Securities Fraud Lawyer Blog

On January 27, 2015, the Securities and Exchange Commission obtained a final judgment against Edwin Fujinaga and MRI International, Inc. The judgment requires Fujinaga and MRI to pay more than $580 million.

The SEC alleged that MRI International and Edwin Fujinaga perpetrated an elaborate Ponzi scheme designed to misappropriate money from investors. The SEC claimed that the MRI International raised money from thousands of investors living primarily in Japan under the premise that MRI was using their funds to buy accounts receivable from medical providers at a discount, and turning those over to collect the full value of the receivables from insurance companies.

The SEC alleged that defendants used the money for other purposes, including financing Edwin Fujinaga’s extravagant lifestyle. In October 2014, the court granted the SEC’s motion for summary judgment on liability against Edwin Fujinaga and MRI International on all charges against them, including the following violations of the antifraud provisions of the federal securities laws: Sections 17(a)(1), (2), and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

On April 7, 2015 the SEC charged Los Angeles-based Pacific West Capital Group, Inc. and its owner Andrew Calhoun with fraud in the sale of “life settlement” investments.

The SEC’s complaint alleges that since 2004, Pacific West and Calhoun raised nearly $100 million from life settlement investors. Since at least 2012, Pacific West and Calhoun are alleged to have defrauded investors by using proceeds from the sale of new life settlements to continue funding life settlement investments sold years earlier. The complaint alleges that Pacific West Capital Group and Calhoun did not disclose this practice to investors, and attempted to make the life settlement investments they were selling appear successful when in fact, Pacific West Capital Group had used up the primary reserves to pay premiums on those policies.

According to the complaint, Pacific West and Calhoun also made false and misleading statements about the risks of investing in life settlements, including the risk of investors having to make increased premium payments as the insured people covered by the contract lived longer than Pacific West and Calhoun anticipated. Pacific West and Calhoun also are alleged to have misled investors about annual returns.

On December 18, 2015 the SEC charged Edward Durante, a recidivist securities law violator for running a multi-year securities offering fraud that targeted investors in New England, Ohio and California.

The SEC alleges that between 2012 and 2014, Edward Durante defrauded at least 50 unsophisticated investors of $11 million through the sale of securities of VGTel, a shell company he controlled.

According to the SEC’s complaint Edward Durante defrauded investors by selling approximately six million shares of VGTel stock to investors using a fictitious name to hide his criminal past and lying to investors regarding the use of stock sale proceeds.  Durante also bribed investment advisers, who advised their clients to purchase VGTel stock without disclosing to their clients that they had been bribed. Durante also engaged in matched trading of VGTel stock with a stockbroker to artificially control the stock’s market price.

On April 7, 2015 the SEC charged Los Angeles-based Pacific West Capital Group, Inc. and its owner Andrew B Calhoun IV with fraud in the sale of “life settlement” investments.

The SEC’s complaint alleges that since 2004, Pacific West Capital Group and Calhoun, a Beverly Hills, California, life insurance agent, have raised nearly $100 million from life settlement investors. Since at least 2012, PWCG and Calhoun are alleged to have defrauded investors by using proceeds from the sale of new life settlements to continue funding life settlement investments sold years earlier.

The complaint alleges that Pacific West Capital Group and Calhoun did not disclose this to investors and made the life settlement investments appear successful when in fact, PWCG had used up the primary reserves to pay premiums on those policies.

On April 24, 2015 the SEC announced charges against an Indianapolis investment adviser, Veros Partners, its president, two associates and several affiliated companies for engaging in two fraudulent farm loan offerings, in which they made ponzi scheme payments to investors in other offerings and paid themselves hundreds of thousands of dollars in undisclosed fees. The SEC obtained a temporary restraining order and emergency asset freeze to halt the scheme.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Indiana, in 2013 and 2014, Veros Partners, its president, Matthew D. Haab, and two associates, attorney Jeffrey B. Risinger and Tobin J. Senefeld, fraudulently raised at least $15 million from at least 80 investors, most of whom were Veros Partners advisory clients. The investors were informed that their funds would be used to make short-term operating loans to farmers, but instead, significant portions of the loans were to cover the farmers’ unpaid debt on loans from prior offerings. According to the SEC’s complaint, Haab, Risinger and Senefeld used money from the two offerings to pay millions of dollars to investors in prior farm loan offerings and to pay themselves over $800,000 in undisclosed “success” and “interest rate spread” fees.

