FINANCIAL COMPANY AND OWNER FOUND LIABLE FOR VIOLATIONS OF SECURITIES LAWS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Court Finds Massachusetts-Based Viking Financial Group, Inc. and Its Owner Steven Palladino Liable for Violations of the Securities Laws

The Securities and Exchange Commission announced today that, on July 15, 2013, the federal district court in Massachusetts held that Massachusetts resident Steven Palladino, and his Massachusetts-based company, Viking Financial Group, Inc., committed securities fraud. On April 30, 2013, the Commission filed an emergency enforcement action against the Defendants. In its complaint, the Commission alleged that, since April 2011, Palladino and Viking falsely promised at least 33 investors that their money would be used to conduct the business of Viking - which was to make to short-term, high interest loans to those unable to obtain traditional financing. The Commission also alleged that Palladino misrepresented to investors that the loans made by Viking would be secured by first interest liens on non-primary residence properties and that investors would be paid back their principal, plus monthly interest at rates generally ranging from 7-15%, from payments made by borrowers on the loans. The complaint alleges that, in truth, the Defendants made very few real loans to borrowers, and instead used investors' funds largely to make payments to earlier investors and to pay for the Palladino family's substantial personal expenses, including cash withdrawals and hundreds of thousands of dollars spent on gambling excursions, vacations, luxury vehicles and tuition.

The Commission first filed this emergency action on April 30, 2013, seeking a temporary restraining order, asset freeze, and other emergency relief, which the Court granted. After the parties had an opportunity to brief the issues, on July 15, 2013, the Court held that the Commission had established that the Defendants' conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The Court further stated that the Commission is entitled to injunctive relief and a temporary order of disgorgement of ill-gotten gains in the amount of at least $3.1 million. The Commission agreed to ascertain whether there are any other possible investors who may have been victims and to submit a final order of disgorgement and a proposed plan of distribution at a later date. The Court also held that imposition of any civil penalties would be determined after a criminal case against the Defendants has been resolved. In the meantime, an order freezing the Defendants' assets remains in place.

DEFENDANTS MUST PAY NEARLY $16,000,000 TO SETTLE UNREGISTERED STOCK SALES CASE

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Court enters final judgment against Defendants

The Securities and Exchange Commission ("Commission") announced today that the Honorable William J. Haynes, Jr., United States District Judge for the Middle District of Tennessee, entered final judgments on February 27, 2013 against J.C. Reed & Company ("JC Parent") and Barron A. Mathis ("Mathis"). The final judgment against JC Parent, to which JC Parent consented, held JC Parent liable for disgorgement of $11,000,000 and prejudgment interest of $3,910,003.07, for a total of $14,910,003.07. The final judgment against Mathis, to which he consented, restrained and enjoined him from future violations of 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 and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Mathis also was held liable for disgorgement of $11,000,000 and prejudgment interest of $4,944,175.39, for a total of $15,944,175.39.

The Commission’s Complaint, filed on November 18, 2008, alleged that, at various times from no later than 2005 through at least September 2008, JC Parent, J.C. Reed & Advisory Group (JC Advisory), John C. Reed ("Reed"), the founder of JC Parent and JC Advisory, and Mathis facilitated the offer and sale of more than $11 million of JC Parent stock in unregistered transactions to over 100 investors in several states. According to the Complaint, JC Parent, JC Advisory, and Reed misrepresented and omitted material facts to investors relating to the value of the investors’ stock, JC Parent’s revenues and profitability, the use of key man life insurance proceeds for redemptions of Reed’s JC Parent stock, and undisclosed sales commissions. The Complaint also alleges that Mathis promoted JC Parent stock to advisory clients and misrepresented material facts to investors about undisclosed sales commissions. In addition, the Complaint alleges that JC Advisory used JC Parent’s inflated stock values to falsely report assets under management as JC Advisory’s basis for registration with the Commission and on reports filed with the Commission.

ALLEGED NEW GOLD EXTRACTION PROCESS EXTRACTED FUNDS FROM INVESTORS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today filed fraud charges against a California-based mining company and its CEO who induced hundreds of investors to pour $16 million into a fruitless gold mining venture.

The SEC alleges that Nekekim Corporation and Kenneth Carlton defrauded investors with representations that a special "complex ore" found at Nekekim's mine site in Nevada contained gold deposits worth at least $1.7 billion. Carlton highlighted test results produced by two small labs that used unconventional methods to test the ore for gold, but he withheld from investors other tests conducted by different firms that suggested the Nekekim mine site held little if any gold. The small labs' reliability also had been called into doubt by geologists and a government study. Yet as Nekekim failed to produce any mining revenue, Carlton gave shareholders false hope that the company was close to perfecting the custom method it supposedly needed to extract gold from its special ore.

Carlton agreed to settle the SEC's charges.

