Securities and Exchange Commission v. Nadel et al

Filing 237

DECLARATION of Carl R. Nelson re #236 MOTION for issuance of order to show cause as to Why Conservation Easement Should Not Be Extinguished by Burton W. Wiand. (Attachments: #1 Exhibit A - Deed of Conservation Easement, #2 Exhibit B - Appraisal, #3 Exhibit C - Pages from 2005 Tax Return, #4 Exhibit D - Order and Complaint filed in W.D.N.C.)(Nelson, Carl)

Securities and Exchange Commission v. Nadel et al

Doc. 237 Att. 4
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I

EXHIBIT
UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIA
TAMPA DIVISION
CASE NO.: 8:09-cv-87-T-26TBM

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SECURITIES AN EXCHANGE COMMISSION,
Plaintiff,
v.

JUN 1 ,N.c.
l!'s. D~~ 02009
IV DflJ'l ,.Cf Co
"'f\J.C, iJft-r

ARTHUR NADEL, SCOOP CAPITAL, LLC,

SCOOP MAAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P., VALHALLA INVESTMENT PARTNERS, L.P., VALHALLA MANAGEMENT, INC., VICTORY IRA FUND, LTD, VICTORY FUND, LTD, VIKING IRA FUND, LLC, VIKING FUND, LLC, AND VIKING MANAGEMENT
Relief Defendants.
/

ORDER REAPPOINTING RECEIVER
WHREAS, Plaintiff Securities and Exchange Commission ("Commssion") filed an
emergency motion for the appointment of a Receiver over Defendants Scoop Capital LLC and
Scoop Management Inc. ("Defendants"), and Relief

Defendants Scoop Real Estate L.P., Valhalla
,IR Fund LTD, Victory Fund

Investment Partners L.P., Valhalla Management Inc., Victory

LTD, Viking IRA Fund LLC, Viking Fund LLC and Viking Management ("Relief

Defendants"),

with full and exclusive power, duty and authority to: administer and manage the business affairs,
fuds, assets, choses in action and any other propert of the Defendants and Relief

Defendants;

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marshal and safeguard all of

the assets of

the Defendants

and Relief

Defendants; and take whatever

actions are necessar for the protection ofthe investors; and

WHREAS, the Conussion has made a suffcient and proper showing in support of the
relief requested by evidence demonstrating a prima facie case of violations of the federal securities

laws by the Defendants; and

WHREAS, the Commssion submitted the credentials of Burton W. Wiand to be appointed
as Receiver of all of the assets, properties, books and records, and other items of the Defendants and

Relief Defendants, including any propertes, assets and other items held in the names of the

Defendants and Relief Defendants, and the Commssion has advised the Cour that Buron W. Wiand
was prepared to assume this responsibility if so ordered by the Court; and
WHREAS, Buron W. Wi

and was appointed Receiver over the Defendants and Relief

Defendants; and

WHREAS, upon suffcient and proper showing by Buron W. Wiand and, for the
protection of

the investors and the Receivership Estate, the Cour expanded the Receivership to

include Venice Jet Center, LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel Preserve,

LLC; the Marguerite J. Nadel Revocable Trust DAD 8/2/07; the Laurel Mountain Preserve
Homeowners Association, Inc.; The Guy-Nadel Foundation, Inc.; Lime Avenue Enterprises, LLC;

and A Victorian Garden Florist, LLC,

NOW, THEREFORE, IT is ORDERED AN ADJUGED that Buron W. Wiand is
hereby reappointed the Receiver over the Defendants and Relief

Defendants and Venice Jet Center,

LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; the Marguerite 1.
Nadel Revocable Trust DAD 8/2/07; the

Laurel Mountain Preserve Homeowners Association, Inc.;

The Guy-Nadel Foundation, Inc.; Lime Avenue Enterprises, LLC; and A Victorian Garden Florist,

2

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LLC (collectively "Receivership Entities"), their subsidiares, successors and assigns, and is hereby
authorized, empowered, and directed to:
1. Take imediate possession of all propert, assets and estates of every kind of

the

Receivership Entities, whatsoever and wheresoever located belongig to or in the possession of the
Receivership Entities, including but not limted to all offces maintained by the Receivership
Entities, rights of action, books, papers, data processing records, evidences of debt, bank accounts,
savings accounts, ceitificates of deposit, stocks, bonds, debentues and other securties, mortgages,
future, fixtues, office supplies and equipment, and all real propert of

the Receivership Entities

wherever situated, and to admister such assets as is required in order to comply with the directions
contained in ths Order, and to hold all other assets pending fuer order of

this Cour;

