint, has failed to state a claim under the CRFA, and its Application for a

Temporary Restraining Order should be denied.

B. The Balance of Equities Strongly Favors Defendants and Mandates the

Denial of the FTC’s Requested Relief.

The FTC’s proposed TRO is draconian. It is vastly overbroad, unnecessary, and

nowhere near equitable. It requests an asset freeze and a receivership that will result in

the de facto termination of all business operations, deprive all Defendants of the ability

135 Shachar Decl. ¶ 27. 136 See In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 782 F. Supp. 481, 484 (C.D. Cal. 1991) (reviewing the “plain wording” of the Clayton Act and noting that “[i]f the meaning of a statute is clear from a reading of the words themselves, it is unnecessary to look to secondary aid for construction”). 137 Shachar Decl. ¶ 27; see also FTC Exhibit 6 at 112 (explaining the consumer’s lawyer assisted him with his refund and agreement negotiation). 138 Exhibit MMMMM, Katayama Decl. ¶ 8; Exhibit KKKKK, Tekletsion Decl. ¶ 7; Exhibit LLLLL, Bianculli Decl. ¶ 6. 139 Id.


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to defend themselves, and seriously hamper the Individual Defendants from supporting

themselves and their dependents—all before the Constitutional due process afforded by

a trial on the merits can take place.140

1. The FTC’s delay in bringing this Action squarely demonstrates that there is no urgency and undercuts its claim that the public interest favors the immediate relief sought.

In its effort to convince this Court to issue an extraordinary and drastic remedy in

the form of the proposed TRO, the FTC claims that “[t]he public interest in this case is

compelling—halting unlawful and injurious conduct and preserving assets for restitution

to injured customers.”141 However, the FTC’s professed interest in seeking to protect

consumers from further injury is completely belied by its delay in seeking the

“immediate” relief it now claims is necessary. The Division’s investigator, Reeve

Tyndall, has been working on the investigation for at least a year, but the last event he

attended was in November 2019.142 In fact, of the mere seven student declarations the

FTC was able to obtain, more than half of them are over four months old.143 Additionally,

as explained above, many of the FTC’s alleged instances of bad conduct are over a year

old.144 The FTC’s claim that emergency relief now is necessary to protect consumers

rings hollow.

If Defendants’ alleged conduct was so egregious, and the alleged harm so great

that Defendants’ assets must be frozen, one wonders why FTC delayed seeking this

Court’s intervention for as long as it did. There is simply no “emergency” justifying any

temporary restraining order, let alone an extreme one.

140 The proposed injunction is inequitable—indeed extreme and unfair—in numerous other respects. For instance, among others, no Defendant may incur any charges on any credit or debit card issued in the name of any Corporate Defendant or cash any checks or deposit any money orders received from any customer. See Proposed TRO, Section VII(C), Doc 12-1 at 11. 141 TRO Mem. at 33. 142 See FTC Exhibit 13, Tyndall Declaration. 143 See, e.g., FTC Exhibit 1 at 7 (signed August 2019); FTC Exhibit 3 (signed July 2019); FTC Exhibit 6 (signed October 2019); FTC Exhibit 7 (signed August 2019). 144 See supra Section IV.B.


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2. The FTC’s request to freeze Defendants’ assets and appoint a receiver is inequitable and overbroad.

Despite the fact that asset freezes are disfavored, the FTC argues that the injunctive

relief sought should include an asset freeze because it “will make it more likely that all

relevant assets will be quickly identified and preserved, and thus available to provide

restitution to consumers harmed by Defendants’ deceptive scheme.”145 The FTC bases

this assertion on the flawed premise that every consumer who purchased from Defendants

was injured and should get their money back. As demonstrated throughout, the evidence

fails to support the lynchpin of this argument and certainly does not justify the imposition

of an asset freeze. The law requires more.

An asset freeze is an “extraordinary and dramatic provisional remedy” that is only

granted sparingly. In re Adelphia Commc’ns Corp., No. 04-CV-2817, 2004 WL

2186582, at *8 (S.D.N.Y. Sept. 27, 2004) (“Both parties acknowledge that this type of

total asset freeze is an extraordinary and dramatic provisional remedy.”); see also Kemp

v. Peterson, 940 F.2d 110, 114 (4th Cir. 1991) (freezing assets is an extraordinary

remedy). A party seeking an asset freeze “must show a likelihood of dissipation of the

claimed assets, or other inability to recover monetary damages, if relief is not granted.”

