UNITED STATES OF AMERICA
In the Matter of
EDWARD THOMAS JUNG
| ORDER INSTITUTING PUBLIC
PURSUANT TO SECTION 15(b)
OF THE SECURITIES EXCHANGE
ACT OF 1934 AND SECTION 203(f) OF THE
INVESTMENT ADVISERS ACT OF 1940,
MAKING FINDINGS AND IMPOSING
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest that public administrative proceedings be instituted against Edward Thomas Jung ("Jung") and E. Thomas Jung Partners, Ltd., also doing business as ETJ Partners, Ltd. ("ETJ Partners"), pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and, as to Jung, Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act").
In anticipation of the institution of these administrative proceedings, Jung and ETJ Partners have submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except as to the Commission's jurisdiction over them and the matters set forth herein, and except as to the Commission's findings set forth in Paragraphs III.A, III.B and III.D, which are admitted, Jung and ETJ Partners consent to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions ("Order").
Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Section 15(b) of the Exchange Act and, as to Jung only, 203(f) of the Advisers Act be, and hereby are, instituted.
On the basis of this Order and Jung and ETJ Partner's Offer, the Commission finds that:
A. Jung is a resident of Chicago, Illinois and, from 1986 to the present, was associated with, owned and controlled ETJ Partners, a broker-dealer registered with the Commission. From July 1994 until October 1998, Jung acted as an investment adviser in that among other things, he, for compensation, acted as manager of a private, unregistered hedge fund known as Strategic Income Fund, L.L.C ("the Fund"), advised it as to which securities it would invest in.
B. ETJ Partners is a broker-dealer registered with the Commission from 1986 to the present. ETJ Partners originally registered with the Commission as E. Thomas Jung Partners, Ltd., but filed an amendment to its Form BD in 1995, changing its name to ETJ Partners, Ltd. ETJ Partners traded on the Chicago Board Options Exchange and was a market-maker there.
C. On June 19, 2001, the Commission filed a Complaint ("Complaint") against Jung and ETJ Partners in SEC v. Edward Thomas Jung and E. Thomas Jung Partners, Ltd., also d/b/a ETJ Partners, Ltd., Case No. 01-C-4645 in the United States District Court for the Northern District of Illinois. The Complaint alleged that Jung, individually and acting through his broker-dealer, ETJ Partners, engaged in a scheme to defraud investors in the Fund. Beginning in July 1994 and continuing to February 1998, Jung was responsible for issuing a series of false performance reports used to solicit investors for the Fund that materially overstated his prior trading record and that of the Fund. In addition, from January 1995 to September 1998, while falsely stating that investor assets would be used solely to conduct the Fund's business and to collateralize trading on behalf of the Fund, Jung, acting through ETJ Partners, placed the Fund's assets in ETJ Partners' account and used the Fund's assets to pay the expenses of running ETJ Partners and to collateralize his own personal margin trading. Jung's personal trading resulted in substantial losses and, in September 1998, ETJ Partners' clearing firm seized control of the account and liquidated the Fund's assets to cover ETJ Partners' margin call. This misappropriation by Jung and ETJ Partners resulted in the loss of more than $21 million invested by 60 investors. Throughout this period, Jung also sent false quarterly statements to the Fund's investors that materially overstated the current value of their investment in order to lull them into a false sense of security.
D. On March 14, 2002, the United States District Court for the Northern District of Illinois entered a Judgment of Permanent Injunction And Other Relief As To Edward Thomas Jung and E. Thomas Jung Partners, Ltd., pursuant to their consent and without admitting or denying the allegations of the Complaint, enjoining: Jung and ETJ Partners from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; ETJ Partners from violating, and Jung from aiding and abetting violations of, Section 15(c)(1) of the Exchange Act and Rule 15c1-2 promulgated thereunder; and Jung from violating Sections 206(1) and 206(2) of Advisers Act.
Based on the foregoing, it is in the public interest to impose the sanctions specified in the Offer submitted by Jung and ETJ Partners.
Accordingly, IT IS HEREBY ORDERED that:
A. Edward Thomas Jung be, and hereby is, barred from association with any broker or dealer or investment adviser.
B. The registration of E. Thomas Jung Partners, Ltd., also doing business as ETJ Partners, Ltd., as a broker-dealer registered with the Commission be, and hereby is, revoked.
By the Commission.
Jonathan G. Katz
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