STORY OF ALLEGED DEVELOPEMENT OF FLORIDA AND LAS VEGAS RESORTS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Jan. 30, 2013 — The Securities and Exchange Commission today charged five former real estate executives who defrauded investors into believing they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a Ponzi scheme.

The SEC alleges that Cay Clubs Resorts and Marinas raised more than $300 million from nearly 1,400 investors nationwide through a network of hundreds of sales agents, marketing seminars, and podcasts that touted the profitability of purchasing units at Cay Clubs resort locations. Investors were promised immediate income from a guaranteed 15 percent return and a future income stream through a rental program that Cay Clubs managed. But instead of using investor funds to develop resort properties and units, the Cay Clubs executives used new investor deposits to pay leaseback returns to earlier investors. Meanwhile they paid themselves exorbitant salaries and commissions totaling more than $30 million, and investor funds also were misused to buy airplanes and boats. While still advertising itself as a profitable venture, Cay Clubs eventually abandoned its operations. Many investors’ properties went into foreclosure.

"These Cay Clubs executives lined their pockets with millions of dollars that they told investors would be used to develop five-star resort properties," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. "They continued to defraud investors as Cay Clubs collapsed."

The SEC’s complaint filed in U.S. District Court for the Southern District of Florida charges the following former Cay Clubs executives:
Fred Davis Clark, Jr. – president and CEO
David W. Schwarz – chief accounting officer
Cristal R. Coleman – manager and sales agent
Barry J. Graham – sales director
Ricky Lynn Stokes – sales director
According to the SEC’s complaint, the scheme began in 2004. Clark, Coleman, Graham, and Stokes solicited investors with promises of guaranteed income, instant equity in undervalued properties, historic appreciation, and at least $30,000 in upgrades to the units they purchased at Cay Clubs resort locations in Florida and Las Vegas. The representations about investors’ profitability and instant equity were false because the purported triple-digit returns resulted from undisclosed insider transactions with Cay Clubs by Coleman, Graham, and Stokes. Their actions made it appear that Cay Clubs units had enormous rates of appreciation over a short period of time when in fact the transactions were merely part of an insider flipping scheme. Further, Stokes wrote letters directly to potential investors claiming that the leaseback payments and profits were "guaranteed" and that Cay Clubs was a "very stable financially healthy company worth BILLIONS."

The SEC alleges that Cay Clubs continued to solicit new investors despite the fact that the company’s financial condition had deteriorated so significantly that it did not have sufficient funds to make the "guaranteed" leaseback or rental payments to investors. Clark, Coleman, and Schwarz misappropriated millions of dollars in investor funds using the multitude of bank accounts they controlled. Besides purchasing airplanes and boats, they misused investor money for unrelated business ventures including investments in precious metals and a liquor distillery that produced Pirate’s Choice Rum. After Cay Clubs abandoned its operations in 2008, Clark and Coleman (who are now husband and wife) moved to the Cayman Islands and continued to dissipate assets and funnel at least $2 million to offshore accounts.

The SEC’s complaint seeks financial penalties from Clark, Coleman, and Stokes and the disgorgement of ill-gotten gains plus prejudgment interest by all five executives. The complaint also seeks injunctive relief to enjoin them from future violations of the federal securities laws as well as an accounting and an order to repatriate investor assets.

The SEC’s investigation was conducted in the Miami Regional Office by Senior Counsel Linda S. Schmidt and Senior Regional Accountant Fernando Torres under the supervision of Assistant Regional Director Jason R. Berkowitz. Senior Trial Counsel Amie R. Berlin will lead the SEC’s litigation.

CFTC CHAIRMAN GARY GENSLER'S REMARKS AT CFTC ROUNDTABLE

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Chairman Gary Gensler’s Opening Remarks at CFTC Roundtable
January 31, 2013
Welcome to the Commodity Futures Trading Commission (CFTC). Thank you, Rick, and thanks to the team for putting together this roundtable. This is the CFTC’s 21st public roundtable since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Next week, we'll be holding the 22nd roundtable, the third focused on customer protection.

Today’s roundtable is occurring at an historic time in the markets. The marketplace is increasingly shifting to implementation of common-sense rules of the road for the swaps market.

For the first time, the public will benefit from the greater access to the markets and the risk reduction that comes with central clearing. Required clearing of interest rate and credit index swaps between financial entities begins in March.

