FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today announced charges and an emergency asset freeze against a Redondo Beach, Calif., resident and his companies for defrauding seniors and other investors in a real estate investment scheme.
The SEC alleges that Alvin R. Brown has raised more than $3 million from investors who were falsely promised high profits for investing in his companies that were purportedly funding commercial and residential rental properties in California and other western states. Brown and his companies - First Choice Investment and Advanced Corporate Enterprises (ACorp) - instead used investor funds to make Ponzi-like payments to pre-existing investors, and Brown routinely withdrew cash for personal use. The ACorp website prominently displayed the seals of the SEC and the State of California as well as the NYSE, NASDAQ, and the Better Business Bureau to falsely imply to investors that these investments were endorsed by these organizations. In reality, the investment offerings were not registered with the SEC under the federal securities laws.
According to the SEC's complaint unsealed today in U.S. District Court for the Central District of California, Brown particularly targeted an elderly investor suffering from a stroke and dementia. After the investor made a $30,000 initial investment, his daughter advised ACorp to stop contacting her father because she had power of attorney, but Brown nonetheless e-mailed him forms to close his brokerage account and move the money to an IRA account that would then invest in ACorp. The investor's daughter replied to Brown again to remind him that she had power of attorney and he should cease-and-desist from contacting her father. But ACorp eventually succeeded in circumventing the daughter to get the investor's signature as well as an additional $45,000 investment. The investor's daughter requested the return of her father's money, but it was never returned.
The SEC alleges that Brown and First Choice lured investors beginning in January 2011 by falsely promising 10 percent annual returns and a planned initial public offering (IPO) at the end of 2012 that would net investors 150 percent of their original investment. They touted Brown's management experience but failed to disclose to investors that he had twice filed for personal bankruptcy. Brown also falsely stated that ACorp's assets guaranteed the investments and misled investors into believing their money was safe and secure.
According to the SEC's complaint, the promised IPO and accompanying investment returns never materialized. Besides making Ponzi-like payments to earlier investors, Brown routinely drains First Choice's bank accounts each month. Therefore, Brown and First Choice have relied on capital infusions from business cash advance providers as lenders of last resort to keep the scheme afloat.
The Honorable Audrey B. Collins for the U.S. District Court for the Central District of California granted the SEC's request for a temporary restraining order and asset freeze against Brown, ACorp, and First Choice, and appointed Krista Freitag as a temporary receiver over the companies. A court hearing has been scheduled for March 18, 2013, on the SEC's motion for a preliminary injunction.
The Commission's complaint alleges that Brown, ACorp, and First Choice violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and seeks preliminary and permanent injunctions, appointment of a permanent receiver, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties, against each of them.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., March 15, 2013 — The Securities and Exchange Commission today charged a group of Canadian stock promoters, two San Diego attorneys, a Bahamas-based broker-dealer, and other participants in an international "pump-and-dump" scheme involving two publicly traded U.S. companies, Pacific Blue Energy Corporation and Tradeshow Marketing Company Ltd.
According to the SEC’s complaint, Canadian stock promoters John Kirk, Benjamin Kirk, Dylan Boyle, James Hinton, and their associates, used false and misleading promotions to pump up trading in the stock of the two microcap companies and made millions when they secretly dumped their own shares. Microcap companies typically have limited assets and low-priced stock that trades in low volumes. The SEC alleges that the promoters sent investors false and misleading emails about the companies through two websites they controlled, Skymark Research and Emerging Stock Report, and used "boiler room" sales calls to tout the stocks, falsely claiming that the recommendations were based on independent research by Skymark and Emerging Stock Report.
The SEC alleges that San Diego-based attorneys Luis Carrillo and Wade Huettel were central participants in the scheme who helped the promoters conceal their ownership interests in the companies, drafted misleading public filings, and provided misleading legal opinions. As part of the scheme, their law firm, Carrillo Huettel LLP, secretly received proceeds of stock sales in the form of a sham "loan."
