U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21275 / November 3, 2009
SEC v. Randy M. Cho, Civil Case No. 09-CV-6261, USDC, N.D.Ill.
SEC OBTAINS PERMANENT INJUNCTIVE RELIEF AGAINST RANDY M. CHO IN LAWSUIT ALLEGING MISAPPROPRIATION OF INVESTORS FUNDS AND PONZI SCHEME
The Securities and Exchange Commission ("Commission") announced that on October 27, 2009, the Honorable James F. Holderman in the U.S. District Court of the Northern District of Illinois entered a permanent injunction order enjoining Randy M. Cho from violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)], the Securities Exchange Act of 1934 [Section 10(b) and Rule 10b-5 thereunder], and the Investment Advisers Act of 1940 [Sections 206(1) and 206(2)] (Permanent Injunction Order). Cho consented to the entry of the Permanent Injunction Order without admitting or denying the allegations in the Complaint. The asset freeze order entered by the Court on October 7, 2009, freezing Cho's assets continues and the Court retains jurisdiction to set the appropriate amount of disgorgement and civil penalties.
Filed on October 7, 2009, in an emergency TRO action, the Commission's complaint alleges that, since at least 2001, Cho engaged in a fraudulent scheme to misappropriate investors' funds for his personal use and to repay other investors, raising at least $3.7 million from at least 45 investors in four states. The complaint alleges that Cho falsely represented to investors that he would pool their funds to invest in shares of specific well-known companies in anticipation of expected initial public offerings of those companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc. and Rosetta Stone, Inc. The complaint alleges that, instead of purchasing these shares for investors, Cho used investor funds for personal trading, the personal expenses of himself and his family, and also operated a Ponzi scheme, using new investor funds to repay existing investors. The complaint alleges that throughout the scheme, Cho falsely told investors that he had worked at Goldman Sachs, still had an account there and made his investments through the firm, and/or that Goldman Sachs still considered him a preferred client. The complaint further alleges that Cho told some investors that additional funds would be needed to satisfy a U.S. tax liability in connection with their supposed purchase of Google and Rosetta Stone shares, when there was no tax liability and when the shares had not even been purchased for the investors.