2. Investigate the maner in which the affairs of the Receivership Entities were.
conducted and institute such actions and legal proceedings, for the benefit and on behalf of the
Receivership Entities and their investors and other creditors as the Receiver deems necessary agaist

those individuals, corporations, parerships, associations and/or uncorporated organations, which

the Receiver may claim have wrongfully, ilegally or otherwise irproperlY-misappropriated or

transfelTed monies or other proceeds directly or indirectly traceable from investors in the
Receivership Entities, including against their officers, directors, employees, affliates, subsidiares, or

any persons acting in concert or participation with them, or against any transfers of money or other

proceeds directly or indirectly traceable from investors in the Receivership Entities; provided such
actions may include, but not be limted to, seeking irposition of constructive trusts, disgorgement of
profits, recovery and/or avoidance of

fraudulent transfers under Florida Statute § 726.101, et. seq. or

otherwise, rescission and restitution, the collection of debts, and such orders from this Cour as may
be necessar to enforce ths Order;

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3. Present to this Court a report reflecting the existence and value of

the assets of

the

Receivership Entities and of

the extent ofliabilties, both those claimed to exist by others and those
the Receivership Entities;

the Receiver believes to be legal obligations of

4. Appoint one or more special agents, employ legal counel, actuaries, accountants,

clerks, consultants and assistants as the Receiver deems necessaiy and to fix and pay their reasonable
compensation and reasonable expenses, as well as al reasonable expenses of takig possession of

the

assets and business of

the Receivership Entities, and exercising the power granted by this Order,

subject to approval by this Court at the time the Receiver accounts to the Cour for such expenditures
and compensation;

5. Engage persons in the Receiver's discretion to assist the Receiver in carring out the
Receiver's duties and responsibilities, including, but not limted to, the United States Marshal's.

Service or a private securty firm;
6. Defend, compromise or settle legal actions, including the instant proceeding, in which
the Receivership Entities or the Receiver is a par, commenced either prior to or subsequent to ths
Order, with authoriation of

ths Cour; except, however, in actions where the Receivership Entities

are a nomial par, where the action does not effect a claim againt or adversely affect the assets of

the Receivership Entities, the Receiver may file appropriate pleadings in the Receiver's discretion.
The Receiver may waive any attorney-client or other privilege held by the Receivership Entities;

7. Assume control of~ and be named as authoried signatory for, all accounts at any
ban, brokerage fir or financial institution which has possession, custody or control of any assets or

fuds, wherever situated, of the Receivership Entities and, upon order of this Cour, of any of their
subsidiares or affiliates, provided that the Receiver deems it necessar;

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8. Make or authorie such payments and disbursements from the fuds and assets taken
into control, or thereafter received by the Receiver, and incur, or authorize the incurrence of, such

expenses and make, or authorie the makig of, such agreements as may be reasonable, necessar,
and advisable in discharging the Receiver's duties;

9. Have access to and review all mail of the Receivership Entities (except for mail that

appears on its face to be purely personal or attorney-client privileged) received at any office or
address of

the Receivership Entities.

IT is FURTHER ORDERED AN ADJUGED that, in connection with the
reappointment of

the Receiver provided for above:

10. The Receivership Entities and all of

their directors, offcers, agents, employees,

attorneys, attorneys-in-fact, shareholders, and other persons who are in custody, possession, or
control of any assets, books, records, or other propei1y of the Receivership Entities shall deliver

fortwith upon demand such property, monies, books and records to the Receiver, and shall forthwith
grant to the Receiver authorization to be a signatory as to all accounts at banks, brokerage firms or
fiancial intitutions which have possession, custody or control of any assets or funds in the name of

or for the benefit of

the Receivership Entities;

11. All bans, brokerage firm, fiancial institutions, and other business entities which
have possession, custody or control of any assets, funds or accounts in the name of, or for the benefit
of, the Receivership Entities shall cooperate expeditiously in the granting of control and authorization

as a necessary signatory as to said assets and accounts to the Receiver;
12. Unless authoried by the Receiver, the Receivership Entities and their pricipals shall
take no action, nor purort to take any action, in the name of or on behalf of

the Receivership

Entities;

