Investment Advisor and Broker/Dealer Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney, Russell L. Forkey, Esq.
Securities and Exchange Commission v. A.L. Waters Capital, LLC, et al., Civil Action No. 12-cv-10783-DJC (District of Massachusetts)
Commission Obtains Preliminary Injunction and Asset Freeze Against Massachusetts-Based Parties Who Misappropriated Investor Funds
The Securities and Exchange Commission recently announced that it has charged Arnett L. Waters, a resident of Milton, Massachusetts, and two entities under his control, broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC, with a scheme to defraud investors. The Commission’s Complaint alleges that, from at least 2009 to the present, the defendants used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend it on personal expenses. The action was filed in federal court in Boston, and on May 3, 2012, the court entered an order that, among other things, freezes the assets of the defendants and two other parties charged as relief defendants, including Arnett Waters’ wife.
The Commission’s complaint alleges that the defendants have raised at least $780,000 from at least 8 investors. Among the investors was a church that placed a $500,000 investment with the defendants as recently the end of March 2012. According to the Commission’s complaint, the defendants promised the church that its money would be invested in a portfolio of securities, but instead a significant amount of the church’s investment was misappropriated by the defendants just days after the investment was made. The Commission also alleges that the defendants made multiple misrepresentations to investors, to the Financial Industry Regulatory Authority (“FINRA”) and to Commission staff to conceal the fact that investor money was misappropriated in a fraudulent scheme.
The action was filed in federal court in Boston on May 1, 2012, and on May 3, 2012, the U.S. District Court in Massachusetts issued a preliminary injunction that, among other things, prohibits the defendants from continuing to violate certain federal securities laws and freezes the assets of the defendants and other parties named as relief defendants who are alleged to have received proceeds of the fraud. The parties agreed to this preliminary relief. The Court’s order further provides that the defendants are prohibited from soliciting or accepting additional investor funds and from altering or destroying any relevant documents, and also requires the defendants to provide an accounting of their assets and uses of investor funds.
The Commission’s complaint alleges that the defendants 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 Commission also alleges that Arnett Waters and Moneta Management violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Complaint also named Arnett Waters’ wife, Janet Waters, and a third entity controlled by Arnett Waters, Port Huron Partners, L.P., as relief defendants. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by both the defendants and relief defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties against the defendants.