SEC OBTAINS RESTRAINING ORDER AGAINST UK COMPANY OPERATING ALLEGED FRAUD SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Obtains Temporary Restraining Order Against Uk Company Operating Fraudulent Profitable Sunrise Internet Scheme and Names Czech Companies as Relief Defendants
On April 4, 2013, the U.S. Securities and Exchange Commission filed an enforcement action against Inter Reef Ltd., doing business as Profitable Sunrise, as a defendant and Melland Company S.R.O., Color Shock S.R.O., Solutions Company S.R.O. and Fortuna-K S.R.O. as relief defendants. The Commission’s complaint was filed in the United States District Court for the Northern District of Georgia.

The Commission’s complaint alleges that Inter Reef, located in the United Kingdom, has operated a fraudulent securities offering over the internet under the name of "Profitable Sunrise" that has been targeted towards investors in the United States. Through its website, promoters and social media, Profitable Sunrise promised investors returns of between 1.6% and 2.7% per business day, compounded daily, on funds invested in various programs that were purportedly to be used to provide loans to businesses at even higher rates. Investors have been encouraged to recruit others for the scheme with promises of percentages of the amounts put in by the new investors. Among other things, the Commission’s complaint alleges that the Profitable Sunrise has promised impossibly high rates of return and misrepresented that investments in the program were insured by a leading investment bank. The fraud appears to have been targeted at religious investors, as Profitable Sunrise’s website contained several Bible verses and the company purported to make frequent charitable donations.

Melland, Color Shock, Solutions Company and Fortuna-K are Czech companies that the Commission alleges have received funds from investors in the United States through transfers at the direction of Profitable Sunrise. At present, a bank account in the name of Color Shock in Hungary has been frozen by authorities there. The Commission has named these Czech companies as relief defendants because they have no right to retain the funds sent to their accounts by investors.

Shortly after the Commission filed its complaint, the Honorable Thomas W. Thrash issued an order granting a temporary restraining order against Inter Reef along with an order directing an accounting, allowing expedited discovery, preventing the destruction of documents and providing for an asset freeze. The Commission may seek additional relief, such as preliminary and permanent injunctions, disgorgement of any ill-gotten gains with prejudgment interest and civil penalties, at a later time. The court’s order also freezes the assets of the relief defendants.

SEC GETS EMERGENCY ASSET FREEZE AGAINST THE ASSOCIATION FOR BETTERMENT THROUGH EDUCATION AND LOVE INC.

Unauthorized securities is something that the SEC frowns on a great deal. In the following case a charity like entity ran a fowl of the SEC by allegedly selling unregistered securities. The following is an excerpt from the SEC web site:

“The Securities and Exchange Commission announced today that it charged Association for Betterment through Education and Love, Inc. (“ABEL”) and its principal, Anthony O. DeGregorio, Sr., age 81 and resident of New Jersey, with offering and selling securities in unregistered transactions and obtained an emergency court order to halt the offerings and preserve assets for investors. The Complaint also names Margherita DeGregorio as a relief defendant.

The Commission's complaint, filed in the District of New Jersey, alleges that ABEL and DeGregorio have raised more than $1.3 million through unregistered securities offerings since ABEL’s inception in 1989, obtaining more than $1 million in the last four years through offering purported “CDs.” According to the Complaint, ABEL’s purported purpose was to invest funds raised in securities offerings and use investment profits to pay a “guaranteed” return to investors, and donate a portion to charity. The Complaint alleges that ABEL and DeGregorio offered securities in the form of charitable gift annuities, without complying with state registration requirements, and offered purported CDs that carried above-market interest rates. The Complaint also charges that, at times, ABEL used the proceeds from new offerings of securities to make promised interest payments to earlier investors.
The Complaint charges ABEL and DeGregorio with violating Sections 5(a) and (c) of the Securities Act of 1933.
Judge Freda L. Wolfson of the United States District Court for the District of New Jersey issued a temporary restraining order, which prohibits ABEL and DeGregorio from committing further violations of the federal securities laws and places a freeze on their assets and the assets of Margherita DeGregorio. In its enforcement action, the Commission is seeking additional relief, including orders enjoining ABEL and DeGregorio, preliminarily and permanently, from committing future violations of the foregoing federal securities laws, and a final judgment ordering ABEL and DeGregorio to disgorge their ill-gotten gains plus prejudgment interest, and assessing civil penalties against them.”