This is a photo of the National Register of Historic Places listing with reference number 7000063
Saturday, September 15, 2012
Friday, September 14, 2012
BROKER AND COMPANY CHARGED WITH STEAING INVESTOR FUNDS
FROM: SECURITIES AND EXCHANGE COMMISSION
Charges Connecticut-Based Broker for Stealing Investor Funds
The Securities and Exchange Commission announced today that it has charged Stephen B. Blankenship, a resident of New Fairfield, Connecticut, and Deer Hill Financial Group, LLC, a Connecticut limited liability company under Blankenship’s control, with a scheme to defraud investors. The Commission’s Complaint alleges that, from at least 2002 through November 2011, Blankenship misappropriated at least $600,000 from at least 12 brokerage customers by falsely representing that he would invest their funds in securities through defendant Deer Hill.
The SEC alleges that until November 2011, Blankenship was a registered representative of Vanderbilt Securities, LLC, a registered broker-dealer based in Melville, New York. According to the complaint, Blankenship lied to his brokerage customers and in many instances, lured customers to withdraw money from their brokerage accounts with promises that they could obtain a greater rate of return by investing through Deer Hill. The complaint alleges that Blankenship assured his customers that he would invest their money in established securities such as publicly traded mutual funds. When customers requested account statements, Blankenship provided the customers with fictitious statements from Deer Hill that falsely represented that Blankenship had invested their money in a variety of investments.
According to the SEC’s Complaint, Blankenship never invested the customers’ money. Instead, Blankenship used the customers’ money for personal expenses, business expenses and to make Ponzi-like payments to other customers who requested a return of all or part of their investment.
The action was filed in federal court in Connecticut on September 13, 2012, and the Complaint alleges that the defendants 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 Commission also alleges that the defendants violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 15(a) of the Exchange Act. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by the defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties.
Based on the same misconduct, the U.S. Attorney’s Office for the District of Connecticut charged Blankenship with criminal violations. The Connecticut Department of Banking‘s Securities Division has obtained, by consent, a revocation of Blankenship’s registration and has barred Blankenship and Deer Hill from operating in Connecticut. The SEC thanks the U.S. Attorney’s Office for the District of Connecticut, the Connecticut Department of Banking’s Securities Division, and the police department in Danbury, Conn., for their assistance in this matter. The Commission’s investigation is continuing.
Charges Connecticut-Based Broker for Stealing Investor Funds
The Securities and Exchange Commission announced today that it has charged Stephen B. Blankenship, a resident of New Fairfield, Connecticut, and Deer Hill Financial Group, LLC, a Connecticut limited liability company under Blankenship’s control, with a scheme to defraud investors. The Commission’s Complaint alleges that, from at least 2002 through November 2011, Blankenship misappropriated at least $600,000 from at least 12 brokerage customers by falsely representing that he would invest their funds in securities through defendant Deer Hill.
The SEC alleges that until November 2011, Blankenship was a registered representative of Vanderbilt Securities, LLC, a registered broker-dealer based in Melville, New York. According to the complaint, Blankenship lied to his brokerage customers and in many instances, lured customers to withdraw money from their brokerage accounts with promises that they could obtain a greater rate of return by investing through Deer Hill. The complaint alleges that Blankenship assured his customers that he would invest their money in established securities such as publicly traded mutual funds. When customers requested account statements, Blankenship provided the customers with fictitious statements from Deer Hill that falsely represented that Blankenship had invested their money in a variety of investments.
According to the SEC’s Complaint, Blankenship never invested the customers’ money. Instead, Blankenship used the customers’ money for personal expenses, business expenses and to make Ponzi-like payments to other customers who requested a return of all or part of their investment.
The action was filed in federal court in Connecticut on September 13, 2012, and the Complaint alleges that the defendants 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 Commission also alleges that the defendants violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 15(a) of the Exchange Act. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by the defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties.
Based on the same misconduct, the U.S. Attorney’s Office for the District of Connecticut charged Blankenship with criminal violations. The Connecticut Department of Banking‘s Securities Division has obtained, by consent, a revocation of Blankenship’s registration and has barred Blankenship and Deer Hill from operating in Connecticut. The SEC thanks the U.S. Attorney’s Office for the District of Connecticut, the Connecticut Department of Banking’s Securities Division, and the police department in Danbury, Conn., for their assistance in this matter. The Commission’s investigation is continuing.
