Articles Posted in Other Types of Fraudulent Activity

Securities and Exchange Commission v. Eric Aronson, Vincent Buonauro, Jr., Robert Kondratick, Fredric Aaron, PermaPave Industries, LLC, PermaPave USA Corp., PermaPave Distributions, Inc., Verigreen, LLC, and Interlink-US-Network, Ltd., Defendants, and Caroline Aronson, Deborah Buonauro, DASH Development, LLC, Aron Holdings, Inc., PermaPave Construction Corp., Dymoncrete Industries, LLC, Dymon Rock LI, LLC, and Lumi-Coat, Inc., Relief Defendants, Civil Action No. 11 Civ. 7033 (S.D.N.Y. filed Oct. 6, 2011)

District Court Finds Eric Aronson Liable for Operating a Ponzi Scheme, Issues Permanent Injunctions Against Remaining Individual Defendants and Grants Other Relief

The Securities and Exchange Commission recently announced that U.S. District Court Judge Jed S. Rakoff has ruled that Defendant Eric Aronson violated the antifraud and other provisions of the federal securities laws. In addition, the Court entered orders of permanent injunctions against Defendants Vincent Buonauro and Fredric Aaron and further imposed officer and director and penny stock bars against Aaron. Furthermore, the Court ordered Aronson’s wife, Relief Defendant Caroline Aronson, to disgorge the ill-gotten gains she received from her husband.

Tampa, Fort Meyers and Naples, Florida Investment Adviser Fraud, Breach of Fiduciary Duty and Misrepresentation FINRA Arbitration and State and Federal Court Litigation Attorney:

The Securities and Exchange Commission recently announced charges against two Tampa-area investment advisers accused of committing fraud by failing to truthfully inform clients about compensation received from offshore funds they were recommending as safe investments despite substantial risks and red flags.

The advisers also are charged with contributing to violations of the “custody rule” that requires investment advisory firms to establish specific procedures to safeguard and account for client assets.

Security and Exchange Commission Obtains Summary Judgment against Defendants Charged With Defrauding Investors in Fictitious Offering

The Securities and Exchange Commission (SEC) recently announced that the United States District Court for the District of Columbia granted the SEC’s motion for summary judgment against all primary defendants and certain relief defendants in a civil action arising from a prime bank investment scheme that defrauded at least 13 investors out of more than $2 million from August 2010 to November 2011. Pursuant to the court’s ruling and judgment issued on August 26, 2013, the court permanently enjoined Washington D.C. attorney Brynee K. Baylor, her law firm Baylor & Jackson, P.L.L.C., and their former “client” The Milan Group, Inc. from violations of the antifraud and other securities law provisions, and from engaging in similar investment schemes. The court also required these defendants to pay disgorgement and penalties, required the Estate of Frank L. Pavlico to pay disgorgement, and barred Baylor from acting as an officer or director of any public company. The court required relief defendants Patrick T. Lewis and The Julian Estate to disgorge illegally obtained investor funds. The court granted in part or denied summary judgment against two other relief defendants, but declined in September 2013 to reconsider that ruling.

The SEC’s complaint, filed on November 30, 2011, alleged that Pavlico and Baylor operated a prime bank scheme, offering investors risk-free returns of up to 20 times the original investment within as few as 45 days through the purported “lease” and “trading” of foreign bank instruments, including “standby letters of credit” and “bank guarantees,” in highly complex transactions with unidentified parties and secretive international “trading platforms.” However, the bank instruments and trading programs were entirely fictitious. As the complaint alleged, Pavlico and Baylor provided investors with phony contracts and legal documents, digitally-created computer screen shots, and copies of fictitious foreign bank instruments as purported proof of the ongoing success of the transactions. Baylor and her law firm acted as “counsel” for Pavlico’s company Milan, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.

Securities and Exchange Commission v. CKB Holdings Ltd., et al., Civil Action No. 13-5584 (E.D.N.Y., filed October 9, 2013)

SEC Halts $20 Million Pyramid Scheme Targeting Asian-American Community

The Securities and Exchange Commission recently announced charges and asset freezes against the operators and promoters of a worldwide pyramid scheme targeting members of the Asian-American community. The perpetrators of the scheme falsely promised exponential, risk-free returns to investors in a venture that purportedly sold Internet-based children’s educational courses.

Securities and Exchange Commission v. Brett A. Cooper, Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP, and REOP Group Inc. and David H. Frederickson and The Law Offices of David H. Frederickson, Civil Action No. 1:13-cv-05781-RMB-AMD (D.N.J.) and 1:13-cv-05787-RMB-AMD (D.N.J.)

SEC Charges New Jersey Resident in Prime Bank Investment Scheme and Files Settled Charges Against California Attorney Escrow Agent

Recently, the Securities and Exchange Commission filed an enforcement action in the U.S. District Court for the District of New Jersey against New Jersey resident Brett A. Cooper and his companies Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP and REOP Group Inc., who from at least November 2008 through about April 2012 perpetrated three fraudulent schemes and engaged in various fraudulent and deceitful acts, practices and courses of business in furtherance of those schemes.

