By Tim Dulaney, PhD
SEC Charges Two Feeders for One of South Florida's Largest-Ever Ponzi Schemes, May 31, 2012, (Litigation Release No. 22383)
The SEC charged George Levin and Frank Preve with perpetrating a Ponzi scheme through which they raised nearly $160 million from close to 200 investors in less than two years. The defendants used the investor funds to purchase (fraudulent) discounted legal settlements from Scott Rothstein (former Florida attorney). Rothstein then used the investor funds to make Ponzi payments and finance his lifestyle. Rothstein's scheme imploded in late 2009 and "[...] is currently serving a 50-year prison sentence." The SEC alleges that the promissory notes Levin and Preve used to raise the investor funds "[...] contained material misrepresentations and omissions."
SEC Charges Two Individuals in Fraudulent Offering of Investments in Dominican Republic Resorts, May 31, 2012, (Litigation Release No. 22382)
The SEC charged James B. Catledge and Derek F. C. Elliott (and certain related entities) with "[...] making material misrepresentations to investors in connection with the unregistered sale of interests in two resorts in the Dominican Republic." The defendants raised more than $160 million from approximately 1,200 investors by promising timeshare (promising a 5% return) and ownership interests (promising an 8-12% return) in two Dominican Republic resorts. The SEC alleges that over 35% of the funds were used to pay commissions to the defendants and that the funds were not used to finance the construction as represented. For the SEC complaint in this matter, see here (link opens PDF).
SEC Charges Penny Stock Financiers and Two Public Companies With Illegal Unregistered Stock Distributions, May 30, 2012, (Litigation Release No. 22381)
The SEC filed a civil injunctive action in Florida against Mark A. Lefkowitz, Compass Capital Group, Inc., Mark A. Lopez, Unico, Inc., Steven R. Peacock, Shane H. Traveller, and Advanced Cell Technology, Inc., alleged that the group "[...] violated the federal securities laws in connection with the unregistered distribution of billions of shares of penny stocks through the repeated misuse of [...]" a registration exemption. In 2006, Lefkowitz allegedly devised a scheme by which penny stock issuers could pay off past due debts and raise additional capital by selling unrestricted common stock "[...] at a substantial discount to the prevailing market price, purportedly to retire the past due debt" to financiers. The sale included a settlement agreement (not disclosed in court) that required the financiers to remit monies to the issuers following the sale of the securities. While each penny stock issuer did extinguish debt, in most cases the amount of money raised far exceeded the level of debt extinguished.
SEC Charges Chicago-Area Resident With Fraud, May 30, 2012, (Litigation Release No. 22380)
Earlier this week, the SEC charged Richard DeMaria with fraud "[...] alleging that he operated a prime bank scheme that defrauded at least thirteen investors out of approximately $4.3 million." Instead of investing client funds in financial instruments as DeMaria allegedly represented, DeMaria misappropriated nearly 90% of the funds for his own personal use (e.g. business ventures, travel and expensive meals). For the SEC complaint in this matter, see here (link opens PDF).
SEC Obtains Dismissal of Complaint Without Prejudice Against Three Swiss Entities in Insider Trading Case, May 29, 2012, (Litigation Release No. 22378)
In July 2011, the SEC filed a complaint (Litigation Release No. 22049) charging a trio of Swiss-based entities (Compania International Financiera S.A., Coudree Capital Gestion S.A. and Chartwell Asset Management Services) with insider trading in the securities of Arch Chemicals, Inc. ahead of the public announcement of their acquisition by Lonza Group Ltd. Following a motion by the SEC earlier this year, a federal court in New York has now dismissed the complaint against each defendant without prejudice since "[...] the dismissal without prejudice would be in the interest of justice."
Court Enters Final Judgments Against New Hampshire Futures Day-Trading Business and Canadian Resident In Ponzi Scheme Case, May 29, 2012, (Litigation Release No. 22377)
In a November 2011 complaint (Litigation Release No. 22159), the SEC alleged that Henry Roche (who directed the New Hampshire business New Futures Trading International Corporation) has been involved in an "[...] ongoing unregistered offering of securities in the United States." Roche raised over $1.3 million from a group of investors by offering promissory notes "purportedly yielding either 5-10% per month, or a 200% return within 14 months." The majority of the funds were used to make Ponzi payments to new investors while the other portion of the investment was misappropriated by Roche to finance his horse breeding venture, Majestic Horses, among other things. Last week, the US District Court for the District of New Hampshire ordered Roche and his corporation to pay (in total) over $1.5 million in disgorgement, prejudgment interest and penalties.
SEC Charges Two Investment Advisers with Fraud, May 29, 2012, (Litigation Release No. 22376)
Earlier this week, the SEC charged Jorge Gomez and Roberto Aleph Espinosa with perpetrating a fraudulent scheme to misappropriate millions of dollars through investment advisory services provided to a client. Gomez allegedly misrepresented his connection to two financial institutions to entice the client to invest nearly $11 million with him. According to the SEC, Gomez misappropriated at least 40% of the funds and concealed this misappropriation by producing "fake account statements and securities certificates." Gomez invested a large portion of the funds in a hedge fund started by Espinosa through which Espinosa was allegedly able to collect certain undisclosed fees. For the SEC complaint in this matter, see here (link opens PDF).
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