South Florida Arbitration & Litigation Lawyer Blog
Securities and Investment Fraud Litigation Attorney, Russell L. Forkey, Esq.
December, 2011:
SEC v. Marcin Malarz et al., Case No. 11-cv-8803 (N.D. Ill., filed December 12, 2011).
SEC Charges Three Individuals in Chicago-Area Offering Fraud
The Securities and Exchange Commission recently announced that it filed a civil injunctive action alleging fraud in the unregistered offer and sale of securities by Defendants Marcin Malarz (“Malarz”), Jacek Sienkiewicz (“Sienkiewicz”), and Arthur Lin (“Lin”) (collectively, “Defendants”). The SEC’s complaint, filed in the U.S. District Court for the Northern District of Illinois, alleges that from at least September 2006 through at least January 2009, Malarz, Sienkiewicz, and Lin raised at least $14,380,000 from at least 43 investors through the fraudulent unregistered offer and sale of promissory notes issued by entities owned and controlled by Malarz and/or Sienkiewicz. Malarz Equity Investments, LLC (“Malarz Equity”) was the primary entity through which the scheme was perpetrated. Malarz and Lin’s wife, Relief Defendant Gloria Lin, were the members of Malarz Equity, and Lin was an officer of Malarz Equity. Malarz, with Sienkiewicz, also used four other entities, Invision Investment, LLC, Burton Grove Condominiums, LLC, Buffalo Creek Condominiums, LLC, and Willow Lake Condominiums, LLC, to carry out the scheme.
The complaint alleges that investors were told that their funds would be used to purchase apartment complexes and rehabilitate and convert the individual apartment units for sale as condominiums, and that their investments were safe because they were personally guaranteed by Malarz and, in some cases, Sienkiewicz. The complaint alleges that contrary to these representations, Malarz used substantial sums of the Malarz Equity investors’ funds for his personal benefit and to make ponzi-type “interest” and principal payments to previous investors. Further, Lin received at least $436,000 in undisclosed commission payments, which were transmitted to Relief Defendant Gloria Lin. The complaint further alleges that Malarz and Sienkiewicz provided several investors with personal financial statements that materially overstated their respective net worths. It also alleges that Malarz and Sienkiewicz granted some investors mortgages on properties that they either owned or were about to acquire, to purportedly secure the investments. Most of these investors were falsely told that their particular mortgage would have priority over all other debts, except for the mortgages that had previously been granted to banks in conjunction with the property’s purchase. At least two investors were told that their funds would be used as part of a down payment on a new apartment complex in Lombard, Illinois, but Malarz and Sienkiewicz never purchased that property.
The SEC’s complaint charges Malarz, Sienkiewicz, and Lin with violating Sections 5(a), 5(c), and 17(a)(2) 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(b) thereunder, and charges Lin only with violating Section 15(a) of the Exchange Act. The complaint seeks permanent injunctive relief, disgorgement, and civil penalties from all of the Defendants. The complaint also seeks disgorgement from Relief Defendant Gloria Lin.