CFTC GETS INJUNCTION GETS INJUNCTION FORCING MAN AND COMPANY TO PAY RESTITUTION AND PENALTY

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Federal Court in Maryland Orders Sidney J. Charles, Jr. and his Company, The Borrowing Station, LLC, to pay over $600,000 to Settle CFTC Forex Fraud Action

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court consent Order of permanent injunction requiring Defendants Sidney J. Charles, Jr., formerly of Bowie, Maryland, and his company, The Borrowing Station, LLC (Borrowing Station) of Bowie, Maryland, jointly and severally to pay $254,236 in restitution and a $350,000 civil monetary penalty in connection with an off-exchange leveraged foreign currency (forex) Ponzi scheme.

The Order, entered on August 23, 2013, by Judge Paul W. Grimm of the U.S. District Court of the District of Maryland, also imposes permanent registration and trading bans against both Defendants and prohibits them from further violations of the Commodity Exchange Act (CEA) and CFTC Regulations, as charged. The court’s Order stems from a CFTC complaint filed on April 23, 2012, that charged Defendants with solicitation fraud, misappropriation, issuing false statements, and registration violations (see CFTC Press Release 6247-12).

The Order finds that, from at least October 2009 through at least July 2011, Defendants fraudulently solicited $369,326 from 18 individuals or entities for participation in a pooled investment vehicle managed by Borrowing Station, through Charles, that traded forex. According to the Order, Defendants solicited pool participants directly and through a website. In their solicitations, Defendants promised substantial investment returns such as 25 percent per year or 10 percent per month, and falsely claimed that pool participant funds were guaranteed against trading losses. The Order finds that Defendants deposited only a portion of pool participant funds into trading accounts and lost a majority of those funds unsuccessfully trading forex.

The Order also finds that Defendants issued checks to pool participants that represented purported “monthly returns” or “return on investment.” However, any purported profits that Defendants paid to pool participants came from the principal of other pool participants in the manner of a Ponzi scheme. In addition, Charles misappropriated pool participant funds to pay for personal expenses and to fund Borrowing Station’s operations, according to the Order.

The Order further finds that Borrowing Station and Charles failed to register as a Commodity Pool Operator (CPO) and Associated Person of a CPO, respectively, as required under the CEA and CFTC Regulations.

The CFTC appreciates the assistance of the U.K. Financial Conduct Authority.

CFTC Division of Enforcement staff responsible for this case are Kara Mucha, Kassra Goudarzi, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.

CFTC FILES TO REVOKE REGISTRATION OF COMMODITY TRADING ADVISOR

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Files Action to Revoke Registration of Commodity Trading Advisor Prestige Capital Advisors, LLC

Washington, DC- The U.S. Commodity Futures Trading Commission (CFTC) today filed a Notice of Intent (Notice) to revoke the registration of Prestige Capital Advisors, LLC (Prestige) of Charlotte, North Carolina, as a Commodity Trading Advisor (CTA).

The CFTC Notice alleges that Prestige is subject to statutory disqualification from CFTC registration based on an Order of default judgment and permanent injunction entered against Prestige in the U.S. District Court for the Western District of North Carolina on January 25, 2013 (see CFTC Press Release 6615-13). The Order finds that Prestige fraudulently solicited and accepted more than $4.7 million from multiple pool participants for investment in one or more commodity pools that traded among other things, commodities and futures contracts. The Order also finds that Prestige misappropriated pool participant funds, posted false trading returns on a website called BarclayHedge (where fund managers could post unverified historical returns for prospective clients to view), sent false trading results to at least one Prestige pool participant, and issued false account statements. As a result, Prestige was ordered to pay approximately $6.9 million in civil monetary penalties and restitution of over $4.1 million.

CFTC Division of Enforcement staff members responsible for this case are Eugenia Vroustouris, Daniel Jordan, Michael Loconte, Erica Bodin, Rick Glaser, and Richard Wagner.

Statement Regarding Joint Rule Reproposal Concerning Credit Risk Retention

Statement Regarding Joint Rule Reproposal Concerning Credit Risk Retention

SEC CHARGES PRINCIPAL OF MEDICAL BUSINESS FOR ROLE IN FRAUD SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Principal of Purported Biomedical Company with Fraud

The Securities and Exchange Commission ("Commission") filed a civil injunctive action on August 19, 2013 in the United States District Court for the Southern District of Indiana relating to Timothy E. Cook's fraudulent offer and sale of shares in his purported biomedical company, Xytos, Inc. (Xytos). The Commission charged Cook, of Indianapolis, and Xytos, a Nevada corporation based in Indianapolis, with securities fraud for engaging in a fraudulent scheme that garnered Cook more than $500,000 in illicit profits. The Commission also charged Cook and Asia Equities, Inc., a Nevada corporation Cook controlled, with related registration violations.

