U. S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21248 / October 15, 2009
SEC v. David F. Merrick, Traders International Return Network, MS, Inc., GTT Services, Inc., MDD Consulting, Inc., and Go ! Tourism, Inc., Civil Case No. 6:09-CV-1744-ORL-31KRS, USDC, M.D., Fla.
SEC OBTAINS EMERGENCY RELIEF AGAINST DAVID F. MERRICK, TRADERS INTERNATIONAL RETURN NETWORK AND OTHERS IN LAWSUIT ALLEGING MISAPPROPRIATION OF INVESTORS’ FUNDS AND PONZI SCHEME
The Securities and Exchange Commission (“Commission”) announced that on October 14, 2009, it filed an emergency civil action in the U.S. District Court of the Middle District of Florida, Orlando Division, charging David F. Merrick, a resident of Apopka, Florida, Traders International Return Network (“TIRN”), MS, Inc., GTT Services, Inc., MDD Consulting, Inc. and Go ! Tourism, Inc. with fraudulent conduct.
The Commission’s complaint alleges that, since at least July 2008, Merrick and entities under his control engaged in a fraudulent scheme to misappropriate investors’ funds for his personal use and to repay other investors in a Ponzi scheme, raising at least $22 million from at least 2500 investors throughout the United States. The complaint alleges that Merrick, as an investment adviser, and TIRN intentionally misled investors in TIRN by misrepresenting that their money would be used to buy Forex, international bonds, international stocks and other investments. The complaint alleges that, instead of purchasing these investments, Merrick and TIRN transferred investor funds among entities controlled by Merrick, including MS, GTT Services, MDD Consulting and Go ! Tourism, and misappropriated at least $3.7 million of the funds for Merrick’s personal expenditures and to pay credit cards debts of MS and GTT Services. The complaint also alleges that Merrick and TIRN operated a Ponzi scheme, using new investor funds to repay existing investors. The complaint alleges that at least $8.8 million was transferred to Anres Technologies Corporation , a privately-owned company that issues pre-paid debit cards. The complaint further alleges that Merrick and TIRN falsely represented that investors requesting a withdrawal of funds would receive a debit card loaded with their initial investment and return on their investments, when, in fact, the money loaded on the cards was money from other investors. The complaint also alleges that at least $2.3 million of investor funds were transferred to accounts in Panama, Mexico, Malaysia, Switzerland and the Netherlands.
In addition, the complaint alleges that TIRN unlawfully operated as a foreign investment company in the United States, Merrick and TIRN sold securities, namely, interests in TIRN, in a public offering without registering the securities with the Commission, and Merrick and TIRN also conducted business as broker-dealers without registering with the Commission.
In an order dated October 14, 2009, the Honorable Judge Gregory Presnell entered a preliminary injunctive order prohibiting the offer or sale of interests in TIRN and enjoining: Merrick, TIRN, MS, GTT Services, MDD Consulting and Go ! Tourism from violating the antifraud provisions of the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder]; Merrick and TIRN from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)]; Merrick from violating the antifraud provisions of the Investment Advisers Act of 1940 [Sections 206(1), 206(2), 206(4) and Rule 206(4)-8]; Merrick and TIRN from violating the securities registrations provisions [Section 5(a) of the Securities Act], foreign investment company provisions [Section 7(d) of the Investment Company Act of 1940] and broker-dealer registration provisions [Section 15(a)(1) of the Exchange Act]. Among other things, the Court also entered orders freezing the assets of the defendants and ordering them to repatriate assets into the United States.
The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Middle District of Florida and the Chicago office of the Commodity Futures Trading Commission.