Thursday, September 13, 2012
COMPANY AND TOP EXECUTIVES CHARGED BY SEC WITH RUNNING A BOILER ROOM OPERATION
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Massachusetts-Based Corporation and Senior Officers in $26 Million Fraudulent Securities Offering
On September 10, 2012, the Securities and Exchange Commission filed an enforcement action in federal court in Boston charging Massachusetts-based Bio Defense Corporation and others for their roles in a fraudulent offering of unregistered Bio Defense securities. The defendants are charged with defrauding investors through various misrepresentations and schemes while raising at least $26 million in investor funds.
In addition to Bio Defense, the Commission’s complaint charges Michael Lu of Lexington, Massachusetts, the founder and former CEO and Chairman of Bio Defense; Jonathan Morrone of Newton, Massachusetts, a former Senior Executive Vice President of Bio Defense; Z. Paul Jurberg of Brookline, Massachusetts, a senior officer of Bio Defense and most recently a Senior Vice President of Sales and Marketing; Anthony Orth of Tustin, California, a former Vice President of Marketing for Bio Defense; and Brett Hamburger of Delray Beach, Florida, a consultant to Bio Defense who raised investor funds for the company. The Commission also named May’s International Corporation, an entity controlled by Michael Lu, as a relief defendant based on its receipt of investor funds.
According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts, Bio Defense, which purports to develop, manufacture and sell a machine for combating the use of dangerous biological agents through the mails, and its principals began engaging in unregistered offers and sales of securities to investors in the United States by at least 2004 and, after attracting the attention of various domestic state regulators in 2008, began utilizing "boiler room" firms to assist in selling shares of Bio Defense securities to overseas investors primarily in the United Kingdom.
The Commission’s complaint alleges that, while making unregistered offers and sales of securities to US investors from at least 2004 through August 2008, Lu, Morrone, and Jurberg made false claims to investors that Bio Defense was not paying financial compensation to its employees and officers. The complaint further alleges that these individuals gave potential investors the false impression that Bio Defense preserved its cash assets by having employees who worked for no, or very little, pay, suggesting that these employees were working solely or primarily for "sweat equity" shares, which might later become valuable when the company became profitable or underwent an initial public offering of stock. In fact, Bio Defense’s largest expense during those years was the money it paid to Lu, Morrone, and Jurberg and other employees from funds raised from investors; in 2004 alone, Bio Defense paid approximately $1 million in compensation to its officers and employees.
The Commission’s complaint further alleges that, as Bio Defense began raising money overseas in August 2008, the defendants transformed the company into a deceptive and fraudulent device designed to enrich its principals while also paying as much as 75% of investor proceeds as commissions to its overseas boiler room fundraisers. From August 2008 through approximately July 2010, Bio Defense’s most substantial source of cash generation and most significant expense was not manufacturing and selling machines, but instead was its securities promotion and sales activities. Bio Defense and its representatives did not tell investors that 75% of funds received from them would be going straight to boiler room operators.
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 Bio Defense, Lu, Morrone, Jurberg and Orth violated Sections 5(a) and 5(c) of the Securities Act; and that Lu, Morrone, Jurberg, Hamburger and Orth violated Section 15(a)(1) of the Exchange Act. The Commission also alleges, in the alternative, that Lu and Morrone are liable under Section 20(a) of the Exchange Act as control persons of Bio Defense for Bio Defense’s violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder. The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, and, against Lu, Morrone, Jurberg and Orth, officer and director bars.
The Commission acknowledges the assistance of the Massachusetts Securities Division, the UK Financial Services Authority and the City of London Police in this matter.
SEC Charges Massachusetts-Based Corporation and Senior Officers in $26 Million Fraudulent Securities Offering
On September 10, 2012, the Securities and Exchange Commission filed an enforcement action in federal court in Boston charging Massachusetts-based Bio Defense Corporation and others for their roles in a fraudulent offering of unregistered Bio Defense securities. The defendants are charged with defrauding investors through various misrepresentations and schemes while raising at least $26 million in investor funds.