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13. The Receivership Entities, and their respective offcers, agents, employees, attorneys,
and attorneys-in-fact, shall cooperate with and assist the Receiver. The Receivership Entities and
their pricipals, respective offcers, agents, employees, attorneys, and attorneys-in-fact shall take no

action, directly or indirectly, to hider, obstrct, or otherwise interfere with the Receiver in the
conduct of the Receiver's duties or to interfere in any manner, directly or indirectly, with the custody,

possession, management, or control by the Receiver of the fuds, assets, premises, and choses in
action described above;

14. The Receiver, and any counsel whom the Receiver may select, are entitled to
reasonable compensation from the assets now held by or in the possession or control of or which may
be received by the Receivership Entities; said amount or amounts of compensation shall be
commensurate with their duties and obligations under the circumstances, subject to approval of the
Court;
15. Without prior permssion from this Court, durg the period of

ths receivership all

persons, including creditors, banks, investors, or others, with actual notice of ths Order, are enjoined
from fiing a petition for relief under the United States Banptcy Code or from in any way

disturbing the assets or proceeds of the receivership or fi'om prosecuting any actions or proceedings

which involve the Receiver or which affect the propert of the Receivership Entities;
16. The Receiver is fully authorized to proceed with any fiing the Receiver may deem

appropriate under the Banptcy Code as to the Receivership Entities;
17. Title to all propert, real or personal, all contracts, rights of action and all books and

records of

the Receivership Entities and their pricipals, wherever located with or without ths state,

is vested by operation oflaw in the Receiver;

6

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18. Upon request by the Receiver, any company providing telephone services to the

Receivership Entities shall provide a reference of calls from any number presently assigned to any of
the Receivership Entities to any such number designated by the Receiver or perform any other
changes necessary to the conduct of

the receivership;

19. Any entity fushing water, electrc, telephone, sewage, garbage or trash removal
services to the Receivership Entities shall maintain such service and transfer any such accounts to the

Receiver unless Instiucted to the contrar by the Receiver;

20. The United States Postal Service is directed to provide any information requested by
the Receiver regarding the Receivership Entities, and to handle futue deliveries of the mail of

the

Receivership Entities as directed by the Receiver;
21. No bank, savings and loan association, other financial intitution, or any other person

or entity shall exercise any form of set-off, alleged set-off, lien, or any form of self-help whatsoever,
or refuse to transfer any funds or assets to the Receiver's control without the permssion of

this Cour;
the Receiver.

22. No bond shall be required in connection with the appointment of

Except for an act of gross negligence or greater, the Receiver shall not be liable for any loss or
damage inculTed by the Receivership Entities or by the Receiver's offcers, agents or employees, or

any other person, by reason of any act performed or onutted to be performed by the Receiver in

connection with the discharge of the Receiver's duties and responsibilties;
23. In the event that the Receiver discovers that funds of persons who have invested in the

Receivership Entities have been transfelTed to other persons or entities, the Receiver shall apply to

ths Cour for an Order giving the Receiver possession of such fuds and, if the Receiver deems it
advisable, extending ths receivership over any person or entity holding such investor fuds; and
24. This Court shall retain jursdiction of

this matter for all puroses.

li

7

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DONE AN ORDERED in Chambers at Tampa, Florida, on June 3, 2009.

sl Richard A. Lar.zara

RICHA A. LAZZA
UNED STATES DISTRICT JUDGE
COPIES FUSHED TO: Counsel of Record
Arhur G. Nadel, Register

No. 50690-018

MCCNewYork
Metropolitan Correctional Center 150 Park Row New York, NY 10007

',-

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8

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lJNITI~DSTATES DISTRIÇTCQURT MlllDLE DISTHICT OF FLORIDA
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Plaintif,
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ARTHUR NADEL, SCOOP CAPITAL, LLC, SCOOP MANAGEMENT, INC.
J)efen diuits,

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scoop REAL ESTA1'E,L.Jl., VALHALLA INVESTMgNT J' ARTNERS, L.P.,
VALHALLA ìVIANAGElVmNT, INC., VICTORY IRA FUND, L1'D,

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VIClORYF'UND,L'rD,
VIKING IRA FUND, LtC,
VIKING

FUND, LtC, AND VIKING MANAGEMENT, LLC
Relief Defendants.
~.!.

