The Securities and Exchange Commission ("Commission") obtained an asset freeze and other emergency relief to halt the continuing false disclosures being made by a Culver City, Calif. investment adviser.
The Commission alleges that Heath M. Biddlecome ("Biddlecome"), through his firm California Wealth Management Group, doing business as IFC Advisory ("IFC"), operated a limited partnership investment fund, raising $9.8 million from investors, many of whom were IFC clients.
The Commission's complaint alleges that Biddlecome established Homestead Properties, L.P. ("Homestead") to invest in mobile home park communities. The complaint further alleges that Biddlecome, without ever informing investors, changed the partnership's investment strategy to securities day trading. According to the complaint, Biddlecome transferred $4.5 million of the partnership's moneys and began to trade options, trade on margin, and engage in short sales. The complaint alleges that this risky day trading strategy has resulted in erratic performance, alternating between six figure trading losses to profits in various months; in September and October 2009 alone, the account value declined $1.9 million.
The Commission's complaint, which was filed in federal court in Los Angeles, alleges that the defendants falsely claimed that a brokerage firm would sell the partnership interests and an accounting firm would audit the partnership's books yearly. The complaint alleges that, in reality, Biddlecome ever enlisted these third parties to perform such services. In addition, although investors were told distributions would be made quarterly out of net profits and certain investors received distributions, Homestead suffered losses for two years. The complaint also alleges Biddlecome misappropriated partnership moneys to pay for his personal credit card bills.
Sunday, November 29, 2009
Saturday, November 28, 2009
SEC Charges Two Individuals With Illegal Insider Trading in Advance of Negative News
On November 19, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Nevada against R. Brooke Dunn, a former executive at Shuffle Master, Inc., and Nicholas P. Howey for illegal insider trading in Shuffle Master stock and options prior to an announcement of disappointing financial results by Shuffle Master.
The SEC's Complaint alleges that, on February 26, 2007, after he first learned that Shuffle Master would announce disappointing preliminary financial results, Dunn called Howey and provided him with material nonpublic information relating to Shuffle Master's anticipated announcement. Howey then immediately sold all of his previously-purchased Shuffle Master stock and calls and purchased Shuffle Master puts. The next day, after Shuffle Master announced its disappointing financial news, Howey sold all of the Shuffle Master puts he purchased the previous day. Through the foregoing transactions, Howey profited by (or avoided losses of) approximately $237,000.
The Complaint charges Dunn and Howey with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks permanent injunctions, disgorgement of illegal trading profits, prejudgment interest, and civil penalties. The Complaint also seeks an order barring Dunn from serving as an officer or director of a public company.
The SEC's Complaint alleges that, on February 26, 2007, after he first learned that Shuffle Master would announce disappointing preliminary financial results, Dunn called Howey and provided him with material nonpublic information relating to Shuffle Master's anticipated announcement. Howey then immediately sold all of his previously-purchased Shuffle Master stock and calls and purchased Shuffle Master puts. The next day, after Shuffle Master announced its disappointing financial news, Howey sold all of the Shuffle Master puts he purchased the previous day. Through the foregoing transactions, Howey profited by (or avoided losses of) approximately $237,000.
The Complaint charges Dunn and Howey with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks permanent injunctions, disgorgement of illegal trading profits, prejudgment interest, and civil penalties. The Complaint also seeks an order barring Dunn from serving as an officer or director of a public company.
Friday, November 27, 2009
SEC HALTS AFFINITY FRAUD TARGETING THE SOMALI COMMUNITY
The Securities and Exchange Commission ("Commission") obtained a court order to halt a securities fraud targeting investors in the Somali immigrant community in San Diego, Seattle, and elsewhere.
The Commission's complaint names Mohamud A. Ahmed ("Ahmed"), age 45, of Spring Valley, Calif., and his company, Shidaal Express, Inc. ("Shidaal Express"), which operates in the San Diego area. The complaint alleges Ahmed formed Shidaal Express to provide check-cashing, money transfer, and other financial services for the Somali immigrant community, and a sign at one storefront location listed "Investment Opportunities" among the services provided. According to the complaint, Ahmed raised at least $3 million, including $200,000 from a San Diego mosque, by promising exorbitant guaranteed returns of 5% per month, or 60% annually.
