LAWYER CHARGED BY SEC WITH HAVING ROLE IN PRIME BANK SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Florida Lawyer in Connection with Multi-Million Dollar Prime Bank Scheme

The Securities and Exchange Commission announced that today that it charged Florida attorney Allen Ross Smith, a sole practitioner, with violating the anti-fraud and securities offering provisions of the federal securities laws for his role in an advance fee investment scheme involving prime bank transactions and overseas debt instruments. The scheme was orchestrated by Switzerland-based Malom Group AG, a company named with an acronym for "Make A Lot Of Money," through individuals in Zurich and Las Vegas. Smith acted as Malom's attorney as well as its escrow agent and "paymaster."

According to the SEC's complaint, filed in the U.S. District Court for the District of New Hampshire, Smith, leveraging his title and position as an attorney, made several false and misleading statements to investors. These statements concerned Malom's financial strength and history of success, Smith's familiarity with Malom and its principals, and the status of transactions from which Malom would repay investors who lost all their funds. In making these misstatements, Smith repeated what he was told by Malom and its agents and did nothing to verify their claims. At least three investors entered into transactions with Malom after having received Smith's misstatements about Malom. These investors collectively lost $2.1 million.

The SEC's complaint also alleges that Smith assisted Malom by allowing it to use his attorney escrow account to collect investor funds, and then by following Malom's direction to distribute those funds to individuals, including many with no connection to the contemplated transactions, located in the United States and abroad. Smith received and distributed approximately $2.44 million in investor funds at Malom's behest. Finally, the complaint alleges that Smith offered and sold unregistered securities by, among other actions, making several required certifications regarding Malom to investors as part of a securities offering that was intended to help New Hampshire-based USA Springs, Inc. emerge from bankruptcy. As a result of that fraudulent offering, the federal bankruptcy court for the District of New Hampshire entered a $60 million judgment against Malom in 2012. In re USA Springs, Inc., 1:08-bk-11816 (Bankr. D.N.H.).

The SEC's complaint alleges that Smith violated Section 17(a) and Section 5 of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against Smith.

The SEC's investigation was conducted by Stephen Simpson and Angela Sierra, and the SEC's litigation will be led by Mr. Simpson. The SEC appreciates the assistance of the Department of Justice, Federal Bureau of Investigation, and the State Attorney's Office for the Canton of Zurich, Switzerland.

The SEC previously charged Malom Group AG, its principals, and agents with violating the antifraud and securities registration provisions of the federal securities laws in SEC v. Malom Group AG, et al, 2:13-cv-2280 (D. Nev. Dec. 16, 2013) and SEC v. Erwin et al., 2:14-cv-623 (D. Nev. Apr. 23, 2014). For additional information about these cases, see Litigation Release Number 22890 (Dec. 16, 2013); Litigation Release Number 22978 (Apr. 28, 2014).

CFTC FREEZES ASSETS IN MISAPPROPRIATION CASE INVOLVING ALLEGED FOREX FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court Freezes Assets of EJS Capital Management, LLC, Alex Vladimir Ekdeshman and Edward J. Servider and Relief Defendants in CFTC Action Charging Misappropriation of Nearly $2 Million in Ongoing Forex Fraud Scheme

Defendant Ekdeshman also charged with violating Federal Court Order

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that The Honorable Kevin P. Castel of the U.S. District Court for the Southern District of New York, on May 1, 2014, entered a restraining order freezing assets and prohibiting the destruction or concealment of books and records of Defendants EJS Capital Management, LLC (EJS), Alex Vladimir Ekdeshman of Holmdel, N.J., and Edward J. Servider of Staten Island, N.Y (collectively Defendants), and of Relief Defendants Alisa Ekdeshman of Holmdel, N.J. (Ekdeshman’s wife), Executive Services of Florida LLC, Executive Management Services of Montana Inc., and Michael Vilner of Sunny Isles Beach, Fla.

The Court’s order arises out of a Complaint filed on May 1, 2014, charging Defendants with fraudulent solicitation of more than $2 million, misappropriation of most of those funds, issuing false account statements, and registration violations in an ongoing retail foreign currency (forex) fraud scheme.

