SEC CHARGES MAN WITH TRADING BASED ON NONPUBLIC INFORMATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23187 / February 3, 2015

Securities and Exchange Commission v. Joel J. Epstein, Civil Action No. 15-cv-0506

SEC Charges Pennsylvania Man with Insider Trading

The Securities and Exchange Commission today charged Joel J. Epstein of Huntingdon Valley, Pennsylvania with insider trading based on material nonpublic information that Epstein misappropriated from his son regarding Nationwide Mutual Insurance Company's merger with Harleysville Group, Inc. On the morning of September 29, 2011, Nationwide and Harleysville, a Pennsylvania-based insurance provider, announced that Nationwide would acquire all publicly-traded shares of Harleysville for $60 per share. At the end of trading on September 29, Harleysville's stock price closed at $58.96, approximately 87% higher than the previous day's close. Epstein has agreed to settle the matter. The settlement is pending final approval by the court.

According to the SEC's complaint filed in the U.S. District Court for the Eastern District of Pennsylvania, Epstein's son learned about the impending Harleysville merger from his long-time girlfriend who was a legal assistant at a law firm that was advising Harleysville on the transaction. On or before September 2, 2011, Epstein's son told him the information he learned from his girlfriend. The complaint further alleges that, between September 2 and September 28, 2011, in breach of a duty of trust and confidence owed to his son, Epstein misappropriated the information that he received from his son and purchased 4,000 shares of Harleysville stock. Epstein sold the shares after the public announcement of the acquisition, realizing ill-gotten gains of $113,503.

The SEC's complaint also alleges that Epstein tipped four people who each purchased 1,000 shares of Harleysville stock between September 21 and September 26, 2011. All four tippees sold their shares on the day of the public announcement, realizing total ill-gotten gains of $123,511.

Epstein has consented to the entry of a final judgment permanently enjoining him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and requiring him to pay disgorgement of $237,014, the amount of his and his tippees' ill-gotten gains, plus prejudgment interest of $21,599, and a civil penalty of $237,014.

The SEC's investigation, which is continuing, has been conducted by Kelly L. Gibson, Assunta Vivolo and John Rymas of the SEC's Market Abuse Unit along with John V. Donnelly of the Philadelphia Regional Office. The case has been supervised by Daniel M. Hawke, Chief of the Market Abuse Unit, and G. Jeffrey Boujoukos. The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of Pennsylvania, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).

CFTC CHARGED HUSBAND, WIFE AND COMPANIES WITH FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

February 3, 2015

CFTC Charges California Residents Christopher Valois and Cynthia Wong and Their Companies with Fraud and Registration Violations

Husband and wife team allegedly stole more than $300,000 of the $750,000 their customers invested

Federal court enters emergency Order freezing Defendants’ assets and protecting books and records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Cormac J. Carney of the U.S. District Court for the Central District of California entered an emergency restraining Order freezing assets and prohibiting the destruction or concealment of books and records of Defendants Christopher Valois, Cynthia Wong, and their companies, Bertram Trade LLC (Bertram) and Churchhill Commodities Trading LLC (Churchhill), all of Orange County California. The judge set a hearing date for February 12, 2015.

The court’s Order arises from a CFTC Complaint filed on January 28, 2015, charging the Defendants with precious metals and futures fraud, misappropriation, engaging in illegal off-exchange precious metals transactions, and registration violations, in violation of the Commodity Exchange Act and CFTC Regulations from October 2011 to the present.

According to the Complaint, husband and wife Valois and Wong, acting by and through Bertram and Churchhill, fraudulently solicited approximately $450,000 from six customers, some of whom were senior citizens, to purchase precious metals or engage in futures trading. The Complaint states that the precious metals transactions offered by Valois and Wong and their companies were illegal off-exchange instruments and alleges that Valois and Wong misappropriated more than $300,000 of customer money to pay their personal expenses.

The Complaint also alleges that Valois and Wong acted as Commodity Trading Advisors by trading another $300,000 of at least four members of the general public in futures contracts and receiving advisory fees for such futures trading, even though they were not registered with the CFTC, as required. In fact, Valois previously had been banned from the futures industry for cheating and defrauding customers, according to the Complaint.

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

The CFTC appreciates the cooperation of the National Futures Association in this matter.

CFTC Division of Enforcement staff members responsible for this case are Camille Arnold, Joseph Patrick, Robert Howell, Scott Williamson, and Rosemary Hollinger.

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Advocating for Investors Saving for Retirement

SEC.gov | Investor Alert: “Prime Bank” Investments Are Scams

SEC.gov | Investor Alert: “Prime Bank” Investments Are Scams

INSURANCE BROKER CHARGED BY SEC WITH RUNNING A PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23182 / January 29, 2015
Securities and Exchange Commission v. Loren W. Holzhueter, et al., Case No. 15-cv-00045
SEC Charges Wisconsin-Based Insurance Broker with Conducting Ponzi Scheme

The Securities and Exchange Commission today announced fraud charges against a Wisconsin-based insurance brokerage firm and its president for conducting a Ponzi scheme with money they solicited for investment purposes. The Court entered a temporary restraining order yesterday freezing assets and prohibiting continuing violations of the securities laws.

In its complaint, filed on January 21 in federal district court in the Western District of Wisconsin, the SEC alleges that Loren W. Holzhueter and his firm Insurance Service Center (ISC) raised at least $10.4 million from approximately 120 investors since January 2008 who were misled to believe their investments would be placed in separate investment accounts at ISC or would be used to expand ISC's business by acquiring other insurance agencies.

The complaint alleges that ISC instead deposited investor funds directly into its general accounts. Holzhueter and ISC siphoned investor money to fund ISC's payroll and general operations as well as to pay off existing bank debts. ISC paid some investor money to Holzhueter and entities under his control. ISC also used money raised from newer investors to make interest and principal payments to earlier investors.

According to the SEC's complaint, Holzhueter and his firm hid critical pieces of information from investors, including that ISC's records had been seized by the IRS pursuant to a search warrant.

The complaint alleges that, based on this conduct, Holzhueter and ISC 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 entered a temporary restraining order that, among other things, freezes Holzhueter's assets, prohibits the defendants from raising new investor funds, and requires the parties to submit a joint plan for independent oversight of ISC.

The SEC's investigation has been conducted by Jen Peltz, Luz Aguilar, and Ariella Guardi and supervised by Paul Montoya of the Chicago office. The litigation is being led by Tim Leiman and Robert Moye.

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