U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22386/ June 1, 2012
Securities and Exchange Commission v. Brian Raymond Callahan et al., Civil Action No. 12-CV-1065 (E.D.N.Y.) (ADS)
SEC CHARGES ADDITIONAL DEFENDANTS FOR DEFRAUDING INVESTORS IN $90 MILLION PONZI SCHEME
On May 31, 2012, the Securities and Exchange Commission amended its complaint against New York investment adviser, Brian Raymond Callahan, and Callahan’s investment advisory firms, Horizon Global Advisors Ltd., and Horizon Global Advisors, LLC, in the SEC’s emergency action filed on March 5, 2012 that halted an ongoing $90 million Ponzi scheme. The SEC’s amended complaint additionally charges Callahan’s five offshore funds with fraud and Callahan’s brother-in-law, Adam Judd Manson (“Manson”) and two of Manson’s entities, with aiding and abetting Callahan’s scheme. The amended complaint also names Callahan’s wife, Sheri Manson Callahan, as a relief defendant. Callahan’s five offshore funds have agreed to be placed under the control of the receiver that the Court appointed in an Order issued on March 27, 2012.
The SEC’s amended complaint includes the following allegations:
The SEC’s amended complaint charges Manson and his two entities with aiding and abetting violations of the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a) and (c) thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against Manson and his entities.
The SEC charges Callahan’s five offshore funds with violating the antifraud provisions of Sections 17(a)(1), (2) and (3) of the Securities Act, and Section 10(b) of the Exchange Act and Rules 10b-5(a), (b) and (c) thereunder. The SEC is seeking permanent injunctions and disgorgement plus prejudgment interest against the funds.
The amended complaint also names Callahan’s wife, Sheri Callahan, who benefited from Callahan’s fraud, as a relief defendant. For example, Sheri Callahan holds the title to Callahan’s primary residence. The SEC alleges that Callahan made over $500,000 in mortgage payments on his primary residence with investor funds. The SEC is seeking the return of Sheri Callahan’s ill-gotten gains, with interest.
The Court previously issued an Order on March 27, 2012 preliminarily enjoining Callahan and his advisory firms from violating antifraud provisions of the federal securities laws, continuing an asset freeze of Callahan’s and his advisory firms’ assets, requiring Callahan and his advisory firms to repatriate assets, prohibiting Callahan and his advisory firms from soliciting or accepting any new investments, and appointing a receiver for the estates of Callahan’s advisory firms.