COMPLAINT FOR IN.JUNCTIVE AND OTHER.RELIEl"
Plaintiff Securities and Exchange Comiiiission alleges and

states ßS lb Ilows:

1. INTROJ)OCTION
1. TlieCoinmìssioli brings this emergency action to halt an ongoing fraud by Arthur

G. Nadel and two investment management companies he controls, Scoop

Capital, LLC and

Scoop

Mal1ugcinent, Inc. ("Defendants"). The lhmd concerns six hedge lunds: Scoop Real

Estate, L.P, Valhalla liivestimmt Partners, L.P., Victory IRA Fund, Ltd, Victory Fund, LId.
Viking IRA Fund. LLC, and Viking Fund, LLC: and two other investment management
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companies, Valhalla Management, Inc. and Viking Management. The latter eight entities are
collectively referred to as Relief

Defendants.

2. From at least January 2008 through the present, the Defendants, who provide
investment advice to Scoop Real Estate, Valhalla Investment Partners, Victory IRA Fund,
Victory Fund, Viking IRA Fund, and Viking Fund (collectively the

"Hedge Funds") have issued

materially false and misleading account. statements to the Hedge Funds' investors. The false

account statements overstated the value of investments in the Funds by approximately $300

milion,
3. The Defendants have also massively overstated the Hedge Funds' historical
investment returns and the value of

their assets in account statements provided to investors.

4. Nadel, the Hedge Funds' principal investment advisor, provided fraudulent
balances and values to others associated with the Hedge Funds knowing they would be used to
create false investor account statements,
5. At the same time he was deceiving investors, Nadel maintained secret bank

accounts, which only he controlled, in the names of at least two of the Hedge Funds. He recently

transferred $1.25 milion from the Viking IRA Fund and Valhalla Investment Partners to one of
the secret accounts,

6. By causing the Hedge Funds to issue materially false statements to investors that
tremendously exaggerated the value of their investments, the Defendants violated, and unless
enjoined, are reasonably likely to continue to violate, Section 17(a) of

the Securities Act of i 933

("Securities Act"), 15 U.s.c. §§ 77e(a); and Section 10(b) of the Securities Exchange Act of
1934 ("Exchange Act"), i 5 U.S,C §78j(b), and Exchange Act Rule 10b-5, 17 C.F.R. §240. i Ob-5.

2

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7, To halt the ongoing fraud, maintain the status quo, and preserve investor assets,

the Commission seeks various forms of equitable relief against the Defendants, including a

temporary restraining order, preliminar injunètions, pennanent injunctions against future
violations of the federal securities laws, disgorgement plus pre-judgment interest, and civil
penalties,
8. Based on the ongoing nature of their violations and the scienter the Defendants

have demonstrated through their wilful and wanton disregard for the federal securities laws, the

Defendants have shown they will continue to violate the law unless the Court grants the
injunctive and other relief

the Commission seeks.

II. DEFENDANTS AND RELIEF DEFENDANTS
9. Defendant Nadel, 76, is a resident of Sarasota, Florida and one of the owners of

Scoop Capital and Scoop M~nagement. He is the sole offcer and director of Scoop Management

and the sole managing member of Scoop CapitaL. At all relevant times, he provided investment
advice to the Hedge Funds, was responsible for the Hedge Funds' trading activities, and provided

the account values included in investor account statements for the Hedge Funds. Nadel received

compensation through the fees charged to the Hedge Funds for management and investment
advice.
10. Defendant Scoop Capital is a Florida limited liabilty company organized on June

28, 2001, with its principal place of business in Sarasota, Florida. Nadel is the sole managing
member of Scoop CapitaL. Nadel and his wife arc the principals of

Scoop CapitaL.

11. Defendant Scoop Management is a Florida corporation incorporated on April 17,

200 i, with its principal place of business in Sarasota, Florida. Nadel is the President, Secretary
and a Director of Scoop Management.

3

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12. Relief Defendant Scoop Real Estate is a Delaware limited partnership fonned on

October 15,2003, Scoop Capital is its general partner,
13. Relief Defendant Valhalla Investment Partners is a Delaware limited partnership

fonned on October 15,2003. Valhalla Management is its general partner,rand its principal place
of

business is Sarasota, Florida.
14, Relief Defendant Valhalla Management is a Florida corporation organized on

February 16, 1999, with its principal place of

business is Sarasota, Florida.

15, Relief Defendant Victory IRA Fund is a Florida limited parnership fonned on

April 3, 2003, with its principal place of business in Sarasota, Florida. Scoop Capital is the
general partner of Victory IRA Fund.
16. Relief Defendant Victory Fund is a Florida limited partnership formed on May I,
2005, with its principal place of business in Sarasota, Florida. Scoop Capital is the general

partner of

Victory Fund.