For the first time, the public is benefiting from seeing the price and volume of each swap transaction. This post-trade transparency builds upon what has worked for decades in the futures and securities markets. The new swaps market information is available free of charge on a website, like a modern-day ticker tape.

For the first time, the public will benefit from specific oversight of registered swap dealers. As of the end of this week, there will be 71 provisionally registered swap dealers. They are subject to standards for sales practices, recordkeeping and business conduct to help lower risk to the economy and protect the public from fraud and manipulation.

An earlier crisis led to similar common-sense rules of the road for the futures and securities markets. I believe these critical reforms of the 1930s have been at the foundation of our strong capital markets and many decades of economic growth.

In the 1980s, the swaps market emerged. Until now, though, it lacked the benefit of such rules to promote transparency, lower risk and protect investors. What followed was the 2008 financial crisis. Eight million American jobs were lost. In contrast, the futures market, supported by earlier reforms, weathered the financial crisis.

President Obama and Congress responded and crafted the swaps provisions of Dodd-Frank by borrowing from what has worked best in the futures market for decades: clearing, transparency and oversight of intermediaries.

Given that we have largely completed swaps market rulewriting, with 80 percent behind us, today is a good opportunity to hear from market participants on where we are and where we ought to go from here. As we have asked throughout this process, we'd like to hear from market participants today on what provisions for swaps should mirror those for futures and when is it appropriate for there to be differences. I would note that Congress included a number of provisions in Dodd-Frank recognizing appropriate differences. For instance, it is critical that farmers, ranchers, merchants and other end users continue to benefit from using customized swaps that are not cleared.

Now that the entire derivatives marketplace -- both futures and swaps – has comprehensive oversight, it's the natural order of things for some realignment to take place.

The notional open interest of the futures market ranges around $30 trillion. There are various estimates for the notional size of the U.S. swaps market, but it ranges around $250 trillion. Though the futures market trades more actively, just one-ninth or so of the combined open interest in the derivatives marketplace is futures. Approximately eight-ninths of the combined derivatives marketplace is swaps, which until recently were unregulated.

This roundtable also provides an opportunity to hear from market participants on the recent actions of the two largest exchanges. Last fall, IntercontinentalExchange converted power and natural gas-related swaps into futures contracts. In addition, the CME Group's ClearPort products, which were cleared as futures, including those that were executed bilaterally as swaps, are now being offered for trading on Globex or on the trading floor. CME also adopted new block trading rules for its ClearPort energy contracts, as well as began trading a futures contract where the underlying product is an interest rate swaps contract.

It’s important to note that whether one calls a product a standardized swap or a future, both markets now benefit from central clearing. Since the late 19th century, central clearing in the futures market has lowered risk for the public. It also has fostered access for farmers, ranchers, merchants, and other participants and allowed them to benefit from greater competition in the markets. In March, swap dealers and the largest hedge funds will be required, for the first time, to clear certain interest rate swaps and credit index swaps. Compliance will be phased in for other market participants throughout this year.

In addition, transparency has been a longstanding hallmark of the futures market –both pre-trade and post-trade. Now, for the first time, the swaps market is benefitting from post-trade transparency. On December 31, registered swap dealers began real-time reporting for interest rate and credit index swap transactions. Building on this, swap dealers will begin reporting swap transactions in equity, foreign exchange and other commodity asset classes on February 28. Other market participants will begin reporting April 10. The time delays for reporting currently range from 30 minutes to longer, but will generally be reduced to 15 minutes this October for interest rate and credit index swaps. For other asset classes, the time delay will be reduced next January. After the CFTC completes the block rule for swaps, trades smaller than a block will be reported as soon as technologically practicable.

Oversight of intermediaries and the protection of customer funds have long been integral parts of futures market regulation. Futures commission merchants, introducing brokers and commodity pool operators have been CFTC-registered intermediaries. Dodd-Frank extended oversight of these intermediaries to include their swaps activity, and to promote market integrity and lower risk to taxpayers, brought oversight to another category of intermediaries called swap dealers. The initial group of provisionally registered swap dealers includes the largest domestic and international financial institutions dealing in swaps with U.S. persons. It includes the 16 institutions commonly referred to as the G16 dealers. Reforms the CFTC has finalized to enhance the protection of customer funds, as well as proposed enhancements, consistently cover both futures and swaps.

