Securities and Exchange Commission v. Clement et al

Filing 29

JUDGMENT OF PERMANENT INJUNCTION AS TO DEFENDANT JOHN CLEMENT. Signed by Judge Larry Alan Burns on 9/15/11.(kaj)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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Plaintiff,

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Case No. 11cv1034-LAB (WVG)

SECURITIES AND EXCHANGE
COMMISSION,

JUDGMENT OF PERMANENT
INJUNCTION AS TO DEFENDANT
JOHN CLEMENT

vs.
JOHN CLEMENT and
EDGEFUND CAPITAL, LLC,
Defendants.

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The Securities and Exchange Commission having filed a Complaint and Defendant John

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Clement (“Clement”) having entered a general appearance; consented to the Court’s jurisdiction

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over Defendant and the subject matter of this action; consented to entry of this Judgment without

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admitting or denying the allegations of the Complaint (except as to jurisdiction); waived findings

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of fact and conclusions of law; and waived any right to appeal from this Judgment:

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I.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant Clement

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and Defendant’s agents, servants, employees, attorneys, and all persons in active concert or

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participation with them who receive actual notice of this Judgment by personal service or

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otherwise are permanently restrained and enjoined from violating Section 17(a) of the Securities

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Act of 1933 (the “Securities Act”), 15 U.S.C. § 77q(a), in the offer or sale of any security by the
11cv1034-LAB (WVG)

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use of any means or instruments of transportation or communication in interstate commerce or

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by use of the mails, directly or indirectly:

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(a)

to employ any device, scheme, or artifice to defraud;

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(b)

to obtain money or property by means of any untrue statement of a material fact

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or any omission of a material fact necessary in order to make the statements

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made, in light of the circumstances under which they were made, not misleading;

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or

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(c)

would operate as a fraud or deceit upon the purchaser.

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II.

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to engage in any transaction, practice, or course of business which operates or

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant Clement

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and Defendant’s agents, servants, employees, attorneys, and all persons in active concert or

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participation with them who receive actual notice of this Judgment by personal service or

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otherwise are permanently restrained and enjoined from violating, directly or indirectly, Section

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10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and

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Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, by using any means or

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instrumentality of interstate commerce, or of the mails, or of any facility of any national

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securities exchange, in connection with the purchase or sale of any security:

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(a)

to employ any device, scheme, or artifice to defraud;

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(b)

to make any untrue statement of a material fact or to omit to state a material fact

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necessary in order to make the statements made, in the light of the circumstances

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under which they were made, not misleading; or

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(c)

to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.
III.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant Clement

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and Defendant’s agents, servants, employees, attorneys, and all persons in active concert or

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participation with them who receive actual notice of this Judgment by personal service or
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otherwise are permanently restrained and enjoined from violating, directly or indirectly, while

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acting as an investment adviser, Sections 206(1), 206(2) and 206(4) of the Investment Advisers

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Act of 1940 (the “Advisers Act”), 15 U.S.C. §§ 80b-6(1), 80b-6(2) & 80b-6(4), and Rule 206(4)-

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8 thereunder, 17 C.F.R. § 275.206(4)-8, by using the mails or any means or instrumentality of

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interstate commerce:

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(a)

client;

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(b)

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to engage in any transaction, practice, or course of business which operates as a
fraud or deceit upon any client or prospective client; or

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to employ any device, scheme, or artifice to defraud any client or prospective

(c)

while acting as an investment adviser to a pooled investment vehicle:
(1)

to engage in any act, practice or course of business which is fraudulent,

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deceptive, or manipulative by making any untrue statement of a material

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fact or omitting to state a material fact necessary to make the statements

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made, in the light of the circumstances under which they are made, not

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misleading, to any investor or prospective investor in the pooled

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investment vehicle; or

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(2)

to otherwise engage in any act, practice, or course of business that is

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fraudulent, deceptive, or manipulative with respect to any investor or

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prospective investor in the pooled investment vehicle.

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IV.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant Clement

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shall pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty

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pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), Section 21(d)(3) of the

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Exchange Act, 15 U.S.C. § 78u(d)(3), and Section 209(e) of the Advisers Act, 15 U.S.C. § 80b-

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9(e). The Court shall determine the amounts of the disgorgement and civil penalty upon motion

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of the Commission. Prejudgment interest shall be calculated from April 29, 2011, based on the

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rate of interest used by the Internal Revenue Service for the underpayment of federal income tax

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as set forth in 26 U.S.C. § 6621(a)(2). In connection with the Commission’s motion for
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disgorgement and/or civil penalties, and at any hearing held on such a motion: (a) Defendant will

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be precluded from arguing that he did not violate the federal securities laws as alleged in the

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Complaint; (b) Defendant may not challenge the validity of the Consent or this Judgment; (c)

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solely for the purposes of such motion, the allegations of the Complaint shall be accepted as and

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deemed true by the Court; and (d) the Court may determine the issues raised in the motion on the

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basis of affidavits, declarations, excerpts of sworn deposition or investigative testimony, and

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documentary evidence, without regard to the standards for summary judgment contained in Rule

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56(c) of the Federal Rules of Civil Procedure. In connection with the Commission’s motion for

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disgorgement and/or civil penalties, the parties may take discovery, including discovery from

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appropriate non-parties.
V.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, except as otherwise

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ordered by this Court, Defendant Clement and Defendant’s agents, servants, employees,

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attorneys, and all persons in active concert or participation with them who receive actual notice

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of this Judgment by personal service or otherwise are permanently restrained and enjoined from,

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directly or indirectly:
A.

