U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21561 / June 17, 2010
Securities and Exchange Commission v. Matthew Jennings, Westmoore Management, LLC, Westmoore Investment, L.P., Westmoore Capital Management, Inc., Westmoore Capital, LLC United States District Court for the Central District of California, Civil Action No. SACV-10-00849-AG (MLGX)
SEC HALTS $53 MILLION INVESTMENT SCHEME IN ORANGE COUNTY
On June 16, 2010, the Securities and Exchange Commission obtained an emergency court order to freeze the assets of an Orange County man and four of his companies that were orchestrating a $53 million Ponzi-like investment scheme on investors.
The SEC alleges that Matthew Jennings and his companies that collectively operated under the brand name of “Westmoore” raised the money from investors in more than 15 offerings of equity and debt that were not registered with the SEC under the securities laws. To attract the new investors necessary to sustain the scheme, Jennings and his companies offered exorbitant short-term returns as high as 130 percent annually.
Rather than financing the operations of Jennings’ businesses, the SEC alleges that Jennings misused new investor funds to pay returns to existing Westmoore investors, and diverted funds into his personal accounts.
The companies charged in the SEC’s complaint are Westmoore Management LLC, Westmoore Investment L.P., Westmoore Capital Management Inc., and Westmoore Capital LLC.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Jennings operated a corporate shell game through Westmoore, directing the movement of funds among Westmoore’s various accounts to prevent the collapse of the scheme. Jennings treated these accounts as one integrated account from which funds, regardless of their source, could be used as necessary to pay investors promised returns.
The SEC alleges that Westmoore did not tell investors that it had to rely on proceeds from new investors to pay existing investors. Instead, investors expected that their funds would be used for investments that might ultimately generate returns if the underlying business succeeded.
In its lawsuit, the SEC obtained an order (1) freezing the assets of Jennings, Westmoore Management, LLC, Westmoore Investment, L.P., Westmoore Capital Management, Inc., Westmoore Capital, LLC; (2) preventing the destruction of documents; (3) requiring accountings from all Defendants; (5) temporarily enjoining all Defendants from future violations of 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 SEC also seeks preliminary and permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all Defendants. A hearing on whether a preliminary injunction should be issued against the Defendants and whether a permanent receiver should be appointed is scheduled for June 24, 2010 at 10:00 a.m.