According to the SEC's complaint filed in federal court in Fresno, Calif., Nekekim succeeded in attracting investors from 2001 to 2011 in such U.S. states as California, Florida, and New Jersey as well as foreign countries including Canada, Australia, and Singapore. Carlton falsely represented to investors that a "physicist" who in reality had no scientific training helped develop a confidential gold extraction technique licensed by Nekekim. Carlton also promoted a series of other supposedly promising extraction methods in frequent reports to shareholders. In one newsletter, he touted: "A NEW GOLD RECOVERY PROCESS IS SUCCESSFUL." As each of these methods actually failed, Carlton's reports grossly overstated Nekekim's progress toward profitability while prompting shareholders to invest more money in the company.

Carlton, who lives in Clovis, Calif., agreed to a judgment requiring him to pay a $50,000 penalty and prohibiting him from selling securities for Nekekim or managing the company. He also will be prohibited from further violations of 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. Nekekim, based in Madera, Calif., agreed to a judgment prohibiting the same violations and requiring disclosure of these sanctions in any offering of securities for the next three years. Carlton and Nekekim neither admitted nor denied the SEC's allegations.

This case was investigated by Thomas Eme and Tracy Davis of the SEC's San Francisco office.

COLLATERALIZED DEBT OBLIGATIONS CASE SETTLED FOR $23 MILLION

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 7, 2012 – The Securities and Exchange Commission today announced that New York-based investment advisory firm ICP Asset Management and its founder and president Thomas C. Priore have agreed to settle the agency’s charges that they defrauded several collateralized debt obligations (CDOs) they managed.

ICP, Priore, and related entities have agreed to pay more than $23 million to settle the case the SEC filed against them in June 2010 in federal court in Manhattan. The SEC alleged they engaged in fraudulent practices and misrepresentations that caused the CDOs to overpay for securities and lose millions of

dollars. Priore and the ICP companies also improperly obtained fees and undisclosed profits at the expense of the CDOs and their investors.

"The settlement with Priore and ICP sends a clear message that investment advisers must always act in the best interests of their advisory clients, even if those clients are sophisticated investors," said George S. Canellos, Deputy Director of the SEC’s Division of Enforcement. "When advisers put their own interests ahead of their clients’ interests, the SEC will seek to hold them accountable."

The court approved the settlement terms on September 6. The final judgment orders Priore to pay disgorgement of $797,337, prejudgment interest of $215,045, and a penalty of $487,618. ICP and its holding company Institutional Credit Partners LLC are required, on a joint and several basis, to pay disgorgement of $13,916,005 and prejudgment interest of $3,709,028. ICP also must pay a penalty of $650,000. An affiliated broker-dealer ICP Securities LLC is ordered to pay disgorgement of $1,637,581, prejudgment interest of $301,893, and a penalty of $1,939,474. Priore also agreed to settle an administrative proceeding against him and be barred from association with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent, and from participating in any offering of a penny stock. He has a right to reapply for association or participation after a period of five years.

Priore and the ICP companies also consented, without admitting or denying the SEC’s allegations, to permanent injunctions enjoining them from future violations of the securities laws that they were alleged to have violated, which include Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(c)(1)(A) of the Securities Exchange Act of 1934 and Rules 10b-3 and 10b-5, and Sections 206(1), (2), (3), and (4) of the Investment Advisers Act of 1940 and Rules 204-2, 206(4)-7 and 206(4)-8.

The SEC’s investigation was conducted by Celeste A. Chase, Joseph Boryshansky, Joshua Pater, Susannah Dunn, and Kenneth Gottlieb of the New York Regional Office. Joseph Boryshansky led the litigation with assistance from Jack Kaufman, Mark Germann, Joshua Pater, and Susannah Dunn.

SEC CHARGES INDIVIDUALS AND ENTITIES IN BOILER ROOM SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges Participants in $5 Million Boiler Room Scheme

The Securities and Exchange Commission announced today that it has charged Edward M. Laborio and others for their roles in a boiler room scheme that used high-pressure sales tactics to raise up to $5.7 million from approximately 150 investors through the fraudulent sale of five unregistered securities offerings involving a group of related entities. The scheme ran from approximately December 2006 to August 2009. Laborio, formerly of Boston, Massachusetts, is now a resident of Boca Raton, Florida. The SEC also charged Jonathan Fraiman of Lantana, Florida; Matthew K. Lazar of Westerville, Ohio; and seven entities controlled by Laborio: Envit Capital Group, Inc. (“Envit Group”); Envit Capital, LLC (“Envit LLC”); Envit Capital Holdings, Inc. (“Envit Holdings”); Envit Capital Private Wealth Management, LLC (“Envit Wealth”); Envit Capital Multi Strategy Mixed Investment Fund I LP (“Envit Fund”); Aetius Group PLC (“Aetius PLC”); and Aetius Group LLC (“Aetius LLC”) (collectively, the “Envit Companies”).

