SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16242 / August 4, 1999
SECURITIES AND EXCHANGE COMMISSION v. INVERWORLD, INC., ET AL. Civil Action No. SA 99 CA 0822-FB
SEC CHARGES INVESTMENT ADVISER, BROKER-DEALER AND PRINCIPALS WITH $475 MILLION SECURITIES FRAUD
On August 4, 1999, the Commission filed a civil action against a San Antonio registered investment adviser, registered broker-dealer and their chairman and president, as well as two related foreign shell companies, charging them with securities fraud, and seeking preliminary and permanent injunctions, an asset freeze, disgorgement, civil penalties and other relief. The defendants may have lost as much as $475 million of client funds in unauthorized, highly leveraged securities investments and practically worthless securities issued by one of the related shell companies.
The Commission's complaint names InverWorld, Inc. ("InverWorld"), an investment adviser formerly registered with the Commission and currently registered with the State of Texas, and InverWorld Securities, Inc. ("InverWorld Securities"), a Commission-registered broker-dealer, together with their chairman Jose P. Zollino ("Zollino") and president, George F. Fahey ("Fahey"), and two related foreign corporations, IWG Services, Ltd. ("IWG") and IG Services, Ltd. ("IG Services") as defendants. The Complaint also names LHH Ltd., ("LHH") a Texas limited partnership, as a relief defendant. In particular, the Complaint alleges the following:
The Complaint charges that InverWorld, InverWorld Securities, Zollino, Fahey, IWG and IG Services violated the antifraud provisions found in Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, and that InverWorld, aided and abetted by Zollino and Fahey, violated Section 206 of the Investment Advisers Act of 1940, based upon these same activities. The Complaint seeks against each preliminary and permanent injunctions, an asset freeze, accounting, repatriation order, order prohibiting the alteration or destruction of books and records, expedited discovery, disgorgement with prejudgment interest and civil penalties. Additionally, against InverWorld and InverWorld Securities, the Commission seeks the appointment of a receiver. The Commission further seeks from LHH the appointment of a receiver, an asset freeze, accounting, repatriation order, order prohibiting the movement, alteration and destruction of books and records and order expediting discovery.
The Commission would like to acknowledge the outstanding assistance of the Texas State Securities Board, the United States Attorney's Office for the Western District of Texas and the Federal Bureau of Investigation, who worked closely with the Commission in its investigation. Their assistance is yet another example of the effective coordination by securities regulators and criminal authorities in their joint efforts to police securities fraud.http://www.sec.gov/litigation/litreleases/lr16242.htm