A courtroom clash unfolding like a high-stakes chess match left a federal appeals panel openly questioning whether a German national undercut his own defense in a long-running $4.6M SEC german suit by failing to answer discovery requests aimed at U.S. jurisdiction.

On Tuesday, the First Circuit examined an appeal by Raimund Gastauer, 80, who is fighting a default judgment in a U.S. Securities and Exchange Commission case tied to an alleged $150 million international pump-and-dump scheme. Judges suggested Gastauer’s silence in discovery may have weakened his bid to escape the judgment.

“Isn’t that a waiver by your client?” Judge William Kayatta asked Gastauer’s attorney, cutting to the heart of the dispute.

Discovery Silence Raises Red Flags

Gastauer is a relief defendant in the SEC’s civil enforcement action, which seeks to claw back proceeds allegedly funneled through international accounts. His counsel, Johannah Cassel-Walker of Hogan Lovells LLP, argued that Gastauer never consented to U.S. jurisdiction and made that clear through letters sent by German counsel to both the SEC and the court.

Cassel-Walker told the panel that the SEC itself forfeited its chance to pursue an alternative jurisdiction theory after the First Circuit ruled in 2024 that the agency failed to show sufficient U.S. ties. She also argued there was no proper basis to reopen discovery after that decision.

Alleged Scheme and Family Ties

The case traces back to Gastauer’s son, Michael Gastauer, an alleged associate of Roger “Rocket” Knox, the owner of Swiss finance firm Wintercap SA. Knox has since been convicted on criminal charges linked to the scheme.

According to the SEC, Michael Gastauer moved more than $3 million in illicit proceeds into accounts controlled by his father — including $500,000 to a German bank and $2.8 million to a trust used to buy a London condominium. Michael Gastauer now faces a $17 million civil forfeiture order, the agency says.

A Second Chance — and a Second Warning

Two years ago, the First Circuit reversed a prior ruling by U.S. District Judge Richard Stearns that ordered Raimund Gastauer to surrender the funds. The appellate court found the lower court erred in concluding Gastauer had waived his due process challenge by partially litigating before contesting jurisdiction, and it sent the case back.

This time, however, the panel hinted that Gastauer may indeed have forfeited his challenge — not by litigating too much, but by saying too little. Judges focused on his failure to comply with discovery probing whether jurisdiction could be established through interactions with U.S. banks, rather than physical presence in the United States.

When Gastauer did not respond, Judge Stearns entered a default judgment, which with interest climbed to $4.6 million.

Cassel-Walker described the renewed discovery order as an “egregious” violation of the First Circuit’s 2024 ruling, lacking any factual footing.

Judges Press Both Sides

Judges Kayatta and Seth Aframe suggested that, absent any response to the SEC’s alternative jurisdiction theory, the district court may have had little choice but to impose default.

The SEC was not spared scrutiny. Theodore Weiman, arguing for the agency, drew pointed criticism from Judge Kayatta.

“We could have avoided the entire proceeding here today if you had just told us you did intend to pursue further jurisdictional discovery,” Kayatta said.

Weiman replied that the theory involving U.S. banking records had always lingered but was effectively sidelined during Gastauer’s earlier challenge, which focused on his lack of U.S. presence since 2009.

“Are there any other positions you’re keeping in your back pocket?” Kayatta asked. Weiman said there were none.

What Comes Next

The panel took the matter under advisement. Judge Sandra Lynch, who is also assigned to the case but was not present Tuesday, will participate in the final decision, the court said.

Circuit Judges William Kayatta and Seth Aframe sat on the panel for the First Circuit.

Gastauer is represented by Johannah Cassel-Walker, Jo-Ann Tamila Sagar and Dana A. Raphael of Hogan Lovells LLP.
The SEC is represented by Jeffrey B. Finnell, Tracey A. Hardin, Daniel Staroselsky and Theodore Weiman.