UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
INVESTMENT ADVISERS ACT OF 1940
Release No. 2131 / May 20, 2003
File No. 3-11130
In the Matter of
DAVID M. MOBLEY, SR.,
ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS, AND IMPOSING A REMEDIAL SANCTION
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against David M. Mobley, Sr. ("Mobley").
In anticipation of the institution of these proceedings, Mobley has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings 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 findingsherein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.Cbelow, which are admitted, Mobley consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing a Remedial Sanction ("Order"), as set forth below.
On the basis of this Order and Mobley's Offer, the Commission finds that:
- Mobley, age 46, created and controlled four purported hedge funds from 1993 to February 2000: Maricopa Investment Fund, Ltd.; Maricopa Index Hedge Fund, Ltd.; Maricopa Financial Corporation; and Ensign Trading Corporation. Mobley did not register as an investment adviser with the Commission or any state securities agency.
- On February 22, 2000, the Commission commenced an emergency civil action, Securities and Exchange Commission v. Mobley, et al., Case No. 00 Civ. 1316, in the United States District Court for the Southern District of New York, alleging that Mobley violated Section 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and Sections 206(1) and 206(2) of the Advisers Act. The Commission's complaint alleged the following:
- Mobley conceived and carried out a $59 million fraud on the investors in the four hedge funds. Mobley claimed to have $450 million under management and told his investors that he invested their funds primarily in major stock index products using computer trading models that he developed. He claimed to have achieved rates of return averaging approximately 51 percent per year, net of his management fee of 30 percent. He declined to have his funds audited, explaining to investors that audits would risk divulging his secret and highly profitable trading strategies.
- In fact, Mobley had no more than about $35 million under management and his trading program was generally unprofitable. He lost the bulk of the investors' funds through a series of failed business ventures. Mobley also used investor funds to make charitable contributions of approximately $3.5 million and to support a lavish lifestyle for himself and his family and associates.
- Only about $33 million of investor assets, including about $5 million of illiquid assets, remain. Taking into account prior redemptions, total investor losses appear to exceed $59 million.
- On July 20, 2001, Mobley pled guilty to one count of mail fraud, three counts of wire fraud, two counts of engaging in monetary transactions in property derived from specified unlawful activity, one count of money laundering, and one count of tax evasion, in violation, respectively, of Title 18, United States Code, Sections 1341, 1343, 1956(a)(1), and 1957, and Title 26, United States Code, Section 7201, before the United States District Court for the Middle District of Florida, Fort Myers Division, Case Nos. 2:00-cr-71-FtM-29DNF and 2:01-cr-48-FtM-29DNF. On October 29, 2001, Mobley was sentenced to seventeen and a half years' imprisonment without the possibility of parole and a term of supervised release of three years upon release from imprisonment, and ordered to pay $76.2 million in restitution.
- The counts of the indictment to which Mobley pled guilty alleged, inter alia, that from September 1992 to February 2000 Mobley engaged in a fraudulent scheme in which he took in money from investors and falsely represented that that money would be invested in his hedge funds. As part of the scheme, Mobley converted investors' money for his own personal expenses, business investments, and charitable donations. Mobley misrepresented the rates of return of the funds, and provided investors with fabricated account statements falsely representing that they were earning money on their investments.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction specified in Respondent Mobley's Offer.
ACCORDINGLY, IT IS HEREBY ORDERED:
Pursuant to Section 203(f) of the Advisers Act that Respondent Mobley be, and hereby is barred from association with any investment adviser.
By the Commission.
Jonathan G. Katz