Friday, October 18, 2013

SEC Litigation Releases: Week in Review

Court Enters Final Judgment by Consent Against Defendant Ronald Baldwin, Jr., October 17, 2013, (Litigation Release No. 22847)

A final judgment was entered against Ronald Baldwin, Jr., former CFO of JBI, Inc., for his alleged involvement in "a scheme to commit securities and accounting fraud in 2009." Previously, the SEC charged JBI, Inc. and its CEO, John Bordynuik for their alleged involvement in the scheme. Baldwin consented to the judgment which permanently enjoins him from future violations of the securities laws, orders him to pay a $25,000 penalty, and imposes a five-year officer-and-director bar against him.

SEC Halts $20 Million Pyramid Scheme Targeting Asian-American Community, October 17, 2013, (Litigation Release No. 22846)

The SEC charged 16 defendants as well as seven entities for their involvement in a "worldwide pyramid scheme targeting members of the Asian-American community." The defendants "falsely promised exponential, risk-free returns to investors in a venture that purportedly sold Internet-based children's educational courses." The defendants allegedly solicited investments "in an entity operating under the business name 'CKB' or 'CKB168,' which they claim is a rapidly growing and legitimate multi-level marketing company that purportedly sells web-based children's educational courses." In reality, however, CKB168 is "nothing more than a fraudulent pyramid scheme" and "CKB has little or no real-world retail consumer sales to generate the promised returns." The court granted the SEC's "request for a temporary restraining order, asset freeze, and other emergency relief against" the defendants. Additionally, the SEC seeks disgorgement, financial penalties, permanent injunctions, and other relief.

The corporate defendants are five entities: WIN168 Biz Solutions Ltd., CKB168 Ltd., CKB168 Holdings, Ltd., CKB168 Biz Solution Inc., and Cyber Kids Best Education Limited. The individual defendants are: Rayla Melchor Santos, Hung Wai (Howard) Shern, and Rui Ling (Florence) Leung (aka Kwai Chee Leung), Daliang (David) Guo, Yao Lin, Chih Hsuan (Kiki) Lin, Wen Chen Hwang (aka Wendy Lee), Toni Tong Chen, Cheongwha (Heywood) Chang, Joan Congyi (JC) Ma, and Heidi Mao Liu (aka Heidi Mao.) Additionally, the SEC has named six relief defendants: USA Trade Group, Inc., Ouni International Trading Inc., E-Stock Club Corp., EZ Stock Club Corp., HTC Consulting LLC, and Arcadia Business Consulting, Inc.

Securities and Exchange Commission v. Peter Madoff, October 15, 2013, (Litigation Release No. 22845)

A default judgment has been entered against Peter Madoff for his involvement in the Bernard L. Madoff Investment Securities LLC ponzi scheme. The judgment permanently enjoins him from future violations of the securities laws, but orders "no monetary relief in light of Peter Madoff’s criminal conviction and the $143 billion in restitution ordered in the parallel criminal proceeding United States v. Peter Madoff."

Former Detroit Mayor Kwame Kilpatrick, Previously Sued by the SEC for Fraud, Sentenced to 28 Years in Prison, October 15, 2013, (Litigation Release No. 22844)

Last week the SEC announced that the court "sentenced former City of Detroit Mayor Kwame Kilpatrick to 28 years in prison." Kilpatrick had previously been convicted of "racketeering, conspiracy, fraud, extortion, and tax crimes in March 2013" by a jury. Kilpatrick is a defendant of a pending SEC civil injunctive action based on the same facts "alleged by the U.S. Attorney's Office."

Court Approves Distribution of $6 Million to Former Heppelwhite Investors, October 11, 2013, (Litigation Release No. 22843)

A final distribution plan was approved for Fair Fund established in SEC v. Hochfeld et al. The SEC "charged Berton M. Hochfeld and his entity Hochfeld Capital Management, L.L.C. with securities fraud for misappropriating assets and making material misstatements to investors in the Heppelwhite Fund, L.P., a now defunct hedge fund." Previously, the court entered judgments ordering injunctions, an asset freeze, disgorgement, and civil penalties. "To date, the SEC has collected approximately $6.2 million for the Fair Fund pursuant to the Final Distribution Plan."

SEC Charges Menomonee Falls, Wisconsin Resident with Operating a Ponzi Scheme, October 11, 2013, (Litigation Release No. 22842)

According to the complaint (PDF), Michael R. Enea operated a $2.1 million Ponzi scheme, "conducting fraudulent, unregistered offerings of securities and misappropriating investor funds to pay his personal expenses." Enea has agreed to a final judgment that permanently enjoins him from violating the Securities Act and Exchange Act, and orders him to pay over $843,000 in disgorgement.

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