17. Relief Defendant Viking IRA Fund is a Florida limited liability company
organized on March 27, 2001, with its principal place of business in Sarasota, Florida. Viking
Management is its sole managing member.

18. Relief Defendant Viking Management is a Florida limited liabilty company
organized on May 21,2001, with its principal place of

business in Sarasota, Florida.

19. Relief Defendant Viking Fund is a Florida limited liabilty company organized on

March 23, 2001, with its principal place of

business in Sarasota, Florida. Viking Management is

its sole managing member,

4

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III. JURISDICTION AND VENUE
20. This Court has jurisdiction over this action pursuant to Sections 21(d) 21(e), and
27 of

the Exchange Act, 15 V.S.C, §§ 78u(d), 78u(e) and 78aa.
21. This Court has personal jurisdiction over the Defendants and Relief Defendants,

and venue is proper in the Middle District of Florida, because the Defendants and Relief
Defendants' principal places of

business are in Sarasota. Additionally, Nadel resides in Sarasota

and has conducted the Defendants' and Relief Defendants' business in Sarasota, Thus, the

conduct constituting the fraud alleged in this Complaint has occurred in the Middle District.

22. The Defendants, directly and indirectly, have made use of the means and
instrumentalities of interstate commerce, the means and instruments of transportation and
communication in interstate commerce, and the mails, in connection with the acts, practices, and
courses of

business set forth in this Complaint.
iv. FACTS
23. Nadel and the two other Defendants have managed the Hedge Funds since 1999.

24. In 2003, Scoop Capital formed Scoop Real Estate to acquire interests in
residential, commercial, offce and industrial real estate properties. Scoop Capital has been
responsible for managing that Hedge Fund's portfolio and its day-to-day operations, with Nadel
responsible for its investment decisions.
25, In 2005, Scoop Capital fonned Victory IRA Fund and Victory Fund. The
investment objective of

these two Funds has been to invest or trade in securities.

26. The Defendants have offered and sold limited partnership interests in Scoop Real

Estate, Víctory IRA Fund and Victory Fund through multiple offerings.

5

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27. According to private placement memoranda (UPPMs") for Scoop Real Estate,

Victory IRA Fund and Victory Fund, Scoop Capital has been responsible for managing those
Hedge Funds' portfolios and their day-to-day operations. Nadel has been responsible for all the
Hedge Funds' investment decisions.
28, The Victory IRA Fund and Victory Fund PPMs tout Scoop Management's

propnetary trading systems and extensive market research.
29. The PPMs state those two Hedge Funds will pay quarterly management fees to
Scoop Capital and Scoop Management, based on a percentage of

those funds' net assets,

A. Valhalla Investment Partners, Viking Fund, and Viking IRA Fund
30. In 1999, Valhalla Management formed Valhalla Investment Partners to invest in
and/or trade in securities.
3 i. In 2001, Viking Management formed Viking IRA Fund and Viking Fund to invest

and/or trade in the securities of

medium to large cap compànies.

32. The Defendants have offered and sold limited partnership and membership

interests in Valhalla Investment Parners, Viking IRA Fund and Viking Fund through multiple
offerings.
33. According to the PPMs, Viking Management and Valhalla Management were

responsible for all of the investment decisions for their respective Hedge Funds, However, the

PPMs also state that Viking Management and Valhalla Management rely on the investment
advice of Scoop Management, or that the Funds' investments wil be made in accordance with
trading signals and other pnnciples Scoop Management developed.

34. More specifically, the PPMs state Scoop Management wil provide trading
signals, market data, computer investment and trading programs, technical and fundamental

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research, and entry of trades for the Hedge Funds, Scoop Management also is expected to
provide Viking Management and Valhalla Management with offce management and technical
services in connection with those Funds' operations, including the use of offce space, facilities,
and bookkeeping.
35, According to the PPMs, the Hedge Funds wil pay Valhalla Management and

Viking Management a management and pedonnance fee, and Scoop Management a monthly advisory fee of $5,000, The PPMs also state Valhalla Management and Viking Management
wil share their management and performance fee with Scoop Management.

