Hobbs Act and Sham Litigation Explored

I came across this case while corresponding back and forth with Google Gemini and it brought it to my attention.

I thought it was interesting, but first let's look at Exegy in-house counsel Patrick Sellers email and extortion letter.

You can see my previous email here that led up to this.

https://drive.google.com/file/d/1UbyJxLkQvCxw2GRQOJhvDEXT8y2vnUo6/view?usp=drivesdk

You can see Patrick Sellers extortion letter here with our correspondence between each other here

You can clearly see in Patrick Sellers letter that he makes false claims by stating I was making threats and demanding payment, since he stated the following in it

Threatening Exegy’s business and disclosure of the purported Vulnerabilties to Exegy’s customers if the Company does not respond to your threats and demands for payment is textbook extortion.

If you look over what I stated on February 7, I stated the following

I know people can have a lot going on and it hard to find the time to get back to someone when you are busy, but think it interesting how I can't even get a single response about wanting to talk about disclosing vulnerability in your network and architect that have a high potential for affecting your customer, which i thought is required and important to disclosing to them.
I would like to talk, if not I will move to trying to talk with your customers and seeing if they have a bounty program and give me time about the things that could affect their network.

You can clearly see I never made any threats or demands for payment. I was only saying if they wouldn't give me any time to talk, I would move on to trying to talk to their customers and see if they had a bounty program.

Exegy is aware that they are required to report all vulnerabilities and flaws to their customers and possibly any Exchanges depending on the circumstances, so there really shouldn't be any problem with someone reaching out to their customers or SEC about possible concerns on things that can affect their network or the stock market.

There are many acts out there to protect people and Whistleblowers, Exegy and their in-house counsel should be fully aware of this.

As you look further on in Patrick Sellers extortion letter you will clearly see where he threatens me. He basically stated he will contact the FBI immediately and seek civil remedies unless I turn over everything in a matter of hours

If you do not respond to this letter before 6:00 p.m. Central Time today, 7 February 2025, with all information necessary for Exegy to identify, assess, and, if necessary, remedy the Vulnerabilities, Exegy will immediately contact the FBI about your Emails and violation of the CFAA. Exegy will also seek all available civil remedies against you under state and federal law.
If Exegy determines, at any time and in its sole discretion, that you are not providing your best efforts to cooperate with any evaluation or remedy or other efforts related to the Vulnerabilties, Exegy will refer this matter to the FBI and seek all available civil remedies against you under state and federal law.

This is clearly text book extortion by Exegy…

It's too long to post it all here, but on February 7 you can clearly see I replied back to Patrick Sellers as soon as possible since he demanded I respond back in a matter of hours with everything I have or I will face his threats.

I tried explaining to him that I had nothing belonging to Exegy at all and none of it was their proprietary property.

He turned around and replied back that he will be following through with his threats, which you can see here

I interpret your response below to be a refusal to disclose the alleged vulnerability you referenced in your emails to Exegy on 29 January, 4 February, and 7 February 2025. That is unfortunate.
Exegy will proceed to take action as described in the letter sent earlier today.

You can clearly see he stated he was following through with his threats to immediately contact the FBI and seek civil remedies against me.

I found this really interesting and unsure if he followed through with his threat at this time, since they never notified or let me know if they did.

Though after I stated to him I was going to sue Exegy he replied back with “We are continuing to review this matter internally and will be in touch later this week.”

This is when Cooley LLP came into play with all of this, which seemed like a way to conceal their extortion attempt and work with me by trying to make an offer.

It wasn't until February 17 I found out Exegy never followed through with their threat, since Kristen Mathews from Cooley LLP stated to me “they do not plan to make a report with the law enforcement” . You can see that in the following set of emails

https://drive.google.com/file/d/1yXt44zlDfR9v9v733bMNR12v4x_w6o8p/view?usp=drivesdk

This shows Patrick Seller committed wire fraud by never actually pursuing with immediately contacting the FBI and seeking all available civil remedies against me under state and federal law like he stated through his electronic communications by email.

There probably more areas in which he is lying, like telling me that I am being the extortionist and the things I have violated

A case I want to look up on about Extortion that includes Wire Fraud is United States v. Avenatti. It showed that if you use deceit (lying to a client/victim) alongside the threat (shakedown), you can be convicted of both crimes simultaneously.

This case below really illustrates how sham litigation is illegal and what Patrick Sellers is doing looks like it falls under the Hobbs Act, especially with him being in Illinois and the other parties who are CC on the Extortion letter are in Missouri and possibly one other state.

Exegy obviously knew they had no lawful claim to my property, since they tried to conceal their extortion attempt with an outside attorney and have them try to work out an offer with me.

The lawsuit they eventually filed against is not seeking access to my property or information regarding it. This shows Exegy was lying when they stated they would seek civil remedies against me.

Obviously my property has monetary value, because the SEC would put penalties on my discoveries and bug bounties programs exists that also put a value on such property. Even though Exegy has shown they are unaware of what these values are, because they wouldn't ever work with me to feel fully protected to full disclose them without being robbed of my property.

