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Monday, February 2, 2015

SEC ANNOUNCES OVER $580 MILLION TO BE PAID BY COMPANY, CEO FOR ROLES IN PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23184 / January 30, 2015
Securities and Exchange Commission v. Edwin Yoshihiro Fujinaga and MRI International, Inc., et al., Civil Action No. 2:13-CV-1658 JCM (CWH) (D. Nev.)

Judge Orders MRI International Inc. and Its CEO Edwin Fujinaga to Pay More Than $580 Million in Ponzi Scheme Case

On January 27, 2015, the Honorable James C. Mahan, United States District Judge for the District of Nevada, entered a final judgment in favor of the Securities and Exchange Commission against defendants Edwin Fujinaga and MRI International, Inc. The final judgment requires Fujinaga and MRI to pay more than $580 million as the outcome of a civil enforcement action originally filed in September 2013. The SEC brought the case on an emergency basis and obtained a temporary restraining order and an asset freeze at the outset of the litigation.

In its pleadings and other court papers, the SEC alleged that the defendants perpetrated an elaborate Ponzi scheme designed to misappropriate money from investors. The SEC alleged that the defendants raised money from thousands of investors living primarily in Japan under the ruse that MRI was using their funds to buy accounts receivable from medical providers at a discount and subsequently collecting the full value of those receivables from insurance companies. The SEC alleged that defendants used the money for other purposes, including financing Fujinaga's extravagant lifestyle. In October 2014, the court granted the SEC's motion for summary judgment on liability against Fujinaga and MRI on all charges against them, including the following violations of the antifraud provisions of the federal securities laws: Sections 17(a)(1), (2), and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The final judgment, in conjunction with the summary judgment opinion, sets forth findings that form the basis for the sanctions imposed, including that the "defendants engaged in a deceitful Ponzi scheme over several years," and that "such conduct manifested a high degree of scienter." The final judgment finds that the defendants collected hundreds of millions of dollars for purported investments in medical accounts receivable, and that they used these funds to repay earlier investors as well as for their own personal expenses.

The final judgment holds the defendants jointly and severally liable for disgorgement of proceeds in the amount of $442,229,611.70 and for prejudgment interest in the amount of $102,129,752.38. The judgment imposes civil money penalties of $20 million against each defendant. The judgment also provides injunctive relief by permanently enjoining the defendants from further securities violations.

The SEC's case is continuing against multiple relief defendants, who the SEC alleges received and used investors' funds.

For further information, please see Litigation Release Number 22832 (October 3, 2013) [SEC Obtains Asset Freeze and Other Emergency Relief in Ponzi Scheme Targeting Investors in Japan] and Litigation Release Number 23111 (October 10, 2014) [SEC Obtains Summary Judgment Win on Liability in Ponzi Scheme Case].

The SEC appreciates the assistance of the Financial Services Agency of Japan and the Securities and Exchange Surveillance Commission of Japan in this matter.

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