U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21329 / December 8, 2009
Securities and Exchange Commission v. Rockford Funding Group, et. al., Civil Action No. 1:2009CV10047 (PGG)(SDNY)
SEC BLOCKS PONZI SCHEME INVOLVING PURPORTED INVESTMENTS IN PERSONAL INJURY SETTLEMENTS
The Securities and Exchange Commission today halted a Ponzi scheme involving a New York firm that solicited investments involving personal injury lawsuit settlements but instead shipped the money overseas. The Court also froze the assets of twelve entities which received investor funds wired to it by Rockford, and the Commission charged as relief defendants Genadi Yagodayev (Rockford’s president), Bookmann Agency, LLP, Houseberg Impex Inc., Infinita Plus Trading Ltd., Intercity Transit Ltd., Madisa Ltd., Milton Benefits LLP, Pacific Gain Technologies Ltd., Partner Asia Distribution Ltd., Rockford Industry Ltd., Star Trading Inc., Sunrise Import & Export Inc. and Traseks Ltd.
The Commission alleges that Rockford Funding Group LLC used cold calling and a Web site to raise at least $11 million from more than 200 investors in 41 different states and Canada since March 2009. Rockford Group falsely touted itself as a leading private equity firm with an $800 million pipeline of investments and many Fortune 500 companies as clients, and told investors their money would be safely invested in structured settlements in private lawsuits.
According to the Commission’s complaint, filed in U.S. District Court for the Southern District of New York, Rockford Group does not appear to engage in any investment activity that would generate any returns for investors, let alone its claimed returns of at least 15 percent annually. Instead, dividend payments made to investors have been funded by other investors’ contributions, and Rockford Group transferred most of the money collected from investors to banks in Latvia and Hong Kong.
The Commission alleges that Rockford Group lured investors by promising high returns and falsely assuring investors that it is a member of the Securities Investor Protection Corporation (SIPC) with up to $4 million in insurance to meet customer claims. According to the Commission’s complaint, however, Rockford Group is not a member of SIPC.
Misrepresentations that Rockford Group made to mislead investors, according to the Commission’s complaint, included:
The Commission further alleges that Rockford Group has no structured settlement assets and does not appear to engage in any investment activity that would generate returns for investors. Besides making dividend payments to investors that are funded by other investors’ contributions, Rockford Group misappropriated more than $10.4 million of investor funds by transferring these funds to foreign bank accounts located in Latvia and Hong Kong to supposedly pay for “cooling systems,” “construction equipment,” “electronic systems,” and other equipment unrelated to the firm’s claimed investment strategies. According to the Commission’s complaint, the investor funds were wired to foreign bank accounts in the names of twelve entities whose relationship to Rockford is unknown. The Commission charged those entities as well as Genadi Yagodayev, the president and sole member of Rockford Group and sole signatory on its bank accounts, as relief defendants for the purposes of recovering investor assets from them.
The Commission’s complaint charges Rockford with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and seeks an injunction, disgorgement and financial penalties.
Judge Gardephe of the United States District Court for the Southern District of New York, issued an order temporarily restraining the defendant, freezing the assets of Rockford and the relief defendants and ordering accountings from Rockford and the relief defendants. The SEC’s complaint also seeks a final judgment permanently enjoining Rockford from future violations of the federal securities laws, ordering it to pay financial penalties and to disgorge ill-gotten gains with prejudgment interest.