B. Misrepresentations to the Funds' Investors Concerning the Value orthe Funds' Assets
36, For at least the last year, the Defendants have materially misrepresented the value

of the Hedge Funds' assets to investors, For example, the Hedge Funds' internal books and

records - used to provide false account statements to investors - indicate the value of their
assets exceeds $300 milion. In fact, the actual value of the Hedge Funds' assets is only about
$506,000.
37. As of mid-January 2009, the account values for the six Hedge Funds were as
follows: (a) Victory Fund - securities worth $1,901.31 and cash of $78,7~4.37; (b) Scoop

Real Estate - securities worth $2,119.81 and cash of $122,830.40; (c) Viking IRA Fund securities worth $2,923.58 and cash of$77,025.20; (d) Viking Fund - securities worth $917.70
and cash of $65,708.33; (e) Valhalla Investment Partners - securities worth $4,413.66 and

cash of $16,158,05; and (f) Victory IRA Fund - securities worth $2,938.86 and cash of
$131,139.52.
38. Thus, the total value of the Hedge Funds' securities holdings as of January 14,

2009 was only $15,214.92, and the cash on hand was only $491,625.87.

7

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39. The Defendants have grossly misrepresented to investors the value of their
investments in the Hedge Funds by providing them false account statements ,that Nadel
directed,
40. In particular, one investor from Virginia who invested in the Victory IRA Fund

received a statement for October 2008 indicating his investment was valued at $599,55 I .55,

and a November 2008 statement indicating his investment was valued at $602,965.39. This
same investor made a second investment in Victory IRA Fund through another account and

subsequently received an October 2008 statement indicating this investment was valued at

$172,354.07, and a November 2008 statement indicating this investment was valued at
$173,335.45. These statements were false because the total value of the entire Victory IRA
Fund's holdings was only $2,938.86 at the end of

October and November 2008,

41. This same investor also invested in Scoop Real Estate. He received account

statements for October 2008 indicating his investment in Scoop Real Estate was valued at

$586,862,54, and a November 2008 statement indicating the value of his investment was
$590,321.8. These statements were false because Scoop Real Estate's entire holdings were
only worth $8,088.35 at the end of October and $ 1'98,224.13 at the end of November 2008.
42. This investor's wife also made two separate investments in the Victory IRA Fund

and received statements for October ,and November 2008 which grossly misrepresented the
value of

her investments.

43. She also invested in Victory Fund and received an account statement for

November 2008 which misrepresented the value of her investment in this fund as worth
$4 i 9,824.89. The November 2008 account stalement was false because Victory Fund's entire
holdings were worth only $91,823.49 at the end of

November 2008,

8

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C. Misrepresentations in the Offer or Sale of the

Hedge Funds' Securities

44.

In addition to misrepresenting to the Funds' investors the value of their

investments, the Defendants have prepared, approved and disseminated offering materials to
prospective investors that materially misstate the Funds' yearly historical returns and the total
capital invested in the Funds.
45. In paricular, the offering materials for the Viking Fund, the Viking IRA Fund,

and the Victory Fund represent those Funds had approximately $342 milion in capital as of

November 30, 2008. In fact, the total value of those Funds' assets as of that date was only
$963,123.85.
46. The offering materials also represent that

'the Funds generated investment returns

ranging from 10,97% to 1 i .82% between January and November of 2008. In fact, these

claimed returns were utterly bogus, At least three of the funds lost money on their investments
from January through November, and a fourth reported lower returns.

COUNT)
Fraud in Violation of Section i O(b) of the Exchange Act and Rule i Ob-S
47, The Commission repeats and reallegcs Paragraphs 1 through 46 of

this Complaint

as if fully set forth herein,

48, From at least January 2008 through the present, the Defendants, directly or
indirectly, by use of the means and instrumentality of interstate commerce, and of the mails in connection with the purchase or sale of the securities, as described in this Complaint,
knowingly, wilfully or recklessly have: (a) employed devices, schemes or artifices to

defraud;

(b) made untrue statements of material facts and omitted to state material facts necessary in
order to make the statements made, in the light of the circumstances under which they were

9

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made, not misleading; and/or (c) engaged in acts, practices and courses of

business which have

operated as a fraud upon the purchasers of such securities;

49. By reason of the foregoing, the Defendants have directly or indirectly violated
and, unless enjoined, are reasonably likely to continue to violate, Section 10(b) of

the Exchange

Act, 15 U.S.C. §78j(b). and Rule lOb-5, 17 C,F.R. §240.lOb-S.
COUNT II

Fraud in Violation of Section 17(0)(1) of the Securities Act
50. The Commission repeats and realteges Paragraphs 1 through 46 of

this Complaint

as if fully set forth herein.

