Securities and Exchange Commission v. Dappah et al
Filing
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ORDER granting 2 Motion for Immediate Entry of Consent Order For Permanent Injunctions, Asset Freeze and Other Relief. Signed by District Judge Robert J. Conrad, Jr on 11/21/2013. (Pro se litigant served by US Mail.)(blf)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
Civil Action No:
3:13-cv-00546
v.
FRANK DAPPAH and
YATALIE CAPITAL MANAGEMENT, a/k/a
YATALIE CAPITAL MANAGEMENT CO,
CREATO FUNDS L.P., a/k/a YATALIE
CAPITAL, INC., a/k/a CREATO FUNDS, L.P.,
a/k/a YATALIE CAPITAL MANAGEMENT
CO.,
Defendants.
ORDER GRANTING PERMANENT INJUNCTIONS,
DISGORGEMENT OF ILL-GOTTEN GAINS, ASSET FREEZE,
AND OTHER RELIEF AS TO DEFENDANTS
FRANK DAPPAH AND YATALIE CAPITAL MANAGEMENT
The Securities and Exchange Commission (the “Commission”) having filed a Complaint,
and Defendant Yatalie Capital Management, a sole proprietorship (a/k/a Yatalie Capital
Management Co, Creato Funds L.P., a/k/a Yatalie Capital, Inc., a/k/a Creato Funds, L.P., a/k/a
Yatalie Capital Management Co. (collectively, “Yatalie”)) and Defendant Frank Dappah
(collectively, “Defendants”) having entered general appearances; consented to the Court’s
jurisdiction over Defendants and the subject matter of this action; consented to entry of this
Order without admitting or denying the allegations of the Complaint (except as to jurisdiction);
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waived findings of fact and conclusions of law; and waived any right to appeal from this Order:
I.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants and
Defendants’ agents, servants, employees, attorneys, and all persons in active concert or
participation with them who receive actual notice of this Order by personal service or otherwise
are permanently restrained and enjoined from violating or aiding and abetting violations of
Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)]
and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or
instrumentality of interstate commerce, or of the mails, or of any facility of any national
securities exchange, in connection with the purchase or sale of any security:
(a)
to employ any device, scheme, or artifice to defraud;
(b)
to make any untrue statement of a material fact or to omit to state a material fact
necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or
(c)
to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.
II.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ agents, servants, employees, attorneys, and all persons in active
concert or participation with them who receive actual notice of this Order by personal service or
otherwise are permanently restrained and enjoined from violating or aiding and abetting
violations of Section 203A of the Investment Advisers Act of 1940 (the “Advisers Act”) [15
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U.S.C. § 80b-3a], by, directly or indirectly, making use of means and instruments of
transportation and communication in interstate commerce and of the mails:
(a)
to register any ineligible entity as an investment adviser with the Commission; or
(b)
to register any entity as an investment adviser with the Commission if such entity
is not otherwise exempt from the provisions of Section 203A of the Advisers Act
[15 U.S.C. § 80b-3a].
III.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ agents, servants, employees, attorneys and all persons in active
concert or participation with them who receive actual notice of this Order are permanently
restrained and enjoined from violating or aiding and abetting violations of Section 204 of the
Advisers Act [15 U.S.C. § 80b-4] and Rule 204-2 thereunder [17 C.F.R. § 275.204-2], by,
directly or indirectly, making use of means and instruments of transportation and communication
in interstate commerce and of the mails and, as an investment adviser registered or required to be
registered under Section 203 of the Advisers Act [15 U.S.C. §80b-3], failing to make and keep
true, accurate, and current all books and records relating to its investment advisory business, as
required by Rule 204-2 [17 C.F.R. § 275.204-2].
IV.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ agents, servants, employees, attorneys and all persons in active
concert or participation with them who receive actual notice of this Order are permanently
restrained and enjoined from violating or aiding and abetting violations of Sections 206(1) and
(2) of the Advisers Act [15 U.S.C. §§ 80b-6(1) and (2)], by, while acting as an investment
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adviser, directly or indirectly, making use of means and instruments of transportation and
communication in interstate commerce and of the mails:
(a)
to employ any device, scheme, or artifice to defraud any client or prospective
client; or
(b)
to engage in any transaction, practice, or course of business which operates as a
fraud or deceit upon any client or prospective client.