In addition to Bio Defense, the Commission’s complaint charges Michael Lu of Lexington, Massachusetts, the founder and former CEO and Chairman of Bio Defense; Jonathan Morrone of Newton, Massachusetts, a former Senior Executive Vice President of Bio Defense; Z. Paul Jurberg of Brookline, Massachusetts, a senior officer of Bio Defense and most recently a Senior Vice President of Sales and Marketing; Anthony Orth of Tustin, California, a former Vice President of Marketing for Bio Defense; and Brett Hamburger of Delray Beach, Florida, a consultant to Bio Defense who raised investor funds for the company. The Commission also named May’s International Corporation, an entity controlled by Michael Lu, as a relief defendant based on its receipt of investor funds.
According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts, Bio Defense, which purports to develop, manufacture and sell a machine for combating the use of dangerous biological agents through the mails, and its principals began engaging in unregistered offers and sales of securities to investors in the United States by at least 2004 and, after attracting the attention of various domestic state regulators in 2008, began utilizing "boiler room" firms to assist in selling shares of Bio Defense securities to overseas investors primarily in the United Kingdom.
The Commission’s complaint alleges that, while making unregistered offers and sales of securities to US investors from at least 2004 through August 2008, Lu, Morrone, and Jurberg made false claims to investors that Bio Defense was not paying financial compensation to its employees and officers. The complaint further alleges that these individuals gave potential investors the false impression that Bio Defense preserved its cash assets by having employees who worked for no, or very little, pay, suggesting that these employees were working solely or primarily for "sweat equity" shares, which might later become valuable when the company became profitable or underwent an initial public offering of stock. In fact, Bio Defense’s largest expense during those years was the money it paid to Lu, Morrone, and Jurberg and other employees from funds raised from investors; in 2004 alone, Bio Defense paid approximately $1 million in compensation to its officers and employees.
The Commission’s complaint further alleges that, as Bio Defense began raising money overseas in August 2008, the defendants transformed the company into a deceptive and fraudulent device designed to enrich its principals while also paying as much as 75% of investor proceeds as commissions to its overseas boiler room fundraisers. From August 2008 through approximately July 2010, Bio Defense’s most substantial source of cash generation and most significant expense was not manufacturing and selling machines, but instead was its securities promotion and sales activities. Bio Defense and its representatives did not tell investors that 75% of funds received from them would be going straight to boiler room operators.
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 Bio Defense, Lu, Morrone, Jurberg and Orth violated Sections 5(a) and 5(c) of the Securities Act; and that Lu, Morrone, Jurberg, Hamburger and Orth violated Section 15(a)(1) of the Exchange Act. The Commission also alleges, in the alternative, that Lu and Morrone are liable under Section 20(a) of the Exchange Act as control persons of Bio Defense for Bio Defense’s violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder. The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, and, against Lu, Morrone, Jurberg and Orth, officer and director bars.
The Commission acknowledges the assistance of the Massachusetts Securities Division, the UK Financial Services Authority and the City of London Police in this matter.
CFTC SEEKING TO REVOKE REGISTRATIONS FOR COMPANIES AND OWNER
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Seeks to Revoke Registrations of Linda Faye Harris and her companies, CDH Forex Investments, LLC and CDH Global Holdings, LLC
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a notice of intent to revoke the registrations of Linda Faye Harris, CDH Forex Investments, LLC (CDH Forex) and CDH Global Holdings, LLC (CDH Global), all of Flower Mound, Texas. CDH Forex is a registered Commodity Pool Operator and Commodity Trading Advisor; CDH Global is a registered Commodity Trading Advisor; and Harris is registered as an Associated Person and is the sole principal of CDH Forex. Harris was an Associated Person and principal of CDH Global.
The notice alleges that Harris, CDH Forex, and CDH Global are subject to statutory disqualification from CFTC registration based on an order of default judgment and permanent injunction entered by the U.S. District Court for the Northern District of Texas on June 12, 2012 (see CFTC News Release 6286-12 June 21, 2012). The order prohibits defendants from committing further fraud, among other violations. At the hearing held on June 12, 2012, Harris appeared and conceded all allegations in the complaint of violations of the Commodity Exchange Act, but contested only the amount of restitution and civil monetary penalty. The court found none of Harris’ arguments credible and entered the order as submitted by the CFTC. The order contains findings of fact and conclusions of law, which find, in relevant part, 1) that Harris fraudulently solicited at least $2.2 million from customers, out of which total trading losses and misappropriated funds equaled at least $1,361,897, and 2) made material false statements to pool participants. The order also finds that Harris provided false, fictitious, or fraudulent statements to the National Futures Association (NFA), including falsified trading account statements and falsified bank statements, to hide the ongoing fraud from NFA.
CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Manal M. Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.
CFTC Seeks to Revoke Registrations of Linda Faye Harris and her companies, CDH Forex Investments, LLC and CDH Global Holdings, LLC
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a notice of intent to revoke the registrations of Linda Faye Harris, CDH Forex Investments, LLC (CDH Forex) and CDH Global Holdings, LLC (CDH Global), all of Flower Mound, Texas. CDH Forex is a registered Commodity Pool Operator and Commodity Trading Advisor; CDH Global is a registered Commodity Trading Advisor; and Harris is registered as an Associated Person and is the sole principal of CDH Forex. Harris was an Associated Person and principal of CDH Global.
The notice alleges that Harris, CDH Forex, and CDH Global are subject to statutory disqualification from CFTC registration based on an order of default judgment and permanent injunction entered by the U.S. District Court for the Northern District of Texas on June 12, 2012 (see CFTC News Release 6286-12 June 21, 2012). The order prohibits defendants from committing further fraud, among other violations. At the hearing held on June 12, 2012, Harris appeared and conceded all allegations in the complaint of violations of the Commodity Exchange Act, but contested only the amount of restitution and civil monetary penalty. The court found none of Harris’ arguments credible and entered the order as submitted by the CFTC. The order contains findings of fact and conclusions of law, which find, in relevant part, 1) that Harris fraudulently solicited at least $2.2 million from customers, out of which total trading losses and misappropriated funds equaled at least $1,361,897, and 2) made material false statements to pool participants. The order also finds that Harris provided false, fictitious, or fraudulent statements to the National Futures Association (NFA), including falsified trading account statements and falsified bank statements, to hide the ongoing fraud from NFA.
CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Manal M. Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.
Wednesday, September 12, 2012
Tuesday, September 11, 2012
SEC CHARGES RADIO PERSONALITY WITH STAGING MISLEADING INVESTMENT SEMINARS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Radio Personality for Conducting Misleading Investment Seminars
Washington, D.C., Sept. 5, 2012
– The Securities and Exchange Commission today charged a nationally syndicated radio personality and financial advice author for spreading misleading information about his "Buckets of Money" strategy at a series of investment seminars that he and his company hosted for potential clients.
The SEC’s Division of Enforcement alleges that investment adviser Ray Lucia, Sr. claimed that the wealth management strategy he promoted at the seminars had been empirically "backtested" over actual bear market periods. Backtesting is the process of evaluating a strategy, theory, or model by applying it to historical data and calculating how it would have performed had it actually been used in a prior time period.
Lucia, who lives in the San Diego area, and his company formerly named Raymond J. Lucia Companies Inc. (RJL) allegedly presented a lengthy slideshow at the seminars indicating that extensive backtesting proved that the Buckets of Money strategy would provide inflation-adjusted income to retirees while protecting and even increasing their retirement savings. However despite the claims they made publicly, Lucia and RJL performed scant, if any, actual backtesting of the Buckets of Money strategy.
"Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy," said Michele Wein Layne, Regional Director of the SEC’s Los Angeles Regional Office. "The so-called backtests weren’t really backtests, and the strategy wasn’t proven as they claimed."
According to the SEC’s order instituting administrative proceedings against Lucia and RJL, they held the seminars highlighting their Buckets of Money strategy in an effort to obtain advisory clients who would be charged fees in return for their advisory services. They promoted the seminars on Lucia’s radio show and on Lucia’s personal and company websites.
According to the SEC’s order, a backtest must utilize actual data from the time period in order to get an accurate result. Lucia and RJL have admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s – copies of which no longer exist – and two two-page spreadsheets.
According to the SEC’s order, the two cursory spreadsheets that Lucia claims were backtests used a hypothetical 3 percent inflation rate even though this was lower than actual historical rates. Lucia admittedly knew that using the lower hypothetical inflation rate would make the results look more favorable for the Buckets of Money strategy. These alleged backtests also failed to account for the negative effect that the deduction of advisory fees would have had on the backtesting of their investment strategy, and their "backtesting" did not even allocate in the manner called for by Lucia’s Buckets of Money strategy. The slideshow presentation that Lucia and RJL used during the seminars failed to disclose the flaws in their alleged backtests and was materially misleading.