Looking ahead, to further enhance liquidity and price competition, the CFTC must finish the pre-trade transparency rules for swap execution facilities, as well as the block rules for swaps. It is also critical that we preserve the pre-trade transparency that has been at the core of the futures market. In that context, I am looking forward to hearing from panelists today about recent actions by exchanges to lower their minimum block sizes for certain energy futures.

Thank you again for coming, and we look forward to your input.

MAN CHARGED WITH UNREGISTERED SECURITES OFFER AND STOCK MANIPULATION

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Jonathan C. Gilchrist with the Unregistered Offer and Sale of Securities and Stock Manipulation

The Securities and Exchange Commission today filed a civil injunctive action in the U.S. District Court for the Southern District of Texas against Jonathan C. Gilchrist, alleging that he effected the unregistered offer and sale of shares of The Alternative Energy Technology Center, Inc. and engaged in a stock manipulation scheme in violation of the registration and antifraud provisions of the federal securities laws.

The Commission’s complaint alleges that in December 2007, Gilchrist, acting as the president and chairman of Mortgage Xpress, Inc. (subsequently renamed The Alternative Energy Technology Center, Inc.), authorized the unregistered offer and sale of six million company shares at a deep discount to himself and two entities he controlled, improperly maintaining that the offer and sale were exempt from registration under Rule 504 of Regulation D of the Securities Act of 1933. The complaint alleges that the company could not claim a Rule 504 exemption from registration because it was a development stage company which, at the time, planned to merge with another entity. The complaint further alleges that the shares issued to the two entities controlled by Gilchrist should have been subject to restriction on resale based on Gilchrist being an affiliate of the company, but were not. As a result, according to the complaint, the share issuance improperly gave Gilchrist control over at least 94% of the public float.

The complaint further alleges that from January through March 2008, Gilchrist effected 25 wash trades in company securities through brokerage accounts he controlled and, in March 2008, arranged for promoters to tout the company. Gilchrist allegedly thereby drove the per share price from $1.00 per share immediately after the reverse stock split on January 18, 2008 to $3.75 per share on April 1, 2008, the day before the Commission suspended trading in the stock. During this time period, Gilchrist made unregistered sales of 229,661 shares, resulting in illicit proceeds of $692,146.38.

Based on the facts alleged, the Commission charged Gilchrist with violating Sections 5(a), 5(c), 17(a)(1) and 17(a)(3) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The Commission is seeking to have Gilchrist permanently enjoined, ordered to pay disgorgement and a civil money penalty, barred from participating in any penny stock offering, and prohibited from serving as an officer or director.

The SEC thanks the Financial Industry Regulatory Authority's (FINRA) Office of Fraud Detection and Market Intelligence for its assistance in this matter

Henley Healthcare, Inc., et al.

Henley Healthcare, Inc., et al.

NEW TIPSTER BOSS AT SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Jan. 22, 2013 — The Securities and Exchange Commission today announced that Vincente L. Martinez has been named Chief of the Enforcement Division’s Office of Market Intelligence, which collects and evaluates thousands of tips, complaints, and referrals that come into the SEC each year.

Mr. Martinez was one of the first assistant directors in the SEC’s Office of Market Intelligence, which was created in 2010 as part of a major restructuring of the Enforcement Division. He left the SEC in 2011 to become the first director of the whistleblower office at the Commodity Futures Trading Commission (CFTC). He will return to the SEC next month to begin his new role.

“Our Office of Market Intelligence employs next-generation technology and data analysis to inform and drive our enforcement effort and priorities in the years to come,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “Vince has the vision and dedication to lead that effort given his talent, commitment, and prior service to the SEC.”

Adam Storch, Managing Executive of the SEC’s Enforcement Division, added, “Vince understands the task at hand and is ready to further leverage the valuable intelligence we get from the public, cultivate our relationships with our regulatory partners, and tackle the increasing sophistication of the schemes victimizing investors.”

Mr. Martinez said, “I am honored and pleased to rejoin the SEC staff and have this opportunity to advance the Office of Market Intelligence’s meaningful contributions to the protection of investors by further developing our ability to proactively identify risks and ferret out misconduct.”

