U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21553 / June 11, 2010
Securities and Exchange Commission v. Richard Elkinson, 10-CV-10015-JLT (D. Mass. January 7, 2010)
SEC OBTAINS $29 MILLION JUDGMENT AGAINST DEFENDANT IN PONZI SCHEME
The Securities and Exchange Commission ("Commission") announced that on June 9, 2010, a Massachusetts federal court entered a default judgment against Richard Elkinson, in a civil enforcement action filed by the Commission on January 7, 2010. The court permanently enjoined Elkinson from future violations of the antifraud and registration provisions of the federal securities laws and ordered him to pay over $29 million in disgorgement, prejudgment interest and civil penalties. On January 7, 2010, at the Commission's request, the court had issued an order freezing Elkinson's assets.
The Commission alleged in its complaint that Elkinson, of Framingham, Massachusetts, operated a Ponzi scheme that defrauded at least 130 investors from multiple states of approximately $28 million. The complaint further alleged that since at least 1997, Elkinson offered and sold unregistered securities in the form of promissory notes. According to the complaint, Elkinson falsely told investors that he was in the business of brokering contracts on behalf of a Japanese firm that manufactured uniforms (such as police uniforms and prison uniforms) to be sold to large purchasers such as state and local governments (and even the U.S. Olympic Committee) and that investors' money would be used to help finance specific uniform contracts. The investors received promissory notes signed by Elkinson, with terms that generally required payment within 300 to 330 days and with an interest rate that ranged from 9% to 13%. According to the complaint, however, Elkinson had no relationship with a Japanese uniform manufacturer, and there were no contracts to purchase uniforms. The Commission alleged that, while some investors did receive payments of principal and interest, those payments were made using funds obtained from other investors, and Elkinson was able to keep the scheme going as long as most of the investors kept rolling over their investments. In reality, according to the complaint, Elkinson used most of the investors' money for his own personal purposes, including gambling.
In its order granting the Commission's motion for default judgment, the court permanently enjoined Elkinson from committing further violations of Sections 5(a) 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 court further ordered Elkinson to pay disgorgement of $28 million plus prejudgment interest of $468,533, and a civil penalty of $1 million.
The Commission acknowledges the assistance of the Federal Bureau of Investigation, the United States Attorneys' Office for the District of Massachusetts, and Massachusetts Secretary of State William Francis Galvin=s Securities Division.
For further information, please see Litigation Release No. 21364 (January 8, 2010) [Order obtaining preliminary injunction, asset freeze, and other relief as to Elkinson].