INVESTMENT ADVISERS ACT OF 1940
Release No. 2223 / March 16, 2004
Admin. Proc. File No. 3-11432
COMMISSION INITIATES ADMINISTRATIVE PROCEEDINGS AGAINST MICHAEL GARIAN
The Securities and Exchange Commission (Commission) announced that on March 16, 2004, it instituted administrative proceedings against Michael Garian, aka Melkon Gharakhanian, aka Bika Balian, based on the entry of a judgment of permanent injunction against him.
A hearing will be held before an Administrative Law Judge to determine whether the Division's allegations are true, to provide respondents an opportunity to dispute the allegations, and to determine what sanctions, if any, are appropriate and in the public interest. The Commission directed that an administrative law judge issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings.
On February 12, 2004, the District Court entered a judgment of permanent injunction against Garian enjoining him from violating the antifraud provisions of 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 (2) of the Investment Advisers Act and from committing violations of the registration provisions of Sections 5(a) and 5(c) of the Securities Act. The Complaint alleged that Garian perpetrated an affinity fraud upon members of the Armenian-American community. Between 1997 and mid-2001, Garian sold interests in an investment pool, raising over $20 million from about 200 investors, by falsely representing to them that he had an "inside line" to upcoming "hot" IPOs, particularly for Internet and other technology-related companies, and could deliver large profits to investors quickly. In reality, Garian invested a little more than one quarter of the money he raised, and in fact ran a Ponzi-like scheme, in which investor returns were paid with other investors' funds.