Notable litigation filed during May 2023 includes: (1) SEC v. Bartlett; (2) SEC v. Griffin; (3) Warrow v. Turnipseede; and (4) Commodity Future Trading Commission v. Galles.
SEC v. Bartlett, Case No. 8:23-cv-00765 (C.D. Cal.)
The SEC filed suit against defendant schemers in California federal court for an alleged scheme run through a purported toy company. The complaint alleges that Defendants recruited investors from an Illinois church to purchase promissory notes, stock, and contracts for gold with promises of high return; but in reality, the company functioned as a Ponzi scheme paying earlier investors and defendant schemers with newer investor funds. The SEC seeks recovery under several provisions of the Securities Act and Securities Exchange Act, discouragement of any ill-gotten gains, civil penalties, and permanent injunctions against defendant schemers from further violations of the acts, from acting as an officer or director, and from participating in the sale of unregistered securities.
SEC v. Griffin, Case No. 3:23-cv-00539 (M.D. Fl.)
The SEC filed suit against the schemer for losses arising from an alleged Ponzi scheme run through real estate investment companies in Florida federal court. The complaint alleges that the defendant sold short-term promissory notes for use in real estate investment deals, with promises of 33% return in 24 days; but rather than investing in real estate, the defendant used $3,950,000 of investor money to fund his living expenses and repay other investors their purported investment returns. The SEC seeks recovery under several provisions of the Securities Act and Securities Exchange Act, discouragement of any ill-gotten gains, civil penalties, and permanent injunctions against defendant schemers from further violations of the acts and from acting as an officer or director.
Warrow v. Turnipseede, Case No: A-23-870522-C Department 22 (Clark Cnty., Nev.)
Plaintiffs, comprising a class of 72 investors, filed suit against the schemers, the schemers’ lawyers, and the schemers’ accountants in Nevada state court for losses arising from an alleged Ponzi scheme. The complaint alleges that the schemers purported to bet invested funds using a complex algorithm, which was approved as lawful by the schemers’ lawyers and substantiated by tax documents prepared by the schemers’ accountants. Yet the schemers never made a substantial number of bets or generated profits, instead using approximately $8.5 million dollars to pay prior investors their returns. Plaintiffs seek recovery against the schemers under theories of breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, intentional misrepresentation, breach of fiduciary duty, negligence, exploitation of the elderly, conversion, and civil RICO. They also seek recovery against the schemers’ lawyers and accounts under theories of negligence and professional malpractice.
Commodity Future Trading Commission v. Galles, Case No. 1:23-cv-02970 (N.D. Ill.)
The Commodity Future Trading Commission (“CFTC”) brought suit against a schemer for an alleged Ponzi scheme Illinois federal court. The complaint alleges that the defendant told investors he was an experienced trader and could generate returns by trading commodity futures and options, while at the same time telling regulators that he was not soliciting investors. It also alleges that the schemer made few trades and instead used the roughly $6,000,0000 deposited in various companies controlled by the schemer to pay for his lavish lifestyle and pay back earlier participants. The CFTC seeks recovery under theories of violations of the Commodity Exchange Act and associated regulations, including commodity fraud, improperly commingling funds, and misrepresentations.