At the CFTC, Mr. Martinez has interacted with whistleblowers and their representatives, developed the CFTC’s policies and procedures for handling whistleblower matters, and worked to raise awareness of the CFTC’s whistleblower program – which was created under the Dodd-Frank Act.

Mr. Martinez previously worked for eight years in the SEC’s Enforcement Division, beginning in 2003 as a staff attorney and later becoming a senior counsel. He served on a task force devoted to pursuing accounting frauds. When he shifted to the Office of Market Intelligence, he played a key role in developing Enforcement Division and SEC-wide policies and procedures for handling tips, complaints, and referrals. He helped cultivate cooperative relationships with other government agencies and self-regulatory organizations. Mr. Martinez received two SEC awards in 2011 (Chairman’s Award for Excellence and Business Operations Award) and an Enforcement Division Director’s Award in 2007.

Prior to joining the SEC staff, Mr. Martinez was a litigator and corporate lawyer in private practice for six years. He is a graduate of Georgetown University and the Boalt Hall School of Law at the University of California at Berkeley.

The Enforcement Division and Mr. Martinez extend their recognition and gratitude for the outstanding contributions of Lori Walsh, who is currently serving as the Acting Chief of the Office of Market Intelligence. Ms. Walsh will continue her leadership role as Deputy Chief of the office, and she will provide an instrumental contribution as the architect of its risk assessment tools and capabilities.

SEC ALLEGES INSIDE TIPPING

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Jan. 25, 2013 — The Securities and Exchange Commission today charged a financial adviser in Boca Raton, Fla., with illegally tipping inside information he learned about the upcoming sale of a pharmaceutical company in exchange for $35,000 and a jet ski dock.

The SEC alleges that Kevin L. Dowd got details about the impeding acquisition of Princeton, N.J.-based Pharmasset Inc. by California-based Gilead Sciences from one of his supervisors at the brokerage firm where he worked. The supervisor learned about the deal from a customer who sat on Pharmasset’s board of directors. Dowd, who knew the customer, breached his duty to keep the information confidential by tipping a friend in the penny stock promotion business who bought Pharmasset stock on the last trading day before the public announcement of the deal. The trader also tipped another individual who bought Pharmasset call options, and collectively they made $708,327 in illicit insider trading profits in just two trading days. The SEC’s investigation is continuing.

The SEC alleges that Dowd profited from the scheme in a roundabout way, receiving the jet ski dock from his tippee and a cashier’s check for $35,000, which he used for expensive upgrades to a pool at his home.

"As an industry professional, Dowd surely knew what he was doing was wrong, but he incorrectly thought that his scheme was clever enough to avoid detection by investigators," said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. "Professionals in the securities industry or any sector should know that you’ll be held accountable for violating insider trading laws, even if you don’t trade the securities yourself."

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Dowd.

According to the SEC’s complaint filed in federal court in New Jersey, the Pharmasset director told Dowd’s supervisor in confidence as his financial adviser that Pharmasset was going to be sold and the price would be in the high $130s per share. Dowd’s supervisor provided Dowd with the information along with an instruction that he was restricted from trading or recommending Pharmasset securities. Despite the warning, Dowd tipped his penny stock promoter friend, who wired $196,000 into a brokerage account with a zero balance and bought 2,700 shares of Pharmasset stock on Friday, Nov. 18, 2011. Dowd’s friend tipped another individual who bought 100 out-of-the-money call options, which are securities that derive their value from the underlying common stock of the issuer and give the purchaser the right to buy the underlying stock at a specific price within a specified time period. Investors typically purchase call options when they believe the value of the underlying securities is going up.

According to the SEC’s complaint, Gilead and Pharmasset announced the acquisition on Monday, November 21. Dowd’s tippees immediately sold all of their Pharmasset securities to obtain their illegal profits.

The SEC alleges that Dowd violated Sections 10(b) and (14)(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, a financial penalty, and a permanent injunction against Dowd.

The SEC’s investigation is being conducted by Market Abuse Unit staff Mary P. Hansen, Paul T. Chryssikos, and John S. Rymas in the Philadelphia Regional Office. The litigation will be handled by G. Jeffrey Boujoukos and Christopher R. Kelly. The SEC has coordinated its action with the U.S. Attorney’s Office for the District of New Jersey, and appreciates the assistance of the Federal Bureau of Investigation and the Options Regulatory Surveillance Authority.