SEC ANNOUNCES CHARGES, ASSET FREEZE AGAINST UTAH RESIDENT AND INVESTMENT ADVISORY FIRM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23188 / February 5, 2015

Securities and Exchange Commission v. Total Wealth Management, Inc., et al., Civil Action No. 15-CV-0226-BAS-DHB

SEC Obtains Emergency Relief Against San Diego Investement Advisor Charged with Wrongfully Taking Client Funds

The Securities and Exchange Commission today announced charges and an emergency temporary restraining order and asset freeze against a Utah resident and his San Diego, Calif. investment advisory firm.

The SEC alleges that Jacob Keith Cooper and Total Wealth Management Inc. wrongfully took at least $150,000 from clients in order to partially fund the potential settlement of an administrative proceeding previously instituted against them in 2014 by the SEC's Division of According to the SEC's complaint, filed yesterday in the U.S. District Court for the Southern District of California, the Division of Enforcement had reached a tentative settlement with Cooper and Total Wealth in the previously-instituted administrative proceeding that required Cooper to escrow $150,000. However, after learning that Cooper intended to pay this amount using funds misappropriated from clients, the Division terminated this settlement and the agency brought this emergency action in federal district court. Cooper's use of investor funds for his settlement with the SEC was never disclosed to or authorized by clients, and was a breach of Total Wealth's and Cooper's fiduciary duty to their clients. According to the complaint, Cooper admitted to taking $150,000 in investor monies to fund his escrow settlement, although he claims that it was a "loan."

According to the complaint, Cooper has also admitted that he and Total Wealth have used investor monies to pay unspecified legal expenses related to the Division of Enforcement's previously-instituted administrative proceeding as well as a private class action lawsuit filed in California state court. The complaint alleges that Total Wealth has been charging investors unexplained, inflated "administrative fees" to pay those expenses and that Total Wealth and Cooper have failed to provide any accounting or meaningful explanation for the fees to investors, despite investors' repeated requests.

The Honorable Cynthia Bashant for the U.S. District Court for the Southern District of California issued an order temporarily enjoining Cooper and Total Wealth from future violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940, and rule 206(4)-8 thereunder, as well as orders (1) freezing Cooper's and Total Wealth's assets; (2) appointing a temporary receiver; (3) prohibiting the destruction of documents, (4) expediting discovery; and (5) requiring accountings. Cooper and Total Wealth stipulated to the entry of the court orders without admitting or denying the SEC's allegations. The SEC also seeks preliminary and permanent injunctions, return of ill-gotten gains with prejudgment interest, and financial penalties against Cooper and Total Wealth.

A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for February 13, 2015.

SEC CHARGES CANADIAN STOCK PROMOTER WITH DISSEMINATING FALSE AND MISLEADING INFORMATION

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
On March 4, 2013, the Securities and Exchange Commission filed a civil action in the United States District Court for the District of Utah charging Canadian stock promoter Colin McCabe with disseminating false and misleading information to investors when recommending penny stocks to them.

In its complaint, the Commission alleges that, from at least early 2008 through 2011, McCabe, among other things: made false and misleading claims about how he selected recommended stocks; failed to disclose to his newsletter subscribers that he was being paid substantial sums to recommend some of the same stocks in his other publications; and made false and misleading statements about the assets of one of the issuers he recommended.

According to the complaint, McCabe falsely claimed that his publications were the result of extensive research conducted by researchers with relevant expertise and contacts, when, in fact, McCabe’s research was limited to reviewing issuers’ filings with the Commission, press releases, and issuer websites, and he did not have any assistance in researching stocks or writing his publications. The complaint alleges that while touting the quality of his stock picking research, McCabe failed to disclose to his newsletter subscribers that he was being paid substantial sums, a total of more than $16 million between early 2008 and 2011, to promote some of the same stocks he recommended to them in his other publications.

The complaint further alleges that McCabe falsely represented that Guinness Exploration Inc. ("Guinness") had acquired a mining property well before discoveries in May 2009 turned the region into "a red-hot area play," when, in fact, the property was not acquired until months later in November 2009. According to the complaint, McCabe’s claims that Guinness’ property held "an estimated recoverable resource in excess of 1 million ounces of gold" were also false and misleading.

The complaint alleges that McCabe, doing business as Elite Stock Report, The Stock Profiteer and Resource Stock Advisor, violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks a final judgment permanently enjoining McCabe from future violations of the federal securities laws and ordering him to pay civil penalties and disgorgement of ill-gotten gains plus prejudgment interest.

CFTC CHARGES TWO UTAH RESIDENTS WITH FRAUD AND MISAPPROPRIATION

FROM:  COMMODITY FUTURES TRADING COMMISSION
CFTC Charges Utah Residents Christopher Hales, Eric Richardson and their Company, Bentley Equities, LLC, with Fraud and Misappropriation
CFTC seeks an emergency restraining order freezing defendants’ assets
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal court action in Utah charging Bentley Equities, LLC (Bentley), a Delaware corporation, and its principals, Christopher D. Hales and Eric A. Richardson, with fraud and misappropriation in connection with commodity futures trading. Richardson resides in Cedar Hills, Utah, and Hales is currently an inmate at the Florence, Colo., Federal Correction Complex. None of the defendants has ever been registered with the CFTC.

The CFTC’s complaint, filed May 2, 2012, in the U.S. District Court for the District of Utah, alleges that from at least April 2009 through August 2010, the defendants fraudulently solicited and accepted more than $1.1 million from approximately 38 pool participants and clients to trade commodity futures in a commodity pool account and in individual managed accounts.

The CFTC seeks an emergency restraining order freezing the defendants’ assets and prohibiting the destruction or alteration of the defendants’ books and records.

Specifically, according to the CFTC’s complaint, Bentley, Hales, and Richardson misrepresented to customers that their trading was profitable, and that they actively managed more than $1 million in commodity futures accounts. In reality, the complaint charges, the defendants were not successful commodity futures traders and never managed more than $480,000 in commodity futures trading accounts at one time. In fact, the defendants lost approximately $1,296,600 of the Bentley participants’ and managed clients’ funds trading commodity futures contracts, according to the complaint.

The complaint further charges that the defendants misappropriated at least $628,000 of customer funds for personal use, including food, clothing, auto expenses, and utility and credit card payments. The defendants also allegedly used misappropriated funds to make payments to existing participants and clients, as is typical of a Ponzi scheme.

To conceal their trading losses and misappropriation, defendants allegedly issued false account statements to participants and clients by altering trading statements that they received from the futures commission merchant carrying the Bentley pool account. These doctored statements falsely showed inflated account balances and profitable commodity futures trading returns, when, in fact, the defendants’ futures trading for their participants and clients “consistently lost money,” according to the complaint.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

In November 2011, Hales was sentenced to more than seven years imprisonment and ordered to pay $12,719,236 in criminal restitution in connection with a judgment entered against him in a related criminal matter for the conduct alleged in the CFTC’s case, as well as mortgage fraud. United States v. Christopher D. Hales,No. 2:10-CR-183-TS-SA-1 (D. Utah, Sept. 2, 2010).

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the District of Utah, the U.S. Department of Housing and Urban Development —Office of Inspector General, the U.S. Postal Inspection Service, and the Federal Bureau of Investigation.