The Commission's complaint alleges that, between 2010 and March 2013, Cook misrepresented Xytos to the investing public as an operational biomedical company specializing in cancer treatment. Meanwhile, according to the compliant, Cook sold millions of his own Xytos shares on the open market and lived off the more than $400,000 in proceeds from those fraudulent sales.

The Commission's complaint alleges that Cook also raised over $100,000 from several private offerings of Xytos shares. The complaint further alleges that Cook, after soliciting private investors with false and misleading offering documents, misappropriated investor money to pay for personal expenses such as clothing and entertainment. Additionally, the complaint alleges that Cook concealed his fraud from Xytos shareholders through a series of misleading shareholder updates.

The Commission's complaint alleges that Cook and Xytos violated the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 (Securities Act); that Cook aided and abetted these violations; and that Cook is liable for the Exchange Act violations as a control person of Xytos. Finally, the complaint alleges that Cook and Asia Equities engaged in unregistered offerings in violation of Section 5(a) and 5(c) of the Securities Act. The Commission's complaint seeks permanent injunctions, civil penalties, disgorgement and prejudgment interest against all defendants. As to Cook, the complaint also seeks penny stock and officer and director bars.

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority.

SEC SETTLES FINANCIAL CRISIS FRAUD CHARGES WITH COO OF UCBH HOLDINGS, INC.

FROM:  SECURITIES EXCHANGE COMMISSION 
SEC Settles Claims Against Ebrahim Shabudin Arising from Understated Bank Losses During Financial Crisis

On August 8, 2013, the United States District Court for the Northern District of California approved a settlement of the Securities and Exchange Commission’s claims against Ebrahim Shabudin, the former Chief Operating Officer of UCBH Holdings, Inc.  The case against Mr. Shabudin and two other defendants involves fraudulent financial reporting for UCBH Holdings, Inc., the publicly-traded holding company for San Francisco-based United Commercial Bank.  The Commission alleges Mr. Shabudin and other defendants concealed losses on loans and other assets from the bank’s auditors and delayed the proper reporting of those losses.  The Commission’s complaint alleges Mr. Shabudin committed securities fraud by making false and misleading statements in connection with the 2008 annual report and misleading the bank’s independent auditors, among other allegations.

Without admitting or denying the allegations, Mr. Shabudin agreed to pay a civil money penalty of $175,000, with the penalty partially reduced by the amount paid as a civil penalty in a related administrative action brought against him by the Federal Deposit Insurance Corporation.

Mr. Shabudin also consented to the entry of a final judgment that permanently enjoins him from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder.  The judgment also bars Mr. Shabudin from acting as an officer or director of a public company under the Exchange Act.

SEC FILES ACTION TO ENFORCE COMPLIANCE OF ORDER TO PAY

FROM:  U.S. SECURITIES EXCHANGE COMMISSION 
SEC Files Action Against Investment Adviser to Enforce Compliance with Order to Pay Disgorgement of Misappropriated Investor Funds, Interest and Civil Penalties

The Securities and Exchange Commission announced today that it filed an application in U.S. District Court for the Eastern District of New York against Anthony T. Vicidomine and North East Capital, LLC alleging that they violated an SEC Order requiring them to pay $346,132.04, consisting of $189,415 in disgorgement, $6,717.04 in prejudgment interest, and a $150,000 civil penalty. According to the application, Vicidomine and North East failed to make any payments by August 21, 2013, despite the SEC's Order and their consent to do so.

According to the SEC's August 16, 2013 order instituting a settled administrative proceeding, Vicidomine, the sole principal of North East Capital, LLC, an unregistered investment adviser, misappropriated $189,415 from the North East Capital Fund LP (the Fund), a pooled investment vehicle he managed, by charging the Fund unearned "incentive fees." Vicidomine disbursed the monies directly into his own personal account, to his other business ventures, and to North East to pay his personal expenses. Additionally, Vicidomine and North East made misrepresentations, both orally and in writing, concerning Vicidomine's own investment in the Fund and the policies and procedures Vicidomine and North East employed to minimize investors' risk of losses.

Based on the above, the SEC ordered Vicidomine and North East to cease and desist from committing or causing any violations and any future violations of Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Vicidomine and North East agreed to pay disgorgement of $189,415 plus prejudgment interest of $6,717.04 as well as a civil monetary penalty of $150,000 by August 21, 2013. They failed to make any payment.

The SEC's application seeks a district court order enforcing its August 16, 2013 Order requiring Vicidomine and North East to pay $346,132.04 in disgorgement, prejudgment interest and civil penalties.