SEC Obtains Asset Freeze in Case of Investor Funds Stolen for Shopping Sprees

The Securities and Exchange Commission today announced an asset freeze it has obtained against three men who aren’t registered to sell investments and 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 alleges that Matthew E. White, Rodney A. Zehner, and Daniel J. Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project.  But they never came close to raising the funds necessary to start the project, and 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.

“We allege that these men stole millions of dollars from investors for personal use and orchestrated sham transactions to prop up the price of the worthless, expired bonds at the center of the fraud,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office.

The SEC encourages investors to check the backgrounds of people selling them investments.  A quick search on the SEC’s investor.gov website would have shown that White, Zehner, and Merandi are not registered to sell investments.

The SEC's complaint filed yesterday alleges that White, Zehner, Merandi, and their companies violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement, and penalties against all of the defendants.  The court order obtained late yesterday freezes defendants’ cash held in a brokerage account and freezes the bonds held in a separate brokerage account.   

The SEC’s investigation was conducted by Debbie Hampton, Tony Winter, and Harry Roback, and supervised by Matthew McNamara and William Hicks of the Atlanta office.

Public Service Announcement: — Check Out Your Investment Professional

SEC Press Release

SEC Halts Ongoing Fraudulent Stock Scheme

The Securities and Exchange Commission today announced it has won a court-ordered asset freeze to halt an ongoing fraud by two former brokers with disciplinary histories who allegedly raised more than $5 million from investors without using the money as promised.

In an emergency action filed in federal court in Chattanooga, Tenn., the SEC alleges that James Hugh Brennan III and Douglas Albert Dyer sold purported shares in eight similarly named companies to more than 240 investors since 2008 without ever registering the stock as they promised.  Instead, according to the SEC’s complaint, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives.  The SEC further alleges that Brennan and Dyer continue to solicit investors while touting their securities industry experience and failing to disclose that Brennan was banned from the brokerage industry and Dyer suspended and fined for executing unauthorized transactions in customers’ accounts.

“We allege that Brennan and Dyer have been telling investors the same lies for several years without fulfilling any of the promises they’ve made, and the court’s temporary restraining order stops them from soliciting any more investors and freezes their assets as we pursue litigation,” said Walter Jospin, Director of the SEC’s Atlanta Regional Office.

The SEC encourages investors to check the backgrounds of investment professionals before investing their money.  A quick search on the SEC’s investor.gov website would have shown that neither Brennan nor Dyer has been registered to sell investments as a broker since the late 1990s as well as their disciplinary problems with the Financial Industry Regulatory Authority and state regulators. 

The SEC’s complaint alleges that Brennan, Dyer, and their company Broad Street Ventures have violated Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctions.  The SEC also seeks penny stock and officer-and-director bars against Brennan and Dyer.  The court’s order issued this morning freezes the assets of Broad Street, Brennan, and Dyer.  Their spouses are named as relief defendants in the SEC’s complaint for the purposes of recovering ill-gotten gains deposited in their accounts.

The SEC’s investigation has been conducted by Michael Mashburn and Peter Diskin under the supervision of William Hicks, and the litigation is being led by Robert Schroeder, Pat Huddleston, and Graham Loomis in the Atlanta Regional Office.

Public Service Announcement: — Check Out Your Investment Professional

SEC Press Release