Securities and Exchange Commission v. Irwin Boock, et al., Civil Action No. Civil Action No. 09 CV 8261 (S.D.N.Y) (DLC)

SEC Obtains Final Judgments Against Attorney Involved in 22 Corporate Hijackings and a Relief Defendant

Recently, the United States District Court for the Southern District of New York entered a consent final judgment against Nicolette Loisel, a Houston-based attorney, in a pending civil injunctive action in which the Commission charged Loisel, along with others, with hijacking 22 defunct or inactive publicly-traded companies and drafting 28 legal opinion letters falsely representing that offerings of approximately 223 million shares were exempt from the registration requirements of the federal securities laws. The final judgment permanently enjoins Loisel from violating the antifraud and registration provisions of the federal securities laws, prohibits her from participating in any penny stock offering, and orders her to pay disgorgement and prejudgment interest of $143,755. Pursuant to the final judgment, payment of these amounts was waived, and no civil penalty was imposed, in light of her financial condition.

Securities and Exchange Commission v. Jenifer E. Hoffman, John C. Boschert, and Bryan T. Zuzga, Civil Action No. 5:13-cv-00455 (U.S. District Court for the Middle District of Florida)

The Securities and Exchange Commission (“Commission”) has charged Jenifer E. Hoffman and John C. Boschert, the former principals of Assured Capital Consultants, LLC – a now-dissolved Florida company – and Bryan T. Zuzga, the company’s purported escrow agent, for their involvement in a fraudulent prime bank offering and Ponzi scheme.

According to the Commission’s complaint, filed in U.S. District Court for the Middle District of Florida, between approximately January and September 2009, Assured Capital, through Hoffman, Boschert, and Zuzga, raised at least $25 million from investors, through false representations and fake documents. The complaint alleges that Hoffman and Boschert represented to investors that their money would be invested in Assured Capital’s offshore, confidential trading program which, in turn, would invest in blocks of medium term notes. As the complaint further alleges, Hoffman and Boschert enticed investors with claims of exorbitant profits and with the illusion of safety by telling them that the investment would provide weekly returns of up to 50% and that it was performing, safe, and guaranteed. In addition, Hoffman and Boschert represented to investors their money would remain safe in an Assured Capital escrow account that would be used to secure a line of credit for investing in the company’s offshore trading program. Furthermore, Hoffman, Boschert, and Zuzga told investors that Zuzga controlled the escrow account as Assured Capital’s escrow agent and that he was a licensed attorney. Moreover, Hoffman provided investors with fake bank documents and a sham verification letter, notarized by Zuzga, purporting to confirm Assured Capital had $500 million at a Panamanian bank.

In the Matter of Sarkauskas & Associates, Inc. and James M. Sarkauskas

Recently, the Securities and Exchange Commission issued a settled Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Section 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order) against Sarkauskas & Associates, Inc. (the Adviser) and James M. Sarkauskas (Sarkauskas).

The Order finds that the Adviser, a Wisconsin-based investment adviser, and its principal, Sarkauskas, violated Sections 206(1) and (2) of the Advisers Act when they purchased unit investment trust (UIT) units bearing transactional sales charges in their clients’ accounts without disclosing that identical no-load UIT units sold at net asset value with no transactional sales charges were available for purchase, and that the Adviser’s purchases of the units bearing transactional sales charges substantially increased the Respondents’ compensation, thereby creating a conflict of interest. The Order further finds that between August 2009 and August 2012, the Adviser, through Sarkauskas, collected $331,433.98 in such sales charges in addition to the Adviser’s asset management fees.

Securities and Exchange Commission Charges Purported Money Manager in New York Who Schemed Investors and Lied to Commission Examiners

The Securities and Exchange Commission (Commission) recently charged the owner of a New York-based investment advisory firm with defrauding investors while grossly exaggerating the amount of assets under his management.

The SEC alleges that Fredrick D. Scott of Brooklyn, N.Y., registered his firm ACI Capital Group as an investment adviser and then embarked on a series of fraudulent schemes targeting individual investors and small businesses. Scott repeatedly touted ACI’s registration under the securities laws and falsely claimed the firm’s assets under management to be as high as $3.7 billion to bolster his credibility when offering too-good-to-be-true investment opportunities. As Scott solicited funds from investors after promising them very high rates of return, he simply stole their money almost as soon as they deposited it with ACI. Scott paid no returns to investors and illegally used their money to fund such personal expenses as his children’s private school tuition, air travel and hotels, department store purchases, and several thousand dollars in dental bills.

SEC Files Civil Injunctive Action Against Alleged Perpetrator and Unregistered Broker in Fraudulent Promissory Note Offering

Recently, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Colorado against Brian G. Elrod for allegedly conducting a fraudulent offering of promissory notes for which Nova Dean Pack acted as an unregistered broker. Elrod and Pack reside in Buffalo Creek, Colorado and Highland, California, respectively.

The Complaint alleges that, from at least March 2009 through November 2009, Elrod and Pack raised approximately $2 million from 12 investors who invested in high-yield promissory notes issued by CFS Holding Company LLC (“CFS”), a Colorado company owned and managed by Elrod. According to the Complaint, Elrod told investors that their investments were secured and guaranteed and would generate annual returns ranging from 12% to 24%. According to the Complaint, Elrod further represented to investors that the proceeds from their promissory notes would be used to expand a group of financial services companies owned and managed by Elrod. The Complaint alleges that the foregoing representations, among others, were false and misleading when made, and that Elrod, rather than use investor money for legitimate business purposes, improperly used most of the investor funds to make substantial payments to himself and family members and to pay for personal expenses, to pay Pack significant commissions for referring investors, and to make interest payments back to investors. According to the Complaint, the CFS note offering was not registered with the Commission, and Pack was not an associated person of a registered broker or dealer at the time he participated in the CFS note offering.

Contact Information