The SEC’s complaint, filed in federal court in Manhattan, alleges that Gibraltar Global Securities, a Bahamian broker-dealer, provided false affidavits and misleading statements that allowed Benjamin Kirk to secretly sell shares of the companies he was promoting. The SEC also charged Gibraltar’s president, Warren Davis, who signed misleading representations on behalf of Gibraltar.
"Microcap fraud is a scourge on our markets and we will continue to aggressively pursue individuals who engage in it, whether they are unscrupulous stock promoters who prey on investors or unethical attorneys who enable these pernicious schemes. Moreover, as this action demonstrates, the SEC is working closely with foreign authorities to root out this conduct in the international arena," said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
According to the SEC, Tradeshow president Luniel de Beer, who served as chairman of Pacific Blue, received more than $330,000 in secret kickbacks for his part in the scheme. In addition, the SEC alleged that de Beer and Pacific Blue president Joel Franklin made misleading representations and facilitated the promoters’ stock sales. Without admitting or denying the SEC’s allegations, Franklin agreed to settle the SEC’s charges and consented to certain injunctive relief.
The SEC’s complaint charges Carrillo Huettel LLP, Carrillo, Huettel, Gibraltar Global Securities, John Kirk, Benjamin Kirk, Boyle, Hinton, de Beer, Franklin, Pacific Blue, and Tradeshow with violations of U.S. anti-fraud laws and rules, and charges these defendants, along with Warren Davis and Carrillo’s father, Dr. Luis Carrillo, with distributing unregistered shares, in violation of U.S. securities laws.
The SEC is seeking to have the defendants return their allegedly ill-gotten gains, with interest, and to bar Carrillo, Huettel, de Beer, John Kirk, Benjamin Kirk, Boyle, and Hinton from participating in penny stock offerings and from serving as public company officers or directors. The SEC is seeking civil monetary penalties from the attorneys, their law firm, and from de Beer.
Joshua Newville, Katherine Bromberg, Michael Paley, and Michael Osnato of the New York Regional Office conducted the SEC’s investigation. Mr. Newville, Ms. Bromberg and Todd Brody will lead the SEC’s litigation effort.
The SEC thanks the Financial Industry Regulatory Authority, the Alberta Securities Commission, the British Columbia Securities Commission, the Bahamas Securities Commission, the National Banking and Securities Commission of Mexico, and the Turks and Caicos Islands Financial Services Commission for their assistance in this matter
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
On March 14, 2013, the Securities and Exchange Commission filed a civil injunctive action against Edmund E. Wilson (Wilson) and Walter L. Ross (Ross), alleging that Wilson and Ross violated the federal securities laws in connection with the sale of securities by Fountain Group of Companies of Utah, Inc. (Fountain Group).
In its Complaint, filed in the U.S. District Court for the District of Utah, the Commission alleges that Wilson raised approximately $11 million from at least 60 investors through the fraudulent and unregistered sale of securities in Fountain Group. The Complaint alleges that beginning in September 2005, Wilson, through his company Fountain Group, offered and sold securities for the stated purpose of providing funding for real estate development. Wilson told investors that for a fee of either $80,000 or $150,000, Fountain Group would leverage a bond backed by senior life settlement policies to generate funding in the tens of millions of dollars for each proposed real estate project. Wilson assured investors their fee would be used to pay expenses to "activate" the funding. Instead of using investors’ funds as represented, Wilson transferred investor funds to other entities he owned and controlled where the funds were spent on expenses related to those businesses. In addition, Wilson used investor funds for his own personal purposes. Wilson was assisted in his solicitation of investors by Ross.
The Commission alleges that by engaging in this conduct Wilson and Ross violated Sections 5(a) and 5(c) Securities Act of 1933 (Securities Act) and Section 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Wilson violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks a permanent injunction as well as disgorgement, prejudgment interest and a civil penalty
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., March 15, 2013 — The Securities and Exchange Commission today announced that Stamford, Conn.-based hedge fund advisory firm CR Intrinsic Investors has agreed to pay more than $600 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies.
