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Univ. of Toledo College of Law

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Wednesday, March 25, 2009

SEC Obtains Preliminary Injunction Against West Virginia-Based Ponzi Scheme

The SEC announced that on March 23, 2009, the federal district court in the Western District of Virginia entered a preliminary injunction order, by consent, against John M. Donnelly, Tower Analysis, Inc., Nasco Tang Corp., and Nadia Capital Corp.  The preliminary injunction restrains Donnelly and the other defendants from violating certain antifraud provisions of the federal securities laws. Also by consent, Judge Conrad ordered that the defendants' and relief defendants' assets remain frozen until further notice, except for a carve-out to provide one relief defendant with reasonable living expenses. The preliminary injunction order continues the relief originally obtained on March 11, 2009, in response to the Commission's emergency civil injunctive action that sought a temporary restraining order, an order freezing assets, disgorgement and civil penalties, and other relief against Donnelly and the other defendants based on their alleged violations of the federal securities laws.

The Commission's complaint alleges that from at least 1998, Donnelly fraudulently obtained at least $11 million from as many as 31 investors through the sale of securities in the form of limited partnership interests in three investment funds. The complaint alleges that Donnelly told investors that he would pool their funds to invest in, among other things, stock and bond index derivatives. According to the complaint, despite representations to investors that he had generated annual returns of as much as 22%, Donnelly has done almost no securities trading. The complaint alleges that instead of using investor funds to execute trades, Donnelly used investor funds to repay other investors, and paid himself approximately $1 million in salary and fees during the last three years alone. The preliminary injunction enjoins Donnelly and the other defendants from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The defendants consented to the preliminary injunction and continued assets freeze, without admitting or denying the SEC's allegations.

http://lawprofessors.typepad.com/securities/2009/03/sec-obtains-preliminary-injunction-against-west-virginiabased-ponzi-scheme.html

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Comments

Your title and text do not match. Judge Conrad, as the text states, sits in the Western District of Virginia. West Virginia has two judicial districts, northern and southern. This ponzi-scheme seems to be based in Charlottesville, Virginia

Posted by: anon2L | Mar 29, 2009 1:24:25 PM

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