Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, April 11, 2007

SEC Obtains TRO Against Novus Technologies

The Commission has obtained an order temporarily restraining Novus Technologies, LLC, Ralph W. Thompson, Jr., Duane C. Johnson, RCH2, LLC, and Robert Casey Hall, from making unregistered fraudulent offers, sales and purchases of securities and freezing the assets of Novus, RCH2, Hall, Thompson, Johnson, U.S. Ventures, LC (US Ventures), U.S. Ventures International, LLC, (USVI), Robert L. Holloway, Online Strategies Group, Inc., and David Story The Order was entered April 11, 2007, by the Honorable Paul G. Cassell, United States District Judge for the District of Utah.

The complaint alleges the defendants have obtained investments of at least $4.8 million from the fraudulent unregistered sale of short-term promissory notes and joint venture agreements from at least 50 investors. It is alleged that Novus and RCH2 have made offers and sales through: the Internet, referrals from current investors and sales presentations at a Salt Lake City shopping mall. Both Novus and RCH2 allegedly have sold six month promissory notes providing for returns to investors of between 3% and 5% per month.

The complaint further alleges that Novus and RCH2 have been telling investors this opportunity is "too good NOT to be true." Novus and RCH2 also allegedly represent to investors that 80% of investor funds are placed in low risk investments such as real estate with only 20% of the funds invested in high risk investments such as currency futures. Investors are also allegedly told the funds are 100% safe because they are pooled in a large interest-bearing account. It is further alleged that Novus and RCH2 have told investors their funds are backed by liquid assets or real estate and sufficient funds are maintained to cover six months worth of interest and principal.The complaint alleges that these representations are false and that, in fact, almost all investor money has been invested in high risk currency futures or S&P 500 futures through US Ventures resulting in trading losses of at least $9 million. It is also alleged in the complaint that funds obtained from later investors in the scheme were used to pay promised returns to earlier investors in a classic Ponzi scheme.  See Litigation Release No. 20075 / April 11, 2007.

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