U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21241 / October 7, 2009
SEC v. Randy M. Cho, Civil Case No. 09-CV-6261, USDC, N.D. Ill.
SEC OBTAINS EMERGENCY RELIEF AGAINST RANDY W. CHO IN LAWSUIT ALLEGING MISAPPROPRIATION OF INVESTORS FUNDS AND PONZI SCHEME
The Securities and Exchange Commission ("Commission") announced that on October 7, 2009, it filed an emergency civil action in the U.S. District Court of the Northern District of Illinois charging Randy W. Cho, a resident of Newton, Massachusetts, with fraudulent conduct.
The Commission's complaint alleges that, since at least 2001, Cho engaged in a fraudulent scheme to misappropriate investors' funds for his personal use and to repay other investors, raising at least $3.7 million from at least 45 investors in four states. The complaint alleges that Cho falsely represented to investors that he would pool their funds to invest in shares of specific well-known companies in anticipation of expected initial public offerings of those companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc. and Rosetta Stone, Inc. The complaint alleges that, instead of purchasing these shares for investors, Cho used investor funds for personal trading, the personal expenses of himself and his family, and also operated a Ponzi scheme, using new investor funds to repay existing investors. The complaint alleges that throughout the scheme, Cho falsely told investors that he had worked at Goldman Sachs, still had an account there and made his investments through the firm, and/or that Goldman Sachs still considered him a preferred client. The complaint further alleges that Cho told some investors that additional funds would be needed to satisfy a U.S. tax liability in connection with their supposed purchase of Google and Rosetta Stone shares, when there was no tax liability and when the shares had not even been purchased for the investors.
In an order dated October 7, 2009, the Honorable Judge James F. Holderman entered a temporary restraining order enjoining Cho from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)], the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder], and the Investment Advisers Act of 1940 [Sections 206(1) and 206(2)]. Among other things, the Court also entered orders freezing the assets of Cho until further order of the court.