The Commission charged Ahmed and Shidaal Express with committing securities fraud by making false and misleading statements to persuade people to invest with them. According to the complaint, Ahmed solicited investors through word-of-mouth, at a mosque in San Diego, at a presentation given in a Seattle-Tacoma hotel, and through Shidaal Express's website. The Commission alleges that Ahmed lured investors by assuring them they could receive their money back at any time. While initially paying investors monthly returns, the complaint alleges Ahmed tried to extract more money from the investors. The complaint alleges Ahmed eventually stopped paying monthly returns but continued lulling investors.
The Honorable Jeffrey Miller, United States District Judge
The Commission's complaint names Mohamud A. Ahmed ("Ahmed"), age 45, of Spring Valley, Calif., and his company, Shidaal Express, Inc. ("Shidaal Express"), which operates in the San Diego area. The complaint alleges Ahmed formed Shidaal Express to provide check-cashing, money transfer, and other financial services for the Somali immigrant community, and a sign at one storefront location listed "Investment Opportunities" among the services provided. According to the complaint, Ahmed raised at least $3 million, including $200,000 from a San Diego mosque, by promising exorbitant guaranteed returns of 5% per month, or 60% annually.
The Commission charged Ahmed and Shidaal Express with committing securities fraud by making false and misleading statements to persuade people to invest with them. According to the complaint, Ahmed solicited investors through word-of-mouth, at a mosque in San Diego, at a presentation given in a Seattle-Tacoma hotel, and through Shidaal Express's website. The Commission alleges that Ahmed lured investors by assuring them they could receive their money back at any time. While initially paying investors monthly returns, the complaint alleges Ahmed tried to extract more money from the investors. The complaint alleges Ahmed eventually stopped paying monthly returns but continued lulling investors.
The Honorable Jeffrey Miller, United States District Judge
Thursday, November 26, 2009
SEC Sues Dallas Company for Conducting Fraudulent $25 Million Promissory-Note Offering and Obtains the Appointment of a Receiver
On November 20, 2009, the Commission filed suit in the United States District Court for the Northern District of Texas against Dallas-based company Capital Mountain Holding Corporation, its president Derek A. Nelson, and two other Nelson-controlled entities known as Systems XXI, Act I, LLC ("Act I") and Systems XXI, Act II, LLC ("Act II"). The Commission also named two other entities owned by Nelson, Plouteo, Inc. and Homaide Real Estate Services, Inc. as Relief Defendants.
The Commission alleges that beginning in 2008 Nelson offered and sold promissory notes issued by CMHC, Act I, and Act II. The notes were marketed through a website and by a Canada-based investment club. The proceeds were to be used to buy distressed properties. Nelson told investors that after acquiring the properties at a discount, he would improve, rent, and resell them at prices closer to the properties' true value, thereby generating the returns promised to investors. The CMHC notes promised 10% per month interest for three months. The Act I and Act II notes that paid 18% per annum for two years (Act I) and 21% per annum for five years (Act II). Nelson promised that 90% of Act I and Act II funds would be used to acquire real estate and to rehabilitate the properties for rental or resale. Nelson further represented that Act I and Act II would loan money to CMHC in exchange for first lien positions on CMHC's properties. Nelson persuaded many of the CMHC noteholders to rollover their CMHC note principal into the Act I and Act II notes because they would be "more secure."
The Commission alleges that beginning in 2008 Nelson offered and sold promissory notes issued by CMHC, Act I, and Act II. The notes were marketed through a website and by a Canada-based investment club. The proceeds were to be used to buy distressed properties. Nelson told investors that after acquiring the properties at a discount, he would improve, rent, and resell them at prices closer to the properties' true value, thereby generating the returns promised to investors. The CMHC notes promised 10% per month interest for three months. The Act I and Act II notes that paid 18% per annum for two years (Act I) and 21% per annum for five years (Act II). Nelson promised that 90% of Act I and Act II funds would be used to acquire real estate and to rehabilitate the properties for rental or resale. Nelson further represented that Act I and Act II would loan money to CMHC in exchange for first lien positions on CMHC's properties. Nelson persuaded many of the CMHC noteholders to rollover their CMHC note principal into the Act I and Act II notes because they would be "more secure."
