When the SEC wants to ensure it wins against a fraudster such as Charlie Scoville, it doesn't go down to the beach and paddle in the shallows.

What it does is present its' case to a Federal judge point by point, so there's no chance of someone smooth talking their way out of the charges.

The "Howey Test" is a test created by the Supreme Court for determining whether certain transactions qualify as "investment contracts." If so, then under the Securities Act of 1933 and the Securities Exchange Act of 1934, those transactions are considered securities and therefore subject to certain disclosure and registration requirements.


Extract from the SEC complaint against Charlie Scoville and Traffic Monsoon



Sunil Patel, Sharon James and stacy532 can argue they are not "investors" till they turn blue in the face.

The Howey test says they are and the SEC has complete jurisdiction.