According to the SEC’s order, Lucia and RJL also failed to maintain adequate records of the backtesting as they were required to do under an SEC rule. The pair of two-page spreadsheets was the only documentation of their backtesting calculations, and those spreadsheets failed to duplicate their advertised investment strategy.
The SEC’s order finds that RJL violated Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-1(a)(5) thereunder. The order finds that Lucia willfully aided and abetted and caused RJL’s violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder. The SEC’s Division of Enforcement is seeking financial penalties and other remedial action in the proceedings.
The SEC’s investigation was conducted by Peter Del Greco of the Los Angeles Regional Office. John Bulgozdy will lead the litigation. Bryan Bennett and John Kreimeyer conducted the SEC examination that prompted the investigation.
SEC Charges Radio Personality for Conducting Misleading Investment Seminars
Washington, D.C., Sept. 5, 2012
– The Securities and Exchange Commission today charged a nationally syndicated radio personality and financial advice author for spreading misleading information about his "Buckets of Money" strategy at a series of investment seminars that he and his company hosted for potential clients.
The SEC’s Division of Enforcement alleges that investment adviser Ray Lucia, Sr. claimed that the wealth management strategy he promoted at the seminars had been empirically "backtested" over actual bear market periods. Backtesting is the process of evaluating a strategy, theory, or model by applying it to historical data and calculating how it would have performed had it actually been used in a prior time period.
Lucia, who lives in the San Diego area, and his company formerly named Raymond J. Lucia Companies Inc. (RJL) allegedly presented a lengthy slideshow at the seminars indicating that extensive backtesting proved that the Buckets of Money strategy would provide inflation-adjusted income to retirees while protecting and even increasing their retirement savings. However despite the claims they made publicly, Lucia and RJL performed scant, if any, actual backtesting of the Buckets of Money strategy.
"Lucia and RJL left their seminar attendees with a false sense of comfort about the Buckets of Money strategy," said Michele Wein Layne, Regional Director of the SEC’s Los Angeles Regional Office. "The so-called backtests weren’t really backtests, and the strategy wasn’t proven as they claimed."
According to the SEC’s order instituting administrative proceedings against Lucia and RJL, they held the seminars highlighting their Buckets of Money strategy in an effort to obtain advisory clients who would be charged fees in return for their advisory services. They promoted the seminars on Lucia’s radio show and on Lucia’s personal and company websites.
According to the SEC’s order, a backtest must utilize actual data from the time period in order to get an accurate result. Lucia and RJL have admitted during the SEC’s investigation that the only testing they actually performed were some calculations that Lucia made in the late 1990s – copies of which no longer exist – and two two-page spreadsheets.
According to the SEC’s order, the two cursory spreadsheets that Lucia claims were backtests used a hypothetical 3 percent inflation rate even though this was lower than actual historical rates. Lucia admittedly knew that using the lower hypothetical inflation rate would make the results look more favorable for the Buckets of Money strategy. These alleged backtests also failed to account for the negative effect that the deduction of advisory fees would have had on the backtesting of their investment strategy, and their "backtesting" did not even allocate in the manner called for by Lucia’s Buckets of Money strategy. The slideshow presentation that Lucia and RJL used during the seminars failed to disclose the flaws in their alleged backtests and was materially misleading.
According to the SEC’s order, Lucia and RJL also failed to maintain adequate records of the backtesting as they were required to do under an SEC rule. The pair of two-page spreadsheets was the only documentation of their backtesting calculations, and those spreadsheets failed to duplicate their advertised investment strategy.
The SEC’s order finds that RJL violated Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-1(a)(5) thereunder. The order finds that Lucia willfully aided and abetted and caused RJL’s violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder. The SEC’s Division of Enforcement is seeking financial penalties and other remedial action in the proceedings.
The SEC’s investigation was conducted by Peter Del Greco of the Los Angeles Regional Office. John Bulgozdy will lead the litigation. Bryan Bennett and John Kreimeyer conducted the SEC examination that prompted the investigation.
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