U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20637 / July 8, 2008
SEC v. Rabinovich & Associates, LP, Alex Rabinovich and Joseph Lovaglio, 07 Civ. 10547(GEL) (S.D.N.Y.)
United States v. Alex Rabinovich, Crim. Information No. 1:08-CR-220 (DC) (S.D.N.Y.)
Alex Rabinovich Permanently Enjoined, and Pleaded Guilty to Criminal Securities Fraud Charges
On June 10, 2008, the Honorable Gerard E. Lynch, United States District Judge for the Southern District of New York, entered a Judgment of Permanent Injunction and Other Relief Against Defendant Alex Rabinovich, permanently enjoining Rabinovich from violating the registration and antifraud provisions of the federal securities laws. More specifically, the judgment enjoins Rabinovich from violating Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Section 206(4) of the Investment Advisers Act of 1940 ("Investment Advisers Act") and Rule 206(4)-8 thereunder. The judgment further orders Rabinovich to disgorge ill-gotten gains, together with prejudgment interest, and pay a civil penalty, but defers the Court's determination of the amount of disgorgement and penalty to be paid until a later date, pending a motion by the Commission. Rabinovich consented to entry of the judgment without admitting or denying the allegations in the Commission's complaint.
The Commission's complaint, filed on November 26, 2007, alleged that defendants Rabinovich, Rabinovich & Associates, LP, an unregistered investment company and broker-dealer managed by Rabinovich, and Joseph Lovaglio, operating out of a storefront boiler room in Brooklyn, sold limited partnership interests in Rabinovich & Associates (sometimes referred to hereafter as the "Fund" or the "firm") and other securities to investors, including senior citizens and retirees. The Complaint further alleged that the defendants obtained investments in the Fund by cold-calling and making fraudulent statements to investors and prospective investors in the Fund, including: (1) false claims that the Fund had been extraordinarily profitable whereas the Fund's actual performance had been dismal; and (2) false representations that Rabinovich & Associates was a Wall Street firm and a member of the NASD, the New York Stock Exchange, and the Securities Investor Protection Corporation. The defendants allegedly also failed to disclose to investors that Rabinovich had been barred by the NASD from associating with any broker or dealer and that there was a pending action by the Financial Industry Regulatory Authority, Inc. seeking to bar Lovaglio from associating with any broker or dealer.
The Complaint charged that the defendants defrauded Fund investors and prospective investors, unlawfully operated as unregistered broker-dealers and offered and sold securities in an unregistered offering; and that defendant Rabinovich & Associates unlawfully operated as an unregistered investment company. The complaint alleged that all defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5, thereunder; that Rabinovich violated Section 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder, and Lovaglio aided and abetted those violations; and Rabinovich & Associates violated Section 7(a) of the Investment Company Act of 1940.
When it filed the complaint, the Commission also sought emergency and preliminary relief.
On November 26, 2007, Judge Lynch entered an order temporarily restraining Rabinovich, Rabinovich & Associates, and Lovaglio from violating the statutes and rules charged in the complaint. The court also ordered that the defendants' assets be frozen, ordered the defendants to promptly provide sworn accountings, ordered that discovery be accelerated and that defendants be prohibited from destroying documents, and scheduled a preliminary injunction hearing. On January 15, 2008, Judge Lynch entered a preliminarily injunction against Rabinovich, Rabinovich & Associates, and Lovaglio pending a final disposition of the action, and continued the emergency relief the court had ordered on November 26, 2007.
Rabinovich has also been criminally charged, and pleaded guilty to a single count criminal information, in connection with the conduct alleged in the Commission's complaint. United States v. Alex Rabinovich, Crim. Information No. 1:08-Cr-220 (DC) (S.D.N.Y.).The Commission's litigation is continuing against defendants Rabinovich & Associates and Lovaglio, and is also continuing against Rabinovich for purposes of determining penalties and disgorgement. See also Litigation Release No. 20372 (November 27, 2007).