SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16526 \ April 24, 2000
SEC v. Gibbons, (U.S.D.C. N.D. Illinois, Civil Action No. 2247)
The Securities and Exchange Commission (Commission) announced that on April 12, 2000, a civil injunctive action was filed in the U.S. District Court for the Northern District of Illinois against Alan C. Gibbons, of Chicago.
The Complaint alleges that Between September 1995 and March 1999, Gibbons raised approximately $172,000 from seven investors who purchased stock and promissory notes in companies he formed and owned (the Gibbons Companies). However, the Complaint alleges, rather than invest the funds in the Gibbons Companies, Gibbons used the investors' funds for his own personal expenses.
The Complaint alleges that Gibbons made misrepresentations to investors concerning the use, safety, and liquidity of their investments, as well as the return on their investments. The Complaint alleges that Gibbons told investors that their funds would be used for investment in the Gibbons Companies. The Gibbons Companies purportedly included an import/export business, a software marketing business, and a business that would find funding for early stage companies. However, each of the Gibbons Companies conducted little or no business and dissolved quickly.
The Complaint alleges that Gibbons represented to investors that he would use their funds for the Gibbons Companies. However, Gibbons used their funds for his own personal expenses. The Complaint further alleges that Gibbons told investors that he would deposit their funds into escrow accounts. However, Gibbons did not deposit their funds in any escrow accounts. Instead, Gibbons commingled investors' funds in his personal and business bank accounts. The Complaint further alleges that Gibbons told investors that their investments were risk-free and guaranteed. However, their investments were very risky because the Gibbons Companies engaged in little or no business, there was no guarantor, and Gibbons lacked sufficient liquid assets to repay the investors. The Complaint further alleges that Gibbons promised large returns on investments in the Gibbons Companies. For example, Gibbons told an investor that he would double or triple his money in a few years. Gibbons told other investors that they would receive at least a 5% return on their investments. The Complaint also alleges that when soliciting investors in the Gibbons Companies to invest more money or to give their investments more time, Gibbons promised returns of 30% to 50% in four months. However, Gibbons did not pay investors any return on investments in the Gibbons Companies.
The Complaint also alleges that Gibbons has a history of securities law violations. In 1989, the National Association of securities Dealers fined Gibbons $25,000, and permanently barred him from association with any member of the NASD for numerous securities law violations. Additionally, the Complaint alleges that in 1994 the Illinois Secretary of State permanently barred Gibbons from offering or selling securities in Illinois, because of his involvement in a fraudulent investment scheme. In 1996, in a criminal action based on the same conduct, a court sentenced Gibbons to a three-year term of probation and ordered Gibbons to pay $15,000 in restitution to an investor whom he defrauded, according to the Complaint.
The Complaint seeks a Final Judgment and Order of Permanent Injunction and Other Equitable Relief enjoining Gibbons from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint also seeks an order of, civil penalties, and disgorgement, plus prejudgment interest, against Gibbons.