SEC Charges Atlanta-Based Adviser with Operating Ponzi-Like Scheme Involving Private Investment Funds, September 19, 2012, (Litigation Release No. 22485)
Earlier this week, the SEC filed a civil complaint (PDF) charging Angelo A. Alleca with "defrauding investors in a purported “fund-of-funds” and then trying to hide trading losses by creating new private funds to make money to pay back the original fund investors in Ponzi-like fashion." Rather than investing investor funds in Summit Investment Fund, LP, Alleca allegedly actively traded the client funds and realized significant losses. According to the SEC, Alleca used profits from new funds (Private Credit Opportunities Fund, LLC and Asset Class Diversification Fund, LP) to meet early redemption requests from the older funds all the while issuing false account statements to investors. When the new funds began to experience losses, the scheme began to fall apart. Alleca allegedly raised approximately $17 million in this Ponzi-like scheme. The US District Court has issued an asset freeze and expedited discovery process.
SEC Charges Former CEO and Chairman of Mamtek US with Fraud in the Offer and Sale of Municipal Bonds, September 18, 2012, (Litigation Release No. 22484)
The SEC recently charged Bruce Cole (former CEO and Chairman of Mamtek, US) with "fraud related to the offer and sale of municipal bonds." In July 2010, the City of Moberly, Missouri offered $39 million worth of bonds to finance a processing plant to be built and operated by Mamtek. Cole allegedly encouraged Mamtek employees to "create false documentation for a nonexistent company to falsely justify fictitious expenses for the [processing plant]." These expenses were then allegedly wired to Cole's wife and used for personal expenses "under the false pretense that she was an agent of the sham company." The SEC is seeking financial penalties and has named Cole's wife, Nanette Cole as a relief defendant.
SEC Obtains Final Judgments Ordering More Than $135 Million in Monetary Relief in “Green” Investment Ponzi Scheme, September 18, 2012, (Litigation Release No. 22483)
Earlier this month, the US District Court for the District of Colorado "entered final judgments against Troy B. Wragg, Amanda E. Knorr, Speed of Wealth, LLC, Wayde M. McKelvy, and Donna M. McKelvy ordering disgorgement, prejudgment interest, and civil penalties totaling more than $135 million." This final judgment is the result of a 2009 SEC complaint that allegedly the McKelvy's made material misrepresentations about "green" initiatives and promised investors exorbitant annual returns, sometimes in excess of a hundred percent. The returns paid to investors were almost entirely funded by investments from new investors, according to the SEC.
SEC Obtains Asset Freeze and Other Relief in Microcap Fraud, September 17, 2012, (Litigation Release No. 22482)
On Monday, the SEC filed a complaint (PDF) alleging that Michael Borish and Michael Ciarlone -- through Freedom Financial Services, Inc. -- violated several federal securities laws including antifraud and officer certification provisions. According to the SEC, Borish (former CEO of Freedom Financial Services, Inc.) was removed by the company's board of directors but orchestrated a scheme to remain the de facto CEO of the company. Borish allegedly caused Freedom Financial Services to file several false or misleading reports to the SEC and in some cases to not file a report when one was required. Furthermore, the SEC contends that Borish and Ciarlone stole corporate funds to pay personal expenses.
SEC Charges Former Systemax Director in Compensation Scheme, September 17, 2012, (Litigation Release No. 22481)
The SEC filed a complaint against Gilbert Fiorentino (former CEO of Systemax's Technology Products Group) received "over $400,000 in extra compensation directly from firms that conducted business with Systemax." As a result of this and other alleged misappropriations, Fiorentino's compensation was under-reported to Systemax's shareholders. Fiorentino has consented to the entry of an injunctive order penalizing him $65,000 and barring him from serving as an officer or director of a public company.