V.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ agents, servants, employees, attorneys and all persons in active
concert or participation with them who receive actual notice of this Order are permanently
restrained and enjoined from violating or aiding and abetting violations of Section 206(4) of the
Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-1 thereunder [17 C.F.R. § 275.206(4)-1],
by, directly or indirectly, making use of means and instruments of transportation and
communication in interstate commerce and of the mails:
(a)
to, as an investment adviser registered or required to be registered under Section
203 of the Advisers Act [15 U.S.C. § 80b-3], directly or indirectly publish,
circulate, or distribute any advertisement which refers, directly or indirectly, to
any testimonial of any kind concerning the investment adviser or concerning any
advice, analysis, report or other service rendered by such investment adviser; or
(b)
to, as an investment adviser registered or required to be registered under Section
203 of the Advisers Act [15 U.S.C. § 80b-3], directly or indirectly publish,
circulate, or distribute any advertisement which contains any untrue statement of a
material fact or which is otherwise false or misleading.
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VI.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants and Defendants’ agents, servants, employees, attorneys and all persons in active
concert or participation with them who receive actual notice of this Order are permanently
restrained and enjoined from violating or aiding and abetting violations of Section 207 of the
Advisers Act [15 U.S.C. § 80b-7], by, directly or indirectly, making use of means and
instruments of transportation and communication in interstate commerce and of the mails to
willfully make untrue statements of material facts in any registration application or report filed
with the Commission under Sections 203 or 204 of the Advisers Act [15 U.S.C. §§ 80b-3, 80b4], or willfully omitting to state in any such application or report any material fact which is
required to be stated therein.
VII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants shall jointly and severally pay disgorgement of ill-gotten gains and prejudgment
interest thereon, and a civil penalty pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C.
§ 78u(d)(3)] and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]. The Court shall
determine the amounts of the disgorgement and civil penalty upon motion of the Commission.
Prejudgment interest shall be calculated from February 1, 2013, based on the rate of interest used
by the Internal Revenue Service for the underpayment of federal income tax as set forth in 26
U.S.C. § 6621(a)(2). In connection with the Commission’s motion for disgorgement and/or civil
penalties, and at any hearing held on such a motion: (a) Defendants will be precluded from
arguing that they did not violate the federal securities laws as alleged in the Complaint; (b)
Defendants may not challenge the validity of the Consent or this Order; (c) solely for the
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purposes of such motion, the allegations of the Complaint shall be accepted as and deemed true
by the Court; and (d) the Court may determine the issues raised in the motion on the basis of
affidavits, declarations, excerpts of sworn deposition or investigative testimony, and
documentary evidence, without regard to the standards for summary judgment contained in Rule
56(c) of the Federal Rules of Civil Procedure. In connection with the Commission’s motion for
disgorgement and/or civil penalties, the parties may take discovery, including discovery from
appropriate non-parties.
VIII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that,
pending entry of a Final Judgment in this matter, all assets of or under the control of Defendants
are frozen, except as otherwise specified herein. Pending entry of the Final Judgment,
Defendants, their officers, agents, servants, employees, attorneys, and all persons in active
concert or participation with them, be, and hereby are, restrained from, directly and indirectly,
transferring, setting off, receiving, changing, selling, pledging, assigning, liquidating or
otherwise disposing of or withdrawing any assets and property owned by, controlled by, or in the
possession of the Defendants. This Court further enjoins any disbursement by Yatalie, its agents,
representatives, employees and officers and all persons acting in concert or participation with it,
whatever business names they may operate under, of any proceeds derived from the scheme
alleged in the Commission’s Complaint. The freeze shall include but not be limited to those
funds located in any bank accounts, brokerage accounts, and any other accounts or property of
Defendants. To the extent that Defendants are in possession of any funds obtained from advisory
clients as set forth in the Commission’s Complaint, the Commission shall seek a further order of
the Court to address the disposition of such funds. Defendant Dappah may apply to the Court
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with a signed, sworn statement of financial condition for an amount which the Court may
determine may be exempted from the freeze for the purpose of meeting his ordinary and
necessary living expenses. Nothing in this order shall prevent Dappah from obtaining
employment in the future and any earnings from that employment shall be segregated from any
frozen accounts and shall not be subject to this freeze.
