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.
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