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Tuesday, April 28, 2015

SEC OBTAINS INJUNCTION AGAINST MAN WHO ALLEGEDLY RAN FRAUD SCHEME TARGETING MILITARY PERSONNEL

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23245 / April 22, 2015
Securities and Exchange Commission v. Leroy Brown, Jr. and LB Stocks and Trades Advice LLC, Civil Action No. 6:15-cv-119-WSS (W.D. Tex. Waco Division)
SEC Obtains Preliminary Injunction Against Central Texas Man Accused of Running Fraudulent Scheme Targeting U.S. Military Members

The Securities and Exchange Commission announced that on April 21, 2015, the Honorable Walter S. Smith, Jr. of the United States District Court for the Western District of Texas entered an Agreed Preliminary Injunction against a central Texas man accused of running a fraudulent investment scheme targeting members of the U.S. military. Among other things, the Agreed Preliminary Injunction, pending a final disposition of the action, enjoins defendants from violating the securities laws that the SEC alleges defendants violated, freezes defendants' assets, orders defendants to provide an accounting, and prohibits the destruction, alteration, or concealment of documents.

On April 13, 2015, the SEC obtained a temporary restraining order and emergency asset freeze against Leroy Brown, Jr. and his firm, LB Stocks and Trades Advice LLC to halt this ongoing and fraudulent scheme. The SEC's complaint accuses Brown and LB Stocks and Trades Advice LLC of using false pretenses to solicit funds from investors, many of whom are active members of the U.S. military, including those serving at Fort Hood in Killeen, Texas. Brown exploited relationships he made during his time in the military, as well as his own military experience, to gain investors' trust. He assured investors that he had years of experience in the securities markets, and that he and companies he controlled had all necessary licenses and registrations with the SEC and the Financial Industry Regulatory Authority (FINRA). Brown promised investors he would double or triple their money, and that his investments could not lose.

According to the SEC, these claims were false. Brown and his companies have no securities licenses, and Brown himself has no evident experience with investments.

The SEC's complaint charges Brown and LB Stocks and Trades Advice LLC with violating the antifraud and securities registration provisions of the federal securities laws, specifically Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief it has already obtained, the SEC seeks civil penalties, disgorgement of ill-gotten gains, and permanent injunctive relief.

The SEC's investigation was conducted by Jim Etri, Chris Ahart and Melvin Warren of the Fort Worth Regional Office. B. David Fraser is leading the SEC's litigation. The SEC appreciates the assistance of the U.S. Attorney's Office for the Western District of Texas, the United States Secret Service, and the Texas Department of Public Safety - Criminal Investigations Division.

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