The U.S. Securities and Exchange Commission is looking for an early victory on certain claims against an investment adviser and its managing partner accused of engaging in an illicit short-selling scheme, arguing the managing partner's online messages and his own admission that he'd made a "poor business decision" support a finding in its favor.

In its Friday motion for summary judgment in New Jersey federal court, the SEC told U.S. District Judge Renee Marie Bumb that she should find Hal D. Mintz and his firm Sabby Management LLC liable for violating antifraud provisions of federal securities laws that bar, among other things, traders from deceiving brokers about their ability to deliver by the settlement date shares they borrow for short-selling.

According to the SEC, Mintz's chat records show he lied to brokerages to push through short sales from which he profited — and his own statements show he knew he wasn't on the right side of the law with those choices.

"No rational jury could conclude that defendants' false and misleading statements — statements that indisputably allowed defendants to engage in unlawful trading, sell shares they did not own and ultimately could not deliver, and earn a substantial profit to which they would not otherwise [have] been entitled — would be unimportant to a reasonable investor," the SEC said on Friday.

The commission sued Sabby and Mintz in 2023, asserting they had made over $2 million from the improper sales of stock in 10 different companies.

Legal short-selling entails selling borrowed securities with the hope of later buying the same securities at a lower price to turn a profit before returning the securities to their original owners.

According to the SEC, the defendants engaged in illegal, "naked" short-selling because they had not actually borrowed or owned the securities they sought to sell.

In its summary judgment bid, the SEC focused on the defendants' trades of shares in three issuers, highlighting in particular their trades in a company called Inpixon. The SEC alleged the firm and Mintz made over $500,000 from trades in the company's shares.

Citing timestamped instant messages the defendants exchanged with a trading desk employee at investment firm BTIG, the SEC argued the chats showed Mintz deliberately misrepresented that he had located Inpixon shares to borrow, which he could use to meet his obligation to deliver the securities.

Despite those representations, the SEC said, Mintz didn't actually have sights on borrowable shares, and when BTIG's compliance officer pressed for proof of the shares Mintz claimed to be borrowing, Mintz turned to other executing brokers to perpetuate the scheme.

On Friday, the SEC said the fact the defendants switched to other brokers to try their luck "reflects the obvious: had they told the truth, their scheme would have come to an abrupt halt."

The SEC also quoted Mintz himself, who said during investigative testimony that he'd "acted foolishly, and I made a very poor business decision for lack of a better word" — in connection with the decision to sell the Inpixon stock before he converted the convertible preferred shares he had.

On Monday, the SEC declined to comment, and Jay Auslander, an attorney for Mintz and Sabby, told Law360: "We're going to save our response on this one for our court papers."

The SEC is represented by its own Daniel J. Maher and Edward J. Reilly.

Hal D. Mintz and Sabby Management LLC are represented by Jay Auslander, Aari Itzkowitz, Ruhi Behal and Michael Van Riper of Wilk Auslander LLP.

The case is Securities And Exchange Commission v. Mintz et al., case number 1:23-cv-03201, in the U.S. District Court for the District of New Jersey.