SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16950 / April 3, 2001
SEC V. STEVEN E. THORN, CRAIG A. MORGAN, KAREN A. ESTRADA, GLOBAL INVESTORS GROUP, LLC, FIRST FINANCIAL VENTURES, LLC, SECOND FINANCIAL VENTURES, LLC, THIRD FINANCIAL VENTURES, LLC, FUND GLOBAL, LLC, AND GLOBAL EQUITY GROUP, LLC, U.S. District Court for the Southern District of Ohio, Civil Action No. C2-01-290 (S.D. Ohio)
The Commission announced today that on April 2, 2001, Judge Algenon L. Marbley of the United States District Court for the Southern District of Ohio entered a temporary restraining order against Steven E. Thorn (Thorn), a resident of Cleveland, Ohio, Karen A. Estrada (Estrada), a resident of Atascadero, California, and their related entities for raising approximately $64.5 million in a fraudulent prime bank scheme. The judge also ordered that their assets be frozen and that defendants account for the funds raised.
The Commission's Complaint alleges that since February 1998, Thorn and Estrada have raised at least $10.5 million by selling investments in purported European bank trading programs through three entities they controlled, Global Investors Group, LLC, Fund Global, LLC and Global Equity Group, LLC (the Global Trading Programs). The Complaint further alleges that since November 1999, Thorn, Estrada, Craig A. Morgan ("Morgan") and others raised at least $54 million through three different entities, First Financial Ventures, LLC, Second Financial Ventures, LLC, and Third Financial Ventures, LLC (Financial Ventures Programs) and had investors deposit funds for the scheme at Bank One in Columbus, Ohio.
In both programs, Thorn and Estrada allegedly made false claims that the money they raised would be used as collateral for the purchase of prime bank instruments issued by European financial institutions. Numerous government agencies, including the Commission, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System, however, have warned the public that trading programs in prime bank instruments do not exist and are fraudulent. The Complaint further alleges that Thorn and Estrada misrepresented to investors in the Global Trading Programs that their principal was never at risk and promised rates of return ranging from 7% to 100% per month. The Complaint alleges that of the total amount raised in the Global Trading Programs, at most only $3.8 million could have been used for any legitimate investment purposes, and $1.5 million was used to pay for Thorn's personal expenses.
The Commission also alleges that the Financial Ventures Programs differed from the early schemes only in that Thorn and Estrada told investors that their funds would remain on deposit in a U.S. bank, that investors would retain control of their funds, and that investor funds would not be pledged as security or collateral to fund the trading. In the Financial Ventures Programs, Thorn and Estrada again told investors that their principal was never at risk and promised returns of 50% to 100% per month. The Complaint further alleges that Thorn and Estrada misrepresented the existence of bank trading programs, the safety of investors' principal and the guarantee of profit, and the use of investor funds.
The Court granted the Commission's emergency motion and temporarily enjoined Thorn, Estrada and their related entities from violations of the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; temporarily enjoined Defendants Thorn and Estrada from violations of the broker-dealer registration and antifraud provisions, Section 15(a) and 15(c) of the Exchange Act and Rule 15c1-2 thereunder; froze the assets of Thorn, Estrada and the defendant entities; and ordered other ancillary relief. A hearing on the Commission's motion for a preliminary injunction is scheduled for April 24, 2001.