U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22702 / May 17, 2013
Securities and Exchange Commission v. Robert Fowler and US Capital Funding II Series Trust 1, Inc. a/k/a US Capital Investments II (HK) Limited, Civil Action No. 1:13-cv-1656 (N.D. Ga.)
SEC Charges Resident in the Atlanta Area and His Firm with Fraud in Connection with Prime Bank Scheme
On May 16, 2013, the Securities and Exchange Commission filed an emergency action in federal court in the federal district in Atlanta, charging Robert Fowler (Fowler), a Duluth, Georgia resident, and his company, US Capital Funding Series II Trust 1 (US Capital), with violations of the federal securities laws for defrauding investors in a "prime bank” investment scheme.
The Commission's complaint alleges that, since at least August 2012, Fowler and US Capital have raised at least $350,000 from investors by falsely promising high profits for investing in standby letters of credit or bank guarantees that would purportedly grant the investors loans, the proceeds of which would be invested for a significant profit. Fowler and US Capital instead misappropriated investor funds for personal and business uses. Fowler was actively soliciting additional investors for his scheme, the complaint alleged.
According to the complaint, Fowler targeted foreign-born small business owners with little or no experience in finance or investing. In exchange for investors' initial "down payment” for a stand-by letter of credit (SBLC) or bank guarantee to be issued by US Capital, Fowler offered to assist in the procurement of commercial loans to companies owned or operated by the investors, and to control the investment of at least a portion of the eventual (fictitious) loan proceeds, sometimes using affiliated "traders” and "trading platforms” in unspecified "instruments,” in order to derive substantial profits. Fowler and US Capital did not use the investor proceeds as represented; rather, shortly after US Capital's bank accounts received investors' funds, Fowler spent the funds at restaurants, grocery stores, gas stations, and clothing stores, and also withdrew thousands of dollars through ATM transactions.
In its complaint, the Commission alleges that US Capital's website misrepresented that it has assets "valued in the Trillions,” and had a "triple A” credit rating by Standard and Poor's . The complaint alleges that, in fact, US Capital had minimal assets and that the S&P rating was for an unaffiliated entity with the same name. The Commission's complaint further alleges that, in an effort to entice additional investors, Fowler misrepresented that the Commission had blessed US Capital's offering.
The complaint alleges that defendants violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities and of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also alleges that defendants violated Section 26 of the Exchange Act, which makes it unlawful to represent to any purchaser or seller of a security that the Commission has "passed upon the merits of or given approval to any security or any transaction . . . therein."
Also today, the Honorable Steven C. Jones, United States District Judge for the Northern District of Georgia, granted the Commission's request for emergency relief, issuing an order that temporarily restrained defendants from further securities law violation, froze defendants' assets, prevented the destruction of documents and expedited discovery. The Court also set a hearing date of June 14, 2013 for the Commission's request for a preliminary injunction. The Commission's complaint also seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. Those claims will be adjudicated at a later date.