U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20191 / July 11, 2007
SEC v. CEP Holdings, Inc. D/B/A Colonendparenthesis.net, Trevor Reed, Clayton Kimbrell and Colon End Parenthesis Trust, LLC, Civil Action No. 5:07-CV-00256-BO (EDNC, July 9, 2007)
The Securities and Exchange Commission (Commission) announced today that it has filed a complaint seeking emergency relief in the United States District Court for the Eastern District of North Carolina against CEP Holdings, Inc. d/b/a www.colonendparenthesis.net (CEP), Colon End Parenthesis Trust, LLC (CEP Trust), and its owners and operators, Trevor Reed (Reed) and Clayton Kimbrell (Kimbrell). The Commission alleges that since approximately November 2005, Reed and Kimbrell, through CEP, have fraudulently sold approximately $12 million worth of securities in unregistered transactions to approximately 5,000 investors, promising returns of 2% per day.
The Commission alleges that Reed and Kimbrell solicited investors to purchase CEP memberships with a minimum investment of $20 through CEP's Internet website. On the homepage of this site, CEP claimed that investors could make the "% of an auto-surf without surfing." In order to invest in CEP, investors were required to open and fund an account at CEP Trust, which was also owned and controlled by Reed and Kimbrell. Reed, Kimbrell, and CEP falsely claimed to use the funds to invest in safe, "brick and mortar" type businesses, such as travel agencies and real estate. In fact, Reed and Kimbrell invested most of the money CEP raised in other high-risk, online schemes, including auto-surf programs. Reed and Kimbrell omitted to disclose to CEP investors that CEP had no record of its investments and that neither CEP nor CEP Trust have reliable financial records. Moreover, Reed and Kimbrell, through CEP, made numerous other misrepresentations and omissions of material facts concerning (1) the safety and rate of return of the investment; (2) the nature and merits of the investment; (3) CEP's compliance with Commission regulations; and (4) the size and scope of CEP's overall membership program.
The Complaint alleges that the defendants, Reed, Kimbrell, and CEP have violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Complaint further alleges that CEP Trust aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The Court subsequently entered an order freezing the defendants' assets, appointing a receiver for the defendants, imposing preliminary injunctions against the defendants for future violations of the antifraud provision of the federal securities laws, and providing other relief.