The SEC filed two more offering fraud cases this week. In both cases investors were assured of the security of their investment. In both cases investors were at times promised large returns. In both investors lost. One action settled while the other did not. SEC v. Elrod, Civil Action No. 13-CV- 02449 (D. Col. Filed Sept. 9, 2013); SEC v. Projaris Management, LLC, Civil Action No. 1:13-cv-00849 (D.N.M. Filed Sept. 9, 2013).
Elrod is an action which names as defendants Brian Elrod and Nova Pack. Over an eight month period beginning in March 2007 Mr. Elrod, aided by defendant Pack who acted as an unregistered broker, raised over $2 million from 12 investors who purchased promissory notes. Investors were assured that their money was secure. The funds would be used to expand a group of finance companies. Above average returns of 12% to as much as 24% would flow to the investors, according to the claims of the defendants. In fact, much of the money went to the defendants. The complaint alleges violations of Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b) and 15(a).
Each defendant settled, consenting to the entry of a permanent injunction. The Order as to defendant Elrod prohibits future violations of each of the Sections cited in the complaint except Exchange Act Section 15(a). He also agreed to pay disgorgement of $1,720,491, prejudgment interest and a penalty equal to the amount of the disgorgement. The Order as to defendant Pack prohibits future violations of Exchange Act Section 15(a) and requires the payment of disgorgement in the amount of $171,500 along with prejudgment interest. Payment, along with a penalty was waived based on financial condition. See Lit. Rel. No. 22794 (Sept. 9, 2013).
Projaris is an action against the management company, its founder Joe Lawler, his four sons, an employee of the management company, Pamela Hass and Victory Partners Financial. In this case about $1.4 million was raised from investors over about four years beginning in May 2008. Investors were told their funds would be part of a pooled investment. Funds would be used to purchase metals, commodities and real estate. The pool would also invest overseas.
In fact about $835,000 of the investor funds were never invested. Rather, the money was diverted to the defendants. The complaint alleges violations of Securities Act Sections 5(a), 5(c), 17(a)(1) and 17(a)(2) and Exchange Act Sections 10(b) and 15(a). The case is in litigation. See Lit. Rel. No. 22793 (Sept. 9, 2013).