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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22692 / April 30, 2013

Securities and Exchange Commission v. A.L. Waters Capital, LLC, et al., Civil Action No. 12-cv-10783-DJC (District of Massachusetts)

United States of America v. Arnett L. Waters, Criminal No. 12-cr-10336-DJC (District of Massachusetts)

Defendant in SEC Action Sentenced On Related Criminal Charges, Receives 17 Year Sentence

The Securities and Exchange Commission announced today that on April 26, 2013, Arnett L. Waters of Milton, Massachusetts, a principal of a broker-dealer and investment adviser who is a defendant in a securities fraud action filed by the Commission in May 2012, was sentenced to 17 years in federal prison in a separate criminal action for orchestrating a securities fraud and for defrauding rare coin investment customers. Waters was also sentenced to three years of supervised release and $9,025,691 in restitution and forfeiture. The criminal charges were brought by the U.S. Attorney for the District of Massachusetts. Waters' guilty plea to securities fraud and other charges occurred on November 29, 2012, and followed an earlier guilty plea by Waters in October 2012 to criminal contempt charges for violating a preliminary injunction order obtained by the Commission in its case. The Commission's Order barring Waters from the securities industry was issued on December 3, 2012.

The Commission filed an emergency enforcement action against Waters on May 1, 2012, alleging that he and two companies under his control, broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC, defrauded investors from at least 2009-2012 by, among other things, misappropriating investor funds and spending it on personal expenses. On May 3, 2012, the Court entered a preliminary injunction order that, among other things, froze Waters' assets and required him to provide an accounting of all his assets to the Commission. On August 7, 2012, the Commission filed a civil contempt motion against Waters, alleging that he had violated the court's preliminary injunction order by establishing an undisclosed bank account, transferring funds to that account, dissipating assets, and failing to disclose the bank account to the Commission, as required by the Court's order. On August 9, 2012, the U.S. Attorney for the District of Massachusetts filed a separate criminal contempt action against Waters based on the same allegations. On October 2, 2012, Waters pleaded guilty to the criminal contempt charges, and the Court ordered him detained pending sentencing.

On December 3, 2012, the Commission barred Waters from the securities industry, based on his October 2, 2012 guilty plea to criminal contempt. The Order bars Waters from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.

The U.S. Attorney for the District of Massachusetts charged Waters with an array of securities fraud and other violations on October 17, 2012. On November 29, 2012, Waters pleaded guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice. The counts of the criminal information to which Waters pleaded guilty alleged that, from at least 2007 through 2012, he used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012. Waters also pleaded guilty to engaging in a criminal scheme to defraud clients of his rare coin business. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers' behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information to which Waters pleaded guilty further alleged that he engaged in money laundering through two transactions totaling $77,000. Finally, Waters pleaded guilty to allegations that he made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters was charged with obstruction of justice related to this conduct.

The Commission acknowledges the assistance of the United States Attorney's Office for the District of Massachusetts, the Federal Bureau of Investigation and FINRA in this matter.

For further information, see Litigation Release No. 22356 (May 4, 2012) [Commission emergency enforcement action filed and preliminary injunction issued]; Litigation Release No. 22512 (October 18, 2012) [criminal charges filed against Waters]; Exchange Act Release No. 34-68334 (December 3, 2012) [Waters barred from securities industry]; Litigation Release No. 22558 (December 4, 2012) [Waters pleads guilty to criminal charges].

 

http://www.sec.gov/litigation/litreleases/2013/lr22692.htm


Modified: 04/30/2013