Friday, August 30, 2013

SEC Litigation Releases: Week in Review

SEC Charges Oklahoma Investment Adviser and Cohort with Fraud, August 27, 2013, (Litigation Release No. 22789)

According to the complaint (PDF), former investment adviser Larry J. Dearman, Sr. "invested his clients in various businesses that" his close friend, Marya Gray, "owned in Bartlesville, Oklahoma." According to the SEC, Dearman and Gray misled investors "about the safety of the investments and how their funds would be used, telling them, for instance, that investor funds would be used to purchase equipment for one of Gray's companies, Bartnet Wireless Internet, Inc" while in reality investor funds were used "on gambling, personal expenses, and Ponzi payments." In addition to the alleged misuse of funds, Dearman allegedly "stole roughly $700,000 from some of his clients through various ruses."

The SEC has charged the defendants with violating various sections of the securities laws and seeks "permanent injunctive relief, disgorgement plus prejudgment interest, and civil monetary penalties." The complaint also named "three of Gray's businesses, including Bartnet Wireless Internet, Inc., The Property Shoppe, Inc., and Quench Buds Holding Company, LLC," as relief defendants in order "to recover funds they derived from Defendants' fraud."

SEC Obtains Final Judgment Against Jonathan C. Gilchrist for Fraud and Registration Violations, August 27, 2013, (Litigation Release No. 22788)

A final summary judgment was entered against Jonathan C. Gilchrist that found he had "violated the antifraud and registration provisions of the federal securities laws." According to the SEC, "Gilchrist, acting as the president and chairman of Mortgage Xpress, Inc. (subsequently renamed The Alternative Energy Technology Center, Inc.), authorized the unregistered offer and sale of six million company shares to himself and two entities he controlled." He then used "effected match trades in company securities through brokerage accounts he controlled" driving up the share price. "Into this inflated market, Gilchrist made unregistered sales of 229,661 shares, which the Court found generated illicit proceeds of $692,146.38." The final judgment "bars Gilchrist from serving as an officer or director of any company that is required to register its securities with the Commission, from acting as a broker or dealer, and from trading in stocks with a per share price [of] less than five dollars." Additionally, the judgment orders Gilchrist to pay over $840,000 in disgorgement and prejudgment interest.

SEC Files Action Against Investment Adviser to Enforce Compliance with Order to Pay Disgorgement of Misappropriated Investor Funds, Interest and Civil Penalties, August 23, 2013, (Litigation Release No. 22787)

The SEC filed an application against Anthony T. Vicidomine and North East Capital, LLC, "alleging that they violated an SEC Order requiring them to pay $346,132.04" in disgorgement and prejudgment interest. According the SEC's original complaint, Vicidomine, "the sole principal of North East Capital, LLC,...misappropriated $189,415 from the North East Capital Fund charging the Fund unearned 'incentive fees.'" Vicidomine then allegedly used these funds for his "other business ventures" and for personal expenses. The SEC's application "seeks a district court order enforcing its August 16, 2013 Order requiring Vicidomine and North East to pay $346,132.04 in disgorgement, prejudgment interest and civil penalties."

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