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Securities and Exchange Commission v. HDG Investment Corporation and Paul J. Edwards, Civil Action No. 99-K-911 (D. Colo.)

On May 11, 1999, the Securities and Exchange Commission filed a civil action in the U.S. District Court for the District of Colorado charging HDG Investment Corporation ("HDG") and Paul J. Edwards ("Edwards") with fraudulently raising over $300,000 from investors through a prime bank investment scheme. HDG is incorporated in the British Virgin Islands and purports to offer various investment services to investors worldwide. Edwards, the sole director of HDG, is a Canadian citizen living in Prague, Czech Republic.

The Commission alleges in its complaint that HDG and Edwards defrauded investors by offering and selling over the Internet, and through other means, interests in a fictitious prime bank investment program. The Commission alleges that Edwards promised investors, among other things, that they would receive a 20-to-1 return in thirty days for their investment in HDG’s program, and that the returns were to be generated from international bank-to-bank loan and/or trade transactions. In fact, the Commission alleges, these representations, as well as representations regarding the use of investor proceeds, were complete fabrications. According to the Commission, HDG’s purported investment program does not exist. The Commission further alleges that Edwards continued to give investors false assurances that they would receive their promised returns months after diverting at least $100,000 of investor proceeds to his personal use.

The Commission seeks preliminary and permanent injunctions to prevent HDG and Edwards from continuing to violate the antifraud provisions of the securities laws, specifically Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5 thereunder. The Commission also seeks an accounting, disgorgement, prejudgment interest, and the imposition of civil penalties.

In addition to this civil action in U.S. District Court against HDG and Edwards, the Commission instituted cease-and-desist proceedings against Lila Keith ("Keith") of Aurora, Colorado, for violations of the antifraud provisions of the federal securities laws and for acting as a unregistered broker-dealer in connection with her sales activities on behalf of HDG and Edwards. A hearing will be scheduled to determine whether the allegations against Keith are true and, if so, whether a cease and desist order should be issued and whether Keith should be required to make an accounting and pay disgorgement, including reasonable interest. (Rel. No. 33- 7678) (Rel. No. 34-41388)