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transferring, assigning, selling, hypothecating, changing, wasting, dissipating,

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converting, concealing, encumbering, or otherwise disposing of, in any manner,

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any funds, assets, securities, claims, or other real or personal property, wherever

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located, of Defendants Clement and Edgefund Capital; and their subsidiaries or

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affiliates, including but not limited to The Edge Fund Ltd, LP and The Edgefund

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LP, owned by, controlled by, managed by or in the possession or custody of any

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of them; and
B.

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transferring, assigning, selling, hypothecating, encumbering, or otherwise

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disposing of any securities, including, but not limited to, any securities of

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Edgefund Capital, and any of its subsidiaries or affiliates, including but not

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limited to The Edge Fund Ltd, LP and The Edgefund LP.

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VI.

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IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, the

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previously ordered freeze placed on all monies and assets (with an allowance for necessary and

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reasonable living expenses to be granted only upon good cause shown by application to the

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Court with notice to and an opportunity for the Commission to be heard) in all accounts at any

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bank, financial institution or brokerage firm, all certificates of deposit, and other funds or assets,

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held in the name of, for the benefit of, and/or over which account authority is held by Clement,

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Edgefund Capital, The Edge Fund Ltd, LP, The Edgefund LP, or any entity affiliated with any of

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them, remains in full force and effect and includes, but is not limited to, the accounts set forth

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below:

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Institution Name

Account Name

Account No.

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Bank of America

Edgefund Capital, LLC

24701-71112

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Fidelity Investments

John Clement

X34771783

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Fidelity Investments

Edgefund Capital LLC John K Clement

Z70689599

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Fidelity Investments

John Clement

X34771791

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JPMorgan Chase Bank,
N.A.

John K Clement

877609768

Penson Financial
Services, Inc.
(Introducing Broker:
Thinkorswim, Division
of TD Ameritrade,
Inc.)

John Clement

84725480

Penson Financial
Services, Inc.
(Introducing Broker:
Thinkorswim, Division
of TD Ameritrade,
Inc.)

John Clement

10979029

Penson Financial
Services, Inc.
(Introducing Broker:

John Clement

27808948

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11cv1034-LAB (WVG)

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Institution Name
NT Securities, LLC)

Account Name

Account No.

Penson Financial
Services, Inc.
(Introducing Broker:
Golden Beneficial
Securities)

John Clement

17954918

Penson Financial
Services, Inc.

John Clement

38201091

Penson Financial
Services, Inc.
(Introducing Broker:
Lightspeed Trading,
LLC)

John Clement

54045471

Mission Federal Credit
Union

Cheryl A. Kilmer

2671376

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VII.
IT IS FURTHER ORDERED that representatives of the Commission are authorized to

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have continuing access to inspect or copy any or all of the books and records and other

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documents of Edgefund Capital, The Edge Fund Ltd, LP, The Edgefund LP and any other

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entities under the control of Clement.

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VIII.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, Defendant

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Clement and Defendant’s agents, servants, employees, attorneys, and all persons in active concert

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or participation with them who receive actual notice of this Judgment by personal service or

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otherwise are permanently restrained and enjoined from, directly or indirectly: destroying,

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mutilating, concealing, transferring, altering, or otherwise disposing of, in any manner, any

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documents, which includes all books, records, computer programs, computer files, computer

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printouts, contracts, correspondence, memoranda, brochures, or any other documents of any kind in

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their possession, custody or control, however created, produced, or stored (manually, mechanically,

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electronically, or otherwise), pertaining in any manner to Defendant Edgefund Capital, and its
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subsidiaries and affiliates, including but not limited to The Edge Fund Ltd, LP and The Edgefund

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LP.
IX.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent is

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incorporated herein with the same force and effect as if fully set forth herein, and that Defendant

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shall comply with all of the undertakings and agreements set forth therein.
X.

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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain
jurisdiction of this matter for the purposes of enforcing the terms of this Judgment, and for

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purposes of determining any additional relief in this case, including the amounts of

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disgorgement, prejudgment interest and civil penalties.
XI.

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There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil

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Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.

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DATED: September 15, 2011
_____________________________________
HONORABLE LARRY ALAN BURNS
UNITED STATES DISTRICT JUDGE

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11cv1034-LAB (WVG)