SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16440 / February 17, 2000
Promoter Of Fraudulent $1.5 Million Internet Trading Scheme Preliminarily Enjoined And Non-Party Held In Contempt
[SECURITIES AND EXCHANGE COMMISSION v. NANCY J. CHEAL, individually and d/b/a RELIEF ENTERPRISE, et al. (United States District Court for the District of Massachusetts, C.A. No. 00 CV 10182-EFH) (January 31, 2000)]
On February 15, 2000, after a hearing, the United States District Court for the District of Massachusetts entered a Preliminary Injunction and Order for Other Equitable Relief in a case against Nancy J. Cheal ("Cheal") (d/b/a Relief Enterprise) and against Richard L. Birmingham ("Birmingham"), a relief defendant from Carson City, based on an allegedly fraudulent Internet trading scheme. The Court´s Order, among other things, freezes assets derived from an alleged Prime Bank-like Internet fraud until the case is completed. The Order also prohibits Cheal from future violations of the general antifraud and securities registration provisions of the federal securities laws. During the hearing, the Court held a non-party, Lindsey Springer ("Springer"), in contempt for violating a prior asset freeze. Springer appeared at the hearing to oppose the Commission´s motion for the preliminary injunction, but is not a party or an attorney for a party. He asserted that he had standing to appear at the hearing by claiming that he was affected by the freeze order. In making his argument, Springer revealed that $1,500 had been spent in violation of the freeze order to pay his travel expenses to attend the hearing from his home in Tulsa, Oklahoma. The Court ordered Springer to pay $1,500 into the Registry of the Court.
The Commission´s Complaint alleges that Cheal, directly and through representatives, raised more than $1.5 million in an investment fraud perpetrated over the Internet and by other means. The Commission alleged that, since at least October 1999, Cheal, doing business as Relief Enterprise, fraudulently offered and sold investments in a purported Abank debenture trading@ program by making baseless promises of a 100% weekly return on a website and through other means of solicitation . According to the Complaint, Cheal also falsely told investors that the extraordinary investment return would be paid using the profits from the trading activity of a Alicensed bank debenture trader@ with whom she was purportedly associated. The Commission also alleged that Cheal or her representatives falsely assured investors that their funds were not at risk and were 100% guaranteed by the U.S. Government. The Commission alleged that the investment program had many hallmarks of so-called Prime Bank trading programs, which do not exist. According to the Complaint, Cheal obtained more than $1.5 million from hundreds of investors in forty-eight states and ten foreign countries.
According to the Commission, Birmingham received a substantial amount of the money raised from the allegedly fraudulent scheme. Birmingham allegedly used those funds to pay various expenses, including debit card withdrawals at a casino. The Commission charged Birmingham as a relief defendant because he allegedly was unjustly enriched through his receipt of those funds.
The Complaint, which was filed on January 31, 2000, alleged that Cheal violated the general antifraud and securities registration provisions of the federal securities laws -- i.e., Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On February 1, 2000, the U.S. District Court for the District of Massachusetts granted the Commission´s motion for an ex parte order temporarily restraining the fraudulent activities, freezing the assets of Cheal and Birmingham and the proceeds of the offering and imposing other equitable relief.
The Commission coordinated its investigation with the Office of the U.S. Attorney for the District of Massachusetts and the Federal Bureau of Investigation.
For further information, please see Litigation Release No. LR-16424 (February 3, 2000).