In addition to Veros Partners, Haab, Risinger, and Senefeld, the SEC charged Veros Partners affiliates Veros Farm Loan Holding LLC and FarmGrowCap LLC, the issuers of the offerings, and PinCap LLC. The SEC also charged registered broker-dealer Pin Financial LLC as a relief defendant.

On May 6, 2015 the SEC announced charges and an emergency asset freeze against North Dakota Developments, LLC and its two principals, Robert L. Gavin and Daniel J. Hogan, for allegedly defrauding investors in a scheme to purportedly build and operate short-term housing facilities or “man camps” for workers in the Bakken oil and gas formation of North Dakota and Montana.

The SEC’s complaint alleges that North Dakota Developments and its owners Gavin and Hogan raised over $62 million from hundreds of investors for “units” in NDD’s projects by promising exceptionally high annual returns, up to 42%. The SEC also alleges that North Dakota Developments and its owners Gavin and Hogan offered investors the option of receiving a “guaranteed” annual return of up to 25% of the purchase price of their unit without regard to actual rental income.

As further inducement to invest, NDD and its owners Gavin and Hogan also promised investors that the various projects would be operational in a very short time frame, often within months. In reality, the SEC alleges, at the present time, none of the projects are fully operational.

On May 8, 2015 the SEC filed a complaint against ClearPath Wealth Management and its president and owner Patrick Churchville as defendants for operating a fraudulent scheme that the SEC alleges resulted in at least $11 million in losses to investors. The Multi-Strategy Funds and the HCR Value Fund, L.P. were named as relief defendants.

According to the SEC’s complaint, from at least December 2010, ClearPath and Patrick Churchville diverted deposits from new investors to pay prior investors, used proceeds from selling investments to pay unrelated investors, used investors’ funds as collateral for loans to make investments for their own benefit,converted investor funds into investments for ClearPath’s own benefit, and stole $2.5 million of investor funds to purchase Patrick Churchville’s waterfront home in Barrington, Rhode Island. The complaint alleges that Patrick Churchville and ClearPath used a variety of deceptive acts and misleading accounting tricks to conceal their fraud, and then prolonged the scheme by lying to investors about the status, worth, and disposition of those investments.

ClearPath, Patrick Churchville, and the Multi-Strategy Funds consented to the entry of an asset freeze and other preliminary relief. In addition to the asset freeze, the court prohibited ClearPath and Patrick Churchville from soliciting, accepting, or depositing any client funds, or from exercising any discretionary authority over clients’ accounts.

On June 9, 2015, The SEC announced that it had charged three men living in California with insider trading in the stock and options of Ardea Biosciences.

The SEC alleges that Michael J. Fefferman learned material nonpublic information as senior director of information technology at Ardea Biosciences, and tipped his brother-in-law Chad Wiegand, a stockbroker, in advance of major public announcements.

Chad Wiegand then purchased Ardea stock in various customer accounts based on the confidential information he received from Fefferman, and he tipped his friend and fellow stockbroker Akis  Eracleous so he could similarly buy stock on behalf of his customers.

On June 24, 2015, The SEC announced that it had obtained a court order freezing the assets of Capital Cove Bancorp and its owner Rashid K. Khalfani, charging them with pocketing money raised from investors.

The SEC alleges that Rashid K. Khalfani (real name Christopher M. Lee) operated under an alias, and hid his past criminal convictions while raising nearly $2 million through his firm Capital Cove Bancorp.

Khalfani aka Christopher Lee raised the money for purported investments in two private funds that invested in distressed real estate. Khalfani/Lee enticed investors by falsely claiming that REO Opportunities Fund II and Rittenhouse Square Trust were “vetted, qualified, and registered” with the SEC and several other government agencies. Lee misappropriated investor money from both funds, and used it to purchase his own real estate.