U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20253 / August 24, 2007
SEC v. Charles O. Morgan, Jr., as Personal Representative of the Estate of Frederick J. Kunen, et al., Case No. 07-22204-CIV-GOLD (S.D. Fla., filed August 23, 2007)
SEC Brings Emergency Action in Connection With Fraudulent Index Option Trading Scheme
The Securities and Exchange Commission (SEC or the Commission) announced that on August 23, 2007, it filed an emergency civil action against Charles O. Morgan, Jr., as personal representative of the Estate of Frederick J. Kunen (Kunen's Estate), in connection with a fraudulent options trading scheme orchestrated by Frederick J. Kunen (Kunen). Kunen died on July 11, 2007 at age 55, and resided in Coconut Creek, Florida. On August 23, 2007, the Honorable Alan S. Gold, United States District Judge for the Southern District of Florida entered, among other things, an emergency order temporarily freezing the assets of Kunen's Estate.
The Commission's complaint (Complaint) alleges that from at least January 2007 until his death on July 11, 2007, Kunen raised over $2 million through a fraudulent index options trading program. The Complaint further alleges that Kunen falsely represented to investors that they were guaranteed a 10-20%, risk-free monthly return on their investment, that their principal was safe, and that the options trading program had a successful eight-year track record. The Complaint also alleges that Kunen effected transactions in individual investors' accounts once the investors had funded the accounts, and after effecting the trades, Kunen falsely told investors that the trading had resulted in profits and instructed investors to send him his portion of the profits. Finally, the Complaint alleges that Kunen received approximately $1 million in fraudulently obtained compensation from investors and that none of the investors' accounts show profits from Kunen's trading.
The Court appointed Scott M. Dimond, an attorney in the law firm of Dimond Kaplan & Rothstein P.A., as Receiver over Kunen's Estate. Among other things, Mr. Dimond is responsible for marshaling and safeguarding assets held by Kunen's Estate.
The Complaint charges Kunen with 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 SEC is also seeking, among other things, disgorgement of ill-gotten profits against and an accounting from Kunen's Estate.
