U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21421 / February 22, 2010
SEC v. Kay Services, LLC, et al., Civil Action No. 08-CV-4016 (SDW)(MCA) (D.N.J.)
COURT ORDERS DEFAULT JUDGMENT AGAINST KAY SERVICES IN PONZI SCHEME.
The Securities and Exchange Commission announced that on February 17, 2010, the United States District Court for the District of New Jersey entered a default judgment against defendant Kay Services LLC, a New Jersey company, in an action filed in August 2008 by the Commission. The Hon. Susan D. Wigenton issued an order permanently enjoining Kay Services from future violation of the Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment further provides that Kay Services will disgorge its ill-gotten gains in the amount of $2,984,895 and prejudgment interest thereon in the amount of $397,273, and that Kay Services will be subject to a civil penalty of $450,000.
The Commission's complaint alleges Kay Services and its sole owner and officer, Marcia Sladich, orchestrated a Ponzi scheme raising more than $10 million from at least 1,000 victims, many of whom were members of the Family Federation for World Peace, formerly known as the Unification Church. Sladich falsely told investors that their money would be invested in domestic and international real estate that would generate substantial returns and promised them a 50-100% guaranteed return on their investment in one year. She also promised investors additional payments for every investor they referred. Contrary to Sladich's representations, Kay Services had no revenue-generating business or assets. Instead of investing in real estate, Sladich used investor money: (1) to pay Kay Services' obligations to existing investors; (2) to pay Sladich's personal expenses; and (3) to purchase real property and other assets for Sladich and her relatives.
In May 2009, the Commission obtained a separate consent judgment against Sladich in the same matter. Without admitting or denying the allegations of the Commission's complaint, Sladich consented to the entry of judgment by Judge Wigenton permanently enjoining Sladich from future violations of the Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment further requires Sladich to disgorge her ill-gotten gains and prejudgment interest, and to pay a civil money penalty, in amounts to be determined by the Court.
For further information, see Litigation Release No. 20682 (Aug. 12, 2008).