U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20294 / September 24, 2007
SEC v. Transnational Fund, Inc., a/k/a National Savings, and Michael Luckett, 07-CA-11774-RWZ (D. Mass.)
SEC Halts Investment Fraud and Obtains Emergency Restraining Order and Asset Freezed
On September 21, 2007, the Securities and Exchange Commission filed an emergency civil enforcement action in U.S. District Court in Boston to halt an ongoing investment fraud by Boston-based Transnational Fund, Inc. and Michael Luckett. That same day, the District Court granted the Commission's request for a temporary restraining order, asset freeze, and other relief.
The Commission's complaint alleges that, from July 20, 2007, through the present, Transnational and Luckett conducted a fraudulent offering of unregistered securities known as "Transnational Certificates" using Transnational's websites, www.transnationalfund.org and www.transnationalfund.com. Defendants promised to pay investors at a rate of 6.35% annual percentage yield in nine months. At least 15 investors in six different states, including Arizona, Kansas, Michigan, Missouri, Pennsylvania, and Texas, purchased these Certificates for at least $432,400. The Complaint further alleges that, in soliciting investors, Transnational and Luckett made material misrepresentations and omissions in that they: (1) failed to disclose to investors and potential investors that Luckett would use investor funds for personal purposes; (2) misrepresented that Transnational was just like a bank; and (3) misrepresented that Transnational had been in business for years. The Complaint alleges that Luckett took thousands of dollars from at least one Transnational bank account into which he had deposited investor funds and used the money to pay, among other things, rent on a luxury condominium in Boston and the lease on a Toyota automobile. According to the Complaint, he also used bankcards issued on bank accounts holding Transnational investor funds for various personal living expenses.
In other court pleadings, the Commission described the process investors went through to purchase the Certificates. Investors searched the Internet using such terms as "high yield certificate of deposit" on websites such as Yahoo! or Google, and a link to the Transnational website would come up. Investors then went onto the Transnational website and completed an application to purchase a Certificate online. After receiving a confirmation e-mail from Transnational instructing the investor to sign a form agreement from the website and send a cashier's check to an address in Hartford, Connecticut (which turned out to be merely a drop box that forwarded mail to Luckett in Boston), investors sent completed forms and checks to Transnational. These funds were then deposited into various bank accounts Transnational opened in the Boston Financial District within the course of several weeks.
In addition to restraining the defendants from violating 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 and Rule 10b-5 thereunder, the District Court's order, entered by Judge Reginald C. Lindsay, freezes the defendants' assets and orders the defendants to cease all operations of Transnational's websites on the Internet. The order also prohibits defendants from soliciting, accepting, or depositing any money from investors. The court set a date for hearing the Commission's request for a preliminary injunction on October 4, 2007.
The Commission's complaint charges Transnational and Luckett with violating 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 and Rule 10b-5 thereunder. In addition to the emergency relief, the Commission seeks a preliminary injunction, a permanent injunction, disgorgement, and civil penalties.
Luckett was arrested by the Boston Police Department on September 13, 2007, and charged with larceny in connection with this activity. He was arrested as he attempted to withdraw $45,000 in cash from a bank account holding Transnational investor funds.
The Commission acknowledges the substantial assistance provided by the Massachusetts Financial Crimes Task Force in this matter.