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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22652 / March 19, 2013

Securities and Exchange Commission v. Gary J. Martel, d/b/a Martel Financial Group and MFG Funding, Civil Action No. 1:12-cr-10345-FDS-1 (District of Massachusetts)

Defendant in SEC Enforcement Action Sentenced to Over Seven Years in Prison and Ordered to Pay Over $3 Million

The Securities and Exchange Commission announced today that, on March 12, 2012, the United States District Court for the District of Massachusetts sentenced former investment advisor Gary J. Martel, a resident of Chelsea, Massachusetts, to eighty-seven months imprisonment plus three years of supervised release, and ordered him to pay restitution in the amount of $3,274,031.41 based upon his guilty plea to criminal charges brought by the United States District Attorney for the District of Massachusetts. In November 2012, Martel pled guilty to three counts of mail fraud and to wire fraud. The criminal information filed against Martel alleged that, from 2004 to 2012, he defrauded his investment advisory clients by diverting funds that he received from them for investments for his own personal use rather than investing the funds as he represented that he would.

The Commission previously filed a related civil enforcement action against Martel in June 2012. In January 2013, the United States District Court for the District of Massachusetts entered a final judgment of default in that case against Martel, who conducted business under the names Martel Financial Group and MFG Funding. The final judgment enjoins Martel from violating Section 10(b) of the Securities Act of 1934 and Rule 10b-5 thereunder; Section 17(a) of the Securities Act of 1933; and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The final judgment also orders Martel to pay $3,957,244 in disgorgement and pre-judgment interest, and a civil penalty in the amount of $3,261,438. According to the complaint the Commission filed against Martel on June 19, 2012, the former investment adviser raised money from investors in Massachusetts, Vermont, New Hampshire, New York, and Florida by promising to invest their money in "pass through" bonds with favorable interest rates, as well as by promising to make pooled investments in mortgage-related securities and Facebook's initial public offering. The complaint alleged that Martel's bonds and investment pools were fictitious, and instead of investing his clients' funds on their behalf as he promised, Martel used the funds for other purposes, including making payments to earlier investors. A preliminary injunction prohibiting Martel from violating the antifraud provisions of the federal securities laws and freezing his assets was entered by the district court on June 20, 2012.

The Commission has barred Martel from the securities industry. On February 7, 2013, an Order Making Findings and Imposing Sanctions by Default was entered against Martel barring him from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical organization and from participating in an offering of penny stock based on findings that Martel, among other things, had pled guilty to the mail and wire fraud charges brought by the United States Attorney's Office for the District of Massachusetts.

For further information, see Litigation Release No. 22396 (June 20, 2012)(SEC Charges Massachusetts Investment Advisor with Fraud and Obtains Asset Freeze); and Litigation Release No. 22591 (January 11, 2013) (Final Judgment Entered Ordering Massachusetts-based Investment Advisor to Pay Over $7.2 Million).

 

http://www.sec.gov/litigation/litreleases/2013/lr22652.htm


Modified: 3/19/2013