According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts, Laborio and Fraiman made multiple misrepresentations and misleading statements to investors about the Envit Companies’ businesses, revenues, financial projections, uses of investor funds, and historical returns generated by Envit Fund, a purported hedge fund that in reality never conducted any operations. According to the complaint, Laborio also created scripts with sales pitches containing fabricated information. For example, one of Laborio’s scripts allegedly included unfounded claims that investors would receive quarterly dividends and “2-3x return on money.” Laborio also allegedly used investor proceeds to cover gambling losses, to make direct payments to himself, and to cover personal expenses. Fraiman allegedly represented to an investor that Envit Fund, the purported hedge fund, returned 42.9% in 2006 and 43.7% in 2007, even though the hedge fund was not launched until mid-2007 and never conducted any operations. The complaint further alleges that Lazar raised $585,000 from approximately 10 investors through the sale of a PIPE (private investment in public equity) in Envit Group (one of the five unregistered securities offerings) by misrepresenting that the PIPE guaranteed an annual 8.5% dividend, and that it was safe, like a fixed annuity or a CD.

As a result of the conduct described in the complaint, the Commission alleges that all defendants violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder; that Laborio, Fraiman, Lazar and Envit Wealth violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”); that Laborio, Fraiman, and Envit Wealth violated Advisers Act Section 206(4) and Rule 206(4)-8 thereunder; that Laborio, Fraiman, and Lazar violated Exchange Act Section 15(a)(1); that Laborio, Envit LLC, Envit Group, Envit Holdings, and Aetius PLC violated Securities Act Sections 5(a) and 5(c); that Laborio violated Exchange Act Section 16(a) and Rule 16a-3 thereunder; and that Envit Fund and Aetius LLC violated Section 7(a) of the Investment Company Act of 1940. The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, penny stock bars against Laborio, Fraiman, and Lazar, and an officer and director bar against Laborio.

The Commission previously suspended trading in the securities of Envit Group in May 2009 and subsequently revoked the registration of the securities of Envit Group in September 2009.

In conducting its investigation, the Commission acknowledges assistance from the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the State of Florida Office of Financial Regulation.

For further information, see Exchange Act Release No. 34-59900 (May 12, 2009) [Order suspending trading in Envit Group securities]; Initial Decision Release No. 385 (August 13, 2009) [Initial decision revoking registration of Envit Group securities]; Exchange Act Release No. 60658 (September 11, 2009) [Notice of final decision revoking registration of Envit Group securities].

SEC SETTLES WITH TWO FORMER BEAR STEARNS HEDGE FUND MANAGERS

FROM:  SECURITES AND EXCHANGE COMMISSION 
June 25, 2012
Court Approves SEC Settlements with Two Former Bear Stearns Hedge Fund Portfolio Managers; SEC Bars Managers from Regulated Industries
The U.S. District Court for the Eastern District of New York approved Securities and Exchange Commission settlements with two former Bear Stearns Asset Management portfolio managers on June 18, 2012, bringing to a close the SEC’s civil litigation against the managers. The court ordered Ralph R. Cioffi and Matthew M. Tannin, who co-managed the Bear Stearns High-Grade Structured Credit Strategies Fund and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, to pay a total of $1.05 million in disgorgement and civil penalties and enjoined them from federal securities law violations. As part of the settlement, the Commission today issued orders instituting administrative proceedings that bar Cioffi and Tannin from industries regulated by the SEC for periods of three years and two years, respectively.

The SEC’s complaint, filed June 19, 2008, alleged that the Bear Stearns funds collapsed in June 2007 after taking highly leveraged positions in structured securities based largely on subprime mortgage-backed securities. Cioffi was the senior portfolio manager, and Tannin was a portfolio manager and the chief operating officer for the funds. According to the complaint, Cioffi and Tannin misrepresented the extent to which the funds had invested in securities backed by subprime mortgages and, during an April 2007 investor conference call, Cioffi misrepresented the level of investor redemption requests. The complaint also alleged that Cioffi did not tell investors about his own April 2007 redemption of a portion of his personal investment in the Enhanced Leverage Fund used to invest in a third fund for which he acted as portfolio manager. The complaint further alleged that Tannin misrepresented that he was going to add to his personal investment in the Enhanced Leverage Fund and that he misrepresented the funds’ prospects during the April 2007 investor call.

Cioffi and Tannin settled the SEC’s charges, without admitting or denying the allegations in the complaint, and consented to the entry of district court judgments that permanently enjoin them from violating Section 17(a)(2) of the Securities Act of 1933, which prohibits untrue statements related to the offer or sale of securities. The judgments also ordered Cioffi to pay $700,000 in disgorgement and a $100,000 civil penalty, and ordered Tannin to pay $200,000 in disgorgement and a $50,000 civil penalty. Cioffi and Tannin further consented to issuance of the Commission orders, which bar them from associating with any investment adviser, broker-dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, for three years as to Cioffi and two years as to Tannin. The Commission issued its orders in administrative proceedings instituted after the district court entered the injunctions.