UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17533 / May 24, 2002
SECURITIES AND EXCHANGE COMMISSION v. INVERWORLD, INC., ET AL., Civil Action No. SA 99 CA 0822-FB
UNITED STATES OF AMERICA v. JOSE ZOLLINO AND GEORGE FAHEY, Criminal Action No. SA-01-CR-180
SAN ANTONIO MAN SENTENCED TO TWELVE YEARS FOR DEFRAUDING CLIENTS
The Securities and Exchange Commission announced that Jose Patricio Zollino was sentenced to twelve years in federal prison for his role in a scheme that victimized more than 1,200 investors out of at least $325 million. Zollino, the former chairman of the board of InverWorld Securities, Inc., a broker-dealer registered with the Commission, and InverWorld, Inc., an investment adviser registered with the Commission, entered formal pleas to conspiring to commit fraud and conspiring to launder money.
On August 4, 1999, the SEC charged Zollino and others with losing as much as $475 million of client funds in unauthorized, highly leveraged securities investments and practically worthless securities issued by foreign shell companies. The companies used by Zollino and others to move client money offshore are in bankruptcy.
On March 22, 2001, Zollino was indicted by a San Antonio grand jury on 13 counts of conspiracy, fraud, and money laundering. Zollino's indictment was based upon the same conduct alleged in the Commission's complaint filed on August 4, 1999 that charged him with violating the antifraud provisions of the Securities and Exchange Act of 1934 and the Investment Advisers Act of 1940. The complaint sought preliminary and permanent injunctions, disgorgement with prejudgment interest and a civil money penalty against Zollino, as well as orders for an asset freeze, an accounting, the prohibition of the movement, alteration and destruction of books and records, the appointment of a receiver, and expedited discovery. In the Commission's action, Judge Fred Biery, United States District Court for the Western District of Texas, San Antonio Division, issued Ex Parte Orders against Zollino Freezing Assets, Requiring an Accounting, Directing the Repatriation of Funds, Requiring Preservation of Documents and Authorizing Expedited Discovery. The Court also appointed a receiver. The Commission's civil enforcement action against the InverWorld entities was stayed pending completion of the criminal case.
The criminal case was prosecuted by the U.S. Attorney's office for the Western District of Texas (San Antonio Division). SEC attorneys assisted the FBI, IRS, and U.S. Attorney's office in the investigation. Additional information can be found in Litigation Release No. 16242 (August 4, 1999) and No. 16974 (April 25, 2001).