Wednesday, November 25, 2009
Former Stratton Oakmont Executive Charged in Securities Fraud Case
Irving Stitsky, a former executive at Stratton Oakmont, along with Mark Alan Shapiro and William B. Foster, have been found guilty of committing securities fraud. The crime involved more than 150 investors who together entrusted Stitsky with $18 million.
The three convicted perpetrated their illegal activity under an umbrella corporation known as, “Cobalt.” The company claimed to acquire and develop real-estate properties, some of which were never under its ownership. The three also lied to investors about the history of their company. In addition to these misrepresentations, Stitsky and Shapiro failed to disclose that they were convicted felons.
Stitsky is most known for his boiler room operations in the 1990s, actions that caused him to lose his securities licenses. Shapiro, on the other hand, served 30 months in prison after pleading guilty to bank fraud and conspiracy to commit tax fraud.
After the three-week trial, Stitsky, Shapiro, and Mr. Foster were found guilty of securities fraud, wire fraud, mail fraud and conspiracy charges.
The three convicted perpetrated their illegal activity under an umbrella corporation known as, “Cobalt.” The company claimed to acquire and develop real-estate properties, some of which were never under its ownership. The three also lied to investors about the history of their company. In addition to these misrepresentations, Stitsky and Shapiro failed to disclose that they were convicted felons.
Stitsky is most known for his boiler room operations in the 1990s, actions that caused him to lose his securities licenses. Shapiro, on the other hand, served 30 months in prison after pleading guilty to bank fraud and conspiracy to commit tax fraud.
After the three-week trial, Stitsky, Shapiro, and Mr. Foster were found guilty of securities fraud, wire fraud, mail fraud and conspiracy charges.
Tuesday, November 24, 2009
SEC Charges Swiss National with Insider Trading
The Commission today announced that it filed a First Amended Complaint against Lorenz Kohler (Kohler), a resident of Mels, Switzerland, and Swiss Real Estate International Holding AG (Swiss Real Estate) alleging that they engaged in insider trading in advance of the October 9, 2006 public announcement of a $566 million merger between CNS and GlaxoSmithKline plc. The First Amended Complaint alleges that Kohler purchased out-of-the-money call options in CNS in his personal account and in an account in the name of Swiss Real Estate, a company controlled by Kohler, based on material non-public information relating to the company's potential acquisition. The Commission alleges that Kohler and Swiss Real Estate realized illicit gains of approximately $387,566. The Commission further alleges that Kohler tipped his wife and his brother-in-law, who then traded in CNS options in advance of the announcement of the acquisition of CNS and realized significant illicit gains.
The First Amended Complaint also names Sacho Todorov Dermendjiev (Dermendjiev) as a relief defendant. The Commission alleges that Dermendjiev, who resides in Bulgaria, was the beneficial owner of banking and securities accounts over which Kohler held power of attorney. According to the First Amended Complaint, Kohler purchased option contracts on CNS stock for Dermendjiev's account just prior to announcement of the acquisition of CNS and sold these options immediately after announcement of the CNS acquisition, resulting in illicit gains of $74,655 for Dermendjiev.
The First Amended Complaint also names Sacho Todorov Dermendjiev (Dermendjiev) as a relief defendant. The Commission alleges that Dermendjiev, who resides in Bulgaria, was the beneficial owner of banking and securities accounts over which Kohler held power of attorney. According to the First Amended Complaint, Kohler purchased option contracts on CNS stock for Dermendjiev's account just prior to announcement of the acquisition of CNS and sold these options immediately after announcement of the CNS acquisition, resulting in illicit gains of $74,655 for Dermendjiev.
33 Days to Opt Out of Schwab Yield Plus Class Action
Aidikoff, Uhl & Bakhtiari announces that the deadline to opt out of the Schwab YieldPlus class action lawsuit is fast approaching. Schwab YieldPlus
Fund investors who are members of the class action -- which involves
the Schwab YieldPlus Fund Select Shares (Nasdaq:SWYSX) and the Schwab
YieldPlus Investor Shares (Nasdaq:SWYPX) -- have approximately 33 days
to submit their request to opt out of the class action if they wish to
pursue an individual arbitration claim with the Financial Industry
Regulatory Authority (FINRA).