The CFTC also charged that Ekdeshman is in violation of a U.S. District Court Order entered on July 8, 2013, arising out of a prior CFTC action against Ekdeshman where he was charged with solicitation fraud and misappropriating “the vast majority” of customer funds for business expenses. Specifically, the Complaint charged Ekdeshman and Paramount Management, LLC with operating a fraudulent scheme that solicited more than $1.3 million from approximately 110 retail customers to engage in leveraged or margined foreign currency (forex) transactions with unregistered off-shore counterparties. CFTC v. Paramount Management, LLC and Alex Vladimir Ekdeshman, C.A. No. 13-Civ. 4436 (CM) (SDNY Sept. 9, 2013) (see CFTC Press Release 6690-13). The prior court Order against Ekdeshman permanently prohibited Ekdeshman from cheating or defrauding other persons, from soliciting, receiving or accepting funds from any person for the purpose of purchasing or selling forex contracts, and from engaging in any activity requiring registration with the CFTC.

According to the CFTC’s Complaint filed yesterday, between April 2013 and the present, the Defendants fraudulently solicited more than $2 million from at least 90 retail customers. The Complaint alleges that the Defendants misappropriated almost all of the customer funds for their own use, including vacations in Florida and Italy, automobile leases, liquor purchases, employee salaries and commissions, and office rent. The Complaint further alleges that Defendants issued false account statements to customers that listed profits from forex trading although no customer funds were traded in forex and no profits were generated from forex trading. And the Complaint charges that EJS’s website falsely reported that specified EJS trading had been profitable.

The CFTC Complaint also alleges that the Relief Defendants directly and indirectly received funds from EJS bank accounts to which they have no legitimate claim. None of the Defendants or Relief Defendants has ever been registered with the CFTC.

The Court has set a hearing date on the CFTC’s motion for a preliminary injunction for May 12, 2014. In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution for the benefit of defrauded EJS customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

In a criminal action, on May 2, 2014, the U.S. Attorney’s Office for the Southern District of New York announced that it had filed a criminal complaint charging Ekdeshman with one count each of commodities fraud, mail fraud, and wire fraud.  Ekdeshman was arrested in Holmdel, N.J., by agents from the Federal Bureau of Investigation (FBI).

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, the United Kingdom Financial Conduct Authority, l'Autorité des Marchés Financiers du Québec, and the Financial Services Board of the Republic of South Africa.

CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Philip D. Rix, Elizabeth C. Brennan, Steven Ringer, Lenel Hickson, Jr., and Manal M. Sultan.

TEXAS MAN AND COMPANIES CHARGED BY SEC WITH SELLING FRAUDULENT INVESTMENTS IN OIL AND GAS

FROM:  SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Texas Resident and His Companies for Selling Fraudulent Oil and Gas Investments

On April 25, 2014, the Securities and Exchange Commission ("Commission") filed civil securities fraud charges against Guardian Oil & Gas, Inc. ("Guardian"), Guardian Oil & Natural Gas, Inc. ("GONG") and their principal, Rick D. Mullins. The charges stem from an alleged oil and gas offering fraud.

The Commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that between August 2010 and June 2013, Mullins, Guardian, and GONG raised approximately $6.5 million through the fraudulent offer and sale of securities to investors in the form of limited partnership interests in oil and gas programs.

According to the complaint, Mullins and Guardian failed to disclose to investors Guardian's deteriorating financial condition, including significant amounts owed on pre-existing bank loans. The Commission further alleges that defendants falsely represented to investors that their contributions would be used solely for the specific drilling project in which they had invested but instead, under Mullins's direction, Guardian and GONG redirected investor funds for other unrelated purposes. The complaint also alleges that defendants falsely represented to investors that they would directly receive revenue from the sale of any oil and gas production from the project in which they were invested when, in truth, operators were deducting from production revenue expenses due on other unrelated projects, a process known as "net checking." Moreover, according to the Complaint, Mullins made direct misrepresentations to investors. When, after collecting money from investors for one project and spending that money on unrelated expenses, Guardian was unable to obtain an interest in the oil and gas drilling project that it had purported to sell to investors, Mullins further lied to investors, telling them, among other things, that the well was unproductive and that Defendants had been approached by a possible purchaser of the partnership's interest. The Commission alleges that Defendants never disclosed that the investors' funds had been spent elsewhere and that Defendants had been unable to actually obtain an interest in the drilling project they sold.