The SEC charged CR Intrinsic with insider trading in November 2012, alleging that one of the firm’s portfolio managers Mathew Martoma illegally obtained confidential details about the clinical trial from Dr. Sidney Gilman, who was selected by the pharmaceutical companies — Elan Corporation and Wyeth — to present the final drug trial results to the public.
The settlement filed today in federal court in Manhattan is the largest ever in an insider trading case, requiring CR Intrinsic — an affiliate of S.A.C. Capital Advisors — to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty.
"The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm," said George S. Canellos, Acting Director of the SEC’s Division of Enforcement.
Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, "A robust culture of compliance and zero tolerance toward employee misconduct can help other firms avoid the severe financial consequences that CR Intrinsic is facing for its misconduct."
The SEC’s complaint against CR Intrinsic, Martoma, and Dr. Gilman alleged that during phone calls arranged by a New York-based expert network firm for which Dr. Gilman moonlighted as a medical consultant, he tipped Martoma with safety data and eventually details about negative results in the trial about two weeks before they were made public in July 2008. Martoma and CR Intrinsic then caused several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week.
In an amended complaint filed today, the SEC added S.A.C. Capital Advisors and four hedge funds managed by CR Intrinsic and S.A.C. Capital as relief defendants because they each received ill-gotten gains from the insider trading scheme. These ill-gotten gains are comprised of profits and avoided losses resulting from trades placed in the hedge fund portfolios that CR Intrinsic and S.A.C. Capital managed, and include fees that S.A.C. Capital received as a result of these ill-gotten gains.
The settlement is subject to the approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York. The settlement would resolve the SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008. The settling parties neither admit nor deny the charges. The settlement does not resolve the charges against Martoma, whose case continues in litigation. The court previously entered a consent judgment against Dr. Gilman requiring him to pay disgorgement and prejudgment interest, and permanently enjoining him from further violations of the anti-fraud provisions of the federal securities laws.
The SEC’s investigation, which is continuing, has been conducted by Charles D. Riely and Amelia A. Cottrell of the SEC’s Market Abuse Unit in New York, and Matthew J. Watkins and Neil Hendelman of the New York Regional Office. The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court in New York Orders Madison Dean, Inc. and Its Principal, George Athanasatos, to Pay over $1.4 Million to Settle Forex Fraud Charges in CFTC Enforcement Action
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order against Defendants Madison Dean, Inc. (Madison Dean), of Wantagh, N.Y., and its principal, George Athanasatos, also of Wantagh, requiring them jointly to pay nearly $250,000 in restitution to defrauded customers. The Consent Order of Permanent Injunction, entered by Judge Joseph F. Bianco of the U.S. District Court for the Eastern District of New York, also imposes a $1 million civil monetary penalty on Madison Dean and a penalty of $210,000 on Athanasatos. The Order imposes permanent trading and registration bans against both defendants and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged.
The Order stems from a CFTC Complaint filed on May 8, 2012, charging Madison Dean, Athanasatos, and another Madison Dean principal, Laurence Dodge of Fresh Meadows, N.Y., with fraudulently soliciting approximately 19 persons to invest approximately $415,000 in managed trading accounts to trade off-exchange foreign currency (forex) contracts on a leverage or margined basis (see CFTC Press Release 6254-12).
The Order finds that Madison Dean and Athanasatos — through an internet website, written solicitation materials, and oral solicitations — misrepresented and omitted material facts about the history of Madison Dean, the performance record of Madison Dean, the nature of the Madison Dean’s clients, and the background and qualifications of the Madison Dean’s employees to create a false impression that Madison Dean was a well-established and successful company. The Order further finds that after being in operation for a little over one year — during which time customers lost approximately $250,000 and Madison Dean collected approximately $112,000 in commissions and fees — Madison Dean shut down its operation with no notice to its customers and no way for customers to contact the company or any of its associates.
The CFTC’s litigation continues against Defendant Laurence Dodge.
The CFTC appreciates the assistance of the United Kingdom’s Financial Services Authority in this matter.
CFTC Division of Enforcement staff members responsible for this case are Alan I. Edelman, James H. Holl, III, Michelle Bougas, Gretchen L. Lowe, and Vincent McGonagle.
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