Litigation Release No. 17598 / July 3, 2002
Securities and Exchange Commission v. Von Christopher Cummings, Paramount Financial Partners, L.P., Paramount Capital Management, LLC, John A. Ryan, Kevin L. Grandy and James Curtis Conley, No. C2 02 629 (S.D. Ohio).
SEC Obtains Preliminary Injunction Against Operators of Alleged Hedge Fund; Court Orders Defendants to Stop Soliciting or Receiveing Investor Funds
The Securities and Exchange Commission announced that on June 28, 2002, The Honorable James L. Graham, United States District Judge for the Southern District of Ohio, entered a preliminary injunction against Von C. Cummings, Paramount Financial Partners, L.P., Paramount Capital Management, LLC, Kevin L. Grandy and James "Curt" Conley. The order prohibits these defendants from selling securities, from accepting funds from investors and enjoins them from violations of the antifraud provisions of the federal securities laws. The order also directs that they provide sworn accountings to the Commission by July 19, 2002.
On Monday, June 24, 2002, the Commission filed a civil injunctive action in federal district court in Columbus, Ohio, accusing Cummings and others of defrauding dozens of investors by conducting a Ponzi scheme through a purported Ohio-based hedge fund, Paramount Financial Partners, L.P. The Commission's complaint alleges that Cummings and various marketers induced investors to pay at least $15 million into the hedge fund from at least May 2000 through March 2001, but that Cummings and others misappropriated or diverted those funds to pay earlier investors and pay personal and business expenses.
The Commission's complaint alleges that the defendants falsely portrayed Paramount as a "registered hedge fund" that generated supposed investment returns of as much as 99 percent. Victims were told that Paramount had access to certain discounted securities that they could purchase through Paramount and sell for large profits. Victims were also told that they were required to maintain their principal and supposed profits with Paramount for a set period of time. The complaint alleges that Paramount issued false trade confirmations and account statements to trick investors into believing that Paramount had purchased and sold certain securities for their accounts and generated large profits. Paramount then raised new investor funds that it used to pay earlier investors and to pay personal and business expenses.
For additional information, see Lit. Rel. 17581 (June 24, 2002).