U.S. Securities and Exchange Commission
Litigation Release No. 21529 / May 21, 2010
SEC v. Edward A. Allen, David L. Olson, and A&O Investments, LLC, Case No. 1:10-cv-01143 (N.D. Ohio, filed May 20, 2010)
The Securities and Exchange Commission today announced that it filed a civil injunctive action against Edward A. Allen and David L. Olson, residents of Lakeland, Florida, and their company A&O Investments, LLC, accusing them of conducting a fraudulent, unregistered offer and sale of approximately $14.8 million in securities.
The SEC’s complaint, filed in the United States District Court for the Northern District of Ohio, alleges that from approximately September 2005 through December 2008, Allen and Olson raised approximately $14.8 million from at least 100 investors through the offer and sale of promissory notes issued by A&O. The complaint alleges that both Allen and Olson recruited promissory note investors from customers of Georgia-based registered broker-dealer World Group Securities, Inc. (WGS), for which Allen and Olson were registered representatives, and through mass mailings and word-of-mouth after Allen and Olson left WGS. The complaint alleges that Allen and Olson told investors that they would use the investors’ money to purchase, rehabilitate, and sell real estate. The complaint further alleges that Allen and Olson promised to pay investors annual returns of 20%, represented that the returns were generated from the sale of its real estate properties, and told investors that they were doing well in the real estate market and were making money. According to the complaint, the majority of the promissory notes purportedly were secured by property owned by A&O. The complaint alleges that Allen and Olson’s representations about their use of offering proceeds, the collateral securing the investments, and the success of the investments were all false. According to the complaint, in reality Allen and Olson operated a Ponzi scheme by using approximately $4.4 million of investors’ funds to pay “interest” and, in some cases, principal to previous investors and spent only $5.1 million of the $14.8 million raised to purchase and rehabilitate real estate. The complaint further alleges that Allen and Olson used $2.2 million to pay personal expenses for themselves and their family members. According to the complaint, Allen and Olson also misrepresented and omitted to state material facts regarding the collateral securing the notes, in that as much as approximately $5.5 million worth of A&O promissory notes purportedly were secured by the same piece of property in Lakeland, Florida. This property’s value was grossly inadequate to secure the notes.
The complaint alleges that as a result of their misconduct, Allen, Olson, and A&O violated Section 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 Commission is seeking permanent injunctions and disgorgement of ill-gotten gains, including prejudgment interest, from Allen, Olson, and A&O and civil penalties from Allen and Olson.
See Also: SEC Complaint