51. From at least January 2008 through the present, the Defendants directly and
indirectly, by use of the means or instruments of

transportation or communication in interstates

commerce and by use of the mails, in the offer or sale of securities, as described in this
Complaint, have knowingly, wilfully or recklessly employed devices, schemes or artifices to
defraud.

52. By reason of the foregoing, the Defendants have directly or indirectly violated
and, unless enjoined, are reasonably likely to continue to violate, Section 17(a)(1) of the
Securiiies Act. 15 U.S.C. §77q(a)(l).
COUNT III

Fraud in Violation of Sections i 7(a)(2) and 17(8)(3) of the Securities Act
53. The Commission repeats and real1eges Paragraphs 1 through 46 of

this Complaint

as if fully set forth herein.

54. From at least January 2008 through the present, the Defendants, directly and
indirectly, by use

of the means or instruments of transportation or communication in interstate

10

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commerce and by the use of the mails, in the offer or sale of securities, as described in this

Complaint have: (a) obtained money or property by means of untre statements of material
facts and omissions to state material facts necessary to make the statements made, in the light
of the circumstaces under which they were made, not misleading; and/or (b) engaged in

transactions, practices and courses of business which are now operating and wil operate as a
fraud or deceit upon purchasers and prospective purchasers of such securities.

55. By reason of the foregoing, the Defendants have directly or indirectly violated

and, unless enjoined, are reasonably likely to continue to violate, Sections 17(a)(2) and l7(a)(3)

ofthe Securities Act, 15 U.S.C. §§77q(a)(2) and 77q(a)(3).

RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests the Court:
i. Declaratory Relief

Declare, determine and find that the Defendants committed the violations of the federal
securities laws alleged in this Complaint.

II. Permanent Injunction

Issue a Permanent Injunction, enjoining the Defendants, their agents, servants,
employees, attorneys, and representatives, and all persons in active concert or participation with

them, and each of them, from violating Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a),
and Section lO(b) and Rule lOb-5 of the Exchange Act, is U.S.C. §78j(b) and 17 C.F.R.

§240.10b-S.

III. Asset Freeze
Issue an Order freezing the assets of all Defendants and Relief Defendants until further
Order of the Court.

ii

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iV. Appointment of a Receiver
Issue an Order appointing a Receiver over all assets held in the name of the Defendants

(other than Nadel) and Relief Defendants to (1) preserve the status quo, (2) ascertain the
financial condition of each of the Defendant and Relief Defendant entities, (3) prevent further

dissipation of the property and assets of each of the Defendant and Relief Defendant entities, to

prevent loss, damage and injury to investors, (4) preserve the books, records and documents of
each ofthese Defendant entities and Relief Defendant entities, and (5) be available to respond to
investor inquiries,
V. Disgorgemeot

Issue an Order directing the Defendants and the Relief Defendants to disgorge all profits

or proceeds that they received as a result of the acts and/or courses of conduct complained of
herein, with prejudgment interest.
Vi. Penalties

Issue an Order directing the Defendants to pay civil money penalties pursuant to Section
20(d) of the Securities Act, 15 U.S.c. § 77t(d), and Section 2I(d) of

the Exchange Act, is U.S.C.

§ 78u(d),

VII. Further Relief

Grant such other and further relief as may be necessary and appropriate.
VIII. Retention of Jurisdiction

Further, the Commission respectfully requests the Court to retain jurisdiction over this
action in order LO implement and carr out the terms of all orders and decrees that it may enter, or

to entertain any suitable application or motion by the Commission for additional relief within the
jurisdiction of

this Court.

12

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January 21, 20Ö9

By:

~

Scott Masel
ScniOl' Trial Couosel

Florida Bar No. 0007110
Telephone: [phone]

Facsiniile:(30S) 53ú.4154
masCls(ivsec;gov
Lead cmd Tría! C010lSe!

Andre Z.\llOranO Senior Collnsel F)(nida Bar No. 09(7361

Telephone: (~05) 982-6324 Facsimile: [phone]
~mmomiioHØ),secJMl;'.

Attomeys forPlainti ff
SecLirities Hrid Exchange Conunission

80 i Brickcli À venue, Suite 1800 Miami, FL 33131

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Case 1 :09-mc-00027-LHT Document 1-2

Filed 06/10/2009