IX.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants shall not exercise any discretionary authority or power of attorney with respect to
securities held in the name of, for the benefit of, or in the interest of any person other than
Defendants (any such exercise of discretionary authority or power of attorney with respect to
securities held in the name of, for the benefit, of or in the interest of Defendants being subject to
the restrictions set forth in Paragraph VIII of this Order). Such prohibition specifically includes,
but is not limited to, any actions by Defendants to withdraw, debit, charge, assess or in any way
seek to disburse moneys or securities from securities accounts held in the name of, for the benefit
of, or in the interest of any person other than Defendants. This Order is not intended to impose
any independent limitations on the ability of Defendants’ advisory clients to buy, sell, liquidate
or withdraw funds from securities accounts held with broker-dealers registered with the
Commission, including accounts over which Defendants have grants of discretionary authority or
limited powers of attorney.
X.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
pending the entry of a Final Judgment in this action, Defendants, their officers, agents, servants,
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employees, attorneys, and those persons in active concert or participation with them who receive
actual notice of this order by personal service, facsimile transmission or otherwise, and each of
them, are hereby enjoined from destroying, mutilating, concealing, altering, or disposing of any
document referring or relating in any manner to any Defendants herein including, but not limited
to, (a) any document relating to the receipt and disbursal of funds by Defendants, and (b) any
document relating to Defendant Yatalie in any way. As used in this Order, “document” means
the original and all non-identical copies (whether non-identical because of handwritten notation
or otherwise) and all written or graphic matter, however produced, and any other tangible record,
or electronic data compilation of any sort, including, without limitation, computer disks,
computer hard drives, computer diskettes, computer tapes, correspondence, memoranda, notes,
minutes, telephone records, reports, studies, telexes, diaries, calendar entries, contracts, and
letters of agreement, and including any and all existing drafts of all documents.
XI.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
Defendants prepare and present to the Commission an accounting of all funds received pursuant
to the scheme described in the Commission’s Complaint and of the disposition and use of those
proceeds. This accounting shall include, but not be limited to, (a) the name, address, phone
number and e-mail address of each client, (b) the amount initially invested by each client, (c) the
total amount in advisory fees deducted from each client for each month, (d) the total amount in
advisory fees authorized to have been taken from each client for each month under the client’s
advisory agreement, (e) the difference between the figures calculated under items (c) and (d), and
(f) the current balance of each client account. This accounting shall be served upon the
Commission within 30 days from the date of entry of this Order.
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XII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that the
Commission may take expedited discovery as follows:
(a) The Commission may take depositions upon oral examination subject to five days’
notice prior to expiration of 30 days after service of the Summons and Complaint
upon Defendants, pursuant to Rule 30(a) of the Federal Rules of Civil Procedure;
(b) Pursuant to Rule 33(a) of the Federal Rules of Civil Procedure, Defendants shall
answer all of the Commission’s interrogatories within five days of service of such
interrogatories;
(c) Pursuant to Rule 34 of the Federal Rules of Civil Procedure, upon request of the
Commission, Defendants shall produce all documents within five days of service of
such request;
(d) The Commission may serve discovery by facsimile or by any other means provided
for within the Federal Rules of Civil Procedure; and
(e) All written responses to the Commission’s requests for discovery under the Federal
Rules of Civil Procedure shall be delivered to the Commission at 950 East Paces
Ferry Road N.E., Suite 900, Atlanta, Georgia 30326, or such other place as counsel
for the Commission may direct, by the most expeditious means available.
XIII.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that the
Consent is incorporated herein with the same force and effect as if fully set forth herein, and that
Defendants shall comply with all of the undertakings and agreements set forth therein.
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XIV.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that this
Court shall retain jurisdiction of this matter for all purposes.
Signed: November 21, 2013
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