FTC v. John Beck Amazing Profits, LLC, No. 2:09-CV-4719, 2009 WL 7844076, at *15

(C.D. Cal. Nov. 17, 2009) (quoting Johnson v. Couturier, 572 F.3d 1067, 1085 (9th Cir.

2009)); see also FTC v. Millennium Telecard, Inc., No. 11-CV-2479, 2011 WL 2745963,

at *11 (D.N.J. July 12, 2011) (applying the same standard). The “likelihood of

dissipation” requirement is a high bar. Indeed, courts have found that plaintiffs failed to

meet this standard even where they succeeded in demonstrating some “financial

impropriety” by defendants. Millennium Telecard, Inc., 2011 WL 2745963, at *13. In

Millennium Telecard, the court modified its previous order imposing a temporary asset

freeze, observing that the FTC’s “proofs of Defendants’ financial impropriety”—

including three bounced checks and evidence of “Defendants’ disregard for the corporate

form”—did not, “as a general mater [sic], rise to the level of those instances where courts

145 Declaration of. T. Biesty ¶ 32.


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have found a likelihood of dissipation of assets.” Millennium Telecard, Inc., 2011 WL

2745963, at *13. That court contrasted the facts before it with cases such as Couturier,

in which the Ninth Circuit found a likelihood of dissipation of assets “where defendant

had convinced his fellow directors and trustees to consent to diverting nearly $35 million

from the company’s account into his personal bank account.” Id. (citing Couturier, 572

F.3d at 1085).

Allegations of wrongdoing far more serious and on a grander scale have not

justified an asset freeze. For example, in Newby v. Enron Corp., the court declined to

impose an asset freeze upon current and former Enron officers and directors, despite the

plaintiff’s arguments that the individual defendants’ assets were the only viable avenue

of recovery for its claims due to Enron’s bankruptcy, that the potential award was likely

to exceed available assets, and that insider trading proceeds are often dissipated or

diminished in securities fraud cases. 188 F. Supp. 2d 684, 707–08 (S.D. Tex. 2002). The

court observed that, “[i]n the cases in which . . . a prejudgment asset-freezing injunction

is granted, the courts have been presented with allegations and evidence showing that the

defendants were concealing assets, were transferring them so as to place them out of the

reach of post-judgment collection, or were dissipating the assets.” Id. at 707 (citing

cases).

Here, the FTC, with all the tools of law enforcement available to it, has offered no

evidence of, or even alleged that, the Defendants having “previously attempted to

intentionally dissipate, hide or otherwise shelter corporate or personal assets from an

effort to collect a debt or judgment against [d]efendants.” John Beck, 2009 WL 7844076,

at *15 (denying FTC’s request for asset freeze). To the contrary, Defendants, and Mr.

Shachar in particular, have been infusing money into the business;146 not siphoning it out.

Evidence regarding a defendant’s alleged misleading marketing practices is

insufficient to support an asset freeze. See John Beck, 2009 WL 7844076, at *15

(requirement of likelihood of dissipation not met where “the only evidence in support of

146 Shachar Decl. ¶ 34.


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an asset freeze is Defendants’ misleading marketing practices”). For example, in John

Beck, the FTC sought an asset freeze against both the corporate defendants and the

individual defendants. The court determined that “the only evidence in support of an

asset freeze is Defendants’ misleading marketing practices.” Id. The court observed that,

“[i]f this were sufficient to support an asset freeze, one would issue in every deceptive

advertising case.” Id. Given the more stringent standard of a likelihood of dissipation,

the Court concluded that “an asset freeze is not supported by the FTC’s evidence.” Id.

Here, there is scant, if any, evidence of misleading or nefarious practices on the

part of Defendants, and the FTC fails to even allege, let alone demonstrate, a likelihood

that Defendants would dissipate assets. Notably, the FTC brought the instant action only

after a lengthy delay and was assured a year ago that Defendants had been instructed to

preserve their assets. These circumstances do not warrant even the issuance of a

temporary restraining order, let alone a remedy so draconian as the asset freeze requested

by the FTC.

Further, both the balancing of equities and the public interest dictate against an

asset freeze. Defendants continue to provide education services to those consumers that

have bought those services. Consumers continue to rate those services highly and assert

that they “want continued access to OTA’s education.”147 An asset freeze and/or a

monitorship will cripple Defendants’ business without cause. If the Defendants’ assets

are frozen, the Defendants will no longer be able to provide those services.148 This Court

should not permit the FTC’s aggression to override the wishes of thousands of informed

consumers who demand, and who have paid for, OTA’s services.

