South Florida Arbitration & Litigation Lawyer Blog
Securities Fraud Litigation, FINRA and AAA Arbitration Attorney, Russell L. Forkey, Esq.
July, 2011:
Securities and Exchange Commission v. Joshua Constantin et al., United States District Court for the Southern District of New York, Civ. Action No. 11-CV-4642 (filed July 6, 2011)
SEC CHARGES NEW YORK BROKERAGE FIRM AND TWO EXECUTIVES WITH DEFRAUDING INVESTORS IN PRIVATE PLACEMENT
The Securities and Exchange Commission recently charged a New York-based brokerage firm and two executives with misappropriating investor funds.
The SEC, in its complaint alleged that Windham Securities, Inc., Windham’s owner and principal Joshua Constantin, and former Windham managing director Brian Solomon fraudulently induced investors to provide more than $1.25 million to Windham for securities investments and fees by making false claims concerning the intended use of investor funds as well as Windham’s investment expertise and historical returns. Instead of purchasing securities for investors as represented, the defendants misappropriated the investors’ funds and then provided false assurances to investors to cover up their fraud.
According to the complaint, Windham, Constantin, and Solomon misappropriated investor funds from an investment opportunity they had recommended to investors in Leeward Group, Inc., then a private company they told investors Windham was helping to take public. Constantin and Solomon raised more than $1.1 million for investments in Leeward and collected an additional $135,000 in fees purportedly for access to Windham investment opportunities or other related investment services. Constantin then transferred approximately $668,000 of the funds raised from investors to his personal bank account and to the account of Constantin Resource Group, Inc. (CRG), an entity he owned and controlled. Constantin used these funds to pay his personal and business expenses and to pay Solomon, among other things. Constantin also transferred $450,000 of investor funds to purchase Leeward securities in the name of Domestic Applications Corp. (DAC), an entity he controlled and in which none of the investors held any ownership interest. Constantin and Solomon then attempted to conceal their fraud and falsely reassure investors by fabricating phony promissory notes and Windham account statements that falsely showed that the investors had purchased Leeward securities.
The SEC’s complaint charged Windham, Constantin, and Solomon with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and charges Constantin with liability as a control person for Windham’s Exchange Act violations and as an aider and abettor of Windham’s and Solomon’s Exchange Act violations. In its complaint, the SEC also names CRG and DAC as relief defendants. The SEC’s complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and penalties against Windham, Constantin, and Solomon, and disgorgement of ill-gotten gains plus prejudgment interest against CRG and DAC as relief defendants.