Another interesting case that shows you cannot use the threat of reporting someone to the authorities as an attempt to gain money and possibly property through an attorney was Flatley v. Mauro and Mendoza v. Hamzeh

Flatley v. Mauro (California Supreme Court, 2006)

Reporting Crimes vs. Getting Paid: You can report a crime, or you can sue for civil damages. You generally cannot say, "Pay me $100,000 or I will report this crime." That "linkage" converts the demand into extortion.
Unrelated Threats: Threatening to expose secrets or crimes unrelated to the dispute (like the immigration/tax issues in this case) is strong evidence of extortion.
No "Litigation Privilege" for Crime: While attorneys usually have "litigation privilege" protecting them from defamation suits for what they say in court or demand letters, Flatley v. Mauro established that this privilege does not protect conduct that is conclusively illegal (extortion).

Mendoza v. Hamzeh (California Court of Appeals, 2013)

The Situation: Attorney Hamzeh sent a letter to a former manager of his client's business. The letter claimed the manager had committed fraud and theft. It stated, "If you do not pay us $75,000, we will proceed with filing a civil complaint and report you to the District Attorney and the IRS."
The Outcome: The court found this to be "civil extortion." Because the attorney explicitly linked the payment of money to silence regarding criminal/tax authorities, it was illegal.

You can clearly see from Patrick Sellers DEMAND letter he used this type of scenario and language in hopes of receiving my property of monetary value.

Still trying to research more on this, but maybe some attorney out there would be interested in showing me more cases or talking about this one.

I haven't actually looked or read through this at all but here something on the following case below

https://cdn.ca9.uscourts.gov/datastore/opinions/2021/04/13/19-50018.pdf

I might have to do more research on this, because I am starting to wonder how much this lawsuit Exegy brought against me can compare to it as well.

Case Summary: United States v. Koziol (9th Cir. 2021)

Citation: United States v. Koziol, 993 F.3d 1160 (9th Cir.1 2021)

This case is a significant decision regarding the Hobbs Act (federal extortion law). It established that threatening to file a lawsuit can constitute criminal extortion if the threatened lawsuit is a "sham"—meaning it is objectively baseless and the threatener knows they have no lawful claim to the money they are demanding.

1. What was it about? (The Facts)

The case centered on a scheme by the defendant, Benjamin Koziol, to extort money from a well-known celebrity (referred to in the opinion as "the Entertainer," identified in court documents as Andy Grammer) by threatening to file a lawsuit containing false sexual assault allegations.

The Incident: In 2016, Koziol's wife, a masseuse, was hired to give a massage to the Entertainer's manager at an apartment. The manager allegedly made unwanted advances, and Koziol (who was present in the apartment) confronted him.
The Extortion Scheme: Although the incident involved the manager, Koziol later targeted the Entertainer, who was much wealthier and more famous.
The Threat: Koziol demanded $1 million from the Entertainer. He threatened that if the money wasn't paid, he would file a lawsuit falsely accusing the Entertainer of sexually assaulting his wife and physically battering Koziol.
The Fabrication: Koziol claimed to have photographic proof that the Entertainer was at the apartment. However, the photo he provided was actually taken a year after the alleged incident. Koziol knew the Entertainer was not the person involved but pursued the demand anyway.

2. What were the charges?

Koziol was charged with and convicted of attempted extortion under the Hobbs Act (18 U.S.C. § 1951).

The Hobbs Act prohibits obtaining property from another with their consent induced by the "wrongful use of actual or threatened force, violence, or fear."
The Defense: Koziol argued that threatening to file a lawsuit is a constitutional right (protected by the First Amendment) and therefore cannot be "wrongful" under the statute, even if the lawsuit is frivolous.

3. How does "Sham Litigation" fit into it?

This is the most legally significant part of the case. The Ninth Circuit had to decide when a threat to sue crosses the line from aggressive legal negotiation to criminal extortion.

The court used the concept of sham litigation to draw this line.

The General Rule (Noerr-Pennington Doctrine): Under the First Amendment, people have a right to petition the government for redress of grievances, which includes filing lawsuits. Generally, you cannot be punished for threatening to sue someone, even if your case is weak.
The "Sham" Exception: The court held that this protection does not apply to "sham litigation." It adopted a definition from antitrust law (Professional Real Estate Investors, Inc. v. Columbia Pictures), ruling that a litigation threat is "wrongful" (and thus extortionate) if it meets two criteria:

Objectively Baseless: The lawsuit is so meritless that no reasonable litigant could realistically expect success on the merits.
Subjectively Wrongful: The defendant knew the claim was baseless and used the threat solely to harass or extract money they knew they weren't entitled to.

In Koziol's case:

The court found his threat was a "sham" because:

It was objectively baseless: He knew the Entertainer wasn't the man who assaulted his wife.
It was subjectively wrongful: He fabricated evidence (the photo) and admitted to the FBI that he was just trying to get a "payday."

Key Takeaway: You can't be charged with extortion just for threatening a frivolous lawsuit. But if you know the lawsuit is a lie (a "sham") and use that threat to demand money you have no right to, it becomes a crime.

Updated this at 1:52PM CST on 11/25/2025

● Added Flatley v. Mauro

● Added Mendoza v. Hamzeh

Interesting case about Hobbs Act and Sham Litigation - United States v. Koziol (9th Cir. 2021)