U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21181 / August 20, 2009
Securities and Exchange Commission v. Mohit A. Khanna and MAK 1 Enterprises Group, LLC, et al., United States District Court for the Southern District of California, Case No. 09cv1784 BEN (CAB) (filed Aug. 17, 2009).
SEC HALTS PHONY INVESTMENT POOL BY SAN DIEGO PROMOTER
The Securities and Exchange Commission (“Commission”) obtained an asset freeze and court order halting an ongoing securities fraud orchestrated by a San Diego, Calif. promoter.
The Commission alleges that Mohit A. Khanna, who was barred in 2004 by the Financial Industry Regulatory Authority (“FINRA”), claimed to have raised as much as $70 million from 300 investors though his company, MAK 1 Enterprises Group, LLC.
The Commission’s complaint alleges that the defendants solicited investors in Southern California and several other states, as well as a charitable foundation, through word-of-mouth referrals and MAK 1’s website. The Commission further alleges that the defendants claimed to pool investor funds to invest in commercial paper, foreign currency trading products, and other guaranteed investments. The complaint alleges that the investment products Khanna claimed to have invested in were non-existent. Instead, the complaint alleges, Khanna misused investor funds to pay for several luxury cars and residential properties, including those now owned by his wife, Sharanjit Khanna of San Diego, Calif., who was also named as a relief defendant.
The Commission’s complaint, which was filed in federal court in San Diego, alleges that the defendants falsely claimed that investor accounts would be FDIC and SIPC insured and were “insured” by insurance policies purchased by the defendants. The complaint alleges Khanna fabricated and gave to an accountant a “screen shot” of MAK 1’s online banking activity purporting to show a balance of over $50 million in its bank account. The defendants obtained a letter verifying the account balance from the accountant which was sent to investors. The complaint alleges that, in reality, the average daily balance in that account never exceeded $197,000. The complaint also alleges the defendants concealed Khanna’s FINRA-bar which resulted from unrelated, alleged fraudulent conduct.
The Honorable Roger T. Benitez, United States District Judge, on August 18, 2009 granted the Commission’s application for a temporary restraining order against the defendants and issued orders freezing defendants’ assets, prohibiting the destruction of documents, requiring accountings, granting expedited discovery, repatriating funds, and requiring Khanna to surrender his passport. The Judge also appointed LaBella & McNamara LLP as the temporary receiver over the assets of MAK 1 and its affiliates. On August 31, 2009, the Court will hold a hearing on the Commission’s motion for a preliminary injunction and appointment of a permanent receiver.
The Commission’s complaint charges defendants with violating the antifraud and securities registration provisions of the federal securities laws, and names as relief defendants Khanna’s wife and another company Khanna controls, First Opportunities Management Group, Inc. The Commission alleges that the relief defendants received ill-gotten gains from Khanna’s fraud. In addition to the emergency relief, the Commission seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties against Khanna and MAK 1.
The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of California, U.S. Postal Inspection Service, Federal Bureau of Investigation, National Futures Association, and the Better Business Bureau - San Diego.
In a related case also filed on August 17 in federal court, the U.S. Commodity Futures Trading Commission and the California Corporations Commissioner jointly filed an emergency action against the defendants.