There is no risk of assets dissipating or of the individual defendants moving. Mr.

Shachar has lived in California for decades and owned OTA for over twenty-two

years149—he is not a flight risk. Moreover, Mr. Shachar has invested millions of dollars

147 See Shachar Decl. ¶ 22 and Exhibit 1. As noted throughout, over 3360 students signed this petition in the few days since the FTC filed its lawsuit against Defendants. 148 Id. ¶ 37. 149 Id. ¶¶ 2-4.


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into the company in the past year.150 Mr. Kimoto and Mr. Seiden do not have access to

OTA’s bank accounts151 and have well-established and long-standing ties and roots in

their communities in Utah and Illinois, respectively. Notably, under very similar

circumstances, in Federal Trade Commission v. Infinity Group Services. Inc., this court

declined to grant the FTC’s request for an asset freeze in its motion for a temporary

restraining order given that the defendant had been in existence for eight years, had a

high rating from the Better Business Bureau and had made efforts to remedy customer

dissatisfaction without knowing it was under investigation by the FTC. 09-CV-977, 2009

WL 10672411, at *3 (C.D. Cal. Sept. 2, 2009).

There is also no need to preserve assets for consumers. OTA willingly refunds

consumers who have requested them, even well outside of the cancellation period.152

The FTC’s request for the appointment of a receiver is unnecessary and wasteful

in light of the lawfully operating business. See Compass Bank v. Baraka Holdings, LLC,

No. 17-CV-06563, 2017 WL 10378348, at *3 (C.D. Cal. Oct. 26, 2017) (“Appointing a

receiver is an extraordinary equitable remedy, which should be applied with caution.”)

(quoting Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir. 2009)). As the

Southern District of New York cautioned in FTC v. Verity Int’l, Ltd., “[c]ourts of equity

must bear in mind that preliminary injunction rulings are based on incomplete records

and therefore arguably have a higher probability of error than rulings after trial or on

summary judgment.” 124 F. Supp. 2d 193, 204 (S.D.N.Y. 2000). When “the relief sought

. . . would have a drastic adverse impact on the defendants’ business,” a court should be

“reluctant to impose what might be a commercial death sentence at an interlocutory stage

if there is some reasonable alternative.” Id.

That is the case here. The imposition of a receivership through the time of trial

would guarantee the destruction of a compliant business educating consumers, and, if the

150 Shachar Decl. ¶ 34. 151 Shachar Decl. ¶ 36. 152 See Exhibits MMMMM, Katayama Decl.; Exhibit KKKKK, Tekletsion Decl.; Exhibit LLLLL, Bianculli Decl.


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FTC is presumed to be correct (which it is not), the destruction of the company would

result in the loss of significant funds to redress alleged consumer harm, harm to

employees who have not been paid despite their ongoing compliance, and harm to

franchise owners and locations.153 Respectfully, a receiver cannot reasonably be

expected to ensure the smooth continuation of this lawfully operating business.

If the TRO does not issue, the FTC will still have its day in court. It will not be

prejudiced in any way. Here, the balance of equities points only in one direction: denial

of the FTC’s request for a TRO.

CONCLUSION

For all of these reasons, the Court should deny the FTC’s request for a temporary

restraining order.

Dated: February 18, 2020 CALL & JENSEN A Professional Corporation

Wayne W. Call Mark L. Eisenhut William P. Cole Chris C. Scheithauer VENABLE LLP Leonard L. Gordon J. Douglas Baldridge Eric S. Berman Katherine Wright Morrone By:/s/ Mark L. Eisenhut

Mark L. Eisenhut

Attorneys for Defendants

153 See Exhibit JJJJJ, Motisi Decl. ¶ 11 (franchise owner explaining the irreparable harm that the FTC’s requested relief would impose); Shachar Decl. ¶¶ 37-38.


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CERTIFICATE OF SERVICE

I hereby certify that on February 18, 2020, I electronically filed the foregoing

document described as DEFENDANTS’ OPPOSITION TO PLAINTIFF’S EX

PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND

ORDER TO SHOW CAUSE WHY PRELIMINARY INJUNCTION SHOULD

NOT ISSUE with the Clerk of the Court using the CM/ECF System which will send

notification of such filing via electronic mail to all counsel of record.

/s/ Mark L. Eisenhut Mark L. Eisenhut


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