U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23292 / June 24, 2015
Securities and Exchange Commission v. Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, Civil Action No. Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani
SEC Obtains Emergency Asset Freeze Against California Firm and Founder Charged with Defrauding Investors
The Securities and Exchange Commission today announced that it has obtained an emergency court order to freeze the assets of a California-based firm and its owner charged with pocketing money raised from investors.
The SEC alleges that Christopher M. Lee operated under an alias Rashid K. Khalfani and hid his past criminal convictions while raising nearly $2 million through his firm Capital Cove Bancorp LLC for purported investments in two private funds that invested in distressed real estate. Lee enticed investors by falsely boasting that REO Opportunities Fund II LLC and Rittenhouse Square Trust LLC were "vetted, qualified, and registered" with the SEC and several other government agencies. Lee misappropriated investor money from both funds, and in some instances used it to purchase his own real estate.
The SEC further alleges that Lee and Capital Cove offered and sold membership interests in the REO fund without registering those transactions or securities with the SEC, and they filed materially false Forms ADV that did not disclose Lee's criminal record.
The SEC's complaint was filed under seal on June 18 in U.S. District Court for the Central District of California. The complaint, unsealed by the court yesterday, charges Capital Cove and Lee with securities fraud and conducting an unregistered securities offering. The SEC is seeking preliminary and permanent injunctions, the return of ill-gotten gains with prejudgment interest, and financial penalties.
The court order grants the SEC's request to temporarily freeze all assets of Lee and Capital Cove and prohibits them from soliciting, accepting, or depositing any money from investors in connection with any offering of securities.
The SEC's investigation was conducted by Junling Ma and C. Dabney O'Riordan of the Los Angeles office, and an examination of Capital Cove was conducted by Yanna Stoyanoff, Brian Krechman, and Melissa Romic. The SEC's litigation is being led by Amy Longo and Ms. Ma.
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Investors may direct questions to the court-appointed temporary receiver in this case:
Robert Mosier - 714-267-3588