The complaint alleges that Mullins, Guardian, and GONG 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. The complaint seeks permanent injunctions and disgorgement of ill-gotten gains plus prejudgment interest against all Defendants, and civil penalties against Mullins.

The SEC's investigation was conducted by Akita Adkins, Ty Martinez, and Jim Etri of the SEC's Fort Worth Office. Matthew Gulde will conduct the Commission's litigation.

SEC.gov | Remarks to the 2014 IAA Investment Adviser Compliance Conference

SEC.gov | Remarks to the 2014 IAA Investment Adviser Compliance Conference

CPA, ACCOUNTING FIRM TO PAY $100,000 PENALTY FOR IMPROPER AUDITS OF REGULATED COMMODITY FUTURES FIRM

FROM:  COMMODITY FUTURES TRADING COMMISSION 

April 28, 2014

Federal Court Orders Illinois CPA Michael Tunney and His Accounting Firm, Tunney & Associates, P.C., to Pay a $100,000 Penalty for Improper Audits of a Commodity Futures Firm

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Consent Order against Tunney & Associates, P.C. (T&A), an accounting firm with offices in Hammond, Indiana and Orland Park, Illinois, and Michael Tunney, its sole owner and a certified public accountant (CPA) licensed in Illinois and Indiana, requiring T&A and Tunney jointly and severally to pay a $100,000 civil monetary penalty for violating CFTC Regulations when conducting audits for The Linn Group (TLG), a CFTC-registered Futures Commission Merchant (FCM).

The Order, entered on April 28, 2014, by Judge Sharon Johnson Coleman of the U.S. District Court, Northern District of Illinois, also permanently prohibits T&A and Tunney from practicing or appearing before the CFTC and from violating the provisions of the CFTC’s Regulations related to independent auditors, as charged.

The Order stems from a CFTC Complaint filed April 18, 2013, that charged T&A and Tunney with conducting year-end audits of TLG for 2007 through 2011 in violation of Generally Accepted Auditing Standards (GAAS) and CFTC Regulations and failing to report material inadequacies to the CFTC when required to do so (see CFTC Press Release 6571-13).

The Order finds that T&A and Tunney did not have experience auditing FCMs or any entity that held customer segregated accounts, were not qualified to conduct an FCM audit, and that Tunney lacked sufficient understanding of the applicable Commodity Exchange Act or CFTC regulatory provisions prior to accepting any of the audit engagements. The Order also finds that there was no planning for the auditing of TLG, and the audits failed to include appropriate tests of TLG’s accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets.

The CFTC appreciates the assistance of the Division of Swap Dealer and Intermediary Oversight. The CFTC also appreciates the assistance of the National Futures Association.

The CFTC Division of Enforcement staff members responsible for this matter are Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

"MAKE A LOT OF MONEY" COMPANY OWNER CHARGED BY SEC FOR PRIME BANK SCHEMES

FROM:  SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Las Vegas Resident and His Company with Securities and Broker-Dealer Registration Violations in Connection with Multi-Million Dollar Prime Bank Schemes

On April 23, 2014, the Securities and Exchange Commission filed charges against Las Vegas resident James Lee Erwin and his company, Las Vegas-based Joint Venture Solutions, Inc., for violating the securities offering and broker-dealer registration provisions of the federal securities laws. Erwin and Joint Venture Solutions, Inc. promoted investments in Malom Group AG of Switzerland, a company named with an acronym for "Make A Lot Of Money," that is behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments.

The SEC's complaint, filed in the U.S. District Court for the District of Nevada, alleges that between 2009 and 2011 Erwin, through Joint Venture Solutions, promoted investments in Malom, offered Malom's securities to prospective investors, and acted as an intermediary between investors and Malom. The defendants' efforts induced at least five investors to pay Malom over $2.5 million to enter into agreements with Malom. The SEC alleges that while the defendants received commissions based upon a percentage of the amount of investor funds raised, the investors they recruited lost all of their invested funds.

The SEC's complaint alleges that Erwin and Joint Venture Solutions, Inc. violated the securities registration provisions of the federal securities laws, specifically, Section 5 of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against each defendant.

The SEC's investigation was conducted by Stephen Simpson and Angela Sierra, and the SEC's litigation will be led by Mr. Simpson. The SEC appreciates the assistance of the Department of Justice, Federal Bureau of Investigation, and State Attorney's Office for the Canton of Zurich, Switzerland.