"Charles Schwab marketed and sold the Schwab YieldPlus Funds as safe,
cash-like investment alternatives. Instead, evidence shows that the
funds contained more than 45% of toxic mortgage- and asset-backed
securities. This exposed investors to not only more risk but also the
potential for more financial losses," says Ryan Bakhtiari, an attorney
whose law firm Aidikoff, Uhl & Bakhtiari has successfully represented
investors in their claims against Charles Schwab and the YieldPlus
Funds.
Bakhtiari adds that investors who suffered financial losses in their
Schwab YieldPlus investments need to carefully consider whether they
remain in the Schwab class action lawsuit or submit their request for
exclusion and pursue a separate individual FINRA arbitration claim.
"For some investors, class action representation in the YieldPlus case
can be an attractive legal option when individual financial losses are
small. In other instances, however, filing an individual claim with
FINRA may be a more economically attractive option. Investors should
consult with counsel to review their options," Bakhtiari says.
Investors must submit their requests for exclusion by December 28,
2009, or they will be bound by the results of the class action lawsuit.
For more information about opting out of the Charles Schwab YieldPlus
class action, please contact us at 866-827-6537.
In 2007, the law firm of Aidikoff, Uhl & Bakhtiari joined an
association of three other law firms to assist investors who suffered
financial losses in the Schwab YieldPlus Funds and other subprime
mortgage-related investments. The laws firms include: Maddox, Hargett &
Caruso, P.C. of Indianapolis, Indiana, and New York, New York; David P.
Meyer & Associates Co., L.P.A. of Columbus, Ohio; and Page Perry, LLC
of Atlanta, Georgia.
Additional information is available at http://www.subprimelosses.com/charles-schwab.php or by contacting an
attorney below.
Fund investors who are members of the class action -- which involves
the Schwab YieldPlus Fund Select Shares (Nasdaq:SWYSX) and the Schwab
YieldPlus Investor Shares (Nasdaq:SWYPX) -- have approximately 33 days
to submit their request to opt out of the class action if they wish to
pursue an individual arbitration claim with the Financial Industry
Regulatory Authority (FINRA).
"Charles Schwab marketed and sold the Schwab YieldPlus Funds as safe,
cash-like investment alternatives. Instead, evidence shows that the
funds contained more than 45% of toxic mortgage- and asset-backed
securities. This exposed investors to not only more risk but also the
potential for more financial losses," says Ryan Bakhtiari, an attorney
whose law firm Aidikoff, Uhl & Bakhtiari has successfully represented
investors in their claims against Charles Schwab and the YieldPlus
Funds.
Bakhtiari adds that investors who suffered financial losses in their
Schwab YieldPlus investments need to carefully consider whether they
remain in the Schwab class action lawsuit or submit their request for
exclusion and pursue a separate individual FINRA arbitration claim.
"For some investors, class action representation in the YieldPlus case
can be an attractive legal option when individual financial losses are
small. In other instances, however, filing an individual claim with
FINRA may be a more economically attractive option. Investors should
consult with counsel to review their options," Bakhtiari says.
Investors must submit their requests for exclusion by December 28,
2009, or they will be bound by the results of the class action lawsuit.
For more information about opting out of the Charles Schwab YieldPlus
class action, please contact us at 866-827-6537.
In 2007, the law firm of Aidikoff, Uhl & Bakhtiari joined an
association of three other law firms to assist investors who suffered
financial losses in the Schwab YieldPlus Funds and other subprime
mortgage-related investments. The laws firms include: Maddox, Hargett &
Caruso, P.C. of Indianapolis, Indiana, and New York, New York; David P.
Meyer & Associates Co., L.P.A. of Columbus, Ohio; and Page Perry, LLC
of Atlanta, Georgia.
Additional information is available at http://www.subprimelosses.com/charles-schwab.php or by contacting an
attorney below.
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