MAN WHO MISAPPROPRIATED COMMODITY POOL MONEY SENTENCED TO 8+ YEARS IN PRISON

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Kevin G. White Sentenced to over Eight Years in Federal Prison for $7.4 Million Commodity Pool Investment Scam

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Kevin G. White of The Woodlands, Texas, who orchestrated a $7.4 million commodity pool investment scam during which he misappropriated approximately $1.7 million from pool participants, was sentenced to over eight years in federal prison for charges related to his fraudulent misconduct. Earlier, on December 11, 2013, White pleaded guilty to committing mail fraud for his actions in connection with the scam.

The criminal charges arose from White’s solicitation fraud and misappropriation of pool participant funds, as charged in a Complaint filed by the CFTC on July 9, 2013 (see CFTC Press Release 6644-13, July 12, 2013), and a companion Complaint filed by the Securities and Exchange Commission. According to the CFTC’s Complaint, White, along two other Defendants in the CFTC’s action, RFF GP, LLC, and KGW Capital Management, LLC, duped pool participants into investing in Revelation Forex Fund, LP, a purported hedge fund and commodity pool. The CFTC’s Complaint further alleged that in making their solicitations through two websites and at a tradeshow presentation, White fabricated Revelation’s performance and lied about his investment experience. A proposed consent Order between the CFTC and White, RFF GP, and KGW Capital is currently pending in the U.S. District Court for the Eastern District of Texas.

Aitan Goelman, the CFTC’s Director of Enforcement, stated: “The sentence in this case should serve as a warning that those who willfully commit fraud in our markets face the very real possibility of a significant term of imprisonment. The CFTC will continue its vigilance in protecting commodities and derivatives investors from fraud and other forms of financial crime.”

The CFTC congratulates the U.S. Attorney’s Office for the Eastern District of Texas for its successful prosecution of this matter.

CFTC Division of Enforcement staff members responsible for the related CFTC case are Harry E. Wedewer, Dmitriy Vilenskiy, John Einstman, and Paul G. Hayeck.

SEC CHARGES STOCK PROMOTER WITH FRAUD IN PURPORTED PURCHASE OF FACEBOOK, TWITTER SHARES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission charged a stock promoter based in Santa Barbara, Calif., with fraudulently raising nearly $3.5 million from investors purportedly to purchase Facebook and Twitter shares prior to their initial public offerings (IPOs).

The SEC alleges that instead of purchasing the shares in the secondary market as promised, Efstratios “Elias” Argyropoulos and his firm Prima Capital Group misappropriated investor funds.  They used the money primarily for day trading of stocks and options as well as to pay off certain investors who complained when they didn’t receive the promised Facebook or Twitter shares.

Argyropoulos agreed to settle the SEC’s charges and be barred from working for an investment adviser or broker-dealer, and financial penalties will be determined at a later date.

“Argyropoulos capitalized on the high demand for pre-IPO Facebook and Twitter shares to steal investor money and secretly fund his own day trading,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.

The SEC’s complaint charges Argyropoulos and Prima Capital with violating the antifraud provisions and broker-dealer registration provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.  Argyropoulos and Prima Capital agreed to settle the charges without admitting or denying the allegations, and the settlement is subject to court approval.

The SEC separately announced an administrative proceeding against Khaled A. Eldaher, a registered representative living in Austin, Texas.  The SEC Enforcement Division alleges that while working for a registered broker-dealer, Eldaher reached a side agreement with Argyropoulos to solicit investors and receive 50 percent of the mark-up on Facebook shares he sold.  Eldaher sold $362,887.50 worth of Facebook shares and was paid $15,478 by Prima Capital.  He was later terminated by the broker-dealer for selling securities other than through the firm.  The Enforcement Division alleges that Eldaher’s sales of unregistered securities violated Section 15(a)(1) of the Exchange Act.  The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate.

The SEC’s investigation was conducted by Tony Regenstreif and supervised by Victoria A. Levin of the Los Angeles Regional Office.  The Enforcement Division’s litigation against Eldaher will be led by Karen Matteson.

SEC FILES ACTION TO ENFORCE COMPLIANCE OF ORDER TO PAY

FROM:  U.S. SECURITIES EXCHANGE COMMISSION 
SEC Files Action Against Investment Adviser to Enforce Compliance with Order to Pay Disgorgement of Misappropriated Investor Funds, Interest and Civil Penalties

The Securities and Exchange Commission announced today that it filed an application in U.S. District Court for the Eastern District of New York against Anthony T. Vicidomine and North East Capital, LLC alleging that they violated an SEC Order requiring them to pay $346,132.04, consisting of $189,415 in disgorgement, $6,717.04 in prejudgment interest, and a $150,000 civil penalty. According to the application, Vicidomine and North East failed to make any payments by August 21, 2013, despite the SEC's Order and their consent to do so.

According to the SEC's August 16, 2013 order instituting a settled administrative proceeding, Vicidomine, the sole principal of North East Capital, LLC, an unregistered investment adviser, misappropriated $189,415 from the North East Capital Fund LP (the Fund), a pooled investment vehicle he managed, by charging the Fund unearned "incentive fees." Vicidomine disbursed the monies directly into his own personal account, to his other business ventures, and to North East to pay his personal expenses. Additionally, Vicidomine and North East made misrepresentations, both orally and in writing, concerning Vicidomine's own investment in the Fund and the policies and procedures Vicidomine and North East employed to minimize investors' risk of losses.

Based on the above, the SEC ordered Vicidomine and North East to cease and desist from committing or causing any violations and any future violations of Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Vicidomine and North East agreed to pay disgorgement of $189,415 plus prejudgment interest of $6,717.04 as well as a civil monetary penalty of $150,000 by August 21, 2013. They failed to make any payment.

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.