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SEC convinces court to freeze assets in case of stolen investors' funds

Chris Hamblin, Editor, London, 1 August 2016

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The US Securities and Exchange Commission has engineered an asset freeze against three men who are not licensed to sell investments.

The trio allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort. In an emergency action filed in federal court in Atlanta, the SEC alleged that Matthew White, Rodney Zehner, and Daniel Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they owned and claimed that the money was going to be used to fund the resort project. However, they never came close to raising the funds necessary to start the project and in the meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace. The SEC alleges that the men orchestrated sham transactions to prop up the price of the worthless, expired bonds at the center of the fraud.

The regulator is encouraging investors to check the backgrounds of people who are trying to sell them investments, pointing out that a quick search on its investor.gov website would have shown that White, Zehner, and Merandi were not licensed to sell investments.

The SEC is accusing White, Zehner, Merandi, and their companies of breaking the anti-fraud provisions of s17(a) Securities Act 1933, s10(b) Exchange Act 1934 and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement, and penalties against all of the defendants.  The court order has frozen the defendants’ cash and bonds held in brokerage account.

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